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TABLE OF CONTENTS
[ALTERNATE PAGE FOR CANADIAN PROSPECTUS] TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
As filed with the Securities and Exchange Commission on September 1, 2015
Registration No. 333-206218

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
Amendment No 1.
to
Form S-1
 REGISTRATION STATEMENT
Under
The Securities Act of 1933
CPI Card Group Inc.
 (Exact name of Registrant as specified in its charter)

Delaware 
(State or other jurisdiction of
incorporation or organization)	 	7374 
(Primary Standard Industrial
Classification Code Number)	 	26-0344657 
(IRS Employer
Identification No.)	
CPI Card Group Inc.
10368 West Centennial Road
Littleton, CO 80127
(303) 973-9311 
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)
Steven Montross
President and Chief Executive Officer
CPI Card Group Inc.
10368 West Centennial Road
Littleton, CO 80127
(303) 973-9311
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Please send copies of all communications to:	

Steven J. Gavin, Esq.
Andrew J. McDonough, Esq.
Arlene K. Lim, Esq.
Winston & Strawn LLP
35 West Wacker Drive
Chicago, Illinois 60601
(312) 558-5600	
 	
Christopher J. Cummings, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison LLP
77 King Street West, Suite 3100
Toronto, Ontario, Canada M5K 1J3
(416) 504-0522	
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:     o
          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
          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  o	 	Non-accelerated filer  ý
 (Do not check if a
smaller reporting company)	 	Smaller reporting company  o	
CALCULATION OF REGISTRATION FEE

 	
Title of Each Class of Securities
to be Registered	 	Proposed Maximum
Aggregate Offering
Price (1)(2)	 	Amount of
Registration Fee	
 	
Common Stock, $0.001 par value per share	 	$100,000,000	 	$11,620 (3)	
 	
(1)
Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)
Includes additional shares that the underwriters have the option to purchase.

(3)
Previously paid.
           The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

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 EXPLANATORY NOTE
        This registration statement contains two forms of prospectus: one to be used in connection with the offering of the securities described herein in the United States, which we refer to as the "U.S. Prospectus," and one to be used in connection with the offering of such securities in Canada, which we refer to as the "Canadian Prospectus." The U.S. Prospectus and the Canadian Prospectus are identical except for the cover page, the table of contents and the back page, and except that the Canadian Prospectus includes pages 164 through 168, a "Certificate of the Company" and a "Certificate of the Canadian Underwriters." The form of the U.S. Prospectus is included herein and is followed by the alternate and additional pages to be used in the Canadian Prospectus. Each of the alternate pages for the Canadian Prospectus included herein is labeled "Alternate Page for Canadian Prospectus." Each of the additional pages for the Canadian Prospectus included herein is labeled "Additional Page for Canadian Prospectus."

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The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling stockholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

			
PRELIMINARY PROSPECTUS	 	 SUBJECT TO COMPLETION, DATED SEPTEMBER 1, 2015	

                             Shares

 CPI Card Group Inc.
 Common Stock
$           per share

This is the initial public offering of our common stock. We are selling                           shares of our common stock, and the selling stockholders named in this prospectus are selling                           shares of our common stock. We currently expect the initial public offering price to be between $             and $             per share of our common stock. We will not receive any proceeds from the sale of shares by the selling stockholders.
Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on the NASDAQ Global Select Market under the symbol "PMTS."
We are an "emerging growth company" as that term is used in the Jumpstart our Business Startups Act of 2012, and as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See "Prospectus Summary—JOBS Act."
Investing in our common stock involves risks. See "Risk Factors" beginning on page 18.

								
 	 	Per Share	 	Total	 	
 ​ 	​ 	​ 	​ 	​ 	​ 	​ 	​	
Initial Public Offering Price	 	 $	           	 	 $	           	 	
Underwriting Discount (1)	 	 $	 	 	 $	 	 	
Proceeds to Us (before expenses)	 	 $	 	 	 $	 	 	
Proceeds to the Selling Stockholders (before expenses)	 	 $	 	 	 $	 	 	
 ​ 	​ 	​ 	​ 	​ 	​ 	​ 	​	
(1)
See "Underwriting" for a description of the compensation payable to the underwriters.
The selling stockholders have granted the underwriters an option to purchase up to                           additional shares of our common stock within 30 days of the closing date of this offering to cover over-allotments.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the shares to purchasers on or about                                        , 2015 through the book-entry facilities of The Depository Trust Company.

					
BMO Capital Markets	 	Goldman, Sachs & Co.	 	CIBC	

Prospectus dated                           , 2015

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[ALTERNATE PAGE FOR CANADIAN PROSPECTUS]
A copy of this amended and restated preliminary prospectus has been filed with the securities regulatory authority in each of the provinces and territories of Canada, but has not yet become final for the purpose of the sale of securities. Information contained in this amended and restated preliminary prospectus may not be complete and may have to be amended. The securities may not be sold until a receipt for the prospectus is obtained from the securities regulatory authorities.
This prospectus has been filed under procedures in each of the provinces and territories of Canada that permit certain information about these securities to be determined after the prospectus has become final and that permit the omission of that information from this prospectus. The procedures require the delivery to purchasers of a supplemented PREP prospectus containing the omitted information within a specified period of time after agreeing to purchase any of these securities.
All of the information contained in the supplemented PREP prospectus that is not contained in the base PREP prospectus will be incorporated by reference into this base PREP prospectus as of the date of the supplemented PREP prospectus.
No securities regulatory authority has expressed an opinion about any information contained herein and it is an offence to claim otherwise. This preliminary prospectus constitutes a public offering of these securities only in those jurisdictions where they may be lawfully offered for sale and only by persons permitted to sell those securities.
We have filed a registration statement on Form S-1 with the United States Securities and Exchange Commission under the United States Securities Act of 1933, as amended, with respect to these securities.
Amended and Restated Preliminary Base
PREP Prospectus dated September 1, 2015,
amending and restating the Preliminary
Base PREP Prospectus dated August 12, 2015

			
Initial Public Offering
 And Secondary Offering	 	
September 1, 2015	

US$
Common Stock
This preliminary base PREP prospectus (the " Prospectus ") qualifies the distribution (the " Offering ") of an aggregate of                        shares of common stock (the " Common Shares ") of CPI Card Group Inc. (the " Company " or " CPI "). We expect the public offering price to be between US$             and US$            per Common Share (the " Offering Price ").
The Common Shares are being offered for sale concurrently in Canada under this Prospectus and in the United States under a registration statement on Form S-1 filed with the United States Securities and Exchange Commission. The Common Shares are being offered in Canada by BMO Nesbitt Burns Inc., Goldman Sachs Canada Inc., CIBC World Markets Inc. and                         (the " Canadian Underwriters ") and in the United States by BMO Capital Markets Corp., Goldman, Sachs & Co., CIBC World Markets Corp. and                        (the " US Underwriters ," and together with the Canadian Underwriters, the " Underwriters ").                                    Common Shares are being offered by the Company and                        Common Shares are being offered by selling stockholders named in this Prospectus. See " Principal and Selling Stockholders ."
Affiliates of each of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., Goldman Sachs Canada Inc., Goldman, Sachs & Co., CIBC World Markets Inc. and CIBC World Markets Corp. are lenders to the Company under its credit facility. Another affiliate of CIBC World Markets Inc. and CIBC World Markets Corp. is a limited partner of Tricor Pacific Capital Partners (Fund IV), Limited Partnership, one of the selling stockholders named in this Prospectus. Consequently, the Company may be considered a "connected issuer" to each of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., Goldman Sachs Canada Inc., Goldman, Sachs & Co., CIBC World Markets Inc. and CIBC World Markets Corp., and such selling stockholder may be considered a "connected issuer" to CIBC World Markets Inc. and CIBC World Markets Corp., in each case within the meaning of National Instrument 33-105—Underwriting Conflicts of the Canadian Securities Administrators. See "Underwriting—Conflicts of Interest".

					

 	
 	
Price: US$            per Common Share	

 	

 	

 

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 	 	Price to the
Public (1)	 	Underwriters'
Commission (2)(3)	 	Net Proceeds
to CPI (2)(4)	 	Net Proceeds
to Selling
Stockholders (3)(5)	
Per Common Share	 	US$	 	US$	 	US$	 	US$	
Total	 	US$	 	US$	 	US$	 	US$	

Notes:
(1)
The Offering Price for the Common Shares has been determined by negotiation between the Company and the Underwriters.

(2)
The Underwriters will receive a commission (the " Commission ") of        % of the gross amount raised in the Offering, payable in cash from the proceeds of the sale of the Common Shares. See " Underwriting " for a description of compensation payable to the Underwriters.

(3)
The selling stockholders have granted to the Underwriters an option (the " Over-Allotment Option "), exercisable in whole or in part at any time until 30 days following the Closing Date (as hereinafter defined), to purchase at the Offering Price up to         % of the number of Common Shares purchased under the Offering to cover over-allotments, if any and for market stabilization purposes. If the Over-Allotment Option is exercised in full, the total Price to the Public, Underwriters' Commission, Net Proceeds to the Company and Net Proceeds to selling stockholders will be US$            , US$            , US$            and US$            , respectively. See " Underwriting " and "Principal and Selling Stockholders." This Prospectus qualifies the grant of the Over-Allotment Option and the distribution of the additional Common Shares by the selling stockholders upon exercise of the Over-Allotment Option. A purchaser who acquires Common Shares forming part of the Underwriters' over-allocation position acquires those Common Shares under this Prospectus, regardless of whether the over-allocation position is ultimately filled through the exercise of the Over-Allotment Option or secondary market purchases. See " Underwriting ."

(4)
After deducting the Commission but before deducting the Offering expenses (the " Expenses "), estimated at US$            .

(5)
The selling stockholders will pay the Underwriters' discounts and commissions in respect of the Common Shares sold by the selling stockholders. The portion of the Expenses that will be borne by the selling stockholders is $            .
The Canadian Underwriters, as principals, conditionally offer the Common Shares qualified under this Prospectus, subject to prior sale, if, as and when issued by CPI and accepted by the Canadian Underwriters in accordance with the conditions contained in the underwriting agreement referred to under " Underwriting " and subject to the approval of certain legal matters on behalf of CPI by Blake, Cassels & Graydon LLP, as to matters of Canadian law, and by Winston & Strawn LLP, as to matters of U.S. law, and on behalf of the Underwriters by Stikeman Elliott LLP, as to matters of Canadian law, and Paul, Weiss, Rifkind, Wharton & Garrison LLP, as to matters of U.S. law.

							
Underwriters' position 	 	Maximum size or number of
securities available	 	Exercise period or
acquisition date	 	Exercise price or average
acquisition price	
Over-Allotment Option	 	Option to acquire up to Common Shares	 	Exercisable for a period of 30 days after the closing date of this Offering	 	US$	
In connection with this Offering, the Underwriters may, subject to applicable laws, overallot or effect transactions that stabilize, maintain or otherwise affect the market price of the Common Shares at levels other than those which otherwise might prevail on the open market. Such transactions, if commenced, may be discontinued at any time. The Underwriters may offer the Common Shares at a lower price than stated above. See " Underwriting ."

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There is currently no market through which the Common Shares may be sold and purchasers may not be able to resell the Common Shares purchased under this Prospectus. This may affect the pricing of the Common Shares in the secondary market, the transparency and availability of trading prices, the liquidity of the securities and the extent of issuer regulation. See "Risk Factors".
Subscriptions for the Common Shares will be received subject to rejection or allotment in whole or in part and the right is reserved to close the subscription books at any time without notice. The Common Shares to be issued or sold in this Offering will be issued in registered form to CDS Clearing and Depositary Services Inc. (" CDS ") or the Depositary Trust Company (" DTC "), and deposited with CDS or DTC on the closing date of this Offering which is expected to occur on or about                        , 2015 or such later date as the Company and the Underwriters may agree, but in any event not later than                        , 2015 (the " Closing Date "). A purchaser of the Common Shares in Canada will receive only a customer confirmation from a registered dealer that is a participant in CDS through which the Common Shares are purchased, unless such purchaser requests from the Company the issuance of a certificate evidencing such Common Shares.
Any "template version" of any "marketing materials" (as such terms are defined under Canadian securities laws) that are utilized by the Canadian Underwriters in connection with the Offering are not part of this prospectus to the extent that the contents of the template version of the marketing materials have been modified or superseded by a statement contained in this prospectus. Any template version of any marketing materials that has been, or will be, filed under the Company's profile on www.sedar.com before the termination of the distribution under the Offering (including any amendments to, or an amended version of, any template version of any marketing materials) is deemed to be incorporated into this prospectus.
The Company, the Company's auditor, Tricor Pacific Capital Partners (Fund IV) US, Limited Partnership, and each of Bradley Seaman, Nicholas Peters, Steven Montross and David Brush (collectively, the "Non-Canadian Directors and Signatories"), are incorporated, continued or otherwise organized under the laws of a foreign jurisdiction or resides outside of Canada. The Company, the Company's auditor, Tricor Pacific Capital Partners (Fund IV) US, Limited Partnership and the Non-Canadian Directors and Signatories have appointed the following agent for service of process:

			
Name of Person or Company 	 	Name and Address of Agent	
CPI Card Group Inc. 	 	Blake, Cassels & Graydon LLP
595 Burrard Street, P.O. Box 49314
Suite 2600, Three Bentall Centre
Vancouver, BC, V7X 1L3
Canada	
KPMG LLP	 	Blakes Vancouver Services Inc.
595 Burrard Street, P.O. Box 49314
Suite 2600, Three Bentall Centre
Vancouver, BC, V7X 1L3
Canada	
Tricor Pacific Capital Partners (Fund IV) US, Limited Partnership	 	Blake, Cassels & Graydon LLP
595 Burrard Street, P.O. Box 49314
Suite 2600, Three Bentall Centre
Vancouver, BC, V7X 1L3
Canada	
Non-Canadian Directors and Signatories	 	Blake, Cassels & Graydon LLP
595 Burrard Street, P.O. Box 49314
Suite 2600, Three Bentall Centre
Vancouver, BC, V7X 1L3
Canada	
Purchasers are advised that it may not be possible for investors to enforce judgments obtained in Canada against any person or company that is incorporated, continued or otherwise organized under the laws of a

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foreign jurisdiction or resides outside of Canada, even if the party has appointed an agent for service of process.
INVESTMENT IN THE COMMON SHARES INVOLVES SIGNIFICANT RISKS. INVESTORS SHOULD CAREFULLY CONSIDER THE RISKS REFERRED TO UNDER THE HEADING "RISK FACTORS" STARTING ON PAGE 18 IN THIS PROSPECTUS.

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         We are responsible for the information contained in this prospectus and in any free-writing prospectus we have authorized. Neither we, the selling stockholders nor the underwriters have authorized anyone to provide you with different information, and neither we, the selling stockholders nor the underwriters take responsibility for any other information others may give you. Neither we, the selling stockholders nor the underwriters are making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information contained in this prospectus is accurate as of any date other than its date.

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 	 	Page	 	
Prospectus Summary	 	 	1	 	
Risk Factors	 	 	18	 	
Forward-Looking Statements	 	 	40	 	
Industry and Market Data	 	 	42	 	
Use of Non-GAAP Financial Information	 	 	43	 	
Trademarks	 	 	44	 	
Glossary of Industry Terms	 	 	45	 	
Use of Proceeds	 	 	47	 	
Dividend Policy	 	 	48	 	
Capitalization	 	 	49	 	
Dilution	 	 	51	 	
Selected Consolidated Financial Data	 	 	53	 	
Management's Discussion and Analysis of Financial Condition and Results of Operations	 	 	56	 	
Industry	 	 	95	 	
Business	 	 	103	 	
Management	 	 	115	 	
Executive Compensation	 	 	123	 	
Structure and Formation of Our Company	 	 	130	 	
Certain Relationships and Related Party Transactions	 	 	131	 	
Principal and Selling Stockholders	 	 	135	 	
Description of Certain Indebtedness	 	 	137	 	
Description of Capital Stock	 	 	138	 	
Shares Eligible for Future Sale	 	 	143	 	
Underwriting	 	 	144	 	
Material U.S. Federal Income Tax Considerations to Non-U.S. Holders	 	 	152	 	
Certain Canadian Federal Income Tax Considerations for Holders of Our Common Stock	 	 	157	 	
Notice to Investors Regarding U.S. GAAP	 	 	162	 	
Legal Matters	 	 	162	 	
Experts	 	 	162	 	
Change in Independent Accountant	 	 	162	 	
Where You Can Find More Information	 	 	163	 	
Index to Consolidated Financial Statements	 	 	F-1	 	
Unaudited Pro Forma Condensed Combined Financial Information	 	 	P-1	 	
i

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 [ALTERNATE PAGE FOR CANADIAN PROSPECTUS]

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 	 	Page	 	
Prospectus Summary	 	 	1	 	
Risk Factors	 	 	18	 	
Forward-Looking Statements	 	 	40	 	
Industry and Market Data	 	 	42	 	
Use of Non-GAAP Financial Information	 	 	43	 	
Trademarks	 	 	44	 	
Glossary of Industry Terms	 	 	45	 	
Use of Proceeds	 	 	47	 	
Dividend Policy	 	 	48	 	
Capitalization	 	 	49	 	
Dilution	 	 	51	 	
Selected Consolidated Financial Data	 	 	53	 	
Management's Discussion and Analysis of Financial Condition and Results of Operations	 	 	56	 	
Industry	 	 	95	 	
Business	 	 	103	 	
Management	 	 	115	 	
Executive Compensation	 	 	123	 	
Structure and Formation of Our Company	 	 	130	 	
Certain Relationships and Related Party Transactions	 	 	131	 	
Principal and Selling Stockholders	 	 	135	 	
Description of Certain Indebtedness	 	 	137	 	
Description of Capital Stock	 	 	138	 	
Shares Eligible for Future Sale	 	 	143	 	
Underwriting	 	 	144	 	
Material U.S. Federal Income Tax Considerations to Non-U.S. Holders	 	 	152	 	
Certain Canadian Federal Income Tax Considerations for Holders of Our Common Stock	 	 	157	 	
Notice to Investors Regarding U.S. GAAP	 	 	162	 	
Legal Matters	 	 	162	 	
Experts	 	 	162	 	
Change in Independent Accountant	 	 	162	 	
Where You Can Find More Information	 	 	163	 	
Prior Sales	 	 	164	 	
Audit Committee	 	 	165	 	
ii

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 	 	Page	 	
Material Contracts	 	 	166	 	
Purchaser's Statutory Rights of Recission	 	 	166	 	
Exemptions	 	 	166	 	
Index to Consolidated Financial Statements	 	 	F-1	 	
Unaudited Pro Forma Condensed Combined Financial Information	 	 	P-1	 	
Certificate of the Company	 	 	C-1	 	
Certificate of the Canadian Underwriters	 	 	C-2	 	
iii

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 PROSPECTUS SUMMARY
         This summary highlights certain significant aspects of our business and this offering. This is a summary of information contained elsewhere in this prospectus, is not complete and does not contain all of the information that you should consider before making your investment decision. You should carefully read the entire prospectus, including the information presented under the sections entitled "Risk Factors," "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the notes thereto, before making an investment decision. This summary contains forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from future results contemplated in any forward-looking statements as a result of certain factors such as those set forth in the sections entitled "Risk Factors" and "Forward-Looking Statements." Unless the context otherwise requires, references to the "Company," "CPI," "us," "we" or "our" refer to CPI Card Group Inc. and its subsidiaries. References to "pro forma net sales" or "pro forma Adjusted EBITDA" mean after giving effect to our acquisition of EFT Source, Inc. as if such acquisition had occurred on January 1, 2014. References to "LTM" or the "LTM Period" refer to the twelve months ended June 30, 2015. LTM financial data is derived by adding financial data for the year ended December 31, 2014 to financial data for the six months ended June 30, 2015 and subtracting financial data for the six months ended June 30, 2014. See "Summary Consolidated Historical Financial Data." Refer to "Glossary of Industry Terms" on page 45 of this prospectus for the definitions of industry and other terms not otherwise defined herein. This prospectus contains information from a report we commissioned from First Annapolis Consulting, Inc. ("First Annapolis"), a leading advisory firm to the payments industry, in May 2015. See "Industry and Market Data."
 Our Business
        We are a leading provider of comprehensive Financial Payment Card solutions in North America. We define Financial Payment Cards as credit, debit and Prepaid Debit Cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express and Discover) and Interac (in Canada). In 2014, we produced over 360 million Financial Payment Cards, provided integrated card services to over 3,200 card-issuing banks and Prepaid Debit Card issuers and personalized more than 130 million Financial Payment Cards. We have established a leading position in the Financial Payment Card market through more than 20 years of experience and are focused primarily on this growing subsector of the financial technology market. Our customers are primarily leading national and regional banks, independent community banks, credit unions, managers of prepaid debit programs, Group Service Providers and card processors. We serve a diverse set of over 4,000 direct and indirect customers, including many of the largest North American issuers of debit and credit cards such as JPMorgan Chase, Bank of America, American Express and Wells Fargo, the largest global managers of Prepaid Debit Card programs, including InComm, Green Dot, Blackhawk Network and American Express, as well as thousands of independent community banks, credit unions, Group Service Providers and card processors.
        We serve our customers through a network of nine production and card services facilities, including seven high-security facilities in North America that are each certified by one or more of the Payment Card Brands and Interac (in Canada) and, where required by our customers, the Payment Card Industry Security Standards Council. We have the largest such network of high-security production facilities in North America, allowing us to optimize our solutions offerings to serve the needs of our diverse and long-term customer base.
        We estimate that we produce approximately 35% of all Financial Payment Cards in the United States, which we believe gives us the #1 market position by unit volume. We believe we have:
•
the #1 position in the U.S. prepaid debit market (which represents the fastest growing subset of the Financial Payment Card market in the United States), serving the top five U.S. Prepaid Debit Card program managers;
 
1

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•
a leading position in the U.S. large issuer market, serving the majority of the top 20 U.S. debit and credit card issuers; and 

•
the #1 position in the highly attractive U.S. small issuer market, which includes independent community banks and credit unions, driven by our strong relationships, capabilities and technologies.
        We have grown our business significantly over the past decade, both organically and through acquisitions. Over that time period, we have completed six acquisitions, significantly increasing our geographic and market coverage, solutions offerings and capacity. On March 9, 2010, we purchased certain assets of Premier Card Solutions, a leading provider of Financial Payment Cards, data personalization services and tamper-evident security packaging for Prepaid Debit Cards that utilize the payment networks of the Payment Card Brands. The Premier Card Solutions transaction significantly enhanced our offering to Prepaid Debit Card customers. On September 2, 2014, we acquired EFT Source, Inc. ("EFT Source"), a recognized leader in the financial technology industry that was named to American Banker and BAI's FinTech Forward 100 in both 2013 and 2014. The acquisition of EFT Source significantly enhanced our card services offering, added Card@Once® to our instant issuance card offering and expanded our end-to-end Financial Payment Card solutions.
        In addition to our seven North American facilities, we have two facilities in the United Kingdom that produce retail cards, such as gift and loyalty cards that are not issued on the networks of the Payment Card Brands, and provide personalization services. For further information on our business, see "Business."
        For the LTM Period, we generated net sales of $338.1 million, net income from continuing operations of $30.5 million and Adjusted EBITDA of $81.5 million, representing net income from continuing operations and Adjusted EBITDA margins of 9.0% and 24.1%, respectively. For the year ended December 31, 2014, we generated $261.0 million of net sales, which represented an increase of 32.9% as compared to the prior year, $16.0 million of net income from continuing operations, which represented an increase of 42.6% as compared to the prior year, and $54.2 million of Adjusted EBITDA, which represented an increase of 41.3% as compared to the prior year, and net income from continuing operations and Adjusted EBITDA margins of 6.1% and 20.8%, respectively. Our 2014 and LTM results include four and ten months of results from EFT Source, respectively. Adjusted EBITDA and Adjusted EBITDA margin are financial measures not presented in accordance with generally accepted accounting principles ("GAAP"). For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income from continuing operations, the most comparable GAAP measure, see "Summary Consolidated Historical Financial Data."
 EMV Conversion in the United States
        As a leading provider of integrated Financial Payment Card solutions in North America, we are well-positioned to capitalize on the U.S. market conversion to EMV. The EMV standard for Financial Payment Cards, which is named after Europay, MasterCard and Visa, is a technologically advanced high security protocol that features a Financial Payment Card with an embedded microprocessor, commonly known as a "chip card." Depending on the features required by the issuer, EMV cards may sell for 5 to 10 times the average selling price of the magnetic stripe cards they are replacing. We estimate based on our experience that the industry-wide average selling prices per card, exclusive of services, are approximately as follows: magnetic stripe—$0.20 per card; Contact EMV—$1.00 per card; and Dual-Interface EMV—$2.00 per card. Comparing our costs to selling prices, we achieve similar gross margin percentages across these three card types. Actual per card pricing and margins will vary significantly depending on issuer size, order size, card features, finishes and EMV chip features selected by the issuer. According to First Annapolis, on a dollar basis, the U.S. Financial Payment Card market (excluding services) more than doubled from $180 million in 2013 to $371 million in 2014, and the conversion of U.S. Financial Payment Cards to the EMV standard is expected to further increase this
 
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market size by more than three-fold to $1.2 billion by 2019. A number of factors have precipitated the ongoing conversion of Financial Payment Cards in the United States to the EMV standard:
•
The Liability Shift.   In August 2011, Visa announced a plan for the U.S. market to adopt the EMV standard for security on credit and debit cards. A key feature of Visa's announcement, which later became a coordinated effort among all of the Payment Card Brands, was a card fraud liability shift effective October 1, 2015. After the October 1, 2015 deadline, the party that caused a non-EMV transaction to occur (i.e., either the non-EMV card issuer or the merchant that does not have an EMV compatible POS system) will be the one held financially liable for any resulting counterfeit fraud losses. 

•
Escalating U.S. Card Fraud.   According to The Nilson Report, the United States represents about one half of global Financial Payment Card and Private Label Credit Card fraudulent transactions (more than $5.3 billion annually), despite accounting for only about one quarter of total card transactions. While a number of factors contribute to this imbalance, we believe counterfeit card fraud has migrated to countries that have lower EMV adoption rates such as the United States, which is the last of the G-20 nations to begin to transition Financial Payment Cards from magnetic stripe technology to the more secure EMV standard. 

•
Enhanced Security.   EMV cards feature an embedded microprocessor that, when paired with an EMV payment terminal, dynamically authenticates cardholder debit and credit card transactions using a cryptographic process that results in a significantly more secure payment transaction environment. Card fraud and, in particular, Card-Present Fraud, has declined significantly in nations that have adopted the EMV standard. 

•
High-Profile Data Breaches.   In the last few years, a number of large U.S. merchants, such as Target and Home Depot, and banks have reported major customer or client data breaches and other fraudulent activities, which have heightened awareness of data security and increased demand for higher security solutions in payments systems, including accelerating the adoption of EMV. As a result, combating such data breaches and card fraud has become a board of director level issue among many of the nation's largest merchants, card issuers and Payment Card Brands and has garnered significant attention from the U.S. Government. 

•
Desire for Global Interoperability of the Acceptance Network.   EMV is increasingly becoming the global standard for Financial Payment Cards outside the United States. The coordinated efforts of the Payment Card Brands to implement the liability shift in the United States reflect, in part, their desire to standardize payment systems technology globally to ensure cardholders' cards will be accepted by merchants anywhere on their global network and to provide a predictable and consistent experience for the cardholder.
        EMV cards issued in the United States to date primarily have been Contact EMV cards. Globally, Dual-Interface EMV cards, which also enable contactless payment, are gaining popularity among card issuers, primarily because of the speed and convenience they offer to cardholders. For example, in Canada, we believe that the majority of all credit cards currently being issued are Dual-Interface EMV cards. Dual-Interface EMV cards are more complex to produce than Contact EMV cards and typically sell at a significantly higher price point. We believe that as the U.S. market migrates to the EMV standard, Dual-Interface EMV cards issued in the United States will gain share relative to Contact EMV cards, further expanding the dollar value of our market opportunity.
 Our Market
        Consumer payments in the United States and globally have shifted over the last several decades from paper-based media such as cash and checks to card-based media such as credit, debit and Prepaid Debit Cards, and electronic methods such as pre-authorized payments through ACH. The Nilson Report estimates that card-based payments have increased from 38.3% of U.S. transactions in 2005 to
 
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56.5% in 2013, and electronic payments have increased from 4.3% to 7.2% over the same period. By 2018, card-based payments are projected to comprise 69.2% of U.S. transactions, with cash and checks accounting for 21.4% and electronic payments representing the remaining 9.4%. We believe that this long-term trend of card-based and electronic payments replacing cash and checks will continue.
        According to First Annapolis, 976 million Financial Payment Cards were produced for the U.S. market in 2014 and this number is estimated to grow to 1.2 billion cards by 2019, representing a compound annual growth rate ("CAGR") of 4.3%. The primary driver of growth is an increasing adoption of Prepaid Debit Cards, along with steady growth in debit and credit cards. On a dollar basis, the U.S. Financial Payment Card market (excluding services) was $371 million in 2014 (up from $180 million in 2013) and is anticipated to grow to $1.2 billion by 2019, driven by the EMV conversion and unit volume growth. This market can be divided as follows:
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Bank debit cards (368 million cards in 2014; 1.5% forecasted CAGR during 2014-2019).   Bank debit cards generally are issued by financial institutions to their customers as a convenient way to access funds under the custody of the issuer. Bank debit cards are issued on the networks of the Payment Card Brands and Interac (in Canada) or similar debit networks and are usable anywhere on the card network to withdraw cash from ATMs or pay merchants for goods and services. There are over 10,000 banks, credit unions and other organizations that issue such cards in the United States. 

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General purpose credit cards (332 million cards in 2014; 4.0% forecasted CAGR during 2014-2019). General purpose credit cards are issued by financial institutions, as well as certain Payment Card Brands including American Express and Discover. All general purpose credit cards are issued on the networks of the Payment Card Brands and usable anywhere on the card network to pay merchants for goods and services or to withdraw cash from ATMs. There are over 4,800 banks, credit unions, card networks and other organizations that issue such cards in the United States. 

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Prepaid debit cards (276 million cards in 2014; 8.0% forecasted CAGR during 2014-2019).   Prepaid debit cards share many of the functional features and conveniences of traditional bank debit cards; they are issued on the network of a Payment Card Brand and usable in the same manner as a bank debit card. However, these cards are not linked to a traditional bank account, are easier to acquire and require cardholders to load money onto the card in advance of any transaction. Prepaid Debit Cards are often issued for use as gift cards (in place of a cash or check gift), for payroll purposes (as an alternative to paper payroll checks), or by employers and government agencies for benefits or incentives. Additionally, GPR Cards, which are registered by the cardholder with the issuing bank or licensed money transmitter in order to reload the card's monetary value, have emerged as an important part of the Prepaid Debit Card market, particularly for low-income and younger consumers. The Prepaid Debit Card market is expected to experience the highest annual growth rate from 2014-2019 as adoption across Prepaid Debit Card products increases.
        According to First Annapolis, the demand for bank debit and general purpose credit cards has been predictable and recurring in nature, with 88% of cards issued in 2014 directly replacing existing cards. This includes the regular renewal of cards (53% of 2014 issuances, which are generally renewed every three to five years due to fixed expiration dates), cards lost, stolen or replaced due to fraudulent usage (19% of 2014 issuances) and portfolio churn (16% of 2014 issuances, when cardholders move from one card program to another). The remaining demand is the issuance of cards in conjunction with net new account growth (12% of 2014 issuances). The issuance of Prepaid Debit Cards has represented a similarly predictable and recurring source of demand, as a majority of Prepaid Debit Cards have an average estimated card life of less than twelve months.
        In addition, according to First Annapolis, outsourced card data personalization services for Financial Payment Cards represented a $417 million market in the United States in 2014 and is
 
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estimated to grow to $604 million by 2019, representing a 7.7% CAGR. The process of personalization involves assigning unique identification numbers and encrypting authentication data (such as a cardholder's account number, name and other data) onto cards, embossing and encoding personal information onto the cards and distributing personal identification numbers ("PINs") and fully packaged cards to individual cardholders. We believe the value of the market for personalization services will grow over the next several years due to the growth of overall cards in circulation and the U.S. EMV conversion, which is expected to increase revenues for service providers as personalizing EMV cards incorporates higher value added services than the process for non-EMV cards.
 Our Products and Services
        Our leading market position is supported by our comprehensive end-to-end Financial Payment Card solutions offering which meets the stringent security requirements of the Payment Card Brands and our customers. This comprehensive offering of end-to-end solutions drives deep customer integration and long-term trusted relationships with our customers, many of which we have served for decades.
•
EMV Financial Payment Cards (Contact and Dual-Interface) (37% of LTM net sales).   We produce Contact EMV cards, which feature a microprocessor that interfaces with an EMV payment terminal over a contact plate on the surface of the card when inserted into an EMV-enabled payment terminal. We also produce Dual-Interface EMV cards, which feature both the contact EMV technology and a RFID antenna that utilizes near field communications ("NFC") technology to allow transactions to also be processed on a contactless basis when the card is brought within the requisite proximity to a NFC enabled payment terminal. 

•
Non-EMV Financial Payment Cards and Retail Gift Cards (22% of LTM net sales).   We produce non-EMV cards that utilize magnetic stripes, contactless cards which utilize NFC technology and cards that include both magnetic stripes and NFC technology. In addition, we produce retail gift cards (which are not issued on the network of the Payment Card Brands) primarily in the U.K. and Canada. 

•
Card Data Personalization (18% of LTM net sales).   We provide data preparation and card data personalization solutions for debit, credit and Prepaid Debit Cards in EMV and non-EMV card formats. Our personalization services are technology-driven and provide a wide range of card customization options, using advanced processes to personalize (encode, program and emboss with data such as cardholder name and account number) and fulfill cards to individual cardholders. In addition, we provide EMV data script development services for our customers and in certain cases generate PIN numbers and mailers on their behalf. We offer patented card design software, known as MYCA™, which provides our customers and their cardholders the ability to design cards on the internet and customize cards with individualized digital images. We also offer integrated business continuity services to card issuers that provide their own card issuance and personalization services, providing an alternate site to personalize and fulfill cards in the event of a business disruption at their captive sites. 

•
Tamper-Evident Security Packaging Solutions (19% of LTM net sales).   We offer specialized and innovative tamper-evident security packaging products and services to customers with a Prepaid Debit Card offering that reduce fraud for Prepaid Debit Cards sold through the retail channel. The majority of the tamper-evident security packaging we produce is protected by our patents. In certain cases, we also manage the fulfillment of fully-completed Prepaid Debit Card packages to retail locations on behalf of our customers utilizing this solution. 

•
Instant Card Issuance Systems and Services (4% of LTM net sales).   We offer Card@Once®, our proprietary and patented instant card issuance system and services, which provide our card issuing bank customers the ability to issue a completely personalized permanent debit card
 
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within the bank branch to individual cardholders upon demand. Our instant issuance system generates both system sales and recurring revenue from software as a service, card personalization and sales of cards and consumables. As of June 30, 2015, we had over 3,400 instant issuance systems installed in bank and credit union branches across the United States. In addition, we provide instant issuance of debit cards to large financial institutions whereby we provide fully-personalized temporary debit cards which are issued to card holders upon opening a new account, and we manage the fulfillment and replenishment of these fully personalized cards directly to thousands of individual bank branches.
 Our Competitive Strengths
•
Leading Market Position with Long-Term Customer Relationships.   We estimate that we produce approximately 35% of all Financial Payment Cards in the United States, which we believe gives us the #1 market position by unit volume. We are a trusted partner across the markets we serve and believe we have the #1 position in the U.S. prepaid debit market (which represents the fastest growing subset of the Financial Payment Card market in the United States), serving the top five U.S. Prepaid Debit Card program managers, a leading position in the U.S. large issuer market, serving the majority of the top 20 U.S. debit and credit card issuers, and the #1 position in the highly attractive U.S. small issuer market, which includes independent community banks and credit unions, driven by our strong relationships, capabilities and technologies. As a market leader, CPI has long-standing trust-based relationships with our key customers and often deep process and technology integration, particularly in the case of customers who utilize our card services and instant issuance systems and services. The solutions that we provide require strict data integrity, and generally card issuers are reluctant to switch away from trusted providers due to the requirements for high-security and access to highly-sensitive cardholder information. As a result, our customers are selective about the partners with which they work and typically seek out partners who have a well-established reputation for trust and quality and are able to meet their service requirements.
We serve a diverse set of over 4,000 direct and indirect customers, including many of the largest North American issuers of debit and credit cards such as JPMorgan Chase, Bank of America, American Express and Wells Fargo, as well as the largest global managers of Prepaid Debit Card programs, including InComm, Green Dot, Blackhawk Network and American Express. We have long-standing relationships with our customers, many of whom we have served for decades and provide a differentiated level of service. We also maintain important relationships with the Payment Card Brands to ensure our facilities and processes consistently meet their standards.
•
Well Positioned for EMV Conversion in the United States.   As a leading provider of integrated credit, debit and Prepaid Debit Card solutions in North America, we are well-positioned to capitalize on the U.S. market conversion to EMV. We serve our customers through a network of nine production and card services facilities, including seven high-security facilities in North America that are each certified by one or more of the Payment Card Brands (Visa, MasterCard, American Express and Discover), Interac (in Canada) and, where required by our customers, the PCI Security Standards Council. We have made significant investments in our physical infrastructure and equipment platform to prepare for the EMV conversion including opening a dedicated EMV technology center in Colorado for EMV production and personalization and significant information technology, human capital and equipment upgrades across our network of facilities. 

•
Comprehensive End-to-End Card Solutions Drive Deep Customer Integration.   The foundation of our strong market position is our comprehensive end-to-end Financial Payment Card solutions. Our solutions provide a full suite of products and card services required to produce, personalize and fulfill Financial Payment Cards, while maintaining the most stringent security requirements
 
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of the Payment Card Brands. We are integral to many of our customers' card programs, pairing card production with an end-to-end offering of card data personalization and card services that are deeply integrated within our customers operations. We provide card data personalization services for more than 3,200 financial institutions and managers of Prepaid Debit Card programs that require extensive technology integration, such as secure data links to transfer highly sensitive cardholder information. Similarly, our installed base of more than 3,400 instant issuance systems at bank and credit union branches across the United States require comparable levels of customer integration, as our Card@Once® instant issuance system utilizes only our secure technology to instantly personalize cards. Certain customers have also integrated our proprietary software into their customer-facing websites to offer card design and customization to their cardholders. We believe that our comprehensive solution allows our customers to choose a single trusted partner to address their card program needs in a cost-effective manner instead of managing multiple suppliers across a complex value chain. We believe our customers choose and retain us for these critical functions, which typically require integrations that are costly and difficult to unwind, due to our reputation as a trusted partner, our high levels of service and proven execution.
•
Certified Network of North American High-Security Facilities.   Our seven high-security North American facilities are each certified by one or more of the Payment Card Brands and Interac (in Canada), forming the largest certified production facility network in North America. The Payment Card Brand certifications allow us to produce cards bearing these brands and provide relevant card services for our issuer customers. Additionally, many of our facilities are also certified by the PCI Security Standards Council and individually by customers. These certification processes are long, complex and costly, and our facilities must comply with the strictest standards of security in order to obtain and retain this designation, which are regularly verified by both the Payment Card Brands and our customers. 

•
Industry Experience and Proprietary and Patented Solutions.   Over the course of our long operating history, we have developed extensive technological, engineering and operational expertise that we believe has made us a leader in our industry for product and process know-how. We believe that our technological and operational know-how, combined with our specific focus on the Financial Payment Card market, gives us a competitive advantage and fosters a culture of innovation. We have developed and acquired significant intellectual property over our operating history and hold 18 U.S. patents, as well as 27 pending U.S. and foreign patent applications, on our Financial Payment Card solutions, including patents on our tamper-evident security packaging used by our customers that have Prepaid Debit Card and instant issuance offerings. We also hold exclusive production rights to certain products the Company has developed as well as patented software solutions such as our MYCA™ offering, which is integrated into the websites of over 300 card issuing banks and other customers. 

•
Strong Management Team.   We have built a strong management team led by Steven Montross, our CEO and President. Mr. Montross has led CPI for six years and under his leadership we have completed three strategic acquisitions and our EBITDA has grown more than three-fold. Our management team, which collectively has more than 140 years of experience in our industry, has established a track record of recognizing and capitalizing on growth opportunities across the markets we serve. Management identified and drove our expansion into Prepaid Debit Card services during the early market adoption period of this card product, which has grown at an estimated 11.8% CAGR since 2009. Similarly, our management team devised and executed on a strategy to develop our card services offering, which was accelerated by our acquisition of EFT Source. Today, we have a card services customer base of more than 3,200 financial institutions and an installed base of more than 3,400 Card@Once® instant issuance systems in U.S. bank branches.
 
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 Our Growth Strategy
        The key components of our strategy include:
•
Capitalize on U.S. EMV Conversion.   The conversion to the EMV standard in the United States is expected to increase the size (measured in dollars) of the Financial Payment Card market (excluding services) from $180 million in 2013 to $1.2 billion by 2019, driven primarily by the increasing levels of card fraud in the United States, the Payment Card Brands' coordinated EMV conversion plan, including the liability shift scheduled for October 1, 2015, and the need for a single global interoperable standard of card acceptance. The conversion of Financial Payment Cards in the United States from magnetic stripe technology to the EMV standard began in earnest in the second half of 2014 and is expected to continue over the next several years, with full adoption in the credit and bank debit card markets expected to be largely complete by 2017 and increasing levels of adoption of Prepaid Debit Cards and Private Label Credit Cards beyond 2017. We believe the conversion to EMV, and subsequently the expected further adoption of the more complex and higher priced Dual-Interface EMV cards, will increase the size (measured in dollars) of our estimated addressable card market by four times over the next decade. In anticipation of the EMV conversion, we invested significantly in our network of facilities (the most extensive in North America), technological infrastructure and human capital resources. We believe our comprehensive solutions offering and proven track record ideally positions us to be our customers' partner of choice to successfully complete the EMV conversion. 

•
Capitalize on Growth in Prepaid Debit Market.   According to First Annapolis, the Prepaid Debit Card market has grown at an 11.8% CAGR from 2009 to 2014 and is expected to continue to grow at an 8.0% CAGR from 2014 to 2019 as consumers increase adoption and additional issuers introduce new products. We believe we are well positioned to capitalize on this continued growth due to our market leading position, supported by our industry expertise and patents and comprehensive end-to-end card solutions. We have driven our leading market position through trust-based relationships with the largest global managers of Prepaid Debit Card programs, including InComm, Green Dot, Blackhawk Network and American Express. Additionally, we have further developed proprietary production techniques which provide us a cost advantage and additional flexibility to meet customer demands. 

•
Capitalize on Growth in Instant Issuance Systems and Services Market.   We acquired our instant card issuance system, Card@Once®, through the acquisition of EFT Source in 2014 and have continued to drive significant growth in sales of our instant issuance systems and related services revenue. We plan to continue to grow our installed base of instant issuance systems in bank branches across the U.S., which was more than 3,400 as of June 30, 2015, to increase our opportunity for continued recurring revenue streams from card personalization which is delivered through our software as a service offering. We believe the U.S. market is in the early stages of instant issuance adoption as, according to First Annapolis, only approximately 20% of U.S. bank branches are equipped with instant issuance solutions. 

•
Cross-Sell Expanded Services Offering Across Customer Base.   We believe our leading market position in card production in North America, combined with recent enhancements to our card services platform, including our acquisition of EFT Source, represents a significant opportunity to cross-sell services across our customer base by offering a comprehensive end-to-end card solution. According to First Annapolis, the dollar value of the U.S. market for outsourced personalization services for Financial Payment Cards is expected to grow from $417 million in 2014 to $604 million in 2019, representing a 7.7% CAGR, and we believe that focused selling efforts of our card services to our existing customers and as part of a complete end-to-end solution, and continued investment in proprietary card services, represents a substantial revenue opportunity and means to further deepen our existing customer relationships. Through our
 
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strong track record in card services, including providing card data personalization services for more than 3,200 financial institutions and managers of Prepaid Debit Card programs and personalizing more than 130 million Financial Payment Cards in 2014, we believe we have established a reputation as a trusted partner and advisor to our customers with the ability to securely manage significant amounts of sensitive and confidential customer data throughout our network. Due to the high costs of failure, such as a data breach, we expect that customers will continue to choose trusted vendors such as CPI that can provide high levels of security, service and certainty to manage these critical functions.
•
Continued Execution on Strategic Acquisitions.   We have a strong track record of acquiring and integrating complementary businesses, completing six acquisitions since 2008, all of which have enhanced our market share, capabilities and capacity. We expect to continue to opportunistically execute strategic acquisitions that give us access to new markets and capabilities while providing a reasonable value proposition to our stockholders.
 Risks Associated with our Business
        As part of your evaluation of our company, you should take into consideration the risks described under "Risk Factors," including the following risks that we face in implementing or executing on our growth strategies and maintaining our profitability:
•
material breaches in the security of our systems; 

•
market acceptance of developing technologies that make Financial Payment Cards less relevant; 

•
a slower or less widespread adoption of EMV technology in the United States than we anticipate; 

•
difficulties in our production processes; 

•
defects in our software; 

•
our failure to meet the standards of security imposed by our customers and the organizations to which they belong; 

•
extension of Financial Payment Card expiration cycles; 

•
failure to identify, attract and retain new customers or a failure to maintain our relationships with our major customers; 

•
our substantial indebtedness; and 

•
infringement on our intellectual property rights, or claims that our technology is infringing on third-party intellectual property.
        See "Risk Factors" beginning on page 18 of this prospectus.
 Recent Developments
 New Credit Facility
        On August 17, 2015, we entered into a first lien credit agreement (the "New Credit Agreement") with a syndicate of lenders providing for a $40 million revolving credit facility (the "New Revolving Credit Facility") with a five year maturity and a $435 million first lien term loan facility (the "New Term Loan Facility" and, together with the New Revolving Credit Facility, the "New Credit Facility") with a seven year maturity. Interest rates under the New Credit Facility are based, at our election, on either a Eurodollar rate plus a margin of 4.50% or a base rate plus a margin of 3.50%. See "Description of Certain Indebtedness." Upon the closing of the New Credit Facility, we drew down the full amount of the New Term Loan Facility and used the net proceeds therefrom to repay
 
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$142.1 million of existing indebtedness, effect the Partial Preferred Redemption as described below, and pay related transaction fees and expenses.
 Preferred Stock Redemption
        On August 17, 2015, we redeemed 62,140 shares of our outstanding preferred stock on a pro rata basis (the "Partial Preferred Redemption") using borrowings under the New Term Loan Facility, for which we are liable. In connection with the Partial Preferred Redemption, we paid an aggregate of $276.3 million in return of capital and accrued dividends to holders of our preferred stock, net of the repayment of certain employee loans. We expect to redeem the remaining 2,576 shares of outstanding preferred stock using approximately $11.5 million of the proceeds from this offering. We also expect to use $             million of the proceeds from this offering to repay borrowings under the New Term Loan Facility incurred in connection with the Partial Preferred Redemption. See "Use of Proceeds."
 Principal Equityholder
        Tricor Pacific Capital Partners (Fund IV), Limited Partnership and Tricor Pacific Capital Partners (Fund IV) US, Limited Partnership (collectively, the "Tricor Funds"), both investment funds managed by an affiliate of Tricor Pacific Capital, Inc. ("Tricor"), currently collectively own approximately 90.9% of our outstanding preferred stock and 82.6% of our fully diluted common stock. Following this offering, all of our preferred stock will be redeemed, and the Tricor Funds will collectively own approximately         % of our fully diluted common stock. Tricor is a private equity firm with offices in Lake Forest, Illinois and Vancouver, British Columbia that has managed over $1.2 billion of investor capital to date. Since its founding in 1996, Tricor's investment funds have invested in the United States and Canada across a broad spectrum of industries, including the specialty manufacturing, business services and value-added distribution sectors.
 JOBS Act
        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier to occur of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our then most recently completed second fiscal quarter and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We refer to the Jumpstart Our Business Startups Act of 2012 as the "JOBS Act," and references to "emerging growth company" have the meaning given to such term in the JOBS Act.
        An emerging growth company may take advantage of specified exemptions from various requirements that are otherwise generally applicable to public companies in the United States. These provisions include:
•
an exemption to include in an initial public offering registration statement less than five years of selected financial data; and 

•
an exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal control over financial reporting.
        We have availed ourselves in this prospectus of the reduced reporting requirements described above with respect to selected financial data. As a result, the information that we are providing to you may be less comprehensive than what you might receive from other public companies.
 
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        In addition, the JOBS Act provides that an emerging growth company may delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
 Corporate Information
        CPI Card Group Inc. is a Delaware corporation. We were initially formed as CPI Holdings I, Inc. in June 2007 and changed our name to CPI Card Group Inc. in August 2015. Our principal executive offices are located at 10368 West Centennial Road, Littleton, CO 80127, and our telephone number is (303) 973-9311. Our website is www.cpicardgroup.com. Information contained on our website is not incorporated by reference into this prospectus, and such information should not be considered to be part of this prospectus.
 
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 THE OFFERING

			
Common stock offered by us	 	             shares	
Common stock offered by the selling stockholders	 	             shares	
Common stock to be outstanding after this offering	 	             shares	
Underwriters' option to purchase additional shares	 	The selling stockholders have granted the underwriters an option to purchase up to            additional shares of common stock within 30 days of the closing date of this offering. See "Underwriting."	
Use of proceeds	 	We estimate that our net proceeds from the sale of the common stock that we are offering will be approximately $            , assuming an initial public offering price of $            per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of common stock by the selling stockholders.	
	 	We intend to use the net proceeds from this offering to redeem the remaining outstanding shares of our preferred stock, to terminate our phantom stock plan and to satisfy all liabilities due thereunder and to repay outstanding indebtedness under our New Credit Facility incurred in connection with the Partial Preferred Redemption. See "Use of Proceeds."	
Exchange Listing	 	It is a condition to the completion of this offering that our common stock be listed on the NASDAQ Global Select Market and the Toronto Stock Exchange. We have applied to list our common stock on the NASDAQ Global Select Market under the symbol "PMTS."	
Risk Factors	 	You should read the "Risk Factors" section of this prospectus for a discussion of facts to consider carefully before deciding to invest in shares of our common stock.	
        Unless otherwise indicated, all information in this prospectus relating to the number of shares of common stock:
•
assumes no exercise by the underwriters of their option to purchase up to            additional shares from us; 

•
excludes             shares of common stock issuable upon exercise of options to purchase shares outstanding as of                         , 2015 under the CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan (the "Option Plan") at a weighted average exercise price of $            per share;
 
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•
excludes an aggregate of             shares of our common stock reserved for issuance under the CPI Card Group Inc. Omnibus Incentive Plan that we intend to adopt in connection with this offering (the "Omnibus Plan"); and 

•
gives effect to the            -for-one stock split which will be effected prior to the consummation of this offering.
 
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 SUMMARY CONSOLIDATED HISTORICAL FINANCIAL DATA
        The following tables set forth our summary consolidated historical financial data. You should read the information set forth below in conjunction with "Use of Proceeds," "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated historical financial statements and notes thereto of CPI included elsewhere in this prospectus. The historical statements of income data for the years ended December 31, 2014, 2013 and 2012 and the balance sheet data as of December 31, 2014 and 2013 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The historical statements of income data for the six months ended June 30, 2015 and 2014 and the balance sheet data as of June 30, 2015 are derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. Results of interim periods are not necessarily indicative of the results expected for a full year or for future periods. The historical statement of income data for the twelve months ended June 30, 2015 are derived by adding data from our audited statement of income for the year ended December 31, 2014 to data from our unaudited statement of income for the six months ended June 30, 2015 and subtracting data from our unaudited statement of income for the six months ended June 30, 2014. Results for the twelve months ended June 30, 2015 include ten months of results from EFT Source, which we acquired in September 2014. See "Index to Consolidated Financial Statements."
 
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 	 	Six Months
Ended
June 30,	 	 	 	 	 	 	 	 	 	
 			 	Twelve Months
Ended
June 30,
2015	 	Year Ended December 31,	 	
Statement of Income Data: 	 	2015	 	2014			 	2014	 	2013	 	2012	 	
 	 	(unaudited)	 	(unaudited)	 	 	 	 	 	 	 	
 	 	(in thousands except share and per share data)	 	
Net sales	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Products	 	 $	112,771	 	 $	58,905	 	 $	213,086	 	 $	159,220	 	 $	101,360	 	 $	98,969	 	
Services	 	 	60,075	 	 	36,862	 	 	124,999	 	 	101,786	 	 	95,010	 	 	84,817	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total net sales	 	 	172,846	 	 	95,767	 	 	338,085	 	 	261,006	 	 	196,370	 	 	183,786	 	
Cost of sales	 	 	111,503	 	 	69,969	 	 	220,813	 	 	179,279	 	 	136,874	 	 	130,897	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Gross profit	 	 	61,343	 	 	25,798	 	 	117,272	 	 	81,727	 	 	59,496	 	 	52,889	 	
Operating expenses	 	 	29,959	 	 	16,262	 	 	60,952	 	 	47,255	 	 	33,347	 	 	32,985	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income from operations	 	 	31,384	 	 	9,536	 	 	56,320	 	 	34,472	 	 	26,149	 	 	19,904	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest, net	 	 	(3,505	)	 	(3,444	)	 	(7,569	)	 	(7,508	)	 	(7,838	)	 	(5,765	)	
Foreign currency gain (loss)	 	 	149	 	 	(211	)	 	236	 	 	(124	)	 	(142	)	 	(279	)	
Loss on debt modification and early extinguishment          	 	 	—	 	 	—	 	 	(476	)	 	(476	)	 	—	 	 	—	 	
Gain on purchase of ID Data	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	604	 	
Other income (expense)	 	 	61	 	 	19	 	 	(59	)	 	(101	)	 	18	 	 	171	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income before income taxes	 	 	28,089	 	 	5,900	 	 	48,452	 	 	26,263	 	 	18,187	 	 	14,635	 	
Provision for income taxes	 	 	(9,974	)	 	(2,334	)	 	(17,931	)	 	(10,291	)	 	(6,988	)	 	(5,909	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income from continuing operations	 	 	18,115	 	 	3,566	 	 	30,521	 	 	15,972	 	 	11,199	 	 	8,726	 	
Loss from discontinued operations, net of taxes (1)	 	 	(606	)	 	(2,763	)	 	(513	)	 	(2,670	)	 	(2,612	)	 	(3,796	)	
Gain on sale of discontinued operation, net of taxes (1)	 	 	887	 	 	—	 	 	887	 	 	—	 	 	—	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income	 	 $	18,396	 	 $	803	 	 $	30,895	 	 $	13,302	 	 $	8,587	 	 $	4,930	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income (loss) per share: (2)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and Diluted—Continuing Operations	 	 $	(3.86	)	 $	(9.32	)	 $	(9.77	)	 $	(15.22	)	 $	(12.89	)	 $	(14.73	)	
Basic and Diluted—Discontinued Operations	 	 	0.15	 	 	(1.48	)	 	0.20	 	 	(1.43	)	 	(1.40	)	 	(2.02	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total	 	 $	(3.71	)	 $	(10.80	)	 $	(9.57	)	 $	(16.65	)	 $	(14.29	)	 $	(16.75	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Weighted average shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and Diluted	 	 	1,877,857	 	 	1,868,816	 	 	1,877,176	 	 	1,872,693	 	 	1,866,925	 	 	1,875,674	 	
Other Financial Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 $	8,040	 	 $	5,614	 	 $	15,678	 	 $	13,252	 	 $	11,595	 	 $	10,514	 	
Capital expenditures	 	 	10,390	 	 	6,578	 	 	19,380	 	 	15,568	 	 	10,628	 	 	9,113	 	
EBITDA (3)	 	 	39,634	 	 	14,958	 	 	71,699	 	 	47,023	 	 	37,620	 	 	30,914	 	
Adjusted EBITDA (3)	 	 	41,897	 	 	14,577	 	 	81,538	 	 	54,219	 	 	38,372	 	 	30,589	 	

																	
 	 	 	 	 	 	As Further
Adjusted (5)	 	 	 	 	 	
 	 	 	 	As Adjusted (4)			 	 	 	 	 	
 	 	 					 	As of December 31,	 	
 	 	As of
June 30,
2015	 	As of June 30,
2015	 	As of June 30,
2015			 	
Consolidated Balance Sheet Data: 							 	2014	 	2013	 	
 	 	(unaudited)	 	(unaudited)	 	(unaudited)	 	 	 	 	 	
 	 	(in thousands)	 	
Cash and cash equivalents	 	 $	13,007	 	 $	8,583	 	 $	 	 	 $	12,941	 	 $	9,702	 	
Total current assets	 	 	107,808	 	 	103,384	 	 	 	 	 	88,719	 	 	65,958	 	
Net property, equipment and leasehold improvements	 	 	48,431	 	 	48,431	 	 	 	 	 	44,772	 	 	36,650	 	
Total assets	 	 	287,784	 	 	300,568	 	 	 	 	 	266,624	 	 	171,867	 	
Total debt	 	 	167,420	 	 	444,000	 	 	 	 	 	179,424	 	 	122,306	 	
Total stockholders' deficit	 	 	(3,690	)	 	(224,762	)	 	 	 	 	(21,694	)	 	(36,896	)	
 
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 	 	Six Months
Ended
June 30,	 	Twelve
Months
Ended
June 30,
2015	 	 	 	 	 	 	 	
 					 	Year Ended December 31,	 	
Other Data: 	 	2015	 	2014			 	2014	 	2013	 	2012	 	
 	 	(in thousands)	 	
Financial Payment Card Shipments	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
EMV	 	 	75,164	 	 	13,921	 	 	125,088	 	 	63,845	 	 	6,769	 	 	5,015	 	
Non-EMV	 	 	111,240	 	 	157,018	 	 	251,607	 	 	297,385	 	 	297,862	 	 	323,817	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total	 	 	186,404	 	 	170,939	 	 	376,695	 	 	361,230	 	 	304,631	 	 	328,832	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(1)
We sold our operating segment located in Nevada in January 2015. This operating segment primarily produced retail gift cards that are not issued on the networks of the Payment Card Brands. Accordingly, our consolidated balance sheets, statements of operations and comprehensive income (loss), and statements of cash flows have been reclassified to present this operating segment as a discontinued operation as of and for the years ended December 31, 2014, 2013 and 2012 and the six months ended June 30, 2015 and 2014. See Note 4 (Discontinued Operation and Disposition) to our audited consolidated financial statements and Note 3 (Discontinued Operation and Disposition) to our unaudited condensed consolidated financial statements, each appearing elsewhere in this prospectus.

(2)
For a computation of historical basic and diluted earnings per share attributable to continuing and discontinued operations, see Note 14 (Earnings per Share) to our audited consolidated financial statements and Note 13 (Earnings per Share) to our unaudited condensed consolidated financial statements, each appearing elsewhere in this prospectus.

(3)
EBITDA is defined as income from continuing operations before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus adjustments for foreign currency gain or loss, loss on debt modification and early extinguishment, gain on purchase of ID Data, non-cash compensation expense related to our phantom stock plan that will be terminated in connection with this offering, performance bonuses in connection with the EFT Source acquisition and investment banking and related fees. EBITDA and Adjusted EBITDA are non-GAAP financial measures that do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. EBITDA and Adjusted EBITDA (collectively, the "Non-GAAP Financial Measures") are the primary measures used by our management to evaluate operating performance. We believe the Non-GAAP Financial Measures are useful to investors because they provide a means to evaluate our operating performance on an ongoing basis using criteria that are used by our internal decision makers and because they are frequently used by investors and other interested parties when comparing companies in our industry that have different financing and capital structures and/or tax rates. We believe the Non-GAAP Financial Measures are meaningful measures because they present a transparent view of our recurring operating performance and allow management to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance. The Non-GAAP Financial Measures, however, are not measures of our liquidity or financial performance under GAAP and should not be considered as an alternative to net income (loss), income (loss) from operations, or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity. The use of the Non-GAAP Financial Measures instead of net income (loss) has limitations as an analytical tool, including the inability to determine profitability; the exclusion of interest expense, interest income and associated significant cash requirements; and the exclusion of depreciation and amortization, which represent unavoidable operating costs. The Non-GAAP Financial Measures are not necessarily

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comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.

The following is a reconciliation of net income from continuing operations to EBITDA and Adjusted EBITDA:

																				
 	 	Six Months
Ended
June 30,	 	 	 	 	 	 	 	 	 	
 			 	Twelve Months
Ended
June 30,
2015	 	Year Ended December 31,	 	
 	 	2015	 	2014			 	2014	 	2013	 	2012	 	
 	 	(in thousands)	 	
Net income from continuing operations	 	 $	18,115	 	 $	3,566	 	 $	30,521	 	 $	15,972	 	 $	11,199	 	 $	8,726	 	
Depreciation and amortization	 	 	8,040	 	 	5,614	 	 	15,678	 	 	13,252	 	 	11,595	 	 	10,514	 	
Interest, net	 	 	3,505	 	 	3,444	 	 	7,569	 	 	7,508	 	 	7,838	 	 	5,765	 	
Provision for income taxes	 	 	9,974	 	 	2,334	 	 	17,931	 	 	10,291	 	 	6,988	 	 	5,909	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
EBITDA	 	 $	39,634	 	 $	14,958	 	 $	71,699	 	 $	47,023	 	 $	37,620	 	 $	30,914	 	
Foreign currency (gain) loss	 	 	(149	)	 	211	 	 	(236	)	 	124	 	 	142	 	 	279	 	
Loss on debt modification and early extinguishment (a)	 	 	—	 	 	—	 	 	476	 	 	476	 	 	—	 	 	—	 	
Gain on purchase of ID Data (b)	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(604	)	
Non-cash compensation expense (c)	 	 	1,503	 	 	(591	)	 	6,628	 	 	4,534	 	 	610	 	 	—	 	
EFT Source performance bonuses (d)	 	 	500	 	 	—	 	 	500	 	 	—	 	 	—	 	 	—	 	
Investment banking and related fees (e)	 	 	409	 	 	—	 	 	2,471	 	 	2,062	 	 	—	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Adjusted EBITDA	 	 $	41,897	 	 $	14,577	 	 $	81,538	 	 $	54,219	 	 $	38,372	 	 $	30,589	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(a)
Represents loss on the modification of our indebtedness in connection with the acquisition of EFT Source.

(b)
Represents gain on our purchase of certain assets of ID Data, Limited.

(c)
Represents compensation expense incurred in connection with our phantom stock plan. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Phantom Stock Plan" and "Executive Compensation—CPI Acquisition, Inc. Phantom Stock Plan."

(d)
Represents performance bonuses earned in connection with the acquisition of EFT Source.

(e)
Includes investment banking, advisory and related professional fees and expenses incurred in connection with the EFT Source acquisition and our consideration of liquidity alternatives.
(4)
The as adjusted balance sheet data gives effect to our entering into the New Credit Agreement, repaying borrowings under our previously outstanding term loan facility and completing the Partial Preferred Redemption. See "Prospectus Summary—Preferred Stock Redemption."

(5)
The as further adjusted balance sheet data gives further effect to (i) the issuance of             shares of common stock in this offering and (ii) our application of the estimated net proceeds from the sale of shares of common stock offered by us in this offering at an assumed initial public offering price of $            per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. See "Use of Proceeds." The as further adjusted information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering.
 
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 RISK FACTORS
         An investment in our common stock involves a high degree of risk and many uncertainties. You should carefully consider the specific factors listed below together with the other information included in this prospectus before purchasing our common stock in this offering. If any of the possibilities described as risks below actually occurs, our operating results and financial condition would likely suffer and the trading price of our common stock could fall, causing you to lose some or all of your investment. The following is a description of what we consider the key challenges and material risks to our business and an investment in our common stock.
 Risks Related to Our Business
 Material breaches in the security of our systems may have a significant effect on our business.
        The reliability and security of our information technology (IT) infrastructure and our ability to protect sensitive and confidential information for our customers, which include many financial institutions, is critical to our business. Our handling of sensitive cardholder data, including cardholder names, account numbers and similar information, makes us a potential target of cyber attacks and threats to our secure IT systems. We may face attempts by others to penetrate our computer systems and networks to misappropriate this information or interrupt our business. Any system or network disruption could result in a loss of our intellectual property, the release of sensitive cardholder information, customer or employee personal data, or the loss of production capabilities at one or more of our production facilities. The protective measures we have in place may not prevent system or network disruptions and may be insufficient to prevent or limit the damage from any future security breaches.
        In addition, our encryption systems are at risk of being breached or decoded. Smart cards are equipped with keys that encrypt and decode messages in order to secure transactions and maintain the confidentiality of data. The security afforded by this technology depends on the integrity of the encryption keys and the complexity of the algorithms used to encrypt and decode information. Any significant advances in technology that enable the breach of cryptographic systems, malicious software infiltration or allow for the exploitation of weaknesses in such systems, could result in a decline in the security we are able to provide through this technology. Any material breach of our secured systems could harm our competitive position, result in a loss of customer trust and confidence, and cause us to incur significant costs to remedy the damages caused by system or network disruptions, whether caused by cyber attacks, security breaches or otherwise, which could ultimately have an adverse effect on our business, financial condition and results of operations. In addition, as these threats continue to evolve, we may be required to invest significant additional resources to modify and enhance our information security and controls or to investigate and remediate any security vulnerabilities.
 New and developing technology solutions and products could make our existing technology solutions and products obsolete or irrelevant, and if we are unable to introduce new products and services in a timely manner, our business could be adversely affected.
        The markets for our products and services are subject to technological changes, frequent introductions of new products and services and evolving industry standards. In particular, the rise in the adoption in wireless payment systems or mobile payments may make physical cards less attractive as a method of payment. Although to date we have not seen any reduction in card-based payments resulting from the emergence of mobile payment applications, mobile payments offer consumers an alternative method to make purchases without the need to carry a physical card and could, if widely adopted, reduce the number of Financial Payment Cards issued to consumers. In addition, other new and developing technology solutions and products could make our existing technology solutions and products obsolete or irrelevant.
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        Our ability to enhance our current products and services and to develop and introduce innovative products and services that address the increasingly sophisticated needs of our customers will significantly affect our future success. We may not be successful in developing, marketing or selling new products and services that meet these changing demands. In addition, we may experience difficulties that could delay or prevent the successful development, introduction or marketing of these services, or our new services and enhancements may not adequately meet the demands of the marketplace or achieve market acceptance. We continually engage in significant efforts to innovate and upgrade our products and services. If we are unsuccessful in completing or gaining market acceptance of new products, services and technologies, it would likely have a material adverse effect on our ability to retain existing customers or attract new ones.
        Our ability to develop and deliver new products and services successfully will depend on various factors, including our ability to:
•
identify and capitalize upon opportunities in new and emerging geographical and product markets effectively; 

•
invest resources in innovation and research and development; 

•
complete and introduce new products and integrated services solutions in a timely manner; 

•
license any required third-party technology or intellectual property rights; 

•
qualify for and obtain required industry certification for our products; and 

•
comply with applicable data protection regulations.
        Opportunities to bundle or package products and service offerings and the ability to cross-sell products and services are critical to remaining competitive in our industry. As a result, part of our business strategy is to develop new products and services that may be used in conjunction with or in addition to our existing offerings. If we are unable to identify adequate opportunities to cross-sell our products and services, our financial condition could be negatively impacted. Furthermore, if we are unable to develop and introduce new and innovative products in a cost-effective and timely manner, our product and service offerings could be rendered obsolete, which could have an adverse effect on our business, financial condition and results of operations.
 The adoption of EMV technology and dual-interface capability in the United States may not be as rapid or widespread as we anticipate, which could adversely affect our growth.
        We have made significant investments in our North American EMV production capabilities. In particular, in 2014, we opened a 50,000 square foot technology center in Colorado dedicated to EMV production and personalization and enhanced our EMV capabilities across our network. Our ability to grow depends significantly on whether U.S. card issuing banks incorporate EMV technology as part of their new technological standards and, following the initial conversion to EMV, whether such banks issue Dual-Interface EMV cards. Banks may be delayed in transitioning to the issuance of EMV cards or Dual-Interface EMV cards due to increased costs and other factors. If these entities do not continue to deploy EMV and Dual-Interface EMV technology or deploy such technology less quickly and/or completely than we expect, the consequence could have an adverse effect on our business, financial condition and results of operations.
 Our business could suffer from production problems.
        We produce our products using processes that are highly complex, require advanced and costly equipment and must continually be modified to improve yields and performance. Difficulties in the production process can reduce yields or interrupt production and, as a result of such problems, we may on occasion not be able to deliver products or do so in a timely or cost-effective manner. As the complexity of both our products and our technological processes has become more advanced,
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production tolerances have been reduced and requirements for precision have become more demanding. We may suffer disruptions in our production, either due to production difficulties, such as machinery or technology failures, or as a result of external factors beyond our control, such as interruption of our electrical service or a natural disaster. Any such event could have an adverse effect on our business, financial condition and results of operations.
 We may experience software defects, which could harm our business and reputation and expose us to potential liability.
        Our services are based on sophisticated software and computing systems, and the software underlying our services may contain undetected errors or defects when first introduced or when new versions are released. In addition, we may experience difficulties in installing or integrating our technology on systems used by our clients. Defects in our software, errors or delays in the processing of electronic transactions or other difficulties could result in the interruption of business operations, delays in market acceptance, additional development and remediation costs, diversion of technical and other resources, loss of clients, negative publicity or exposure to liability claims. Although we attempt to limit our potential liability through disclaimers and limitation of liability provisions in our license and client agreements, we cannot be certain that these measures will successfully limit our liability.
 Our failure to operate our business in accordance with the standards of the PCI Security Standards Council or other industry standards applicable to our customers, such as Payment Card Brand certification standards, could have a material adverse effect on our business.
        Many of our customers issue their cards on the networks of the Payment Card Brands that are subject to the standards of the PCI Security Standards Council or other standards and criteria relating to service providers' and manufacturers' facilities, products and physical and logical security which we must satisfy in order to be eligible to supply products and services to these customers. Most of our contractual arrangements with our customers may be terminated if we fail to comply with these standards and criteria.
        We make significant investments to our network of seven North American and one European high-security facilities in order to meet these standards and criteria, including investments required to satisfy changes adopted from time to time in their respective standards and criteria. Further investments may be costly, and if we are unable to continue to meet these standards and criteria, we may become ineligible to provide products and services that have constituted in the past an important part of our revenues and profitability. For the year ended December 31, 2014, the vast majority of the products we produced and services we provided were subject to certification with one or more of the Payment Card Brands. If we were to lose our certification from one or more of the Payment Card Brands, Interac (in Canada) or PCI certification for one or more of our facilities, we may lose the ability to produce cards for or provide services to banks issuing credit or debit cards on the networks of the Payment Card Brands. If we are not able to produce cards for or provide services to any or all of the issuers issuing debit or credit cards on such networks, we could lose a substantial number of our customers and our financial condition and results of operations would be adversely affected.
 The continued adoption of EMV technology may cause our customers to extend their expiration cycles, which could reduce the volume of cards they purchase from us.
        We estimate that, on average, bank debit cards and general purpose credit cards have historically been renewed every three years due to fixed expiration dates, and this regular renewal cycle is a significant driver of demand for Financial Payment Cards. As card issuers continue to adopt EMV technology, First Annapolis estimates that certain issuers of bank debit cards and general purpose credit cards will extend the length of time that each card may be active prior to expiration from three years to four or five years in order to reduce the costs associated with issuing more expensive EMV cards. As a result of this longer reissuance cycle, we may experience a decreased demand for bank
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debit cards and general purpose credit cards. If the reissuance cycle is significantly extended beyond historical averages, demand from our customers for our products may decrease significantly and our business, financial condition and results of operations could be materially and adversely affected.
 Demand for credit cards may be adversely impacted by U.S. and global market and economic conditions.
        For the foreseeable future, we expect to continue to derive most of our revenue from products and services we provide to the financial services industry. Given this concentration, we are exposed to the economic conditions affecting the financial services industry in North America and Europe. In particular, prolonged economic downturns typically have resulted in significant reductions in the demand for general purpose credit cards due to tightening credit conditions. A prolonged poor economic environment could result in significant decreases in demand by current and potential customers for our products and services, which could have a material adverse effect on our business, results of operations and financial condition.
 Failure to identify, attract and retain new customers or a failure to maintain our relationships with our major customers could adversely affect our business.
        Our business is dependent upon our ability to identify, attract and retain new customers and to maintain our relationships with our existing customers. A decline in the business of our large customers or a failure to retain such customers may adversely affect our business, financial condition and results of operations.
        A substantial portion of our net sales is derived from several large customers. Our top five customers as of December 31, 2014 accounted for approximately 33.9% of our pro forma net sales (37.8% of our reported net sales) for the year ended December 31, 2014, and our top customer accounted for approximately 10.1% of our pro forma net sales (11.3% of our reported net sales) for the same period. Our continued business relationship with these customers, and the renewal of key contracts by major customers, may be impacted by several factors beyond our control, including more attractive product offerings from our competitors, pricing pressures or the financial health of these customers. Many of our key customers operate in competitive businesses, and their demand and market positions may vary considerably. These customers depend on favorable macroeconomic conditions and are impacted by the availability of affordable credit and capital, the level and volatility of interest rates, inflation, employment levels and consumer confidence, among other factors.
        With most of our key customers, we enter into long-term master agreements that govern the general terms and conditions of our commercial relationships. We then enter into purchase order or other short-term agreements that define the prices and the quantities of products to be delivered. Usually, our contractual arrangements include neither exclusivity clauses nor commitments from our customers to order any given quantities of products on a medium-term or longer basis.
        Therefore, we may not be able to maintain our market share with our key customers, which in turn could affect the revenue streams upon which we currently rely. Furthermore, there is no guarantee that we will be able to renew or win significant contracts in a given year. If we were to lose important programs for our products with any of our key customers, or if any key customer were to reduce or change its contract, seek alternate suppliers, increase its product returns or become unable or otherwise fail to meet its payment obligations, our business, financial condition and results of operations could be materially adversely affected.
 Our outstanding indebtedness may impact our business and may restrict our growth and results of operations.
        As of August 17, 2015, we had $444.0 million of total indebtedness outstanding, including $435.0 million outstanding under our New Term Loan Facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and "Description of Certain Indebtedness."
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        We may incur additional indebtedness in the future to help fund the growth of our business, subject to market and other conditions. Our substantial indebtedness and interest expense could have important consequences to us, including:
•
limiting our ability to use a substantial portion of our cash flow from operations in other areas of our business, including for working capital, capital expenditures and other general business activities, because we must dedicate a substantial portion of these funds to service our debt; 

•
requiring us to seek to incur further indebtedness in order to make the capital expenditures and other expenses or investments planned by us to the extent our future cash flows are insufficient; 

•
limiting our ability to obtain additional financing in the future for working capital, capital expenditures, debt service requirements, acquisitions and the execution of our growth strategy, and other expenses or investments planned by us; 

•
limiting our flexibility and our ability to capitalize on business opportunities and to react to competitive pressures and adverse changes in government regulation, our business and our industry; 

•
limiting our ability to satisfy our obligations under our indebtedness (which could result in an event of default and acceleration if we fail to comply with the requirements of our indebtedness); 

•
increasing our vulnerability to a downturn in our business and to adverse economic and industry conditions generally; 

•
placing us at a competitive disadvantage as compared to our competitors that are less leveraged; and 

•
limiting our ability, or increasing the costs, to refinance indebtedness.
        The limitations described above could have a material adverse effect on our business, financial condition, results of operations, prospects, and ability to satisfy our obligations under our indebtedness.
 We may be required to defend against alleged infringement of the intellectual property rights of others and/or may be unable to adequately protect or enforce our own intellectual property rights.
        Companies in our industry aggressively protect and pursue their intellectual property rights. Our products may contain technology provided to us by other parties such as suppliers or customers. We may have little or no ability to determine in advance whether such technology infringes the intellectual property rights of a third party. From time to time, we receive notices that claim we have infringed upon, misappropriated or misused other parties' proprietary rights. Additionally, we receive notices that challenge the validity of our patents. Intellectual property litigation can be expensive, time consuming and distracting to management. An adverse determination in any of these types of disputes could prevent us from producing or offering some of our products and services or could prevent us from enforcing our intellectual property rights. Furthermore, settlements can involve royalty or other payments that could reduce our profit margins and adversely affect our financial results. Our suppliers, customers and licensors may not be required to indemnify us in the event that a claim of infringement is asserted against us, or they may be required to indemnify us only up to a maximum amount, above which we would be responsible for any further costs or damages. Any of these claims or litigation may materially and adversely affect our business, financial condition and results of operations.
        We may also be required to indemnify some customers and strategic partners under our agreements if a third party alleges or if a court finds that our products or activities have infringed upon, misappropriated or misused another party's proprietary rights. Indemnification provisions may, in some circumstances, extend our liability beyond the products we provide and may include consequential damages and/or lost profits. Even if claims or litigation against us are not valid or successfully asserted,
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these claims could result in significant costs and the diversion of the attention of management and other key employees to defend.
        Furthermore, our success and future revenue growth will depend, in part, on our ability to protect our intellectual property. We depend significantly on patents and other intellectual property rights to protect our products, proprietary designs and technological processes against misappropriation by others. We may in the future have difficulty obtaining patents and other intellectual property protection, and the patents and intellectual property rights that we receive may be insufficient to provide us with meaningful protection or commercial advantage. Effective patent, trademark, service mark, copyright and trade secret protection may not be available in every country in which our services are made available. It is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose our technologies and processes, or confidential employee, customer or supplier data. Any of our existing or future patents may be challenged, invalidated or circumvented. We engage in litigation to enforce or defend our intellectual property rights, protect our trade secrets and determine the validity and scope of the proprietary rights of others, including our customers. We also enter into confidentiality agreements with our consultants and strategic partners and control access to and distribution of our technologies, documentation and other proprietary information; however, such agreements may not be enforceable or provide us with an adequate remedy. Despite these efforts, internal or external parties may attempt to copy, disclose, obtain or use our products, services or technology without our authorization. If we cannot adequately protect our technology, our competitors may be able to offer certain products and/or services similar to ours.
        Our software may be derived from open source software, which is generally made available to the public by its authors and/or other third parties. Open source software is often made available under licenses, which impose certain obligations in the event we distribute derivative works of the open source software. These obligations may require us to make source code for the derivative works available to the public and/or license such derivative works on terms different from those customarily used to protect our intellectual property. With respect to our proprietary software, we generally license such software under terms that prohibit combining it with open source software. Despite these restrictions, parties may combine our proprietary software with open source software without our authorization, in which case we might nonetheless be required to release the source code of our proprietary software. In addition to risks related to license requirements, usage of open source software can lead to greater risks than the use of third-party commercial software, as open source licensors generally do not provide warranties, controls on the origin or development of the software, or remedies against the licensors. Many of the risks associated with usage of open source software cannot be eliminated and could adversely affect our business.
        Our efforts to prevent the misappropriation or infringement of our intellectual property or the intellectual property of our customers may not succeed. Although we actively seek to protect our proprietary rights, nevertheless, unauthorized parties may attempt to copy aspects of our products or technologies or to obtain and use information that we regard as proprietary. Identifying unauthorized use of our products and technologies is difficult and time consuming. The initiation of litigation as a result of the misappropriation or infringement of our intellectual property may adversely affect our relationships and agreements with certain customers that have a stake in the outcome of the litigation proceedings. Litigation is very expensive and may divert the attention of management and other key employees from the operation of our business, all of which could have an adverse effect on our business, financial condition and results of operations.
 If we fail to meet customer demands in a timely manner, we could lose certain critical business relationships.
        Our ability to provide products and services and meet very high quality standards in a timely manner is critical to our business success. For example, one of the key services that we offer our customers is the prompt and timely production and delivery of replacement bank cards. Orders for replacement bank cards are often placed on short notice and may require personalization. If we are
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unable to offer these and our other products and services in a timely manner or due to software malfunction, logistical impediments at any of our facilities or economic, social, political or other challenges impacting the industry as a whole, our relationships with our customers may be adversely affected and we may lose major contracts, all of which could have an adverse effect on our business, financial condition and results of operations.
 We face competition that may result in a loss of our market share and/or a decline in our profitability.
        We expect our marketplace to continue to be highly competitive as new product markets develop, industry standards become well known and other competitors attempt to enter the markets in which we operate. In addition, we expect to encounter further consolidation in the markets in which we operate.
        Some of our competitors have longer operating histories, and, when viewed globally, larger customer bases and significantly greater financial, sales and marketing, manufacturing, distribution, technical and other capabilities than we do. These competitors may be able to adapt more quickly to new or emerging technological requirements and changes in customer and/or regulatory requirements. They may also be able to devote greater resources to the promotion and sale of their products and services. We also face competition from newly established competitors, suppliers of products and customers who choose to develop their own products and services.
        Existing or new competitors may develop products, technologies or services that more effectively address our markets with enhanced features and functionality, greater levels of integration and/or lower cost. Additionally, mobile payment technology could develop to replace the products and services we offer, which could render our offerings dated or obsolete, or existing alternative standards of secured mobile payment technology could gain widespread market acceptance, which could have an adverse impact on our business. As the technological sophistication of our competitors and the size of the market increase, competing low-cost producers could emerge and grow stronger. If our customers prefer low-cost alternatives to our products, our revenues and profitability could be adversely affected. Increased competition has historically resulted in, and is likely to continue to result in, declining average selling prices and reduced gross margins in certain of our businesses and the loss of market share in certain markets. We may not be able to continue to compete successfully against current or new competitors. If we fail to compete successfully, we may lose market share in our existing markets, which could have an adverse effect on our business, financial condition and results of operations.
 The financial payment card industry may be subject to price erosion, which could have an adverse effect on our business.
        One of the results of the rapid innovation in the financial payment card industry is that pricing pressure can be intense, in particular for large credit and debit card issuers and large card processors. Our large credit and debit card issuer customers face continued competitive pressure. As these issuers seek to reduce their expenses, we, in turn, may experience a decline in the prices at which our products can be sold and at which such services can be offered. In such instances, in order to continue to supply these products and services at competitive prices, we must reduce our production costs. Typically, we are able to accomplish this through leveraging our scale and production efficiencies. However, if we cannot continue to improve our efficiencies to a degree sufficient for maintaining the required margins, we may no longer be able to make a profit from the sale of these products and services. Moreover, we may not be able to cease production of such products, either due to our ongoing contractual obligations or the risk of losing our existing customer relationships, and as a result may be required to bear a loss on such products. Further competition in our core product and service markets may lead to price erosion, lower revenue growth rates and lower margins in the future. Should reductions in our production costs fail to keep pace with reductions in market prices for the products we sell, there could be an adverse effect on our business, financial condition and results of operations.
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 Our business may be adversely affected by costs relating to product defects, and we could be faced with product liability and warranty claims.
        We offer highly complex services and products and, accordingly, there is a risk that defects may occur in any of our services or products. Such defects can give rise to significant costs, including expenses relating to recalling products, replacing defective items, writing down defective inventory and the loss of potential sales. In addition, the occurrence of such defects may give rise to product liability and warranty claims, including liability for damages caused by such defects. If we release defective products in the market, our reputation could suffer and we may lose sales opportunities and incur liability for damages, including damage claims from customers in excess of the amounts they pay us for our products, including consequential damages. In addition, our customers may recall their products if they prove to be defective or make compensatory payments in accordance with industry or business practice or in order to maintain good customer relationships. If such a recall or payment is caused by a defect in one of our products, our customers may seek to recover all or a portion of their losses from us. If any of these risks materialize, our reputation would be harmed and there could be an adverse effect to our business, financial condition and results of operations.
 We rely on licensing arrangements in production and other fields, and actions taken by any of our licensing partners could adversely affect our business.
        Many of our products integrate third-party technologies that we license or otherwise obtain the right to use, including software relating to smart card operating systems used in products such as EMV cards. As part of our strategy, we have entered into licensing agreements with other leading industry participants that provide us, among other benefits, with access to technology owned by third parties. For example, we license Java card technology from Oracle and Multos card technology from Multos International, a subsidiary of a competitor, for use in certain of our products, including in EMV cards. This Java and Multos card technology provides a secure environment for applications on smart cards and other devices with limited memory and processing capabilities, and we rely on our commercial arrangements with Oracle and Multos International for the continued use of the Java and Multos platforms, respectively. Oracle and Multos International may not continue to renew their licenses with us on similar terms or at all, which could negatively impact our net sales. We have also entered into cross-licensing agreements with certain of our competitors that provide for an exchange of intellectual property, including the sharing of certain patent rights in our respective portfolios. If we are unable to continue to successfully renew these agreements we may lose our access to certain technologies that we rely upon to develop certain of our products, which could adversely affect our operations.
 All of our facilities are leased, in whole or in part, and our inability to renew our leases on commercially acceptable terms or at all may adversely affect our results of operations.
        Each of our nine facilities, in whole or in part, is located on leased property. We may be unable to renew such leases on commercially acceptable terms or at all. Our inability to renew our leases, or a renewal of our leases with a rental rate higher than the prevailing rate under the applicable lease prior to expiration, may have an adverse impact on our operations, including disrupting our operations or increasing our cost of operations. In addition, in the event of non-renewal of any of our leases, we may be unable to locate suitable replacement properties for our facilities or we may experience delays in relocation that could lead to a disruption in our operations. Any disruption in our operations could have an adverse effect on our financial condition and results of operation.
 The smart card systems developed by our competitors may put us at a competitive disadvantage .
        Certain of our competitors have internally developed their own smart card operating systems. Ownership of these internal operating systems may give our competitors a cost advantage over us, as we utilize JavaCard and Multos systems in our EMV cards, which we must license from the owners of such technology. If our competitors are able to reduce the prices of their products and services as a result of the cost savings they might realize from using their own internally developed operating system,
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our profitability may be adversely affected. Additionally, customers may prefer the operating systems of our competitors over the operating systems that we utilize in our EMV cards. If customers are more attracted to our competitors' internally developed operating systems, demand for our products and services may be reduced, thereby adversely affecting our results of operations.
 Interruptions in our IT systems could adversely affect our business.
        We rely on the efficient and uninterrupted operation of complex IT applications, systems and networks to operate our business. The reliability of our IT infrastructure and software, and our ability to expand and continually update technologies in response to our changing needs, are critical to our business. Any significant interruption in our business applications, systems or networks, including, but not limited to, new system implementations, facility issues or energy blackouts, could have a material adverse impact on our operations, sales and operating results.
        Not only would we suffer damage to our reputation in the event of a system outage or data loss or interruption, but we may also be liable to third parties. Some of our contractual agreements with financial institutions require the payment of penalties if our systems do not meet certain operating standards. In addition, to successfully operate our business, we must be able to protect our processing and other systems from interruption, including from events that may be beyond our control. The protective measures we have adopted to avoid system or network disruptions may be insufficient to prevent or limit the damage from any future disruptions, and any such disruption could have an adverse effect on our business, financial condition and results of operations.
 Our business depends on the continued viability of the card networks of the Payment Card Brands.
        The vast majority of cards we produce and the services we provide are associated with one of the Payment Card Brands. As a result, we depend on the continued viability of the card networks of the Payment Card Brands, including their authorization, clearing and settlement systems. If one or more of the Payment Card Brands were to discontinue their services or otherwise experience a decline in the volume of cards bearing their brands, our results of operations could be adversely affected.
 The terms of our New Credit Facility restrict, and covenants contained in agreements governing indebtedness in the future may restrict, our ability to operate our business and to pursue our business strategies.
        Our New Credit Facility contains, and any future indebtedness of ours may contain, a number of restrictive covenants that impose customary operating and financial restrictions on us. Our New Credit Facility limits our ability and the ability of our restricted subsidiaries, among other things, to:
•
incur additional debt or contingent liabilities; 

•
declare or pay dividends, redeem stock, or make other distributions to stockholders; 

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make loans, advances, guarantees or other investments; 

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create liens or use assets as security in other transactions; 

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merge or consolidate, or sell, transfer, lease or dispose of substantially all of our assets; 

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enter into transactions with affiliates; and 

•
enter into certain asset sale transactions or other dispositions of assets.
        In addition, as of the last day of any fiscal quarter, if the amount we have drawn under the New Revolving Credit Facility is greater than 50% of the aggregate principal amount of all commitments of the lenders thereunder, we are required to maintain a first lien net leverage ratio not in excess of 7.0x. Our failure to comply with any of these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our indebtedness under the New Credit Facility.
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 We are dependent on key executives, the loss of whom could adversely affect our business.
        Our future success depends to a significant extent on the efforts of our senior management. We believe there are only a limited number of available and qualified executives with substantial experience in our industry. Accordingly, the loss of the services of one or more of the members of our senior management could delay or prevent us from fully implementing our business strategy and, consequently, significantly and negatively affect our business.
        If any member of senior management dies or becomes incapacitated, or leaves the company to pursue employment opportunities elsewhere, we would need to locate an adequate replacement. To the extent that we are unable to locate an adequate replacement or are unable to do so within a reasonable period of time, our business may be significantly and negatively affected.
 We rely on the timely supply of materials and products and our business could suffer if our suppliers fail to meet their delivery obligations or raise their prices.
        Our production operations depend on deliveries of microchips and other materials in a timely manner and, in some cases, on a just-in-time basis. From time to time, suppliers may extend lead times, limit the amounts supplied to us or increase prices due to capacity constraints or other factors. We may not be able to meet the demands of our customers in a timely manner, or at all, due to shortages in the supply of critical materials. Additionally, certain product materials required in our production operations are only available from a limited number of suppliers, and we may not be able to find an adequate replacement for such materials if our suppliers are unable to meet their delivery obligations to us. In particular, we rely on a small group of suppliers for the provision the EMV microchips that we use in our Financial Payment Cards. For the year ended December 31, 2014, we obtained approximately 96.1% of our total purchased EMV microchips from five main suppliers. If any one of these EMV microchip suppliers, or any supplier of our other raw materials, fails to deliver our requirements, our production could be disrupted. In addition, as a result of a shortage, we may be compelled to delay shipments of our products, or devote additional resources to maintaining higher levels of inventory. Consequently, we may experience substantial period-to-period fluctuations in our cost of revenues and, therefore, in our future results of operations. If we are unable to obtain adequate supplies of quality materials in a timely manner or if there are significant increases in the cost of these materials, our business, financial condition and results of operations could be adversely affected.
 We are required to comply with laws and regulations in other countries and are exposed to business risks associated with our international operations.
        For the six months ended June 30, 2015 and the years ended December 31, 2014 and 2013, we derived 12.9%, 24.7% and 31.0%, respectively, of our net sales from outside the United States, primarily in Canada and the United Kingdom. As a result, we are subject to numerous evolving and complex laws and regulations which apply, among other things, to financial reporting standards, corporate governance, data privacy, tax, trade regulations, export controls, competitive practices, and labor and health and safety laws and regulations in each jurisdiction in which we operate. We are also required to obtain environmental permits and other authorizations or licenses from governmental authorities for certain of our operations and must protect our intellectual property worldwide. In the jurisdictions in which we operate, we need to comply with various standards and practices of different regulatory, tax, judicial and administrative bodies.
        There are a number of risks associated with international business operations, including political instability (e.g., the threat of war, terrorist attacks or civil unrest), inconsistent regulations across jurisdictions, unanticipated changes in the regulatory environment, and import and export restrictions. Any of these events may affect our employees, reputation, business or financial results as well as our ability to meet our objectives, including the following international business risks:
•
negative economic developments in economies around the world and the instability of governments, or the downgrades in the debt ratings of certain major economies;
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social and political instability; 

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complex regulations governing certain of our products; 

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potential terrorist attacks; 

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adverse changes in governmental policies, especially those affecting trade and investment; 

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foreign currency exchange, particularly with respect to the Canadian Dollar and British Pound Sterling; and 

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threats that our operations or property could be subject to nationalization and expropriation.
        We may not be in full compliance at all times with the laws and regulations to which we are subject. Likewise, we may not have obtained or may not be able to obtain the permits and other authorizations or licenses that we need. If we violate or fail to comply with laws, regulations, permits, health and safety regulations or other authorizations or licenses, we could be fined or otherwise sanctioned by regulators. In such a case, or if any of these international business risks were to materialize, our business, financial condition and results of operations could be adversely affected.
 Changes in laws, regulations and enforcement activities relating to the financial services industry may adversely affect the products, services and markets in which we operate.
        We and our customers are subject to laws and regulations that affect the financial services industry in the many countries in which our products and services are used. In particular, our customers are subject to numerous laws and regulations applicable to banks, financial institutions and card issuers in the United States, Europe and other regions. The U.S. Government, for instance, has increased its scrutiny of a number of credit and debit card practices, from which some of our customers derive significant revenue. Regulation of the payments industry, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), privacy and data security regulations such as the Gramm-Leach-Bliley Act (the "GLBA"), and other regulations applicable to us and our customers, has increased significantly in recent years. Our failure to comply with the laws and regulations applicable to our business may result in the suspension or revocation of our licenses or registrations, the limitation, suspension or termination of our services, and/or the imposition of consent orders or civil and criminal penalties, including fines, which could have an adverse effect on our business, financial condition and results of operations.
 Environmental, health and safety laws and regulations expose us to liability and any such liability may adversely affect our business.
        We are subject to environmental, health and safety laws and regulations in each jurisdiction in which we operate. Such regulations govern, among other things, emissions of pollutants into the air, wastewater discharges, waste disposal, the investigation and remediation of soil and groundwater contamination, and the health and safety of our employees. For example, our products and the raw materials we use in our production processes are subject to numerous environmental laws and regulations. We are also required to obtain environmental permits from governmental authorities for certain of our operations. We may not have been, nor may we be able to be at all times, in full compliance with such laws, regulations and permits. If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators.
        As with other companies engaged in similar activities or that own or operate real property, we face inherent risks of environmental liability at our current and historical production facilities. Certain environmental laws impose strict and, in certain circumstances, joint and several liability on current or previous owners or operators of real property for the cost of the investigation, removal or remediation of hazardous substances as well as liability for related damages to natural resources. In addition, we
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may discover new facts or conditions that may change our expectations or be faced with changes in environmental laws or their enforcement that would increase our liabilities. Furthermore, our costs of complying with current and future environmental and health and safety laws, or our liabilities arising from past or future releases of, or exposure to, regulated materials, may have a material adverse effect on our business, financial condition and results of operations.
        The scientific examination of, political attention to, and rules and regulations on issues surrounding the existence and extent of climate change may result in an increase in our cost of production due to increases in the price of energy and/or the introduction of energy or carbon taxes. A variety of regulatory developments have been introduced that focus on restricting or managing the emission of carbon dioxide, methane and other greenhouse gasses. Companies such as ours may need to purchase at higher costs new equipment or raw materials with lower carbon footprints. These developments and further legislation that is likely to be enacted could negatively affect our operations. Changes in environmental regulations could increase our production costs, which could adversely affect our business, financial condition and results of operations.
 Certain natural disasters, such as flooding, earthquakes, nuclear disasters, certain weather conditions and other catastrophic events, such as fire, may negatively impact our business.
        The occurrence of severe weather events, such as rain, snow, wind, storms, hurricanes or other natural disasters, such as flooding, earthquakes, nuclear disasters, fire or a combination thereof, may negatively impact our business. If certain natural disasters, extreme weather conditions or other events such as fire were to directly damage, destroy or disrupt our production facilities, it could disrupt our operations, delay new production and shipments of existing inventory or result in costly repairs, replacements or other costs, all of which would negatively impact our business. Even if our production facilities are not directly damaged, a large natural disaster or fire may result in disruptions in distribution channels or supply chains and significantly increase the prices of the raw materials we use in our production processes. The impact of any such natural disasters, weather changes or other disasters such as fire depends on the specific geographic circumstances but could be significant, and we cannot predict the economic impact, if any, of natural disasters or climate change. Any such disruptions could have an adverse effect on our business, financial condition and results of operations.
 Our revenue may be adversely affected by fluctuations in currency exchange rates.
        A portion of our revenues, costs, assets and liabilities are denominated in foreign currencies, including the Canadian Dollar and the British Pound Sterling. However, we report our financial condition and results of operations in U.S. dollars. As a result, our results of operations and, in some cases, cash flows may in the future be adversely affected by certain movements in exchange rates. In particular, the exchange rate from the U.S. dollar to the Canadian Dollar has fluctuated substantially in the past and may continue to do so in the future. Though we may choose to hedge our exposure to foreign currency exchange rate changes in the future, there is no guarantee such hedging, if undertaken, will be successful.
 Our insurance may be inadequate to cover future liabilities and our insurance premiums may increase substantially.
        We may be subject to significant losses from claims, liabilities, hazards and disasters. While we currently maintain insurance which we believe is adequate and consistent with industry practice, we may experience losses in excess of our insurance coverage or claims not covered by our insurance. Furthermore, we may not be able to obtain insurance coverage in the future on acceptable terms, or at all. Any such losses not covered by insurance may have a material adverse effect on our business, financial condition and results of operations.
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 We face risks associated with our acquisition strategy.
        Our future success may depend on acquiring businesses and technologies, making investments or forming joint ventures that complement, enhance or expand our current portfolio or otherwise offer us growth opportunities. The expansion of our business through acquisitions allows us to complement our existing product offerings and enhance our technological capabilities.
        We face a number of challenges associated with our acquisition strategy that could disrupt our ongoing business and distract our management team, including:
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lower gross margins, revenues and operating income than originally anticipated at the time of acquisition and other financial challenges; 

•
delays in the timing and successful integration of an acquired company's technologies; 

•
the loss of key personnel; and 

•
becoming subject to intellectual property, antitrust or other litigation.
        Acquisitions can result in increased debt or contingent liabilities. Acquisitions can also result in adverse tax consequences, warranty or product liability exposure related to acquired assets, additional stock-based compensation expense, the write-up of acquired inventory to fair value, and the recording and later amortization of amounts related to certain purchased intangible assets, all of which can adversely affect our reported results. In addition, we have in the past and may in the future record goodwill and other purchased intangible assets in connection with an acquisition and incur impairment charges.
        A failure to implement our acquisition strategy, obtain sufficient financing or integrate acquired businesses successfully could adversely affect our business, financial condition and results of operations.
 Goodwill and other identifiable intangible assets represent a significant portion of our total assets, and we may never realize the full value of our intangible assets.
        We have recorded a significant amount of goodwill. Total goodwill, which reflects, among other things, our market share and assembled workforce, our ability to develop future innovative technologies and seize business opportunities, was $73.8 million as of June 30, 2015, or 25.6% of our total assets.
        We perform goodwill impairment testing on an annual basis on October 1 of each year. If we were to conclude that a future write-down of our goodwill is necessary, we would have to record the appropriate charge, which could result in a material adverse effect on our results of operations. A write-down of our goodwill may result from, among other things, deterioration in our performance and a decline in expected future cash flows and could have an adverse effect on our business, financial condition and results of operations.
 The ability to recruit, retain and develop qualified personnel is critical to our success and growth.
        Our business functions are complex and require wide-ranging expertise and intellectual capital. For us to successfully compete and grow, we must retain, recruit and develop personnel who can provide the needed expertise across the entire spectrum of our intellectual capital needs. In addition, we must develop our personnel to provide succession plans capable of maintaining continuity in the midst of the inevitable unpredictability of human capital. However, the market for qualified personnel is competitive and we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors. Our efforts to retain and develop personnel may also result in significant additional expenses, which could adversely affect our profitability. Our key personnel may not continue to be employed or we may be unable to attract and retain qualified
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personnel in the future. Such a failure to retain or attract key personnel could have an adverse effect on our business, financial condition and results of operations.
 Our operating results may vary significantly from quarter to quarter and annually, and may differ significantly from our expectations or guidance.
        Our operating results are affected by a wide variety of factors that could materially and adversely affect revenues and profitability or lead to significant variability in our operating results. These factors include, among others, the cyclicality of the financial card and electronic payment industries, capital requirements, inventory management, the availability of funding, competition, new product developments, technological changes and production problems. For example, if anticipated sales or shipments do not occur when expected, expenses and inventory levels in a given quarter can be disproportionately high, and our results of operations for that quarter, and potentially for future quarters, may be adversely affected. In addition, our effective tax rate currently takes into consideration certain favorable tax rates and incentives which, in the future, may not be available to us.
        A number of other factors could lead to fluctuations in quarterly and annual operating results, including:
•
order cancellations or rescheduling by customers; 

•
restructuring and impairment charges; 

•
fluctuations in currency exchange rates, particularly between the U.S. dollar and the Canadian Dollar and British Pound Sterling; 

•
intellectual property developments; 

•
changes in distribution and sales arrangements; 

•
the failure to win new projects; 

•
production performance and yields; 

•
product liability or warranty claims; 

•
litigation; 

•
taxation; 

•
acquisitions or divestitures; 

•
problems in obtaining adequate raw materials or production equipment on a timely basis; 

•
property loss or damage or interruptions to our business, including as a result of fire, natural disasters or other disturbances at our facilities or those of our customers and suppliers that may exceed the amounts recoverable under our insurance policies; and 

•
changes in the market value or yield of the financial instruments in which we invest our liquidity.
        Unfavorable changes related to certain of the above factors have in the past and any of the above factors may in the future adversely affect our operating results. Furthermore, in periods of industry overcapacity or when our key customers encounter difficulties in their end-markets, orders are more exposed to cancellations, reductions, price renegotiations or postponements, which in turn reduce our management's ability to forecast the next quarter or full-year production levels, net sales and margins. For these reasons, our net sales and operating results may differ materially from our expectations or guidance as visibility is reduced and have an adverse effect on our business, financial condition and results of operations.
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 Consolidations in the banking and financial services industry could eliminate existing or potential clients.
        Failures, mergers and consolidations of financial institutions may reduce the number of our clients and potential clients, which could adversely affect our net sales. Further, if our clients fail, merge with or are acquired by other entities that are not our clients, or that use fewer of our services, they may discontinue or reduce their use of our services. It is also possible that the larger financial institutions that result from mergers or consolidations would have greater leverage in negotiating terms with us or could decide to perform in-house some or all of the services which we currently provide or could provide. Any of these developments could have an adverse effect on our business, results of operations and financial condition.
 We are subject to the credit risk that our customers may be unable to satisfy their obligations to us.
        A significant portion of our net sales are on an open credit basis, with typical payment terms of up to 60 days in some cases, and we are subject to the credit risk of our customers being unable to make payments to us. If any of our customers experience a bankruptcy or are otherwise unable to satisfy their payment obligations to us, any related losses, if incurred, could harm our business and have an adverse effect on our operating results and financial condition if they significantly exceed our reserve for losses on our balance sheet.
 Our business depends upon our ability to obtain specialized equipment from third-party suppliers, and we may be subject to delayed deliveries and future price increases.
        Our production processes depend on specialized equipment that we purchase and/or lease from third party suppliers. At times during the business cycle, there may be high demand for such equipment, with extended lead times to obtain such equipment. Further, there are a limited number of suppliers that manufacture and service the equipment we use. Should our current suppliers be unable or unwilling to provide the necessary equipment or otherwise fail to deliver or service such equipment in a timely manner, any resulting delays in our production processes could have an adverse effect on our business, financial condition, results of operations. In addition, the prices of the equipment we use may rise in the future, and any future price increases for this type of equipment could negatively impact our ability to purchase new equipment or to service existing equipment.
 We have identified a material weakness in our internal controls over financial reporting. If we are unable to implement and maintain effective internal controls over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.
        As a public company, we will be required to maintain internal controls over financial reporting and to report any material weaknesses in such internal controls. A material weakness is a deficiency, or a combination of deficiencies, in financial reporting such that there is a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be presented or detected on a timely basis. Section 404 of the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") requires that we evaluate and determine the effectiveness of our internal controls over financial reporting and, beginning with our annual report for the fiscal year ending December 31, 2016, provide a management report on the internal controls over financial reporting. We are in the process of designing and implementing internal controls over financial reporting required to comply with this obligation, which process will be time consuming, costly and complicated. Such report must also be attested to by our independent registered public accounting firm to the extent we are no longer an "emerging growth company," as defined by the JOBS Act. We do not expect to have our independent registered public accounting firm attest to our management report on our internal controls over financial reporting for so long as we are an emerging growth company.
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        In connection with our preparation for this offering, we recently identified a material weakness in our internal controls over financial reporting related to a current lack of finance expertise that could result in a failure to properly account for non-routine and complex transactions in accordance with GAAP. With the oversight of senior management, we are taking steps to remediate the underlying causes of this material weakness, primarily through the hiring of additional finance personnel and through the development and implementation of formal policies and improved processes. Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take, and our initiatives may not prove to be successful in remediating this material weakness.
        If we are unable to remediate this material weakness, or if we identify other material weaknesses in our internal controls over financial reporting, we may not detect errors on a timely basis and our financial statements may be materially misstated. In addition, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to assert that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is not required to express an opinion due to the provisions of the JOBS Act or is unable to express an opinion as to the effectiveness of our internal controls over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected, and we could become subject to investigations by the stock exchange on which our common stock is listed, the Securities and Exchange Commission (the "SEC"), or other regulatory authorities, which could require additional financial and management resources.
 We will incur significantly increased costs and devote substantial management time as a result of operating as a public company.
        As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. For example, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and will be required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as rules and regulations subsequently implemented by the SEC, the Canadian Securities Administrators, the TSX and the NASDAQ Global Select Market, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices, including the establishment and maintenance of a majority independent board of directors and required committees. In addition, depending on the composition of our board of directors and stockholder base, we may become subject to additional periodic reporting requirements under Canadian securities laws. We expect that compliance with these requirements will increase our legal and financial compliance costs and will make some activities more time consuming and costly. In addition, our management team and board of directors have limited experience implementing public company compliance requirements, and therefore we expect that our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to such efforts. In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when we are no longer an emerging growth company, as defined in the JOBS Act. We will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and may need to establish an internal audit function. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of such costs. We also expect that operating as a public company will make it more difficult and significantly more expensive for us to obtain director and officer liability insurance.
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 We are an "emerging growth company" and we cannot be certain if the reduced disclosure and other requirements applicable to emerging growth companies will make our common stock less attractive to investors.
        We are an "emerging growth company," as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies" including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act with respect to our internal control over financial reporting, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these provisions for up to five years or such earlier time that we are no longer an "emerging growth company." We would cease to be an emerging growth company upon the earliest to occur of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we become a large accelerated filer, which means that we have been public for at least 12 months, have filed at least one annual report and the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last day of our then most recently completed second fiscal quarter and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We may choose to take advantage of some but not all of these reduced reporting and other burdens. To the extent we take advantage of any of the reduced reporting burdens in this prospectus or in future filings, the information that we provide our security holders may be different than the information such holders might get from other public companies in which they hold equity interests. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
        In addition, Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Stated another way, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to "opt out" of such extended transition period, however, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
 Risks Related to Ownership of Our Common Stock
 There is no existing market for our common stock, and we do not know if one will develop to provide you with adequate liquidity to sell our common stock at prices equal to or greater than the price you paid in this offering.
        Prior to this offering, there has not been a public market for our common stock. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the NASDAQ Global Select Market or otherwise or how liquid that market might become. If an active trading market does not develop, you may have difficulty selling any of our common stock that you buy. The initial public offering price for the common stock will be determined by negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this offering. Consequently, you may not be able to sell our common stock at prices equal to or greater than the price you paid in this offering, or at all.
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 The price of our common stock may fluctuate significantly, and you could lose all or part of your investment.
        Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for them. The market price for our common stock could fluctuate significantly for various reasons, including:
•
our operating and financial performance and prospects; 

•
our quarterly or annual earnings or those of other companies in our industry; 

•
the public's reaction to our press releases, our other public announcements and our filings with the SEC; 

•
changes in, or failure to meet, earnings estimates or recommendations by research analysts who track our common stock or the stock of other companies in our industry; 

•
the failure of research analysts to cover our common stock; 

•
general economic, industry and market conditions; 

•
strategic actions by us, our customers or our competitors, such as acquisitions or restructurings; 

•
new laws or regulations or new interpretations of existing laws or regulations applicable to our business; 

•
changes in accounting standards, policies, guidance, interpretations or principles; 

•
material litigation or government investigations; 

•
changes in general conditions in the U.S. and global economies or financial markets, including those resulting from war, incidents of terrorism or responses to such events; 

•
changes in key personnel; 

•
sales of common stock by us, our principal stockholders or members of our management team; 

•
termination of lock-up agreements with our management team and principal stockholders; 

•
the granting or exercise of employee stock options; 

•
volume of trading in our common stock; and 

•
impact of the facts described elsewhere in "Risk Factors."
        In addition, in recent years, the stock market has regularly experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies, including companies in our industry. The changes frequently appear to occur without regard to the operating performance of the affected companies. Hence, the price of our common stock could fluctuate based upon factors that have little or nothing to do with us and these fluctuations could materially reduce our share price.
 Our majority stockholders will have the ability to control significant corporate activities after the completion of this offering.
        After the consummation of this offering, the Tricor Funds will collectively beneficially own approximately        % of our common stock, assuming the underwriters do not exercise their option to purchase additional shares (or        % if the underwriters exercise in full their option to purchase additional shares). As a result of its ownership, the Tricor Funds, so long as they hold a majority of our outstanding shares, will have the ability to control the outcome of matters submitted to a vote of stockholders and, through our board of directors, the ability to control decision-making with respect to our business direction and policies.
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        Matters over which the Tricor Funds will, directly or indirectly, exercise control following this offering include:
•
election of directors; 

•
mergers and other business combination transactions, including proposed transactions that would result in our stockholders receiving a premium price for their shares; 

•
other acquisitions or dispositions of businesses or assets; 

•
incurrence of indebtedness and the issuance of equity securities; 

•
repurchases of stock and payment of dividends; and 

•
the issuance of shares to management under our incentive plans.
 Conflicts of interest may arise because directors who are principals of our largest stockholder constitute a majority of our board of directors.
        Messrs. Seaman, Peters and Rowntree, who are officers or affiliates of Tricor, serve on our board of directors. The Tricor Funds, our majority stockholders (prior to and after giving effect to this offering), are funds controlled by Tricor and its affiliates. Tricor and entities controlled by it may in the future hold equity interests in entities that directly or indirectly compete with us, and companies in which it currently invests may begin directly or indirectly competing with us. As a result of these relationships, when conflicts between the interests of Tricor, on the one hand, and of other stockholders, on the other hand, arise, these directors may not be disinterested. Although our directors and officers have a duty of loyalty to us under Delaware law and our certificate of incorporation, transactions that we enter into in which a director or officer has a conflict of interest are generally permissible so long as (1) the material facts relating to the director's or officer's relationship or interest as to the transaction are disclosed to our board of directors and a majority of our disinterested directors approves the transaction, (2) the material facts relating to the director's or officer's relationship or interest as to the transaction are disclosed to our stockholders and a majority of our disinterested stockholders approve the transaction or (3) the transaction is otherwise fair to us. Our certificate of incorporation also provides that any principal, officer, member, manager and/or employee of Tricor or any entity that controls, is controlled by or under common control with Tricor (other than any company that is controlled by us) or any investment funds managed by Tricor will not be required to offer any transaction opportunity of which they become aware to us and could take any such opportunity for themselves or offer it to other companies in which they have an investment, unless such opportunity is offered to them solely in their capacities as our directors. See "Description of Capital Stock—Corporate Opportunity."
 If you purchase shares of our common stock in our initial public offering, you will experience substantial and immediate dilution.
        If you purchase shares of our common stock in our initial public offering, you will experience substantial and immediate dilution in the pro forma net tangible book value per share because the price that you pay will be substantially greater than the pro forma net tangible book value per share of the common stock that you acquire. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of our capital stock. You will experience additional dilution upon exercise of options to purchase common stock under our equity incentive plans, upon vesting of options to purchase common stock under our equity incentive plans, if we issue restricted stock to our employees under our equity incentive plans, or if we otherwise issue additional shares of our common stock.
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 Our ability to pay regular dividends to our stockholders is subject to the discretion of our board of directors and may be limited by our holding company structure and applicable provisions of Delaware law.
        We intend to pay regular cash dividends on our common stock. However, our board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. In addition, because we are a holding company with no material direct operations, we are dependent on dividends and other payments from our operating subsidiaries to generate the funds necessary to pay dividends on our common stock. We expect to cause our subsidiaries to make distributions to us in an amount sufficient for us to pay dividends. However, their ability to make such distributions will be subject to their operating results, cash requirements and financial condition, the applicable provisions of Delaware law that may limit the amount of funds available for distribution and our ability to pay cash dividends, compliance with covenants and financial ratios related to existing or future indebtedness and other agreements with third parties. In addition, each of the companies in our corporate chain must manage its assets, liabilities and working capital in order to meet all of its cash obligations, including the payment of dividends or distributions. As a consequence of these various limitations and restrictions, we may not be able to make, or may have to reduce or eliminate, the payment of dividends on our common stock. Any change in the level of our dividends or the suspension of the payment thereof could adversely affect the market price of our common stock.
 Future sales of our common stock, or the perception in the public markets that these sales may occur, may depress our stock price.
        Sales of substantial amounts of our common stock in the public market after this offering, or the perception that these sales could occur, could adversely affect the price of our common stock and could impair our ability to raise capital through the sale of additional shares. Upon completion of this offering, there will be                 shares of our common stock outstanding. Of these, the                shares being sold in this offering (or                shares if the underwriters exercise their option to purchase additional shares in full) will be freely tradable immediately after this offering (except for any shares purchased by affiliates, if any) and approximately                shares may be sold upon expiration of lock-up agreements 180 days after the date of this prospectus (subject in some cases to volume limitations).
        We also intend to register all common stock that we may issue under the Omnibus Plan or pursuant to outstanding options under the CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan (the "Option Plan"), as described in "Executive Compensation—Incentive Plans—CPI Card Group Inc. Omnibus Incentive Plan." Effective upon the completion of this offering, an aggregate of                        shares of our common stock will be reserved for future issuance under the Omnibus Plan and                shares of common stock will be issuable upon the exercise of outstanding options under the Option Plan. Once we register these shares, which we plan to do shortly after the completion of this offering, they can be freely sold in the public market upon issuance, subject to the lock-up agreements referred to above. If a large number of these shares are sold in the public market, the sales could reduce the trading price of our common stock.
 Certain provisions of our organizational documents and other contractual provisions may make it difficult for stockholders to change the composition of our board of directors and may discourage hostile takeover attempts that some of our stockholders may consider to be beneficial.
        Certain provisions of our amended and restated certificate of incorporation and bylaws may have the effect of delaying or preventing changes in control if our board of directors determines that such changes in control are not in the best interests of us and our stockholders. The provisions in our
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amended and restated certificate of incorporation and bylaws will include, among other things, the following:
•
the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms, including preferences and voting rights, of those shares without stockholder approval; 

•
following the time that the Tricor Funds and their affiliates cease to beneficially own a majority of our common stock, stockholder action may only be taken at a special or regular meeting and not by written consent, and special meetings may only be called by a majority of the total number of directors that we would have if there were no vacancies on our board of directors; 

•
advance notice procedures for nominating candidates to our board of directors or presenting matters at stockholder meetings; 

•
following the time that the Tricor Funds and their affiliates cease to beneficially own a majority of our common stock, removal of directors only for cause, and only upon the affirmative vote of 75% of our outstanding voting stock at a meeting of our stockholders called for that purpose; 

•
allowing only our board of directors to fill vacancies on our board of directors; and 

•
following the time that the Tricor Funds and their affiliates cease to beneficially own a majority of our common stock, super-majority voting requirements to amend our bylaws and certain provisions of our certificate of incorporation.
        In connection with this offering, we will enter into a Director Nomination Agreement (the "Director Nomination Agreement") with the Tricor Funds that provides the Tricor Funds the right to designate nominees for election to our board of directors for so long as the Tricor Funds collectively beneficially own 5% or more of the total number of shares of our common stock then outstanding. The number of nominees that the Tricor Funds are entitled to designate under the Director Nomination Agreement will bear the same proportion to the total number of members of our board of directors as the number of shares of common stock beneficially owned by the Tricor Funds bears to the total number of shares of common stock outstanding, rounded up to the nearest whole number. In addition, the Tricor Funds shall be entitled to designate the replacement for any of its board designees whose board service terminates prior to the end of such designee's term regardless of the Tricor Funds' beneficial ownership at such time. The Tricor Funds shall also have the right to have their designees participate on committees of our board of directors, subject to compliance with applicable law and stock exchange rules. The Director Nomination Agreement will terminate at such time as the Tricor Funds collectively own less than 5% of our outstanding common stock.
        We will elect in our certificate of incorporation not to be subject to Section 203 of the Delaware General Corporation Law (the "DGCL"), an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning 15% or more of the corporation's voting stock for a period of three years following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Accordingly, we will not be subject to any anti-takeover effects of Section 203. However, our certificate of incorporation will contain provisions that have the same effect as Section 203, except that they will provide that the Tricor Funds, their affiliates (including any investment funds managed by Tricor) and any person that becomes an interested stockholder as a result of a transfer of 5% or more of our voting stock by the forgoing persons to such person are excluded from the "interested stockholder" definition in our certificate of incorporation and are therefore not subject to the restrictions set forth therein that have the same effect as Section 203.
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        While these provisions have the effect of encouraging persons seeking to acquire control of our company to negotiate with our board of directors, they could enable the board of directors to hinder or frustrate a transaction that some, or a majority, of our stockholders might believe to be in their best interests and, in that case, may prevent or discourage attempts to remove and replace incumbent directors.
        In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. For more information regarding these provisions, see "Description of Capital Stock."
 Any issuance of preferred stock could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.
        Upon completion of this offering, our board of directors will have the authority to issue preferred stock and to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium over the market price, and adversely affect the market price and the voting and other rights of the holders of our common stock.
 Our business and stock price may suffer as a result of our lack of public company operating experience. In addition, if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
        We are a privately-held company. Our lack of public company operating experience may make it difficult to forecast and evaluate our future prospects. If we are unable to execute our business strategy, either as a result of our inability to effectively manage our business in a public company environment or for any other reason, our business, prospects, financial condition and results of operations may be harmed. In addition, as a new public company we do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.
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 FORWARD-LOOKING STATEMENTS
        This prospectus contains forward-looking statements that involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could" and similar expressions. Examples of forward-looking statements include, without limitation:
•
statements regarding our growth and other strategies, results of operations or liquidity; 

•
statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; 

•
statements regarding our industry, including statements related to industry volume and revenue growth, EMV and Dual-Interface EMV adoption, fraud reduction, Financial Payment Card renewal and replacement rates, growing prevalence of card-based payments, growth of particular industry segments and mobile payment adoption rates; 

•
statements of management's goals and objectives; 

•
projections of revenue, earnings, capital structure and other financial items; 

•
assumptions underlying statements regarding us or our business; and 

•
other similar expressions concerning matters that are not historical facts.
        Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made or management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to, factors discussed under the headings "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business."
        Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances, or achievements expressed or implied by the forward-looking statements. These risks include, but are not limited to, those listed below and those discussed in greater detail under the heading "Risk Factors" above:
•
material breaches in the security of our systems; 

•
market acceptance of developing technologies that make Financial Payment Cards less relevant; 

•
a slower or less widespread adoption of EMV and Dual-Interface EMV technology than we anticipate; 

•
difficulties in our production processes; 

•
defects in our software; 

•
our failure to operate our business in accordance with the PCI security standards or other industry standards such as Payment Card Brand certification standards; 

•
extension of card expiration cycles; 

•
a decline in U.S. and global market and economic conditions;
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•
failure to identify, attract and retain new customers or a failure to maintain our relationships with our major customers; 

•
our substantial indebtedness; 

•
infringement on our intellectual property rights, or claims that our technology is infringing on third-party intellectual property; 

•
failure to meet our customers' demands in a timely manner; 

•
competition in the payment card industry; 

•
price erosion in the financial payment card industry; 

•
costs related to product defects; 

•
our dependence on licensing arrangements; 

•
inability to renew leases for our facilities; 

•
competitive disadvantage caused by the smart card systems of our competitors; 

•
interruptions in our IT systems or production capabilities; 

•
our dependence on the viability of payment card brands; 

•
the restrictive terms of our credit facility and covenants of future agreements governing indebtedness; 

•
loss of our key executives; 

•
failure by our suppliers to meet their delivery obligations to us; 

•
non-compliance with, and changes in, laws in foreign jurisdictions in which we operate and sell our products; 

•
changes in laws relating to the financial services industry; 

•
our liability under environmental, health and safety laws and regulations; 

•
the occurrence of natural disasters; 

•
fluctuations in currency exchange rates; 

•
inadequate insurance to cover future liabilities; 

•
challenges related to our acquisition strategy; 

•
that we may never realize the full value of our intangible assets; 

•
our ability to recruit, retain and develop qualified personnel; 

•
fluctuations in our results of operations; 

•
consolidations in the banking industry eliminating clients; 

•
the credit risk presented by our customers; 

•
our dependence on specialized equipment from third party suppliers; 

•
the inability to maintain effective internal controls over financial reporting; 

•
the increased costs of operating as a public company; and 

•
our status as an "emerging growth company" and its effect on investors.
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        Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. Forward-looking statements are based on assumptions made in light of management's perception of trends, current conditions and expected developments, which may prove to be incorrect. Certain assumptions have been made with respect to the following, among others:
•
the successful completion of this offering; 

•
the correctness of our market research and industry data referenced elsewhere in this prospectus; 

•
our ability to accurately assess and anticipate trends in our industry; 

•
the absence of material adverse changes in our industry or the global economy; 

•
our ability to raise sufficient debt or equity financing if required to support our continued growth; 

•
our ability to generate revenue while controlling our costs and expenses; 

•
our ability to maintain current operating expenses; 

•
our ability to realize our business objectives and manage cash flow; 

•
our ability to manage and integrate acquisitions; 

•
our ability to protect our intellectual property rights; 

•
our continued compliance with third-party license terms and non-infringement of third-party intellectual property rights; 

•
our ability to develop solutions that keep pace with the continuing changes in technology, evolving industry standards, changes to the regulatory environment, new product introductions by competitors and changing merchant preferences and requirements; 

•
our ability to engage and retain qualified key personnel and employees; 

•
our ability to maintain good business relationships with our merchants and vendors; 

•
our customers entering into anticipated contracts with us; and 

•
the ability of our customers to perform their obligations under existing contracts.
While we believe our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and we may not be able to anticipate all factors that could affect our actual results.
        The forward-looking statements speak only as of the date on which they are made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Consequently, you should not place undue reliance on forward-looking statements.

 INDUSTRY AND MARKET DATA
        This prospectus includes industry data, forecasts and information that we have prepared based, in part, upon data, forecasts and information obtained from independent industry publications and surveys and other information available to us. In particular, this prospectus includes statistical data extracted from a market research report prepared by First Annapolis Consulting, Inc. ("First Annapolis"), which
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was commissioned by us and was issued in May 2015. First Annapolis provides consulting and investment banking services with a focus on payments-based industries. Unless otherwise indicated, all industry and market data presented in this prospectus is derived from data estimated and reported by First Annapolis or estimated by us using such data as the primary source. Additionally, certain data in this prospectus is derived from The Nilson Report, a publication covering global payment systems. The data presented in this prospectus, including data provided by First Annapolis and The Nilson Report, involves a number of assumptions and limitations and contains projections and estimates of the future performance of the industry in which we operate that are subject to a high degree of uncertainty. We caution you not to give undue weight to such projections, assumptions and estimates. Some data contained in this prospectus is also based on our good faith estimates, which are derived from management's knowledge of the industry and independent sources. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable; however, we have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. In addition, statements as to our market position and projections, assumptions and estimates of our future performance and the future performance of our industry are based on data currently available to us, and such estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading "Risk Factors" in this prospectus.

 USE OF NON-GAAP FINANCIAL INFORMATION
        In this prospectus, we present EBITDA, Adjusted EBITDA and Adjusted EBITDA margin (calculated as Adjusted EBITDA divided by total net sales) (collectively, the "Non-GAAP Financial Measures"), as supplemental measures of our operating performance. EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures that do not have any standardized meaning prescribed by U.S. GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. EBITDA is defined as income from continuing operations before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus adjustments for foreign currency gain or loss, loss on debt modification and early extinguishment, gain on purchase of ID Data, non-cash compensation expense related to our phantom stock plan that will be terminated in connection with this offering, performance bonuses earned in connection with the EFT Source acquisition and investment banking and related fees. The Non-GAAP Financial Measures are the primary measures used by our management to evaluate operating performance. We believe the Non-GAAP Financial Measures are useful to investors because they provide a means to evaluate our operating performance on an ongoing basis using criteria that are used by our internal decision makers and because they are frequently used by investors and other interested parties when comparing companies in our industry that have different financing and capital structures and/or tax rates. We believe the Non-GAAP Financial Measures are meaningful measures because they present a transparent view of our recurring operating performance and allow management to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance.
        The Non-GAAP Financial Measures have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our operating results or cash flows as reported under GAAP. Some of these limitations are:
•
they do not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; 

•
they do not reflect changes in, or cash requirements for, our working capital needs; 

•
they do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
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•
although depreciation is a non-cash charge, the assets being depreciated will often have to be replaced in the future, and the Non-GAAP Financial measures do not reflect any cash requirements for such replacements; 

•
they are not adjusted for all non-cash income or expense items that are reflected in our statements of cash flows; and 

•
other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.
        Because of these limitations, the Non-GAAP Financial Measures should not be considered as an alternative to net income (loss), income (loss) from operations, or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity. We compensate for these limitations by relying primarily on our GAAP results and using the Non-GAAP Financial Measures only for supplemental purposes. Please see our consolidated financial statements contained elsewhere in this prospectus. Our measures of EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation. Our presentation of the Non-GAAP Financial Measures should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.
        For a reconciliation of EBITDA and Adjusted EBITDA to net income from continuing operations, the most comparable GAAP measure, see "Summary Consolidated Historical Financial Data."

 TRADEMARKS
        This prospectus contains references to our trademarks and service marks. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. In addition, this prospectus contains trade names, trademarks and service marks of other companies, which we do not own. We do not intend our use or display of other companies' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
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 GLOSSARY OF INDUSTRY TERMS
        Set forth below is a glossary of industry and other terms used in this prospectus:
        " Automated Clearing House " (" ACH ") is an electronic clearing and settlement system for electronic financial transactions among participating U.S. commercial banks and depository institutions.
        " Card Personalization " is the process of preparing a Financial Payment Card for the cardholder, including the encoding, programming and embossing of the card with the account-specific information and related data (such as an account number). In certain cases, this will also include the cardholder's name.
        " Card-Not-Present Fraud " is the unauthorized use of Financial Payment Card or Private Label Credit Card information to make transactions without physically swiping or inserting a card into a POS terminal, often when the card and its information cannot be visually verified by a merchant. This type of fraud can be conducted over the Internet, by phone, by fax or by mail, or by manually inputting card information into a POS terminal.
        " Card-Present Fraud " occurs when a Financial Payment Card or Private Label Credit Card is used to make an unauthorized transaction in a face-to-face setting, such as a retail store checkout lane. This type of fraud may involve the use of the actual stolen card or a fraudulent duplicated card made using card and cardholder information.
        " Contact EMV " represents a Financial Payment Card with an embedded microprocessor, which interfaces with an EMV payment terminal over a contact plate on the surface of the card when inserted into the terminal. These cards are commonly referred to as "chip cards."
        " Contactless Cards " are Financial Payment Cards with an RFID antenna, allowing transactions to be completed using Near Field Communication in proximity to an NFC-enabled payment terminal without having to physically insert the card into the terminal.
        " Dual-Interface EMV " refers to cards which contain both "contact" and "contactless" EMV technology and functionalities.
        " EMV " or " EMV standard ," named for the original organizations that developed the standard (Europay, MasterCard and Visa), is a technologically advanced high-security protocol designed to reduce the fraud to which magnetic stripe cards are susceptible. The EMV standard for Financial Payment Cards utilizes an embedded microprocessor that, when paired with an EMV payment terminal, dynamically authenticates cardholder debit and credit card transactions using a cryptographic process that results in a significantly more secure payment transaction environment.
        " Financial Payment Cards " are credit, debit and Prepaid Debit Cards issued on the network of one of the Payment Card Brands.
        " General Purpose Reloadable Cards " (" GPR Cards ") are a type of open-loop Prepaid Debit Card generally acquired through retail channels, both in-store and online. The user of a GPR card registers the card with the issuing bank or licensed money transmitter, determines the card's spending limit by adding money directly to the account and can reload the card with additional funds as needed. These cards lack the account requirements typically needed for a traditional debit or credit card (such as a credit check).
        " Group Service Provider " is an organization that assists small issuers, such as credit unions, with managing their credit and debit card programs, including managing the Financial Payment Card issuance process.
        " Large Issuer " is defined as the top 20 U.S. debit and credit card issuers, including financial institutions such as JPMorgan Chase, Bank of America, American Express and Wells Fargo.
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        " Liability Shift " is an agreement among the Payment Card Brands that, effective October 1, 2015, the party that caused a non-EMV transaction to occur (i.e., either the card issuer or the merchant) will be held financially liable for any resulting counterfeit fraud losses.
        " Near Field Communications " (" NFC ") is a wireless technology that uses radio waves to enable communication over short distances (e.g., 4 cm), such as between a Contactless Card and a point of sale terminal.
        " Net Promoter Score " (" NPS ") is a measure of customer loyalty calculated from customer surveys conducted by an independent research firm. Respondents judge how likely they would be willing to recommend a particular company to a colleague, answering on a scale of one to ten. NPS is calculated by taking the respondents who are enthusiastic promoters (a nine or a ten rating) and subtracting the percentage who are detractors (a one through six rating).
        " Payment Card Brands " are the operators of the debit and credit financial payment networks: Visa; MasterCard; American Express and Discover.
        " Payment Card Industry Security Standards Council " (" PCI ") is an open global forum, launched in 2006, that is responsible for the development, management, education and awareness of the PCI Security Standards, including the Data Security Standard (PCI DSS), Payment Application Data Security Standard (PA-DSS) and PIN Transaction Security (PTS) requirements.
        " Prepaid Debit Cards " share many of the functional features and conveniences of traditional bank debit cards; they are issued on the network of a Payment Card Brand and usable in the same manner as a bank debit card. However, these cards are not linked to a traditional bank account, are easier to acquire (they do not require a credit check) and require cardholders to load money onto the card in advance of any transaction. Prepaid debit cards are sometimes referred to as "open-loop cards" to denote their acceptance on a network of the Payment Card Brands and to contrast them to retail gift or loyalty cards that are referred to as "closed-loop cards" and can only be used at a merchant whose brand such card carries (e.g. a Starbucks card).
        " Private Label Credit Cards " are credit cards that an individual merchant issues for exclusive use in its own stores. Such cards are generally not issued on the network of a Payment Card Brand and therefore do not constitute Financial Payment Cards.
        " Point of Sale (" POS ") Terminals " are physical hardware installed in merchant locations that enables the electronic processing of card payments by transmitting account information and sales data through a payment network operated by one of the Payment Card Brands (and often facilitated by a merchant acquirer and/or card processor) to the issuing institution of the Financial Payment Card. POS Terminals acquire cardholder account information by reading the data stored on a card's magnetic stripe, contactless chip, or EMV-enabled microprocessor or, alternatively, by manual entry.
        " Radio-Frequency Identification " (" RFID ") is a technology that uses electronic tags placed on objects to relay identifying information to an electronic reader by means of radio waves.
        " Small Issuer " is defined as all issuers other than the Large Issuers, including financial institutions such as regional banks, independent community banks and credit unions that issue Financial Payment Cards.
        " Trusted Service Manager " (" TSM ") is a role within the ecosystem of NFC payments, acting as a neutral broker that coordinates the technical and business relationships of the various participants, including mobile network operators and service providers such as card-issuing banks. Trusted Service Managers can act either within a secure element, such as an embedded microprocessor, or in the cloud, via host card emulation technology.
        " unbanked " refers to households or persons that do not hold an account at an institution insured by the Federal Deposit Insurance Corporation (" FDIC ").
        " underbanked " refers to households or persons that hold an account at an institution insured by the FDIC and have also used at least one of the following alternative financial services from non-bank providers in the last 12 months: money orders, check cashing, remittances, payday loans, refund anticipation loans, rent-to-own services, pawn shops loans or auto title loans.
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 USE OF PROCEEDS
        We estimate that the net proceeds from our issuance and sale of               shares of common stock in this offering will be approximately $               million, assuming an initial public offering price of $            per share, which is the midpoint of the price range listed on the cover page of this prospectus, and after deducting underwriting discounts and commissions and offering expenses payable by us. The selling stockholders expect to receive net proceeds of approximately $             million, assuming an initial public offering price of $            per share, which is the midpoint of the price range listed on the cover page of this prospectus, and after deducting underwriting discounts and commissions and offering expenses payable by the selling stockholders (or if the underwriters exercise in full their over-allotment option, we estimate that the selling stockholders will receive net proceeds of approximately $             million). We will not receive any proceeds from the sale of shares by the selling stockholders.
        A $1.00 increase (decrease) in the assumed initial public offering price of $            per share would increase (decrease) our net proceeds from this offering by approximately $             million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the underwriting discounts and commissions and offering expenses payable by us.
        We intend to use approximately $11.5 million of the net proceeds from this offering to redeem the remaining outstanding shares of our preferred stock, approximately $             million of the net proceeds to terminate our phantom stock plan and to satisfy all liabilities due thereunder and the remainder of the net proceeds to repay outstanding indebtedness under our New Term Loan Facility incurred in connection with the Partial Preferred Redemption. As of August 17, 2015, an aggregate of approximately $435.0 million of borrowings were outstanding under our New Term Loan Facility. The interest rate on the $435.0 million of borrowings outstanding under our New Term Loan Facility at August 17, 2015 was 5.5%. Our New Term Loan Facility matures on August 17, 2022. Borrowings under our New Credit Facility have been used to fund the Partial Preferred Redemption and to repay indebtedness under our previously outstanding term loan facility, and we expect to use our New Credit Facility in the future to fund capital expenditures, for acquisition activity and for general corporate purposes.
        Redeeming the remaining outstanding shares of our preferred stock, terminating our phantom stock plan and repaying outstanding borrowings under our New Term Loan Facility will achieve the objective of optimizing our capital structure in connection with the offering. Subject to the use of the net proceeds described herein, we may use any remaining net proceeds for general corporate and working capital purposes.
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 DIVIDEND POLICY
        Following the consummation of this offering, we expect to pay quarterly cash dividends on our common stock, subject to the sole discretion of our board of directors and the considerations discussed below. We intend to fund any future dividends from distributions made by our operating subsidiaries from their available cash generated from operations.
        Future cash dividends, if any, will be at the discretion of our board of directors and the amount of cash dividends per share will depend upon, among other things, our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions, number of shares of common stock outstanding and other factors our board of directors may deem relevant. The timing and amount of future dividend payments will be at the discretion of our board of directors.
        In addition, because we are a holding company with no material direct operations, we are dependent on loans, dividends and other payments from our operating subsidiaries to generate the funds necessary to pay dividends on our common stock. We may be restricted from paying cash dividends on our common stock in certain circumstances, including by the covenants in our New Credit Facility, and may be further restricted by the terms of future debt or preferred securities. See "Risk Factors—Risks Related to Ownership of our Common Stock—Our ability to pay regular dividends to our stockholders is subject to the discretion of our board of directors and may be limited by our holding company structure and applicable provisions of Delaware law" and "Description of Certain Indebtedness."
        Our dividend policy entails certain risks and limitations, particularly with respect to liquidity. Although we expect to pay dividends according to our dividend policy, we may not pay dividends according to our policy, or at all, if, among other things, we do not have the cash necessary to pay our intended dividends. By paying cash dividends rather than saving or investing that cash, we risk, among other things, slowing the pace of our growth and having insufficient cash to fund our operations or unanticipated capital expenditures.
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 CAPITALIZATION
        The following table sets forth our cash and cash equivalents and capitalization as of June 30, 2015:
•
on an actual basis; 

•
on an adjusted basis to give effect to our entering into the New Credit Agreement, repaying borrowings under our previously outstanding term loan facility and effecting the Partial Preferred Redemption; and 

•
on a further adjusted basis to give further effect to (i) the issuance of               shares of common stock in this offering and (ii) our receipt of the estimated net proceeds from the sale of shares of common stock offered by us in this offering at an assumed initial public offering price of $            per share, the midpoint of the price range set forth on the cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, and the application of the net proceeds as described in "Use of Proceeds."
        This information should be read in conjunction with "Use of Proceeds," "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the historical consolidated financial statements and related notes appearing elsewhere in this prospectus.

											
 	 	As of June 30, 2015	 	
 	 	Actual	 	As Adjusted	 	As Further
Adjusted (1)	 	
 	 	(in thousands except share data)	 	
Cash and cash equivalents	 	 $	13,007	 	 $	8,583	 	 $	 	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Debt:	 	 	 	 	 	 	 	 	 	 	
Long-term debt (including current portion) (2)	 	 $	158,420	 	 $	435,000	 	 $	 	 	
EFT Sellers Note (3)	 	 	9,000	 	 	9,000	 	 	 	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total debt	 	 	167,420	 	 	444,000	 	 	 	 	
Commitments and contingencies:	 	 	

 	 	
Series A preferred stock; par value $0.001 per share; 64,716 shares outstanding with liquidation preference of $281,005 on an actual basis; 2,576 shares outstanding with liquidation preference of $11,185 on an as adjusted basis and 0 shares outstanding on an as further adjusted basis (4)	 	 	57,880	 	 	2,304	 	 	 	 	
Stockholders' deficit:	 	 	

 	 	
Common stock, par value $0.001 per share; 2,600,000 authorized shares, 1,885,278 shares outstanding on an actual and as adjusted basis and         shares outstanding on an as further adjusted basis (5)	 	 	2	 	 	2	 	 	 	 	
Additional paid-in capital	 	 	(24,848	)	 	(245,590	)	 	 	 	
Accumulated earnings	 	 	24,194	 	 	23,756	 	 	 	 	
Accumulated other comprehensive loss	 	 	(2,930	)	 	(2,930	)	 	 	 	
Employee notes receivable	 	 	(108	)	 	—	 	 	 	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total stockholders' deficit	 	 	(3,690	)	 	(224,762	)	 	 	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total capitalization	 	 $	221,610	 	 $	221,542	 	 $	 	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(1)
A $1.00 increase or decrease in the assumed initial public offering price of $            per share, the midpoint of the price range set forth on the cover of this prospectus, would result in an approximately $             million increase or decrease in each of cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization, assuming that the number of shares offered by us set forth on the cover of this prospectus remains the same, and after deducting the underwriting discounts
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and commissions and estimated offering expenses payable by us. Each 1.0 million increase or decrease in the number of shares offered by us would increase or decrease each of cash and cash equivalents, additional paid-in capital, total stockholders' deficit and total capitalization by approximately $             million, assuming the initial public offering price of $            per share, the midpoint of the price range set forth on the cover of this prospectus, remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The as further adjusted information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering.
(2)
Actual long-term debt as of June 30, 2015 consists of borrowings under the Company's previously outstanding term loan facility, which was repaid in connection with our entering into the New Credit Agreement. As Adjusted long-term debt consists of borrowings under the New Term Loan Facility, which were used to repay the Company's previous term loan facility, effect the Partial Preferred Redemption, and pay related transaction fees and expenses. As Further Adjusted long-term debt gives effect to the repayment of $          of borrowings under the New Term Loan Facility using a portion of the net proceeds of this offering. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources" and "Description of Certain Indebtedness."

(3)
As partial consideration for the Company's acquisition of EFT Source, the Company issued a $9 million subordinated promissory note bearing interest at 5% per annum, which matures on the earlier of (i) September 2, 2016, (ii) twelve months following the consummation of an initial public offering or (iii) the occurrence of certain change of control events.

(4)
As of June 30, 2015, 1,970 shares of Series A Preferred Stock were subject to a put, where employees holding these shares upon termination of their employment have the option to require us to purchase the shares at the then current liquidation preference. As of June 30, 2015, the liquidation preference of the Series A Preferred Stock had a value of approximately $4,342.12 per outstanding share for a total aggregate cumulative liquidation value of $281.0 million. On August 17, 2015, we effected the Partial Preferred Redemption in which we redeemed 62,140 shares of preferred stock.

(5)
Numbers of shares of common stock on an actual and adjusted basis does not reflect the        -for-one stock split which will be effected prior to the consummation of this offering. Number of shares outstanding on a further adjusted basis gives effect to such stock split.
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 DILUTION
        If you purchase our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of our common stock after this offering. Dilution results from the fact that the initial public offering price per share of our common stock is substantially in excess of the book value per share of common stock attributable to the existing stockholders for the currently outstanding shares of common stock.
        Our pro forma net tangible book value as of              was $             million, or $            per share of common stock after giving effect to the Partial Preferred Redemption and the              -for-one stock split effected on                  , 2015. Net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the basic weighted average number of shares of common stock that will be outstanding immediately prior to the completion of the offering.
        After giving effect to the sale of the               shares of common stock offered by us in this offering at an assumed initial public offering price of $            per share, the midpoint of the price range set forth on the cover of this prospectus, less estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of              would have been approximately $             million, or $            per share of common stock after giving effect to this offering. This represents an immediate increase in net tangible book value to our existing stockholders of $            per share and an immediate dilution to purchasers in this offering of $            per share. The following table illustrates this pro forma per share dilution in net tangible book value to purchasers.

						
 	Assumed initial public offering price per share	 	 $	 	 	
 	Pro forma net tangible book value (deficit) per share as of            	 	 	 	 	
 	Increase per share attributable to purchasers in this offering	 	 	 	 	
 	Pro forma net tangible book value per share after giving effect to this offering	 	 	 	 	
 	 ​	​	​ 	​ 	​	
 	Dilution in pro forma net tangible book value per share to purchasers in this offering	 	 $	 	 	
 	 ​	​	​ 	​ 	​	
 	 ​	​	​	​	​	
 	 ​	​	​ 	​ 	​	
        A $1.00 increase or decrease in the assumed initial public offering price of $            per share, the midpoint of the price range set forth on the cover of this prospectus, would increase or decrease pro forma net tangible book value by $             million, or $            per share, and would increase or decrease the dilution per share to purchasers in this offering by $            , based on the assumptions set forth above.
        The following table summarizes as of              , on an as adjusted basis, the number of shares of common stock purchased, the total consideration paid and the average price per share paid by purchasers in this offering, based upon an assumed initial public offering price of $            per share, the midpoint of the initial public offering price range on the cover page of this prospectus, and before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:

																	
 	 	 	 	 	 	Total
consideration	 	 	 	
 	 	Shares purchased			 	 	 	
 					 	Average price
per share	 	
 	 	Number	 	Percent	 	Amount	 	Percent			 	
Existing stockholders	 	 	        	 	 	      	%	 $	        	 	 	      	%	 $	        	 	
New investors	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total	 	 	 	 	 	100	%	 	 	 	 	100	%	 	        	 	
        Except as otherwise indicated, the discussion and tables above assume no exercise of the underwriters' option to purchase additional shares and no exercise of any outstanding options. If the
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underwriters' option to purchase additional shares is exercised in full, our existing stockholders would own approximately        % and purchasers in this offering would own approximately         % of the total number of shares of our common stock outstanding after this offering. If the underwriters exercise their option to purchase additional shares in full, the pro forma net tangible book value per share after this offering would be $            per share, and the dilution in the pro forma net tangible book value per share to purchasers in this offering would be $            per share.
        The tables and calculations above are based on               shares of common stock outstanding as of              and assume no exercise by the underwriters of their option to purchase up to an additional               shares from us. This number excludes, as of              , an aggregate of               shares of common stock reserved for issuance under the Omnibus Plan that we intend to adopt in connection with this offering and               shares of common stock issuable upon the exercise of outstanding options under the Option Plan.
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 SELECTED CONSOLIDATED FINANCIAL DATA
        The following tables set forth our selected consolidated historical financial data. You should read the information set forth below in conjunction with "Use of Proceeds," "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated historical financial statements and notes thereto included elsewhere in this prospectus. The statements of income data for the years ended December 31, 2014, 2013 and 2012 and the balance sheet data as of December 31, 2014 and 2013 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The statements of income data for the six months ended June 30, 2015 and 2014 and the balance sheet data as of June 30, 2015 are derived from our unaudited condensed consolidated financial statements included elsewhere in this propectus. See "Index to Consolidated Financial Statements." Results of interim periods are not necessarily indicative of the results expected for a full year or for future periods.

																	
 	 	Six Months Ended
June 30,	 	Year Ended December 31,	 	
 	 	2015	 	2014	 	2014	 	2013	 	2012	 	
 	 	(unaudited)	 	 	 	 	 	 	 	
 	 	(in thousands, except share and per share data)	 	
Statement of Income Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Products	 	 $	112,771	 	 $	58,905	 	 $	159,220	 	 $	101,360	 	 $	98,969	 	
Services	 	 	60,075	 	 	36,862	 	 	101,786	 	 	95,010	 	 	84,817	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total net sales	 	 	172,846	 	 	95,767	 	 	261,006	 	 	196,370	 	 	183,786	 	
Cost of sales	 	 	111,503	 	 	69,969	 	 	179,279	 	 	136,874	 	 	130,897	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Gross profit	 	 	61,343	 	 	25,798	 	 	81,727	 	 	59,496	 	 	52,889	 	
Operating expenses	 	 	29,959	 	 	16,262	 	 	47,255	 	 	33,347	 	 	32,985	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income from operations	 	 	31,384	 	 	9,536	 	 	34,472	 	 	26,149	 	 	19,904	 	
Other income (expense)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest, net	 	 	(3,505	)	 	(3,444	)	 	(7,508	)	 	(7,838	)	 	(5,765	)	
Foreign currency gain (loss)	 	 	149	 	 	(211	)	 	(124	)	 	(142	)	 	(279	)	
Loss on debt modification and early extinguishment	 	 	—	 	 	—	 	 	(476	)	 	—	 	 	—	 	
Gain on purchase of ID Data	 	 	—	 	 	—	 	 	—	 	 	—	 	 	604	 	
Other income (expense)	 	 	61	 	 	19	 	 	(101	)	 	18	 	 	171	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income before taxes	 	 	28,089	 	 	5,900	 	 	26,263	 	 	18,187	 	 	14,635	 	
Provision for income taxes	 	 	(9,974	)	 	(2,334	)	 	(10,291	)	 	(6,988	)	 	(5,909	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income from continuing operations	 	 	18,115	 	 	3,566	 	 	15,972	 	 	11,199	 	 	8,726	 	
Loss from discontinued operations, net of taxes (1)	 	 	(606	)	 	(2,763	)	 	(2,670	)	 	(2,612	)	 	(3,796	)	
Gain on sale of discontinued operation, net of taxes (1)	 	 	887	 	 	—	 	 	—	 	 	—	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income	 	 $	18,396	 	 $	803	 	 $	13,302	 	 $	8,587	 	 	4,930	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income (loss) per share: (2)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and Diluted—Continuing Operations	 	 $	(3.86	)	 $	(9.32	)	 $	(15.22	)	 $	(12.89	)	 	(14.73	)	
Basic and Diluted—Discontinued Operations	 	 	0.15	 	 	(1.48	)	 	(1.43	)	 	(1.40	)	 	(2.02	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total	 	 $	(3.71	)	 $	(10.80	)	 $	(16.65	)	 $	(14.29	)	 $	(16.75	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Weighted average shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and Diluted	 	 	1,877,857	 	 	1,868,816	 	 	1,872,693	 	 	1,866,925	 	 	1,875,674	 	
Other Financial Data:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 $	8,040	 	 $	5,614	 	 $	13,252	 	 $	11,595	 	 $	10,514	 	
Capital expenditures	 	 	10,390	 	 	6,578	 	 	15,568	 	 	10,628	 	 	9,113	 	
EBITDA (3)	 	 	39,634	 	 	14,958	 	 	47,023	 	 	37,620	 	 	30,914	 	
Adjusted EBITDA (3)	 	 	41,897	 	 	14,771	 	 	54,219	 	 	38,372	 	 	30,589	 	
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 	 	 	 	As of December 31,	 	
 	 	As of
June 30,
2015			 	
 			 	2014	 	2013	 	
 	 	(unaudited)	 	 	 	 	 	
 	 	(in thousands)	 	
Consolidated Balance Sheet Data:	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 $	13,007	 	 $	12,941	 	 $	9,702	 	
Total current assets	 	 	107,808	 	 	88,719	 	 	65,958	 	
Net property, equipment and leasehold improvements	 	 	48,431	 	 	44,772	 	 	36,650	 	
Total assets	 	 	287,784	 	 	266,624	 	 	171,867	 	
Total debt	 	 	167,420	 	 	179,424	 	 	122,306	 	
Total stockholders' deficit	 	 	(3,690	)	 	(21,694	)	 	(36,896	)	

(1)
We sold our operating segment located in Nevada in January 2015. This operating segment primarily produced retail gift cards that are not issued on the networks of the Payment Card Brands. Accordingly, the Company's consolidated balance sheets, and statements of operations and comprehensive income (loss), and statements of cash flows have been reclassified to present this operating segment as a discontinued operation as of and for the years ended December 31, 2014, 2013 and 2012 and the six months ended June 30, 2015 and 2014. See Note 4 (Discontinued Operation and Disposition) to our audited consolidated financial statements and Note 3 (Discontinued Operation and Disposition) to our unaudited condensed consolidated financial statements, each appearing elsewhere in this prospectus.

(2)
For a computation of historical basic and diluted earnings per share attributable to continuing and discontinued operations, see Note 14 (Earnings per Share) to our audited consolidated financial statements and Note 13 (Earnings per Share) to our unaudited condensed consolidated financial statements, each appearing elsewhere in this prospectus.

(3)
EBITDA is defined as income from continuing operations before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus adjustments for foreign currency gain or loss, loss on debt modification and early extinguishment, gain on purchase of ID Data, non-cash compensation expense related to our phantom stock plan that will be terminated in connection with this offering, performance bonuses earned in connection with the EFT Source acquisition and investment banking and related fees. EBITDA and Adjusted EBITDA are Non-GAAP Financial Measures that do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. The Non-GAAP Financial Measures are the primary measures used by our management to evaluate operating performance. The Non-GAAP Financial Measures are the primary measures used by our management to evaluate operating performance. We believe the Non-GAAP Financial Measures are useful to investors because they provide a means to evaluate our operating performance on an ongoing basis using criteria that are used by our internal decision makers and because they are frequently used by investors and other interested parties when comparing companies in our industry that have different financing and capital structures and/or tax rates. We believe the Non-GAAP Financial Measures are meaningful measures because they present a transparent view of our recurring operating performance and allow management to readily view operating trends, perform analytical comparisons and identify strategies to improve operating performance. The Non-GAAP Financial Measures, however, are not measures of our liquidity or financial performance under GAAP and should not be considered as an alternative to net income (loss), income (loss) from operations, or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of our liquidity. The use of the Non-GAAP Financial Measures instead of net income (loss) has limitations as an analytical tool, including the inability to determine profitability; the exclusion of interest expense, interest income and associated significant cash requirements; and the exclusion of depreciation and amortization, which represent unavoidable operating costs. The Non-GAAP Financial Measures are not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.
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The following is a reconciliation of net income from continuing operations to EBITDA and Adjusted EBITDA:

																	
 	 	Six Months
Ended
June 30,	 	Year Ended December 31,	 	
 	 	2015	 	2014	 	2014	 	2013	 	2012	 	
 	 	(in thousands)	 	
Net income from continuing operations	 	 $	18,115	 	 $	3,566	 	 	15,972	 	 	11,199	 	 $	8,726	 	
Depreciation and amortization	 	 	8,040	 	 	5,614	 	 	13,252	 	 	11,595	 	 	10,514	 	
Interest, net	 	 	3,505	 	 	3,444	 	 	7,508	 	 	7,838	 	 	5,765	 	
Provision for income taxes	 	 	9,974	 	 	2,334	 	 	10,291	 	 	6,988	 	 	5,909	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
EBITDA	 	 	39,634	 	 	14,958	 	 	47,023	 	 	37,620	 	 	30,914	 	
Foreign currency (gain) loss	 	 	(149	)	 	211	 	 	124	 	 	142	 	 	279	 	
Loss on debt modification and early extinguishment (a)	 	 	—	 	 	—	 	 	476	 	 	—	 	 	—	 	
Gain on purchase of ID Data (b)	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(604	)	
Non-cash compensation expense (c)	 	 	1,503	 	 	(398	)	 	4,534	 	 	610	 	 	—	 	
EFT Source performance bonuses (d)	 	 	500	 	 	—	 	 	—	 	 	—	 	 	—	 	
Investment banking and related fees (e)	 	 	409	 	 	—	 	 	2,062	 	 	—	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Adjusted EBITDA	 	 $	41,897	 	 $	14,771	 	 $	54,219	 	 $	38,372	 	 $	30,589	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(a)
Represents loss on the modification of our indebtedness in connection with the acquisition of EFT Source.

(b)
Represents gain on our purchase of certain assets of ID Data, Limited.

(c)
Represents compensation expense incurred in connection with the Company's phantom stock plan. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Phantom Stock Plan" and "Executive Compensation—CPI Acquisition, Inc. Phantom Stock Plan."

(d)
Represents performance bonuses earned in connection with the acquisition of EFT Source.

(e)
Includes investment banking, advisory and related professional fees and expenses incurred in connection with the EFT Source acquisition and our consideration of liquidity alternatives.

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 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
         The following discussion and analysis of our financial condition and results of operations is intended to help prospective investors understand our business, results of operations, liquidity and capital resources and should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those which are not within our control. See "Forward-Looking Statements." Our 2014 reported results include four months of results from EFT Source, and references to pro forma results give effect to our acquisition of EFT Source as if such acquisition occurred on January 1, 2014.
 Company Overview
        We are a leading provider of comprehensive Financial Payment Card solutions in North America. We define Financial Payment Cards as credit, debit and Prepaid Debit Cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express and Discover) and Interac (in Canada). In 2014, we produced over 360 million Financial Payment Cards, provided integrated card services to over 3,200 card-issuing banks and Prepaid Debit Card issuers and personalized more than 130 million Financial Payment Cards. We have established a leading position in the Financial Payment Card market through more than 20 years of experience and are focused primarily on this growing subsector of the financial technology market. Our customers are primarily leading national and regional banks, independent community banks, credit unions, managers of prepaid debit programs, Group Service Providers and card processors. We serve a diverse set of over 4,000 direct and indirect customers, including many of the largest North American issuers of debit and credit cards such as JPMorgan Chase, Bank of America, American Express and Wells Fargo, the largest global managers of Prepaid Debit Card programs, including InComm, Green Dot, Blackhawk Network and American Express, as well as thousands of independent community banks, credit unions, Group Service Providers and card processors.
        We serve our customers through a network of nine production and card services facilities, including seven high-security facilities in North America that are each certified by one or more of the Payment Card Brands and Interac (in Canada) and, where required by our customers, the PCI Security Standards Council. We have the largest such network of high-security production facilities in North America, allowing us to optimize our solutions offerings to serve the needs of our diverse and long-term customer base.
        In addition to our seven North American facilities, we have two facilities in the United Kingdom that produce retail cards, such as gift and loyalty cards that are not issued on the networks of the Payment Card Brands, as well as provide personalization services.
        For the six months ended June 30, 2015, we generated net sales of $172.8 million, which represented an increase of 80.5% as compared to the six months ended June 30, 2014, net income from continuing operations of $18.1 million, which represented an increase of 408.0% compared to the six months ended June 30, 2014 and Adjusted EBITDA of $41.9 million, which represented an increase of 183.6% compared to the six months ended June 30, 2014, representing net income from continuing operations and Adjusted EBITDA margins of 10.5% and 24.2%, respectively. For the year ended December 31, 2014, we generated $261.0 million of net sales, which represented an increase of 32.9% as compared to the prior year, $16.0 million of net income from continuing operations, which represented an increase of 42.6% as compared to the prior year, and $54.2 million of Adjusted EBITDA, which represented an increase of 41.3% as compared to the prior year, and net income from continuing operations and Adjusted EBITDA margins of 6.1% and 20.8%, respectively. Our 2014
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reported results include four months of results from EFT Source. Adjusted EBITDA and Adjusted EBITDA margin are Non-GAAP Financial Measures. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income from continuing operations, the most comparable GAAP measure, see "—Key Performance Indicators—EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin."
 Segment Overview
        Our business consists of three reportable segments: the U.S. Debit and Credit segment, the U.S. Prepaid Debit segment and the U.K. Limited segment.
 U.S. Debit and Credit Segment
        Our U.S. Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services to card-issuing banks in the United States. Products manufactured by this segment primarily include EMV and non-EMV credit cards, debit cards and Prepaid Debit Cards issued on the networks of the Payment Card Brands, Private Label Credit Cards that are not issued on the networks of the Payment Cards Brands and instant issuance systems. This segment also provides a variety of integrated card services, including card personalization and fulfillment services and instant issuance services. The U.S. Debit and Credit segment includes our operations in Colorado, Indiana and Tennessee, which are each certified by multiple global Payment Card Brands and, where required by our customers, the PCI Security Standards Council.
 U.S. Prepaid Debit Segment
        Our U.S. Prepaid Debit segment primarily provides integrated card services to Prepaid Debit Card issuers in the United States. Services provided include tamper-evident security packaging services and card personalization and fulfillment services. This segment also produces Financial Payment Cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages mentioned above. The U.S. Prepaid Debit segment includes our operation in Minnesota which is certified by multiple global Payment Card Brands and the PCI Security Standards Council.
 U.K. Limited Segment
        Our U.K. Limited segment primarily produces retail gift and loyalty cards for customers in the United Kingdom and continental Europe. This segment also provides card personalization and fulfillment services. The U.K. Limited segment includes our operations in Colchester, United Kingdom and Liverpool, United Kingdom. Neither of our operations in this segment is certified by any of the Payment Card Brands, nor are they PCI certified.
 Other
        Our operations in Ontario, Canada and Petersfield, United Kingdom are not included in the three reportable segments listed above due to not meeting the materiality thresholds set forth in ASC 280. In July 2015, we ceased operations at our Petersfield facility. The Petersfield facility is not material to our business. These two operations comprise the "other" category in the discussion below. Also, our corporate headquarters is not included in our three reportable segments as required by ASC 280. See Note 19 (Segment Reporting) to our audited consolidated financial statements for certain additional information regarding our operating segments.
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 Trends and Key Factors Affecting our Financial Performance
 Shift to Card-Based and Other Forms of Electronic Payments
        Consumer payments in the United States and globally have shifted over the last several decades from paper-based media such as cash and checks to card-based media such as credit, debit and Prepaid Debit Cards, and electronic methods such as pre-authorized payments through Automated Clearing House ("ACH"). The Nilson Report estimates that card-based payments have increased from 38.3% of U.S. transactions in 2005 to 56.5% in 2013, and electronic payments have increased from 4.3% to 7.2% over the same period. By 2018, card-based payments are projected to comprise 69.2% of U.S. transactions, with cash and checks accounting for 21.4% and electronic payments representing the remaining 9.4%.
 EMV Conversion in the United States
        Our net sales are impacted by the changing technological trends in our industry and our ability to respond to such trends. In particular, issuers in the United States have begun the process of converting from the issuance of magnetic stripe Financial Payment Cards to the issuance of EMV Financial Payment Cards. The shift to EMV technology has been precipitated by a number of factors, including an impending shift of liability to the party in a transaction not utilizing EMV technology, escalating card fraud in the United States, the enhanced security offered by EMV cards, the recent occurrence of high-profile data breaches and the desire for global interoperability of the acceptance network. See "Business—EMV Conversion in the United States." In preparation for the EMV conversion, we have invested significantly in our network of facilities, technological infrastructure and human capital resources. In particular, during 2014 we opened a dedicated secure facility in Colorado for EMV production and personalization and made significant information technology and equipment upgrades across our network of facilities.
        During the six months ended June 30, 2015, we produced and shipped 75.2 million EMV cards, as compared to 13.9 million during the six months ended June 30, 2014. During 2014, we produced and shipped 63.8 million EMV cards, as compared to 6.8 million during 2013. Of the 63.8 million EMV cards we shipped in 2014 (17.7% of the total Financial Payment Cards we shipped in 2014), over 50 million were shipped in the second half of 2014. We believe that demand for EMV cards increased sharply in the second half of 2014 primarily as a result of, among other things, the impending Liability Shift and occurrence of high-profile data breaches. See "Industry—EMV Conversion in the United States." We anticipate that this trend will continue and that an increasing number and proportion of the Financial Payment Cards that we ship in the future will be EMV Cards. The upgrade by our customers from magnetic stripe and contactless Financial Payment Cards to EMV Financial Payment Cards has resulted in significant changes to our financial profile including, but not limited to, the following:
•
Increased Net Sales—The conversion of non-EMV cards to EMV cards has driven growth in our net sales because EMV cards have a higher selling price than comparable magnetic stripe cards. 

•
Increased Cost of Goods Sold—The conversion of magnetic stripe cards to EMV cards also drove increases in our cost of goods sold as EMV cards include an integrated circuit chip assembly and may also include an RFID inlay assembly, in the case of a Dual-Interface EMV card, which meaningfully increased our cost of goods sold. 

•
Increased Gross Profit and Gross Profit Margin—The conversion of magnetic stripe cards to EMV cards also drove an increase in our gross profit, as the gross profit generated by an EMV card is higher than the gross profit generated by an otherwise comparable magnetic stripe card. Likewise, the conversion of magnetic stripe cards to EMV cards resulted in an increase to our gross profit margins.
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•
Increased Income from Operations and Operating Margin—The conversion of magnetic stripe cards to EMV cards drove an increase in our income from operations, as the increased operating expenses required to support the increased production of EMV cards was less than the incremental gross profit generated. These factors drove an increase in our operating margin. 

•
Increased Working Capital Investment—The conversion of magnetic stripe cards to EMV cards resulted in increased investment in working capital, particularly accounts receivable and inventory. This is a direct result of the increased levels of net sales and cost of goods sold discussed above. 

•
Increased Capital Spending and Depreciation—We incurred elevated levels of capital investment to prepare for the U.S. EMV conversion, including investments in our network of facilities and technological infrastructure discussed above. We anticipate spending up to an additional $10 million in capital investment during 2015 in connection with our further EMV preparation. This will utilize cash from our operations and result in additional depreciation expense in future years.
        Our ability to offer technologically relevant products and services and to remain responsive to the evolving demands of our customers are, we believe, key to maintaining our leading market position.
 Acquisition of EFT Source, Inc.
        On September 2, 2014, we acquired 100% of the stock of EFT Source. EFT Source provides data personalization services and instant issuance systems and services to issuers of Financial Payment Cards in the United States. Total consideration for EFT Source was $68.9 million. We paid cash consideration of $54.9 million and non-cash consideration consisting of a subordinated unsecured promissory note (the "EFT Sellers Note") of $9.0 million and the issuance of $5.0 million of our preferred and common stock. We also incurred additional indebtedness to fund the cash portion of the purchase price. The EFT Sellers Note bears interest at a rate of 5.0% per annum, payable quarterly in arrears and matures on September 2, 2016. The financial results of EFT Source from September 2, 2014 through December 31, 2014 are included in our 2014 financial results.
 Card Expiration Cycle
        An important driver of demand for bank debit cards and general purpose credit cards, which comprised approximately 71.7% of the U.S. market for Financial Payment Cards in 2014, is the length of time that cards are active prior to expiration. Approximately 53% of the demand for bank debit cards and general purpose credit cards in 2014 resulted from this regular renewal cycle. We estimate that bank debit and general purpose credit cards historically have been replaced on average every three years. However, First Annapolis believes that certain issuers of bank debit cards and general purpose credit cards have recently extended the expiration dates on their cards which may be due, in part, to the higher cost of EMV cards. This longer card expiration cycle would result in lower demand for bank debit cards and general purpose credit cards in the United States, and First Annapolis has taken this into consideration in estimating the growth rates of these markets. First Annapolis now estimates that bank debit and general purpose credit cards in the United States will be replaced on average every four years.
 Discontinued Operation and Disposition
        On January 12, 2015, we sold our operating segment in Nevada under an asset purchase agreement for $5.0 million in cash (the "Nevada Sale"). Assets classified as a discontinued operation include inventory and plant and equipment and leasehold improvements of $3.0 million and $2.9 million, respectively. We recognized a pre-tax loss of $4.1 million for the year ended December 31, 2014, which is included in Loss from discontinued operation, net of taxes in our consolidated statement of
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operations for that period. After the Nevada Sale, we retained no continuing involvement in the operations in Nevada other than obligations under a 180-day transition services agreement.
 Key Performance Indicators
        To evaluate the performance of our business, in addition to our results of operations, we utilize a variety of financial and performance measures that we refer to as key performance indicators. These key performance indicators include Financial Payment Card Shipments by card type (EMV and non-EMV), Net sales—Services, EBITDA, Adjusted EBITDA and Adjusted EBITDA margin.
 Financial Payment Card Shipments
        Financial Payment Card Shipments represent the total number of Financial Payment Cards we ship during the period, and we further divide this into the following card types: EMV and non-EMV. We expect Financial Payment Card shipments to increase due to the growth in the market for Financial Payment Cards and non-EMV cards to be upgraded on an increasing basis to EMV cards due to the U.S. EMV Conversion. See "—Shift to Card-Based and Other Forms of Electronic Payments" and "—EMV Conversion in the United States."
 EBITDA, Adjusted EBITDA and Adjusted EBITDA Margin
        We use EBITDA, Adjusted EBITDA and Adjusted EBITDA margin as a supplemental measure of our performance. Adjusted EBITDA is also the basis for financial performance evaluation under our executive compensation programs. EBITDA is defined as income from continuing operations before interest expense, income taxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA plus adjustments for foreign exchange gain or loss, loss on debt modification and early extinguishment, gain on purchase of ID Data, non-cash compensation expense related to our phantom stock plan that will be terminated in connection with this offering, performance bonus earned in connection with the EFT Source acquisition and investment banking and related fees. We believe that Adjusted EBITDA is an appropriate measure of operating performance because it eliminates the impact of expenses that do not relate to ongoing business performance. We also evaluate Adjusted EBITDA margin, which is Adjusted EBITDA as a percentage of net sales. We use Adjusted EBITDA and Adjusted EBITDA margin measures to benchmark our performance versus prior periods and our annual operating plan.
        EBITDA, Adjusted EBITDA and Adjusted EBITDA margin are Non-GAAP Financial Measures. The Non-GAAP Financial Measures as presented in this prospectus are supplemental measures of our performance that are neither required by, nor presented in accordance with, GAAP. The Non-GAAP Financial Measures should not be considered as a substitute for GAAP metrics such as net income or any other performance measures derived in accordance with GAAP. Also, in the future we may incur expenses or charges such as those added back to calculate Adjusted EBITDA and Adjusted EBITDA
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margin. Our presentation of Adjusted EBITDA and Adjusted EBITDA margin should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

														
 	 	Six Months
Ended
June 30,	 	Year Ended
December 31,	 	
 	 	2015	 	2014	 	2014	 	2013	 	
 	 	(in thousands)	 	
Financial Payment Card Shipments	 	 	 	 	 	 	 	 	 	 	 	 	 	
EMV	 	 	75,164	 	 	13,921	 	 	63,845	 	 	6,769	 	
Non-EMV	 	 	111,240	 	 	157,018	 	 	297,385	 	 	297,862	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total	 	 	186,404	 	 	170,939	 	 	361,230	 	 	304,631	 	
EBITDA (1)	 	 $	39,634	 	 $	14,958	 	 $	47,023	 	 $	37,620	 	
Adjusted EBITDA (1)	 	 	41,897	 	 	14,771	 	 	54,219	 	 	38,372	 	
Adjusted EBITDA margin	 	 	24.2	%	 	15.4	%	 	20.8	%	 	19.5	%	

(1)
The following is a reconciliation of net income from continuing operations to EBITDA and Adjusted EBITDA.

														
 	 	Six Months
Ended
June 30,	 	Year Ended
December 31,	 	
 	 	2015	 	2014	 	2014	 	2013	 	
 	 	(in thousands)	 	
Net income from continuing operations	 	 $	18,115	 	 $	3,566	 	 $	15,972	 	 $	11,199	 	
Depreciation and amortization	 	 	8,040	 	 	5,614	 	 	13,252	 	 	11,595	 	
Interest, net	 	 	3,505	 	 	3,444	 	 	7,508	 	 	7,838	 	
Provision for income taxes	 	 	9,974	 	 	2,334	 	 	10,291	 	 	6,988	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
EBITDA	 	 	39,634	 	 	14,958	 	 	47,023	 	 	37,620	 	
Foreign currency (gain) loss	 	 	(149	)	 	211	 	 	124	 	 	142	 	
Loss on debt modification and early extinguishment (a)	 	 	—	 	 	—	 	 	476	 	 	—	 	
Non-cash compensation expense (b)	 	 	1,503	 	 	(591	)	 	4,534	 	 	610	 	
EFT performance bonuses (c)	 	 	500	 	 	—	 	 	—	 	 	—	 	
Investment banking and related fees (d)	 	 	409	 	 	—	 	 	2,062	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Adjusted EBITDA	 	 $	41,897	 	 $	14,577	 	 $	54,219	 	 $	38,372	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(a)
Represents loss on the modification of the Company's indebtedness in connection with the acquisition of EFT Source.

(b)
Represents compensation expense incurred in connection with the Company's phantom stock plan. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Phantom Stock Plan" and "Executive Compensation—CPI Acquisition, Inc. Phantom Stock Plan."

(c)
Represents performance bonuses earned in connection with the acquisition of EFT Source.
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(d)
Includes investment banking, advisory and related professional fees and expenses incurred in connection with the EFT Source acquisition and the Company's consideration of liquidity alternatives.

 Key Components of Results of Operations
        Set forth below is a brief description of key line items of our consolidated statements of operations and comprehensive income.
 Net Sales
        Net sales reflect our revenue generated from the sale of products and services. Product net sales include the design and production of Financial Payment Cards in Contact EMV, Dual-Interface EMV, contactless and magnetic stripe formats. We also generate product revenue from the sale of our Card@Once® instant issuance systems, Private Label Credit Cards and retail gift cards. Services net sales include revenue from the personalization and fulfillment of Financial Payment Cards, the provision of tamper-evident security packaging, providing fulfillment services to Prepaid Debit Card program managers, and software as a service personalization of instant issuance debit cards. We also generate service revenue from personalizing retail gift cards (primarily in Canada and the United Kingdom) and from click-fees generated from our patented MYCA™ software.
        Generally, we recognize net sales related to products upon shipment and services upon the provision of the service, when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is reasonably assured. See "—Critical Accounting Policies and Estimates—Revenue Recognition."
 Cost of Sales
        Cost of sales includes the direct and indirect costs of the products we sell and the services that we provide. Product costs include the cost of raw materials, including microchip assemblies in the case of EMV cards and, additionally, RFID assemblies in the case of Dual-Interface EMV cards, labor costs, material costs, equipment and facilities costs, operation overhead, depreciation, leases and rental charges and transport costs. Product costs also include desktop card personalization terminals in the case of Card@Once® instant issuance system sales. Services costs include the cost of labor, raw materials in the case of tamper-evident security packaging, and equipment and facilities costs, operation overhead, depreciation, leases and rental charges and transport costs. Cost of sales can be impacted by many factors, including volume, operational efficiencies, promotional activity and employee relations.
 Gross Profit and Gross Margin
        Gross profit consists of our net sales less our cost of sales. Gross margin is gross profit as a percentage of net sales.
 Operating Expenses
        Operating expenses are primarily comprised of selling, general and administrative expenses ("SG&A") which generally consist of expenses for executive, finance, sales, marketing, legal, human resources and administrative personnel, including payroll, benefits and stock-based compensation expense, and outside legal and other advisory fees. Operating expense also includes depreciation and amortization expense, including the amortization of tangible and intangible assets. We anticipate increases in SG&A as we incur the costs of compliance associated with being a public company, including audit and consulting fees.
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 Income from Operations and Operating Margin
        Income from operations consists of our gross profit less our operating expenses. Operating margin is income from operations as a percentage of net sales.
 Other Income (Expense)
        Other income (expense) consists primarily of interest expense and foreign currency gains and losses.
 Net Income from Continuing Operations
        Net income from continuing operations consists of our income from operations plus / less other income or expense and provision for income tax.
 Results of Operations
 Six Months Ended June 30, 2015 Compared With Six Months Ended June 30, 2014
        The table below presents our results of operations for the six months ended June 30, 2015 compared with the six months ended June 30, 2014:

														
 	 	Six Months Ended
June 30,	 	 	 	 	 	
 	 	2015	 	2014	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Net sales:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Products	 	 $	112,771	 	 $	58,905	 	 $	53,866	 	 	91.4	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Services	 	 	60,075	 	 	36,862	 	 	23,213	 	 	63.0	%	
Total net sales	 	 	172,846	 	 	95,767	 	 	77,079	 	 	80.5	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Cost of sales	 	 	111,503	 	 	69,969	 	 	41,534	 	 	59.4	%	
Gross profit	 	 	61,343	 	 	25,798	 	 	35,545	 	 	137.8	%	
Operating expenses	 	 	29,959	 	 	16,262	 	 	13,697	 	 	84.2	%	
Income from operations	 	 	31,384	 	 	9,536	 	 	21,848	 	 	229.1	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Other income (expense):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest, net	 	 	(3,505	)	 	(3,444	)	 	(61	)	 	1.8	%	
Foreign currency gain (loss)	 	 	149	 	 	(211	)	 	360	 	 	(170.6	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Other income	 	 	61	 	 	19	 	 	42	 	 	221.1	%	
Income before taxes	 	 	28,089	 	 	5,900	 	 	22,189	 	 	376.1	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Provision for income taxes	 	 	(9,974	)	 	(2,334	)	 	(7,640	)	 	327.3	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Net income from continuing operations	 	 	18,115	 	 	3,566	 	 	14,549	 	 	407.9	%	
Loss from discontinued operations, net of taxes	 	 	(606	)	 	(2,763	)	 	2,157	 	 	78.1	%	
Gain on sale of discontinued operations, net of taxes	 	 	887	 	 	—	 	 	887	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Net income	 	 $	18,396	 	 $	803	 	 $	17,593	 	 	2,190.9	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
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 Net Sales

														
 	 	Six Months Ended June 30,	 	 	 	 	 	
 	 	2015	 	2014	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Net sales by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S Debit and Credit segment—Products	 	 $	103,161	 	 $	46,727	 	 $	56,434	 	 	120.8	%	
U.S Debit and Credit segment—Services	 	 	20,244	 	 	2,543	 	 	17,701	 	 	696.1	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.S Debit and Credit segment—Total	 	 	123,405	 	 	49,270	 	 	74,135	 	 	150.5	%	
U.S. Prepaid Debit segment—Products	 	 	
—	 	 	
—	 	 	
—	 	 	
—	 	
U.S. Prepaid Debit segment—Services	 	 	29,823	 	 	23,298	 	 	6,525	 	 	28.0	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.S. Prepaid Debit segment—Total	 	 	29,823	 	 	23,298	 	 	6,525	 	 	28.0	%	
U.K. Limited segment—Products	 	 	
9,231	 	 	
11,142	 	 	
(1,911	
)	 	
(17.2	
)%	
U.K. Limited segment—Services	 	 	4,687	 	 	5,188	 	 	(501	)	 	(9.7	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.K. Limited segment—Total	 	 	13,918	 	 	16,330	 	 	(2,412	)	 	(14.8	)%	
Other—Products	 	 	
4,818	 	 	
5,177	 	 	
(359	
)	 	
(6.9	
)%	
Other—Services	 	 	5,104	 	 	6,006	 	 	(902	)	 	(15.0	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Other—Total	 	 	9,922	 	 	11,183	 	 	(1,261	)	 	(11.3	)%	
Inter-company eliminations	 	 	(4,222	)	 	(4,314	)	 	92	 	 	(2.1	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	172,846	 	 $	95,767	 	 $	77,079	 	 	80.5	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Net sales for the six months ended June 30, 2015 increased $77.1 million, or 80.5%, to $172.8 million compared to $95.8 million for the six months ended June 30, 2014. The increase in net sales during the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 was due to growth in net sales of 150.5% and 28.0% in our U.S. Debit and Credit segment and U.S. Prepaid Debit segment, respectively, offset by a 14.8% decline in our U.K. Limited segment as compared to the same period in the prior year.
        Net sales for the U.S. Debit and Credit segment for the six months ended June 30, 2015 increased $74.1 million, or 150.5%, to $123.4 million compared to $49.3 million for the six months ended June 30, 2014. The increase in net sales was driven by an increase in EMV related revenue of $59.0 million, a $15.5 million increase in card services revenue and a $7.3 million increase in instant issuance revenue, offset in part by a decline in magnetic stripe card revenue of $13.7 million. The increase in EMV revenue of $59.0 million was driven by our card issuing bank customers or end-users adopting EMV technology for debit and credit cards. For the six months ended June 30, 2015, we sold 74.7 million EMV cards at an Average Selling Price ("ASP") of $0.98 compared to 13.0 million EMV cards at an ASP of $1.08 for the six months ended June 30, 2014. The increase in card services revenue of $15.5 million was driven primarily by the impact of our acquisition of EFT Source on September 2, 2014. Likewise, the $7.3 million growth in instant issuance revenue was also driven by the acquisition of EFT Source, as well as continued growth of Card@Once® during the quarter. The $13.7 million decline in magnetic stripe revenue was primarily driven by our card issuing bank customers upgrading from magnetic stripe cards to EMV cards.
        Net sales for the U.S. Prepaid Debit segment for the six months ended June 30, 2015 increased $6.5 million, or 28.0%, to $29.8 million compared to $23.3 million for the six months ended June 30, 2014. The increase was driven primarily by our largest customer for this segment refreshing its packaging designs, combined with growth in the overall market segment.
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        Net sales for the U.K. Limited segment for the six months ended June 30, 2015 declined $2.4 million, or 14.8%, to $13.9 million compared to $16.3 million for the six months ended June 30, 2014. The decrease in net sales was primarily driven by a decrease in retail gift and loyalty card product and services net sales.
 Cost of Sales

														
 	 	Six Months Ended
June 30,	 	 	 	 	 	
 	 	2015	 	2014	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Cost of sales by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S Debit and Credit segment	 	 	78,098	 	 	35,010	 	 	43,088	 	 	123.1	%	
U.S. Prepaid Debit segment	 	 	18,526	 	 	16,220	 	 	2,306	 	 	14.2	%	
U.K. Limited segment	 	 	10,550	 	 	12,955	 	 	(2,405	)	 	(18.6	)%	
Other	 	 	7,955	 	 	8,869	 	 	(914	)	 	(10.3	)%	
Eliminations	 	 	(3,626	)	 	(3,085	)	 	(541	)	 	17.5	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 	111,503	 	 	69,969	 	 	41,534	 	 	59.4	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Cost of sales for the six months ended June 30, 2015 increased $41.5 million, or 59.4%, to $111.5 million compared to $70.0 million for the six months ended June 30, 2014. Cost of sales for the U.S. Debit and Credit segment for the six months ended June 30, 2015 increased $43.1 million, or 123.1%, to $78.1 million compared to $35.0 million for the six months ended June 30, 2014. The increase in cost of sales was driven by a $19.0 million increase in technology materials (primarily EMV chip assemblies), a $7.0 million increase in other materials, a $13.3 million increase in overhead, a $1.6 million increase in labor and benefits costs and a $0.5 million increase in depreciation and amortization expense. The $19.0 million increase in technology materials was driven by the increased number of EMV cards shipped as noted above and is a direct result of U.S. card issuing banks upgrading to EMV debit and credit cards, which include an integrated circuit chip assembly, and in certain cases may also include an RFID inlay assembly. The $7.0 million increase in other materials and $13.3 million increase in overhead expenses were driven primarily by the EFT Source acquisition and, to a lesser extent, by new secure EMV production and card services capacity that became operational in the second quarter of 2014. The $1.6 million increase in labor and benefits costs was driven by the acquisition of EFT Source and additional labor costs associated with the production of EMV cards, which have a higher labor cost component due to their complexity. Finally, increases in depreciation and amortization expense were driven by the EFT Source acquisition and the new secure EMV production and card services capacity noted above.
        Cost of sales for the U.S. Prepaid Debit segment for the six months ended June 30, 2015 increased $2.3 million, or 14.2%, to $18.5 million compared to $16.2 million for the six months ended June 30, 2014. The increase in cost of sales was driven by the increased level of net sales referenced above, partially offset by more efficient production.
        Cost of sales for the U.K. Limited segment for the six months ended June 30, 2015 decreased $2.4 million, or 18.6%, to $10.6 million compared to $13.0 million for the six months ended June 30, 2014. The decrease in cost of sales was driven by the decreased level of net sales referenced above and more efficient production.
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 Gross Profit and Gross Profit Margin

																				
 	 	Six Months Ended June 30,	 	 	 	 	 	
 	 	2015	 	% of
net sales	 	2014	 	% of
net sales	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Gross profit by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S Debit and Credit segment	 	 $	45,307	 	 	 36.7	%	 $	14,260	 	 	28.9	%	 $	31,047	 	 	217.7	%	
U.S. Prepaid Debit segment	 	 	11,297	 	 	37.9	%	 	7,078	 	 	30.4	%	 	4,219	 	 	59.6	%	
U.K. Limited segment	 	 	3,368	 	 	24.2	%	 	3,375	 	 	20.7	%	 	(7	)	 	(0.2	)%	
Other	 	 	1,371	 	 	24.1	%	 	1,085	 	 	15.8	%	 	286	 	 	26.4	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
Total	 	 $	61,343	 	 	 35.5	%	 $	25,798	 	 	26.9	%	 $	35,545	 	 	137.8	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
        Gross profit for the six months ended June 30, 2015 increased $35.5 million, or 137.8%, to $61.3 million compared to $25.8 million for the six months ended June 30, 2014. Gross profit margin for the six months ended June 30, 2015 increased to 35.5% compared to 26.9% for the six months ended June 30, 2014. Gross profit for the U.S. Debit and Credit segment for the six months ended June 30, 2015 increased $31.0 million, or 217.7%, to $45.3 million compared to $14.3 million for the six months ended June 30, 2014. Gross profit margin for the U.S. Debit and Credit segment for the six months ended June 30, 2015 increased to 36.7% compared to 28.9% for the six months ended June 30, 2014. Increases in gross profit were driven by the increased level of net sales referenced above and an $11.1 million increase from the EFT Source acquisition.
        Gross profit for the U.S. Prepaid Debit segment for the six months ended June 30, 2015 increased $4.2 million, or 59.6%, to $11.3 million compared to $7.1 million for the six months ended June 30, 2014. The increase in gross profit was primarily driven by the increased level of net sales referenced above and improved production efficiencies. Gross profit margin for the U.S. Prepaid Debit segment for the six months ended June 30, 2015 increased to 37.9% compared to 30.4% for the six months ended June 30, 2014.
        Gross profit for the U.K. Limited segment for the six months ended June 30, 2015 decreased 0.2% to $3.4 million. Gross profit margin for the U.K. Limited segment for the six months ended June 30, 2015 increased to 24.2% compared to 20.7% for the six months ended June 30, 2014. The decrease in gross profit was driven by decreases in retail gift and loyalty card product and services net sales, partially offset by more efficient production.
 Operating Expenses

														
 	 	Six Months Ended
June 30,	 	 	 	 	 	
 	 	2015	 	2014	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Operating expenses by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S Debit and Credit segment	 	 $	12,191	 	 $	4,923	 	 $	7,268	 	 	147.6	%	
U.S. Prepaid Debit segment	 	 	2,773	 	 	2,519	 	 	254	 	 	10.1	%	
U.K. Limited segment	 	 	2,932	 	 	3,199	 	 	(267	)	 	(8.3	)%	
Other	 	 	3,254	 	 	2,653	 	 	601	 	 	22.7	%	
Corporate	 	 	8,809	 	 	2,968	 	 	5,841	 	 	196.8	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	29,959	 	 $	16,262	 	 $	13,697	 	 	84.2	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Operating expenses for the six months ended June 30, 2015 increased $13.7 million, or 84.2%, to $30.0 million compared to $16.3 million for the six months ended June 30, 2014. Excluding a charge of
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$1.5 million and a benefit of $0.6 million for the six months ended June 30, 2015 and 2014, respectively, related to our phantom stock plan, $0.4 million of transaction costs for the six months ended June 30, 2015 and $0.5 million of accrued performance bonus charges in connection with the EFT Source acquisition in the six months ended June 30, 2015, operating expenses for the six months ended June 30, 2015 increased $10.7 million, or 65.5%. The increase in operating expenses was driven primarily by a $7.3 million increase in the U.S. Debit and Credit segment and a $5.8 million increase in our corporate expenses. The $3.8 million increase in the U.S. Debit and Credit segment was driven by a $3.2 million increase related to the EFT Source acquisition and the remaining increase was primarily attributable to additional salary and benefit expenses related to the elevated levels of segment net sales discussed above. The $5.8 million increase in corporate expenses was primarily driven by the $2.1 million increase in charges related to our phantom stock plan, $0.4 million of transaction costs, $0.5 million related to accrued performance bonus in connection with the EFT Source acquisition, a $2.5 million increase in depreciation and amortization expense and a $0.6 million increase in corporate salaries.
 Income from Operations and Operating Margin

																				
 	 	Six Months Ended June 30,	 	 	 	 	 	
 	 	2015	 	% of
net sales	 	2014	 	% of
net sales	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Income from operations by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S Debit and Credit segment	 	 $	33,116	 	 	 26.8	%	 $	9,337	 	 	19.0	%	 $	23,779	 	 	254.7	%	
U.S. Prepaid Debit segment	 	 	8,524	 	 	28.6	%	 	4,559	 	 	19.6	%	 	3,965	 	 	87.0	%	
U.K. Limited segment	 	 	436	 	 	3.1	%	 	176	 	 	1.1	%	 	260	 	 	147.7	%	
Other	 	 	(1,883	)	 	(19.0	)%	 	(1,568	)	 	(14.0	)%	 	(315	)	 	20.1	%	
Corporate	 	 	(8,809	)	 	 	 	 	(2,968	)	 	 	 	 	(5,841	)	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
Total	 	 $	31,384	 	 	 18.2	%	 $	9,536	 	 	10.0	%	 $	21,848	 	 	229.1	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
        Income from operations for the six months ended June 30, 2015 increased $21.8 million, or 229.1%, to $31.4 million compared to $9.5 million for the six months ended June 30, 2014. Excluding a charge of $1.5 million and a benefit of $0.6 million, for the six months ended June 30, 2015 and 2014, respectively, related to our phantom stock plan, $0.4 million of transaction costs for the six months ended June 30, 2015 and $0.5 million of accrued performance bonuses in connection with the EFT Source acquisition in the six months ended June 30, 2015, income from operations for the six months ended June 30, 2015 increased $24.8 million, or 278.1%, relative to the six months ended June 30, 2014. Operating margins for the six months ended June 30, 2015 increased to 18.2% compared to 10.0% for the six months ended June 30, 2014. Excluding the charges related to our phantom stock plan and the EFT Source acquisition performance bonus charge discussed above, operating margins for the six months ended June 30, 2015 increased to 19.9% compared to 10.0% for the six months ended June 30, 2014.
        Income from operations for the U.S. Debit and Credit segment for the six months ended June 30, 2015 increased $23.8 million, or 254.7%, to $33.1 million compared to $9.3 million for the six months ended June 30, 2014. Operating margins for the six months ended June 30, 2015 increased to 26.8% compared to 19.0% for the six months ended June 30, 2014. Income from operations for the U.S. Prepaid Debit segment for the six months ended June 30, 2015 increased $4.0 million, or 87.0%, to $8.5 million compared to $4.6 million for the six months ended June 30, 2014. Operating margins for the six months ended June 30, 2015 increased to 28.6% compared to 19.6% for the six months ended June 30, 2014. Income from operations for the U.K. Limited segment for the six months ended June 30, 2015 increased $0.2 million, or 147.3%, to $0.4 million compared to $0.2 million for the six
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months ended June 30, 2014. Operating margins for the six months ended June 30, 2015 increased to 3.1% compared to 1.1% for the six months ended June 30, 2014.
        Interest income (expense).     Interest expense for the six months ended June 30, 2015 increased $0.1 million, or 1.8%, to $3.5 million compared to $3.4 million for the six months ended June 30, 2014. The increase in interest expense was driven by incremental indebtedness incurred in September 2014 in connection with the acquisition of EFT Source, partially offset by repayments of debt during the period.
        Provision for income taxes.     The provision for income taxes for the six months ended June 30, 2015 increased $7.7 million to $10.0 million compared to $2.3 million for the six months ended June 30, 2014, driven by the increase in income before taxes of $22.2 million.
 Three Months Ended June 30, 2015 Compared With Three Months Ended June 30, 2014
        The table below presents our results of operations for the three months ended June 30, 2015 compared with the three months ended June 30, 2014:

														
 	 	Three Months Ended June 30,	 	 	 	 	 	
 	 	2015	 	2014	 	Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Net Sales	 	 	 	 	 	 	 	 	 	 	 	 	 	
Products	 	 $	67,757	 	 $	33,574	 	 $	34,183	 	 	101.8	%	
Services	 	 	27,779	 	 	19,662	 	 	8,117	 	 	41.3	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total net sales	 	 	95,536	 	 	53,236	 	 	42,300	 	 	79.5	%	
Cost of sales	 	 	59,701	 	 	37,682	 	 	22,019	 	 	58.4	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Gross profit	 	 	35,835	 	 	15,554	 	 	20,281	 	 	130.4	%	
Operating expenses	 	 	16,148	 	 	8,685	 	 	7,463	 	 	85.9	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Income from operations	 	 	19,687	 	 	6,869	 	 	12,818	 	 	186.6	%	
Other income (expense):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest — net	 	 	(1,616	)	 	(1,761	)	 	145	 	 	(8.2	)%	
Foreign currency gain/(loss)	 	 	27	 	 	(33	)	 	60	 	 	(181.8	)%	
Other income (expense)	 	 	73	 	 	23	 	 	50	 	 	217.4	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Income before taxes	 	 	18,171	 	 	5,098	 	 	13,073	 	 	256.4	%	
Provision for income taxes	 	 	(6,016	)	 	(2,028	)	 	(3,988	)	 	196.6	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Net income from continuing operations, net of taxes	 	 	12,155	 	 	3,070	 	 	9,085	 	 	295.9	%	
Loss from discontinued operations, net of taxes	 	 	—	 	 	(1,167	)	 	1,167	 	 	(100.0	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Net income	 	 $	12,155	 	 $	1,903	 	 $	10,252	 	 	538.7	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
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 Net Sales

														
 	 	Three Months Ended June 30,	 	 	 	 	 	
 	 	2015	 	2014	 	Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Net sales by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S Debit and Credit segment — Products	 	 $	62,829	 	 $	27,291	 	 $	35,538	 	 	130.2	%	
U.S Debit and Credit segment — Services	 	 	10,525	 	 	1,292	 	 	9,233	 	 	714.6	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.S Debit and Credit segment — Total	 	 	73,354	 	 	28,583	 	 	44,771	 	 	156.6	%	
U.S. Prepaid Debit segment — Products	 	 	—	 	 	—	 	 	—	 	 	0.0	%	
U.S. Prepaid Debit segment — Services	 	 	12,392	 	 	13,015	 	 	(623	)	 	(4.8	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.S. Prepaid Debit segment — Total	 	 	12,392	 	 	13,015	 	 	(623	)	 	(4.8	)%	
U.K. Limited segment — Products	 	 	5,139	 	 	6,632	 	 	(1,493	)	 	(22.5	)%	
U.K. Limited segment — Services	 	 	2,540	 	 	2,584	 	 	(44	)	 	(1.7	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.K. Limited segment — Total	 	 	7,679	 	 	9,216	 	 	(1,537	)	 	(16.7	)%	
Other — Products	 	 	2,924	 	 	2,403	 	 	521	 	 	21.7	%	
Other — Services	 	 	2,895	 	 	2,839	 	 	56	 	 	2.0	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Other — Total	 	 	5,819	 	 	5,242	 	 	577	 	 	11.0	%	
Inter-company eliminations	 	 	(3,708	)	 	(2,820	)	 	(888	)	 	31.5	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	95,536	 	 $	53,236	 	 $	42,300	 	 	79.5	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Net sales for the three months ended June 30, 2015 increased $42.3 million, or 79.5%, to $95.5 million compared to $53.2 million for the three months ended June 30, 2014. The increase in net sales during the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 was due to growth in net sales of 156.6% in our U.S. Debit and Credit segment, offset by a 4.8% and 16.7% decline in our U.S. Prepaid Debit segment and U.K. Limited segment, respectively, as compared to the same period in the prior year.
        Net sales for the U.S. Debit and Credit segment for the three months ended June 30, 2015 increased $44.8 million, or 156.6%, to $73.4 million compared to $28.6 million for the three months ended June 30, 2014. The increase in net sales was driven by an increase in EMV related revenue of $38.6 million, a $8.7 million increase in card services revenue and a $2.9 million increase in instant issuance revenue, offset in part by a decline in magnetic stripe card revenue of $9.3 million. The increase in EMV revenue of $38.6 million was driven by our card issuing bank customers or end-users adopting EMV technology for debit and credit cards. For the three months ended June 30, 2015, we sold 49.8 million EMV cards at an ASP of $0.96 compared to 10.7 million EMV cards at an ASP of $0.94 for the three months ended June 30, 2014. The increase in card services revenue of $8.7 million was driven primarily by the impact of our acquisition of EFT Source on September 2, 2014. Likewise, the $2.9 million growth in instant issuance revenue was also driven by the acquisition of EFT Source, as well as continued growth of Card@Once® during the quarter. The $9.3 million decline in magnetic stripe revenue was primarily driven by our card issuing bank customers upgrading from magnetic stripe cards to EMV cards.
        Net sales for the U.S. Prepaid Debit segment for the three months ended June 30, 2015 decreased $0.6 million, or 4.8%, to $12.4 million compared to $13.0 million for the three months ended June 30, 2014. The decrease was driven by our largest customer for this segment refreshing its packaging designs in 2014, which resulted in unusually large sales which did not reoccur at the same levels in 2015. The decrease was partially offset by growth in 2015 net sales for the rest of the U.S. Prepaid Debit segment.
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        Net sales for the U.K. Limited segment for the three months ended June 30, 2015 declined $1.5 million, or 16.7%, to $7.7 million compared to $9.2 million for the three months ended June 30, 2014. The decrease in net sales was primarily driven by a decrease in retail gift and loyalty card product and services revenue.
 Cost of Sales

														
 	 	Three Months Ended June 30,	 	 	 	 	 	
 	 	2015	 	2014	 	Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Cost of sales by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S Debit and Credit segment	 	 $	44,842	 	 $	20,361	 	 $	24,481	 	 	120.2	%	
U.S. Prepaid Debit segment	 	 	7,784	 	 	8,372	 	 	(588	)	 	(7.0	)%	
U.K. Limited segment	 	 	5,638	 	 	6,929	 	 	(1,291	)	 	(18.6	)%	
Other	 	 	4,476	 	 	3,598	 	 	878	 	 	24.4	%	
Eliminations	 	 	(3,039	)	 	(1,578	)	 	(1,461	)	 	92.6	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	59,701	 	 $	37,682	 	 $	22,019	 	 	58.4	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Cost of sales for the three months ended June 30, 2015 increased $22.0 million, or 58.4%, to $59.7 million compared to $37.7 million for the three months ended June 30, 2014. The increases in cost of sales were driven by a $12.1 million increase in technology materials (primarily EMV chip assemblies), a $1.5 million increase in other materials, a $6.9 million increase in overhead, and a $0.2 million increase in depreciation and amortization expense. The $12.1 million increase in technology materials was driven by the increased number of EMV cards produced as noted above and is a direct result of U.S. card issuing banks upgrading to EMV debit and credit cards which include an integrated circuit chip assembly, and in certain cases, may also include an RFID inlay assembly. The $1.5 million increase in other materials and $6.9 million increase in overhead expenses was driven primarily by the EFT Source acquisition. Finally, increases in depreciation and amortization expense were driven by the EFT Source acquisition and the new secure EMV production and card services capacity noted above.
        Cost of sales for the U.S. Debit and Credit segment for the three months ended June 30, 2015 increased $24.5 million, or 120.2%, to $44.8 million compared to $20.3 million for the three months ended June 30, 2014, driven by increased net sales as referenced above.
        Cost of sales for the U.S. Prepaid Debit segment for the three months ended June 30, 2015 decreased $0.6 million, or 7.0%, to $7.8 million compared to $8.4 million for the three months ended June 30, 2014. The decrease in cost of sales was primarily driven by the decreased level of net sales referenced above.
        Cost of sales for the U.K. Limited segment for the three months ended June 30, 2015 decreased $1.3 million, or 18.6%, to $5.6 million compared to $6.9 million for the three months ended June 30, 2014. The decrease in cost of sales was driven by the decreased level of net sales referenced above and more efficient production.
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 Gross Profit and Gross Profit Margin

																				
 	 	Three Months Ended June 30,	 	 	 	 	 	 	 	 	 	
 	 	2015	 	% of net sales	 	2014	 	% of net sales	 	Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Gross profit by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S Debit and Credit segment	 	 $	28,512	 	 	 38.9	%	 $	8,222	 	 	 28.8	%	 $	20,290	 	 	246.8	%	
U.S. Prepaid Debit segment	 	 	4,608	 	 	37.2	%	 	4,644	 	 	35.7	%	 	(36	)	 	(0.8	)%	
U.K. Limited segment	 	 	2,041	 	 	26.6	%	 	2,287	 	 	24.8	%	 	(246	)	 	(10.8	)%	
Other	 	 	674	 	 	31.9	%	 	402	 	 	16.6	%	 	272	 	 	67.7	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
Total	 	 $	35,835	 	 	 37.5	%	 $	15,555	 	 	 29.2	%	 $	20,280	 	 	130.4	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
        Gross profit for the three months ended June 30, 2015 increased $20.3 million, or 130.4%, to $35.8 million compared to $15.6 million for the three months ended June 30, 2014. Gross profit margin for the three months ended June 30, 2015 increased to 37.5% compared to 29.2% for the three months ended June 30, 2014. Gross profit for the U.S. Debit and Credit segment for the three months ended June 30, 2015 increased $20.3 million, or 246.8%, to $28.5 million compared to $8.2 million for the three months ended June 30, 2014. The increase in gross profit for the U.S. Debit and Credit segment was primarily a result of increased EMV revenues combined with the EFT Source acquisition. Gross profit margin for the U.S. Debit and Credit segment for the three months ended June 30, 2015 increased to 38.9% compared to 28.8% for the three months ended June 30, 2014.
        Gross profit for the U.S. Prepaid Debit segment for the three months ended June 30, 2015 of $4.6 million was flat as compared to the three months ended June 30, 2014, with improved production efficiencies offsetting decreased net sales. Gross profit margin for the U.S. Prepaid Debit segment for the three months ended June 30, 2015 increased to 37.2% compared to 35.7% for the three months ended June 30, 2014.
        Gross profit for the U.K. Limited segment for the three months ended June 30, 2015 decreased 10.8% to $2.0 million. Gross profit margin for the U.K. Limited segment for the three months ended June 30, 2015 increased to 26.6% compared to 24.8% for the three months ended June 30, 2014. Increases in gross profit was driven more efficient production partially offset by decreases in retail gift and loyalty card product and services net sales.
 Operating Expenses

														
 	 	Three Months Ended June 30,	 	 	 	 	 	
 	 	2015	 	2014	 	Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Operating expenses by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S Debit and Credit segment	 	 $	6,372	 	 $	2,582	 	 $	3,790	 	 	146.8	%	
U.S. Prepaid Debit segment	 	 	1,396	 	 	1,316	 	 	80	 	 	6.1	%	
U.K. Limited segment	 	 	1,555	 	 	1,688	 	 	(133	)	 	(7.9	)%	
Other	 	 	1,799	 	 	1,422	 	 	377	 	 	26.5	%	
Corporate	 	 	5,026	 	 	1,677	 	 	3,349	 	 	199.7	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	16,148	 	 $	8,685	 	 $	7,463	 	 	85.9	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Operating expenses for the three months ended June 30, 2015 increased $7.5 million, or 85.9%, to $16.1 million compared to $8.7 million for the three months ended June 30, 2014. The increase in operating expenses was driven primarily by a $3.8 million increase in the U.S. Debit and Credit
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segment and a $3.3 million increase in our corporate expenses. The $3.8 million increase in the U.S. Debit and Credit segment was driven by a $3.2 million increase related to the EFT Source acquisition and the remaining increase was primarily attributable to additional salary and benefit expenses related to the elevated levels of segment net sales discussed above. The $3.3 million increase in corporate expenses was primarily driven by the $1.1 million increase in charges related to our phantom stock plan, $0.3 million related to accrued performance bonus in connection with the EFT Source acquisition, a $0.7 million increase in depreciation and amortization expense, a $0.2 million increase in corporate salaries and a $0.9 million increase in other general and administrative expenses.
 Income from Operations and Operating Margin

																				
 	 	Three Months Ended June 30,	 	 	 	 	 	 	 	 	 	
 	 	2015	 	% of net sales	 	2014	 	% of net sales	 	Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Income from operations by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S Debit and Credit segment	 	 $	22,140	 	 	 30.2	%	 $	5,640	 	 	 19.7	%	 $	16,500	 	 	292.6	%	
U.S. Prepaid Debit segment	 	 	3,212	 	 	25.9	%	 	3,327	 	 	25.6	%	 	(115	)	 	(3.5	)%	
U.K. Limited segment	 	 	486	 	 	6.3	%	 	599	 	 	6.5	%	 	(113	)	 	(18.9	)%	
Other	 	 	(1,125	)	 	(19.3	)%	 	(1,020	)	 	(19.5	)%	 	(105	)	 	10.3	%	
Corporate	 	 	(5,026	)	 	 	 	 	(1,677	)	 	 	 	 	(3,349	)	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
Total	 	 $	19,687	 	 	 20.6	%	 $	6,869	 	 	 12.9	%	 $	12,818	 	 	186.6	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
        Income from operations for the three months ended June 30, 2015 increased $12.8 million, or 186.6%, to $19.7 million compared to $6.9 million for the three months ended June 30, 2014. Excluding charges of $0.9 million and a benefit of $0.2 million, for the three months ended June 30, 2015 and 2014, respectively, related to our phantom stock plan and $0.3 million of accrued performance bonuses in connection with the EFT Source acquisition in the three months ended June 30, 2015, income from operations for the three months ended June 30, 2015 increased $14.2 million, or 213.2%, relative to the three months ended June 30, 2014. Operating margins for the three months ended June 30, 2015 increased to 20.6% compared to 12.9% for the three months ended June 30, 2014. Excluding the charges related to our phantom stock plan and the EFT Source acquisition performance bonus charge discussed above, operating margins for the three months ended June 30, 2015 increased to 21.9% compared to 12.5% for the three months ended June 30, 2014.
        Income from operations for the U.S. Debit and Credit segment for the three months ended June 30, 2015 increased $16.5 million, or 292.6%, to $22.1 million compared to $5.6 million for the three months ended June 30, 2014. Operating margins for the three months ended June 30, 2015 increased to 30.2% compared to 19.7% for the three months ended June 30, 2014. Income from operations for the U.S. Prepaid Debit segment for the three months ended June 30, 2015 decreased $0.1 million, or 3.5%, to $3.2 million compared to $3.3 million for the three months ended June 30, 2014. Operating margins for the three months ended June 30, 2015 increased to 25.9% compared to 25.6% for the three months ended June 30, 2014. Income from operations for the U.K. Limited segment for the three months ended June 30, 2015 decreased $0.1 million, or 18.9%, to $0.5 million compared to $0.6 million for the three months ended June 30, 2014. Operating margins for the three months ended June 30, 2015 decreased to 6.3% compared to 6.5% for the three months ended June 30, 2014.
        Interest income (expense).     Interest expense for the three months ended June 30, 2015 decreased $0.1 million, or 8.2%, to $1.6 million compared to $1.8 million for the three months ended June 30, 2014 as a result of decreased debt levels.
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        Provision for income taxes.     The provision for income taxes for the three months ended June 30, 2015 increased $4.0 million to $6.0 million compared to $2.0 million for the three months ended June 30, 2014, driven by the increase in income before taxes of $13.1 million.
 Year Ended December 31, 2014 Compared With Year Ended December 31, 2013
        The table below presents our results of operations for the years ended December 31, 2014 and 2013:

														
 	 	Year Ended
December 31,	 	 	 	 	 	
 	 	2014	 	2013	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Net sales:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Products	 	 $	159,220	 	 $	101,360	 	 $	57,860	 	 	57.1	%	
Services	 	 	101,786	 	 	95,010	 	 	6,776	 	 	7.1	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total net sales	 	 	261,006	 	 	196,370	 	 	64,636	 	 	32.9	%	
Cost of sales	 	 	179,279	 	 	136,874	 	 	42,405	 	 	31.0	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Gross profit	 	 	81,727	 	 	59,496	 	 	22,231	 	 	37.4	%	
Operating expenses	 	 	47,255	 	 	33,347	 	 	13,908	 	 	41.7	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Income from operations	 	 	34,472	 	 	26,149	 	 	8,323	 	 	31.8	%	
Other income (expense):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest, net	 	 	(7,508	)	 	(7,838	)	 	330	 	 	4.2	%	
Foreign exchange gain (loss)	 	 	(124	)	 	(142	)	 	18	 	 	12.7	%	
Loss on debt modification and early extinguishment	 	 	(476	)	 	—	 	 	(476	)	 	—	 	
Other (expense) income	 	 	(101	)	 	18	 	 	(119	)	 	(661.1	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Income before taxes	 	 	26,263	 	 	18,187	 	 	8,076	 	 	44.4	%	
Provision for income taxes	 	 	(10,291	)	 	(6,988	)	 	(3,303	)	 	(47.3	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Net income from continuing operations	 	 	15,972	 	 	11,199	 	 	4,773	 	 	42.6	%	
Loss from discontinued operations	 	 	(2,670	)	 	(2,612	)	 	(58	)	 	(2.2	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Net income	 	 $	13,302	 	 $	8,587	 	 $	4,715	 	 	54.9	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
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 Net Sales

														
 	 	Year Ended
December 31,	 	 	 	 	 	
 	 	2014	 	2013	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Net sales by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Debit and Credit segment—Products	 	 $	132,975	 	 $	86,302	 	 $	46,673	 	 	54.1	%	
U.S. Debit and Credit segment—Services	 	 	20,040	 	 	5,324	 	 	14,716	 	 	276.4	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.S. Debit and Credit segment—Total	 	 	153,015	 	 	91,626	 	 	61,389	 	 	67.0	%	
U.S. Prepaid Debit segment—Products	 	 	
—	 	 	
—	 	 	
—	 	 	
—	 	
U.S. Prepaid Debit segment—Services	 	 	59,271	 	 	65,895	 	 	(6,624	)	 	(10.1	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.S. Prepaid Debit segment—Total	 	 	59,271	 	 	65,895	 	 	(6,624	)	 	(10.1	)%	
U.K. Limited segment—Products	 	 	
24,623	 	 	
22,238	 	 	
2,385	 	 	
10.7	
%	
U.K. Limited segment—Services	 	 	10,540	 	 	11,004	 	 	(464	)	 	(4.2	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.K. Limited segment—Total	 	 	35,163	 	 	33,242	 	 	1,921	 	 	5.8	%	
Other—Products	 	 	
11,682	 	 	
10,907	 	 	
775	 	 	
7.1	
%	
Other—Services	 	 	12,226	 	 	13,771	 	 	(1,545	)	 	(11.2	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Other—Total	 	 	23,908	 	 	24,678	 	 	(770	)	 	(3.1	)%	
Inter-company eliminations	 	 	
(10,351	
)	 	
(19,071	
)	 	
8,720	 	 	
(45.7	
)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	261,006	 	 $	196,370	 	 $	64,636	 	 	32.9	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Net sales for the year ended December 31, 2014 increased $64.6 million, or 32.9%, to $261.0 million compared to $196.4 million for the year ended December 31, 2013. The increase in net sales during 2014 was due to growth in net sales of 67.0% and 5.8% in our U.S. Debit and Credit segment and U.K. Limited segment, respectively, offset by a 10.1% decline in our U.S. Prepaid Debit segment as compared to 2013.
        Net sales for the U.S. Debit and Credit segment for the year ended December 31, 2014 increased $61.4 million, or 67.0%, to $153.0 million compared to $91.6 million for the year ended December 31, 2013. The increase in net sales was driven by an increase in EMV related revenue of $58.2 million, a $14.7 million increase in card services revenue, a $7.4 million increase in instant issuance revenue and various other items, offset by declines in magnetic stripe card revenue of $12.0 million and contactless card revenue of $2.4 million. The increase in EMV revenue of $58.2 million was driven by our card issuing bank customers or end-users adopting EMV technology for debit and credit cards. For the year ended December 31, 2014, we sold 62.5 million EMV cards (approximately 5.7% of which were Dual-Interface EMV) at an average selling price of $1.06 per card compared to 5.6 million EMV cards (approximately 12.7% of which were Dual-Interface EMV) at an average selling price of $1.28 per card for the year ended December 31, 2013. The increase in card services revenue of $14.7 million was driven primarily by the impact of our acquisition of EFT Source on September 2, 2014, including new personalization customers coming onto our acquired service platform and services related to debit and credit cards reissued in response to data breaches at large U.S. retailers. Likewise, the $7.4 million growth in instant issuance revenue was also driven by the acquisition of EFT Source, as well as continued growth of Card@Once® in 2014. The $12.0 million decline in magnetic stripe revenue and the $2.4 million decline in contactless revenue were primarily driven by our card issuing bank customers upgrading from magnetic stripe cards and contactless cards to EMV cards.
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        Net sales for the U.S. Prepaid Debit segment for the year ended December 31, 2014 decreased $6.6 million, or 10.1%, to $59.3 million compared to $65.9 million for the year ended December 31, 2013. The decline was driven primarily by our largest customer for this segment drawing down inventory levels.
        Net sales for the U.K. Limited segment for the year ended December 31, 2014 increased $1.9 million, or 5.8%, to $35.2 million compared to $33.2 million for the year ended December 31, 2013. The increase in sales was primarily driven by a $1.9 million increase in retail gift and loyalty card product and services revenue.
 Cost of Sales

														
 	 	Year Ended
December 31,	 	 	 	 	 	
 	 	2014	 	2013	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Cost of sales by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Debit and Credit segment	 	 $	103,555	 	 $	66,585	 	 $	36,970	 	 	55.5	%	
U.S. Prepaid Debit segment	 	 	38,249	 	 	43,010	 	 	(4,761	)	 	(11.1	)%	
U.K. Limited segment	 	 	26,992	 	 	25,576	 	 	1,416	 	 	5.5	%	
Other	 	 	20,926	 	 	21,718	 	 	(792	)	 	(3.6	)%	
Eliminations	 	 	(10,443	)	 	(20,015	)	 	9,572	 	 	47.8	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	179,279	 	 $	136,874	 	 $	42,405	 	 	31.0	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Cost of sales for the year ended December 31, 2014 increased $42.4 million, or 31.0%, to $179.3 million compared to $136.9 million for the year ended December 31, 2013. Cost of sales for the U.S. Debit and Credit segment for the year ended December 31, 2014 increased $37.0 million, or 55.5%, to $103.6 million compared to $66.6 million for the year ended December 31, 2013. The increases in cost of sales were driven by a $21.2 million increase in technology materials (primarily EMV chip assemblies), a $4.4 million increase in other materials, a $6.8 million increase in overhead, a $5.3 million increase in labor and benefits costs and a $1.1 million increase in depreciation and amortization. The $21.2 million increase in technology materials was driven by the increased number of EMV cards shipped as noted above and is a direct result of U.S. card issuing banks upgrading debit and credit cards to EMV which include an integrated circuit chip assembly and in certain cases may also include an RFID inlay assembly. The $6.8 million increase in overhead expenses and the $4.4 million increase in other materials was driven primarily by the EFT Source acquisition and to a lesser extent by our new secure EMV production and card services facility that became operational in 2014. The $5.3 million increase in labor costs was driven by the acquisition of EFT Source and additional labor costs associated with the production of EMV cards which are more complex than non-EMV cards and therefore have a higher labor component. Finally, increases in depreciation and amortization expense were driven by the EFT Source acquisition and the new secure EMV production and card services facility noted above.
        Cost of sales for the U.S. Prepaid Debit segment for the year ended December 31, 2014 decreased $4.8 million, or 11.1%, to $38.2 million compared to $43.0 million for the year ended December 31, 2013. The decrease in cost of sales was driven by the reduced level of net sales referenced above and more efficient production, partially offset by increased depreciation from elevated levels of capital investment during 2013 and 2014 to expand our tamper-evident security packaging capacity.
        Cost of sales for the U.K. Limited segment for the year ended December 31, 2014 increased $1.4 million, or 5.5%, to $27.0 million compared to $25.6 million for the year ended December 31, 2013. Increases in cost of sales was driven by a $0.9 million increase in labor costs and a $0.7 million increase in materials costs which were partially offset by a decrease in depreciation and amortization.
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The increase in labor and material expense was driven by the increased level of net sales in 2014, as compared to 2013, noted above.
 Gross Profit and Gross Profit Margin

																				
 	 	Year Ended December 31,	 	 	 	 	 	
 	 	2014	 	% of
net sales	 	2013	 	% of
net sales	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Gross profit by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Debit and Credit segment	 	 $	49,460	 	 	32.3	%	 $	25,041	 	 	27.3	%	 $	24,419	 	 	97.5	%	
U.S. Prepaid Debit segment	 	 	21,022	 	 	35.5	%	 	22,885	 	 	34.7	%	 	(1,863	)	 	(8.1	)%	
U.K. Limited segment	 	 	8,171	 	 	23.2	%	 	7,666	 	 	23.1	%	 	505	 	 	6.6	%	
Other	 	 	3,074	 	 	12.9	%	 	3,904	 	 	15.8	%	 	(830	)	 	(21.3	)%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
Total	 	 $	81,727	 	 	31.3	%	 $	59,496	 	 	30.3	%	 $	22,231	 	 	37.4	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
        Gross profit for the year ended December 31, 2014 increased $22.2 million, or 37.4%, to $81.7 million compared to $59.5 million for the year ended December 31, 2013. Gross profit margin for the year ended December 31, 2014 increased to 31.3% compared to 30.3% for the year ended December 31, 2013. Gross profit for the U.S. Debit and Credit segment for the year ended December 31, 2014 increased $24.4 million, or 97.5%, to $49.5 million compared to $25.0 million for the year ended December 31, 2013. Gross profit margin for the U.S. Debit and Credit segment for the year ended December 31, 2014 increased to 32.3% compared to 27.3% for the year ended December 31, 2013. Increases in gross profit were driven by a $14.0 million contribution from increased EMV volumes (net of reduced gross profit from non-EMV cards) and a $10.5 million increase from the EFT Source acquisition.
        Gross profit for the U.S. Prepaid Debit segment for the year ended December 31, 2014 decreased $1.9 million, or 8.1%, to $21.0 million compared to $22.9 million for the year ended December 31, 2013. The decrease in gross profit was primarily driven by a reduced level of net sales referenced above, partially offset by the improved production efficiencies at this segment. Gross profit margin for the U.S. Prepaid Debit segment for the year ended December 31, 2014 increased to 35.5% compared to 34.7% for the year ended December 31, 2013.
        Gross profit for the U.K. Limited segment for the year ended December 31, 2014 increased $0.5 million, or 6.6%, to $8.2 million compared to $7.7 million for the year ended December 31, 2013. Gross profit margin for the U.K. Limited segment for the year ended December 31, 2014 increased to 23.2% compared to 23.1% for the year ended December 31, 2013. Increases in gross profit were driven by increased retail gift and loyalty card product and services revenue which drove a $0.5 million increase in gross profit.
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 Operating Expenses

														
 	 	Year Ended
December 31,	 	 	 	 	 	
 	 	2014	 	2013	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Operating expenses by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Debit and Credit segment	 	 $	15,053	 	 $	9,730	 	 $	5,323	 	 	54.7	%	
U.S. Prepaid Debit segment	 	 	5,266	 	 	4,976	 	 	290	 	 	5.8	%	
U.K. Limited segment	 	 	6,396	 	 	6,301	 	 	95	 	 	1.5	%	
Other	 	 	5,457	 	 	5,549	 	 	(92	)	 	(1.7	)%	
Corporate	 	 	15,083	 	 	6,791	 	 	8,292	 	 	122.1	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	47,255	 	 $	33,347	 	 $	13,908	 	 	41.7	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Operating expenses for the year ended December 31, 2014 increased $13.9 million, or 41.7%, to $47.2 million compared to $33.3 million for the year ended December 31, 2013. Excluding charges of $4.5 million and $0.6 million, in 2014 and 2013, respectively, related to our phantom stock plan and investment banking, advisory and related professional fees in 2014 of $2.1 million, operating expenses for the year ended December 31, 2014 increased $7.9 million, or 24.1%. The increase in operating expenses was driven primarily by a $5.3 million increase in the U.S. Debit and Credit segment and a $8.3 million increase in our corporate expenses. The $5.3 million increase in the U.S. Debit and Credit segment was driven by a $4.1 million increase related to the EFT Source acquisition and the remaining increase was primarily attributable to additional selling, salary and other expenses related to the elevated levels of segment net sales discussed above. The $8.3 million increase in corporate expenses was primarily driven by the $4.5 million charge related to our phantom stock plan, $2.1 million related to investment banking, advisory and related professional fees, and a $1.3 million increase in corporate salaries and management incentive payments.
 Income from Operations and Operating Margin

																				
 	 	Year Ended December 31,	 	 	 	 	 	
 	 	2014	 	% of
net sales	 	2013	 	% of
net sales	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Income from operations by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Debit and Credit segment	 	 $	34,407	 	 	22.5	%	 $	15,311	 	 	16.7	%	 $	19,096	 	 	124.7	%	
U.S. Prepaid Debit segment	 	 	15,756	 	 	26.6	%	 	17,909	 	 	27.2	%	 	(2,153	)	 	(12.0	)%	
U.K. Limited segment	 	 	1,775	 	 	5.0	%	 	1,365	 	 	4.1	%	 	410	 	 	30.0	%	
Other	 	 	(2,383	)	 	(10.0	)%	 	(1,645	)	 	(6.7	)%	 	(738	)	 	(44.9	)%	
Corporate	 	 	(15,083	)	 	 	 	 	(6,791	)	 	       	 	 	(8,292	)	 	       	 	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
Total	 	 $	34,472	 	 	13.2	%	 $	26,149	 	 	13.3	%	 $	8,323	 	 	31.8	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
        Income from operations for the year ended December 31, 2014 increased $8.3 million, or 31.8%, to $34.5 million compared to $26.2 million for the year ended December 31, 2013. Excluding the 2014 and 2013 charges of $4.5 million and $0.6 million, respectively, related to our phantom stock plan and investment banking, advisory and related professional fees in 2014 of $2.1 million, income from operations for the year ended December 31, 2014 increased $14.3 million, or 53.3%, relative to the year ended December 31, 2013. Operating margins for the year ended December 31, 2014 decreased to 13.2% compared to 13.3% for the year ended December 31, 2013. Excluding the 2014 and 2013 charges related to our phantom stock plan and investment banking, advisory and related professional fees discussed above, operating margins for the year ended December 31, 2014 increased to 15.7% compared to 13.6% for the year ended December 31, 2013.
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        Income from operations for the U.S. Debit and Credit segment for the year ended December 31, 2014 increased $19.1 million, or 124.7%, to $34.4 million compared to $15.3 million for the year ended December 31, 2013. Operating margins for the year ended December 31, 2014 increased to 22.5% compared to 16.7% for the year ended December 31, 2013. Income from operations for the U.S. Prepaid Debit segment for the year ended December 31, 2014 decreased $2.2 million, or 12.0%, to $15.8 million compared to $17.9 million for the year ended December 31, 2013. Operating margins for the year ended December 31, 2014 decreased to 26.6% compared to 27.2% for the year ended December 31, 2013. Income from operations for the U.K. Limited segment for the year ended December 31, 2014 increased $0.4 million, or 30.0%, to $1.8 million compared to $1.4 million for the year ended December 31, 2013. Operating margins for the year ended December 31, 2014 increased to 5.0% compared to 4.1% for the year ended December 31, 2013.
        Interest income (expense).     Interest expense for the year ended December 31, 2014 decreased $0.3 million, or 4.2%, to $7.5 million compared to $7.8 million for the year ended December 31, 2013. The decrease in interest expense was driven by a reduction in borrowing rates negotiated with our lenders in September 2014 which was partially offset by additional interest expense related to incremental indebtedness incurred in September 2014 in connection with the acquisition of EFT Source.
        Loss on debt modification and early extinguishment.     Loss on debt modification and early extinguishment for the year ended December 31, 2014 was $0.5 million driven by a write-off of capitalized debt expense in connection with the debt modification described above.
        Provision for income taxes.     The provision for income taxes for the year ended December 31, 2014 increased $3.3 million, to $10.3 million, compared to $7.0 million for the year ended December 31, 2013 driven by the increase in income before taxes of $8.1 million.
 Fourth Quarter
        Our fourth quarter net sales performance has historically been strong. Net sales for our U.S. Debit & Credit segment grew by 186.3% in the fourth quarter of 2014 versus a decline of 5.3% in the fourth quarter of 2013, compared to the prior year. Net sales for our U.S. Prepaid Debit segment declined by 14.8% in the fourth quarter of 2014 and 33.1% in the fourth quarter of 2013, compared to the prior year. Net sales for our U.K. Limited segment grew by 11.3% in the fourth quarter of 2014 and 0.4% in the fourth quarter of 2013, compared to the prior year.
        Adjusted EBITDA margins in the fourth quarter of 2014 continued to improve over the fourth quarter of 2013 due to increased operating leverage driven by increased net sales. The increases in net sales have been primarily driven by an increase in the shipment of EMV Financial Payment Cards, which generally have higher selling prices and gross profits than the non-EMV Financial Payment Cards that they are replacing.
        The fourth quarter of 2014 benefited from the EFT Source acquisition on September 2, 2014, which became part of our U.S. Debit and Credit segment. The fourth quarter of 2014 also benefited from a sharp increase in the shipment of EMV Financial Payment Cards as U.S. debit and credit card issuers began the process of upgrading non-EMV Financial Payment Cards to EMV Financial Payment Cards.
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 Year Ended December 31, 2013 Compared With Year Ended December 31, 2012
        The table below presents our results of operations for the years ended December 31, 2013 and 2012:

														
 	 	Year Ended December 31,	 	 	 	 	 	
 	 	2013	 	2012	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Net Sales	 	 	 	 	 	 	 	 	 	 	 	 	 	
Products	 	 $	101,360	 	 $	98,969	 	 $	2,391	 	 	2.4	%	
Services	 	 	95,010	 	 	84,817	 	 	10,193	 	 	12.0	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total net sales	 	 	196,370	 	 	183,786	 	 	12,584	 	 	6.8	%	
Cost of sales	 	 	136,874	 	 	130,897	 	 	5,977	 	 	4.6	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Gross profit	 	 	59,496	 	 	52,889	 	 	6,607	 	 	12.5	%	
Operating expenses	 	 	33,347	 	 	32,985	 	 	362	 	 	1.1	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Income from operations	 	 	26,149	 	 	19,904	 	 	6,245	 	 	31.4	%	
Other income (expense):	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest, net	 	 	(7,838	)	 	(5,765	)	 	(2,073	)	 	36.0	%	
Foreign currency gain (loss)	 	 	(142	)	 	(279	)	 	137	 	 	(49.1	)%	
Gain on purchase of ID Data	 	 	—	 	 	604	 	 	(604	)	 	(100.0	)%	
Other income	 	 	18	 	 	171	 	 	(153	)	 	(89.5	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Income before taxes	 	 	18,187	 	 	14,635	 	 	3,552	 	 	24.3	%	
Provision for income taxes	 	 	(6,988	)	 	(5,909	)	 	(1,079	)	 	18.3	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Net income from continuing operations	 	 	11,199	 	 	8,726	 	 	2,473	 	 	28.3	%	
Loss from discontinued operations	 	 	(2,612	)	 	(3,796	)	 	1,184	 	 	(31.2	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Net income	 	 $	8,587	 	 $	4,930	 	 $	3,657	 	 	74.2	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 Net Sales

														
 	 	Year Ended December 31,	 	 	 	 	 	
 	 	2013	 	2012	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Net sales by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Debit and Credit segment—Products	 	 $	86,302	 	 $	79,266	 	 $	7,036	 	 	8.9	%	
U.S. Debit and Credit segment—Services	 	 	5,324	 	 	2,336	 	 	2,988	 	 	127.9	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.S. Debit and Credit segment—Total	 	 	91,626	 	 	81,602	 	 	10,024	 	 	12.3	%	
U.S. Prepaid Debit segment—Products	 	 	—	 	 	—	 	 	—	 	 	 	 	
U.S. Prepaid Debit segment—Services	 	 	65,895	 	 	64,624	 	 	1,271	 	 	2.0	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.S. Prepaid Debit segment—Total	 	 	65,895	 	 	64,624	 	 	1,271	 	 	2.0	%	
U.K. Limited segment—Products	 	 	22,238	 	 	22,162	 	 	76	 	 	0.3	%	
U.K. Limited segment—Services	 	 	11,004	 	 	11,973	 	 	(969	)	 	(8.1	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
U.K. Limited segment—Total	 	 	33,242	 	 	34,135	 	 	(893	)	 	(2.6	)%	
Other—Products	 	 	10,907	 	 	11,215	 	 	(308	)	 	(2.7	)%	
Other—Services	 	 	13,771	 	 	7,277	 	 	6,494	 	 	89.2	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Other—Total	 	 	24,678	 	 	18,492	 	 	6,186	 	 	33.5	%	
Inter-company eliminations	 	 	(19,071	)	 	(15,067	)	 	(4,004	)	 	26.6	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	196,370	 	 $	183,786	 	 $	12,584	 	 	6.8	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
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        Net sales for the year ended December 31, 2013 increased $12.6 million, or 6.8%, to $196.4 million compared to $183.8 million for the year ended December 31, 2012. The increase in net sales during the year ended December 31, 2013 as compared to the year ended December 31, 2012 was primarily due to growth in net sales of 12.3% in our U.S. Debit and Credit segment and 33.5% in our other operating segments.
        Net sales for the U.S. Debit and Credit segment for the year ended December 31, 2013 increased $10.0 million, or 12.3%, to $91.6 million compared to $81.6 million for the year ended December 31, 2012. The increase in net sales was primarily driven by increases in Contactless Card related net sales of $7.0 million and card services net sales of $3.0 million.
        Net sales for the U.S. Prepaid Debit segment for the year ended December 31, 2013 increased $1.3 million, or 2.0%, to $65.9 million compared to $64.6 million for the year ended December 31, 2012. The increase in net sales was due to increased demand for tamper-evident security packaging for Prepaid Debit Card customers.
        Net sales for the U.K. Limited segment for the year ended December 31, 2013 declined $0.9 million, or 2.6%, to $33.2 million compared to $34.1 million for the year ended December 31, 2012. The decrease in net sales was primarily due to the strengthening U.S. dollar.
        Net sales for the other operating segments for the year ended December 31, 2013 increased $6.2 million, or 33.5%, to $24.7 million compared to $18.5 million for the year ended December 31, 2012. The increase in net sales was primarily driven by the full-year impact of the ID Data acquisition.
 Cost of Sales

														
 	 	Year Ended December 31,	 	 	 	 	 	
 	 	2013	 	2012	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Cost of sales by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Debit and Credit segment	 	 $	66,585	 	 $	60,280	 	 $	6,305	 	 	10.5	%	
U.S. Prepaid Debit segment	 	 	43,010	 	 	43,310	 	 	(300	)	 	(0.7	)%	
U.K. Limited segment	 	 	25,576	 	 	26,001	 	 	(425	)	 	(1.6	)%	
Other	 	 	21,718	 	 	16,146	 	 	5,572	 	 	34.5	%	
Eliminations	 	 	(20,015	)	 	(14,840	)	 	(5,175	)	 	34.9	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	136,874	 	 $	130,897	 	 $	5,977	 	 	4.6	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Cost of sales for the year ended December 31, 2013 increased $6.0 million, or 4.6%, to $136.9 million compared to $130.9 million for the year ended December 31, 2012. Cost of sales for the U.S. Debit and Credit segment for the year ended December 31, 2013 increased $6.3 million, or 10.5%, to $66.6 million compared to $60.3 million for the year ended December 31, 2012. The increase in cost of sales was primarily driven by an increase in technology materials (primarily RFID inlay assemblies), as well as increases in labor and overhead related to the elevated level of Contactless Card net sales referenced above. The increase was also driven by costs associated with the increased levels of card services net sales.
        Cost of sales for the U.S. Prepaid Debit segment for the year ended December 31, 2013 decreased $0.3 million, or 0.7%, to $43.0 million compared to $43.3 million for the year ended December 31, 2012. The decrease in cost of sales was driven by more efficient production.
        Cost of sales for the U.K. Limited segment for the year ended December 31, 2013 decreased $0.4 million, or 1.6%, to $25.6 million compared to $26.0 million for the year ended December 31, 2012. The decrease in cost of sales was driven by the decreased level of net sales referenced above.
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        Cost of sales for the other operating segments for the year ended December 31, 2013 increased $5.6 million, or 34.5%, to $21.7 million compared to $16.1 million for the year ended December 31, 2012. The increase in cost of sales was primarily driven by the full-year impact of the ID Data acquisition.
 Gross Profit and Gross Profit Margin

																				
 	 	Year Ended December 31,	 	 	 	 	 	 	 	 	 	
 	 	2013	 	% of
net sales	 	2012	 	% of
net sales	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	 	 	 	 	
Gross profit by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Debit and Credit segment	 	 $	25,041	 	 	27.3	%	 $	21,322	 	 	26.1	%	 $	3,719	 	 	17.4	%	
U.S. Prepaid Debit segment	 	 	22,885	 	 	34.7	%	 	21,314	 	 	33.0	%	 	1,571	 	 	7.4	%	
U.K. Limited segment	 	 	7,666	 	 	23.1	%	 	8,134	 	 	23.8	%	 	(468	)	 	(5.8	)%	
Other	 	 	3,904	 	 	15.8	%	 	2,119	 	 	11.5	%	 	1,785	 	 	84.2	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
Total	 	 $	59,496	 	 	30.3	%	 $	52,889	 	 	28.8	%	 $	6,607	 	 	12.5	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
        Gross profit for the year ended December 31, 2013 increased $6.6 million, or 12.5%, to $59.5 million compared to $52.9 million for the year ended December 31, 2012. Gross profit margin for the year ended December 31, 2013 increased to 30.3% compared to 28.8% for the year ended December 31, 2012. Gross profit for the U.S. Debit and Credit segment for the year ended December 31, 2013 increased $3.7 million, or 17.4%, to $25.0 million compared to $21.3 million for the year ended December 31, 2012. Gross profit margin for the U.S. Debit and Credit segment for the year ended December 31, 2013 increased to 27.3% compared to 26.1% for the year ended December 31, 2012. Increases in U.S. Debit and Credit segment gross profit were driven by an increased level of net sales referenced above.
        Gross profit for the U.S. Prepaid Debit segment for the year ended December 31, 2013 increased $1.6 million, or 7.4%, to $22.9 million compared to $21.3 million for the year ended December 31, 2012. The increase in gross profit was primarily driven by the increased level of net sales referenced above and improved production efficiencies. Gross profit margin for the U.S. Prepaid Debit segment for the year ended December 31, 2013 increased to 34.7% compared to 33.0% for the year ended December 31, 2012.
        Gross profit for the U.K. Limited segment for the year ended December 31, 2013 decreased 5.8% to $7.7 million compared to $8.1 million for the year ended December 31, 2012. Gross profit margin for the U.K. Limited segment for the year ended December 31, 2013 decreased to 23.1% compared to 23.8% for the year ended December 31, 2012. The declines in gross profit were driven by the decrease in net sales referenced above.
        Gross profit for the other operating segment for the year ended December 31, 2013 increased $1.8 million, or 84.2%, to $3.9 million compared to $2.1 million for the year ended December 31, 2012. The increase in gross profit was primarily driven by the full-year impact of the ID Data acquisition.
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 Operating Expenses

														
 	 	Year Ended December 31,	 	 	 	 	 	
 	 	2013	 	2012	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	
Operating expenses by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Debit and Credit segment	 	 $	9,730	 	 $	9,455	 	 $	275	 	 	2.9	%	
U.S. Prepaid Debit segment	 	 	4,976	 	 	4,643	 	 	333	 	 	7.2	%	
U.K. Limited segment	 	 	6,301	 	 	5,989	 	 	312	 	 	5.2	%	
Other	 	 	5,549	 	 	5,001	 	 	548	 	 	11.0	%	
Corporate	 	 	6,791	 	 	7,897	 	 	(1,106	)	 	(14.0	)%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
Total	 	 $	33,347	 	 $	32,985	 	 $	362	 	 	1.1	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​	​	​	
        Operating expenses for the year ended December 31, 2013 increased $0.4 million, or 1.1%, to $33.3 million compared to $33.0 million for the year ended December 31, 2012. Excluding a charge of $0.6 million for the year ended 2013 related to our phantom stock plan, operating expenses for the year ended December 31, 2013 decreased $0.3 million, or 0.8%, to $32.7 million compared to $33.0 million for the year ended December 31, 2012.
 Income from Operations and Operating Margin

																				
 	 	Year Ended December 31,	 	 	 	 	 	 	 	 	 	
 	 	2013	 	% of
net sales	 	2012	 	% of
net sales	 	$ Change	 	% Change	 	
 	 	(dollars in thousands)	 	 	 	 	 	
Income from operations by segment:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. Debit and Credit segment	 	 $	15,311	 	 	16.7	%	 $	11,867	 	 	14.5	%	 $	3,444	 	 	29.0	%	
U.S. Prepaid Debit segment	 	 	17,909	 	 	27.2	%	 	16,671	 	 	25.8	%	 	1,238	 	 	7.4	%	
U.K. Limited segment	 	 	1,365	 	 	4.1	%	 	2,145	 	 	6.3	%	 	(780	)	 	(36.4	)%	
Other	 	 	(1,645	)	 	(6.7	)%	 	(2,882	)	 	(15.6	%)	 	1,237	 	 	(42.9	)%	
Corporate	 	 	(6,791	)	 	 	 	 	(7,897	)	 	 	 	 	1,106	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
Total	 	 $	26,149	 	 	13.3	%	 $	19,904	 	 	10.8	%	 $	6,245	 	 	31.4	%	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	​ 	​ 	​	​	​	​	
        Income from operations for the year ended December 31, 2013 increased $6.2 million, or 31.4%, to $26.1 million compared to $19.9 million for the year ended December 31, 2012. Operating margins for the year ended December 31, 2013 increased to 13.3% compared to 10.8% for the year ended December 31, 2012.
        Excluding charges of $0.6 million for the year ended December 31, 2013 related to our phantom stock plan, income from operations for the year ended December 31, 2013 increased $6.8 million, or 34.4%, to $26.7 million compared to $19.9 million for the year ended December 31, 2012. Excluding the charge related to our phantom stock plan discussed above, operating margins for the year ended December 31, 2013 increased to 13.6% compared to 10.8% for the year ended December 31, 2012.
        Income from operations for the U.S. Debit and Credit segment for the year ended December 31, 2013 increased $3.4 million, or 29.0%, to $15.3 million compared to $11.9 million for the year ended December 31, 2012. Operating margins for the year ended December 31, 2013 increased to 16.7% compared to 14.5% for the year ended December 31, 2012. Income from operations for the U.S. Prepaid Debit segment for the year ended December 31, 2013 increased $1.2 million, or 7.4%, to $17.9 million compared to $16.7 million for the year ended December 31, 2012. Operating margins for the year ended December 31, 2013 increased to 27.2% compared to 25.8% for the year ended December 31, 2012. Income from operations for the U.K. Limited segment for the year ended
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December 31, 2013 decreased $0.8 million, or 36.4%, to $1.4 million from $2.1 million for the year ended December 31, 2012. Operating margins for the year ended December 31, 2013 decreased to 4.1% compared to 6.3% for the year ended December 31, 2012.
 Interest income (expense)
        Interest expense for the year ended December 31, 2013 increased $2.1 million, or 36.0%, to $7.8 million compared to $5.8 million for the year ended December 31, 2012. The increase in interest expense was driven by incremental indebtedness incurred in November 2012 in connection with a redemption of preferred stock.
 Provision for income taxes
        The provision for income taxes for the year ended December 31, 2013 increased $1.1 million to $7.0 million compared to $5.9 million for the year ended December 31, 2012 driven by the increase in income before taxes of $3.6 million.
 Liquidity and Capital Resources
        As of June 30, 2015, we had $13.0 million of cash and cash equivalents. Of this amount, $1.9 million was held in accounts outside of the United States.
        On August 17, 2015, we and certain of our wholly-owned subsidiaries entered into the New Credit Agreement with a syndicate of lenders providing for the New Credit Facility, consisting of the $435 million New Term Loan Facility and the $40 million New Revolving Credit Facility. The New Term Loan Facility and New Revolving Credit Facility mature on August 17, 2022 and August 17, 2020, respectively. We used proceeds from the New Term Loan Facility to effect the Partial Preferred Redemption and to refinance our previously outstanding credit facility.
        Interest rates under our New Credit Facility are based, at the company's election, on either a Eurodollar rate plus a margin of 4.50% or a base rate plus a margin of 3.50%. Letters of credit are subject to a 0.125% fronting fee payable to the issuing bank and a fee payable to the revolving lenders equal to the margin applicable to Eurodollar revolving loans. In addition, we are required to pay an unused commitment fee ranging from 0.50% per annum to 0.375% per annum of the average unused portion of the revolving commitments. The unused commitment fee is determined on the basis of a grid that results in a lower unused commitment fee as our total net leverage ratio declines.
        Our New Credit Facility contains customary covenants, including among other things, restrictions on indebtedness, issuance of liens, investments, dividends, redemptions and other distributions to equityholders, asset sales, certain mergers or consolidations, sales, transfers, leases or dispositions of substantially all of our assets, and affiliate transactions. See "Description of Certain Indebtedness."
        We expect to use approximately $         million of the proceeds from this offering to repay indebtedness under the New Term Loan Facility incurred in connection with the Partial Preferred Redemption. Following this offering and the use of proceeds therefrom, we expect to have approximately $         million of availability under our New Credit Facility to fund working capital and other liquidity needs.
        As of August 17, 2015, we were in compliance with all covenants under the New Credit Facility. As of August 17, 2015, we had no amounts drawn under the New Revolving Credit Facility and $435.0 million of outstanding borrowings under the New Term Loan Facility.
        On August 17, 2015, we redeemed 62,140 shares of Series A Preferred Stock and paid an aggregate of $276.3 million in return of capital and accrued dividends, net of the repayment of certain employee loans. Following the Partial Preferred Redemption, we had 2,576 shares of Series A Preferred Stock outstanding. The Series A Preferred Stock has an initial liquidation preference equal to $1,000 per outstanding share. In addition, the Series A Preferred Stock liquidation preference accrues a
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dividend of 20% per share per annum, payable when declared by the board of directors. Such dividends accrue on each share from the date of original issuance and accrue on a daily basis, whether or not declared. Such dividends are cumulative so that if such dividend in respect of any previous or current annual dividend period, at the annual 20% rate, has not been paid, the deficiency shall first be fully paid before any dividend or other distribution shall be paid or declared and set apart for the Common Stock. As of August 17, 2015, the liquidation preference of Series A Preferred Stock had a value of approximately $4,446.70 per outstanding share. We expect to use approximately $11.5 million of the proceeds from this offering to redeem the remaining outstanding shares of our preferred stock.
        We believe that our cash flows from operations, combined with our current cash levels and available borrowing capacity, will be adequate to fund debt service requirements and provide cash, as required, to support our ongoing operations, capital expenditures, lease obligations, and working capital for at least the next 12 months.
 Operating Activities
        Cash provided by operating activities for the six months ended June 30, 2015 was $18.9 million, compared to $1.0 million for the six months ended June 30, 2014. Cash provided by operating activities increased during the six months ended June 30, 2015 compared to the same period in the prior year primarily as a result of a $21.5 million increase in cash operating net income (net income adjusted for changes in non-cash charges related to our phantom stock plan of $2.1 million, depreciation and amortization expense of $0.8 million and loss on sale of discontinued operation of $1.0 million), which was driven primarily by strong performance in our U.S. Debit and Credit and U.S. Prepaid segments, partially offset by increases in corporate spending. The increase in cash operating net income was reduced by a $7.0 million increase in cash used to pay taxes, offset by a $3.9 million net decrease in working capital investments.
        Cash provided by operating activities for the year ended December 31, 2014 was $26.6 million, compared to $23.6 million for the year ended December 31, 2013. Cash provided by operating activities increased during the year ended December 31, 2014 primarily due to a $12.7 million increase in cash operating income (operating income from continuing and discontinued operations as adjusted for changes in non-cash charges related to our phantom stock plan of $3.9 million and depreciation and amortization expense of $0.5 million) which was primarily driven by the significant increase in operating income of the U.S. Debit and Credit segment and partially offset by decreases in operating income of the U.S. Prepaid Debit segment and increases in corporate spending. The increase in cash operating income was partially offset by a $3.2 million increase in current income tax expense driven by increased profit before tax and a $6.6 million increase in working capital and other non-significant items.
        Cash provided by operating activities for the year ended December 31, 2013 was $23.6 million, compared to $21.3 million for the year ended December 31, 2012. Cash provided by operating activities increased during the year ended December 31, 2013 primarily due to a $10.4 million increase in cash operating income (operating income from continuing and discontinued operations as adjusted for changes in non-cash charges related to our phantom stock plan of $0.6 million and depreciation and amortization expense of $1.6 million) which was primarily driven by the increase in operating income of the U.S. Debit and Credit segment and to a lesser extent the increases in operating income of the U.S. Prepaid Debit segment, the other operating segments and decreases in operating losses from our discontinued operation in Nevada and corporate expenses as further explained above. The increase in cash operating income was partially offset by a $1.5 million increase in current income tax expense driven by increased profit before tax, a $2.0 million increase in interest expense driven by increased debt level, and a $4.2 million increase in working capital and other non-significant items.
 Investing Activities
        Cash used in investing activities for the six months ended June 30, 2015 was $5.5 million, compared to $8.2 million for the six months ended June 30, 2014. Cash used by investing activities
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decreased by $2.6 million due to $5.0 million of cash provided from the sale of a discontinued operation during the six months ended June 30, 2015, partially offset by a $2.4 million increase in acquisition of plant, equipment and leasehold improvements for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014. The increase in acquisition of plant, equipment and leasehold improvements primarily related to elevated capital spending to prepare for the U.S. EMV conversion. As of June 30, 2015, we had $5.5 million in commitments to make capital expenditures.
        Cash used in investing activities for the year ended December 31, 2014 was $71.8 million, compared to $9.2 million for the year ended December 31, 2013. Cash used in investing activities increased by $54.9 million primarily due to the EFT Source acquisition, and $7.7 million due to increased acquisition of plant, equipment and leasehold improvements primarily related to elevated capital spending to prepare for the U.S. EMV conversion. As of December 31, 2014, we had $7.9 million in commitments to make capital expenditures.
        Cash used by investing activities for the year ended December 31, 2013 was $9.2 million, compared to $12.2 million for the year ended December 31, 2012. Cash used by investing activities decreased $1.8 million due to reduced acquisition of plant, equipment and leasehold improvements for the year ended December 31, 2013 as compared to the year ended December 31, 2012. Cash used for investing activities was also $1.2 million lower for the year ended December 31, 2013 as compared to the year ended December 31, 2012 due to the acquisition of ID Data, Limited. which occurred during the year ended December 31, 2012 and had no effect on the year ended December 31, 2013.
 Financing Activities
        Cash used in financing activities for the six months ended June 30, 2015 was $13.3 million, compared to $3.0 million of cash provided by financing activities for the six months ended June 30, 2014. The $16.3 million decrease in cash provided by financing activities was comprised of a $4.5 million increase in cash used to repay long-term debt, $10.8 million in borrowings being repaid under our previously outstanding credit facility, $0.6 million of cash paid for costs associated with the anticipated issuance of stock and $0.4 million of cash used for the redemption of preferred and common stock.
        Cash provided from financing activities for the year ended December 31, 2014 was $48.5 million, compared to $12.1 million of cash used by financing activities for the year ended December 31, 2013. The increase in cash provided from financing activities of $60.6 million was funded by $60.0 million of long-term debt borrowings.
        Cash used for financing activities for the year ended December 31, 2013 was $12.1 million, compared to $20.7 million for the year ended December 31, 2012. The $8.5 million decrease in cash used financing activities was comprised of a $36.2 million reduction in cash provided by indebtedness and $44.7 million reduction in cash used for the redemption of preferred and common stock and stockholder dividends.
 Working Capital
        Our working capital as of June 30, 2015 was $61.5 million compared to $45.5 million as of December 31, 2014. The $16.0 million increase in working capital during the six months ended June 30, 2015 was the result of recognizing a $10.5 million income tax benefit related to the write-off of tax deductible goodwill and intangible assets associated with our Nevada operation, which was recorded as a current tax receivable amount as of June 30, 2015. Additionally, the net of accounts receivable, inventories, accounts payable and accrued expenses increased $11.2 million during the six month period, reflecting an increase in the growth in the net sales of the Company. Offsetting these increases was a $5.8 million decrease in the current assets of discontinued operation, resulting from the sale of our Nevada operation during the period.
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        Our working capital as of December 31, 2014 was $45.5 million compared to $28.1 million as of December 31, 2013. The $17.4 million increase in working capital was driven by a $7.2 million increase in investment in working capital from operating activities, $7.6 million of working capital acquired in the EFT Source acquisition and a $2.9 million increase from the reclassification of fixed assets to current assets of a discontinued operation.
 Bad Debt Expense
        The allowance for bad debts and returns activity for the six months ended June 30, 2015 and the years ended December 31, 2014 and 2013 is summarized as follows:

					
Balance as of December 31, 2012	 	 $	1,034	 	
Bad debt expense	 	 	650	 	
Write-off of uncollectible accounts	 	 	(320	)	
Currency translation adjustments	 	 	1	 	
 ​	​	​ 	​ 	​	
Balance as of December 31, 2013	 	 	1,365	 	
Bad debt expense	 	 	(100	)	
Write-off of uncollectible accounts	 	 	(986	)	
Currency translation adjustments	 	 	(7	)	
 ​	​	​ 	​ 	​	
Balance as of December 31, 2014	 	 	272	 	
Bad debt expense	 	 	407	 	
Currency translation adjustments	 	 	(5	)	
 ​	​	​ 	​ 	​	
Balance as of June 30, 2015	 	 $	674	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        The Company reserves for bad debts and customer credits on the specific identification method and assesses the amount of the required reserve for the period by an account-by-account analysis to determine which past due accounts may not be collected.
        For the year ended December 31, 2013, the Company had reserved for several specific past due accounts attributable to its discontinued operations that were disputed by the customer. The disputed accounts were written off against the reserve during the year ended December 31, 2014. For the year ended December 31, 2014, the Company recognized $(0.1) million of bad debt expense as compared to $0.7 million of bad debt expense in the year ended December 31, 2013. The reduction in bad debt expense was the result of lower reserve requirements for the year ended December 31, 2014, as compared to the year ended December 31, 2013 as a result of an account-by-account analysis to determine which past due accounts may not be collected. For the six months ended June 30, 2015, the Company increased its reserve for bad debt to $0.7 million due to specific accounts of its discontinued operations that were retained in the sale of the discontinued operations on January 12, 2015. The Company determined that certain retained accounts may not be collected as a result of the sale.
 Contractual Obligations
        The following table summarizes our material contractual obligations as of December 31, 2014:

																	
 	 	Payments due by period—December 31, 2014
(in thousands)	 	
 	 	Total	 	Less than
1 year	 	1 - 3 Years	 	3 - 5 Years	 	More than
5 Years	 	
Long-term debts	 	 $	179,866	 	 $	6,547	 	 $	173,319	 	 $	—	 	 $	—	 	
Capital lease obligations	 	 	133	 	 	82	 	 	51	 	 	—	 	 	—	 	
Operating leases	 	 	9,813	 	 	2,885	 	 	3,673	 	 	1,947	 	 	1,308	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total contractual obligations	 	 $	189,812	 	 $	9,514	 	 $	177,043	 	 $	1,947	 	 $	1,308	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
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        Additionally, as of June 30, 2015, 1,970 shares of our Preferred Stock are subject to a put, where the employees holding these preferred shares have the option upon leaving the Company to have the Company purchase the preferred shares at the then current liquidation preference. As of June 30, 2015, the aggregate liquidation preference of such shares was $8.4 million. See Note 11 (Series A Preferred Stock) to our unaudited condensed consolidated financial statements.
 Cyclical and Seasonal Nature of Business
        Financial Payment Cards and Private Label Credit Cards are generally influenced by broader cyclical changes in the economy, with economic downturns resulting in decreases in the demand for our products and services. In particular, prolonged economic downturns typically have resulted in significant reductions in the demand for general purpose credit cards due to tightening credit conditions. Additionally, we generate slightly higher net sales in the third and fourth quarters of the year, as our sales of Prepaid Debit Card solutions and retail gift cards are more heavily weighted toward the second half of the year when consumers tend to purchase more of these products and services in anticipation of the holiday season.
 Taxation
        We account for income taxes using an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
        We account for uncertain income tax positions in accordance with ASC 740, Income Taxes. ASC 740 prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption. In addition, ASC 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
        We have analyzed our filing positions in all of the jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions, and based upon our review, determined there are no unrecognized tax liabilities as of June 30, 2015.
 Off-Balance Sheet Arrangements
        We had no off-balance sheet arrangements at June 30, 2015 and December 31, 2014 and 2013.
 Critical Accounting Policies and Estimates
        Our management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. In preparing our financial statements, we make estimates, assumptions and judgments that can have a significant impact on our reported revenues, results of operations and net income, as well as on the value of certain assets and liabilities on our balance sheet during and as of the reporting periods. These estimates, assumptions and judgments are necessary because future events and their effects on our results and the value of our assets cannot be determined with certainty, and are made based on our historical experience and on other assumptions that we believe to be reasonable under the circumstances. These estimates may change as new events occur or additional information is obtained, and we may periodically be faced with uncertainties, the outcomes of which are not within our control and may not be known for a
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prolonged period of time. Because the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates.
 Revenue Recognition
        Generally, we recognize revenue related to sales of our products upon shipment, when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable, and collectability is reasonably assured. A provision for payment discounts, product return allowances and uncollectable accounts, which is estimated based upon our historical performance, management's experience and current economic trends, is recorded as a reduction of sales in the same period that the revenue is recognized.
        In certain cases, at the customer's request, we enter into bill-and-hold transactions whereby title transfers to the customer, but the product does not ship until a specified later date. We recognize revenue associated with bill-and-hold arrangements when the product is complete and ready to ship, hold criteria have been met, the amount due from the customer is fixed, and collectability of the related receivable is reasonably assured. All of the foregoing requires us to apply our judgment. Bill-and-hold arrangements most often occur when customers request that we ship complete tamper-evident security packages containing a Prepaid Debit Card to our secure fulfillment center until they provide us further instructions at a later date to ship those packages to numerous individual retail locations or distribution centers.
 Multiple-Element Arrangements
        We enter into warehouse, fulfillment and distribution service agreements with several customers, where we are engaged to store and handle completed cards and tamper-evident security packages on their behalf. For the sales arrangements that contain multiple deliverables, the arrangement is split into separate units of accounting and individually delivered elements have value to the customer on a standalone basis. When separate units of accounting exist, revenue is allocated to each element based on our best estimate of competitive market prices. At the point in which completed cards and packages are shipped to our warehouse, the product is billed and the revenue is recognized in accordance with our revenue recognition policy. Warehousing services are recognized monthly based on volume and handling requirements; fulfillment services are recognized when the product is handled in the manner specified by the customer for a unit or handling fee. All of the foregoing requires us to apply our judgment. Multiple-element arrangements most often occur when customers request that we ship complete tamper-evident security packages containing a Prepaid Debit Card to our secure fulfillment center until they provide us further instructions at a later date to ship those packages to numerous individual retail locations or distribution centers.
 Impairment Assessments of Goodwill and Long-Lived Assets
        A component of our growth strategy has been to acquire and integrate businesses that complement our existing operations. We account for business combinations using the acquisition method and allocate the acquisition price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based upon their estimated fair values at the acquisition date. The difference between the acquisition price and the fair value of the net assets acquired is recorded as goodwill.
        In determining the fair value of assets acquired and liabilities assumed in business combinations and for determining fair values in impairment tests, we use one of the following recognized valuation methods: the income approach (including discounted cash flows), the market approach or the cost approach. Our significant estimates in those fair value measurements include identifying business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and earnings multiples. Further, when measuring fair value based on discounted cash flows, we
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make assumptions about risk adjusted discount rates, future price levels, rates of increase in revenue, cost of revenue and operating expenses, weighted average cost of capital, rates of long term growth and income tax rates. Valuations are performed by management or third party valuation specialists under management's supervision, where appropriate. We believe that the estimated fair values assigned to the assets acquired and liabilities assumed and for determining fair value in business combinations and impairment tests are based on reasonable assumptions that marketplace participants would use. However, such assumptions are inherently uncertain and actual results could differ from those estimates. Goodwill is allocated to our reporting units at the date the goodwill is initially recorded. Once goodwill has been allocated to the reporting units, it no longer retains its identification with a particular acquisition and becomes identified with the reporting unit in its entirety. Accordingly, the fair value of the reporting unit as a whole is available to support the recoverability of its goodwill.
        We evaluate goodwill for impairment annually on October 1 or more frequently when an event occurs or circumstances change that indicates the carrying value may not be recoverable. We have the option to assess goodwill for impairment by first performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount. If we determine that it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, then the two-step goodwill impairment test is not required to be performed. If we determine that it is more likely-than-not that the fair value of a reporting unit is less than its carrying amount, or if we do not elect the option to perform an initial qualitative assessment, we perform the two-step goodwill impairment test. In the first step, the fair value of the reporting unit is compared to its book value including goodwill. If the fair value of the reporting unit is in excess of its book value, the related goodwill is not impaired and no further analysis is necessary. If the fair value of the reporting unit is less than its book value, there is an indication of potential impairment and a second step is performed. When required, the second step of testing involves calculating the implied fair value of goodwill for the reporting unit. The implied fair value of goodwill is determined in the same manner as goodwill recognized in a business combination, which is the excess of the fair value of the reporting unit determined in step one over the fair value of its net assets and identifiable intangible assets as if the reporting unit had been acquired. If the carrying value of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. For reporting units with a negative book value (i.e., excess of liabilities over assets), we evaluate qualitative factors to determine whether it is necessary to perform the second step of the goodwill impairment test. As of June 30, 2015, the goodwill on our balance sheet was $73.8 million.
        Long-lived assets, such as property, equipment and software, and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Plant, equipment, and leasehold improvements are recorded at cost. Accumulated depreciation is computed using the straight-line method over the lesser of the estimated useful life of the related assets (generally 3 to 10 years for equipment, furniture, and leasehold improvements) or, when applicable, the lease term. Maintenance and repairs that do not extend the useful life of the respective assets are charged to expense as incurred. If circumstances require that a long-lived asset or asset group be tested for possible impairment, we first compare the undiscounted cash flows expected to be generated by that long-lived asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, impairment is recognized to the extent that the carrying amount exceeds its fair value.
        Future changes in our assumptions or the interrelationship of those assumptions may negatively impact future valuations. In future measurements of fair value, adverse changes in assumptions could result in an impairment of goodwill or long-lived assets that would require a non-cash charge to the consolidated statements of operations and may have a material effect on our financial condition and operating results.
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 Inventory Valuation
        Raw materials, work-in-process and finished goods inventories are valued at the lower of cost or market, with cost determined using a weighted average method. Cost is calculated based upon the price paid for an item at the time it is received by us, and also includes the capitalization of labor, overhead and other expenses in the case of work-in-process and finished goods inventory. This net inventory cost is recognized through cost of sales when the inventory is sold. It is impractical for us to assign specific allocated overhead costs to individual units of inventory. As such, to match net inventory costs against the related revenues, we estimate the net inventory costs to be deferred and recognized each period as the inventory is sold. Also, we must exercise significant judgment in the case of work-in-process inventory to allocate the appropriate costs to this unfinished product.
 Phantom Stock Plan
        We maintain the CPI Acquisition, Inc. Phantom Stock Plan, a deferred compensation plan that provides incentive compensation to certain key employees based on the value of our preferred stock. Under the terms of the plan agreement, holders of an award are entitled to a cash payment upon redemption equal to the increase in value of phantom units in CPI Acquisition, Inc. above a certain base amount. All awards vest on the defined Redemption Date or earlier fixed date pursuant to each award agreement. The Redemption Date is defined as the earlier of a Change-in-Control or seven years from grant. Unvested awards expire upon the participant's termination of service. Total authorized units under the plan are 100,000. At June 30, 2015, there were 81,156 units issued and outstanding under the terms of the plan, of which 13,088 were fully vested. As these awards must be settled in cash, we account for them as liabilities. As a non-public company, we have elected to measure the liability at intrinsic value, with changes in the intrinsic value of the liability recognized as expense each year in the consolidated statements of operations and comprehensive income (loss). There was $1.5 million, $4.5 million and $0.6 million of compensation expense recognized for the six months ended June 30, 2015 and the years ended December 31, 2014 and December 31, 2013, respectively, related to this plan. Upon the filing of the registration statement, there will be a change in accounting policy in subsequent periods and vested units will be recorded at fair value, with the change in value recognized as expense in the consolidated statements of operations and comprehensive income (loss).
        Because prior to this offering we have been privately held and there was no public market for our Preferred Stock, which is a key determinant of the value of the awards under the phantom stock plan, we were required to exercise significant judgment in valuing the awards under this plan. The fair value of our equity was historically estimated by our management and approved by our board. In estimating the fair value of our preferred stock, management and the board considered factors it believed were material to the valuation process including our actual and projected financial results, the principal amount of our indebtedness, net of cash, and the trading multiples of comparable companies. In connection with the offering, we intend to terminate this phantom stock plan and satisfy all liabilities due under the plan.
 Stock Option Plan
        We maintain the 2007 Stock Option Plan under which stock options have been granted to employees. We recognize compensation expense for option awards based on the fair value of the award on a straight-line basis over the vesting period of the award based on the estimated portion of the award that is expected to vest. The fair value of the award is based on the valuation of our common stock on the date of grant. We include the expense in selling, general and administrative expenses in our consolidated statement of operations and comprehensive income. Because prior to this offering, there was no public market for our common stock, we were required to exercise significant judgment in valuing the fair value of the awards under this plan. The fair value of our equity was historically
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estimated by our management and approved by our board. In estimating the fair value of our common stock, management and the board considered factors it believed were material to the valuation process including the process, rights, preferences and privileges of our preferred stock relative to the common stock, our actual and projected financial results, current business conditions and projections, the principal amount of our indebtedness, net of cash and the trading multiples of comparable companies.
 Income Taxes
        We record income tax expense using the liability method for taxes and are subject to income tax in many jurisdictions, including the United States, various states and localities, the United Kingdom, and Canada. A current tax asset or liability is recognized for the estimated taxes refundable or payable on the tax returns for the current year and a deferred tax asset or liability is recognized for the estimated future tax effects attributable to temporary differences and carryforwards. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized. In evaluating our ability to realize our deferred tax asset, we considered the following sources of future taxable income:
•
future reversals of existing taxable temporary differences; 

•
future taxable income, exclusive of reversing temporary differences and carryforwards; 

•
taxable income in prior carryback years; and 

•
tax-planning strategies.
        Our evaluation regarding whether a valuation allowance is required or should be adjusted also considers, among other things, the nature, frequency and severity of recent losses, forecasts of future profitability and the duration of statutory carryforward periods. Our forecast of future profitability represents our best estimate of these future events. After conducting this assessment, the valuation allowance recorded, net of federal benefit, against our deferred tax assets was $4.1 million, $4.1 million and $4.8 million as of June 30, 2015, December 31, 2014 and December 31, 2013, respectively. If actual results differ from estimated results, or if we adjust these assumptions in the future, we may need to adjust our deferred tax assets or liabilities, which could impact our effective tax rate.
        The amount of income taxes we pay could be subject to possible audits in the taxing jurisdictions in which we operate. In the event of these possible audits, the taxing authorities might challenge items on our tax returns. Because the tax matters challenged by tax authorities are typically complex, the ultimate outcome of these challenges is uncertain. We recognize tax benefits for uncertain positions only to the extent that we believe it is more likely than not that the tax position will be sustained. Our future results may include favorable or unfavorable adjustments to our unrecognized tax benefits due to closure of income tax audits, new regulatory or judicial pronouncements, or other relevant events. As a result, our effective tax rate may fluctuate significantly on a quarterly and annual basis.
 Internal Control Over Financial Reporting
        Assessing our staffing and training procedures to improve our internal control over financial reporting is an ongoing process. We are not currently required to comply with Section 404 of the Sarbanes-Oxley Act, and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting. As a result, our management did not perform an evaluation of our internal control over financial reporting as of December 31, 2014. Further, our independent registered public accounting firm has not been engaged to express, nor have they expressed, an opinion on the effectiveness of our internal control over financial reporting. However, we
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recently identified a material weakness related to a lack of finance expertise that could result in a failure to properly account for non-routine and complex transactions. With the oversight of senior management, we are taking steps to remediate the underlying causes of this material weakness, primarily through the hiring of additional finance personnel, as well as the development and implementation of formal policies and improved processes. Although we plan to address this material weakness as promptly as possible, we cannot estimate when the remediation process will be completed. See "Risk Factors—Risks Related to Our Business—We have identified a material weakness in our internal controls over financial reporting. If we are unable to implement and maintain effective internal controls over financial reporting in the future, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected."
        For the year ending December 31, 2016, pursuant to Section 404 of the Sarbanes-Oxley Act, management will be required to deliver a report that assesses the effectiveness of our internal control over financial reporting. Under current SEC rules, our independent registered public accounting firm will eventually be required to deliver an attestation report on the effectiveness of our internal control over financial reporting when we no longer qualify as an emerging growth company. We may qualify as an emerging growth company for as long as five years, although we may lose that status under certain circumstances. See "Risk Factors—Risks Related to Our Business—We are an "emerging growth company" and we cannot be certain if the reduced disclosure and other requirements applicable to emerging growth companies will make our common stock less attractive to investors."
 Quantitative and Qualitative Disclosures about Market Risk
 Key Input Price Risks
        Our profitability is dependent on, among other things, our ability to anticipate and react to changes in the costs of key operating resources, including EMV microchips, polyvinyl chloride ("PVC"), energy and other commodities. We have been able to offset cost increases, which have historically not been significant, by increasing our selling prices, as well as, making other operational adjustments that increase productivity. However, substantial increases in costs and expenses could impact our operating results to the extent that such increases cannot be offset by selling price increases.
 Labor and Benefits Costs
        We are exposed to inflation in wage and benefits costs which represented 31.6% of net sales for the year ended December 31, 2014. Due to the high-security nature of our business, the availability of potential applicants is limited by the security and other requirements of the Payment Card Brands and applicants are required to undergo a rigorous background screening process. Due to these factors, we have historically provided a starting wage that is above the minimum wage in place for the particular states or provinces in which we do business to attract qualified applicants. We further believe that this enables us to attract a higher caliber employee and this translates directly to higher quality and productivity. There can be no assurance that we will generate sales growth in an amount sufficient to offset increases in minimum wage or other inflationary pressures.
 Interest Rate Risk
        We are exposed to interest rate risk through fluctuations in interest rates on our Term Loan obligations. Our New Revolving Credit Facility and New Term Loan Facility carry interest at a floating rate. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities. As of August 17, 2015, we had $435.0 million in outstanding floating rate debt obligations under our New Term Loan Facility. Each quarter point increase or decrease in the interest rate on our New Term Loan Facility would change our annual interest expense by approximately
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$1.1 million. If our New Revolving Credit Facility was fully-drawn, each quarter point increase or decrease in the interest rate on our New Revolving Credit Facility would change our annual interest expense by approximately $0.1 million.
 Foreign Currency Exchange Risk
        We are not currently subject to significant foreign currency exchange risk. While we have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the British Pound Sterling and the Canadian Dollar, historically we have not been impacted materially by the changes in exchange rates. We have experienced and will continue to experience fluctuations in our consolidated statement of operations as a result of transaction gains or losses related to revaluing certain current asset and current liability balances that are denominated in currencies other than the functional currency of the entities in which they are recorded. Risk can be estimated by measuring the impact of a near-term adverse movement of 10% in foreign currency rates against the U.S. Dollar. If foreign currency exchange rates were 10% higher or lower at December 31, 2014, there would not have been a material adverse impact on our net income from continuing operations or financial position.
 Pricing Risk
        While we have been able to partially offset historical pricing pressure and other changes in the price of our products and services by offering higher-value added products and services, cross-selling additional products and services, selectively implementing pricing increases, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future. From time to time, competitive conditions could limit our pricing flexibility and macroeconomic conditions could increase pricing pressure. There can be no assurance that future pricing pressure can be offset by our ability to reduce our costs. In addition, there can be no assurance that we will generate sales growth in an amount sufficient to offset pricing pressures.
 Recent Accounting Pronouncements
        The FASB issued ASU 2014-09, Revenue from Contracts with Customers, in May 2014. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for annual reporting periods beginning after December 15, 2017. We will implement the provisions of ASU 2014-09 as of January 1, 2018. We are in the process of determining the method of adoption and assessing the impact of ASU 2014-09 on our results of operations, financial position and consolidated financial statements.
        The FASB issued ASU 2015-03, Interest—Imputation of Interest, in April 2015. ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The new standard is effective for public entities annual reporting periods beginning after December 15, 2015. We will implement the provisions of ASU 2015-03 as of January 1, 2016. The adoption of ASU 2015-03 will require us to reclassify deferred loan costs as a direct deduction from the carrying amount of debt on our balance sheet. We do not expect any material impact to our balance sheet from this change.
        The FASB issued ASU 2015-11, Inventory—Simplifying the Measurement of Inventory, in July 2015. ASU 2015-11 requires that inventory be at the lower of cost and net realizable value. Net
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realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable cost of completion, disposal, and transportation. The new standard is effective for public business entities for fiscal years beginning after December 15, 2016. We will implement the provisions of ASU 2015-11 as of January 1, 2017. We are in the process of assessing the impact of ASU 2015-11 on our results of operations, financial position and consolidated financial statements.
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 INDUSTRY
 Overview
        Consumer payments in the United States and globally have shifted over the last several decades from paper-based media such as cash and checks to card-based media such as credit, debit and Prepaid Debit Cards, and electronic methods such as pre-authorized payments through ACH. The Nilson Report estimates that card-based payments have increased from 38.3% of U.S. transactions in 2005 to 56.5% in 2013, and electronic payments have increased from 4.3% to 7.2% over the same period. By 2018, card-based payments are projected to comprise 69.2% of U.S. transactions, with cash and checks accounting for 21.4% and electronic payments representing the remaining 9.4%. We believe that this long-term trend of card-based and electronic payments replacing cash and checks will continue.
 Financial Payment Card Production and Service
        Our primary market is production of and services for Financial Payment Cards, which are cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express and Discover) and Interac (in Canada), that require high levels of security throughout the card production and issuance process. According to First Annapolis, 976 million Financial Payment Cards were produced for the U.S. market in 2014 and this number is estimated to grow to 1.2 billion cards by 2019, representing a CAGR of 4.3%. The primary driver of growth is predicted to be an increasing adoption of Prepaid Debit Cards, along with anticipated steady growth in debit and credit cards. On a dollar basis, the U.S. Financial Payment Card market (excluding services) was $371 million in 2014 (up from $180 million in 2013), and is anticipated to grow to $1.2 billion by 2019, driven by the EMV conversion and unit volume growth.

 Annual U.S. Financial Payment Card Production                       (number of cards in millions)

Source: First Annapolis
        According to First Annapolis, the demand for bank debit and general purpose credit cards has been predictable and recurring in nature, with 88% of cards issued in the United States in 2014 directly replacing existing cards. This includes:
•
regular renewal of cards, which generally occurs every three to five years due to fixed expiration dates (53% of 2014 issuances); 

•
cards lost, stolen or replaced due to fraudulent usage (19%); and 

•
portfolio churn, which is when cardholders move from one card program to another (16%).
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        The remaining demand for general purpose credit and bank debit cards is the issuance of cards in conjunction with net new account growth (12%). The issuance of Prepaid Debit Cards has represented a similarly predictable and recurring source of demand, as a majority of Prepaid Debit Cards have an average estimated card life of less than twelve months.
        We estimate that bank debit and general purpose credit cards historically have been replaced on average every three years. First Annapolis estimates that certain issuers of bank debit cards and general purpose credit cards may extend the expiration dates on their cards which may be due, in part, to the higher cost of EMV cards. This longer card expiration cycle would result in lower demand for bank debit cards and general purpose credit cards in the United States, and First Annapolis has taken this into consideration in estimating the growth rates of these markets.
        Our market can be divided as follows: bank debit cards, general purpose credit cards and Prepaid Debit Cards.
 Bank debit cards
        Bank debit cards generally are issued by financial institutions to their customers as a convenient way to access funds under the custody of the issuer. Bank debit cards are issued on the networks of the Payment Card Brands and Interac (in Canada) or similar debit networks and are usable anywhere on the card network to withdraw cash from ATMs or pay merchants for goods and services. There are over 10,000 banks, credit unions and other organizations that issue such cards in the United States.
        First Annapolis estimates that the market for bank debit card production for the U.S. will grow from 368 million cards in 2014 to 396 million cards by 2019, which represents a compounded annual growth rate of 1.5% over this period. First Annapolis believes the primary drivers of demand in this market over this period will be the automatic renewal of cards at expiration (59% of annual issuance), portfolio churn (21%), cards lost, stolen or replaced due to fraudulent usage (15%) and net new account growth (5%). Demand from portfolio churn is generated primarily from cardholders exchanging one card for another, which often occurs due to the competitive nature of the personal banking market, such as banks competing to offer the most attractive card benefits or promotions. Demand from the opening of net new accounts has historically been tied to population and Gross Domestic Product growth. The shift from magnetic stripe cards to EMV cards is expected to reduce card fraud, which currently affects nearly 1% of cards in an issuer's portfolio every month. By 2017 First Annapolis expects that nearly all new bank debit cards issued in the United States will be EMV-enabled, with larger issuers leading the conversion.
 General purpose credit cards
        General purpose credit cards are issued by financial institutions, as well as certain Payment Card Brands including American Express and Discover. All general purpose credit cards are issued on the networks of the Payment Card Brands and usable anywhere on the card network to pay merchants for goods and services or to withdraw cash from ATMs, as opposed to Private Label Credit Cards, which are not issued on the networks of the Payment Card Brands. There are over 4,800 banks, credit unions, card networks and other organizations that issue such cards in the United States.
        First Annapolis estimates that the market for general purpose credit card production for the U.S. market will grow from 332 million cards in 2014 to 403 million cards by 2019, which represents a compounded annual growth rate of 4.0% over this period. The primary drivers of demand in this market over this period are expected to be the automatic renewal of cards at expiration (65% of annual issuance), portfolio churn (12%), cards lost, stolen or replaced due to fraudulent usage (15%) and net new account growth (9%). Demand from portfolio churn is generated primarily from cardholders exchanging one card for another, which often occurs due to the competitive nature of the market for personal credit cards, such as rewards cards that appeal to consumers with specific purchasing habits,
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balance transfer offers to lower interest rates and changes in co-branded agreements between card networks and large merchants. The opening of net new accounts has historically been tied to population growth and the strength of the consumer credit markets. The shift from magnetic stripe cards to EMV cards is expected to reduce card fraud, which currently affects nearly 1% of cards in an issuers' portfolio every month. By 2017, we expect that nearly all new general purpose credit cards issued in the United States will be EMV-enabled, with larger issuers leading the conversion.
 Prepaid debit cards
        Prepaid debit cards share many of the functional features and conveniences of traditional bank debit cards; they are issued on the network of a Payment Card Brand and usable in the same manner as a bank debit card. However, these cards are not linked to a traditional bank account, are easier to acquire (they do not require a credit check) and require cardholders to load money onto the card in advance of any transaction. Prepaid Debit Cards are often issued for use as gift cards (in place of a cash or check gift), for payroll purposes (as an alternative to paper payroll checks), or by employers and government agencies for benefits or incentives. Additionally, GPR Cards, which are registered by the cardholder with the issuing bank or licensed money transmitter in order to reload the card's monetary value, have emerged as an important part of the Prepaid Debit Card market, particularly the unbanked and underbanked populations, as well as for low-income and younger consumers. The Federal Deposit Insurance Corporation ("FDIC") estimates that in 2013, 7.7% and 20.0% of U.S. households were classified as unbanked and underbanked, respectively.
        As described in the table below, the prepaid debit market can be divided into six segments based on distribution channel, related characteristics and use:

											
Prepaid Category 	 	Distribution Model	 	Key Distribution Channels	 	Funding	 	2014 - 2019E
CAGR	 	
General Purpose Reloadable	 	Direct to Consumer	 	· Retail
 · Check cashing
 · Tax preparation
 · Bank branches
 · Internet	 	Reloadable	 	 	16	%	
Gift	 	 	 	· Retail
 · Internet	 	Single load	 	 	
5	
%	
Payroll	 	Enterprise (B2B)	 	· Employers
 · Payroll providers
 · Bank resellers	 	Reloadable	 	 	
11	
%	
Government Disbursement	 	 	 	· Government agencies	 	Reloadable	 	 	
5	
%	
Incentive	 	 	 	· B2B
 · Internet	 	Usually single load	 	 	
5	
%	
Employee Benefits	 	 	 	· Plan administrators
 · Employers	 	Reloadable	 	 	
19	
%	
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 Annual U.S. Prepaid Debit Card Production                       (number of cards in millions)

Source: First Annapolis
        The Prepaid Debit Card market is expected to experience the highest annual growth rate from 2014-2019 as adoption across Prepaid Debit Card products increases. First Annapolis estimates that the U.S. market for Prepaid Debit Card manufacturing will grow from 276 million cards in 2014 to 405 million cards by 2019, which represents a CAGR of 8.0% over this period. Unlike other Financial Payment Card subsets where many cards are replaced at expiration (generally three to five year cycles), Prepaid Debit Cards generally have shorter use periods, with many cards discarded when the funds have been depleted, specifically single load cards, which composed approximately two thirds of the prepaid market in 2014. Growth in this subset is driven by new card issuance as consumers increase adoption and additional financial institutions introduce new products. Consumers increasingly have adopted Prepaid Debit Cards and, according to the Federal Reserve, spent approximately $100 billion on open-loop cards in 2012, up from $40 billion in 2009, which represents a 36% CAGR over the period. New entrants to the prepaid market, particularly large bank debit and credit card issuers such as JPMorgan Chase and American Express, have driven further adoption in GPR Cards, particularly by consumers that also use traditional bank services. We believe that certain subsets of Prepaid Debit Cards, particularly cards that are reloadable, including government disbursement, payroll, employee benefits, and many GPR cards, will be substantially converted to the EMV standard by 2017.
 Private Label Credit Card Production
        Private Label Credit Cards are credit cards that an individual merchant issues for exclusive use in its own stores. They are generally not issued on the network of a Payment Card Brand. While Private Label Credit Cards are not our primary market, we believe they represent another possible growth opportunity, as issuers of these cards are increasingly demanding the high levels of security and certification prevalent in the market for Financial Payment Cards, and certain merchants have already begun implementing EMV-enabled cards for their captive card programs following high profile data breaches.
        First Annapolis estimates that the market for Private Label Credit Card production in the U.S. will grow from 174 million cards in 2014 to 220 million cards by 2019, which represents a compounded annual growth rate of 4.8% over this period. The primary drivers of demand in this market over this period are expected to be automatic renewal of cards at expiration (68% of annual issuance), portfolio churn (21%), cards lost, stolen or replaced due to fraudulent usage (4%) and net new account growth (7%). We believe that growth in this market is sensitive to economic conditions, and account growth is
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primarily tied to the strength of the consumer credit markets. Private Label Credit Cards experience lower instances of fraud than bank debit and general purpose credit cards as they are less attractive targets for fraud given their limited acceptance. We believe that Private Label Credit Cards will convert to EMV cards at a slower rate than bank debit and general purpose credit cards, but will ultimately convert to avoid negative consumer perceptions and to fit into the issuing merchant's payment terminal strategy.
 Card Data Personalization and Card Services
        According to First Annapolis, outsourced card data personalization services for Financial Payment Cards represented a $417 million market in the United States in 2014 and is estimated to grow to $604 million by 2019, representing a 7.7% CAGR. The process of personalization involves assigning unique identification numbers and encrypting authentication data (such as a cardholder's account number, name and other data) onto cards, embossing and encoding personal information onto the cards and distributing PINs and fully packaged cards to individual cardholders. We believe the value of the market for personalization services will grow over the next several years due to the growth of overall cards in circulation and the U.S. EMV conversion, which is expected to increase revenues for service providers as personalizing EMV cards incorporates higher value added services than the process for non-EMV cards.
 Instant Card Issuance Systems and Services
        Instant card issuance refers to card issuing banks providing their customers with a new debit card, issued on the network of one of the Payment Card Brands, within the bank branch upon demand. When a debit card is "instantly issued", it is personalized within the bank branch and handed to the customer on the spot. This debit card can be issued in connection with the cardholder opening a new deposit account or to replace a card that has been lost or stolen. Instant card issuance has emerged primarily as a method for card issuing banks to provide an enhanced level of service to their cardholders. Additionally, instant card issuance allows card issuing banks to immediately begin capturing interchange revenue as the cardholder does not have to wait for the new card to be sent in the mail. Finally, instant issuance eliminates the problem of cardholders not activating their cards, a persistent challenge for card issuers, as the cards are automatically activated when they are delivered through the instant issuance model.
        Instant issuance can be facilitated by either temporary cards, or systems and solutions that can be used to issue permanent cards. Temporary cards have a short expiration, are generally only intended for use until a permanent card is fulfilled through a central issuance process and are personalized only to the extent needed to link the physical card to the cardholder's account (i.e., are not embossed with a cardholder's name). Permanent instant issuance systems and solutions also enable the immediate use of cards, but offer a superior customer experience by providing a permanent, fully-personalized card that is encoded and embossed on a desktop terminal in a bank branch. Permanent instant issued cards look similar to and carry the same length of expiration as a centrally issued card. This permanent card avoids the confusion of having to replace a temporary card at a later date and any related complications of using a temporary card (e.g., without a cardholder name POS security verification is not possible).
        The Aite Group, an advisory firm to the financial services industry, estimates that in 2014, approximately 14,000 bank branches have deployed instant issuance systems, with this number expected to grow to over 37,000 by 2018, which represents a 27.7% CAGR. This growth is driven primarily by the growing number of financial institutions adopting this product offering and the ability to offer permanent Financial Payment Cards, including EMV cards, through instant issuance.
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 EMV Conversion in the United States
        The EMV standard for Financial Payment Cards, which is named after Europay, MasterCard and Visa, is a technologically advanced high security protocol that features a Financial Payment Card with an embedded microprocessor, commonly known as a "chip card." Depending on the features desired by the issuer, EMV cards may sell for 5 to 10 times the average selling price of the magnetic stripe cards they are replacing. We estimate based on our experience that the industry-wide average selling prices per card, exclusive of services, are approximately as follows: magnetic stripe—$0.20 per card; Contact EMV—$1.00 per card; and Dual-Interface EMV—$2.00 per card. Actual per card pricing will vary significantly depending on issuer size, order size, card features, finishes, and EMV chip features selected by the issuer. According to First Annapolis, the conversion of U.S. Financial Payment Cards to the EMV standard is expected to increase the size (measured in dollars) of the Financial Payment Card market (excluding services) by more than three-fold to $1.2 billion by 2019.
        The conversion of U.S. Financial Payment Cards from magnetic stripe technology to the EMV standard began in earnest in the second half of 2014 and is expected to continue over the next several years, with full adoption in the credit and traditional debit card markets largely complete by 2017 and increasing levels of adoption of Prepaid Debit Cards and Private Label Credit Cards beyond 2017. EMVCo, an industry organization overseen by six financial institutions, estimates that at the end of 2014, only 7.3% of Financial Payment Cards in circulation in the United States were EMV-enabled. The following table sets forth the estimated mix of EMV and non-EMV Financial Payment Cards and Private Label Credit Cards produced in the United States on a unit basis annually for the periods specified:

																							
 	 	2013	 	2014	 	2015E	 	2016E	 	2017E	 	2018E	 	2019E	 	
EMV Cards	 	 	2	%	 	17	%	 	42	%	 	59	%	 	69	%	 	70	%	 	71	%	
Non-EMV Cards	 	 	98	%	 	83	%	 	58	%	 	41	%	 	31	%	 	30	%	 	29	%	

Source: First Annapolis
        A number of factors have precipitated the ongoing conversion of Financial Payment Cards in the United States to the EMV standard:
 The Liability Shift
        In August 2011, Visa announced a plan for the U.S. market to adopt the EMV standard for security on credit and debit cards. A key feature of Visa's announcement, which later became a coordinated effort among all of the Payment Card Brands, was a card fraud liability shift effective October 1, 2015. After the October 1, 2015 deadline, the party that caused a non-EMV transaction to occur (i.e., either the non-EMV card issuer or the merchant that does not have an EMV compatible POS system) will be the one held financially liable for any resulting counterfeit fraud losses.
 Escalating U.S. Card Fraud
        According to The Nilson Report, the United States represents about one half of global Financial Payment Card and Private Label Credit Card fraudulent transactions (more than $5.3 billion annually), despite accounting for only about one quarter of total card transactions. While a number of factors contribute to this imbalance, we believe counterfeit card fraud has migrated to countries that have lower EMV adoption rates such as the United States, which is the last of the G-20 nations to begin to transition Financial Payment Cards from magnetic stripe technology to the more secure EMV standard.
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 Enhanced Security
        EMV cards feature an embedded microprocessor that, when paired with an EMV payment terminal, dynamically authenticates cardholder debit and credit card transactions using a cryptographic process that results in a significantly more secure payment transaction environment. Card fraud and, in particular, Card-Present Fraud, has declined significantly in nations that have adopted the EMV standard. For example, in the U.K., counterfeit card fraud has been reported to have dropped 75% from its peak in 2008 to 2013, according to Financial Fraud Action UK, with other countries experiencing similar levels of fraud reduction following EMV adoption.
 High-Profile Data Breaches
        In the last few years, a number of large U.S. merchants, such as Target and Home Depot, and banks have reported major customer or client data breaches and other fraudulent activities, which have heightened awareness of data security and increased demand for higher security solutions in payments systems, including accelerating the adoption of EMV. As a result, combating such data breaches and card fraud has become a board of director level issue among many of the nation's largest merchants, card issuers and Payment Card Brands and has garnered significant attention from the U.S. Government. For example, Congress held hearings regarding financial data privacy in response to the Target and similar breaches and in January 2014, U.S. Senator Al Franken (Chairman of the Senate Judiciary Subcommittee on Privacy, Technology and the Law) requested that major issuers of Financial Payment Cards (Bank of America, Capital One, Citigroup, JPMorgan Chase and Wells Fargo), as well as the Payment Card Brands submit in writing their EMV conversion plans and timing. President Obama signed an executive order in October 2014 directing that all Financial Payment Cards issued by or on the behalf of the U.S. Government be EMV-enabled.
 Desire for Global Interoperability of the Acceptance Network
        EMV is increasingly becoming the global standard for Financial Payment Cards outside the United States. The coordinated efforts of the Payment Card Brands to implement the liability shift in the United States reflect, in part, their desire to standardize payment systems technology globally to ensure cardholders' cards will be accepted by merchants anywhere on their global network and to provide a predictable and consistent experience for the cardholder. EMVCo, an industry group overseen by the Payment Card Brands, estimates that in Europe Zone I (which represents the Single Euro Payments Area, or "SEPA") 96.6% of the card present transactions processed in the twelve months ended December 31, 2014 were completed on both EMV-enabled cards and terminals. Over the same period, EMVCo estimates that 85.4% of transactions processed in the Americas (excluding the United States) were EMV enabled and only 0.12% of U.S. transactions were EMV-enabled.
        EMV cards issued in the United States to date primarily have been Contact EMV cards. Globally, Dual-Interface EMV cards, which also enable contactless payment, are gaining popularity among card issuers, primarily because of the speed and convenience they offer to cardholders. For example, in Canada, we believe that the majority of all credit cards currently being issued are Dual-Interface EMV cards. Dual-Interface EMV cards are more complex to produce than Contact EMV cards and typically sell at a significantly higher price point. We believe that as the U.S. market migrates to the EMV standard, Dual-Interface EMV cards issued in the United States will gain share relative to Contact EMV cards, further expanding the dollar value of our market opportunity.
 Mobile Payments
        A trend in the financial technology industry over the past decade has been the emergence of mobile payment solutions enabled on smart phones. While mobile payment products have been around for some time, they gained more visibility in recent years beginning with Starbucks' launch of its
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popular captive mobile payments application in 2011. In the same year Google introduced Google Wallet, usable on NFC-enabled terminals accepting MasterCard and Visa, and these mobile payment products gained further visibility in 2013 with the release of Softcard, developed as a joint venture between AT&T, T-Mobile and Verizon. Today, a broad array of organizations has developed varying and competing mobile payment technologies, leading to a fragmented landscape. Apple Pay, introduced by Apple into the United States in October of 2014, utilizes an iPhone's NFC technology to wirelessly transmit a user's secure transaction information to a POS terminal. Merchant Customer Exchange, a consortium of U.S. merchants such as CVS and Walmart, developed CurrentC, a mobile offering which utilizes a Quick Response code on the consumer's mobile phone that can be scanned by a merchant's bar code reader. LoopPay, which was acquired by Samsung in February of 2015 and subsequently rebranded as Samsung Pay, employs Magnetic Secure Transmission technology, which generates changing magnetic fields in a user's mobile phone that can be read by a magnetic stripe reader and, to date, is not EMV compliant.
        History has shown that change in payment technology often takes decades to occur. The concept of a general purpose credit card was first introduced by Diner's Club in 1950. The adoption of these cards has occurred in a steady manner over time; according to the Federal Reserve, bank-issued general purpose credit cards increased from 16% adoption in 1970 to 68% in 1998. According to The Nilson Report, cards represented 38.3% of total transactions in 2005 and continued to rise to 56.5% of total transactions in 2013. Additionally, the adoption of technology within this card-based ecosystem has been slow. Magnetic stripe technology was first introduced in the 1970's, yet most cards in circulation today still have embossed numbering, for the occasional occurrences where a merchant still utilizes the original card acceptance method, taking a mechanical imprint of the card. Conversion to EMV remains in its infancy in the United States, despite the fact that the technology has been available for over 20 years and is already broadly utilized in other developed regions across the world.
        We believe that mobile payments will serve a complementary role in the payments ecosystem, coexisting with Financial Payment Cards. We believe mobile payments will be a particularly relevant payment option for making low-price, high-frequency transactions, such as at quick-service restaurants or vending machines. However, we believe card based payment will still be the primary form of payment utilized given its convenience, ubiquitous acceptance, reliability and security. In order for issuers to discontinue issuing cards, we believe they would need assurance that consumers could utilize mobile payment solutions in a ubiquitous fashion (i.e., able to make mobile payments at all merchants at all times) and consumers must be willing to shift exclusively to mobile payments. Given the absence of uniform technologies and standards as well as user concerns with respect to the ease, benefit, security and technology of exclusive mobile payments, we do not believe such ubiquity is obtainable in the foreseeable future. Even upon broader adoption, simple technical issues, such as a mobile phone's battery limitations, will require issuers to provide cards to consumers as another option, much like the embossed lettering on cards provided today.
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 BUSINESS
 Overview
        We are a leading provider of comprehensive Financial Payment Card solutions in North America. We define Financial Payment Cards as credit, debit and Prepaid Debit Cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express and Discover) and Interac (in Canada). In 2014, we produced over 360 million Financial Payment Cards, provided integrated card services to over 3,200 card-issuing banks and Prepaid Debit Card issuers and personalized more than 130 million Financial Payment Cards. We have established a leading position in the Financial Payment Card market through more than 20 years of experience and are focused primarily on this growing subsector of the financial technology market. Our customers are primarily leading national and regional banks, independent community banks, credit unions, managers of prepaid debit programs, Group Service Providers and card processors. We serve a diverse set of over 4,000 direct and indirect customers, including many of the largest North American issuers of debit and credit cards such as JPMorgan Chase, Bank of America, American Express and Wells Fargo, the largest global managers of Prepaid Debit Card programs, including InComm, Green Dot, Blackhawk Network and American Express, as well as thousands of independent community banks, credit unions, Group Service Providers and card processors.
        We serve our customers through a network of nine production and card services facilities, including seven high-security facilities in North America that are each certified by one or more of the Payment Card Brands and Interac (in Canada) and, where required by our customers, the PCI Security Standards Council. We have the largest such network of high-security production facilities in North America, allowing us to optimize our solutions offerings to serve the needs of our diverse and long-term customer base.
        We estimate that we produce approximately 35% of all Financial Payment Cards in the United States, which we believe gives us the #1 market position by unit volume. We believe we have:
•
the #1 position in the U.S. prepaid debit market (which represents the fastest growing subset of the Financial Payment Card market in the United States), serving the top five U.S. Prepaid Debit Card program managers; 

•
a leading position in the U.S. large issuer market, serving the majority of the top 20 U.S. debit and credit card issuers; and 

•
the #1 position in the highly attractive U.S. small issuer market, which includes independent community banks and credit unions, driven by our strong relationships, capabilities and technologies.
        We have grown our business significantly over the past decade, both organically and through acquisitions. Over that time period, we have completed six acquisitions, significantly increasing our geographic and market coverage, solutions offerings and capacity. On March 9, 2010, we purchased certain assets of Premier Card Solutions, a leading provider of Financial Payment Cards, data personalization services and tamper-evident security packaging for Prepaid Debit Cards that utilize the payment networks of the Payment Card Brands. The Premier Card Solutions transaction significantly enhanced our offering to Prepaid Debit Card customers. On September 2, 2014, we acquired EFT Source, a recognized leader in the financial technology industry that was named to American Banker and BAI's FinTech Forward 100 in both 2013 and 2014. The acquisition of EFT Source significantly enhanced our card services offering, added Card@Once® to our instant issuance card offering and expanded our end-to-end Financial Payment Card solutions.
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        In addition to our seven North American facilities, we have two facilities in the United Kingdom that produce retail cards, such as gift and loyalty cards that are not issued on the networks of the Payment Card Brands, and personalization services.
        For the LTM Period, we generated net sales of $338.1 million, net income from continuing operations of $30.5 million and Adjusted EBITDA of $81.5 million, representing net income from continuing operations and Adjusted EBITDA margins of 9.0% and 24.1%, respectively. For the year ended December 31, 2014, we generated $261.0 million of net sales, which represented an increase of 32.9% as compared to the prior year, $16.0 million of net income from continuing operations, which represented an increase of 42.6% as compared to the prior year, and $54.2 million of Adjusted EBITDA, which represented an increase of 41.3% as compared to the prior year and net income from continuing operations and Adjusted EBITDA margins of 6.1% and 20.8%, respectively. Our 2014 and LTM results include four and ten months of results from EFT Source, respectively. Adjusted EBITDA and Adjusted EBITDA margin are financial measures not presented in accordance with generally accepted accounting principles ("GAAP"). For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income from continuing operations, the most comparable GAAP measure, see "Summary Consolidated Historical Financial Data."
 Our Competitive Strengths
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Leading Market Position with Long-Term Customer Relationships.   We estimate that we produce approximately 35% of all Financial Payment Cards in the United States, which we believe gives us the #1 market position by unit volume. We are a trusted partner across the markets we serve, and believe we have the #1 position in the U.S. Prepaid Debit Card market (which represents the fastest growing subset of the Financial Payment Card market in the United States), serving the top five U.S. Prepaid Debit Card program managers, a leading position in the U.S. large issuer market, serving the majority of the top 20 U.S. debit and credit card issuers, and the #1 position in the highly attractive U.S. small issuer market, which includes independent community banks and credit unions, driven by our strong relationships, capabilities and technologies. As a market leader, CPI has long-standing trust-based relationships with our key customers and often deep process and technology integration, particularly in the case of customers who utilize our card services and instant issuance systems and services. The solutions that we provide require strict data integrity, and generally card issuers are reluctant to switch away from trusted providers due to the requirements for high-security and access to highly-sensitive cardholder information. As a result, our customers are selective about the partners with which they work and typically seek out partners who have a well-established reputation for trust and quality and are able to meet their service requirements.
We serve a diverse set of over 4,000 direct and indirect customers, including many of the largest North American issuers of debit and credit cards such as JPMorgan Chase, Bank of America, American Express and Wells Fargo, as well as the largest global managers of Prepaid Debit Card programs, including InComm, Green Dot, Blackhawk Network and American Express. We have long-standing relationships with our customers, many of whom we have served for decades and provide a differentiated level of service, as evidenced by our strong net promoter score, a customer satisfaction metric developed through customer satisfaction surveys conducted by an independent market research firm. We also maintain important relationships with the Payment Card Brands to ensure our facilities and processes consistently meet their standards.
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Well Positioned for EMV Conversion in the United States.   As a leading provider of integrated credit, debit and Prepaid Debit Card solutions in North America, we are well-positioned to capitalize on the U.S. market conversion to EMV. We serve our customers through a network of nine production and card services facilities, including seven high-security facilities in North America that are each certified by one or more of the Payment Card Brands (Visa, MasterCard,
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American Express and Discover), Interac (in Canada) and, where required by our customers, the PCI Security Standards Council. We have made significant investments in our physical infrastructure and equipment platform to prepare for the EMV conversion including opening a dedicated EMV technology center in Colorado for EMV production and personalization and significant information technology, human capital and equipment upgrades across our network of facilities.
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Comprehensive End-to-End Card Solutions Drive Deep Customer Integration.   The foundation of our strong market position is our comprehensive end-to-end Financial Payment Card solutions. Our solutions provide a full suite of products and card services required to produce, personalize and fulfill Financial Payment Cards, while maintaining the most stringent security requirements of the Payment Card Brands. We are integral to many of our customers' card programs, pairing card production with an end-to-end offering of card data personalization and card services that are deeply integrated within our customers operations. We provide card data personalization services for more than 3,200 financial institutions and managers of Prepaid Debit Card programs that require extensive technology integration, such as secure data links to transfer highly sensitive cardholder information. Similarly, our installed base of more than 3,400 instant issuance systems at bank and credit union branches across the United States require comparable levels of customer integration, as our Card@Once® instant issuance system utilizes only our secure technology to instantly personalize cards. Certain customers have also integrated our proprietary software into their customer-facing websites to offer card design and customization to their cardholders. We believe that our comprehensive solution allows our customers to choose a single trusted partner to address their card program needs in a cost-effective manner instead of managing multiple suppliers across a complex value chain. We believe our customers choose and retain us for these critical functions, which typically require integrations that are costly and difficult to unwind, due to our reputation as a trusted partner, our high levels of service and proven execution. 

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Certified Network of North American High-Security Facilities.   Our seven high-security North American facilities are each certified by one or more of the Payment Card Brands and Interac (in Canada), forming the largest certified production facility network in North America. The Payment Card Brand certifications allow us to produce cards bearing these brands and provide relevant card services for our issuer customers. Additionally, many of our facilities are also certified by the PCI Security Standards Council and individually by customers. These certification processes are long, complex and costly, and our facilities must comply with the strictest standards of security in order to obtain and retain this designation, which are regularly verified by both the Payment Card Brands and our customers. 

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Industry Experience and Proprietary and Patented Solutions.   Over the course of our long operating history, we have developed extensive technological, engineering and operational expertise that we believe has made us a leader in our industry for product and process know-how. We believe that our technological and operational know-how, combined with our specific focus on the Financial Payment Card market, gives us a competitive advantage and fosters a culture of innovation. We have developed and acquired significant intellectual property over our operating history and hold 18 U.S. patents, as well as 27 pending U.S. and foreign patent applications, on our Financial Payment Card solutions, including patents on our tamper-evident security packaging used by our customers that have Prepaid Debit Card and instant issuance offerings. We also hold exclusive production rights to certain products the Company has developed as well as patented software solutions such as our MYCA™ offering, which is integrated into the websites of over 300 card issuing banks and other customers. 

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Strong Management Team.   We have built a strong management team led by Steven Montross, our CEO and President. Mr. Montross has led CPI for six years and under his leadership we
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have completed three strategic acquisitions and our EBITDA has grown more than three-fold. Our management team, which collectively has more than 140 years of experience in our industry, has established a track record of recognizing and capitalizing on growth opportunities across the markets we serve. Management identified and drove our expansion into Prepaid Debit Card services during the early market adoption period of this card product which has grown at an estimated 11.8% CAGR since 2009. Similarly, our management team devised and executed on a strategy to develop our card services offering, which was accelerated by our acquisition of EFT Source. Today, we have a card services customer base of more than 3,200 financial institutions and an installed base of more than 3,400 Card@Once® instant issuance systems in U.S. bank branches.
 Our Growth Strategy
        The key components of our strategy include:
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Capitalize on U.S. EMV Conversion.   The conversion to the EMV standard in the United States is expected to increase the size (measured in dollars) of the Financial Payment Card market (excluding services) from $180 million in 2013 to $1.2 billion by 2019, driven primarily by the increasing levels of card fraud in the United States, the Payment Card Brands' coordinated EMV conversion plan, including the liability shift scheduled for October 1, 2015, and the need for a single global interoperable standard of card acceptance. The conversion of Financial Payment Cards in the United States from magnetic stripe technology to the EMV standard began in earnest in the second half of 2014 and is expected to continue over the next several years, with full adoption in the credit and bank debit card markets expected to be largely complete by 2017 and increasing levels of adoption of Prepaid Debit Cards and Private Label Credit Cards beyond 2017. We believe the conversion to EMV, and subsequently the expected further adoption of the more complex and higher priced Dual-Interface EMV cards, will increase the size (measured in dollars) of our estimated addressable card market by four times over the next decade. In anticipation of the EMV conversion, we invested significantly in our network of facilities (the most extensive in North America), technological infrastructure and human capital resources. We believe our comprehensive solutions offering and proven track record ideally positions us to be our customers' partner of choice to successfully complete the EMV conversion. 

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Capitalize on Growth in Prepaid Debit Market.   According to First Annapolis, the Prepaid Debit Card market has grown at an 11.8% CAGR from 2009 to 2014 and is expected to continue to grow at an 8.0% CAGR from 2014 to 2019 as consumers increase adoption and additional issuers introduce new products. We believe we are well positioned to capitalize on this continued growth due to our market leading position, supported by our industry expertise and patents and comprehensive end-to-end card solutions. We have driven our leading market position through trust-based relationships with the largest global managers of Prepaid Debit Card programs, including InComm, Green Dot, Blackhawk Network and American Express. Additionally, we have further developed proprietary production techniques which provide us a cost advantage and additional flexibility to meet customer demands. 

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Capitalize on Growth in Instant Issuance Systems and Services Market.   We acquired our instant card issuance system, Card@Once®, through the acquisition of EFT Source in 2014 and have continued to drive significant growth in sales of our instant issuance systems and related services revenue. We plan to continue to grow our installed base of instant issuance systems in bank branches across the U.S., which was more than 3,400 as of June 30, 2015, to increase our opportunity for continued recurring revenue streams from card personalization which is delivered through our software as a service offering. We believe the U.S. market is in the early
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stages of instant issuance adoption as, according to First Annapolis, only approximately 20% of U.S. bank branches are equipped with instant issuance solutions.
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Cross-Sell Expanded Services Offering Across Customer Base.   We believe our leading market position in card production in North America, combined with recent enhancements to our card services platform, including our acquisition of EFT Source, represents a significant opportunity to cross-sell services across our customer base by offering a comprehensive end-to-end card solution. According to First Annapolis, the dollar value of the U.S. market for outsourced personalization services for Financial Payment Cards is expected to grow from $417 million in 2014 to $604 million in 2019, representing a 7.7% CAGR, and we believe that focused selling efforts of our card services to our existing customers and as part of a complete end-to-end solution, and continued investment in proprietary card services, represents a substantial revenue opportunity and means to further deepen our existing customer relationships. Through our strong track record in card services, including providing card data personalization services for more than 3,200 financial institutions and managers of Prepaid Debit Card programs and personalizing more than 130 million Financial Payment Cards in 2014, we believe we have established a reputation as a trusted partner and advisor to our customers with the ability to securely manage significant amounts of sensitive and confidential customer data throughout our network. Due to the high costs of failure, such as a data breach, we expect that customers will continue to choose trusted vendors such as CPI that can provide high levels of security, service and certainty to manage these critical functions. 

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Continued Execution on Strategic Acquisitions.   We have a strong track record of acquiring and integrating complementary businesses, completing six acquisitions since 2008, all of which have enhanced our market share, capabilities and capacity. We expect to continue to opportunistically execute strategic acquisitions that give us access to new markets and capabilities while providing a reasonable value proposition to our stockholders.
 Our History of Acquisitions, Divestitures and Investments
        Over the last decade, we have completed six acquisitions and heavily invested in our platform to drive organic growth. Our first major phase of growth occurred throughout 2008, during which time we made three acquisitions to enter new markets and gain access to new client bases. In January 2008, we made our first acquisition, purchasing Wm. A. Didier & Sons, Inc., a privately owned Financial Payment Card producer based in Fort Wayne, Indiana, which was a direct competitor within our market. In August 2008, we entered the Western European market with our acquisition of PCC, a card producer and card services provider primarily serving the European retail gift card market with two facilities located in the U.K. Finally in October 2008, we entered the Canadian market by purchasing Metaca, a Toronto-based provider of EMV and Prepaid Debit Cards and card services.
        Our next phase of growth focused on expanding capabilities within these markets. In March 2010, we purchased certain assets of Premier Card Solutions, which strengthened our position in the prepaid debit market, added tamper-evident security packaging solutions to our portfolio of services and added capacity and capabilities in Financial Payment Card production and card services. In May 2012, we acquired certain assets of ID Data, Limited, an operator of a U.K.-based Financial Payment Card production and card services business, in order to bolster our capabilities in Europe. Finally, in September 2014 we expanded our card services offerings with the acquisition of EFT Source, a leading provider of card services for Financial Payment Cards. In addition to its strong card services platform, EFT's Card@Once® instant issuance offering earned it multiple leadership recognitions within the financial technology industry. In April 2015, we completed the consolidation of our Colorado Springs facility, obtained through the EFT Source acquisition, with our Midway facility in order to realize on planned synergies from this acquisition.
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        In addition to these acquisitions, we have made significant investments in our physical infrastructure and equipment platform over the past decade. To prepare for the EMV conversion, we opened a dedicated EMV technology center in Colorado for EMV production and personalization and also made significant information technology, human capital and equipment upgrades across our network of facilities. In Minnesota, we added significant capacity and also opened a secure fulfillment facility.
        In January 2015, we divested our Nevada facility, a unit focused on the production of retail gift cards, to further align our strategy and focus on the Financial Payment Card market in North America.
 Our Products and Services
        Our leading market position is supported by our comprehensive end-to-end Financial Payment Card solutions offering which meets the stringent security requirements of the Payment Card Brands and our customers. This comprehensive offering of end-to-end solutions drives deep customer integration and long-term trusted relationships with our customers, many of which we have served for decades.
 EMV Financial Payment Cards (Contact and Dual-Interface) (37% of LTM net sales)
        We produce Contact EMV cards, which feature a microprocessor that interfaces with an EMV payment terminal over a contact plate on the surface of the card when inserted into an EMV-enabled payment terminal. We also produce Dual-Interface EMV cards, which feature both the contact EMV technology and a RFID antenna that utilizes near field communications ("NFC") technology to allow transactions to also be processed on a contactless basis when the card is brought within the requisite proximity to a NFC enabled payment terminal.
 Non-EMV Financial Payment Cards and Retail Gift Cards (22% of LTM net sales)
        We produce non-EMV cards that utilize magnetic stripes, contactless cards which utilize NFC technology and cards that include both magnetic stripes and NFC technology. In addition, we produce retail gift cards (which are not issued on the network of the Payment Card Brands) primarily in the U.K. and Canada.
 Card Data Personalization (18% of LTM net sales)
        We provide data preparation and card data personalization solutions for debit, credit and Prepaid Debit Cards in EMV and non-EMV card formats. Our personalization services are technology-driven and provide a wide range of card customization options, using advanced processes to personalize (encode, program and emboss with data such as cardholder name and account number) and fulfill cards to individual cardholders. In addition, we provide EMV data script development services for our customers and in certain cases generate PIN numbers and mailers on their behalf. We offer patented card design software, known as MYCA™, which provides our customers and their cardholders the ability to design cards on the internet and customize cards with individualized digital images. We also provide consultation and card design services to further assist customers in card customization. We also offer integrated business continuity services to card issuers that provide their own card issuance and personalization services, providing an alternate site to personalize and fulfill cards in the event of a business disruption at their captive sites. Finally, we have the capabilities to provide Trusted Service Manager services, leveraging our existing data connectivity with processors and other customers to offer a trusted, high-security solution for facilitating mobile payments.
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 Tamper-Evident Security Packaging Solutions (19% of LTM net sales)
        We offer specialized and innovative tamper-evident security packaging products and services to customers with a Prepaid Debit Card offering that reduce fraud for Prepaid Debit Cards sold through the retail channel. The majority of the tamper-evident security packaging we produce is protected by our patents. In certain cases, we also manage the fulfillment of fully-completed Prepaid Debit Card packages to retail locations on behalf of our customers utilizing this solution.
 Instant Card Issuance Systems and Services (4% of LTM net sales)
        We offer Card@Once®, our proprietary and patented instant card issuance system and services, which provide our card issuing bank customers the ability to issue a completely personalized permanent debit card within the bank branch to individual cardholders upon demand. Our instant issuance system is enabled by cloud-based software that securely transfers data from our servers to the card branch to encode and print the card on a small specialized desktop printer in a process which is certified by MasterCard and Visa. Our instant issuance system generates both system sales and recurring revenue from software as a service, card personalization and sales of cards and consumables. As of June 30, 2015, we had over 3,400 instant issuance systems installed in bank and credit union branches across the United States. In addition, we provide instant issuance of debit cards to large financial institutions whereby we provide fully-personalized temporary debit cards which are issued to card holders upon opening a new account, and we manage the fulfillment and replenishment of these fully personalized cards directly to thousands of individual bank branches.
 Our Value Proposition
        We provide a strong value proposition to our customers through our comprehensive end-to-end Financial Payment Card solutions that we tailor to meet the specific requirements of each of our customers. The three key components of our value proposition are our:
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large and integrated North American production network; 

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focus on providing a superior customer experience; and 

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proprietary products and suite of value-added services
        The first element of our value proposition is that our card production and services facilities together serve as an integrated network, which is the largest in our industry in North America. All of our North American facilities are certified by one or more of the Payment Card Brands, Interac (in Canada) and, where required by our customers, the PCI Security Standards Council, utilizing integrated and standardized practices, processes and technologies. We believe our highly integrated network of seven facilities allows us to provide a differentiated value proposition to the North American Financial Payment Card market for several reasons. First, our network allows us to provide our customers with a complete solution across a wide variety of card products and services. This allows our customers to choose a single trusted partner to address their card program needs in a cost-effective manner instead of managing multiple suppliers across a complex value chain. Second, our large card production network provides economies of scale that allows us to provide all of our customers with a competitive price point. Third, our network provides us with significant flexibility to move card production and services orders between facilities to provide high levels of service and precise execution. This is valuable to our customers because it allows us to accelerate delivery times and provide a consistent supply. Our customers have told us, directly and through third-party market research that we conduct, that on-time delivery is very important to them and we use our network to maximize our performance in this regard.
        The second element of our value proposition is the high-importance that we place on the customer experience. We are focused across our Company on providing our customers with the highest-level of service in the industry. We have long-standing relationships with our customers, many of whom we have
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served for decades, and provide a differentiated level of service, as evidenced by our strong net promoter score of greater than 60, a customer satisfaction metric developed through customer satisfaction surveys conducted by an independent market research firm. We measure our net promoter score regularly to assess our customers' perception of our service levels and hold ourselves accountable by tying a portion of our incentive compensation to continuous improvement of our service levels.
        The third element of our value proposition is our proprietary products and value-added services. We have developed several proprietary products and services that provide our customers with individually tailored solutions and have fostered a culture of innovation to continue to improve upon our existing, and develop new, solutions. We have developed a patented suite of tamper-evident security packaging options, which we believe leads the industry, and enables our prepaid debit customers to differentiate themselves with a high-level of security performance. The success of this product is evidenced by the fact that our tamper-evident security packaging is used by all of the top five Prepaid Debit Card program managers. Similarly, we have developed our patented instant card issuance platform, Card@Once®, which provides our customers an easy-to-use, software-as-a-service enabled instant issuance solution that allows them to provide their cardholders permanent debit cards without a significant investment of capital or internal resources. The success of this solution is evidenced by the more than 3,400 instant issuance systems installed in bank branches across the United States. Finally, our patented card-design software, MYCA™, is integrated with more than 300 of our customers and allows their cardholders to design customized cards over the internet, including the ability to select personal digital images, that enable our customers to differentiate themselves in their market and become "top of wallet" with their cardholders.
 Suppliers
        The most important component of our products is the EMV microchip, which represented approximately 23.4% of our total cost of goods sold for the year ended December 31, 2014, and which we expect to become even more significant as EMV cards comprise an increasing percentage of the cards we ship. While we have developed constructive relationships with our suppliers and, in general, receive a high level of cooperation and support from them, the objective of our procurement strategy is not to depend on any single supplier. We obtain our components from multiple suppliers located in South Korea, France, the United States and Singapore, primarily on a purchase order basis. Our main suppliers of EMV microchips are five leading semiconductor manufacturers: KONA I Co. Ltd, Smart Packaging Solutions, NXP Semiconductors USA, Inc., Inside Secure and Multos International. Approximately 96.1% of our total purchased EMV microchips for the year ended December 31, 2014 came from these five main suppliers. The other key components for our products are substrates (such as PVC), antennas and inlays, which we also source from multiple suppliers. We continuously monitor supply chain risks and evaluate alternative suppliers based on numerous attributes including quality, performance, service, scalability, features, innovation and price.
 Customers
        In the United States, we categorize our customers as follows: large issuers, prepaid debit issuers and program managers and small issuers. Our diverse customer base of over 4,000 direct and indirect customers includes many of the largest issuers of credit and debit cards in the United States and the five largest global managers of Prepaid Debit Card programs. Our top five customers represented approximately 33.9% of our pro forma net sales for the year ended December 31, 2014. Our top five customers in 2014, who we have been serving for an average of greater than 10 years, were First Data Corporation, InComm, Wells Fargo, American Express and Green Dot.
        We typically enter into long-term master purchase or service agreements that govern the general terms and conditions of our commercial relationships. We then enter into short-term statements of work to define the prices and the quantities of products to be delivered and services rendered. Usually,
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our contractual arrangements include neither exclusivity clauses nor commitments from our customers to order any given quantities of products on a medium or long-term basis.
 Production and Services
        Our production and services strategy has several key facets. We have a large network of integrated high-security facilities that we leverage to balance customer orders, expand the array of products and services available to our customers, provide consistent supply and execute short lead times. Our facilities and operating processes are designed to provide a differentiated level of service to each our key customer sets. For example, we have the processes and capabilities to:
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execute high-volume, low-cost production runs that allow us to meet the competitive price points of large orders; 

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execute lower-volume, highly personalized customized runs that allow us to meet the high-service and quick-turn needs of smaller orders; and 

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meet the specific needs of our Prepaid Debit Card customers.
        We operate approximately 480,000 square feet of facilities in the United States, Canada and the United Kingdom, where we focus on Financial Payment Card production and personalization services. See "Facilities" for information on the operations of each facility.
        We rely on secure ground freight to deliver products to our banking customers. Due to the high-security nature of the products we provide to our banking customers, product must be shipped to these customers via a secure method, such as armored vehicle. With respect to customers for whom we fulfill individual and personalized debit and credit cards, we utilize the U.S., Canadian and U.K. postal services to deliver these cards directly to individual cardholders. For other customers, we predominately deliver our products via regular ground and air freight.
 Sales and Marketing
        We market our products and services to national and regional banks, independent community banks, credit unions, managers of prepaid programs, Group Service Providers and card processors. We have approximately 30 field-based sales representatives that gives us a wide geographic reach across North America, Western Europe and Canada. Our sales representatives offer a complete end-to-end solution to our customers that incorporates the full spectrum of our products and services from concept to delivery. Our sales and marketing strategy focuses on strengthening our relationships with existing customers, providing a differentiated offer that includes cross-selling expanded services. We leverage the strength of our full-service offerings to attract new customers. Our marketing efforts focus on the needs of our specific types of customers. By tailoring our marketing strategy to different customer groups, we are able to provide relevant targeted solutions to meet their individual needs. We utilize an array of different marketing communications focused on thought leadership that include industry publications, editorial white papers, conferences and trade shows, print and digital advertisements and educational webinars designed to introduce our existing customers and new customers to innovations in the payments market. Through these efforts, we drive customer retention and satisfaction, and have been able to attract new customers.
 Competition
        The market for products and services in the payment card industry is highly competitive. Some of our competitors possess substantially greater financial, sales and marketing resources than we do and have substantial flexibility in competing with us, including through the use of integrated product offerings and competitive pricing. Competitive factors for our business include product quality, security,
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service reliability, product line comprehensiveness and integration, timely introduction of new products and features and price. We believe that we compete favorably in each of these categories.
        Our products and services compete with other card manufacturers and card solutions providers. We believe our primary competitors are Oberthur Technologies S.A., Giesecke & Devrient GmbH, Valid S.A. and Gemalto NV. Certain existing and potential financial institution customers also have the ability to personalize Financial Payment Cards in-house. In addition, we compete with customers that offer transaction processing products and services to financial institutions.
 Intellectual Property
        We own and control various intellectual property rights, such as patents, trade secrets, confidential information, trademarks, service marks, trade names, copyrights and applications. We are also party to certain patent cross-license arrangements with industry participants and may, from time to time, enter into similar commercial agreements should we consider it necessary or beneficial for our business.
        We rely on a combination of statutory (copyright, trademark and trade secret) and contractual safeguards for intellectual property protection throughout the world. As of August 25, 2015, we had 22 registered U.S. and foreign trademarks, 18 existing U.S. patents, as well as 27 pending U.S. and foreign patent applications. Our patents have an average remaining maturity of 14.5 years, and our trademarks will be due for renewal for additional ten or fifteen-year periods on an ongoing basis over the next 11.5 years.
 Environmental Protection
        Our manufacturing operations are subject to environmental protection regulations, including those governing the emissions of pollutants into the air, wastewater discharges, the use and handling of hazardous substances, waste disposal, the investigation and remediation of soil and groundwater contamination. We are also required to obtain environmental permits from governmental authorities for certain of our operations. We believe that we are in material compliance with environmental requirements and that environmental matters will not have a material adverse effect on our business, although resolution of any item in any particular year or quarter could be material to the results of operations or liquidity for that period.
 Regulation
 Privacy and Data Security
        In the course of our business, we receive personally identifiable information of cardholders from our customers, either from a financial institution or through a card processor on behalf of a financial institution. Such information includes names, addresses, card account numbers and expiration dates. In some cases, we receive a cardholder's social security number and/or PIN number. As a service provider to financial institutions in the United States, we comply with the privacy provisions of the GLBA and its implementing regulations and, as applicable, with various other federal, state and foreign privacy statutes and regulations, and the PCI Security Standards Council's Data Security Standards, each of which is subject to change at any time. We may only use and disclose the personal information we receive on behalf of our customers for the purposes for which it was provided to us and in a manner that is consistent with each financial institution's and processor's own data privacy and security obligations.
        In order to comply with our obligations under the GLBA, applicable state laws and our contractual agreements with our customers, we are required to safeguard and protect the privacy of personally identifiable information we receive. As part of their compliance with these requirements, each of our U.S. customers is expected to have a program in place for responding to unauthorized access to, or use
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of, consumer information that could result in substantial harm or inconvenience to consumers. A majority of U.S. states have enacted security breach legislation, requiring varying levels of consumer notification in the event of a security breach, which could result in significant costs to us and significant damage to our reputation.
        The interpretation of pending and existing laws and regulations is evolving and, therefore, these laws and regulations may be applied inconsistently. It is possible that our current data protection policies and practices may be deemed inconsistent with new legal requirements or interpretations thereof, and breaches in the security of our systems and technology could result in a violation of these laws and regulations.
        We are also subject to requirements from the Payment Card Brands, which require us to meet certain security standards in order to achieve certification that allows us to produce Financial Payment Cards issued on their networks. These standards include extensive checklists with respect to the physical characteristics of our facilities, as well as our electronic treatment and storage of cardholder data. We believe that we have developed significant expertise in acquiring and maintaining these certifications, and have invested significant capital to obtain and retain these designations, which are regularly verified by both the Payment Card Brands and our customers. We believe the long, complex and costly certification process serves as a significant barrier to new entrants to our market.
 Financial Services
        We are generally not directly subject to federal or state regulations specifically applicable to financial institutions such as banks, thrifts and credit unions. However, as a provider of products and services to these financial institutions, our operations may be examined by various state and federal regulatory authorities and representatives of the Federal Financial Institutions Examination Council, which is a formal inter-agency body empowered to prescribe uniform principles, standards and report forms for the federal examination of financial institutions and to make recommendations to promote uniformity in the supervision of financial institutions. Also, state and federal regulations require our financial institution clients to include certain provisions in their contracts with service providers like us and to conduct ongoing monitoring and risk management for third party relationships. In addition, independent auditors annually review many of our operations to provide internal control evaluations for our clients' auditors.
        In conducting certain of our card services, we are directly subject to various federal and state laws and regulations including those relating to the movement of money. In order to comply with our obligations under applicable laws, we are required, among other things, to comply with licensing and reporting requirements, to implement operating policies and procedures to comply with anti-money laundering laws, to protect the privacy and security of our clients' information and to undergo periodic audits and examinations.
        In 2010, the Dodd-Frank Act was enacted. The Dodd-Frank Act introduced substantial reforms to the supervision and operation of the financial services industry, including introducing changes that: affect the oversight and supervision of financial institutions; provide for a new resolution procedure for large financial companies; introduce more stringent regulatory capital requirements; implement changes to corporate governance and executive compensation practices; and require significant rule-making. The Dodd-Frank Act has generated numerous new regulations that have imposed compliance costs and, in some cases, limited revenue sources for us and our clients. The Dodd-Frank Act established the Consumer Financial Protection Bureau ("CFPB") which is empowered to conduct rule-making and supervision related to, and enforcement of, federal consumer financial protection laws. The CFPB has issued guidance that applies to "supervised service providers" which the CFPB has defined to include service providers, like us, to CFPB supervised banks and nonbanks. The CFPB has in the past and may in the future issue regulations that may require us to make compliance investments and/or limit our
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fees or other revenue sources. We do not currently anticipate a materially adverse impact on our business, results of operations or financial condition due to these regulations, but it is difficult to predict with certainty the extent to which the Dodd-Frank Act, the CFPB or the resulting regulations will impact our business or the businesses of our current and potential clients over the long term.
 Employees
        As of June 30, 2015 we had approximately 1,255 employees, all of whom are full-time employees. We have never experienced any work stoppages or strikes as a result of labor disputes. We consider relations with our employees to be good.
 Facilities
        We maintain a network of nine facilities. Information regarding each of our facilities is set forth below.

								
Location (1) 	 	Operations	 	Square Footage	 	Owned/Leased	
Littleton, Colorado (Centennial)	 	Financial Payment Card production and corporate headquarters	 	 	65,000	 	Leased	
Littleton, Colorado (Midway)	 	Financial Payment Card production and card personalization services	 	 	
50,000	 	Leased	
Roseville, Minnesota (2 facilities)	 	Financial Payment Card production, card personalization services and secure fulfillment center	 	 	
164,000	 	Leased	
Fort Wayne, Indiana	 	Financial Payment Card production	 	 	
50,000	 	Leased	
Nashville, Tennessee	 	Financial Payment Card personalization services and fulfillment	 	 	
49,000	 	Leased	
Toronto, Ontario	 	Financial Payment Card and retail gift card production and card personalization services and fulfillment	 	 	
67,000	 	Leased	
Colchester, United Kingdom	 	Retail gift card production	 	 	
37,000	 	Owned and Leased	
Liverpool, United Kingdom	 	Retail gift card personalization services	 	 	
30,000	 	Owned and Leased	

(1)
We also lease a facility in Petersfield, United Kingdom. In August 2015, we completed the shutdown and closure of our operations at our Petersfield facility.
 Legal Proceedings
        We are subject to routine legal proceedings in the ordinary course of business. We believe that the ultimate resolution of these matters will not have a material adverse effect on our business, financial condition or results of operations.
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 MANAGEMENT
 Executive Officers and Directors
        The following table provides information with respect to individuals who will serve as our directors and executive officers at the time of this offering.

								
Name 	 	Age	 	Position	 	Residence	
Steven Montross	 	 	62	 	President, Chief Executive Officer and Director	 	Colorado, United States	
David Brush	 	 	50	 	Chief Financial Officer	 	Colorado, United States	
Lisa Jacoba	 	 	48	 	Chief Human Resources Officer	 	Colorado, United States	
William Dinker	 	 	60	 	President, CPI EFT Source	 	Tennessee, United States	
Anna Rossetti	 	 	55	 	President—CPI Canada	 	Ontario, Canada	
Jerry Dreiling	 	 	53	 	Vice President and Chief Accounting Officer	 	Colorado, United States	
Nicholas Cahn	 	 	51	 	Managing Director—CPI Europe	 	Surrey, United Kingdom	
Bradley Seaman	 	 	55	 	Chairman of the Board	 	Illinois, United States	
Robert Pearce	 	 	60	 	Director	 	Ontario, Canada	
Nicholas Peters	 	 	42	 	Director	 	Illinois, United States	
David Rowntree	 	 	59	 	Director	 	British Columbia, Canada	
 Executive Officers
         Steven Montross has served as our President and Chief Executive Officer since January 2009. Prior to joining CPI, Mr. Montross was a founding shareholder and Managing Director of FirstLight Financial Corporation, a business which invests senior debt capital in private-equity owned businesses, from 2007 to 2008. Prior to forming FirstLight, Montross had a 17 year career at General Electric Company where he held positions of increasing responsibility and leadership within GE's financial service businesses, including a business that financed private-equity owned enterprises. Mr. Montross holds a Bachelor of Business Administration degree from the University of Michigan and a Masters of Business Administration from the Kellogg School of Management at Northwestern University. Mr. Montross brings to the board extensive executive leadership experience, and, through his position as our Chief Executive Officer, he brings to the board management's perspective over a full range of issues affecting the Company.
         David Brush has served as our Chief Financial Officer since 2015. From 2013 to 2015, Mr. Brush managed Idris Capital Partners, a financial and operational advisory firm. From 2012 to 2013, Mr. Brush served as Group Executive and President—Power Transmission of Rexnord Corporation, a global industrial business in process and motion control and water management. From 1994 to 2011, Mr. Brush served in various roles at Pactiv Corporation, a multi-national manufacturer of packaging and consumer products, including Vice President and General Manager, Specialty Packaging from 2005 to 2011, Vice President and Treasurer from 2000 to 2005, Vice President Finance, Protective & Flexible Packaging from 1997 to 1999 and multiple finance positions within Specialty Packaging from 1994 to 1996. Prior to joining Pactiv, Mr. Brush was Audit Manager at Price Waterhouse LLC from 1987 to 1994. Mr. Brush received his Bachelor Degree in Accounting from the University of Northern Iowa.
         Lisa Jacoba has served as our Chief Human Resources Officer since 2015. From 2006 to 2014, Ms. Jacoba served as Senior Vice President at Western Union in the United States and United Kingdom where she held leadership positions in the human resources function. Prior to that, Ms. Jacoba held various human resources leadership positions at First Data Corporation from 1990 to 2006. Ms. Jacoba received her Bachelor of Science in Human Resources from Bellevue University.
         William Dinker has served as the President, CPI EFT Source since the Company's acquisition of EFT in September 2014. Prior to our acquisition of EFT Source, Mr. Dinker served as the President and Chief Executive Officer of EFT from 1999 to 2014 and as Vice President of Sales of EFT Source
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from 1989 to 1999. Prior to joining EFT Source, Mr. Dinker held various management positions at Anheuser-Busch working with its distributors. Mr. Dinker holds a Bachelor of Business Administration degree from Middle Tennessee State University and a Masters of Business Administration from Vanderbilt University.
         Anna Rossetti has served as the President of CPI Card Group—Canada since 2008. From 1999 to 2008, Ms. Rossetti held several positions with Giesecke & Devrient (Canada), including President from 2004 to 2008 and Senior Vice President and General Manager from 1999 to 2004. Prior to that, Ms. Rossetti worked with Equifax Canada, Bank of Nova Scotia and Bank of Montreal. Ms. Rossetti received her Bachelor Degree in Economics with Honors from York University.
         Jerry Dreiling has served as our Vice President and Chief Accounting Officer since August 2011 overseeing the Company's audit and budgeting function. From 2000 to 2011, Mr. Dreiling served as Chief Financial Officer of Picosecond Pulse Labs. From 1990 to 2000, he served in several senior financial roles, including Director of Strategic Financial Planning, and business unit Finance Director at Storage Tek. From 1984 to 1990, he served as an officer at United Bank of Denver. Mr. Dreiling received his Bachelor's in Business Administration with honors from the University of Northern Colorado and his Master of Business Administration with honors from Regis University.
         Nicholas Cahn has served as Managing Director of CPI Europe since 2008. From 2000 to 2008, Mr. Cahn was Director of the Card Division for Oakhill plc and then Managing Director of PCC Services Ltd., prior to its acquisition in 2008 by CPI. Prior to this, Mr. Cahn spent 15 years with Group Bull of France, serving as Director of International Sales in their smartcard division in Paris, Smartcard Business Unit Director in London and Vice President of a joint venture with Dai Nippon Printing in Tokyo. Mr. Cahn holds a business studies degree from Thames Valley University and is an alumnus of Bull's Executive Advanced Management Course and the European Executive Training Program in Japan.
 Directors
         Bradley Seaman has served on our board of directors since 2007. Mr. Seaman has been employed, since August 1999, by Tricor Pacific Capital, Inc., a private equity firm that makes control investments in lower middle market companies in the United States and Canada. From 1999 through December 2011, Mr. Seaman was Tricor's Managing Director and leader of its U.S. operations, and, since January 2012, has served as its Managing Partner, responsible for leading overall firm operations, strategy, funding and investments. Prior to joining Tricor, and from 1990 through July 1999, Mr. Seaman was employed by GE Capital Corporation where he held a number of increasingly senior positions in GE's Transportation & Industrial Funding and Commercial Finance units, ultimately being promoted to head GE Capital's transactions origination teams in Ohio, Michigan and Missouri. In 1994, Mr. Seaman was selected to be part of a new group that was established to focus GE Capital's debt and equity products on the emerging private equity market, and, in that capacity, headed GE's offices in New York and Chicago. Mr. Seaman is also a member of the board of directors of Steel Dynamics, Inc. (NASDAQ: STLD). Mr. Seaman holds a Bachelor of Science degree in Business Administration from Bowling Green State University and an MBA from the University of Dallas. He brings to the board a comprehensive understanding and experience in the capital markets, management experience, and both operational and corporate governance experience drawn from his involvement in the management and oversight of Tricor's portfolio companies.
         Robert Pearce has served on our board of directors since 2007. Mr. Pearce also serves on the board of directors of Canada Guaranty Mortgage Insurance Company and First American Payments Systems, and as an advisor to NorthCard Inc. Mr. Pearce spent 26 years with BMO Bank of Montreal, from 1980 to 2006, most recently holding the position of Chief Executive Officer and President, Personal and Commercial Client Group. He also served on the board of directors of MasterCard International from 1998 to 2006 and as Chairman of the Canadian Bankers' Association from 2004 to 2006. Mr. Pearce holds a Bachelor of Arts from the University of Victoria and a Master of Business Administration from
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the University of British Columbia. Mr. Pearce brings to the board over 30 years of operational and leadership experience in the financial services industry, including extensive operating experience in credit card, debit card and prepaid cards in both card issuing and merchant acceptance in Canada and the United States.
         Nicholas Peters has served on our board of directors since 2007. Mr. Peters is a Managing Director at Tricor, which he joined in 2002 and also began serving as Tricor's Chief Financial Officer in 2012. Prior to joining Tricor, Mr. Peters was a Senior Manager at Arthur Andersen LLP in Chicago. Mr. Peters is the Chairman of BFG Supply Company LLC and Certified Recycling and has served on the board of several other Tricor investment companies. Mr. Peters holds a Bachelor of Science degree in Business Administration from the University of Dayton in Ohio. He is a Certified Public Accountant and is affiliated with the American Institute of Certified Public Accountants and the Ohio Society of CPAs. Mr. Peters brings to the board strong finance and accounting skills, as well as valuable experience from his oversight of the management and operations of several of Tricor's portfolio companies.
         David Rowntree has served on our board of directors since 2007. Mr. Rowntree is the President and Chair of Highland West Capital Ltd., a Vancouver-based merchant bank that he founded in July 2012. Mr. Rowntree is one of the founders of Tricor, where he served as a Managing Director from January 1996 to June 2013. Prior to co-founding Tricor, Mr. Rowntree was a practicing attorney in both public practice and as in-house counsel. Mr. Rowntree is the Chair of Ten Peaks Coffee Co Inc. (TSE:TPK). Mr. Rowntree holds a Bachelor of Arts from the University of British Columbia and a Bachelor of Law from the Osgoode Hall Law School in Toronto, Ontario. Mr. Rowntree brings to the board more than three decades of public and private investment expertise as well as experience in corporate governance, strategic planning and risk mitigation and assessment.
 Share Ownership by Directors and Officers
        As at the date of this prospectus, as a group, the Company's directors and executive officers beneficially owned, directly or indirectly, or exercised control over 141,813 shares of common stock and 73 shares of preferred stock, representing 7.52% and 2.83%, respectively, of the issued and outstanding shares of common stock and preferred stock of the Company, respectively. The foregoing does not include shares held by the Tricor Funds. Each of Messrs. Seaman, Peters and Rowntree is an officer or member of Tricor and has an indirect pecuniary interest in the shares held by the Tricor Funds through their respective interests in the Tricor Funds.
 Corporate Cease Trade Orders, Bankruptcies, Penalties and Sanctions
        No director or executive officer of the Company is, as at the date of this Prospectus, or was within 10 years before the date of this Prospectus, a director, chief executive officer or chief financial officer of any company (including the Company), that was subject to a cease trade order, an order similar to a cease trade order, or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than 30 consecutive days:
(a)
that was issued while the director or executive officer was acting in the capacity as director, chief executive officer or chief financial officer, or

(b)
that was issued after the director or executive officer ceased to be a director, chief executive officer or chief financial officer and which resulted from an event that occurred while that person was acting in the capacity as director, chief executive officer or chief financial officer.
        No director or executive officer of the Company, or a stockholder holding a sufficient number of securities of the Company to affect materially the control of the Company:
(a)
is, as at the date of the Prospectus, or has been within the 10 years before the date of the Prospectus, a director or executive officer of any company (including the Company) that, while that person was acting in that capacity, or within a year of that person ceasing to act in that capacity, became bankrupt, made a proposal under any legislation relating to bankruptcy or
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insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or
(b)
has, within the 10 years before the date of the Prospectus, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold the assets of the director, executive officer or stockholder.
        No director or executive officer of the Company, or a stockholder holding a sufficient number of securities of the Company to affect materially the control of the Company, has been subject to (a) any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into a settlement agreement with a securities regulatory authority; or (b) any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in making an investment decision.
 Conflicts of Interest
        Other than as disclosed herein, none of our directors, officers or principal stockholders and no associates or affiliates of any of them, have or have had any material interest in any transaction which materially affects us.
 Board Composition and Structure; Director Independence
        Our amended and restated certificate of incorporation, which will be in effect prior to the completion of this offering, will provide that, subject to any rights applicable to any then outstanding preferred stock, our board of directors shall consist of such number of directors as determined from time to time by resolution adopted by a majority of the total number of authorized directors, whether or not there exist any vacancies in previously authorized directorships. Initially, our board of directors will consist of five directors. We plan to appoint additional directors following the completion of this offering, and we are currently in the process of identifying such additional directors. Subject to any rights applicable to any then outstanding preferred stock, any additional directorships resulting from an increase in the number of directors may only be filled by the directors then in office unless otherwise required by law or by a resolution passed by our board of directors. The term of office for each director will be until his or her successor is elected at our annual meeting or his or her death, resignation or removal, whichever is earliest to occur.
        In connection with this offering, we will enter into a Director Nomination Agreement with the Tricor Funds that provides the Tricor Funds the right to designate nominees for election to our board of directors for so long as the Tricor Funds collectively beneficially own 5% or more of the total number of shares of our common stock then outstanding. The number of nominees that the Tricor Funds are entitled to designate under the Director Nomination Agreement will bear the same proportion to the total number of members of our board of directors as the number of shares of common stock beneficially owned by the Tricor Funds bears to the total number of shares of common stock outstanding, rounded up to the nearest whole number. In addition, the Tricor Funds shall be entitled to designate the replacement for any of its board designees whose board service terminates prior to the end of such designee's term regardless of the Tricor Funds' beneficial ownership at such time. The Tricor Funds shall also have the right to have their designees participate on committees of our board of directors, subject to compliance with applicable law and stock exchange rules. The Director Nomination Agreement will terminate at such time as the Tricor Funds collectively own less than 5% of our outstanding common stock.
        We will take steps to ensure that adequate structures and processes are in place to permit our board of directors to function independently of management. The directors will be able to request at any time a meeting restricted to independent directors for the purposes of discussing matters
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independently of management and are encouraged to do so should they feel that such a meeting is required.
        Our board of directors intends to encourage a culture of ethical business conduct. Our board of directors encourages each member to conduct a self-review to determine if he or she is providing effective service with respect to both the Company and the stockholders. Should it be determined that a member of our board of directors is unable to effectively act in the interests of the Company or its stockholders, such member would be encouraged to resign.
        Because the Tricor Funds will beneficially own more than a majority of our outstanding voting power following the completion of this offering, we are eligible to be a "controlled company" under the corporate governance rules of the NASDAQ Global Select Market. A company that avails itself of the controlled company exemption is not required to, among other things, have a majority of its board of directors be independent, nor is it required to have independent director oversight of executive compensation and director nominations. We do not intend to avail ourselves of the controlled company exemption for the foreseeable future. The board has determined that each of Messrs. Seaman, Peters, Rowntree and Pearce satisfy the independence requirements of the NASDAQ Global Select Market (other than the additional requirements applicable to members of our audit committee).
 Board Mandate
        The mandate of our board of directors will be to oversee corporate performance and to provide quality, depth and continuity of management so that we can meet our strategic objectives. Following the completion of this offering, we will adopt a board mandate, which will, among other things, govern the roles, responsibilities and requirements for our board of directors.
 Position Descriptions
        Our board of directors expects to develop and implement a written position description for each of the chairman and the chief executive officer. Each committee of our board of directors will have a committee charter that will set out the mandate of such committee, including the responsibilities of the chair of such committee.
        The chairman's key responsibilities will include facilitating communication between our board of directors and management, assessing management's performance, managing board members, acting as chair of board meetings and meetings of the Company's stockholders and managing relations with stockholders, other stakeholders and the public.
        The chief executive officer's key responsibilities will include providing leadership and vision, developing, in concert with our board of directors, the Company's strategic direction, tactics and business plan necessary to realize organizational objectives and manage the overall business of the Company, ensuring strategic and business plans are effectively implemented.
 Orientation and Continuing Education
        Director orientation and continuing education will be conducted by the Nominating and Corporate Governance Committee. All newly elected directors will be provided with a comprehensive orientation on our business and operations. This will include familiarization with our reporting structure, strategic plans, significant financial, accounting and risk management issues, compliance programs, policies and management and the external auditor. We plan to periodically update existing directors in respect of these matters. The orientation program is designed to assist the directors in fully understanding the nature and operation of our business, the role of our board of directors and its committees, and the contributions that individual directors are expected to make.
 Committees of our Board of Directors
        We expect that, immediately following this offering, the standing committees of our board of directors will consist of an Audit Committee, a Compensation Committee and a Nominating and
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Corporate Governance Committee. Each of the committees will report to our board of directors as they deem appropriate and as the board may request. The expected composition, duties and responsibilities of these committees are set forth below.
 Audit Committee
        The audit committee will be responsible for, among other matters: (1) appointing, retaining and evaluating our independent registered public accounting firm and approving all services to be performed by them; (2) overseeing our independent registered public accounting firm's qualifications, independence and performance; (3) overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with Canadian Securities Regulators and the SEC; (4) reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; (5) establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters; and (6) reviewing and approving related person transactions.
        Upon the completion of this offering, our audit committee will consist of Robert Pearce, Nicholas Peters and Bradley Seaman. We believe that Mr. Pearce meets the independence criteria for purposes of serving on an audit committee under the NASDAQ Global Select Market Rules and Rule 10A-3 under the Exchange Act. In addition, our board of directors has determined that Mr. Pearce qualifies as an "audit committee financial expert," as such term is defined in Item 407(d)(5) of Regulation S-K. The NASDAQ Global Select Market Rules and Rule 10A-3 under the Exchange Act provide for a phase-in of the independence requirements for audit committees, requiring one independent director on the date our registration statement becomes effective, a majority of independent directors within 90 days of such date and a fully independent committee within one year of such date. In accordance with this phase-in schedule, we expect to add additional independent directors to our audit committee in order to satisfy the applicable independence requirements under the rules of the NASDAQ Global Select Market and the SEC. Our board of directors will adopt a new written charter for our audit committee, which will be available on our corporate website at www.cpicardgroup.com upon the completion of this offering. The information on our website is not part of this prospectus.
 Compensation Committee
        The Compensation Committee will be responsible for, among other matters: (1) reviewing key employee compensation goals, policies, plans and programs; (2) reviewing and approving the compensation of our directors, chief executive officer and other executive officers; (3) reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and (4) administering our stock plans and other incentive compensation plans.
        Immediately following this offering, our Compensation Committee will consist of Robert Pearce, David Rowntree and Bradley Seaman, each of whom meets the definition of "independent director" under NASDAQ Global Select Market rules. Our board of directors will adopt a written charter for the Compensation Committee in connection with this offering, which will be available on our corporate website at www.cpicardgroup.com upon the completion of this offering. The information on our website is not part of this prospectus.
 Nominating and Corporate Governance Committee
        Our Nominating and Corporate Governance Committee will be responsible for, among other matters: (1) identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors; (2) overseeing the organization of our board of directors to discharge the board's duties and responsibilities properly and efficiently; (3) identifying best practices and recommending corporate governance principles; and (4) developing and recommending to our board of directors a set of corporate governance guidelines and principles applicable to us.
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        Immediately following this offering, our Nominating and Corporate Governance Committee will consist of Robert Pearce, Nicholas Peters and David Rowntree, each of whom meets the definition of "independent director" under NASDAQ Global Select Market rules. Our board of directors will adopt a written charter for the Nominating and Corporate Governance Committee in connection with this offering, which will be available on our corporate website at www.cpicardgroup.com upon the completion of this offering. The information on our website is not part of this prospectus.
 Compensation Committee Interlocks and Insider Participation
        None of our executive officers has served as a member of the board of directors or compensation committee of another entity that had one or more of its executive officers serving as a member of our board of directors.
 Other Committees
        Our board of directors may establish other committees as it deems necessary or appropriate from time to time.
 Majority Voting Policy
        Our board of directors will adopt a majority voting policy in accordance with the requirements under the TSX Company Manual. This policy will provide that any nominee for election as a director who has more votes "withheld" than votes "for" his or her election at a meeting of the stockholders must immediately tender his or her resignation to the board following the meeting. This policy applies only to uncontested elections. The Nominating and Corporate Governance Committee shall consider any resignation tendered pursuant to the policy and within 90 days after the stockholder's meeting, determine whether or not it should be accepted. Our board of directors shall accept the resignation absent exceptional circumstances and the resignation will be effective when accepted by the board. A director who tenders a resignation pursuant to this policy will not participate in any meeting of the board or the Nominating and Corporate Governance Committee at which the resignation is considered. The board will disclose its decision via press release as soon as practicable following receipt of the resignation. If the board determines not to accept a resignation, the news release must fully state the reasons for that decision. If a resignation is accepted, our board of directors may leave the resultant vacancy unfilled until the next annual meeting of the stockholders of the Company, appoint a new director to fill any vacancy created by the resignation or call a special meeting of the stockholders to consider the election of a nominee.
 Director Term Limits
        Our board of directors will not adopt policies imposing an arbitrary term or retirement age limit in connection with individuals nominated for election as directors as it does not believe that such a limit is in the best interests of the Company. Our Nominating and Corporate Governance Committee will annually review the composition of the board of directors, including the age and tenure of individual directors. Our board of directors strives to achieve a balance between the desirability of its members having a depth of institutional experience, on the one hand, and the need for renewal and new perspectives, on the other hand.
 Gender Diversity Policy
        Our board of directors is committed to nominating the best individuals to fulfill director and executive roles. Our board has not adopted policies relating to the identification and nomination of women directors and executives and as it does not believe that it is necessary in the case of the Company to have such written policies at this time. Our board of directors believes that diversity is important to ensure that board members and senior management provide the necessary range of perspectives, experience and expertise required to achieve effective stewardship and management. We have not adopted a target regarding women on the Board or regarding women in executive officer
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positions as the Board believes that such arbitrary targets are not appropriate for the Company. Currently there are no women directors on the board and two women holding an executive position, representing 29% of our executive officers.
 Risk Oversight
        Our board of directors will oversee the risk management activities designed and implemented by our management. The board of directors will execute its oversight responsibility for risk management both directly and through its committees. The full board of directors will also consider specific risk topics, including risks associated with our strategic plan, business operations and capital structure. In addition, the board of directors will regularly receive detailed reports from members of our senior management and other personnel that include assessments and potential mitigation of the risks and exposures involved with their respective areas of responsibility.
        Our board of directors will delegate to the audit committee oversight of our risk management process. Our other board committees will also consider and address risk as they perform their respective committee responsibilities. All committees will report to the full board of directors as appropriate, including when a matter rises to the level of a material or enterprise level risk.
 Assessments
        Upon the completion of this offering, our board of directors, each of its committees and our individual directors will be assessed on an annual basis. Such assessment will be conducted with an emphasis on the overall effectiveness and contributions made by the board as a whole and each committee of the board. Evaluations will include the completion of written effectiveness surveys by directors and interviews with each director, as applicable.
 Family Relationships
        There are no family relationships among any of our executive officers or any of the persons to be nominated as our directors prior to the consummation of this offering.
 Code of Ethics
        In connection with this offering, we intend to adopt an amended and restated Code of Ethics that will apply to all of our employees, including our chief executive officer, chief financial officer and principal accounting officer. Our Code of Ethics will be available on our website at www.cpicardgroup.com by clicking on About CPI and then Code of Ethics . If we amend or grant a waiver of one or more of the provisions of our Code of Ethics, we intend to satisfy the requirements under Item 5.05 of Form 8-K regarding the disclosure of amendments to or waivers from provisions of our Code of Ethics that apply to our principal executive officer, financial and accounting officers by posting the required information on our website at the above address. The information on our website is not part of this prospectus.
        Our board of directors, management and all employees of the Company will be committed to implementing the Code of Ethics. Therefore, it will be up to each individual to comply with the Code of Ethics and to be in compliance of the Code of Ethics. Where an individual is concerned that there has been a violation of the Code of Ethics, he or she will be able to report in good faith to his or her superior. While a record of such reports will kept confidential by the Company for the purposes of investigation, the report may be made anonymously and no individual making such a report will be subject to any form of retribution.
 Director Compensation
        See "Executive Compensation—Director Compensation."
 Risk Management
        The Company intends to implement effective risk management relating to its compensation policies. The Company anticipates that the board of directors or the compensation committee will review the overall executive compensation program on an annual basis and will consider the implications of the risks associated with the Company's executive compensation policies, philosophy and practices.
        The Company does not anticipate permitting directors and officers to purchase financial instruments for the purposes of hedging or otherwise engaging in price protective transactions with respect to securities which are held, directly or indirectly, by a director or officer of the Company.
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 EXECUTIVE COMPENSATION
 Summary Compensation Table
        The following Summary Compensation Table discloses the compensation information for fiscal year 2014 for our principal executive officer ("PEO") and the two most highly compensated executive officers other than the PEO who were serving as executive officers at the end of the last completed fiscal year. Certain updated 2015 compensation and other information is provided in the narrative sections following the Summary Compensation Table.

																													
Name and Principal
Position 	 	Year	 	Salary	 	Bonus	 	Stock
Awards	 	Option
Awards	 	Non-Equity
Incentive Plan
Compensation	 	Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings	 	All Other
Compensation (1)	 	Total	 	
 Steven Montross	 	 	2014	 	 $	415,740	 	 $	207,850	(2)	 	—	 	 	—	 	 $	207,850	 	 	—	 	 $	13,078	 	 $	844,518	 	
 President and Chief Executive Officer	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

Marvin Press (3)	

2014	
 	
 $	
275,000	

—	

—	

—	
 	
 $	
100,000	

—	
 	
  $	
54,000	
 	
 $	
429,000	
 	
Former Chief Financial Officer	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

 Anna Rossetti	

2014	
 	
 $	
226,450	

—	

—	

—	
 	
  $	
107,564	

—	
 	
  $	
21,243	
 	
 $	
355,257	
 	
 President, CPI Card Group-Canada	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	

(1)
Represents a car allowance for Mr. Montross; a stipend for living expenses in Colorado and matching contributions under the Company's 401(k) plan for Mr. Press; and life insurance coverage, employer contributions under the Company's pension plan and a car allowance for Ms. Rossetti.

(2)
Mr. Montross was awarded a special bonus of $207,850 in light of his exceptional performance in 2014. In determining this bonus, the board of directors considered the increase in the Company's EBITDA for the year ended December 31, 2014 as compared to the prior year and the successful completion of the EFT Source acquisition.

(3)
Mr. Press retired from the Company effective May 8, 2015. In connection with his retirement, Mr. Press did not receive any payments other than accrued salary and accrued benefits.
 Base Salaries
        Base salaries established for the Company's executive officers are intended to reflect each individual's responsibilities, experience, historical performance and other discretionary factors deemed relevant by the Company and have generally been set at levels deemed necessary to attract and retain individuals with superior talent. Base salaries are also designed to provide executive officers with steady cash flow during the course of the fiscal year that is not contingent on short-term variations in the Company's operating performance.
        Our named executive officers were entitled to the following annual base salaries:

								
Named Executive Officer 	 	2014 Base Salary
(Effective January 1, 2014)	 	2015 Base Salary
(Effective January 1, 2015)	 	
Steven Montross	 	 $	415,740	 	 $	500,000	 	
Marvin Press	 	 $	275,000	 	 $	275,000	 	
Anna Rossetti	 	 $	226,450	 	 $	226,450	 	
 Annual Incentive Awards
        The Company maintains an incentive compensation program ("IC Plan") to incentivize senior management and other key employees to achieve the short-term financial and non-financial objectives
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of the company. The annual incentive awards are intended to reward both overall Company and individual performance during the year, and as such, are variable from year to year. The Company believes that establishing cash bonus opportunities is an important factor in both attracting and retaining the services of qualified and highly skilled executives and in motivating our senior management to achieve the Company's annual objectives. In 2014, the IC Plan provided for an aggregate target bonus pool of $2.5 million, and up to a maximum bonus pool of $3.1 million, based upon the company achieving certain levels Adjusted EBITDA. Payout of the aggregate target bonus to individual management team members is based upon a variety of factors including the performance of the individual management team members and the achievement of individual objectives. Generally, payouts to individual management team members are based 70% on the achievement of certain levels of Adjusted EBITDA and 30% on the achievement of personal objectives. In 2014, the IC Plan target bonus pool of $2.5 million was attained and aggregate payouts under the IC Plan to individual management team members were $2.18 million, with the named executive officers earning the following amounts: Mr. Montross—$207,850; Mr. Press—$100,000; and Ms. Rossetti—$107,564. For 2015, the IC plan provides for a bonus pool equal to $1.75 to $5.25 million for achieving certain levels of Adjusted EBITDA during the 2015 calendar year.
        In addition, Mr. Montross was paid a special bonus, outside of the IC Plan, of $207,850 in 2015 for his exceptional performance in 2014, as described in the "Summary Compensation Table," above.
 Employee Benefits
        The Company maintains the CPI Holdings I, Inc. 401(k), which is a qualified defined-contribution plan under the provisions of the Internal Revenue Code Section 401(k), which covers substantially all employees who meet certain eligibility requirements. Under the plan, participants may defer their salary subject to statutory limitations and may direct the contributions among various investment accounts. The Company matches 100% of the participant's first 3% of deferrals and 50% of the next 2% deferral percentage. The Company's portion is 100% vested at the time of the match.
 Mr. Montross' Employment Agreement
        Effective April 22, 2009, Mr. Montross entered into an employment agreement with the Company to serve as President and Chief Executive Officer for a term of five years, plus automatic one-year renewals thereafter unless either party provides notice of intent not to renew the agreement. The agreement provided for an initial base salary of $390,000 per year. In addition, Mr. Montross is entitled to participate in the annual incentive compensation program with a target of 50% of his annual base salary. In 2010, Mr. Montross received grants of 52,049 restricted shares of common stock and 213 restricted shares of preferred stock and also purchased 9,060 shares of common stock and 425 shares of preferred stock. The Company loaned Mr. Montross $150,000 in the form of notes payable to fund a portion of his investment. The remaining balance of this loan was repaid in full by Mr. Montross in August 2015. The Company also agreed to provide a tax gross-up payment of $71,000 in connection with Mr. Montross' grants of restricted shares of common and preferred stock. Mr. Montross is also provided with a reasonable automobile allowance to be approved by the Chairman of the Board.
        In the event Mr. Montross is terminated by the Company without "Cause," he resigns for "Good Reason" (each as defined in the agreement) or the Company fails to renew his agreement upon its expiration, Mr. Montross would be entitled to (i) continued payments of his base salary and 1/12 th of his estimated annual bonus for a period of 12 months and (ii) a prorated portion of his annual bonus (excluding any portion related to individual objectives), based on the number of full months completed during the fiscal year in which such termination of employment occurs. If Mr. Montross dies or suffers a "Disability" (as defined in the agreement) during the term of the agreement, he or his estate would
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be entitled to continued base salary and prorated bonus payments for a period of 6 months. Mr. Montross may resign upon giving no less than 90 days' notice.
        Mr. Montross is subject to certain restrictive covenants, including non-competition and non-solicitation of Company employees and customers obligations, during the term and for a period of two years following any termination of his employment with the Company.
        The estimated payment to Mr. Montross on termination, assuming termination as of December 31, 2014, would have been $585,000 for termination without "Cause" as defined in the agreement, "Good Reason" as defined in the agreement or failure to renew the agreement, and $292,500 for death or "Disability" as defined in the agreement.
 Ms. Rossetti's Employment Agreement
        Effective October 1, 2008, we entered into an employment agreement with Ms. Rossetti to serve as President of CPI Card Group-Canada for a term ending on October 1, 2011, plus automatic one-year renewals thereafter unless either party provides notice of intent not to renew the agreement. The agreement provided for an initial base salary of CDN $250,000 per year (amounts shown in the Summary Compensation Table above have been converted based on the Canadian Dollar to U.S. dollar exchange rate as of December 31, 2014). In addition, Ms. Rossetti is entitled to participate in the annual incentive compensation program with a target of up to 80% of her annual base salary.
        In the event that we terminate Ms. Rossetti's employment without "Cause" (as defined in the agreement) or fail to renew her agreement upon its expiration, Ms. Rossetti would be entitled to receive a payment each month for the 12 months following such termination equal to the sum of (i) the monthly installment of her base salary, (ii) her monthly car allowance and (iii) 1/12 th of her annual bonus, calculated as the average of the bonuses received by her in the prior three calendar years. If Ms. Rossetti's employment terminates due to Ms. Rossetti's death or "Disability" (as defined in the agreement) during the term of the agreement, she or her estate would be entitled to receive the monthly payments described in (i) and (iii) above for the 12 months following such termination. Ms. Rossetti may resign upon giving no less than 90 days' notice.
        Ms. Rossetti is subject to certain restrictive covenants, including non-competition and non-solicitation (of our employees and customers) obligations, during the term and for a period of one year following any termination of her employment with us.
        The estimated payment to Ms. Rossetti on termination, assuming termination as of December 31, 2014, would have been CDN $324,105 for termination without cause, "Good Reason" as defined in the agreement or failure to renew the agreement, and CDN $312,105 for death or "Disability" as defined in the agreement.
 Outstanding Equity Awards at 2014 Fiscal Year-End

								
 	 	Stock Awards (1)	 	
Name 	 	Number of
Shares of
Stock that
Have Not
Vested (#)	 	Market
Value of
Shares of
Stock that
Have Not
Vested ($)	 	
Steven Montross	 	 	—	 	 	—	 	
Marvin Press	 	 	—	 	 	—	 	
Anna Rossetti	 	 	—	 	 	—	 	

(1)
As of December 31, 2014, none of our named executive officers held any options or unvested equity awards.
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 Director Compensation
        As described more fully below, the following table summarizes the annual compensation for our non-employee directors during 2014.

 2014 DIRECTOR COMPENSATION

								
Name 	 	Fees Earned
or Paid
in Cash
($)	 	Total
($)	 	
Robert Pearce	 	 $	100,000	 	 $	100,000	 	
Nicholas Peters	 	 	—	 	 	—	 	
Bradley Seaman	 	 	—	 	 	—	 	
James Galliher (1)	 	 $	100,000	 	 $	100,000	 	
Robert Clarke (1)	 	 $	100,000	 	 $	100,000	 	
Jonathan Dries (1)	 	 	—	 	 	—	 	
David Rowntree	 	 	—	 	 	—	 	

(1)
Messrs. Galliher, Clarke and Dries resigned from our board of directors in August 2015.
 Narrative to Director's Compensation Table
        Our non-employee directors who are not affiliated with the Tricor Funds receive an annual cash retainer of $100,000 per year.
        No changes were made with respect to director compensation in 2015.
 Incentive Plans
 CPI Holdings I, Inc. Amended and Restated 2007 Stock Option Plan
        Prior to this offering, 95,000 of our common shares were available to be issued to our employees, directors and consultants in the form of stock option awards under the Option Plan, which became effective October 26, 2007. As shown above in the "Outstanding Equity Awards at 2014 Fiscal Year-End" table, there are no stock option awards held by our named executive officers under the Option Plan. Upon and following the completion of this offering, outstanding awards under the Option Plan shall remain outstanding, but no additional options will be granted under the Option Plan.
        As of May 14, 2015, 24,000 outstanding options to acquire shares of common stock are held by 13 employees of the Company. These 24,000 options have a weighted average exercise price of $0.008 with a weighted average remaining term of 6.11 years. None of our executive officers hold any options.
 CPI Acquisition, Inc. Phantom Stock Plan
        In connection with the consummation of this offering, the CPI Acquisition, Inc. Phantom Stock Plan will be terminated (except with respect to participants' continuing non-competition and non-solicitation obligations) and awards held by employees thereunder will be paid out. Participants in the phantom stock plan received phantom preferred units in CPI Acquisition, Inc. and upon redemption are entitled to a cash payment equal to the increase in value of those units above a certain base amount. Our named executive officers participating in the phantom stock plan and the amount they
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will receive in connection with the phantom stock plan's termination and the redemption of their awards is set forth below.

						
Name 	 	Number of
Units
Vesting(#)	 	Payout
Amount ($)	
Steven Montross	 	 	30,112	 	 	
Anna Rossetti	 	 	1,571	 	 	
 CPI Card Group Inc. Omnibus Incentive Plan
        We intend to adopt the CPI Card Group Inc. Omnibus Incentive Plan (the "Omnibus Plan") pursuant to which cash and equity-based incentives (including through an annual incentive program) may be granted to participating employees, directors and consultants. We expect our board of directors to adopt, and our stockholders to approve, the Omnibus Plan before the consummation of this offering. The principal purposes of the Omnibus Plan are to optimize the profitability and growth of the company through short-term and long-term incentives that are consistent with the company's objectives and that link participants' interests to those of the company's stockholders; to give participants an incentive for excellence in individual performance; to promote teamwork among participants; and to give the company a significant advantage in attracting and retaining key employees, directors, and consultants. Our Omnibus Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance based awards (including performance shares, performance units and performance bonus awards), and other stock or cash-based awards. When considering new grants of share-based or option-based awards, the Company intends to take into account previous grants of such awards.
        Administration.     The Omnibus Plan will be administered by our board of directors or by a committee that the board designates for this purpose (referred to below as the plan administrator). The plan administrator will have the power to determine the terms of the awards granted under our Omnibus Plan, including the exercise price, the number of shares subject to each award, and the exercisability of the awards. The plan administrator also will have full power to determine the persons to whom and the time or times at which awards will be made and to make all other determinations and take all other actions advisable for the administration of the Omnibus Plan.
        Grant of Awards; Shares Available for Awards.     Certain employees, advisors, and directors will be eligible to be granted awards under the Omnibus Plan, other than incentive stock options, which may be granted only to employees. We will reserve                     shares of our common stock for issuance under the Omnibus Plan. The number of shares issued or reserved pursuant to the Omnibus Plan will be adjusted by the plan administrator, as they deem appropriate and equitable, as a result of stock splits, stock dividends, and similar changes in our common stock. No more than                     shares of our common stock will be granted, or $            paid in cash, pursuant to awards which are intended to be performance-based compensation (within the meaning of Section 162(m) of the Internal Revenue Code) to any one participant in a calendar year.
        Stock Options.     Under the Omnibus Plan, the plan administrator may grant participants incentive stock options, which qualify for special tax treatment in the United States, as well as non-qualified stock options. Stock options are a variable component of compensation designed to incentivize the participants to grow the Company and to increase the value of the Company's shares. The plan administrator will establish the duration of each option at the time it is granted, with a maximum duration of 10 years from the effective date of the Omnibus Plan, and may also establish vesting performance requirements that must be met prior to the exercise of options. Stock option grants must have an exercise price that is equal to or greater than the fair market value of our common stock on
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the date of grant. Stock option grants may include provisions that permit the option holder to exercise all or part of the holder's vested options, or to satisfy withholding tax liabilities, by tendering shares of our common stock already owned by the option holder for at least six months (or another period consistent with the applicable accounting rules) with a fair market value equal to the exercise price.
        Stock Appreciation Rights.     The plan administrator may also grant stock appreciation rights, which will be exercisable upon the occurrence of certain contingent events. Stock appreciation rights are a variable component of compensation designed to retain key employees. Stock appreciation rights entitle the holder upon exercise to receive an amount in any combination of cash and shares of our common stock (as determined by the plan administrator) equal in value to the excess of the fair market value of the shares covered by the stock appreciation rights over the exercise price of the right.
        Restricted Stock.     The plan administrator may also grant restricted stock, which are awards of our shares of common stock that vest in accordance with the terms and conditions established by the plan administrator. The plan administrator will determine in the award agreement whether the participant will be entitled to vote the shares of restricted stock and/or receive dividends on such shares. Restricted stock is a variable component of compensation also available to retain key employees when deemed appropriate.
        Restricted Stock Units.     Restricted stock units represent the right to receive shares of our common stock at a specified date in the future, subject to forfeiture of such right. If the restricted stock unit has not been forfeited, then on the date specified in the restricted stock unit grant, the Company must deliver to the holder of the restricted stock unit, unrestricted shares of our common stock, which will be freely transferable. Restricted stock units are a variable component of compensation also designed to retain key employees when deemed appropriate.
        Performance-Based Awards.     Performance-based awards are denominated in shares of our common stock, stock units, or cash, and are linked to the satisfaction of performance criteria established by the plan administrator. Performance-based awards are a variable component of compensation designed to reward key management for achieving annual performance goals. If the plan administrator determines that the performance-based award to an employee is intended to meet the requirements of "qualified performance-based compensation" and therefore may be deductible under Section 162(m) of the Internal Revenue Code, then the performance-based criteria upon which the awards will be based shall be with reference to any one or more of the following: earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; net operating profit after tax; cash flow; revenue; net revenues; sales; income; net income; operating income; net operating income, operating margin; earnings; earnings per share; return on equity; return on investment; return on capital; return on assets; return on net assets; total stockholder return; economic profit; market share; appreciation in the fair market value, book value or other measure of value of the company's common stock; expense/cost control; working capital; volume/production; new products; customer satisfaction; brand development; employee retention or employee turnover; employee satisfaction or engagement; environmental, health, or other safety goals; individual performance; or strategic objectives milestones.
        Change in Control Provisions.     In connection with the grant of an award, the plan administrator may provide for the treatment of such award in the event of a change in control of the Company, including that, in the event of an involuntary termination of an executive's employment by the company in connection with a change in control, any outstanding awards that are unexercisable or otherwise unvested will become fully vested and/or immediately exercisable.
        Amendment and Termination.     Our board of directors may alter, amend, modify, or terminate the Omnibus Plan at any time. However, no modification of an award will, without the prior written consent of the participant, materially impair any rights or obligations under any award already granted
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under the Omnibus Plan unless the board expressly reserved the right to do so at the time of the award.
        Compliance with Applicable Laws.     We intend to to structure the Omnibus Plan so that we can grant stock options and other performance-based awards that may qualify for an exemption from the deduction limitation contained in Section 162(m) of the Internal Revenue Code, to the extent that Section 162(m) is applicable. Awards under our Omnibus Plan shall be designed, granted, and administered in such a manner that they are either exempt from the application of, or comply with, the requirements of Section 409A of the Internal Revenue Code.
 Appointment of New CFO
        We entered into an employment agreement with David Brush effective June 22, 2015 to serve as our Chief Financial Officer. The initial term of the employment agreement is five years, plus automatic one-year renewals thereafter unless either party provides notice of intent not to renew the agreement. The agreement provides for an initial base salary of $450,000 per year plus an annual target incentive award equal to 50% of his base salary, with a pro-rated incentive award for 2015. Mr. Brush also received an award of 6,712 restricted shares of common stock that vests in three annual installments in June of 2016, 2017 and 2018 subject to his continued employment.
        Mr. Brush would be entitled to severance benefits if his employment terminates under certain circumstances following the 12-month anniversary of the effective date of the agreement. In the event of a termination of employment by us without "Cause," Mr. Brush's resignation of employment for "Good Reason" (each as defined in the agreement), or our failure to renew the agreement upon its expiration, Mr. Brush would be entitled to continued monthly payments of his base salary and 1/12 th of his estimated annual bonus for a period of 12 months. In the event that Mr. Brush's employment terminates due to his death or "Disability" (as defined in the agreement), he or his estate would be entitled to continued monthly payments of base salary and 1/12 th of his estimated annual bonus, prorated for the portion of the calendar year during which Mr. Brush was employed by us, for a period of 12 months.
        Mr. Brush is subject to certain restrictive covenants, including non-competition and non-solicitation of Company employees and customers obligations, during the term and for a period of one year following any termination of his employment with the Company.
        Mr. Brush was hired in June 2015 and was not an executive officer in 2014; however, based on the terms of his employment agreement, the estimated payments to him for a termination without "Cause," for "Good Reason," the Company's failure to renew the agreement or due to his death or "Disability," in each case, occurring after the 12-month anniversary of the effective date of the agreement, would be approximately equal to 1 1 / 2  times his annual base salary rate of $450,000.
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 STRUCTURE AND FORMATION OF OUR COMPANY
        CPI Card Group Inc. was formed as CPI Holdings I, Inc. under the laws of Delaware, United States on June 4, 2007 in connection with the initial investment in our business by the Tricor Funds. We changed our name to CPI Card Group Inc. in August 2015. Our registered office is located at 1209 Orange Street, Wilmington, Delaware 19801 and our head office is located at 10368 West Centennial Road Littleton, Colorado 80127. We are a holding company and through our subsidiaries, we operate the Financial Payment Card business described in this prospectus. Since incorporation, there have been a number of amendments to our certificate of incorporation and the bylaws. Prior to the closing of the offering, we anticipate further amending our certificate of incorporation and bylaws as described in "Description of Capital Stock". The following diagram illustrates our ownership structure following the completion of this offering. All subsidiaries are wholly-owned.

(1)
In January 2015, we sold all of our business operations conducted at CPI Card Group-Nevada, Inc. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Trends and Key Factors Affecting our Financial Performance—Discontinued Operation and Disposition."

(2)
As of July 2015, we ceased operations at our Petersfield facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Segment Overview."
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 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
        The following is a description of transactions since January 1, 2012 to which we have been a party in which the amount involved exceeded or will exceed $120,000 within any fiscal year and in which any of our directors, executive officers, beneficial holders of more than 5% of our capital stock or entities affiliated with them had or will have a direct or indirect material interest.
 Stockholders Agreement
        The Company is party to a Stockholders Agreement with the Tricor Funds and the other holders of the Company's common and preferred stock. The Stockholders Agreement sets forth certain rights and obligations of the Company's stockholders with respect to the Company's board of directors, share transfer restrictions, sale transactions and stock issuances and repurchases. The Stockholders Agreement will be terminated in connection with this offering.
 Sales of our Securities
        We sold the following capital stock to our directors, officers and holders of 5% or more of our outstanding capital stock, and their respective affiliates, in private transactions on the dates set forth below.

													
Stockholder 	 	Shares of
Common
Stock	 	Shares of
Preferred
Stock	 	Date of
Purchase	 	Total
Purchase Price	 	
Anna Rossetti	 	 	3,000	 	 	—	 	1/6/2012	 	 $	30	 	
William Dinker	 	 	9,329	 	 	438	 	9/2/2014	 	 $	3,984,354	 	
Nicholas Cahn	 	 	12,278	 	 	107	 	1/4/2012	 	 $	181,114	 	
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 Preferred Stock Redemptions
        We redeemed shares of preferred stock held by our directors, executive officers and 5% stockholders on the dates set forth below.

										
Stockholder 	 	Shares of
Preferred
Stock
Redeemed	 	Date of
Redemption	 	Aggregate
Redemption
Payment	 	
 Tricor Pacific Capital Partners (Fund IV), Limited Partnership	 	 	5,364	 	11/12/2012	 	 $	14,386,677	 	
	 	 	4,207	 	12/26/2012	 	 $	11,514,727	 	
	 	 	 35,510	 	8/17/2015	 	 $	157,902,317	 	
Tricor Pacific Capital Partners (Fund IV) US, Limited Partnership	 	 	
3,167	 	11/12/2012	 	
 $	
8,494,147	 	
	 	 	2,484	 	12/26/2012	 	 $	6,798,807	 	
	 	 	 20,961	 	8/17/2015	 	 $	93,207,279	 	
 Steven Montross	 	 	
84	 	11/12/2012	 	
 $	
225,295	 	
	 	 	66	 	12/26/2012	 	 $	180,645	 	
	 	 	 556	 	8/17/2015	 	 $	2,472,365	 	
Jerry Dreiling	 	 	
8	 	11/12/2012	 	
 $	
21,457	 	
	 	 	7	 	12/26/2012	 	 $	19,159	 	
	 	 	 56	 	8/17/2015	 	 $	249,015	 	
 William Dinker	 	 	
 421	 	8/17/2015	 	
 $	
1,872,061	 	
Nicholas Cahn	 	 	
12	 	11/12/2012	 	
 $	
32,185	 	
	 	 	10	 	12/26/2012	 	 $	27,370	 	
	 	 	 82	 	8/17/2015	 	 $	364,629	 	
 Robert Pearce	 	 	
102	 	11/12/2012	 	
 $	
273,572	 	
	 	 	80	 	12/26/2012	 	 $	218,963	 	
	 	 	 679	 	8/17/2015	 	 $	3,019,309	 	
Robert Clarke	 	 	
236	 	11/12/2012	 	
 $	
632,971	 	
	 	 	185	 	12/26/2012	 	 $	506,352	 	
	 	 	 1,565	 	8/17/2015	 	 $	6,959,086	 	
 James Galliher	 	 	
270	 	11/12/2012	 	
 $	
724,162	 	
	 	 	212	 	12/26/2012	 	 $	580,252	 	
	 	 	 1,789	 	8/17/2015	 	 $	7,955,146	 	
        Each of Messrs. Seaman, Peters and Rowntree, members of our Board of Directors, has an indirect pecuniary interest in the shares of common stock held by the Tricor Funds through their investments in the Tricor Funds.
 Loans to Executive Officers
        In connection with investments in shares of our common and preferred stock by certain of our executive officers, we have made loans to such officers to fund the purchase of shares. In connection
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with the redemption transactions described above, the executive officers have made partial repayments of these loans. Each of the loans to our executive officers was repaid in full in August 2015.

									
Executive Officer 	 	Aggregate
Principal
Amount
of Loan	 	Principal
Outstanding
as of
June 30, 2015	 	Interest Rate	
Steven Montross	 	 $	150,000	 	 $	49,277	 	5% per annum	
Jerry Dreiling	 	 $	37,056	 	 $	19,333	 	5% per annum	
 Acquisition of EFT Source, Inc.
        On September 2, 2014, we acquired all of the outstanding capital stock of EFT Source. One of our executive officers, William Dinker, together with trusts for the benefit of certain of his family members, owned approximately 75% of EFT Source. Mr. Dinker did not have any relationship with the Company at the time of the acquisition. The purchase price for the acquisition of EFT Source was $68.9 million, consisting of $54.9 million in cash, a $9.0 million subordinated unsecured promissory note (the "Seller Note") and the issuance of $5.0 million of the Company's preferred and common stock. The Seller Note bears interest at a rate of 5% per annum and matures on the earlier of (i) September 2, 2016, (ii) twelve months following the consummation of an initial public offering or (iii) the occurrence of certain change of control events.
        In connection with the EFT Source acquisition, we entered into an Employment and Non-Competition Agreement with Mr. Dinker. Pursuant to this agreement, if EFT Source achieves certain EBITDA targets prior to December 31, 2016, Mr. Dinker will be entitled to bonus payments in an amount up to $666,667.
 Lease of Indiana Facility
        We lease our Fort Wayne, Indiana facility from an entity owned by James Galliher, a stockholder and member of our board of directors who resigned from our board in August 2015. We paid $175,000 under the lease for each of the years ended December 31, 2012, 2013 and 2014.
 Registration Rights Agreement
        In connection with this offering, we intend to enter into a registration rights agreement with the Tricor Funds (the "Registration Rights Agreement"). Under the Registration Rights Agreement, the Tricor Funds will be entitled to request that we register shares of our common stock on a long-form or short-form registration statement on one or more occasions in the future, provided that we will not be obligated to register such shares within 90 days after the effective date of a registration statement previously filed pursuant to a request under the Registration Rights Agreement and otherwise for up to 60 days from the date of a request under the Registration Rights Agreement in certain circumstances. The Tricor Funds will also be entitled to participate in certain registered offerings that we may conduct in the future, subject to certain restrictions. However, subject to limited exceptions described in "Underwriting," the Tricor Funds may not sell shares of our common stock or otherwise exercise its demand rights under the Registration Rights Agreement for a period of 180 days after the date of the closing of this offering without the prior written consent of the Representatives (as defined below), on behalf of the underwriters. See "Underwriting." We will pay the Tricor Funds' expenses in connection with the exercise of these rights.
        The registration rights described in this paragraph apply to (i) shares of our common stock held by the Tricor Funds as of the closing of this offering, (ii) any of our capital stock (or that of our subsidiaries) issued or issuable with respect to the common stock described in clause (i) with respect to any dividend, distribution, recapitalization, reorganization, or certain other corporate transactions, and
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(iii) any of our common stock owned or acquired following the closing of this offering by the Tricor Funds ("Registrable Securities"). These registration rights are also for the benefit of any subsequent holder of Registrable Securities; provided that any particular securities will cease to be Registrable Securities when they have been sold in a registered public offering, sold in compliance with Rule 144 under the Securities Act or repurchased by us or our subsidiaries. A copy of the Registration Rights Agreement is included as exhibit 10.11 to the registration statement of which this prospectus forms a part, and this description of the terms of the Registration Rights Agreement is qualified in its entirety by reference to the full text of such agreement.
 Nomination of our Directors
        In connection with this offering, we will enter into a Director Nomination Agreement with the Tricor Funds that provides the Tricor Funds the right to designate nominees for election to our board of directors for so long as the Tricor Funds collectively beneficially own 5% or more of the total number of shares of our common stock then outstanding. The number of nominees that the Tricor Funds are entitled to designate under the Director Nomination Agreement will bear the same proportion to the total number of members of our board of directors as the number of shares of common stock beneficially owned by the Tricor Funds bears to the total number of shares of common stock outstanding, rounded up to the nearest whole number. In addition, the Tricor Funds shall be entitled to designate the replacement for any of its board designees whose board service terminates prior to the end of such designee's term regardless of the Tricor Funds' beneficial ownership at such time. The Tricor Funds shall also have the right to have their designees participate on committees of our board of directors, subject to compliance with applicable law and stock exchange rules. The Director Nomination Agreement will terminate at such time as the Tricor Funds collectively own less than 5% of our outstanding common stock.
        A copy of the Director Nomination Agreement is included as exhibit 10.10 to the registration statement of which this prospectus forms a part, and this description of the terms of the Director Nomination Agreement is qualified in its entirety by reference to the full text of such agreement.
 Policies and Procedures for Related Party Transactions
        In connection with this offering, our board of directors will adopt a written related party transaction policy setting forth the policies and procedures for the review and approval of related party transactions. The policy will cover transactions involving us in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person will be defined as a director, executive officer, nominee for director, or a greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed fiscal year, and any immediate family member of or person sharing a household with any of these individuals. All related party transactions must be presented to the Audit Committee for review, consideration and approval. In approving or rejecting any such proposed transaction, the Audit Committee will consider the material facts of the transaction, including whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party's interest in the transaction.
        All related party transactions described in this section were not subject to the approval and review procedures set forth in such policy.
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 PRINCIPAL AND SELLING STOCKHOLDERS
        The following table sets forth information regarding the beneficial ownership of our common stock as of August 20, 2015 and the anticipated beneficial ownership percentages immediately following this offering, by:
•
each person who is known by us to beneficially own more than 5% of our outstanding common stock, 

•
each individual who will be a director or named executive officer at the time of this offering; 

•
all directors and executive officers as a group; and 

•
each selling stockholder.
        Each stockholder's percentage ownership before the offering is based on 1,885,278 shares of our common stock outstanding as of August 20, 2015. Each stockholder's percentage ownership after the offering is based on            shares of our common stock outstanding immediately after the completion of this offering, assuming no exercise of the underwriters' option to purchase additional shares. We have granted the underwriters an option to purchase up to                additional shares of our common stock and the table below assumes no exercise of that option.
        Beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days. Common stock subject to options that are currently exercisable or exercisable within 60 days of August 20, 2015 are deemed to be outstanding and beneficially owned by the person holding the options. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Percentage of beneficial ownership is based on            shares of common stock outstanding as of August 20, 2015 and            shares of common stock to be outstanding after the completion of this offering. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder.
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Unless otherwise specified in the footnotes, the address of each beneficial owner listed in the table below is c/o CPI Card Group Inc., 10368 West Centennial Road, Littleton, Colorado 80127.

																							
 	 	 	 	 	 	 	 	Beneficially Owned
Following the Offering	 	
 	 	 	 	 	 	 	 	Assuming No
Exercise of
Underwriters'
Option	 	Assuming Full
Exercise of
Underwriters'
Option	 	
 	 	Beneficially Owned
Before the Offering	 	 					 	
 			 	Shares of
Common
Stock
Offered					 	
Name and Address of Beneficial Owners 	 	Number of
Shares	 	Percent			 	Number of
Shares	 	Percent	 	Number of
Shares	 	Percent	 	
5% Stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tricor Pacific Capital Partners (Fund IV), Limited Partnership (1)	 	 	991,653	 	 	52.6	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Tricor Pacific Capital Partners (Fund IV) US, Limited Partnership (1)	 	 	585,335	 	 	31.1	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Named Executive Officers and Directors:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Steven Montross	 	 	73,047	 	 	3.9	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Anna Rossetti	 	 	3,000	 	 	*	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Robert Pearce	 	 	18,893	 	 	1.0	%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Nicholas Peters (1)	 	 	—	 	 	—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
David Rowntree (1)	 	 	—	 	 	—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Bradley Seaman (1)	 	 	—	 	 	—	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
All Executive Officers and Directors as a Group (11 persons)	 	 	
141,813	 	 	
7.5	
%	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Selling Stockholders:	 	 	

 	 	 	

 	 	 	

*
Less than 1.0%

(1)
Each of the Tricor Funds is managed by Tricor Pacific Capital Partners (Fund IV), ULC, as the general partner. Mr. Seaman, Mr. Rowntree, J. Trevor Johnstone and Roderick Senft are the sole members of an investment committee of the Tricor Funds that has the power to vote or dispose of the shares held by the Tricor Funds. Each of Messrs. Seaman, Peters and Rowntree is an officer or member of Tricor and has an indirect pecuniary interest in the shares of common stock held by the Tricor Funds through their respective interests in the Tricor Funds. Each of Messrs. Seaman, Peters and Rowntree expressly disclaims any beneficial ownership of any shares of common stock held by the Tricor Funds. The address of the Tricor Funds is c/o Tricor Pacific Capital, One Westminster Place, Suite 100, Lake Forest, Illinois 60045.
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 DESCRIPTION OF CERTAIN INDEBTEDNESS
        On August 17, 2015, we, our subsidiary, CPI Acquisition, Inc., as borrower, and our principal domestic operating subsidiaries, CPI Card Group—Minnesota, Inc., CPI Holding Co., CPI Card Group—Colorado, Inc., CPI Card Group—Indiana, Inc., EFT Source, Inc., and CPI Card Group—Nevada, Inc., as guarantors, entered into the New Credit Agreement with a syndicate of lenders providing for the New Revolving Credit Facility and the New Term Loan Facility. As of August 17, 2015, the aggregate principal balance of the New Term Loan Facility totaled $435.0 million and the aggregate commitments under the New Revolving Credit Facility totaled $40.0 million. As of August 17, 2015, we did not have any outstanding revolving loans other than outstanding letters of credit of approximately $100,000, which reduced our borrowing capacity under our New Revolving Credit Facility by an equivalent amount.
        The New Term Loan Facility and New Revolving Credit Facility mature on August 17, 2022 and August 17, 2020, respectively. The loans under our New Credit Facility are required to be prepaid in advance of the maturity date upon the occurrence of certain customary events. We are also required to prepay at least $75.0 million of the New Term Loan Facility upon the closing of this offering.
        Our New Credit Facility is secured by a first-priority security interest in substantially all of our assets constituting equipment, inventory, receivables, cash and other personal property. Such security excludes certain specified assets, as more fully set forth in the collateral agreement under our New Credit Facility.
        Interest rates under our New Credit Facility are based, at our election, on either a Eurodollar rate plus a margin of 4.50% or a base rate plus a margin of 3.50%. Letters of credit are subject to a 0.125% fronting fee payable to the issuing bank and a fee payable to the revolving lenders equal to the margin applicable to Eurodollar revolving loans. In addition, we are required to pay an unused commitment fee ranging from 0.50% per annum to 0.375% per annum of the average unused portion of the revolving commitments. The unused commitment fee is determined on the basis of a grid that results in a lower unused commitment fee as our total net leverage ratio declines.
        Our New Credit Facility contains customary covenants, including among other things, restrictions on indebtedness, issuance of liens, investments, dividends, redemptions and other distributions to equityholders, asset sales, certain mergers or consolidations, sales, transfers, leases or dispositions of substantially all of our assets, and affiliate transactions. The restrictions on dividends, redemptions and other distributions to equityholders contained in our New Credit Facility are subject to certain exceptions.
        Our New Credit Facility also contains a requirement that, as of the last day of any fiscal quarter, if the amount we have drawn under the New Revolving Credit Facility is greater than 50% of the aggregate principal amount of all commitments of the lenders thereunder, we maintain a first lien net leverage not in excess of 7.0x.
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 DESCRIPTION OF CAPITAL STOCK
         The following is a summary of our capital stock and provisions of our amended and restated certificate of incorporation and our amended and restated bylaws, as each will be in effect prior to the closing of this offering, and certain provisions of Delaware law. This summary does not purport to be complete and is qualified in its entirety by the provisions of our amended and restated certificate of incorporation (the "certificate of incorporation") and amended and restated bylaws (the "bylaws"), copies of which have been or will be filed with the SEC as exhibits to the registration statement of which this prospectus is a part. References in this section to the "Company," "we" "us" and "our" refer to CPI Card Group Inc. and not to any of its subsidiaries.
 General
        The total amount of our authorized capital stock consists of               shares of common stock, $0.001 par value, and                shares of preferred stock, $0.001 par value. As of August 25, 2015, we had 27 holders of record of our common stock. As of                  , 2015, after giving effect to the issuance and sale of shares of common stock in this offering and the use of proceeds therefrom, we will have               shares of common stock outstanding and no shares of preferred stock outstanding, assuming no exercise of the underwriters' option to purchase additional shares.
 Common Stock
        Holders of common stock are entitled to one vote for each share held on all matters subject to a vote of stockholders, subject to the rights of holders of any outstanding preferred stock. Accordingly, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect all of the directors standing for election, subject to the rights of holders of any outstanding preferred stock. Holders of common stock will be entitled to receive ratably any dividends that the board of directors may declare out of funds legally available therefor, subject to any preferential dividend rights of outstanding preferred stock. Upon our liquidation, dissolution or winding up, the holders of common stock will be entitled to receive ratably our net assets available after the payment of all debts and other liabilities and subject to the prior rights of holders of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of our capital stock are fully paid and nonassessable, and the shares of common stock to be issued upon the closing of this offering will be fully paid and nonassessable.
 Preferred Stock
        The board of directors, without further approval of the stockholders, will be authorized to fix the number of shares constituting any series, as well as the dividend rights and terms, conversion rights and terms, voting rights and terms, redemption rights and terms, liquidation preferences and any other rights, preferences, privileges and restrictions applicable to each series of preferred stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could also adversely affect the voting power and dividend and liquidation rights of the holders of common stock. The issuance of preferred stock could also, under certain circumstances, have the effect of making it more difficult for a third-party to acquire, or discouraging a third-party from acquiring, a majority of our outstanding voting stock or otherwise adversely affect the market price of our common stock. It is not possible to state the actual effect of the issuance of any shares of preferred stock on the rights of holders of common stock until the board of directors determines the specific rights of that series of preferred stock.
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 Elimination of Liability in Certain Circumstances
        Our certificate of incorporation eliminates the liability of our directors to us or our stockholders for monetary damages resulting from breaches of their fiduciary duties as directors. Directors will remain liable for breaches of their duty of loyalty to us or our stockholders, as well as for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, and transactions from which a director derives improper personal benefit. Our certificate of incorporation will not absolve directors of liability for payment of dividends or stock purchases or redemptions by us in violation of Section 174 (or any successor provision of the Delaware General Corporation Law).
        The effect of this provision is to eliminate the personal liability of directors for monetary damages for actions involving a breach of their fiduciary duty of care, including any such actions involving gross negligence. We do not believe that this provision eliminates the liability of our directors to us or our stockholders for monetary damages under the federal securities laws. The certificate of incorporation and by-laws provide indemnification for the benefit of our directors and officers to the fullest extent permitted by the Delaware General Corporation Law as it may be amended from time to time, including most circumstances under which indemnification otherwise would be discretionary.
 Corporate Opportunity
        Messrs. Seaman, Peters and Rowntree, who are officers or members of Tricor, serve on our board of directors. The Tricor Funds and entities controlled by them may hold equity interests in entities that directly or indirectly compete with us, and companies in which they currently invest may begin competing with us. As a result of these relationships, when conflicts between the interests of Tricor, on the one hand, and of other stockholders, on the other hand, arise, these directors may not be disinterested. Although our directors and officers have a duty of loyalty to us under Delaware law and our certificate of incorporation, transactions that we enter into in which a director or officer has a conflict of interest are generally permissible so long as (1) the material facts relating to the director's or officer's relationship or interest as to the transaction are disclosed to our board of directors and a majority of our disinterested directors approves the transaction, (2) the material facts relating to the director's or officer's relationship or interest as to the transaction are disclosed to our stockholders and a majority of our disinterested stockholders approve the transaction or (3) the transaction is otherwise fair to us. Our certificate of incorporation also provides that any principal, officer, member, manager and/or employee of the Tricor Funds or any entity that controls, is controlled by or under common control with, the Tricor Funds (other than the Company or any company that is controlled by the Company) or any investment funds managed by Tricor will not be required to offer any transaction opportunity of which they become aware to us and could take any such opportunity for themselves or offer it to other companies in which they have an investment.
 Anti-Takeover Effects of Delaware Law and our Certificate of Incorporation and Bylaws
        Our certificate of incorporation and bylaws also contain provisions that may delay, defer or discourage hostile takeovers, or changes in control or management of our company. These provisions, which are summarized below, are designed to encourage persons seeking to acquire control of us to first negotiate with our board of directors, which we believe may result in an improvement of the terms of any such acquisition in favor of our stockholders. However, they also give our board of directors the power to discourage acquisitions that some stockholders may favor.
 Undesignated Preferred Stock
        The ability to authorize undesignated preferred stock will make it possible for our board of directors to issue preferred stock with super voting, special approval, dividend or other rights or
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preferences on a discriminatory basis that could impede the success of any attempt to acquire us. See "—Preferred Stock" above.
 Removal of Directors
        Under our certificate of incorporation, on and after the date that the Tricor Funds and their affiliates cease to beneficially own a majority of the voting power of our then outstanding capital stock entitled to vote generally in the election of directors (the "Trigger Date"), our directors may only be removed for cause and only upon the affirmative vote of 75% of our outstanding voting stock, at a meeting of our stockholders called for that purpose.
 Special Meetings of Stockholders
        Our certificate of incorporation provides that special meetings of our stockholders may be called only upon a resolution approved by a majority of the total number of directors that we would have if there were no vacancies on our board of directors or, prior to the Trigger Date, at the request of the holders of a majority of the voting power of our then outstanding shares of voting capital stock.
 Requirements for Nominations and Proposals at Stockholder Meetings
        Our bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. Our bylaws also provide that nominations of persons for election to our board of directors may be made at annual and special meetings of stockholders at which directors are to be elected pursuant to the notice of meeting (1) by or at the direction of our board of directors or (2) provided that our board of directors has determined that directors shall be elected at such meeting, by any stockholder who (i) is a stockholder of record at the time the notice is delivered, on the record date for the determination of stockholders entitled to vote at the meeting and on the date of the meeting, (ii) is entitled to vote at the meeting and upon such election and (iii) complies with the notice procedures set forth in our bylaws. These provisions do not apply to nominations by the Tricor Funds pursuant to the Director Nomination Agreement.
 Stockholder Action by Written Consent
        Pursuant to Section 228 of the DGCL, any action required to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of our stock entitled to vote thereon were present and voted, unless a company's certificate of incorporation provides otherwise. Our certificate of incorporation provides that, prior to the Trigger Date, any action required or permitted to be taken by our stockholders may be effected by written consent. However, from and after the Trigger Date, any action required or permitted to be taken by the stockholders may be effected only at a duly called annual or special meeting.
 Business Combinations with Interested Stockholders
        We have elected in our certificate of incorporation not to be subject to Section 203 of the DGCL, an anti-takeover law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning 15% or more of the corporation's voting stock for a period of three years following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Accordingly, we are not subject to any anti-takeover effects of Section 203. However, our certificate of incorporation
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contains provisions that have the same effect as Section 203, except that they provide that (i) Tricor and any of its affiliates or associates, including any investment funds managed by Tricor, (ii) any other person with whom any of the foregoing are acting as a group or in concert for the purpose of acquiring, holding, voting or disposing of shares of our stock and (iii) any person who would otherwise be an interested stockholder because of a transfer of 5% or more of our outstanding voting stock by any person described in clause (i) or (ii) to such person are excluded from the "interested stockholder" definition in our certificate of incorporation and are therefore not subject to the restrictions therein that have the same effect as Section 203.
 Requirements for Amendments to our Bylaws and Certificate of Incorporation
        Our certificate of incorporation provides that, prior to the Trigger Date, our bylaws may be adopted, amended, altered or repealed by the vote of a majority of the voting power of our then outstanding voting stock, voting together as a single class. After the Trigger Date, our bylaws may be adopted, amended, altered or repealed by either (i) a vote of a majority of the total number of directors that would be on our board of directors if there were no vacancies or (ii) in addition to any vote otherwise required by law, the affirmative vote of the holders of at least 66 2 / 3 % of the voting power of our then outstanding capital stock entitled to vote generally in the election of directors, voting together as a single class.
        Following the Trigger Date, the provisions of our certificate of incorporation relating to the size and composition of our board of directors, limitation on liabilities of directors, stockholder action by written consent, the ability of stockholders to call special meetings, business combinations with interested persons, amendment of our bylaws or certificate of incorporation and the Court of Chancery as the exclusive forum for certain disputes, may only be amended, altered, changed or repealed by the affirmative vote of the holders of at least 66 2 / 3 % of the voting power of all of our outstanding shares of our capital stock entitled to vote generally in the election of directors, voting together as a single class. Our certificate of incorporation provides that, prior to the Trigger Date, such provisions may be amended, altered, changed or repealed by the affirmative vote of the holders of a majority of the voting power of our then outstanding capital stock entitled to vote generally in the election of directors, voting together as a single class. Our certificate of incorporation also provides that the provision relating to corporate opportunity may only be amended, altered or repealed by a vote of 80% of the voting power of our then outstanding capital stock entitled to vote generally in the election of directors, voting together as a single class.
 Authorized but Unissued Shares
        The authorized but unissued shares of common stock will be available for future issuance without stockholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of common stock could render it more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
 Advance Notice Requirements for Stockholder Proposals and Nomination of Directors
        Our by-laws provide that stockholders seeking to bring business before an annual meeting of stockholders, or to nominate candidates for election as directors at an annual meeting of stockholders, must provide timely notice in writing. To be timely, a stockholder's notice must be delivered to or mailed and received at our principal executive offices not less than 60 days nor more than 90 days prior to the anniversary date of the immediately preceding annual meeting of stockholders. However, in the event that the annual meeting is called for a date that is not within 30 days before or after such anniversary date, such notice will be timely only if received not later than the close of business on the
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tenth day following the date on which notice of the date of the annual meeting was mailed to stockholders or made public, whichever first occurs. Our by-laws also specify requirements as to the form and content of a stockholder's notice.
 Exchange Listing
        It is a condition to the completion of this offering that our common stock be listed on the NASDAQ Global Select Market and the Toronto Stock Exchange. We have applied to list our common stock on the NASDAQ Global Select Market under the symbol "PMTS".
 Transfer Agent and Registrar
        The transfer agent and registrar for our common stock is Wells Fargo Bank, N.A. The transfer agent's address is 1110 Centre Pointe Curve, Suite 101, Mendota Heights, Minnesota 55120, and its telephone number is 800-468-9716. The Canadian transfer agent acting as co-agent for our common stock is TMX Equity Transfer Services at 650 West Georgia Street, Suite 2700, Vancouver, BC V6B4N9, Canada.
 Auditor
        The Company's auditor is KPMG LLP. The auditor's address is 1225 17th St #800, Denver, Colorado 80202.
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 SHARES ELIGIBLE FOR FUTURE SALE
        Prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of our common stock in the public market, or the perception that such sales may occur, could adversely affect the prevailing market price of our common stock. No prediction can be made as to the effect, if any, future sales of shares, or the availability of shares for future sales, will have on the market price of our common stock prevailing from time to time.
 Rule 144
        In general, under Rule 144 under the Securities Act ("Rule 144") as currently in effect, once we have been subject to public company reporting requirements under the Exchange Act for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell such shares without complying with the manner of sale, volume limitation or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144.
        In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates are entitled to sell within any three-month period beginning 90 days after the date of this prospectus, a number of shares that does not exceed the greater of:
•
1% of the number of shares of common stock then outstanding; or 

•
the average weekly trading volume of the common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.
        Such sales under Rule 144 are also subject to prescribed requirements relating to the manner of sale, notice and availability of current public information about us.
 Rule 701
        Rule 701 generally allows a stockholder who purchased shares of our common stock pursuant to a written compensatory plan or contract and who is not deemed to have been one of our affiliates during the immediately preceding 90 days to sell such shares in reliance upon Rule 144, but without being required to comply with the public information, holding period, volume limitation or notice provisions of Rule 144. Rule 701 also permits our affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144.
 Stock Plans
        We intend to file a registration statement on Form S-8 under the Securities Act covering all of the shares of our common stock reserved for issuance under the Omnibus Plan, which we intend to adopt in connection with this offering. We expect to file this registration statement as soon as practicable after this offering and adoption of the Omnibus Plan. Accordingly, shares registered under the registration statement on Form S-8 will be available for sale in the open market following its effective date, subject to any applicable vesting provisions and the Rule 144 limitations applicable to affiliates.
 Lock-Up Agreements
        In connection with this offering, we and the selling stockholders, our executive officers and directors (whose common stock represents                         of our pre-offering shares) will enter into 180-day lock-up agreements with the underwriters of this offering under which neither we nor they may, with limited exceptions, for a period of 180 days after the date of this prospectus, directly or indirectly sell, dispose of or hedge any shares of common stock or any securities convertible into or exchangeable or exercisable for shares of common stock without the prior written consent of the Representatives (as defined below), on behalf of the underwriters.
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 UNDERWRITING
        BMO Capital Markets Corp., Goldman, Sachs & Co., CIBC World Markets Inc.,               and              are acting as the underwriters of this offering, and BMO Capital Markets Corp., Goldman, Sachs & Co. and CIBC World Markets Inc., are acting as the representatives of the several underwriters (the "Representatives"). Subject to the terms and conditions stated in the underwriting agreement dated the date of this prospectus among us, the selling stockholders and the Underwriters, or the "Underwriting Agreement," each underwriter named below has severally agreed to purchase from us and the selling stockholders, and we and the selling stockholders have agreed to sell to each such underwriter, the respective number of shares of common stock shown opposite its name below at a price of $        per share, payable in cash against delivery. We will not receive any proceeds from the sale of shares by the selling stockholders.

			
Underwriter 	 	Number of Shares of Common Stock	
BMO Capital Markets Corp. 	 	 	
Goldman, Sachs & Co. 	 	 	
CIBC World Markets Inc. 	 	 	

 ​	​	​ 	
 ​	​	​	
 ​	​	​ 	
Total	 	 	
        This offering is being made concurrently in the United States and in each of the provinces and territories of Canada. The shares of common stock will be offered in the United States through those underwriters or their U.S. affiliates who are registered to offer the shares of common stock for sale in the United States, and in Canada through those underwriters or their Canadian affiliates who are registered to offer the shares of common stock for sale in applicable Canadian provinces or territories, and such other registered dealers as may be designated by the underwriters. Subject to applicable law, the underwriters may offer the shares of common stock outside of the United States and Canada.
        The obligations of the underwriters under the Underwriting Agreement may be terminated at their discretion based on their assessment of the state of the financial markets and may also be terminated upon the occurrence of certain stated events. The underwriters are, however, obligated to take up and pay for all of the offered shares of common stock if any of the shares of common stock are purchased under the Underwriting Agreement. The Underwriting Agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.
        The underwriters propose to offer the shares of common stock directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $          per share. After the initial public offering of the shares of common stock, the offering price and other selling terms may be changed by the underwriters. After the underwriters have made a reasonable effort to sell the offered shares of common stock at the price of offering, the offering price may be decreased and may be further changed from time to time to an amount not greater than the offering price, and the compensation realized by those underwriters who sell their proportionate share of the shares offered at a reduced price will be decreased by the amount that the aggregate price paid by the purchasers for such offered shares is less than the price paid by the applicable underwriters.
        The underwriters have an option to buy up to              additional shares of common stock from the selling stockholders at a price of $        per share to cover sales of shares of common stock by the underwriters which exceed the number of shares of common stock specified in the table above. The
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underwriters have 30 days from the closing date of this offering to exercise this overallotment option, in whole or from time to time in part. If any shares of common stock are purchased with this overallotment option, the underwriters will purchase shares of common stock in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares of common stock are being offered. We will not receive any proceeds from the exercise of the underwriters' overallotment option.
        A purchaser who acquires shares of common stock forming part of the underwriters' overallotment position acquires such shares under this prospectus, regardless of whether the overallotment position is ultimately filled through the sales of shares of common stock by the selling stockholders upon exercise of the overallotment option or secondary market purchases. Any naked short position shall form part of the underwriters' overallotment position.
        The following table shows the per share and total underwriters' commission to be paid to the underwriters, assuming both no exercise and full exercise of the underwriters' option to purchase additional shares of common stock.

														
 	 	Per Share	 	Total	 	
 	 	Without
Over-
Allotment	 	With
Over-
Allotment	 	Without
Over-
Allotment	 	With
Over-
Allotment	 	
Public offering price	 	 $	          	 	 $	          	 	 $	          	 	 $	          	 	
Underwriters' commissions paid by us	 	 $	          	 	 $	          	 	 $	          	 	 $	          	 	
Underwriters' commissions paid by the selling stockholders	 	 $	          	 	 $	          	 	 $	          	 	 $	          	 	
        The public offering price for our shares of common stock, wherever offered, is payable in U.S. dollars, except as may otherwise be agreed by the underwriters.
        In addition to the underwriters' commissions, we are responsible for reimbursing the expenses of the underwriters incurred in relation to this offering, including legal expenses and expenses related to road show and marketing activities subject to certain limitations described in the Underwriting Agreement. We estimate that the total amount of such reimbursable expenses will be approximately $          .
        We estimate that the total expenses of this offering to us, including registration, filing and listing fees, printing fees, and legal and accounting expenses, but excluding the underwriters' commission, will be approximately $          .
        Each of the selling stockholders, us and our directors and executive officers will enter into lock-up agreements with the underwriters pursuant to which each of these persons or entities, with limited exceptions, for a period of 180 days after the date of the closing of this offering, may not, without the prior written consent of the Representatives, on behalf of the underwriters, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any of our shares or any securities convertible into or exercisable or exchangeable for our shares (including, without limitation, our shares or such other securities which may be deemed to be beneficially owned by such persons in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant), or publicly disclose the intention to do any of the foregoing, (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of our shares or such other securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of our shares or such other securities, in cash, or otherwise, or (3) file, request or make any demand for or exercise any right with respect to the registration of any of our shares or any security convertible into or exercisable or
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exchangeable for our shares. In addition, the lock-up agreements will not restrict the transfer of shares of common stock (A) as bona fide gifts, (B) by will or the laws of intestacy, (C) to family members (including to vehicles of which they are beneficial owners), (D) pursuant to domestic relations or court orders, (E) following the 180 day lock-up period, pursuant to Rule 10b5-1 trading plans established during the 180 day lock-up period without any announcement or public disclosure being required during the 180 day lock-up period, (F) solely for the purpose of satisfying tax withholding amounts that become due in connection with the vesting of awards granted under an equity incentive plan of the Company, (G)(i) in the case of corporations or other entities, to affiliates that do not involve any disposition for value or (ii) as part of a disposition, transfer, distribution or liquidation without consideration to its equity holders, (H) by selling stockholders pursuant to the Underwriting Agreement, (I) acquired in open market transactions after the completion of this offering or (J) pursuant to a bona fide third party tender offer, merger, consolidation or other similar transaction made to all holders of the common stock involving a change of control of the Company (unless such tender offer, merger, consolidation or other similar transaction is not completed); provided, that in the case of clauses (A), (B), (C) and (G), each donee or transferee shall agree with the Representatives in writing to be bound by the lock-up restrictions for the duration that such restrictions remain in effect at the time of transfer; and provided, further, that, in the case of clauses (A), (B), (C) and (I), no filing by any donor or transferor under the Exchange Act or Canadian securities laws, or other public announcement by any donor or transferor shall be required or shall be made voluntarily in connection with such transfer or distribution (other than a filing on a Form 5 made prior to the expiration of the 180-day period referred to above); and provided, further, that, in the case of clauses (D), (F) and (G)(i), any public filing or public announcement under the Exchange Act or Canadian securities laws, reporting a reduction in beneficial ownership of shares of common stock, or otherwise required or voluntarily made shall clearly indicate in the footnotes or comments section of such filing that such transfer was made pursuant to the circumstances described in such clause.
        We and the selling stockholders have agreed to indemnify the underwriters against certain liabilities, including liabilities under the U.S. Securities Act and applicable Canadian securities laws.
        Pursuant to Canadian securities laws and the Universal Market Integrity Rules for Canadian Marketplaces, the underwriters may not, throughout the period of distribution, bid for, or purchase our shares, except in accordance with certain permitted transactions, including market stabilization and passive market making activities.
        In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing, and selling our shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of our shares of common stock while this offering is in progress. These stabilizing transactions may include making short sales of our shares of common stock, which involves the sale by the underwriters of a greater number of our shares of common stock than they are required to purchase in this offering, and purchasing our shares of common stock on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' overallotment option referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their overallotment option, in whole or in part, or by purchasing shares of common stock in the open market. In making this determination, the underwriters will consider, among other things, the price of shares of common stock available for purchase in the open market compared to the price at which the underwriters may purchase shares of common stock through the overallotment option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our shares of common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares of common stock in the open market to cover the position.
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        The underwriters have advised us that, pursuant to Regulation M of the U.S. Securities Act and applicable Canadian securities laws, they may also engage in other activities that stabilize, maintain, or otherwise affect the price of our shares, including the imposition of penalty bids. This means that if the underwriters purchase our shares of common stock in the open market in stabilizing transactions or to cover short sales, the joint book-running managers can require the underwriters that sold those shares of common stock as part of this offering to repay the underwriters' commission received by them.
        These activities may have the effect of raising or maintaining the market price of our shares of common stock or preventing or retarding a decline in the market price of our shares of common stock, and, as a result, the price of our shares of common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on applicable stock exchanges, in the over-the-counter market, or otherwise.
        Prior to this offering, there has been no public market for our shares of common stock. The initial public offering price will be determined by negotiations between us and the underwriters. In determining the initial public offering price, we and the underwriters expect to consider a number of factors including:
•
the information set forth in this prospectus and otherwise available to us and the underwriters; 

•
our prospects and the history and prospects for the industry in which we compete; 

•
an assessment of our management; 

•
our prospects for future earnings; 

•
the general condition of the securities markets at the time of this offering; 

•
the recent market prices of, and demand for, publicly traded common stock of generally comparable companies; and 

•
other factors deemed relevant by the underwriters and us.
        Neither we nor the underwriters can assure investors that an active trading market will develop for our shares of common stock, or that the shares of common stock will trade in the public market at or above the initial public offering price.
        Other than in the United States and in each of the Canadian provinces and territories, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
 Conflicts of Interest
        Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking, and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for
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their own account or the account of customers, and hold, on behalf of themselves or their customers, long or short positions in our equity or debt securities or loans, and may do so in the future. In addition, affiliates of each of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., Goldman Sachs Canada Inc., Goldman, Sachs & Co., CIBC World Markets Inc. and CIBC World Markets Corp. are lenders to the Company under the New Revolving Credit Facility. Accordingly, we may be considered a "connected issuer" (as defined in National Instrument 33-105— Underwriting Conflicts of the Canadian Securities Administrators) of each of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., Goldman Sachs Canada Inc., Goldman, Sachs & Co., CIBC World Markets Inc. and CIBC World Markets Corp. for the purposes of applicable Canadian securities laws. Proceeds of this offering will not be applied for the benefit of such affiliates. In connection with the New Credit Agreement, the Company provided the lenders under the New Credit Agreement with a general security interest over the Company's assets. We and our subsidiaries that are party to the New Credit Agreement have been in compliance with the terms thereof at all times, and no breach thereof has been waived since the execution thereof. Other than as disclosed in this prospectus, our financial position has not changed since the execution of the New Credit Agreement. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."
        Furthermore, an affiliate of CIBC World Markets Inc. and CIBC World Markets Corp. (the " CIBC LP ") is a limited partner in Tricor Pacific Capital Partners (Fund IV), Limited Partnership, one of the selling stockholders named in this Prospectus, and therefore, Tricor Pacific Capital Partners (Fund IV), Limited Partnership may also be considered a "connected issuer" of CIBC World Markets Inc. and CIBC World Markets Corp. (as defined in National Instrument 33-105— Underwriting Conflicts of the Canadian Securities Administrators). As a limited partner of Tricor Pacific Capital Partners (Fund IV), Limited Partnership, the CIBC LP is entitled to share in the returns generated by the fund in proportion to its limited partnership interest. None of CIBC World Markets Inc., CIBC World Markets Corp. or the CIBC LP have any direct or indirect control over the management of the general partner of Tricor Pacific Capital Partners (Fund IV), Limited Partnership, and the CIBC LP is entitled to less than 10% of the aggregate distributions made to limited partners of the fund. As a result of this offering, Tricor Pacific Capital Partners (Fund IV), Limited Partnership may indirectly apply some of the proceeds of this offering to make distributions to its limited partners, including the CIBC LP.
        The decision to offer our shares of common stock was made solely by us and the selling stockholders, and the terms upon which the shares of common stock are being offered were determined by negotiation between us, the selling stockholders and the underwriters. This offering was not required or suggested by, but was consented to by, each of BMO Nesbitt Burns Inc., BMO Capital Markets Corp., Goldman Sachs Canada Inc., Goldman, Sachs & Co., CIBC World Markets Inc. and CIBC World Markets Corp., or any of their respective affiliates. As a result of this offering, such underwriters will receive their share of the underwriting fee payable to the underwriters.
        Subscriptions will be received subject to rejection or allotment in whole or in part and the right is reserved to close the subscription books at any time without notice.
        Our offered shares of common stock (other than any shares of common stock issuable or to be sold on exercise of the overallotment option) are to be taken up by the underwriters, if at all, on or before a date not later than 42 days after the date of the receipt for the final Canadian prospectus.
 Selling Restrictions
        Other than in the United States and each of the provinces and territories of Canada, no action has been taken by us that would permit a public offering of our shares of common stock offered by this prospectus in any jurisdiction where action for that purpose is required. Our shares of common stock offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such shares
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of common stock be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any shares of common stock offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
 Notice to Prospective Investors in the European Economic Area
        This document has been prepared on the basis that all offers of our shares of common stock will be made pursuant to an exemption under Article 3 of the Prospectus Directive, as implemented in member states of the European Economic Area (the "EEA"), from the requirement to produce a prospectus for offers of our shares of common stock. Accordingly, any person making or intending to make any offer within the EEA of our shares of common stock should only do so in circumstances in which no obligation arises for us or any of the underwriters to produce a prospectus for such offer. Neither we nor the underwriters have authorized, nor do we or the underwriters authorize, the making of any offer of our shares of common stock through any financial intermediary, other than offers made by the underwriters, which constitute the final sale of the shares of common stock contemplated in this document.
        In relation to each member state of the EEA that has implemented the Prospectus Directive (each, a "Relevant Member State"), with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State, an offer to the public of our shares of common stock has not been made, and may not be made in that Relevant Member State, other than:
a)
to any legal entity which is a qualified investor as defined in the Prospectus Directive;

b)
to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the relevant underwriter or underwriters nominated by us for any such offer; or

c)
in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of our shares of common stock shall require us or the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive.
        For the purposes of the foregoing restrictions:
•
the expression an "offer of common stock to the public" in relation to our shares of common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and our shares of common stock to be offered so as to enable an investor to decide to purchase or subscribe for our shares of common stock, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State; 

•
the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive), and includes any relevant implementing measure in the Relevant Member State; and 

•
the expression "2010 PD Amending Directive" means Directive 2010/73/EU.
        Each subscriber for or purchaser of our shares of common stock in the offer located within a Relevant Member State will be deemed to have represented, acknowledged and agreed that it is a "qualified investor" within the meaning of Article 2(1)(e) of the Prospectus Directive. We, the underwriters and their respective affiliates, and others will rely upon the truth and accuracy of the foregoing representation, acknowledgement and agreement.
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 Notice to Prospective Investors in the United Kingdom
        This document is for distribution only to, and is only directed at, persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (the "FSMA") (Financial Promotion) Order 2005, as amended (the "Financial Promotion Order"), (ii) are persons falling within Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the Financial Promotion Order, or (iii) are persons to whom an invitation or inducement to engage in investment activity within the meaning of section 21 of the FSMA in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as "relevant persons"). This document is directed only at relevant persons and must not be acted on or relied on by anyone who is not a relevant person. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons.
 Notice to Prospective Investors in Hong Kong
        Our shares of common stock may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in this document being a "prospectus" within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to our shares of common stock may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to our shares of common stock which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
 Notice to Prospective Investors in Japan
        Our shares of common stock offered in this document have not been and will not be registered under the Financial Instruments and Exchange Law of Japan. The shares of common stock have not been offered or sold and will not be offered or sold, directly or indirectly, in Japan or to or for the account of any resident of Japan (including any corporation or other entity organized under the laws of Japan), except (i) pursuant to an exemption from the registration requirements of the Financial Instruments and Exchange Law and (ii) in compliance with any other applicable requirements of Japanese law.
 Notice to Prospective Investors in Singapore
        This document has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this document and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our shares of common stock may not be circulated or distributed, nor may our shares of common stock be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
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        Where our shares of common stock are subscribed for or purchased under Section 275 of the SFA by a relevant person which is:
•
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or 

•
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
shares, debentures and units of shares and debentures of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
•
to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions specified in Section 275 of the SFA; 

•
where no consideration is or will be given for the transfer; or 

•
where the transfer is by operation of law.
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 MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS TO NON-U.S. HOLDERS
        The following is a summary of the material U.S. federal income tax consequences of the ownership and disposition of our common stock to a non-U.S. holder that purchases shares of our common stock in this offering. This summary applies only to a non-U.S. holder that holds our common stock as a "capital asset," within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the "Code"). For purposes of this summary, a "non-U.S. holder" means any beneficial owner of our common stock that is, for U.S. federal income tax purposes, an individual, corporation, estate or trust other than:
•
an individual citizen or resident of the United States; 

•
a corporation or other entity treated as a corporation for U.S. federal income tax purposes created or organized in the United States or under the laws of the United States or any state thereof or the District of Columbia; 

•
an estate the income of which is subject to U.S. federal income tax regardless of its source; or 

•
a trust if it (1) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (2) has a valid election in place to be treated as a U.S. person for U.S. federal income tax purposes.
        In the case of a holder that is classified as a partnership for U.S. federal income tax purposes, the tax treatment of a partner in such partnership generally will depend upon the status of the partner and the activities of the partner and the partnership. If you are a partnership or a partner in a partnership considering an investment in our common stock, you are urged to consult your tax advisor.
        This summary is based upon the provisions of the Code, the U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those summarized below. We cannot assure you that a change in law, possibly with retroactive application, will not alter significantly the tax considerations that we describe in this summary. We have not sought and do not plan to seek any ruling from the U.S. Internal Revenue Service (the "IRS"), with respect to statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with our statements and conclusions.
        This summary does not address all aspects of U.S. federal income taxes that may be relevant to non-U.S. holders in light of their personal circumstances, and does not deal with federal taxes other than the U.S. federal income tax (such as U.S. federal estate and gift tax laws) or with non-U.S., state or local tax or tax treaty considerations. The tax consequences for the shareholders, partners, or beneficiaries of a non-U.S. holder are not discussed. Special rules, not discussed here, may apply to certain non-U.S. holders, including:
•
former citizens or residents of the U.S. or part-year resident aliens; 

•
brokers, dealers or traders in securities, commodities or currencies; 

•
persons who hold our common stock as a position in a "straddle," "conversion transaction" or other risk reduction transaction; 

•
controlled foreign corporations, passive foreign investment companies, or corporations that accumulate earnings to avoid U.S. federal income tax; 

•
tax-exempt organizations;
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•
persons subject to the unearned income Medicare contribution tax on certain investment income; 

•
non-U.S. holders subject to the alternative minimum tax; 

•
governments, government instrumentalities or agencies; 

•
persons who received shares through the exercise of incentive options or through the issuance of restricted stock under an equity incentive plan or through a tax-qualified retirement plan; 

•
entities disregarded as separate from their owner for U.S. federal income tax purposes; 

•
"expatriated entities" subject to section 7874 of the Code; 

•
hybrid or reverse hybrid entities; 

•
banks, underwriters, insurance companies, or other financial institutions; and 

•
pass-through entities (including entities that are treated as pass-through entities for U.S. federal income tax purposes) and the owners of such entities that are subject to special treatment under the Code.
        If you are considering the purchase of our common stock, you are urged to consult your tax advisor to determine the U.S. federal, state, local and other tax and tax treaty consequences that may be relevant to you.
 Dividends
        A distribution of cash or property that we pay in respect of our common stock, will be treated as a dividend for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Dividends paid to you generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty, assuming certain requirements to obtain such reduced rate are met, as discussed below. However, dividends that are effectively connected with the conduct of a trade or business by you within the U.S. (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or a fixed base maintained by the non-U.S. holder in the United States) are not subject to the withholding tax, but instead are subject to U.S. federal income tax on a net income basis at applicable graduated individual or corporate rates, unless an applicable income tax treaty provides otherwise. Certain certification and disclosure requirements, including delivery of a properly completed and executed IRS Form W-8ECI, must be satisfied for effectively connected income to be exempt from withholding. Any such effectively connected dividends received by a foreign corporation may be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. Any distributions of cash or property that we pay in respect of our common stock would also be subject to the discussions below under the sections titled "—Information Reporting and Backup Withholding" and "—FATCA."
        If the amount of a distribution paid on our common stock exceeds our current and accumulated earnings and profits, such excess will be allocated ratably among each share of common stock with respect to which the distribution is paid and treated first as a tax-free return of capital to the extent of your adjusted tax basis in each such share, and thereafter as capital gain from a sale or other taxable disposition of such share of common stock that is taxed to you as described below under the heading "Gain on Disposition of Common Stock." Your adjusted tax basis in a share is generally the purchase price of such share, reduced by the amount of any such tax-free returns of capital.
        If you wish to claim the benefit of an applicable treaty rate to avoid or reduce withholding of U.S. federal income tax for dividends, then you must (a) provide the withholding agent with a properly completed and executed IRS Form W-8BEN or W-8BEN-E (as applicable) and any applicable
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attachments and certify under penalties of perjury that you are not a United States person and are eligible for treaty benefits, or (b) if our common stock is held through certain foreign intermediaries, satisfy the relevant certification requirements of applicable U.S. Treasury regulations. Special certification and other requirements apply to certain non-U.S. holders that act as intermediaries (including partnerships and other flow-through entities). These certifications must be provided to the applicable withholding agent prior to the payment of dividends and must be updated periodically. A claim for exemption or reduction in tax will not be valid if the person receiving the applicable form has actual knowledge or reason to know that the statements on the form are false.
        If you are eligible for a reduced rate of U.S. federal income tax pursuant to an income tax treaty, then you may obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim with the IRS.
 Gain on Disposition of Common Stock
        Subject to the discussions below in "Information Reporting and Backup Withholding" and "FATCA," you generally will not be subject to U.S. federal income tax with respect to gain realized on the sale or other taxable disposition of our common stock, unless:
•
the gain is effectively connected with a trade or business you conduct in the United States, and, where a tax treaty applies, is attributable to a permanent establishment or fixed base maintained by you in the United States; 

•
if you are an individual, you are present in the United States for 183 days or more in the taxable year of the sale or other taxable disposition and certain other conditions are met; or 

•
we are or have been during a specified testing period a "United States real property holding corporation" as defined in the Code (a "USRPHC") for U.S. federal income tax purposes, and certain other conditions are met.
        We believe that we are not, and we do not anticipate becoming, a USRPHC for U.S. federal income tax purposes. However, there can be no assurance that we will not become a USRPHC in the future. Even if we are or become a USRPHC, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain in respect of our common stock as long as our common stock is "regularly traded on an established securities market" and such non-U.S. holder owned (directly, indirectly or constructively) or is deemed to have owned no more than 5% of our common stock during the specified testing period. However, there can be no assurance that our common stock will be "regularly traded on an established securities market" for purposes of these rules. If we are or become a USRPHC and you owned (directly, indirectly or constructively) or are deemed to have owned more than 5% of our common stock at any time during the specified testing period or our common stock is not "regularly traded on an established securities market," you will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates.
        If you are a person described in the first bullet point above, you will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates. In addition, a non-U.S. holder corporation may be subject to the branch profits tax equal to 30% of its effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty.
        If you are an individual described in the second bullet point above, you will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by U.S. source capital losses, provided the non-U.S. holder timely files a U.S. federal income tax return with respect to such losses.
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 Information Reporting and Backup Withholding
        Generally, we must report annually to the IRS and to you, certain information, including the non-U.S. holder's name, address and taxpayer identification number, the aggregate amount of dividends paid to you and the amount of tax, if any, withheld with respect to such dividends. The IRS may make this information available to the tax authorities in the country in which you are resident under the provisions of an applicable income tax treaty.
        In addition, you may be subject to information reporting requirements and backup withholding (currently at a rate of 28%) with respect to dividends paid on, and the proceeds of disposition of, shares of our common stock, unless, generally, you certify under penalties of perjury (usually on IRS Form W-8BEN or W-8BEN-E) that you are not a United States person or you otherwise establish an exemption. Additional rules relating to information reporting requirements and backup withholding with respect to payments of the proceeds from the disposition of shares of our common stock include:
•
If the proceeds are paid to or through the U.S. office of a broker, the proceeds generally will be subject to backup withholding and information reporting, unless you certify under penalties of perjury (usually on IRS Form W-8BEN or W-8BEN-E) that you are not a United States person or you otherwise establish an exemption. 

•
If the proceeds are paid to or through a non-U.S. office of a broker that is not a United States person and is not a foreign person with certain specified U.S. connections (a "U.S.-related person"), information reporting and backup withholding generally will not apply. 

•
If the proceeds are paid to or through a non-U.S. office of a broker that is a United States person or a U.S.-related person, the proceeds generally will be subject to information reporting (but not to backup withholding), unless you certify under penalties of perjury (usually on IRS Form W-8BEN or W-8BEN-E) that you are not a United States person or you otherwise establish an exemption.
        Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against your U.S. federal income tax liability, provided the required information is timely furnished by you to the IRS.
 FATCA
        Sections 1471-1474 of the Code, the U.S. Treasury regulations and official IRS guidance associated with such provisions (such provisions, regulations and guidance commonly known as "FATCA") generally impose a United States federal withholding tax of 30% on dividend income and the gross proceeds of a sale or other disposition of common stock paid to (1) a foreign financial institution ("FFI") (as the beneficial owner or as an intermediary for the beneficial owner), unless such institution (a) enters into, and is in compliance with, a withholding and information reporting agreement with the United States government to collect and provide to the United States tax authorities substantial information regarding United States account holders of such institution (which would include certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with United States owners) (a "FATCA Agreement") or (b) is a resident in a country that has entered into an intergovernmental agreement with the United States in relation to such withholding and information reporting and the FFI complies with the related information reporting requirements of such country, (2) a foreign entity that is not a financial institution, unless such entity identifies the substantial United States owners of the entity, which generally includes any United States person who directly or indirectly owns more than 10% of the entity or certifies that it does not have any substantial United States owners. Certain exemptions may apply. A person that receives payments through one or more foreign financial institutions may receive reduced payments as a result of FATCA withholding taxes if (i) any such foreign financial institution does not enter into a FATCA Agreement and does not
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otherwise establish an exemption, or (ii) such person is (a) a "recalcitrant account holder" (as defined in FATCA) or (b) a foreign financial institution that fails to enter into a FATCA Agreement or establish an exemption.
        Withholding under FATCA may apply to dividend payments on our common stock regardless of when they are made. However, under the applicable U.S. Treasury regulations, withholding under FATCA generally will only apply to payments of gross proceeds from the sale or other disposition of our common stock on or after January 1, 2017. An intergovernmental agreement between the United States and the applicable non-U.S. country, or future U.S. Treasury regulations or other official IRS guidance, may modify these requirements. Under certain circumstances, a non-U.S. holder of our common stock may be eligible for refunds or credits of such taxes, but a non-U.S. holder would generally be required to file a U.S. federal income tax return (which may entail significant administrative burden) to claim such refunds or credits. Investors are urged to consult with their tax advisors regarding the implications of FATCA on their investment in our common stock.
THE SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES ABOVE IS INCLUDED FOR GENERAL INFORMATION PURPOSES ONLY. POTENTIAL PURCHASERS OF OUR COMMON STOCK ARE URGED TO CONSULT THEIR TAX ADVISORS TO DETERMINE THE U.S. FEDERAL, STATE, LOCAL AND NON-U.S. TAX AND TAX TREATY CONSIDERATIONS OF OWNING AND DISPOSING OF OUR COMMON STOCK.
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 CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS FOR HOLDERS OF OUR
COMMON STOCK
        The following is a summary of certain Canadian federal income tax considerations under the Income Tax Act (Canada), or the "Tax Act," generally applicable to a holder who acquires our common stock pursuant to this offering, and who, for the purposes of the Tax Act and at all relevant times, holds such common stock as capital property and deals at arm's length with, and is not affiliated with, us, which we refer to as a "Holder." Common stock will generally be considered to be capital property to a Holder unless the Holder holds such common stock in the course of carrying on a business of buying and selling securities or has acquired them in one or more transactions considered to be an adventure or concern in the nature of trade.
        This summary is not applicable to a Holder: (i) with respect to whom our company is or will be a "foreign affiliate" within the meaning of the Tax Act, (ii) that is a "financial institution" for the purposes of the mark-to-market rules under the Tax Act, (iii) an interest in which is a "tax shelter" or a "tax shelter investment" as defined in the Tax Act, (iv) that is a "specified financial institution" as defined in the Tax Act, (v) who has made a "functional currency" reporting election under section 261 of the Tax Act to report the holder's "Canadian tax results" (as defined in the Tax Act) in a currency other than the Canadian currency or (vi) that has entered or will enter into a "derivative forward agreement" (as defined in the Tax Act) with respect to the common stock. Any such holder should consult its own tax advisor with respect to the income tax considerations applicable to it in respect of acquiring, holding and disposing of common stock.
        This summary is based on the current provisions of the Tax Act and the regulations thereunder and an understanding of the current published administrative policies and assessing practices of the Canada Revenue Agency, or the "CRA," made public prior to the date hereof. This summary takes into account all proposed amendments to the Tax Act and the regulations that have been publicly announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof, which we refer to as the "Proposed Amendments," and assumes that such Proposed Amendments will be enacted in the form proposed, although no assurance can be given that the Proposed Amendments will be enacted in their current form or at all. Except for the Proposed Amendments, this summary does not take into account or anticipate any other changes in law or any changes in the CRA's administrative policies and assessing practices, whether by judicial, governmental or legislative action or decision, nor does it take into account other federal or any provincial, territorial or foreign tax legislation or considerations, which may differ from the Canadian federal income tax considerations described herein. The provisions of provincial income tax legislation vary from province to province in Canada and in some cases differ from the Tax Act.
         This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any particular Holder, and no representations with respect to the income tax considerations applicable to any particular Holder are made. This summary is not exhaustive of all Canadian federal income tax considerations. The relevant tax considerations applicable to the acquiring, holding and disposing of common stock may vary according to the status of the purchaser, the jurisdiction in which the purchaser resides or carries on business and the purchaser's own particular circumstances. Accordingly, prospective Holders are urged to consult their own tax advisors about the specific tax consequences to them of acquiring, holding and disposing of common stock.
 Currency Conversion
        For purposes of the Tax Act, all amounts relating to the acquisition, holding or disposition of securities (including dividends, adjusted cost base and proceeds of disposition) must generally be expressed in Canadian Dollars. Amounts denominated in any other currency must be converted into Canadian Dollars generally based on the exchange rate quoted by the Bank of Canada for noon on the
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date such amounts arise or such other rate of exchange as is acceptable to the Minister of National Revenue (Canada).
 Stockholders Resident in Canada
        The following discussion applies to a Holder who, for the purposes of the Tax Act, and at all relevant times, is, or is deemed to be, resident in Canada, which we refer to as a "Resident Holder."
 Dividends on Common Stock
        A Resident Holder will be required to include in computing such Resident Holder's income for a taxation year the amount of any dividends including amounts deducted for U.S. withholding tax, if any, received on our common stock. Dividends received on our common stock by a Resident Holder who is an individual will not be subject to the gross-up and dividend tax credit rules in the Tax Act normally applicable to taxable dividends received from taxable Canadian corporations. A Resident Holder that is a corporation will be required to include dividends received on our common stock in computing its income and will not be entitled to deduct the amount of such dividends in computing its taxable income.
        To the extent that U.S. withholding tax is payable by a Resident Holder in respect of any dividends received on our common stock, the Resident Holder may be eligible for a foreign tax credit or deduction under the Tax Act to the extent and under the circumstances described in the Tax Act. Resident Holders should consult their own tax advisors regarding the availability of a foreign tax credit or deduction in their particular circumstances.
 Disposition of Common Stock
        A disposition or deemed disposition of our common stock by a Resident Holder (including on a purchase of common stock for cancellation by the company) will generally result in a capital gain (or capital loss) to the extent that the proceeds of disposition, net of any reasonable costs of the disposition, exceed (or are less than) the adjusted cost base to the Resident Holder of our common stock immediately before the disposition. See "—Taxation of Capital Gains and Capital Losses."
 Taxation of Capital Gains and Capital Losses
        Generally, one-half of any capital gain, or a "taxable capital gain," realized by a Resident Holder will be included in the Resident Holder's income for the year of disposition. One-half of any capital loss, or an "allowable capital loss," realized by a Resident Holder in a taxation year generally must be deducted by the Resident Holder against taxable capital gains in that year (subject to, and in accordance with, the provisions of the Tax Act). Any excess of allowable capital losses over taxable capital gains of a Resident Holder realized in the year of disposition may be carried back up to three taxation years or forward indefinitely and deducted against net taxable capital gains realized in such years, to the extent and under the circumstances described in the Tax Act.
        Capital gains realized by a Resident Holder that is an individual or trust, other than certain specified trusts, may give rise to a liability for minimum tax under the Tax Act.
        U.S. tax, if any, levied on any gain realized on a disposition of our common stock may be eligible for a foreign tax credit under the Tax Act to the extent and under the circumstances described in the Tax Act. Resident Holders should consult their own tax advisors with respect to the availability of a foreign tax credit, having regard to their own particular circumstances.
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 Offshore Investment Fund Property Rules
        The Tax Act contains provisions, or the "OIF Rules," which, in certain circumstances, may require a Resident Holder to include an amount in income in each taxation year in respect of the acquisition and holding of our common stock if (1) the value of such common stock may reasonably be considered to be derived, directly or indirectly, primarily from portfolio investments in: (i) shares of the capital stock of one or more corporations, (ii) indebtedness or annuities, (iii) interests in one or more corporations, trusts, partnerships, organizations, funds or entities, (iv) commodities, (v) real estate, (vi) Canadian or foreign resource properties, (vii) currency of a country other than Canada, (viii) rights or options to acquire or dispose of any of the foregoing or (ix) any combination of the foregoing, which we collectively refer to as "Investment Assets" and (2) it may reasonably be concluded that one of the main reasons for the Resident Holder acquiring, holding or having our common stock was to derive a benefit from portfolio investments in Investment Assets in such a manner that the taxes, if any, on the income, profits and gains from such Investment Assets for any particular year are significantly less than the tax that would have been applicable under Part I of the Tax Act if the income, profits and gains had been earned directly by the Resident Holder.
        In making this determination, the OIF Rules provide that regard must be had to all of the circumstances, including (i) the nature, organization and operation of any non-resident entity, including our company, and the form of, and the terms and conditions governing, the Resident Holder's interest in, or connection with, any such non-resident entity, (ii) the extent to which any income, profit and gains that may reasonably be considered to be earned or accrued, whether directly or indirectly, for the benefit of any such non-resident entity, including our company, are subject to an income or profits tax that is significantly less than the income tax that would be applicable to such income, profits and gains if they were earned directly by the Resident Holder and (iii) the extent to which any income, profits and gains of any such non-resident entity, including our company, for any fiscal period are distributed in that or the immediately following fiscal period.
        If applicable, the OIF Rules can result in a Resident Holder being required to include in its income for each taxation year in which such Resident Holder owns our common stock the amount, if any, by which (i) the total of all amounts each of which is the product obtained when the Resident Holder's "designated cost" (as defined in the Tax Act) of our common stock at the end of a month in the year is multiplied by 1 / 12 of the aggregate of the prescribed rate of interest for the period including that month plus two percentage points exceeds (ii) the Resident Holder's income for the year (other than a capital gain) in respect of our common stock determined without reference to the OIF Rules. Any amount required to be included in computing a Resident Holder's income under these provisions will be added to the adjusted cost base of our common stock to the Resident Holder.
        The CRA has taken the position that the term "portfolio investment" should be given a broad interpretation. While the value of our common stock should not be regarded as being derived primarily from portfolio investments in Investment Assets, there is a possibility that the CRA may take a different view. However, as noted above, even if this is the case, the OIF Rules will apply only if it is reasonable to conclude that one of the main reasons for a Resident Holder acquiring, holding or having our common stock was to derive, either directly or indirectly, a benefit from Investment Assets in such a manner that the taxes, if any, on the income, profits and gains from such Investment Assets for any particular year are significantly less than the tax that would have been applicable under Part I of the Tax Act if the income, profits and gains had been earned directly by the Resident Holder.
         The OIF Rules are complex and their application will potentially depend, in part, on the reasons for a Resident Holder acquiring, holding or having our common stock. Resident Holders are urged to consult their own tax advisors regarding the application and consequences of the OIF Rules in their own particular circumstances.
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 Additional Refundable Tax
        A Resident Holder that is, throughout the relevant taxation year, a "Canadian-controlled private corporation" (as defined in the Tax Act) may be subject to pay a refundable tax on its "aggregate investment income" (as defined in the Tax Act), including taxable capital gains and certain dividends.
 Foreign Property Information Reporting
        In general, a Resident Holder that is a "specified Canadian entity" (as defined in the Tax Act) for a taxation year or a fiscal period and whose total cost amount of "specified foreign property" (as defined in the Tax Act), including our common stock, at any time in the year or fiscal period exceeds C$100,000 will be required to file an information return with the CRA for the taxation year or fiscal period disclosing certain prescribed information in respect of such property. Subject to certain exceptions, a taxpayer resident in Canada, other than a corporation or trust exempt from tax under Part I of the Tax Act, will be a "specified Canadian entity," as will certain partnerships. Our common stock will be "specified foreign property" to a Resident Holder. Penalties may apply where a Resident Holder fails to file the required information return in respect of such Resident Holder's "specified foreign property" (as defined in the Tax Act) on a timely basis in accordance with the Tax Act. The reporting requirements with respect to "specified foreign property" were expanded so that more detailed information is required to be provided to the CRA.
        The reporting rules in the Tax Act are complex and this summary does not purport to address all circumstances in which reporting may be required by a Resident Holder. Resident Holders should consult their own tax advisors regarding the reporting rules contained in the Tax Act.
 Eligibility for Investment
        The common stock offered hereby will, on the date of this offering, provided that the common stock is on that date listed on a designated stock exchange, as defined in the Tax Act (which currently includes the Toronto Stock Exchange, or "TSX," and the NASDAQ Global Select Market or "NASDAQ"), be qualified investments under the Tax Act and the regulations thereunder for trusts governed by a registered retirements savings plan, or "RRSP," registered retirement income fund, or "RRIF," registered disability savings plan, deferred profit sharing plan, tax-free savings account, or "TFSA," or registered education savings plan, all within the meaning of the Tax Act.
        Notwithstanding, that the common stock may be qualified investments for a trust governed by a TFSA, RRSP or RRIF, the holder of the TFSA or the annuitant under a RRSP or RRIF, as the case may be, will be subject to tax in respect of the common stock if such common stock is a "prohibited investment" for the TFSA, RRSP or RRIF, as the case may be. The common stock will generally not be a "prohibited investment" provided the holder of the TFSA or the annuitant under the RRSP or RRIF, as the case may be, deals at arm's length with our company for purposes of the Tax Act and does not have a "significant interest" in our company for purposes of the prohibited investment rules in the Tax Act. Holders of a TFSA and annuitants under a RRSP or RRIF should consult their own tax advisors as to whether the common stock will be a "prohibited investment" in their particular circumstances.
 Shareholders Not Resident in Canada
        The following portion of this summary is applicable to a Holder who: (i) has not been, is not, and will not be resident or deemed to be resident in Canada for purposes of the Tax Act ; and (ii) does not and will not use or hold, and is not and will not be deemed to use or hold, our common stock in connection with, or in the course of, carrying on a business in Canada, or a "Non-Resident Holder." Special rules, which are not discussed in this summary, may apply to a Non-Resident Holder that is an
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insurer carrying on business in Canada and elsewhere. Such Non-Resident Holders should consult their own tax advisors.
 Dividends on Common Stock
        Dividends paid in respect of our common stock to a Non-Resident Holder will not be subject to Canadian withholding tax or other income tax under the Tax Act.
 Disposition of Common Stock
        A Non-Resident Holder who disposes or is deemed to dispose of our common stock that were acquired under the offering will not be subject to Canadian income tax in respect of any capital gain realized on the disposition unless such common stock constitute "taxable Canadian property" of the Non-Resident Holder for the purposes of the Tax Act and no exemption is available under an applicable income tax convention between Canada and the jurisdiction in which the Non-Resident Holder is resident.
        Generally, our common stock will not be taxable Canadian property at a particular time of a Non-Resident Holder provided that our common stock are listed on a designated stock exchange (which currently includes the TSX and NASDAQ) that time, unless, at any time during the sixty-month period that ends at that time when (a)(i) the Non-Resident Holder; (ii) persons not dealing at arm's length with such Non-Resident Holder; (iii) partnerships in which the Non-Resident Holder or a person mentioned in (a)(ii) holds a membership interest directly or indirectly through one or more partnerships or (iv) any combination of (a)(i) to (iii), owned 25% or more of the issued shares of any class of the capital stock of our company and (b) at that time more than 50% of the value of such common stock was derived directly or indirectly from one or any combination of (i) real or immoveable property situated in Canada; (ii) "Canadian resource properties" as defined in the Tax Act; (iii) "timber resource properties" as defined in the Tax Act; and (iv) options in respect of, interests in or rights in any property listed in (i)-(iii) whether or not the property exists. Notwithstanding the foregoing, in certain circumstances set out in the Tax Act, our common stock may be deemed to be taxable Canadian property to a Non-Resident Holder. Non-Resident Holders whose common stock is taxable Canadian property should consult their own tax advisors for advice having regard to their particular circumstances.
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 NOTICE TO INVESTORS REGARDING U.S. GAAP
        We prepare our financial information in accordance with U.S. GAAP, which differs in certain material respects from Canadian generally accepted accounting principles. We have historically provided financial information prepared in accordance with U.S. GAAP. As we will become an SEC issuer (as such term is defined in NI-52-107— Acceptable Accounting Principles and Auditing Standards of the Canadian Securities Administrators), we are not required to provide, and have not provided, a reconciliation of our financial statements to IFRS.

 LEGAL MATTERS
        The validity of the common stock offered hereby will be passed upon for us by Winston & Strawn LLP, Chicago, Illinois. Certain Canadian legal matters relating to this offering are being passed upon for us by Blake, Cassels & Graydon LLP. Certain legal matters in connection with this offering will be passed upon for the underwriters by Paul, Weiss, Rifkind, Wharton & Garrison LLP, with respect to U.S. law, and Stikeman Elliott LLP, with respect to Canadian law. The partners and associates of Blake, Cassels & Graydon LLP, collectively, beneficially own, directly or indirectly, less than 1% of our shares. The partners and associates of Stikeman Elliott LLP, collectively, beneficially own, directly or indirectly, less than 1% of our shares.

 EXPERTS
        The consolidated financial statements of CPI Card Group Inc. and its subsidiaries as of December 31, 2014 and 2013 and for each of the years in the three year period ended December 31, 2014, have been included herein in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
        The financial statements of EFT Source, Inc. as of September 2, 2014 and for the period from January 1, 2014 to September 2, 2014 have been included herein in reliance upon the report of KPMG LLP, independent auditors, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
        The financial statements of EFT Source, Inc. as of December 31, 2013 and 2012 and for the years then ended have been included herein in reliance upon the report of Lattimore, Black, Morgan & Cain, P.C., independent auditors, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.
        Certain statistical data contained herein have been derived from, and included herein in reliance upon, the market research report prepared by First Annapolis Consulting, Inc., an independent consulting firm, commissioned by the Company and issued on May 13, 2015, and upon the authority of said firm as experts with respect to the matters covered by its report.
        None of the experts named above own any registered or beneficial interest, direct or indirect, in any securities or other property of CPI or any of its associates or affiliates.

 CHANGE IN INDEPENDENT ACCOUNTANT
        Ernst & Young LLP previously served as our independent auditors since 2007. On November 12, 2014, after a customary review, our board of directors dismissed Ernst & Young LLP and retained KPMG LLP as our auditor.
        The report of Ernst & Young LLP on our consolidated financial statements of CPI Holdings I, Inc. which comprise the consolidated balance sheet as of December 31, 2013, and the related consolidated statements of operations and comprehensive income (loss), cash flows and stockholders' equity for the
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fiscal year ended December 31, 2013 contained no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principle. During the fiscal year ended December 31, 2013 and the subsequent interim period through November 12, 2014, there were no disagreements with Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement if not resolved to the satisfaction of Ernst & Young LLP would have caused them to make reference thereto in their report on the financial statements for such year. During the fiscal year ended December 31, 2013 and the subsequent interim period through November 12, 2014, there were no reportable events (as defined in Regulation S-K 304(a)(1)(v)).
        We have provided Ernst & Young LLP with a copy of the foregoing disclosure and have requested that Ernst & Young LLP furnish us with a letter addressed to the SEC stating whether or not Ernst & Young LLP agrees with the above statements and, if not, stating the respects in which it does not agree.

 WHERE YOU CAN FIND MORE INFORMATION
        We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits filed therewith. For further information about us and the common stock offered hereby, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and in each instance we refer you to the copy of such contract or other document filed as an exhibit to the registration statement. We currently do not file periodic reports with the SEC. Upon closing of our initial public offering, we will be required to file periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act. A copy of the registration statement and the exhibits filed therewith may be inspected without charge at the public reference room maintained by the SEC, located at 100 F Street, NE, Washington, DC 20549, and copies of all or any part of the registration statement may be obtained from that office. Please call the SEC at 1-800-SEC-0330 for further information about the public reference room. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address of the website is www.sec.gov.
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[ADDITIONAL PAGE FOR CANADIAN PROSPECTUS]

 PRIOR SALES
        This table sets out particulars of the Common Shares and Preferred Shares issued within the 12-month period prior to the date of this Prospectus. There were no securities exercisable for or exchangeable into Common Shares or Preferred Shares issued within the 12-month period prior to the date of this Prospectus.
 Issuance of Common and Preferred Shares

										
Date of Issuance/Grant 	 	Type of
Security	 	Number of
Securities Issued	 	Issue Price Per Share	 	
September 2, 2014	 	Common Shares (1)	 	 	11,694	 	 $	252.27	 	
September 2, 2014	 	Preferred Shares (1)	 	 	549	 	 $	3,733.88	 	

Notes:
(1)
Issued in connection with the acquisition of EFT Source, Inc. in September 2014.
 Restricted Common Shares
        As of the date of this prospectus, a total of 8,712 common shares that have restrictions on transferability ("restricted shares") have been granted by the Company to certain executive officers as an inducement to employment. On June 22, 2015, 6,712 restricted shares were granted to David Brush and 2,000 restricted shares were granted to Lisa Jacoba.
        The grants of restricted shares did not involve any cash payments from the recipients, however, the weighted average fair value as at the date of grant is $208.60 per share.
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[ADDITIONAL PAGE FOR CANADIAN PROSPECTUS]

 AUDIT COMMITTEE
 Composition of the Audit Committee
        The Company currently has an Audit Committee (the " Audit Committee ") which, upon the Company becoming a reporting issuer in a jurisdiction in Canada, will be comprised of Robert Pearce, Nicholas Peters and Bradley Seaman, all of whom are financially literate. Mr. Peters is considered independent for the purposes of serving on the audit committee. In accordance with the phase-in schedule under the NASDAQ Global Select Market Rules and Rule 10A-3 under the Exchange Act, the Company expects to add additional independent directors so that the audit committee will have a majority of independent directors within 90 days of the filing of the prospectus, and an entirely independent committee within one year of such date. A description of the education and experience of each Audit Committee member that is relevant to the performance of his responsibilities as an Audit Committee member may be found above under the heading " Management—Executive Officers and Directors. "
        The Audit Committee will be responsible for, among other matters: (i) appointing, retaining and evaluating our independent registered public accounting firm and approving all services to be performed by them; (ii) overseeing our independent registered public accounting firm's qualifications, independence and performance; (iii) overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual financial statements that we file with the SEC; (iv) reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; (v) establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters; and (vi) reviewing and approving related person transactions. The Audit Committee will also review the annual audited financial statements and make recommendations to the Board. A copy of the Audit Committee's charter is attached as Appendix "A" hereto.
 Audit Committee Oversight
        Since the commencement of the Company's most recently completed financial year, there has not been a recommendation of the Audit Committee to nominate or compensate an external auditor which was not adopted by the Company's board.
 Pre-Approval Policies and Procedures
        The Audit Committee will have authority and responsibility for pre-approval of all non-audit services to be provided to the Company by the external auditor, unless such pre-approval is otherwise appropriately delegated or if appropriate specific policies and procedures for the engagement of non-audit services have been adopted by the Audit Committee.
 External Auditor Service Fees by Category
        In connection with the Company's last fiscal year end, the Company incurred audit fees as set out in the table below. In the table, "audit fees" are fees billed by the Company's external auditor for services provided in auditing the Company's annual financial statements. "Audit-related fees" are fees not included in audit fees that are billed by the auditor for assurance and related services that are reasonably related to the performance of the audit review of the Company's financial statements. "Tax fees" are fees billed by the auditor for professional services rendered for tax compliance, tax advice and tax planning. "All other fees" are fees billed by the auditor for products and services not included in the foregoing categories.

														
Financial Year Ending 	 	Audit Fees	 	Audit Related Fees	 	Tax Fees	 	All Other Fees	 	
December 31, 2014	 	 $	421,805	 	 	—	 	 	—	 	 $	345,288	 	
December 31, 2013	 	 $	482,267	 	 	—	 	 	—	 	 $	115,523	 	
165

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[ADDITIONAL PAGE FOR CANADIAN PROSPECTUS]

 MATERIAL CONTRACTS
        The following are the only material contracts, other than those contracts entered into in the ordinary course of business, which we have entered into during the most recently completed financial year or before the most recently completed financial year that are still in effect or to which we are or will become a party on or prior to the closing date of this offering:
1.
The Underwriting Agreement between us, the selling stockholders and the underwriters, referred to under "Underwriting."

2.
Purchase and Sale Agreement, dated as of August 22, 2014, by and among William S. Dinker, Katherine S. Nevill, Bobby Smith and Tom Hedrich, William S. Dinker 2012 Trust for Edward McCullough Dinker, William S. Dinker 2012 Trust for John Walsh Dinker and William S. Dinker 2012 Trust for William S. Dinker III, EFT Source, Inc., CPI Acquisition, Inc. and William S. Dinker, as Sellers' Representative.

3.
First Lien Credit Agreement, dated as of August 17, 2015, by and among CPI Card Group Inc., CPI Acquisition Inc., the lenders from time to time party thereto and the Bank of Nova Scotia, as Administrative Agent and Collateral Agent, referred to under "Description of Certain Indebtedness."
        Copies of the foregoing contracts may be inspected at the Company's head office during ordinary business hours at any time during the period of distribution of the securities offered hereby or may be viewed at the SEC website or on the Company's profile on the SEDAR website maintained by the Canadian Securities Administrators at www.sedar.com.

 PURCHASER'S STATUTORY RIGHTS OF RESCISSION
        Securities legislation in certain of the provinces and territories of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. In several of the provinces and territories of Canada, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, revisions of the price or damages if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that the remedies for rescission, revisions of the price or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for the particulars of these rights or consult with a legal adviser.

 EXEMPTIONS
 Accounting Standards Relief
        The Company has applied to the securities regulatory authority in British Columbia for relief from the requirement in sections 3.2 and 3.3 of NI 52-107— Acceptable Accounting Principles and Auditing Standards ("NI 52-107") that financial statements included in this prospectus be prepared in accordance with International Financial Reporting Standards and audited in accordance with Canadian generally accepted auditing standards (the "Accounting Standards Relief") , respectively. The Accounting Standards Relief will allow the Company to include in this prospectus financial statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP") and audited in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("U.S. GAAS") .
166

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[ADDITIONAL PAGE FOR CANADIAN PROSPECTUS]
        In connection with the offering, the Company is filing the Registration Statement with the SEC. On the effective date of the Registration Statement, the Company will become an "SEC issuer" within the meaning of NI 52-107. As prescribed by U.S. federal securities laws, the financial statements included in the U.S. Prospectus included herein have been prepared in accordance U.S. GAAP and audited in accordance with U.S. GAAS. The Company's application for the Accounting Standards Relief is based on the fact that the use of U.S. GAAP and U.S. GAAS is permitted by NI 52-107 for reporting issuers that are SEC issuers. In accordance with National Policy 11-202— Process for Prospectus Reviews in Multiple Jurisdictions (" NP 11-202 "), the issuance of a receipt by the securities regulatory authority in British Columbia for the final prospectus will constitute evidence that the Accounting Standards Relief has been granted.
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[ADDITIONAL PAGE FOR CANADIAN PROSPECTUS]
Appendix "A"
Audit Committee Charter
        The Company intends to adopt an audit committee charter upon completion of the offering, and it will be appended hereto once finalized.
168

Table of Contents

 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

					
 	 	Page	 	
CPI Card Group Inc.	 	 	 	 	
As of December 31, 2014 and 2013 and for the Years Ended December 31, 2014, 2013 and 2012	 	 	 	 	
Report of Independent Registered Public Accounting Firm	 	 	F-2	 	
Consolidated Balance Sheets	 	 	F-3	 	
Consolidated Statements of Operations and Comprehensive Income	 	 	F-4	 	
Consolidated Statements of Stockholders' Deficit	 	 	F-5	 	
Consolidated Statements of Cash Flows	 	 	F-6	 	
Notes to Consolidated Financial Statements	 	 	F-7	 	
As of December 31, 2014 and June 30, 2015 and for the Three and Six Months Ended June 30, 2015 and 2014	 	 	
 	 	
Condensed Consolidated Balance Sheets	 	 	F-35	 	
Condensed Consolidated Statements of Operations and Comprehensive Income	 	 	F-36	 	
Condensed Consolidated Statements of Cash Flows	 	 	F-37	 	
Notes to Condensed Consolidated Financial Statements	 	 	F-38	 	
EFT Source, Inc.	 	 	
 	 	
As of September 2, 2014 and for the Period from January 1, 2014 to September 2, 2014	 	 	 	 	
Independent Auditor's Report	 	 	F-61	 	
Balance Sheet	 	 	F-62	 	
Statement of Operations	 	 	F-63	 	
Statements of Stockholders' Equity	 	 	F-64	 	
Statement of Cash Flows	 	 	F-65	 	
Notes to Financial Statements	 	 	F-66	 	
As of September 2, 2013 and for the Period from January 1, 2013 to September 2, 2013	 	 	
 	 	
Independent Accountants' Review Report	 	 	F-74	 	
Balance Sheet	 	 	F-75	 	
Statement of Operations	 	 	F-76	 	
Statement of Changes in Stockholders' Equity	 	 	F-77	 	
Statement of Cash Flows	 	 	F-78	 	
Notes to the Financial Statements	 	 	F-79	 	
As of and for the Years Ended December 31, 2013 and 2012	 	 	
 	 	
Independent Auditor's Report	 	 	F-87	 	
Balance Sheets	 	 	F-88	 	
Statements of Operations	 	 	F-89	 	
Statements of Changes in Stockholders' Equity	 	 	F-90	 	
Statements of Cash Flows	 	 	F-91	 	
Notes to the Financial Statements	 	 	F-92	 	
F-1

Table of Contents

  Report of Independent Registered Public Accounting Firm
The Board of Directors
CPI Card Group Inc.:
        We have audited the accompanying consolidated balance sheets of CPI Card Group Inc. (the Company) and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive income, stockholders' deficit, and cash flows for each of the years in the three year period ended December 31, 2014. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements 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, 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 financial position of CPI Card Group Inc. and subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the years in the three year period ended December 31, 2014 in conformity with U.S. generally accepted accounting principles.
/s/ KPMG LLP
Denver, Colorado
July 7, 2015
F-2

Table of Contents

 CPI Card Group Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in Thousands, Except Shares and Per Share Amounts)

								
 	 	December 31,	 	
 	 	2014	 	2013	 	
Assets	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 $	12,941	 	 $	9,702	 	
Accounts receivable, net of allowances of $272 and $1,365, respectively	 	 	43,548	 	 	31,435	 	
Inventories	 	 	21,605	 	 	17,551	 	
Prepaid expenses and other current assets	 	 	4,129	 	 	1,612	 	
Income taxes refundable	 	 	—	 	 	3,061	 	
Deferred income taxes	 	 	634	 	 	2,597	 	
Current assets of a discontinued operation	 	 	5,862	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total current assets	 	 	88,719	 	 	65,958	 	
Plant, equipment and leasehold improvements, net	 	 	
44,772	 	 	
36,650	 	
Capitalized loan fees	 	 	614	 	 	1,166	 	
Intangible assets, net	 	 	58,703	 	 	26,266	 	
Goodwill	 	 	73,801	 	 	40,818	 	
Deferred income taxes	 	 	—	 	 	1,009	 	
Other assets	 	 	15	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total assets	 	 $	266,624	 	 $	171,867	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Liabilities and stockholders' deficit	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	
Accounts payable	 	 $	16,276	 	 $	16,077	 	
Accrued expenses	 	 	10,591	 	 	7,613	 	
Deferred revenue and customer deposits	 	 	3,382	 	 	4,431	 	
Current maturities of long-term debt	 	 	6,326	 	 	6,841	 	
Income taxes payable	 	 	13	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total current liabilities	 	 	36,588	 	 	34,962	 	
Long-term debt, net of current maturities	 	 	
164,098	 	 	
115,465	 	
Sellers Note	 	 	9,000	 	 	—	 	
Deferred income taxes	 	 	13,810	 	 	—	 	
Other long-term liabilities	 	 	6,572	 	 	2,135	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total liabilities	 	 	230,068	 	 	152,562	 	
Commitments and contingencies	 	 	

Series A Preferred Stock; $0.001 par value—100,000 shares authorized; 86,407 shares issued and 64,809 shares outstanding and 85,858 shares issued and 64,260 shares outstanding; liquidation preference of $256,017 and $211,540 at December 31, 2014 and 2013 respectively	 	 	
58,250	 	 	
56,201	 	
Stockholders' deficit:	 	 	

Common Stock; $0.001 par value—2,600,000 shares authorized; 2,038,208 shares issued and 1,880,510 shares outstanding and 2,026,514 shares issued and 1,868,816 shares outstanding at December 31, 2014 and 2013, respectively	 	 	2	 	 	2	 	
Additional paid-in capital	 	 	(24,802	)	 	(27,747	)	
Accumulated earnings (deficit)	 	 	5,798	 	 	(7,504	)	
Accumulated other comprehensive loss	 	 	(2,584	)	 	(1,520	)	
Employee notes receivable	 	 	(108	)	 	(127	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total stockholders' deficit	 	 	(21,694	)	 	(36,896	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total liabilities and stockholders' deficit	 	 $	266,624	 	 $	171,867	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
    
See accompanying notes to consolidated financial statements
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Table of Contents

 CPI Card Group Inc. and Subsidiaries

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Dollars in Thousands, Except Per Share Amounts)

											
 	 	Year Ended December 31,	 	
 	 	2014	 	2013	 	2012	 	
Net sales:	 	 	 	 	 	 	 	 	 	 	
Products	 	 $	159,220	 	 $	101,360	 	 $	98,969	 	
Services	 	 	101,786	 	 	95,010	 	 	84,817	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total net sales	 	 	261,006	 	 	196,370	 	 	183,786	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Cost of sales:	 	 	 	 	 	 	 	 	 	 	
Products (exclusive of depreciation and amortization shown below)	 	 	105,580	 	 	66,154	 	 	65,777	 	
Services (exclusive of depreciation and amortization shown below)	 	 	65,052	 	 	63,054	 	 	58,360	 	
Depreciation and amortization	 	 	8,647	 	 	7,666	 	 	6,760	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total cost of sales	 	 	179,279	 	 	136,874	 	 	130,897	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Gross profit	 	 	81,727	 	 	59,496	 	 	52,889	 	
Operating expenses:	 	 	

 	 	
Selling, general and administrative (exclusive of depreciation and amortization shown below)	 	 	42,650	 	 	29,418	 	 	29,231	 	
Depreciation and amortization	 	 	4,605	 	 	3,929	 	 	3,754	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total operating expenses	 	 	47,255	 	 	33,347	 	 	32,985	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income from operations	 	 	34,472	 	 	26,149	 	 	19,904	 	
Other income (expense):	 	 	

 	 	
Interest, net	 	 	(7,508	)	 	(7,838	)	 	(5,765	)	
Foreign currency loss	 	 	(124	)	 	(142	)	 	(279	)	
Loss on debt modification and early extinguishment	 	 	(476	)	 	—	 	 	—	 	
Gain on purchase of ID Data	 	 	—	 	 	—	 	 	604	 	
Other income (expense), net	 	 	(101	)	 	18	 	 	171	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total other expense	 	 	(8,209	)	 	(7,962	)	 	(5,269	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income before income taxes	 	 	26,263	 	 	18,187	 	 	14,635	 	
Provision for income taxes	 	 	(10,291	)	 	(6,988	)	 	(5,909	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income from continuing operations	 	 	15,972	 	 	11,199	 	 	8,726	 	
Loss from a discontinued operation, net of taxes (note 4)	 	 	(2,670	)	 	(2,612	)	 	(3,796	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income	 	 $	13,302	 	 $	8,587	 	 $	4,930	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Other Comprehensive Income	 	 	 	 	 	 	 	 	 	 	
Currency translation adjustment	 	 	(1,064	)	 	(261	)	 	604	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total comprehensive income	 	 $	12,238	 	 $	8,326	 	 $	5,534	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income from continuing operations	 	 $	15,972	 	 $	11,199	 	 $	8,726	 	
Preferred stock dividends	 	 	(44,477	)	 	(35,268	)	 	(36,363	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Loss from continuing operations attributable to common stockholders	 	 	(28,505	)	 	(24,069	)	 	(27,637	)	
Loss from a discontinued operation, net of taxes	 	 	(2,670	)	 	(2,612	)	 	(3,796	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net loss attributable to common stockholders	 	 $	(31,175	)	 $	(26,681	)	 $	(31,433	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Basic and diluted loss per share:	 	 	 	 	 	 	 	 	 	 	
Continued operations	 	 $	(15.22	)	 $	(12.89	)	 $	(14.73	)	
Discontinued operation	 	 	(1.43	)	 	(1.40	)	 	(2.02	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	(16.65	)	 $	(14.29	)	 $	(16.75	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
    
See accompanying notes to consolidated financial statements
F-4

Table of Contents

 CPI Card Group Inc. and Subsidiaries

Consolidated Statement of Stockholders' Deficit

(Dollars in Thousands, Except Share Amounts)

																							
 	 	Common Shares	 	 	 	 	 	Accumulated
other
comprehensive
loss	 	 	 	 	 	
 			 	Additional
paid-in
capital	 	Accumulated
earnings
(deficit)			 	Employee
notes
receivable	 	 	 	
 	 	Shares	 	Amount									 	Total	 	
January 1, 2012	 	 	1,858,581	 	 $	2	 	 $	621	 	 $	(21,021	)	 $	(1,863	)	 $	(463	)	 $	(22,724	)	
Issuance of common stock, net of issuance costs	 	 	17,278	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
Preferred stock dividend	 	 	—	 	 	—	 	 	(28,368	)	 	—	 	 	—	 	 	—	 	 	(28,368	)	
Repayment of employee note	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	326	 	 	326	 	
Components of comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	—	 	 	—	 	 	—	 	 	4,930	 	 	—	 	 	—	 	 	4,930	 	
Currency translation adjustment	 	 	—	 	 	—	 	 	—	 	 	—	 	 	604	 	 	—	 	 	604	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
December 31, 2012	 	 	1,875,859	 	 $	2	 	 $	(27,747	)	 $	(16,091	)	 $	(1,259	)	 $	(137	)	 $	(45,232	)	
Issuance of common stock, net of issuance costs	 	 	5,596	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
Redemption of common stock	 	 	(12,639	)	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
Repayment of employee note	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	10	 	 	10	 	
Components of comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	—	 	 	—	 	 	—	 	 	8,587	 	 	—	 	 	—	 	 	8,587	 	
Currency translation adjustment	 	 	 	 	 	—	 	 	—	 	 	—	 	 	(261	)	 	—	 	 	(261	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
December 31, 2013	 	 	1,868,816	 	 $	2	 	 $	(27,747	)	 $	(7,504	)	 $	(1,520	)	 $	(127	)	 $	(36,896	)	
Issuance of common stock	 	 	11,694	 	 	—	 	 	2,945	 	 	—	 	 	—	 	 	—	 	 	2,945	 	
Repayment of employee note	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	19	 	 	19	 	
Components of comprehensive income:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income	 	 	—	 	 	—	 	 	—	 	 	13,302	 	 	—	 	 	—	 	 	13,302	 	
Currency translation adjustment	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(1,064	)	 	—	 	 	(1,064	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
December 31, 2014	 	 	1,880,510	 	 $	2	 	 $	(24,802	)	 $	5,798	 	 $	(2,584	)	 $	(108	)	 $	(21,694	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
    
See accompanying notes to consolidated financial statements
F-5

Table of Contents

 CPI Card Group Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Dollars in Thousands)

											
 	 	Year Ended December 31,	 	
 	 	2014	 	2013	 	2012	 	
Operating activities	 	 	 	 	 	 	 	 	 	 	
Net income	 	 $	13,302	 	 $	8,587	 	 $	4,930	 	
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities, net of effects of acquisitions:	 	 	 	 	 	 	 	 	 	 	
Depreciation, amortization and accretion expense	 	 	14,789	 	 	14,295	 	 	12,666	 	
Non-cash accretion of defined stock compensation plan	 	 	4,534	 	 	610	 	 	—	 	
Loss on debt modification and extinguishment	 	 	476	 	 	—	 	 	—	 	
Deferred income tax	 	 	(1,433	)	 	1,960	 	 	1,001	 	
Other	 	 	80	 	 	27	 	 	456	 	
Unrealized foreign currency exchange (gain) / loss	 	 	(204	)	 	(94	)	 	130	 	
Gain on purchase of ID Data	 	 	—	 	 	—	 	 	(604	)	
Changes in operating assets and liabilities:	 	 	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	(7,003	)	 	4,368	 	 	(1,426	)	
Inventories	 	 	(5,763	)	 	5,705	 	 	(270	)	
Prepaid expenses and other current assets	 	 	(8,473	)	 	572	 	 	759	 	
Income taxes refundable	 	 	3,061	 	 	(1,013	)	 	(1,995	)	
Accounts payable	 	 	1,466	 	 	(9,006	)	 	8,559	 	
Accrued expenses	 	 	12,567	 	 	(2,192	)	 	(1,793	)	
Deferred revenue and customer deposits	 	 	(772	)	 	(197	)	 	(1,088	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Cash provided by operating activities	 	 	26,627	 	 	23,622	 	 	21,325	 	
Investing activities	 	 	

 	 	
Acquisition of EFT Source, Inc	 	 	(54,859	)	 	—	 	 	—	 	
Acquisition of ID Data	 	 	—	 	 	—	 	 	(1,156	)	
Acquisitions of plant, equipment and leasehold improvements	 	 	(16,956	)	 	(9,240	)	 	(11,047	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Cash used in investing activities	 	 	(71,815	)	 	(9,240	)	 	(12,203	)	
Financing activities	 	 	

 	 	
Payment on long-term debt	 	 	(11,045	)	 	(7,122	)	 	(5,565	)	
Proceeds from long-term debt	 	 	60,000	 	 	—	 	 	24,505	 	
Payment on line of credit	 	 	(19,300	)	 	(14,750	)	 	—	 	
Proceeds from line of credit	 	 	19,300	 	 	9,750	 	 	5,000	 	
Loan issuance costs	 	 	(440	)	 	—	 	 	(192	)	
Proceeds from employee note receivable	 	 	19	 	 	10	 	 	326	 	
Proceeds from sale of Company stock, net of issuance costs	 	 	—	 	 	50	 	 	181	 	
Dividend distribution	 	 	—	 	 	—	 	 	(28,367	)	
Redemption of preferred and common stock	 	 	—	 	 	(48	)	 	(16,632	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Cash provided by (used in) financing activities	 	 	48,534	 	 	(12,110	)	 	(20,744	)	
Effect of exchange rates on cash	 	 	
(107	
)	 	
37	 	 	
111	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net increase (decrease) in cash and cash equivalents:	 	 	3,239	 	 	2,309	 	 	(11,511	)	
Cash and cash equivalents, beginning of period	 	 	9,702	 	 	7,393	 	 	18,904	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Cash and cash equivalents, end of period	 	 $	12,941	 	 $	9,702	 	 $	7,393	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Supplemental disclosures of cash flow information	 	 	 	 	 	 	 	 	 	 	
Cash paid during the period for:	 	 	 	 	 	 	 	 	 	 	
Interest	 	 $	6,793	 	 $	7,248	 	 $	5,323	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income taxes	 	 $	3,219	 	 $	4,680	 	 $	4,269	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
    
See accompanying notes to consolidated financial statements
F-6

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 1. Business
        CPI Card Group Inc., formerly known as CPI Holdings I, Inc. (which, together with its subsidiary companies, is referred to herein as "CPI" or the "Company") is engaged in the design, production, data personalization, packaging and fulfillment of Financial Payment Cards which the Company defines as credit cards, debit cards and prepaid debit cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express, Discover and Interac (in Canada)) in the United States, Europe and Canada. The Company also is engaged in the design, production, data personalization, packaging and fulfillment of retail gift and loyalty cards (primarily in Europe and Canada).
        The Company's business consists of three reportable segments: the U.S. Debit and Credit segment, the U.S. Prepaid Debit segment and the U.K. Limited segment.
•
U.S. Debit and Credit Segment.   The U.S. Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services to card-issuing banks in the United States. Products manufactured by this segment primarily include EMV and non-EMV credit cards, debit cards and prepaid debit cards issued on the networks of the Payment Card Brands, private label credit cards that are not issued on the networks of the Payment Cards Brands and instant issuance systems. This segment also provides a variety of integrated card services, including card personalization and fulfillment services and instant issuance services. The U.S. Debit and Credit segment includes the Company's operations in Colorado, Indiana and Tennessee, which are each certified by multiple global Payment Card Brands, and where required by the Company's customers and the PCI Security Standards Council. 

•
U.S. Prepaid Debit Segment.   The U.S. Prepaid Debit segment primarily provides integrated card services to prepaid debit card issuers in the United States. Services provided include tamper-evident security packaging services and card personalization and fulfillment services. This segment also produces Financial Payment Cards issued on the networks of the payment card brands that are included in the tamper-evident security packages mentioned above. The U.S. Prepaid Debit segment includes the Company's operation in Minnesota which is certified by multiple global Payment Card Brands and the PCI Security Standards Council. 

•
U.K. Limited Segment.   The U.K. Limited segment primarily produces retail gift and loyalty cards for customers in the United Kingdom and continental Europe. This segment also provides card personalization and fulfillment services. The U.K. Limited segment includes the Company's operations in Colchester, United Kingdom and Liverpool, United Kingdom. Neither of the Company's operations in this segment is certified by any of the Payment Card Brands, nor are they PCI certified.
        The Company applied acquisition accounting for the acquisition of both EFT Source, Inc. (the "EFT Acquisition") and ID Data, Limited ("ID Data" or the "ID Data acquisition") in accordance with Accounting Standards Codification (ASC) 805, Business Combinations . As such, the acquired assets and assumed liabilities were recorded at fair value as of the acquisition date. See Note 3 for more information related to the acquisitions.
        The Company sold its non-secure operation located in Nevada on January 12, 2015 (the "Nevada Sale") under an asset purchase agreement for $5,000 in cash. Nevada primarily produced retail gift cards that are not issued on the networks of the Payment Card Brands. Accordingly, the Company's consolidated balance sheets and statements of operations and comprehensive income have been
F-7

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 1. Business (Continued)
reclassified to present Nevada as a discontinued operation for the years ended December 31, 2014, 2013 and 2012. See Note 4 for more information related to the discontinued operation and disposition.
        As a producer and provider of services for Financial Payment Cards, each of the Company's secure facilities must be certified by one or more of the Payment Card Brands and are therefore subject to specific requirements and conditions. Noncompliance with these requirements would prohibit the individual facilities of the Company from producing Financial Payment Cards for these entities' payment card issuers.
 2. Summary of Significant Accounting Policies
 Basis of Presentation
        The accompanying consolidated financial statements include the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements.
        Subsequent to the initial issuance of the Company's consolidated financial statements as of and for the years ended December 31, 2014 and December 31, 2013, the Company identified immaterial errors to those financial statements related to the customer relationship intangible asset of the CPI Nevada operating segment, and the related amortization of the intangible asset which should have been impaired prior to 2012. Those immaterial errors have been corrected in the accompanying consolidated financial statements.
        As a result of the correction, there was a decrease for 2014 in intangible assets (net) and deferred income taxes in the consolidated balance sheet of $16,449 and $5,928, respectively. In addition, in 2014, there was a decrease in depreciation and amortization expense associated with cost of sales and an increase in the provision for income taxes in the consolidated statement of operations and comprehensive income (loss) of $1,395 and $503, respectively.
        For 2013, there was a decrease in intangible assets (net) and deferred income taxes in the consolidated balance sheet of $17,884 and $6,471, respectively. In addition, in 2013, there was a decrease in depreciation and amortization expense associated with cost of sales and an increase in the provision for income taxes in the consolidated statement of operations and comprehensive income (loss) of $1,435 and $517, respectively.
 Revenue Recognition
        Generally, the Company recognizes revenue related to sales of its products upon shipment, when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable and collectability is reasonably assured.
        In certain cases, at the customer's request, the Company enters into bill-and-hold transactions whereby title transfers to the customer, but the product does not ship until a specified later date. The Company recognizes revenue associated with bill-and-hold arrangements when the product is complete and ready to ship, hold criteria have been met, the amount due from the customer is fixed and collectability of the related receivable is reasonably assured.
F-8

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 2. Summary of Significant Accounting Policies (Continued)
        Freight revenue totaling $4,249, $4,278 and $3,885 is included in net sales during the years ended December 31, 2014, 2013 and 2012, respectively. The related freight costs are included in cost of sales.
 Multiple-Element Arrangements
        The Company enters into warehouse, fulfillment and distribution service agreements with several customers, engaging the Company to store and handle completed cards and packages on their behalf. For the sales arrangements that contain multiple deliverables, the arrangement is split into separate units of accounting and individually delivered elements have value to the customer on a standalone basis. When separate units of accounting exist, revenue is allocated to each element based on the Company's best estimate of competitive market prices. At the point in which completed cards and packages are shipped to the Company's warehouse, the product is billed and the revenue is recognized in accordance with the Company's revenue recognition policy. Warehousing services revenue is recognized monthly based on volume and handling requirements; fulfillment services revenue is recognized when the product is handled in the manner specified by the customer for a unit or handling fee.
 Cash and Cash Equivalents
        The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents and they are stated at cost, which approximates fair value.
 Trade Accounts Receivable and Concentration of Credit Risk
        Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company performs ongoing credit evaluations of its customers and generally requires no collateral to secure accounts receivable. The Company maintains an allowance for potentially uncollectible accounts receivable based upon its assessment of the collectability of accounts receivable. Accounts are written off against the allowance when it becomes probable collection will not occur. The allowance for bad debt and credit activity for the years ended December 31, 2014 and 2013 is summarized as follows:

					
Balance as of December 31, 2012	 	 $	1,034	 	
Bad debt expense	 	 	650	 	
Write-off of uncollectible accounts	 	 	(320	)	
Currency translation adjustments	 	 	1	 	
 ​	​	​ 	​ 	​	
Balance as of December 31, 2013	 	 	1,365	 	
Bad debt expense	 	 	(100	)	
Write-off of uncollectible accounts	 	 	(986	)	
Currency translation adjustments	 	 	(7	)	
 ​	​	​ 	​ 	​	
Balance as of December 31, 2014	 	 $	272	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        For the year ended December 31, 2014, the Company had sales to one customer of $29,523 (11.3% of consolidated net sales). For the years ended December 31, 2013 and 2012, the Company had sales to
F-9

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 2. Summary of Significant Accounting Policies (Continued)
a different customer of $31,924 (16.3% of consolidated net sales) and $27,510 (15.0% of consolidated net sales), respectively.
 Inventories
        Inventories consist of raw materials, work-in-process and finished goods and are valued at the lower-of-cost (determined on the first-in, first-out or specific identification basis) or market.
 Plant, Equipment and Leasehold Improvements
        Plant, equipment and leasehold improvements are recorded at cost. Accumulated depreciation is computed using the straight-line method over the lesser of the estimated useful life of the related assets (generally 3 to 10 years for equipment, furniture and leasehold improvements) or, when applicable, the lease term. Maintenance and repairs that do not extend the useful life of the respective assets are charged to expense as incurred. For the Company's continuing operations, amounts charged to expense for the depreciation of plant, equipment and leasehold improvements were $10,359, $9,560, and $8,438 for the years ended December 31, 2014, 2013 and 2012, respectively.
        Long-lived assets with finite lives are reviewed for impairment whenever events indicate that the carrying amount of the asset or the carrying amounts of the asset group containing the asset may not be recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets or asset groups are compared with their carrying value to determine if a write-down to fair value is required. Based upon the Company's analysis, it concluded that there was no impairment of its long-lived assets for the years ended December 31, 2014, 2013 and 2012, respectively.
 Goodwill and Intangible Assets
        Goodwill and other indefinite-lived intangible assets are not amortized, but instead are tested for impairment at least annually on October 1. Testing is done in accordance with ASC 350, Intangibles—Goodwill and Other and ASC 820, Fair Value Measurements and Disclosures . For impairment evaluations, the Company or third-party firm first makes a qualitative assessment with respect to both goodwill and other indefinite-lived intangibles. In the case of goodwill, if it is more likely than not that a reporting unit's fair value is less than its carrying value, the fair value of the reporting unit is compared to its respective carrying amount. If the carrying value of a reporting unit were to exceed its fair value, any excess of the carrying amount over the fair value would be charged to operations as an impairment loss. With respect to indefinite-lived intangible assets, if it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying value, any excess of the carrying value over the fair value of the indefinite-lived intangible asset is also charged to operations as an impairment loss.
        For the years ending December 31, 2014, 2013 and 2012 the Company determined goodwill and other indefinite-lived intangibles were not impaired. As of December 31, 2014, 2013 and 2012, $24,377, $27,562 and $30,747 of goodwill were tax-deductible, respectively.
        Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. The estimated remaining useful lives for intangible assets range 1 to
F-10

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 2. Summary of Significant Accounting Policies (Continued)
14.5 years. Acquired indefinite-lived intangible assets related to trademarks are capitalized and subject to impairment.
 Capitalized Loan Fees
        Certain costs incurred with borrowings or the establishment/modification of credit facilities are capitalized. These costs are amortized as an adjustment to interest expense over the life of the borrowing using the effective-interest rate method.
 Income Taxes
        The Company accounts for income taxes using an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.
        The Company accounts for uncertain income tax positions in accordance with ASC 740, Income Taxes . ASC 740 prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. Only tax positions that meet the more-likely-than-not recognition threshold at the effective date may be recognized or continue to be recognized upon adoption. In addition, ASC 740 provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
        The Company has analyzed its filing positions in all of the jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions, and based upon its review, determined there are no unrecognized tax liabilities as of December 31, 2014 and 2013.
        The Company is generally subject to potential federal and state examinations for the tax years after December 31, 2010 for federal purposes and December 31, 2009 for state purposes.
 Stock-Based Compensation
        The Company uses the fair value recognition provisions of ASC 718, Compensation—Stock Compensation . The Black-Scholes option pricing model is used to estimate stock option fair values. This option pricing model requires a number of assumptions, of which the most significant are estimated common stock fair value, expected stock price volatility, the expected forfeiture rate and the expected option term (the length of time from the grant date until the options are exercised or expire). Expected volatility was calculated based on an analysis of the volatility of stock prices for public companies in the Company's business segment. Forfeitures are assumed to be minimal, given that the Company has a limited history of forfeitures. The expected option life is estimated to be five years, based on the historical exercise patterns of option holders. See Notes 17 and 18 for additional information regarding stock-based compensation.
F-11

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 2. Summary of Significant Accounting Policies (Continued)
 Advertising Costs
        Advertising costs are expensed as incurred. Advertising costs during the years ended December 31, 2014, 2013 and 2012 were $392, $144 and $710, respectively.
 Use of Estimates
        Management uses estimates and assumptions relating to the reporting of assets and liabilities in its preparation of the consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets, valuation allowances for receivables, inventories, deferred tax assets and stock-based compensation expense. Actual results could differ from those estimates.
 Foreign Currency Translation
        Financial statements of foreign subsidiaries that use local currencies as their functional currency are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the weighted-average exchange rate for each period for revenues, expenses, gains and losses. Translation adjustments are recorded as the only component of other comprehensive income in the accompanying financial statements. Foreign currency transaction gains and losses resulting from the process of re-measurement are recorded in other income (expense) in the accompanying consolidated statements of operations and comprehensive income. For the years ended December 31, 2014, 2013 and 2012 there were $124, $142 and $279 of such foreign currency losses, respectively.
 Recently Issued Accounting Pronouncements
        The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers , in May 2014. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for annual reporting periods beginning after December 15, 2017. The Company will implement the provisions of ASU 2014-09 as of January 1, 2018. The Company is in the process of determining the method of adoption and assessing the impact of ASU 2014-09 on its results of operations, financial position and consolidated financial statements.
        The FASB issued ASU 2015-03, Interest — Imputation of Interest, in April 2015. ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The new standard is effective for public entities annual reporting periods beginning after December 15, 2015. We do not expect that this pronouncement will have a material impact on our consolidated financial statements.
F-12

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 3. Acquisitions
 (a)    EFT Source Acquisition
        On September 2, 2014, CPI Card Group Inc., through its wholly-owned subsidiary, CPI Acquisition, Inc., purchased EFT Source, Inc. ("EFT Source") headquartered in Nashville, Tennessee. EFT Source is a provider of Financial Payment Card services such as data personalization and fulfillment in the U.S. market. The primary reasons for the acquisition were to extend the Company's existing product lines, expand its markets and increase revenue.
 Purchase Price
        Total consideration for the EFT Acquisition of $68,859 was paid in cash of $54,865 and non-cash considerations of the Sellers Note of $9,000 and issuance of $4,994 of CPI Card Group Inc. preferred and common stock.
 Allocation of Purchase Price
        The EFT Acquisition was accounted for in accordance with ASC 805, Business Combinations . As such, the acquired assets and assumed liabilities have been recorded at their estimated acquisition date fair values.
        The allocation of purchase price to the assets acquired and liabilities assumed at the EFT Acquisition date is presented below:

					
Cash and cash equivalents	 	 $	381	 	
Accounts receivable	 	 	5,837	 	
Inventory	 	 	1,724	 	
Prepaid expenses	 	 	1,426	 	
Other current assets	 	 	645	 	
Property, equipment and leasehold improvements, net	 	 	6,460	 	
Goodwill	 	 	33,619	 	
Intangible assets subject to amortization (a)	 	 	31,100	 	
Trademarks (indefinite-lived)	 	 	4,400	 	
Other assets	 	 	13	 	
Deferred tax liability	 	 	(14,751	)	
Other current liabilities	 	 	(1,995	)	
 ​	​	​ 	​ 	​	
Total purchase price	 	 $	68,859	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	

(a)
Amounts primarily include intangible assets related to customer relationships. At September 2, 2014, the weighted average useful life of EFT Source customer relationships was 15 years.
        The fair value of the intangible assets acquired was primarily determined based upon the present value of expected future cash flows, utilizing a risk-adjusted discount rate. The customer relationships were valued based on a "multi-period excess earnings approach." The "multi-period excess earnings approach" measures an asset's value as the present value of cash flows generated by the asset adjusted
F-13

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 3. Acquisitions (Continued)
for contributory charges for other assets which contribute to the cash flows. The non-compete agreements were valued based on a "with and without" approach. The "with and without" method measures an asset value by estimating the difference in cash flows generated by the business with the asset in-use versus without the asset. The difference in cash flows is attributable to incremental earnings or cost savings associated with the asset. The trademark and trade names were valued based on a "relief from royalty" approach. The "relief from royalty" method is based on the premise that a third party would be willing to pay a royalty to use the trade name or trademark asset owned by the subject company. The projected royalties are converted into their present value equivalents through the application of a risk adjusted discount rate.
        The Company recorded the excess of the aggregate purchase price over the estimated fair values of the identifiable assets acquired as goodwill, which is not deductible for tax purposes.
        The assets and liabilities assumed in the acquisition and the results of EFT Source operations were included in the Company's consolidated financial statements as of September 2, 2014.
 (b)    ID Data, Limited Acquisition
        On May 23, 2012, CPI Card Group Inc. through its wholly-owned indirect subsidiary, CPI Card Group—Petersfield, Inc., purchased certain assets of ID Data. ID Data is located in Petersfield, England, and serves both the secure financial card market and the retail, gift, loyalty, and government ID card markets. ID Data produces cards, including Financial Payment Cards (magnetic stripe and EMV) and provides card services (data personalization, card issuance and fulfillment) to customers throughout Europe.
 Purchase Price
        Consideration for the ID Data acquisition was cash of $1,156, which was funded by the Company with available cash.
 Allocation of Purchase Price
        The acquisition was accounted for as a business combination in accordance with ASC 805. As such, the acquired assets and assumed liabilities have been recorded at their estimated acquisition date fair values.
        The Company has estimated that the fair value of the identifiable assets, net of the liabilities assumed, was $1,760, resulting in a gain on purchase of $604 for the year ended December 31, 2012.
F-14

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 3. Acquisitions (Continued)
        The allocation of purchase price to the assets acquired and liabilities assumed at the acquisition date is presented below:

					
Current assets	 	 $	458	 	
Property, equipment and leasehold improvements	 	 	1,549	 	
Intangible assets subject to amortization	 	 	237	 	
Deferred tax liability	 	 	(268	)	
Other current liabilities	 	 	(216	)	
Gain on acquisition	 	 	(604	)	
 ​	​	​ 	​ 	​	
Total purchase price	 	 $	1,156	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
 Pro Forma Information
        The following unaudited pro forma consolidated operating results give effect to the EFT Acquisition as if it had been completed on January 1, 2013. These pro forma amounts are not necessarily indicative of the operating results that would have occurred if these transactions had occurred on such date. The pro forma adjustments are based on certain assumptions that the Company considers to be reasonable.

								
 	 	December 31,	 	
 	 	2014	 	2013	 	
Revenue—Continuing Operations	 	 $	291,302	 	 $	233,360	 	
Net Income—Continuing Operations	 	 	16,916	 	 	10,186	 	
Basic and Diluted Loss Per Share from Continuing
Operations	 	 	(14.66	)	 	(13.27	)	
        The Company's consolidated statement of operations for the year ended December 31, 2014 includes revenue and net income from operations of $21,999 and $4,446 respectively, attributable to EFT Source.
 4. Discontinued Operation and Disposition
        On January 12, 2015, the Company sold its Nevada non-secure operating segment under an asset purchase agreement for $5,000 in cash (the "Nevada Sale"). Nevada was primarily engaged in the design, production, data personalization, packaging and daily fulfillment of retail gift and loyalty cards for customers in the United States and was not certified by any of the Payment Card Brands. The net carrying values of the assets classified as a discontinued operation include inventory and plant, equipment and leasehold improvements of $3,100 and $2,900 respectively. Nevada recognized a loss of $2,670, $2,612 and $3,796 for the years ended December 31, 2014, 2013 and 2012, respectively, which is included in loss from a discontinued operation, net of an income tax benefit of $1,421, $1,398 and $2,182 in the Company's consolidated statement of operations. After the Nevada Sale, CPI retained no continuing involvement in the Nevada operations other than a 180 day transition of services agreement. The transition of services agreement requires the buyer to complete all work for purchase orders received by CPI prior to the Nevada Sale for any customers that could not be converted to a buyer's purchase order.
F-15

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 5. Inventories
        Inventories are summarized below:

								
 	 	December 31,	 	
 	 	2014	 	2013	 	
Raw materials	 	 $	10,217	 	 $	8,605	 	
Work-in-process	 	 	8,222	 	 	7,261	 	
Finished goods	 	 	3,166	 	 	1,685	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	21,605	 	 $	17,551	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 6. Plant, Equipment and Leasehold Improvements
        Plant, equipment and leasehold improvements consist of the following:

								
 	 	December 31,	 	
 	 	2014	 	2013	 	
Buildings	 	 $	2,486	 	 $	3,143	 	
Machinery and equipment	 	 	47,792	 	 	58,402	 	
Furniture and fixtures	 	 	4,203	 	 	8,811	 	
Leasehold improvements	 	 	12,593	 	 	11,784	 	
Construction in progress	 	 	3,448	 	 	3,617	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
	 	 	70,522	 	 	85,757	 	
Less accumulated depreciation and amortization	 	 	(25,750	)	 	(49,107	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	44,772	 	 $	36,650	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
        At December 31, 2013, the Company had $1,388 of accounts payable related to property, plant and equipment.
 7. Goodwill and Other Intangible Assets
        The Company's goodwill at December 31, 2014 and 2013 relates to the U.S. Debit and Credit reporting unit and the U.K. Limited reporting unit.
        Goodwill activity is summarized as follows:

					
Balance as of January 1, 2013	 	 $	41,132	 	
Adjustments to 2007 goodwill related to tax deductions	 	 	(314	)	
 ​	​	​ 	​ 	​	
Balance as of December 31, 2013	 	 	40,818	 	
EFT Acquisition	 	 	33,619	 	
Currency translation	 	 	(636	)	
 ​	​	​ 	​ 	​	
Balance as of December 31, 2014	 	 $	73,801	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        The Company completed its evaluation of the carrying value of goodwill as of October 1, 2014 and 2013 and determined there was no impairment to the recorded value of goodwill. In order to identify
F-16

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 7. Goodwill and Other Intangible Assets (Continued)
potential impairments, CPI compared the fair value of its reporting units with their carrying amounts, including goodwill. As the fair value of the reporting units exceeded their carrying amounts, the Company was not required to complete the second step of the process which would measure the amount of any impairment.
        CPI's intangible assets consist of customer relationships, technology and software, noncompete agreements, favorable leases and trademarks. Total intangible assets are being amortized over a weighted-average useful life of 16 years. Intangible amortization expense totaled $2,893, $2,035 and $2,024, for the years ended December 31, 2014, 2013 and 2012, respectively.
        Intangible assets consist of the following:

																						
 	 	 	 	December 31, 2014	 	December 31, 2013	 	
 	 	Average
Life (Years)	 	Cost	 	Accumulated
Amortization	 	Net Book
Value	 	Cost	 	Accumulated
Amortization	 	Net Book
Value	 	
Customer relationships	 	12 to 20	 	 $	59,871	 	 $	(14,304	)	 $	45,567	 	 $	36,455	 	 $	(11,886	)	 $	24,569	 	
Technology and software	 	7 to 10	 	 	7,101	 	 	(310	)	 	6,791	 	 	—	 	 	—	 	 	—	 	
Noncompete agreements	 	5 to 8	 	 	491	 	 	(198	)	 	293	 	 	191	 	 	(159	)	 	32	 	
Favorable leases	 	9.5	 	 	111	 	 	(88	)	 	23	 	 	111	 	 	(76	)	 	35	 	
 ​	​	​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Intangible assets subject to amortization	 	 	 	 	67,574	 	 	(14,900	)	 	52,674	 	 	36,757	 	 	(12,121	)	 	24,636	 	
Trademarks (indefinite-lived)	 	 	 	 	6,029	 	 	—	 	 	6,029	 	 	1,630	 	 	—	 	 	1,630	 	
 ​	​	​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
	 	 	 	 $	73,603	 	 $	(14,900	)	 $	58,703	 	 $	38,387	 	 $	(12,121	)	 $	26,266	 	
 ​	​	​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
        The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of December 31, 2014 is as follows:

					
2015	 	 $	4,602	 	
2016	 	 	4,588	 	
2017	 	 	4,576	 	
2018	 	 	4,576	 	
2019	 	 	4,576	 	
Thereafter	 	 	29,756	 	
 ​	​	​ 	​ 	​	
	 	 $	52,674	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
 8. Fair Value of Financial Instruments
        Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In determining fair value, the Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
•
Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
F-17

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 8. Fair Value of Financial Instruments (Continued)
•
Level 2—Inputs, other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. 

•
Level 3—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.
        The Company's financial assets and liabilities subject to fair value measurements and the necessary disclosures are as follows:

														
 	 	 	 	Fair Value Measurement at
December 31, 2014
(Using Fair Value Hierarchy)	 	
 	 	Fair Value as of
December 31,
2014			 	
 			 	Level 1	 	Level 2	 	Level 3	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 $	12,941	 	 $	12,941	 	 $	—	 	 $	—	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Term Loan	 	 $	170,866	 	 $	—	 	 $	170,866	 	 $	—	 	
Sellers Note	 	 $	9,000	 	 $	—	 	 $	—	 	 $	9,000	 	

														
 	 	 	 	Fair Value Measurement at
December 31, 2013
(Using Fair Value Hierarchy)	 	
 	 	Fair Value as of
December 31,
2013			 	
 			 	Level 1	 	Level 2	 	Level 3	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 $	9,702	 	 $	9,702	 	 $	—	 	 $	—	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Term Loan	 	 $	122,677	 	 $	—	 	 $	122,677	 	 $	—	 	
        The Company has determined that the carrying value of the Term Loan approximates the fair value based on the Company's floating rate note which did not change significantly from the amended and restated Credit Agreement of September 2, 2014. The value of the Sellers Note approximates fair value based on the rate on the U.S. portion of the Term Loan at December 31, 2014.
        The fair value measurements associated with the EFT Acquisition are based on significant unobservable inputs, which are classified as Level 3 (see Note 3 for additional information) based on the Company's estimates and assumptions. A discount rate of 11.9% was utilized in determining the fair value of acquired customer relationship intangible assets related to the EFT Acquisition.
 9. Related-Party Transactions
        The Company leases its operating facility in Indiana from an entity that is owned by a stockholder, who is also a member of the Company's Board of Directors. The lease expires in January 2018 and requires the Company to pay property taxes, insurance and normal maintenance costs. The Company paid rent of $175 for each of the three years ended December 31, 2014, 2013 and 2012.
F-18

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 9. Related-Party Transactions (Continued)
        In conjunction with certain officer and non-officer Company employees acquiring Preferred and Common Stock during 2013 and 2012, the Company obtained notes receivable from the employees that have remaining balances outstanding of $108 and $127 at December 31, 2014 and 2013, respectively. See Note 13 for further discussion.
 10. Long-Term Debt and Subordinated Credit Facility
        Long-term debt consists of the following:

																				
 	 	December 31, 2014	 	December 31, 2013	 	
 	 	Principal	 	Unamortized
Discount	 	Total	 	Principal	 	Unamortized
Discount	 	Total	 	
Term Loan facilities	 	 $	170,866	 	 $	(442	)	 $	170,424	 	 $	122,677	 	 $	(371	)	 $	122,306	 	
Less current maturities	 	 	(6,547	)	 	221	 	 	(6,326	)	 	(6,841	)	 	—	 	 	(6,841	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Long-term debt, net of current maturities	 	 	164,319	 	 	(221	)	 	164,098	 	 	115,836	 	 	(371	)	 	115,465	 	
Sellers Note	 	 	9,000	 	 	—	 	 	9,000	 	 	—	 	 	—	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	173,319	 	 $	(221	)	 $	173,098	 	 $	115,836	 	 $	(371	)	 $	115,465	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
        On September 2, 2014, the Company and its lenders amended and restated the Credit Agreement dated November 8, 2012. As a result, the existing senior term debt and related revolver were refinanced with new senior term debt of $175,343 (the "Term Loan") and a $25,000 unfunded revolver (the "Revolver") and the maturity was extended to September 30, 2016. The Term Loan included incremental gross proceeds of $60,000, and as of September 2, 2014, the Term Loan consisted of a U.S. Dollar term loan of $161,414 and a British Pound Sterling term loan of £8,194. The primary purpose of the additional debt was to finance the cash portion of the acquisition consideration of EFT Source. Principal and accrued interest payments on the Term Loan are due quarterly, with a final principal payment due on September 30, 2016. See Note 3 for further information.
        The Company accounted for the debt refinancing in accordance with ASC 470-50-40-6, Modifications and Exchanges. The Company performed a present value of cash flows analysis of the new debt instrument as compared to the present value of the remaining cash flows under the terms of the original debt instrument on a creditor-by-creditor basis. This evaluation resulted in different methods of accounting for the modification depending on each creditor's participation in the senior term debt. As a result, the Company recognized a $476 loss on extinguishment. For the portion accounted for as a debt modification, any fees associated with the debt modification incurred between the Company and the creditors, along with any existing unamortized discount, will be amortized as an adjustment of interest expense over the remaining term of the modified debt. Any third party costs incurred as part of the debt modification have been deferred.
        All fees associated with the debt extinguishment between the Company and the creditor, along with any existing unamortized discount, were recognized as a loss on extinguishment. Any third party costs incurred as part of the debt extinguishment have been expensed as incurred.
F-19

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 10. Long-Term Debt and Subordinated Credit Facility (Continued)
 Term Loan
        The Term Loan interest rate is calculated using either the London Interbank Offered Rate ("LIBOR") plus a margin on a sliding scale between 2.75% to 4.25% depending on the Company's leverage ratio as determined every fiscal quarter, or at a Base Rate plus a margin on a sliding scale between 1.75% to 3.25% depending on the Company's leverage ratio as determined every fiscal quarter. At December 31, 2014, the U.S. term loan was at a borrowing rate of 3.91% and the British Pound Sterling term loan was at a borrowing rate of 4.25%. Principal and accrued interest payments are due quarterly, with a maturity date of September 30, 2016.
        The Credit Agreement is collateralized by the Company's equity interests in domestic subsidiaries and its unencumbered assets, which include accounts receivable, inventory, equipment, and intellectual property. The Credit Agreement is also collateralized by a partial pledge of the Company's equity interests in foreign subsidiaries, and no foreign assets are subject to a security interest.
        The Credit Agreement contains restrictive covenants that, among other things, limit the incurrence of additional indebtedness, dividends, transactions with affiliates, disposition of assets, acquisitions, mergers and consolidations, liens and encumbrances, sale-leasebacks, changes in fiscal periods and restrictive payments. As of December 31, 2014 and 2013, the Company was in compliance with all covenants under the Credit Agreement, as amended. During the year ended December 31, 2014, the Company made total principal payments under the Term Loan of $11,045 including payments on the British Pound Sterling term loan of £475 ($777). During the year ended December 31, 2013, the Company made total principal payments under the Term Loan of $7,122 including payments on the British Pound Sterling term loan of £475 ($752).
 Sellers Note
        The Company entered into a subordinated, unsecured promissory note for $9,000 ("Sellers Note") with certain sellers of EFT Source as part of the EFT Acquisition. Interest on the Sellers Note accrues at 5.0% per annum, and is paid quarterly. The Sellers Note principal and unpaid interest is due to the Sellers at the sooner of September 2, 2016 or with the execution of certain specific events as outlined in the Sellers Note. The Company reports the Sellers Note separately as long-term subordinated debt on the consolidated balance sheet.
        Maturities of long-term debt as of December 31, 2014 consist of the following:

					
Year ending December 31:	 	 	 	 	
2015	 	 $	6,547	 	
2016	 	 	173,319	 	
2017	 	 	—	 	
2018	 	 	—	 	
2019	 	 	—	 	
 ​	​	​ 	​ 	​	
	 	 $	179,866	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
F-20

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 10. Long-Term Debt and Subordinated Credit Facility (Continued)
 Revolving Loan Facility
        At December 31, 2014 and 2013, the Company had no outstanding balances under the Revolver and had $24,900 available for borrowing (see Letters of Credit below). The Company pays a commitment fee equal to 0.50% per annum on the undrawn portion available under the Revolver. The Revolver matures on September 30, 2016 and any outstanding balances are due at that time.
        The Revolver accrues interest at either LIBOR plus a margin on a sliding scale between 2.75% to 4.25%, depending on the Company's leverage ratio as determined every fiscal quarter, or at a Base Rate plus a margin on a sliding scale between 1.75% and 3.25%, depending on the Company's leverage ratio as determined every fiscal quarter. The Revolver is collateralized the same as the term loan and is subject to the same restrictive debt covenants.
 Letters of Credit
        The Company has two outstanding letters of credit for security deposits on two real property lease agreements. These letters of credit are for a total of $100, reducing the Revolver availability. The Company pays a fee on the outstanding letters of credit at the applicable margin, which was 3.75% as of December 31, 2014, in addition to a fronting fee of 0.25% per annum.
 11. Income Taxes
        Income tax expense and effective income tax rates consist of the following:

											
 	 	December 31,	 	
 	 	2014	 	2013	 	2012	 	
Current taxes:	 	 	 	 	 	 	 	 	 	 	
Domestic	 	 $	8,424	 	 $	4,982	 	 $	4,404	 	
Foreign	 	 	—	 	 	6	 	 	224	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
	 	 	8,424	 	 	4,988	 	 	4,628	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Deferred taxes:	 	 	 	 	 	 	 	 	 	 	
Domestic	 	 	2,238	 	 	2,347	 	 	1,494	 	
Foreign	 	 	(371	)	 	(347	)	 	(213	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
	 	 	1,867	 	 	2,000	 	 	1,281	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total tax expense	 	 $	10,291	 	 $	6,988	 	 $	5,909	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income before income taxes	 	 	 	 	 	 	 	 	 	 	
Domestic	 	 $	27,984	 	 $	19,954	 	 $	15,959	 	
Foreign	 	 	(1,721	)	 	(1,767	)	 	(1,324	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total	 	 $	26,263	 	 $	18,187	 	 $	14,635	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Effective income tax rate	 	 	39.1	%	 	38.4	%	 	40.4	%	
F-21

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 11. Income Taxes (Continued)
        The effective income tax rate differs from the U.S. federal statutory income tax rate as follows:

											
 	 	December 31,	 	
 	 	2014	 	2013	 	2012	 	
Tax at federal statutory rate	 	 	35.0	%	 	34.0	%	 	34.0	%	
Permanent differences	 	 	(2.9	)	 	(1.7	)	 	(2.6	)	
State income taxes	 	 	3.1	 	 	4.8	 	 	4.7	 	
Foreign taxes	 	 	2.5	 	 	(1.6	)	 	0.7	 	
Other	 	 	1.4	 	 	2.9	 	 	3.6	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Effective income tax rate	 	 	39.1	%	 	38.4	%	 	40.4	%	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
        The components of the deferred tax assets and liabilities are as follows:

								
 	 	December 31,	 	
 	 	2014	 	2013	 	
Deferred tax assets:	 	 	 	 	 	 	 	
Allowance for doubtful accounts	 	 $	65	 	 $	427	 	
Inventory valuation	 	 	607	 	 	757	 	
Deferred revenue	 	 	—	 	 	553	 	
Accrued expense	 	 	372	 	 	657	 	
Unrealized foreign exchange loss	 	 	634	 	 	688	 	
Capital loss carryforward	 	 	480	 	 	521	 	
Net operating loss carryforward	 	 	2,148	 	 	2,997	 	
Goodwill	 	 	2,159	 	 	2,994	 	
Intangibles	 	 	—	 	 	622	 	
Asset retirement obligation	 	 	292	 	 	270	 	
Stock compensation	 	 	1,853	 	 	214	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total gross deferred tax assets	 	 	8,610	 	 	10,700	 	
Valuation allowance	 	 	(4,120	)	 	(4,798	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Net deferred tax assets	 	 	4,490	 	 	5,902	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Deferred tax liabilities:	 	 	 	 	 	 	 	
Plant, property and leasehold improvements	 	 	(4,238	)	 	(1,791	)	
Intangibles	 	 	(12,383	)	 	—	 	
Prepaid expense	 	 	(1,045	)	 	(485	)	
Other	 	 	—	 	 	(20	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total gross deferred tax liabilities	 	 	(17,666	)	 	(2,296	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Net deferred tax liabilities	 	 $	(13,176	)	 $	3,606	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
F-22

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 11. Income Taxes (Continued)
        The net deferred tax assets and liabilities are reflected in the consolidated balance sheets as follows:

								
 	 	December 31,	 	
 	 	2014	 	2013	 	
Current deferred tax assets	 	 $	634	 	 $	2,597	 	
Long-term deferred tax assets	 	 	—	 	 	1,009	 	
Long-term deferred tax liabilities	 	 	(13,810	)	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Net deferred tax assets (liabilities)	 	 $	(13,176	)	 $	3,606	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
        The net change in the valuation allowance was $678 and $399 for the years ended December 31, 2014 and 2013, respectively, related to change in net operating losses of a foreign location.
        The Company has state operating loss carryforwards of $1,136 which expire at various dates from 2028 through 2033.
        The Company has potential tax benefits associated with $798 of foreign operating loss carryforwards, which expire at various dates from 2024 through 2033. Due to the uncertainty of being able to recognize these loss carryforwards, the Company has provided a valuation allowance of 100% of the tax benefit.
        At December 31, 2014, no provision has been made for U.S. federal and state taxes on cumulative foreign earnings from CPI Card Group—Europe Limited operations of approximately $1,161, which are expected to be indefinitely reinvested outside of the U.S.
 12. Series A Preferred Stock
        Series A Preferred Stock has a par value of $0.001 per share. The original Series A Preferred Stock has an initial liquidation preference equal to $1,000 per outstanding share. In addition, the Series A Preferred Stock liquidation preference earns a dividend of 20% per share per annum, payable when declared by the Board of Directors. Such dividends accrue on each share from the date of original issuance and accrue on a daily basis, whether or not declared. Such dividends are cumulative so that if such dividend in respect of any previous or current annual dividend period, at the annual 20% rate, has not been paid, the deficiency shall first be fully paid before any dividend or other distribution shall be paid or declared and set apart for the Common Stock. As of December 31, 2014, 1,970 shares of Series A Preferred Stock were subject to a put, where the employees holding these shares upon leaving the Company have the option to have the Company purchase the shares at the then current liquidation preference. As of December 31, 2014, the liquidation preference of Series A Preferred Stock had a value of approximately $3,950.33 per outstanding share for a total aggregate cumulative liquidation value of $256,017. As of December 31, 2013, the liquidation preference of
F-23

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 12. Series A Preferred Stock (Continued)
Series A Preferred Stock had a value of approximately $3,291.95 per outstanding share for a total aggregate cumulative liquidation value of $211,540.

								
 	 	Series A Preferred Stock	 	
 	 	Shares	 	Amount	 	
Balance at January 1, 2012	 	 	80,777	 	 $	72,649	 	
Issuance of preferred	 	 	107	 	 	182	 	
Less redemption of preferred	 	 	(16,628	)	 	(16,632	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Balance at January 1, 2013	 	 	64,256	 	 	56,199	 	
Issuance of preferred	 	 	28	 	 	50	 	
Less redemption of preferred	 	 	(24	)	 	(48	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Balance at December 31, 2013	 	 	64,260	 	 	56,201	 	
Acquisition of EFT Source, Inc	 	 	549	 	 	2,049	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Balance at December 31, 2014	 	 	64,809	 	 $	58,250	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
        During the year ended December 31, 2014, the Company issued 549 shares at an estimated value of $3,733.88 per share of Series A Preferred Stock as part of the payment consideration for the EFT Acquisition. The Company did not redeem any shares of Series A Preferred Stock during the year ended December 31, 2014. During the year ended December 31, 2013, the Company issued 28 shares of Series A Preferred Stock at $1,775.87 per share for total proceeds of $50. The Company redeemed 24 shares of Series A Preferred Stock at $1,992.89 per share for a total redemption value of $48 during the year ended December 31, 2013. During the year ended December 31, 2012, the Company issued 107 shares of Series A Preferred Stock at $1,691.72 per share for total proceeds of $181. The Company redeemed 9,321 and 7,307 shares of Series A Preferred Stock at $2,682.11 and $2,737.09, respectively, per share for a total redemption value of $45,000 during the year ended December 31, 2012.
        In the event of any liquidation, dissolution, or winding up of the Company, the Series A Preferred Stock holders shall be entitled to receive, prior and in preference to any distributions of any of the Company's assets to the Common Stock holders, the value of the liquidation preference. If the distribution of such assets is insufficient to permit the payment to such holders, the distribution shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to the amount of such stock owned by each holder. The Series A Preferred Stock has no voting rights.
 13. Stockholders' Equity
 Common Stock
        Common Stock has a par value of $0.001 per share. Holders of Common Stock are entitled to receive dividends and distributions subject to the participation rights of holders of all classes of stock at the time outstanding, as such holders have prior rights as to dividends pursuant to the rights of any series of Preferred Stock. Upon any liquidation, dissolution, or winding up of the Company, after required payments are made to holders of any series of Preferred Stock, any remaining assets of the Company will be distributed ratably to the holders of Common Stock. Holders of Common Stock are entitled to one vote per share.
F-24

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 13. Stockholders' Equity (Continued)
        During the year ended December 31, 2014, the Company issued 11,694 shares of Common Stock at an estimated value of $252.27 per share, as part of the payment consideration for the EFT Acquisition. The Company did not redeem any Common Stock during the year ended December 31, 2014.
        During the year ended December 31, 2013, in connection with the preferred shares issued as discussed above pursuant to the Stockholder Agreement, the Company issued 5,596 shares of Common Stock, which had a de minimis fair value and issue price. The Company redeemed 12,639 shares of Common Stock for a de minimis amount.
 Employee Notes Receivable
        Included in contra stockholders' equity are promissory notes received in connection with equity issuances of Series A Preferred Stock and Common Stock to certain employees made during 2011 and earlier years. The notes receivable accrue interest at 5% per annum and are paid in bimonthly installments. The principal balances of the notes are due upon the employee's termination, the sale of the Company, upon any distributions, or at such time that the employee fails to own the underlying shares. The notes may be paid in whole or in part without any penalties at any time at the employee's option. During 2014 and 2013, the Company did not issue any new Employee notes.
        For the year ended December 31, 2014 and 2013, $19 and $10, respectively, of employee notes were repaid. Employee notes receivable totaled $108 and $127 at December 31, 2014 and 2013, respectively.
 14. Earnings per Share
        Basic earnings or diluted loss per share is computed by dividing net earnings or loss by the weighted number of ordinary shares outstanding during the period. All potentially dilutive shares have been excluded from the weighted-average number of shares of common stock outstanding as their inclusion in the computation for would be antidilutive due to net losses from continuing operations attributable to common stockholders.
F-25

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 14. Earnings per Share (Continued)
        The following table sets forth the computation of basic and diluted EPS attributable to continuing and discontinued operations:

											
 	 	December 31,	 	
 	 	2014	 	2013	 	2012	 	
Numerator:	 	 	 	 	 	 	 	 	 	 	
Net income from continuing operations	 	 $	15,972	 	 $	11,199	 	 $	8,726	 	
Preferred stock dividends	 	 	(44,477	)	 	(35,268	)	 	(36,363	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Loss from continuing operations attributable to common stockholders	 	 	(28,505	)	 	(24,069	)	 	(27,637	)	
Loss from a discontinued operation, net of taxes	 	 	(2,670	)	 	(2,612	)	 	(3,796	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net loss attributable to common stockholders	 	 $	(31,175	)	 $	(26,681	)	 $	(31,433	)	
Denominator:	 	 	

 	 	
Basic EPS—weighted average common shares outstanding          	 	 	1,872,693	 	 	1,866,925	 	 	1,875,674	 	
Basic EPS:	 	 	

 	 	
Loss from continuing operations	 	 $	(15.22	)	 $	(12.89	)	 $	(14.73	)	
Loss from a discontinued operation, net of taxes	 	 	(1.43	)	 	(1.40	)	 	(2.02	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net loss	 	 $	(16.65	)	 $	(14.29	)	 $	(16.75	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
        The Company reported losses from continuing operations attributable to common stockholders for the years ended December 31, 2014, 2013 and 2012. Accordingly, the potentially dilutive effect of the outstanding stock options of 28,500, 29,500 and 24,000, respectively, has been excluded from the computation of diluted loss per share because their inclusion would have been anti-dilutive. As further described in Note 12, the cumulative dividends in arrears related to Series A Preferred Stock must be paid before any distribution can be paid to the Company's common shareholders. As of December 31, 2014, cumulative dividends in arrears related to the Series A Preferred Stock in aggregate was $191,208.
 15. Commitments and Contingencies
        The Company leases real property for its facilities under noncancelable operating lease agreements. Land and facility leases expire at various dates between 2015 and 2023 and contain various provisions for rental adjustments and renewals. All of these leases require the Company to pay property taxes, insurance and normal maintenance costs.
        The Company also leases equipment for use in CPI's Petersfield operation production under capital leases. Amortization of capital leases is included in depreciation and amortization expense in the consolidated statements of operations and comprehensive income. Amortization expense for capital leases was $62, $62, and $39 for the years ended December 31, 2014, 2013 and 2012, respectively.
F-26

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 15. Commitments and Contingencies (Continued)
Equipment under capital leases included in plant, equipment and leasehold improvements are as follows:

								
 	 	December 31,	 	
 	 	2014	 	2013	 	
Equipment under capital leases	 	 $	264	 	 $	280	 	
Less accumulated amortization	 	 	(160	)	 	(105	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total	 	 $	104	 	 $	175	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
        During the normal course of business, the Company also enters into non-cancellable agreements to purchase goods and services, including production equipment and IT systems.
        Future cash payments with respect to non-cancellable capital leases, operating leases and purchase obligations as of December 31, 2014 are as follows:

											
 	 	Capital
Leases	 	Operating
Leases	 	Purchase
Obligations	 	
2015	 	 $	82	 	 $	2,885	 	 $	7,864	 	
2016	 	 	51	 	 	2,445	 	 	—	 	
2017	 	 	—	 	 	1,228	 	 	—	 	
2018	 	 	—	 	 	1,105	 	 	—	 	
2019	 	 	—	 	 	842	 	 	—	 	
Thereafter	 	 	—	 	 	1,308	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total	 	 $	133	 	 $	9,813	 	 $	7,864	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Less interest costs	 	 	(14	)	 	 	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
Present value of minimum lease payments	 	 $	119	 	 	 	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
        The amount of the minimum lease payments under capital leases is included in other current and long-term liabilities in the consolidated balance sheet at December 31, 2014 and 2013.
        The Company incurred rent expense under non-cancellable operating leases during the years ended December 31, 2014, 2013 and 2012, totaling $3,320, $3,096 and $2,432, respectively.
        Asset retirement obligations relate to legal obligations associated with the removal of all leasehold improvements at the end of the lease term. The Company records all asset retirement obligations, which primarily relate to "make-good" clauses in operating leases, for its leased property containing leasehold improvements. The liability, reported within other long-term liabilities, is accreted through charges to operating expenses. If the asset retirement obligation is settled for an amount other than the carrying amount of the liability, the Company recognizes a gain or loss on settlement. The Company incurred accretion expense during the years ended December 31, 2014, 2013 and 2012 totaling $53, $55 and $54, respectively. As of December 31, 2014 and 2013, the Company's asset retirement obligations included in other long-term liabilities were $911 and $871, respectively.
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 16. Employee Benefit Plan
        The Company maintains a qualified defined-contribution plan under the provisions of the Internal Revenue Code Section 401(k), which covers substantially all employees who meet certain eligibility requirements. Under the plan, participants may defer their salary subject to statutory limitations and may direct the contributions among various investment accounts. The Company matches 100% of the participant's first 3% of deferrals and 50% of the next 2% deferral percentage. The Company's portion is 100% vested at the time of the match.
        The aggregate amounts charged to expense in connection with the plan were $824, $908 and $663, for the years ended December 31, 2014, 2013 and 2012, respectively.
 17. Stock Option Plan
        In 2007, the Company's Board of Directors adopted the 2007 Stock Option Plan (the "Plan"). Under the provisions of the Plan, stock options may be granted to employees, directors and consultants at an exercise price greater than or equal to (and not less than) the fair market value of a share on the date the option is granted. The number of common shares available is 95,000, of which 66,500 were available to be granted at December 31, 2014. The stock options have a 10-year life and vest as noted in each respective grant letter. All stock options are nonqualified.
        Outstanding and exercisable stock options are as follows:

											
 	 	Options	 	Weighted-
Average
Exercise
Price	 	Weighted-
Average
Remaining
Contractual Term
(in Years)	 	
Outstanding as of January 1, 2012	 	 	20,500	 	 $	0.007	 	 	8.63	 	
Granted	 	 	3,500	 	 	0.010	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
Outstanding as of December 31, 2012	 	 	24,000	 	 $	0.008	 	 	7.48	 	
Granted	 	 	7,500	 	 	0.010	 	 	 	 	
Forfeited	 	 	(2,000	)	 	0.010	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
Outstanding as of December 31, 2013	 	 	29,500	 	 $	0.008	 	 	7.35	 	
Forfeited	 	 	(1,000	)	 	0.001	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
Outstanding as of December 31, 2014	 	 	28,500	 	 $	0.008	 	 	6.44	 	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
Exercisable as of December 31, 2014	 	 	24,333	 	 $	0.008	 	 	7.55	 	
F-28

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 17. Stock Option Plan (Continued)
        Unvested options as of December 31, 2014, vest as follows:

					
December 31, 2015	 	 	2,333	 	
December 31, 2016	 	 	1,834	 	
 ​	​	​ 	​ 	​	
Total unvested options as of December 31, 2014	 	 	4,167	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        Compensation expense and unrecorded compensation expense for the years ended December 31, 2014, 2013 and 2012 were de minimis.
 18. Phantom Stock Plan
        Effective January 1, 2012, the Company's Board of Directors adopted the CPI Acquisition, Inc. Phantom Stock Plan to provide incentive compensation to certain key employees. Under the terms of the agreement, holders of an award are entitled to a cash payment equal to the difference between the fair market value of the award, as defined in the agreement, at the time of exercise and the award's exercise price. Each award is issued for a specified number of units at an established base amount per unit of $2,000.
        All awards vest on the defined Redemption Date or earlier fixed date pursuant to each award agreement. The Redemption Date is defined as the earlier of a Change-in-Control or seven years from grant. Unvested awards expire upon participant's termination of service.
        Total authorized units under the plan are 100,000. At December 31, 2014, there were 84,297 units issued and outstanding under the terms of the plan, of which 13,088 were fully vested.
        As these awards must be settled in cash, the Company accounts for them as liabilities. As a nonpublic company, the company has elected to measure the liability at intrinsic value, with changes in the intrinsic value of the liability recognized as expense each year in the consolidated statements of operations and comprehensive income. There was $4,534, $610 and $0 of compensation expense recognized for the years ended December 31, 2014, 2013 and 2012, respectively, related to this plan.
 19. Segment Reporting
        The Company has identified reportable segments as those consolidated subsidiaries that represent 10% or more of its revenue, EBITDA (as defined below), or total assets or subsidiaries which the Company believes information about the segment would be useful to the readers of the financial statements from a qualitative perspective. The Company's chief operating decision maker is its Chief Executive Officer who is charged with management of the Company and is responsible for the evaluation of operating performance and decision making about the allocation of resources to operating segments based on measures such as revenue and EBITDA.
        EBITDA is the primary measure used by the Company's chief operating decision maker to evaluate segment operating performance. As the Company uses the term, EBITDA is defined as income from continuing operations before interest expense, income taxes, depreciation and amortization. The Company's chief operating decision maker believes EBITDA is a meaningful measure and is superior to available U.S. GAAP measures as it represents a transparent view of the
F-29

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 19. Segment Reporting (Continued)
Company's operating performance that is unaffected by fluctuations in property, equipment and leasehold improvement additions. The Company's chief operating decision maker uses EBITDA to perform periodic reviews and comparison of operating trends and identify strategies to improve the allocation of resources amongst segments.
        As of December 31, 2014, the Company's reportable segments are as follows:
•
U.S. Debit and Credit 

•
U.S. Prepaid Debit 

•
U.K. Limited
        The U.S. Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services to card-issuing banks in the United States. Products manufactured by this segment primarily include EMV and non-EMV credit cards, debit cards and prepaid debit cards issued on the networks of the Payment Card Brands, private label credit cards that are not issued on the networks of the Payment Cards Brands and instant issuance systems. This segment also provides a variety of integrated card services, including card personalization and fulfillment services and instant issuance services. The U.S. Debit and Credit segment includes the Company's operations in Colorado, Indiana and Tennessee, which are each certified by multiple global Payment Card Brands and, where required by the Company's customers and the PCI Security Standards Council. These operating segments have been aggregated into a single reportable segment due to similarities in the nature of the products and services sold by these subsidiaries, a common customer base, the substantial degree of integration and redundancy across the segments, and utilization of centrally shared sales, marketing, quality and planning departments. Separate information about these segments would not be useful to the readers of the financial statements.
        The U.S. Prepaid Debit segment primarily provides integrated card services to prepaid debit card issuers in the United States. Services provided include tamper-evident security packaging services and card personalization and fulfillment services. This segment also produces financial payment cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages mentioned above. The U.S. Prepaid Debit segment includes the Company's operation in Minnesota which is certified by multiple global Payment Card Brands and the PCI Security Standards Council.
        The U.K. Limited segment primarily produces retail gift and loyalty cards for customers in the United Kingdom and continental Europe. This segment also provides card personalization and fulfillment services. The U.K. Limited segment includes the Company's operations in Colchester, United Kingdom and Liverpool, United Kingdom. Neither of the Company's operations in this segment is certified by any of the Payment Card Brands, nor are they PCI certified.
        The "other" category includes the Company's corporate headquarters and less significant operating segments that derive their revenue from the production of Financial Payment Cards and retail gift cards in Canada (CPI—Canada) and the U.K. (CPI—Petersfield). For additional information regarding the Company's decision to shut down the CPI—Petersfield facility during the third quarter of 2015, see Note 20.
F-30

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 19. Segment Reporting (Continued)
 Performance Measures of Reportable Segments
        Revenue and EBITDA of the Company's reportable segments for the years ended December 31, 2014, 2013 and 2012 were as follows:

																				
 	 	Revenue	 	EBITDA	 	
 	 	December 31,	 	December 31,	 	
 	 	2014	 	2013	 	2012	 	2014	 	2013	 	2012	 	
U.S. Debit and Credit (a)	 	 $	153,015	 	 $	91,626	 	 $	81,602	 	 $	37,547	 	 $	18,871	 	 $	15,153	 	
U.S. Prepaid Debit	 	 	59,271	 	 	65,895	 	 	64,624	 	 	18,654	 	 	20,438	 	 	18,813	 	
U.K Limited	 	 	35,163	 	 	33,242	 	 	34,135	 	 	2,943	 	 	2,801	 	 	3,261	 	
Other	 	 	23,908	 	 	24,678	 	 	18,492	 	 	(12,121	)	 	(4,491	)	 	(2,316	)	
Intersegment eliminations (b)	 	 	(10,351	)	 	(19,071	)	 	(15,067	)	 	—	 	 	—	 	 	(3,997	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total:	 	 $	261,006	 	 $	196,370	 	 $	183,786	 	 $	47,023	 	 $	37,620	 	 $	30,914	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(a)
Amounts for 2014 include the post-acquisition revenue and EBITDA of EFT Source from September 2, 2014 through December 31, 2014.

(b)
Amounts include the revenue from sales between the U.S. Debit and Credit segment, U.K. Limited segment, and "other" category and are eliminated upon consolidation.
        The following table provides a reconciliation of total segment EBITDA to income before taxes for the years ended December 31, 2014, 2013 and 2012:

											
 	 	December 31,	 	
 	 	2014	 	2013	 	2012	 	
Total segment EBITDA from continuing operations	 	 $	47,023	 	 $	37,620	 	 $	30,914	 	
Depreciation and amortization	 	 	(13,252	)	 	(11,595	)	 	(10,514	)	
Interest, net	 	 	(7,508	)	 	(7,838	)	 	(5,765	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income before income taxes	 	 $	26,263	 	 $	18,187	 	 $	14,635	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
F-31

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 19. Segment Reporting (Continued)
 Balance Sheet Data of Reportable Segments
        Total assets of the Company's reportable segments as of December 31, 2014 and 2013 were as follows:

								
 	 	December 31,	 	
 	 	2014	 	2013	 	
U.S. Debit and Credit	 	 $	200,572	 	 $	107,492	 	
U.S. Prepaid Debit	 	 	20,183	 	 	22,186	 	
U.K. Limited	 	 	29,740	 	 	32,770	 	
Other	 	 	10,267	 	 	9,419	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total continuing operations:	 	 	260,762	 	 	171,867	 	
Discontinued operation (a) :	 	 	5,862	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total assets:	 	 $	266,624	 	 $	171,867	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	

(a)
As of December 31, 2014, certain assets of the Nevada operation sold on January 12, 2015, see Note 4, are presented in assets of a discontinued operation in the Company's consolidated balance sheet.
 Plant, Equipment and Leasehold Improvement Additions of Geographic Locations
        Plant, equipment and leasehold improvement additions of the Company's geographical locations for the years ended December 31, 2014 and 2013 were as follows:

											
 	 	December 31,	 	
 	 	2014	 	2013	 	2012	 	
U.S. 	 	 $	15,082	 	 $	9,679	 	 $	6,776	 	
Canada	 	 	32	 	 	125	 	 	222	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total North America	 	 	15,114	 	 	9,804	 	 	6,998	 	
U.K. 	 	 	454	 	 	824	 	 	2,115	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total plant, equipment and leasehold improvement additions	 	 $	15,568	 	 $	10,628	 	 $	9,113	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
F-32

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 19. Segment Reporting (Continued)
 Net Sales of Geographic Locations
        Net sales of the Company's geographic locations for the years ended December 31, 2014, 2013 and 2012 were as follows:

											
 	 	December 31,	 	
 	 	2014	 	2013	 	2012	 	
U.S. (a)	 	 $	196,418	 	 $	135,525	 	 $	137,757	 	
Canada	 	 	16,133	 	 	17,661	 	 	12,605	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total North America	 	 	212,551	 	 	153,186	 	 	150,362	 	
U.K. 	 	 	36,682	 	 	32,448	 	 	27,356	 	
Other (b)	 	 	11,773	 	 	10,736	 	 	6,068	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total revenue	 	 $	261,006	 	 $	196,370	 	 $	183,786	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(a)
Amounts for 2014 include the post-acquisition net sales of EFT Source from September 2, 2014 through December 31, 2014.

(b)
Amounts in other include sales to various countries that individually are not material.
 Long-Lived Assets of Geographic Segments
        Long-lived assets of the Company's geographic segments as of December 31, 2014 and 2013 were as follows:

								
 	 	December 31,	 	
 	 	2014	 	2013	 	
U.S. 	 	 $	160,144	 	 $	82,793	 	
Canada	 	 	2,525	 	 	3,395	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total North America:	 	 	162,669	 	 	86,188	 	
U.K. 	 	 	14,607	 	 	17,546	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total long-lived assets	 	 $	177,276	 	 $	103,734	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
F-33

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
 19. Segment Reporting (Continued)
 Net Sales by Product and Services
        Net sales from products and services sold by the Company for the years ended December 31, 2014, 2013 and 2012 were as follows:

											
 	 	December 31,	 	
 	 	2014	 	2013	 	2012	 	
Product net sales (a)	 	 $	159,220	 	 $	101,360	 	 $	98,969	 	
Services net sales (b)	 	 	101,786	 	 	95,010	 	 	84,817	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total net sales:	 	 $	261,006	 	 $	196,370	 	 $	183,786	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(a)
Product net sales include the design and production of Financial Payment Cards, in Contact EMV, Dual-Interface EMV, contactless and magnetic stripe formats. The Company also generates product revenue from the sale of Card@Once® instant issuance systems, private label credit cards, and retail gift cards.

(b)
Services net sales include revenue from the personalization and fulfillment of Financial Payment Cards, the provision of tamper-evident security packaging, providing fulfillment services to Prepaid Debit Card program managers and software as a service personalization of instant issuance debit cards. The Company also generates service revenue from personalizing retail gift cards (primarily in Canada and the United Kingdom) and from click-fees generated from the Company's patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images.
 20. Subsequent Event
        On February 16, 2015, the CPI Board of Directors decided that its operation located in Petersfield, United Kingdom would be shut down. The shutdown and closure of this facility is expected to be completed in the third quarter of 2015.
F-34

Table of Contents

CPI Card Group Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars in Thousands, Except Shares and Per Share Amounts)
(Unaudited)

								
 	 	June 30,
2015	 	December 31,
2014	 	
Assets	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 $	13,007	 	 $	12,941	 	
Accounts receivable, net of allowances of $674 and $272, respectively	 	 	51,385	 	 	43,548	 	
Inventories	 	 	28,043	 	 	21,605	 	
Prepaid expenses and other current assets	 	 	4,243	 	 	4,129	 	
Income taxes refundable	 	 	10,494	 	 	—	 	
Deferred income taxes	 	 	636	 	 	634	 	
Current assets of a discontinued operation	 	 	—	 	 	5,862	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total current assets	 	 	107,808	 	 	88,719	 	
Plant, equipment and leasehold improvements, net	 	 	48,431	 	 	44,772	 	
Capitalized loan fees	 	 	438	 	 	614	 	
Intangible assets, net	 	 	56,425	 	 	58,703	 	
Goodwill	 	 	73,770	 	 	73,801	 	
Other assets	 	 	912	 	 	15	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total assets	 	 $	287,784	 	 $	266,624	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Liabilities and stockholders' deficit	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	
Accounts payable	 	 $	21,495	 	 $	16,276	 	
Accrued expenses	 	 	8,473	 	 	10,591	 	
Deferred revenue and customer deposits	 	 	3,373	 	 	3,382	 	
Current maturities of long-term debt	 	 	6,556	 	 	6,326	 	
Income taxes payable	 	 	—	 	 	13	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total current liabilities	 	 	39,897	 	 	36,588	 	
Long-term debt, net of current maturities	 	 	
151,864	 	 	
164,098	 	
Sellers Note	 	 	9,000	 	 	9,000	 	
Deferred income taxes	 	 	24,969	 	 	13,810	 	
Other long-term liabilities	 	 	7,864	 	 	6,572	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total liabilities	 	 	233,594	 	 	230,068	 	
Commitments and contingencies	 	 	

Series A Preferred Stock; $0.001 par value—100,000 shares authorized; 86,407 shares issued and 64,716 shares outstanding and 86,407 shares issued and 64,809 shares outstanding; liquidation preference of $281,005 and $256,017 at June 30, 2015 and December 31, 2014, respectively	 	 	
57,880	 	 	
58,250	 	
Stockholders' deficit	 	 	

Common Stock; $0.001 par value—2,600,000 shares authorized; 2,046,920 shares issued and 1,885,278 shares outstanding and 2,038,208 shares issued and 1,880,510 shares outstanding at June 30, 2015 and December 31, 2014, respectively	 	 	2	 	 	2	 	
Additional paid-in capital	 	 	(24,848	)	 	(24,802	)	
Accumulated earnings	 	 	24,194	 	 	5,798	 	
Accumulated other comprehensive loss	 	 	(2,930	)	 	(2,584	)	
Employee notes receivable	 	 	(108	)	 	(108	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total stockholders' deficit	 	 	(3,690	)	 	(21,694	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total liabilities and stockholders' deficit	 	 $	287,784	 	 $	266,624	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
    
See accompanying notes to condensed consolidated financial statements
F-35

Table of Contents

CPI Card Group Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Income
(Dollars in Thousands)
(Unaudited)

														
 	 	Three Months
Ended June 30,	 	Six Months Ended
June 30,	 	
 	 	2015	 	2014	 	2015	 	2014	 	
Net sales:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Products	 	 $	67,757	 	 $	33,574	 	 $	112,771	 	 $	58,905	 	
Services	 	 	27,779	 	 	19,662	 	 	60,075	 	 	36,862	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total net sales	 	 	95,536	 	 	53,236	 	 	172,846	 	 	95,767	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Cost of sales:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Products (exclusive of depreciation and amortization shown below)	 	 	41,892	 	 	25,425	 	 	72,802	 	 	45,684	 	
Services (exclusive of depreciation and amortization shown below)	 	 	15,464	 	 	10,349	 	 	33,929	 	 	20,435	 	
Depreciation and amortization	 	 	2,345	 	 	1,908	 	 	4,772	 	 	3,850	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total cost of sales	 	 	59,701	 	 	37,682	 	 	111,503	 	 	69,969	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Gross profit	 	 	35,835	 	 	15,554	 	 	61,343	 	 	25,798	 	
Operating expenses:	 	 	

 	 	 	
 	 	
Selling, general, and administrative (exclusive of depreciation and amortization shown below)	 	 	14,514	 	 	7,805	 	 	26,691	 	 	14,498	 	
Depreciation and amortization	 	 	1,634	 	 	880	 	 	3,268	 	 	1,764	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total operating expenses	 	 	16,148	 	 	8,685	 	 	29,959	 	 	16,262	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income from operations	 	 	19,687	 	 	6,869	 	 	31,384	 	 	9,536	 	
Other income (expense):	 	 	

 	 	 	
 	 	
Interest, net	 	 	(1,616	)	 	(1,761	)	 	(3,505	)	 	(3,444	)	
Foreign currency gain (loss)	 	 	27	 	 	(33	)	 	149	 	 	(211	)	
Other income, net	 	 	73	 	 	23	 	 	61	 	 	19	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total other expense, net	 	 	(1,516	)	 	(1,771	)	 	(3,295	)	 	(3,636	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income before income taxes	 	 	18,171	 	 	5,098	 	 	28,089	 	 	5,900	 	
Provision for income taxes	 	 	(6,016	)	 	(2,028	)	 	(9,974	)	 	(2,334	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income from continuing operations	 	 	12,155	 	 	3,070	 	 	18,115	 	 	3,566	 	
Discontinued Operation (see note 3):	 	 	

 	 	 	
 	 	
Loss from a discontinued operation, net of taxes	 	 	—	 	 	(1,167	)	 	(606	)	 	(2,763	)	
Gain on sale of discontinued operation, net of taxes	 	 	—	 	 	—	 	 	887	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income	 	 $	12,155	 	 $	1,903	 	 $	18,396	 	 $	803	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Other Comprehensive Income	 	 	 	 	 	 	 	 	 	 	 	 	 	
Currency translation adjustment	 	 	434	 	 	395	 	 	(346	)	 	303	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total comprehensive income	 	 $	12,589	 	 $	2,298	 	 $	18,050	 	 $	1,106	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Earnings Per Share	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income from continuing operations	 	 $	12,155	 	 $	3,070	 	 $	18,115	 	 $	3,566	 	
Preferred stock dividends	 	 	(12,747	)	 	(10,548	)	 	(25,359	)	 	(20,980	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Losses from continuing operations attributable to common stockholders	 	 	(592	)	 	(7,478	)	 	(7,244	)	 	(17,414	)	
(Loss) Income from a discontinued operation, net of taxes	 	 	—	 	 	(1,167	)	 	281	 	 	(2,763	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net loss available to common stockholders	 	 $	(592	)	 $	(8,645	)	 $	(6,963	)	 $	(20,177	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Basic and diluted (loss) income per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Continued operations	 	 $	(0.32	)	 $	(4.00	)	 $	(3.86	)	 $	(9.32	)	
Discontinued operations	 	 	—	 	 	(0.62	)	 	0.15	 	 	(1.48	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	(0.32	)	 $	(4.62	)	 $	(3.71	)	 $	(10.80	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
See accompanying notes to condensed consolidated financial statements
F-36

Table of Contents

CPI Card Group Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)

								
 	 	Six Months Ended
June 30,	 	
 	 	2015	 	2014	 	
Operating activities	 	 	 	 	 	 	 	
Net income	 	 $	18,396	 	 $	803	 	
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities, net of effects of acquisitions:	 	 	 	 	 	 	 	
Depreciation, amortization and accretion expense	 	 	8,364	 	 	7,574	 	
Non-cash accretion of defined stock compensation plan	 	 	1,503	 	 	(591	)	
Loss on sale of a discontinued operation	 	 	1,039	 	 	—	 	
Other	 	 	396	 	 	68	 	
Unrealized foreign currency exchange gain	 	 	85	 	 	22	 	
Deferred taxes	 	 	11,151	 	 	—	 	
Changes in operating assets and liabilities:	 	 	 	 	 	 	 	
Accounts receivable	 	 	(7,680	)	 	(5,658	)	
Inventories	 	 	(6,826	)	 	(8,729	)	
Prepaid expenses and other current assets	 	 	593	 	 	(2,304	)	
Income taxes	 	 	(10,494	)	 	(1,184	)	
Accounts payable	 	 	4,659	 	 	7,504	 	
Accrued expenses	 	 	(2,093	)	 	800	 	
Deferred revenue and customer deposits	 	 	(184	)	 	2,671	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Cash provided by operating activities	 	 	18,909	 	 	976	 	
Investing activities	 	 	

Proceeds from sale of a discontinued operation	 	 	5,000	 	 	—	 	
Acquisitions of plant, equipment and leasehold improvements	 	 	(10,526	)	 	(8,161	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Cash used in investing activities	 	 	(5,526	)	 	(8,161	)	
Financing activities	 	 	

Payment of long-term debt	 	 	(12,268	)	 	(7,763	)	
Proceeds from line of credit	 	 	—	 	 	10,800	 	
Payment of deferred stock issuance costs	 	 	(589	)	 	 	 	
Redemption of preferred and common stock	 	 	(417	)	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Cash (used in) provided by financing activities	 	 	(13,274	)	 	3,037	 	
Effect of exchange rates on cash	 	 	
(43	
)	 	
120	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Net increase (decrease) in cash and cash equivalents:	 	 	66	 	 	(4,028	)	
Cash and cash equivalents, beginning of period	 	 	12,941	 	 	9,702	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Cash and cash equivalents, end of period	 	 $	13,007	 	 $	5,674	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Supplemental disclosures of cash flow information	 	 	 	 	 	 	 	
Cash paid during the period for:	 	 	 	 	 	 	 	
Interest	 	 $	3,173	 	 $	3,173	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Income taxes	 	 $	7,277	 	 $	274	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
See accompanying notes to condensed consolidated financial statements
F-37

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 1. Summary of Significant Accounting Policies
 Basis of Presentation
        The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and with the rules and regulations of the Securities and Exchange Commission ("SEC") for reporting on Form S-1, but does not include all the disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements and these notes thereto have been condensed or omitted pursuant to rules and regulations and should be read in conjunction with our 2014 consolidated financial statements and notes thereto included in this prospectus. In the opinion of management, these financial statements reflect all adjustments (consisting solely of normal recurring matters) considered necessary for a fair statement of the results for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results for the full year.
        The Company sold its non-secure operation located in Nevada on January 12, 2015 (the "Nevada Sale") under an asset purchase agreement for $5,000 in cash. Nevada primarily produced retail gift cards that are not issued on the networks of the Payment Card Brands. Accordingly, the Company's consolidated balance sheets for the year ended December 31, 2014 and the statements of operations and comprehensive income for the three and six months ended June 30, 2015 and 2014 have been reclassified to present Nevada as a discontinued operation. See Note 3 for more information related to the discontinued operation and disposition.
 Revenue Recognition
        Generally, the Company recognizes revenue related to sales of its products upon shipment, when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee is fixed or determinable and collectability is reasonably assured.
        In certain cases, at the customer's request, the Company enters into bill-and-hold transactions whereby title transfers to the customer, but the product does not ship until a specified later date. The Company recognizes revenue associated with bill-and-hold arrangements when the product is complete and ready to ship, hold criteria have been met, the amount due from the customer is fixed and collectability of the related receivable is reasonably assured.
        Freight revenue totaling $1,017 and $1,035 is included in net sales for the three months ended June 30, 2015 and 2014, respectively, and $1,978 and $2,101 for the six months ended June 30, 2015 and 2014, respectively. The related freight costs are included in cost of sales.
 Multiple-Element Arrangements
        The Company enters into warehouse, fulfillment and distribution service agreements with several customers, engaging the Company to store and handle completed cards and packages on their behalf. For the sales arrangements that contain multiple deliverables, the arrangement is split into separate units of accounting and individually delivered elements have value to the customer on a standalone basis. When separate units of accounting exist, revenue is allocated to each element based on the Company's best estimate of competitive market prices. At the point in which completed cards and
F-38

Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 1. Summary of Significant Accounting Policies (Continued)
packages are shipped to the Company's warehouse, the product is billed and the revenue is recognized in accordance with the Company's revenue recognition policy. Warehousing service revenue is recognized monthly based on volume and handling requirements. Fulfillment service revenue is recognized when the product is handled in the manner specified by the customer for a unit or handling fee.
 Trade Accounts Receivable and Concentration of Credit Risk
        Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company performs ongoing credit evaluations of its customers and generally requires no collateral to secure accounts receivable. The Company maintains an allowance for potentially uncollectible accounts receivable based upon its assessment of the collectability of accounts receivable. Accounts are written off against the allowance when it becomes probable collection will not occur.
        For the three and six months ended June 30, 2015, the Company did not have any sales to one customer over 10% of consolidated net sales. For the three months ended June 30, 2014 the Company had sales to two customers amounting to $6,113 (11.5% of consolidated net sales) and $5,835 (11.0% of consolidated net sales). For six months ended June 30, 2014, the Company did not have any sales to one customer over 10% of consolidated net sales.
 Plant, Equipment and Leasehold Improvements
        Plant, equipment and leasehold improvements are recorded at cost. Accumulated depreciation is computed using the straight-line method over the lesser of the estimated useful life of the related assets (generally 3 to 10 years for equipment, furniture and leasehold improvements) or, when applicable, the lease term. Maintenance and repairs that do not extend the useful life of the respective assets are charged to expense as incurred. For the Company's continuing operations, amounts charged to expense for the depreciation of plant, equipment and leasehold improvements was $2,834 and $2,278 for the three months ended June 30, 2015 and 2014, respectively, and $5,751 and $4,592 for the six months ended June 30, 2015 and 2014, respectively.
        Long-lived assets with finite lives are reviewed for impairment whenever events indicate that the carrying amount of the asset or the carrying amounts of the asset group containing the asset may not be recoverable. In such reviews, estimated undiscounted future cash flows associated with these assets or asset groups are compared with their carrying value to determine if a write-down to fair value is required. To date in the periods presented, the Company has determined no impairment was required.
 Goodwill and Intangible Assets
        Goodwill and other indefinite-lived intangible assets are not amortized, but instead are tested for impairment at least annually on October 1. Testing is done in accordance with ASC 350, Intangibles—Goodwill and Other and ASC 820, Fair Value Measurements and Disclosures . For impairment evaluations, the Company or third-party firm first makes a qualitative assessment with respect to both goodwill and other indefinite-lived intangibles. In the case of goodwill, if it is more likely than not that a reporting unit's fair value is less than its carrying value, the fair value of the reporting unit is compared to its
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 1. Summary of Significant Accounting Policies (Continued)
respective carrying amount. If the carrying value of a reporting unit were to exceed its fair value, any excess of the carrying amount over the fair value would be charged to operations as an impairment loss. With respect to indefinite-lived intangible assets, if it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying value, any excess of the carrying value over the fair value of the indefinite-lived intangible asset is also charged to operations as an impairment loss.
        Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. The estimated remaining useful lives for intangible assets range from 6 months to 14 years. Acquired indefinite-lived intangible assets related to trademarks are capitalized and subject to impairment.
 Use of Estimates
        Management uses estimates and assumptions relating to the reporting of assets and liabilities in its preparation of the condensed consolidated financial statements. Significant items subject to such estimates and assumptions include the carrying amount of property and equipment, goodwill and intangible assets; valuation allowances for receivables, inventories and deferred tax assets; and stock-based compensation expense. Actual results could differ from those estimates.
 Foreign Currency Translation
        Financial statements of international subsidiaries that use local currencies as their functional currency are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and the weighted-average exchange rate for each period for revenues, expenses, gains and losses. Translation adjustments are recorded as the only component of other comprehensive income in the accompanying financial statements. Foreign currency transaction gains and losses resulting from the process of re-measurement are recorded in other income (expense) in the accompanying consolidated statements of operations and comprehensive income. For the three months ended June 30, 2015 and 2014 there were $27 and ($33), respectively, and for the six months ended June 30, 2015 and 2014 there were $149 and $(211), respectively, of such foreign currency gains (losses).
 Recently Issued Accounting Pronouncements
        The Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers , in May 2014. ASU 2014-09 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In July 2015, the FASB deferred the effective date to annual reporting periods beginning after December 15, 2017, and interim reporting periods within those periods. The Company plans to implement the provisions of ASU 2014-09 as of January 1, 2018.
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 1. Summary of Significant Accounting Policies (Continued)
The Company is in the process of determining the method of adoption and assessing the impact of ASU 2014-09 on its results of operations, financial position and consolidated financial statements.
        The FASB issued ASU 2015-03, Interest — Imputation of Interest, in April 2015. ASU 2015-03 requires debt issuance costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the debt liability, similar to the presentation of debt discounts. The new standard is effective for public entities annual reporting periods beginning after December 15, 2015. We do not expect that this pronouncement will have a material impact on our consolidated financial statements.
        The FASB issued ASU 2015-11, Inventory—Simplifying the Measurement of Inventory, in July 2015. ASU 2015-11 requires that inventory be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new standard is effective for public entities annual reporting periods beginning after December 15, 2016. We will implement the provisions of ASU 2015-11 as of January 1, 2017. We are in the process of assessing the impact of ASU 2015-11 on our results of operations, financial position and consolidated financial statements.
 2. EFT Source Acquisition
        On September 2, 2014, CPI Card Group Inc., through its wholly-owned subsidiary, CPI Acquisition, Inc., purchased EFT Source, Inc. ("EFT Source") headquartered in Nashville, Tennessee. EFT Source is a provider of Financial Payment Card services such as data personalization and fulfillment in the U.S. market. The primary reasons for the acquisition were to extend the Company's existing product lines, expand its markets, and increase revenue. Total consideration of $68,859 was paid in cash of $54,859 and non-cash considerations of $9,000 in Sellers Note and issuance of $5,000 of CPI Card Group Inc. preferred and common stock.
        The assets and liabilities assumed in the acquisition were included in the condensed consolidated balance sheet as of June 30, 2015 and December 31, 2014. The results of the EFT Source operations were also included in the condensed consolidated statement of operations for the three and six month period ended June 30, 2015.
 Pro Forma Information
        The following unaudited pro forma consolidated operating results give effect to the EFT Source acquisition as if it had been completed on January 1, 2014. These pro forma amounts are not necessarily indicative of the operating results that would have occurred if these transactions had
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 2. EFT Source Acquisition (Continued)
occurred on such date. The pro forma adjustments are based on certain assumptions that the Company considers to be reasonable.

								
 	 	Three Months
Ended
30-Jun-14	 	Six Months
Ended
30-Jun-14	 	
Revenue—Continuing Operations	 	 $	64,086	 	 $	118,202	 	
Net Income—Continuing Operations	 	 $	2,889	 	 $	3,192	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Basic and diluted loss per share from Continuing Operations	 	 $	(4.07)	(a)	$	(9.45)	(a)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	

(a)
Loss per share from continuing operations attributable to common stockholders after giving effect to preferred stock dividends.
 3. Discontinued Operation and Disposition
        On January 12, 2015, the Company sold its Nevada non-secure operating segment under an asset purchase agreement for $5,000 in cash (the "Nevada Sale"). Nevada was primarily engaged in the design, production, data personalization, packaging and daily fulfillment of retail gift and loyalty cards for customers in the United States and was not certified by any of the Payment Card Brands. The net carrying values of the assets classified as a discontinued operation include inventory and plant, equipment and leasehold improvements of $3,128 and $2,910 respectively. During the six months ended June 30, 2015, the Company recognized a gain on the sale of discontinued operations of $887, which is included in the gain from a discontinued operation, net of an income tax benefit of $1,926 in the Company's consolidated statement of operations.
        Nevada recognized a loss of $1,167 for the three months ended June 30, 2014, which is included in loss from a discontinued operation, net of an income tax benefit of $626 in the Company's consolidated statement of operations. Nevada recognized a loss of $606 for the six months ended June 30, 2015 and a loss of $2,763 for the six months ended June 30, 2014, which is included in loss from a discontinued operation, net of an income tax benefit of $404 and $1,482, respectively, in the Company's consolidated statement of operations.
        After the Nevada Sale, CPI retained no significant continuing involvement in the Nevada operations other than a 180 day transition of services agreement. As a result of the Nevada Sale, the Company expects to be able to take a tax deduction of $32,128 related to the tax deductible goodwill and intangible assets of CPI Nevada of which $4,190 of the tax deductible goodwill resulted in the recognition of an income tax benefit of $1,510 during the six months ended June 30, 2015.
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 4. Inventories
        Inventories are summarized below:

								
 	 	June 30,
2015	 	December 31,
2014	 	
Raw materials	 	 $	14,388	 	 $	10,217	 	
Work-in-process	 	 	11,539	 	 	8,222	 	
Finished goods	 	 	2,116	 	 	3,166	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	28,043	 	 $	21,605	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 5. Plant, Equipment and Leasehold Improvements
        Plant, equipment and leasehold improvements consist of the following:

								
 	 	June 30,
2015	 	December, 31
2014	 	
Buildings	 	 $	2,509	 	 $	2,486	 	
Machinery and equipment	 	 	51,451	 	 	47,792	 	
Furniture and fixtures	 	 	6,081	 	 	4,203	 	
Leasehold improvements	 	 	13,634	 	 	12,593	 	
Construction in progress	 	 	3,555	 	 	3,448	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
	 	 	77,230	 	 	70,522	 	
Less accumulated depreciation and amortization	 	 	(28,799	)	 	(25,750	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	48,431	 	 $	44,772	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 6. Goodwill and Other Intangible Assets
        Goodwill relates to the Company's U.S. Debit and Credit, U.K. Limited, and Canada reporting units. The change in goodwill from December 31, 2014 to June 30, 2015 was a result of currency translation adjustments.
        Intangible assets consist of customer relationships, technology and software, noncompete agreements, favorable leases and trademarks. Total intangible assets are being amortized over a weighted-average useful life of 16 years. The changes in the cost basis of the intangibles from December 31, 2014 to June, 2015 are related to foreign currency translations. Intangible amortization expense was $1,145 and $510 for the three months ended June 30, 2015 and 2014, respectively. Intangible amortization expense was $2,289 and $1,022 for the six months ended June 30, 2015 and 2014, respectively.
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 6. Goodwill and Other Intangible Assets (Continued)
        As of June 30, 2015 and December 31, 2014, intangible assets, excluding goodwill, consist of the following:

																						
 	 	 	 	June 30, 2015	 	December 31, 2014	 	
 	 	Average
Life (Years)	 	Cost	 	Accumulated
Amortization	 	Net Book
Value	 	Cost	 	Accumulated
Amortization	 	Net Book
Value	 	
Customer relationships	 	12 to 20	 	 $	59,892	 	 $	(16,097	)	 $	43,795	 	 $	59,871	 	 $	(14,304	)	 $	45,567	 	
Technology and software	 	7 to 10	 	 	7,101	 	 	(774	)	 	6,327	 	 	7,101	 	 	(310	)	 	6,791	 	
Noncompete agreements	 	5 to 8	 	 	491	 	 	(234	)	 	257	 	 	491	 	 	(198	)	 	293	 	
Favorable leases	 	9.5	 	 	111	 	 	(94	)	 	17	 	 	111	 	 	(88	)	 	23	 	
 ​	​	​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Intangible assets subject to amortization	 	 	 	 	67,595	 	 	(17,199	)	 	50,396	 	 	67,574	 	 	(14,900	)	 	52,674	 	
Trademarks (indefinite-lived)	 	 	 	 	6,029	 	 	—	 	 	6,029	 	 	6,029	 	 	—	 	 	6,029	 	
 ​	​	​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
	 	 	 	 $	73,624	 	 $	(17,199	)	 $	56,425	 	$	73,603	 	 $	(14,900	)	 $	58,703	 	
 ​	​	​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
        The estimated future aggregate amortization expense for the identified amortizable intangibles noted above as of June 30, 2015 is as follows:

					
2015 (remaining 6 months)	 	 $	2,296	 	
2016	 	 	4,581	 	
2017	 	 	4,554	 	
2018	 	 	4,554	 	
2019	 	 	4,534	 	
Thereafter	 	 	29,877	 	
 ​	​	​ 	​ 	​	
	 	 $	50,396	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
 7. Fair Value of Financial Instruments
        Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). In determining fair value, the Company utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
•
Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. 

•
Level 2—Inputs, other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. 

•
Level 3—Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 7. Fair Value of Financial Instruments (Continued)
        The Company's financial assets and liabilities subject to fair value measurements and the necessary disclosures are as follows:

														
 	 	 	 	Fair Value Measurement at
June 30, 2015
(Using Fair Value Hierarchy)	 	
 	 	Fair Value
as of June 30,
2015			 	
 			 	Level 1	 	Level 2	 	Level 3	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 $	13,007	 	 $	13,007	 	 $	—	 	 $	—	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Term Loan	 	 $	158,734	 	 $	—	 	 $	158,734	 	 $	—	 	
Sellers Note	 	 $	9,000	 	 $	—	 	 $	—	 	 $	9,000	 	

														
 	 	 	 	Fair Value Measurement at
December 31, 2014
(Using Fair Value Hierarchy)	 	
 	 	Fair Value as of
December 31,
2014			 	
 			 	Level 1	 	Level 2	 	Level 3	 	
Assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 $	12,941	 	 $	12,941	 	 $	—	 	 $	—	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Term Loan	 	 $	170,866	 	 $	—	 	 $	170,866	 	 $	—	 	
Sellers Note	 	 $	9,000	 	 $	—	 	 $	—	 	 $	9,000	 	
        The Company has determined that the carrying value of the Term Loan approximates the fair value based on the floating interest rate and minimal changes in credit spreads since the amended and restated Credit Agreement was entered into on September 2, 2014. The value of the Sellers Note approximates fair value based on the rate on the U.S. portion of the Term Loan at June 30, 2015.
 8. Related-Party Transactions
        The Company leases its operating facility in Indiana from a company that is owned by an individual who was a member of the Company's Board of Directors until August 7, 2015, and who is also a stockholder. The lease expires in January 2018 and requires the Company to pay property taxes, insurance and normal maintenance costs. The Company paid rent of $40 for each of the three month periods ended June 30, 2015 and 2014, and $81 for each of the six month periods ended June 30, 2015 and 2014.
        In conjunction with certain officer and non-officer Company employees acquiring Preferred and Common Stock during 2013 and 2012, the Company obtained notes receivable from the employees that have remaining balances outstanding of $108 at both June 30, 2015 and December 31, 2014, respectively. These notes from employees were repaid in full as of August 17, 2015. See Note 12 for further discussion.
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 9. Long-Term Debt and Subordinated Credit Facility
        Long-term debt consists of the following:

																				
 	 	June 30, 2015	 	December 31, 2014	 	
 	 	Principal	 	Unamortized
Discount	 	Total	 	Principal	 	Unamortized
Discount	 	Total	 	
Term Loan facilities	 	 $	158,734	 	 $	(314	)	 $	158,420	 	 $	170,866	 	 $	(442	)	 $	170,424	 	
Less current maturities	 	 	(6,808	)	 	252	 	 	(6,556	)	 	(6,547	)	 	221	 	 	(6,326	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Long-term debt, net of current maturities	 	 	151,926	 	 	(62	)	 	151,864	 	 	164,319	 	 	(221	)	 	164,098	 	
Sellers Note	 	 	9,000	 	 	—	 	 	9,000	 	 	9,000	 	 	—	 	 	9,000	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	160,926	 	 $	(62	)	 $	160,864	 	 $	173,319	 	 $	(221	)	 $	173,098	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
        On September 2, 2014, the Company and its lenders amended and restated the Credit Agreement dated November 8, 2012. As a result, the existing senior term debt and related revolver were refinanced with new senior term debt of $175,343 (the "Term Loan") and a $25,000 unfunded revolver (the "Revolver") and the maturity was extended to September 30, 2016. The Term Loan included incremental gross proceeds of $60,000, and as of September 2, 2014, the Term Loan consisted of a U.S. Dollar term loan of $161,414 and a British Pound Sterling term loan of £8,194. The primary purpose of the additional debt was to finance the cash portion of the acquisition consideration of EFT Source. Principal and accrued interest payments on the Term Loan are due quarterly, with a final principal payment due on September 30, 2016. See Note 2 for further information.
        The Company accounted for the debt refinancing in accordance with ASC 470-50-40-6, Modifications and Exchanges. The Company performed a present value of cash flows analysis of the new debt instrument as compared to the present value of the remaining cash flows under the terms of the original debt instrument on a creditor-by-creditor basis. This evaluation resulted in different methods of accounting for the modification depending on each creditor's participation in the senior term debt. As a result, on September 2, 2014 the Company recognized a $476 loss on extinguishment. For the portion accounted for as a debt modification, any fees associated with the debt modification incurred between the Company and the creditors, along with any existing unamortized discount, will be amortized as an adjustment of interest expense over the remaining term of the modified debt. Any third party costs incurred as part of the debt extinguishment have been expensed as incurred.
        All fees associated with the debt extinguishment between the Company and the creditor, along with any existing unamortized discount, were recognized as a loss on extinguishment. Any third party costs incurred as part of the debt modification have been deferred.
 Term Loan
        The Term Loan interest rate is calculated using either the London Interbank Offered Rate ("LIBOR") plus a margin on a sliding scale between 2.75% to 4.25% depending on the Company's leverage ratio as determined every fiscal quarter, or at a Base Rate plus a margin on a sliding scale between 1.75% to 3.25% depending on the Company's leverage ratio as determined every fiscal quarter. At June 30, 2015, the U.S. term loan was at a borrowing rate of 3.02% and the British Pound
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CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 9. Long-Term Debt and Subordinated Credit Facility (Continued)
Sterling term loan was at a borrowing rate of 3.32%. Principal and accrued interest payments are due quarterly, with a maturity date of September 30, 2016.
        The Credit Agreement is collateralized by the Company's equity interests in domestic subsidiaries and its unencumbered assets, which include accounts receivable, inventory, equipment, and intellectual property. The Credit Agreement is also collateralized by a partial pledge of the Company's equity interests in foreign subsidiaries, and no foreign assets are subject to a security interest.
        The Credit Agreement contains restrictive covenants that, among other things, limit the incurrence of additional indebtedness, dividends, transactions with affiliates, disposition of assets, acquisitions, mergers and consolidations, liens and encumbrances, sale-leasebacks, changes in fiscal periods and restrictive payments. As of December 31, 2014 and June 30, 2015 the Company was in compliance with all covenants under the Credit Agreement, as amended. During the three months ended June 30, 2015 and 2014, the Company made total principal payments under the Term Loan of $5,639 and $9,551, respectively, including payments on the British Pound Sterling term loan of £119 ($187) and £119 ($202), respectively. During the six months ended June 30, 2015 and 2014, the Company made total principal payments under the Term Loan of $12,268 and $11,263, respectively, including payments on the British Pound Sterling term loan of £238 ($363) and £238 ($400), respectively.
        The Credit Agreement was repaid in full and replaced with a new $435,000 term loan under the first lien credit facility entered into on August 17, 2015. See Note 18 for further information.
 Sellers Note
        The Company entered into a subordinated, unsecured promissory note for $9,000 with certain sellers of EFT Source as part of the EFT Acquisition. Interest on the Sellers Note accrues at 5.0% per annum and is paid quarterly. The Sellers Note principal and unpaid interest is due to the Sellers at the earlier of September 2, 2016 or with the execution of certain specific events as outlined in the Sellers Note. The Company reports the Sellers Note separately as long-term subordinated debt on the consolidated balance sheet.
 Revolving Loan Facility
        As of June 30, 2015, the Company has no outstanding balances under the Revolver and had $24,900 available for borrowing (see Letters of Credit below). The Company pays a commitment fee equal to 0.50% per annum on the undrawn portion available under the Revolver. The Revolver matures on September 30, 2016 and any outstanding balances are due at that time.
        The Revolver accrues interest at either LIBOR plus a margin on a sliding scale between 2.75% to 4.25%, depending on the Company's leverage ratio as determined every fiscal quarter, or at a Base Rate plus a margin on a sliding scale between 1.75% and 3.25%, depending on the Company's leverage ratio as determined every fiscal quarter. The Revolver is collateralized the same as the term loan and is subject to the same restrictive debt covenants.
        The Revolving Loan Facility was replaced with a new $40,000 revolving commitment under the new first lien credit facility on August 17, 2015. See Note 18 for further information.
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CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 9. Long-Term Debt and Subordinated Credit Facility (Continued)
 Letters of Credit
        The Company has two outstanding letters of credit for the security deposits on two real property lease agreements. These letters of credit are for a total of $100, reducing the Revolver availability. The Company pays a fee on the outstanding letters of credit at the applicable margin, which was 3.25% as of June 30, 2015, in addition to a fronting fee of 0.25% per annum.
 10. Income Taxes
        During the three months ended June 30, 2015, we recognized an income tax expense from continuing operations of $6,016 on pre-tax income of $18,171, representing an effective income tax rate of 33.1% compared to an income tax expense from continuing operations of $2,028 on pre-tax income of $5,098, representing an effective tax rate of 39.8% during the three months ended June 30, 2014.
        During the six months ended June 30, 2015, we recognized an income tax expense of $9,974 on pre-tax income of $28,089, representing an effective income tax rate of 35.5% compared to an income tax expense of $2,334 on pre-tax income of $5,900, representing an effective tax rate of 39.6% during the six months ended June 30, 2014.
        The effective tax rates for all periods presented differs from the federal U.S. statutory rates primarily due to a benefit from permanent deductions related to credits for domestic production activities partially offset by the impact of state income taxes.
 11. Series A Preferred Stock
        Series A Preferred Stock has a par value of $0.001 per share. The original Series A Preferred Stock has an initial liquidation preference equal to $1,000 per outstanding share. In addition, the Series A Preferred Stock liquidation preference earns a dividend of 20% per share per annum payable when declared by the Board of Directors. Such dividends accrue on each share from the date of original issuance and accrue on a daily basis, whether or not declared. Such dividends are cumulative so that if such dividend in respect of any previous or current annual dividend period, at the annual 20% rate, has not been paid, the deficiency shall first be fully paid before any dividend or other distribution shall be paid or declared and set apart for the Common Stock. As of June 30, 2015 the liquidation preference of Series A Preferred Stock had a redemption value of approximately $4,342.12 per outstanding share for a total aggregate cumulative liquidation value of $281,005.

								
 	 	Series A Preferred
Stock	 	
 	 	Shares	 	Amount	 	
Balance as of December 31, 2014	 	 	 64,809	 	 $	58,250	 	
Less redemptions of preferred stock	 	 	(93	)	 	(370	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Balance as of June 30, 2015	 	 	 64,716	 	 $	57,880	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
        During the year ended December 31, 2014, the Company issued 549 shares of Series A Preferred Stock at an estimated value of $3,733.88 per share as part of the payment consideration for the EFT
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CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 11. Series A Preferred Stock (Continued)
Source Acquisition. The Company redeemed 40 and 53 shares of Series A Preferred Stock at $3,950.33 and $4,017.43 per share, respectively, during the six months ended June 30, 2015.
        In the event of any liquidation, dissolution or winding up of the Company, the Series A Preferred Stock holders shall be entitled to receive, prior and in preference to any distributions of any of the Company's assets to the Common Stock holders, the value of the liquidation preference. If the distribution of such assets is insufficient to permit the payment to such holders, the distribution shall be distributed ratably among the holders of the Series A Preferred Stock in proportion to the amount of such stock owned by each holder. The Series A Preferred Stock has no voting rights.
        On August 17, 2015, the Company redeemed 62,140 shares of the Series A Preferred Stock for $276,318, or $4,446.70 per share. See Note 18 for more information.
 12. Stockholders' Equity
 Common Stock
        Common Stock has a par value of $0.001 per share. Holders of Common Stock are entitled to receive dividends and distributions subject to the participation rights of holders of all classes of stock at the time outstanding, as such holders have prior rights as to dividends pursuant to the rights of any series of Preferred Stock. Upon any liquidation, dissolution, or winding up of the Company, after required payments are made to holders of any series of Preferred Stock, any remaining assets of the Company will be distributed ratably to the holders of Common Stock. Holders of Common Stock are entitled to one vote per share.
        During the six months ended June 30, 2015, the Company redeemed 3,944 shares of Common Stock at values ranging from $7.10 to $20.10 per share. During the three months ended June 30, 2015, there was no Common Stock issued or redeemed. The redeemed common stock share values were calculated based on the related stockholder agreements.
 Employee Notes Receivable
        Included in contra stockholders' equity are promissory notes received in connection with equity issuances of Series A Preferred Stock and Common Stock to certain employees made during 2011 and earlier years. The notes receivable accrue interest at 5% per annum and are paid in bimonthly installments. The principal balances of the notes are due upon the employee's termination, the sale of the Company, upon any distributions, or at such time that the employee fails to own the underlying shares. The notes may be paid in whole or in part without any penalties at any time at the employee's option. During the six months ended June 30, 2015, the Company did not issue any new employee notes.
        Employee notes receivable totaled $108 at both June 30, 2015 and December 31, 2014, respectively. There were no payments paid on the employee notes receivable during the three and six months ended June 30, 2015 and 2014. As of August 17, 2015, the employee notes receivable were repaid in full to the Company.
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CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 13. Earnings per Share
        Basic or diluted earnings (loss) per share is computed by dividing net earnings or loss by the weighted number of ordinary shares outstanding during the period. All potentially dilutive shares have been excluded from the weighted-average number of shares of common stock outstanding as their inclusion in the computation for all years would be antidilutive due to net losses.
        The following table sets forth the computation of basic and diluted EPS attributable to continuing and discontinued operations:

														
 	 	Three Months Ended June 30,	 	Six Months Ended June 30,	 	
 	 	2015	 	2014	 	2015	 	2014	 	
Numerator:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income from continuing operations	 	 $	12,155	 	 $	3,070	 	 $	18,115	 	 $	3,566	 	
Preferred stock dividends	 	 	(12,747	)	 	(10,548	)	 	(25,359	)	 	(20,980	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Loss from continuing operations attributable to common stockholders	 	 	(592	)	 	(7,478	)	 	(7,244	)	 	(17,414	)	
(Loss) income from a discontinued operation, net of taxes	 	 	—	 	 	(1,167	)	 	281	 	 	(2,763	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net loss available to common stockholders	 	 $	(592	)	 $	(8,645	)	 $	(6,963	)	 $	(20,177	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Denominator:	 	 	

 	 	 	
 	 	
Basic EPS—weighted average common shares outstanding	 	 	1,876,566	 	 	1,868,816	 	 	1,877,857	 	 	1,868,816	 	
Basic EPS:	 	 	

 	 	 	
 	 	
Loss from continuing operations	 	 $	(0.32	)	 $	(4.00	)	 $	(3.86	)	 $	(9.32	)	
(Loss) income from a discontinued operation, net of taxes	 	 	—	 	 	(0.62	)	 	0.15	 	 	(1.48	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net loss	 	 $	(0.32	)	 $	(4.62	)	 $	(3.71	)	 $	(10.80	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
        The Company reported losses from continuing operations available to common stockholders for three months ended June 30, 2015 and 2014 and the six months ended June 30, 2014 and 2014. Accordingly, the potentially dilutive effect of the outstanding stock options and non-vested restricted Common Stock of 32,712, and 28,500, respectively, has been excluded from the computation of diluted loss per share because their inclusion would have been anti-dilutive. As further described in Note 11, the cumulative dividends in arrears related to Series A Preferred Stock must be paid before any distribution can be paid to the Company's common shareholders. As of June 30, 2015, cumulative dividends in arrears related to Series A Preferred Stock in aggregate was $216,289.
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 14. Commitments and Contingencies
        The Company leases real property for its facilities under noncancelable operating lease agreements. Land and facility leases expire at various dates between 2015 and 2023 and contain various provisions for rental adjustments and renewals. All of these leases require the Company to pay property taxes, insurance and normal maintenance costs.
        During the normal course of business, the Company also enters into non-cancellable agreements to purchase goods and services, including production equipment and IT systems.
        Future cash payments with respect to non-cancellable capital leases, operating leases and purchase obligations as of June 30, 2015 are as follows:

											
 	 	Capital
Leases	 	Operating
Leases	 	Purchase
Obligations	 	
2015 (remaining 6 months)	 	 $	41	 	 $	2,279	 	 $	5,497	 	
2016	 	 	52	 	 	4,250	 	 	—	 	
2017	 	 	—	 	 	3,414	 	 	—	 	
2018	 	 	—	 	 	2,538	 	 	—	 	
2019	 	 	—	 	 	1,156	 	 	—	 	
Thereafter	 	 	—	 	 	1,272	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total	 	 	 93	 	 $	14,909	 	 $	5,497	 	
 ​	​	​	​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​ 	​ 	​	​ 	​ 	​	
Less interest costs	 	 	(10	)	 	 	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
Present value of minimum lease payment	 	 $	83	 	 	 	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
        The amount of the minimum lease payments under capital leases is included in other long-term liabilities in the consolidated balance sheet at June 30, 2015 and December 31, 2014.
        The Company incurred rent expense under non-cancellable operating leases of $886 and $799 for the three months ended June 30, 2015 and 2014, respectively and $1,819 and $1,568 for the six months ended June 30, 2015 and 2014, respectively.
        Asset retirement obligations relate to legal obligations associated with the removal of all leasehold improvements at the end of the lease term. The Company records all asset retirement obligations, which primarily relate to "make-good" clauses in operating leases, for its leased property containing leasehold improvements. The liability, reported within other long-term liabilities, is accreted through charges to operating expenses. If the asset retirement obligation is settled for an amount other than the carrying amount of the liability, the Company recognizes a gain or loss on settlement. Accretion expense was $4 for both the six month periods ended June 30, 2015 and 2014. As of June 30, 2015 and December 31, 2014, the Company's asset retirement obligations included in other long-term liabilities were $918 and $911, respectively.
 15. Stock-Based Compensation
        The Company accounts for stock-based compensation pursuant to ASC 718, "Share-Based Payment," which requires measurement of compensation cost for all stock awards at fair value on the
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CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 15. Stock-Based Compensation (Continued)
date of grant and recognition of compensation, net of estimated forfeitures, over the requisite service period for awards expected to vest.
        In 2007, the Company's Board of Directors adopted the 2007 Stock Option Plan (the "Plan"). Under the provisions of the Plan, stock options may be granted to employees, directors, and consultants at an exercise price greater than or equal to, (and not less than), the fair market value of a share on the date the option is granted. The number of common shares available is 95,000, of which 71,000 were available to be granted as of June 30, 2015. The stock options have a 10-year life and vest as noted in each respective grant letter. All stock options are nonqualified. No stock options were granted in 2015.
        The following table summarizes the changes in the number of outstanding stock options for the six month period ended June 30, 2015:

											
 	 	Options	 	Weighted-Average
Exercise
Price	 	Weighted-Average
Remaining
Contractual
Term
(in Years)	 	
Outstanding as of December 31, 2014	 	 	28,500	 	 	0.007	 	 	6.44	 	
Granted	 	 	—	 	 	—	 	 	—	 	
Forfeited	 	 	(4,500	)	 	0.007	 	 	—	 	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
Outstanding as of June 30, 2015	 	 	24,000	 	 	0.007	 	 	6.11	 	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	
Exercisable as of June 30, 2015	 	 	20,333	 	 	0.008	 	 	7.22	 	
        Unvested options as of June 30, 2015, vest as follows:

					
2015	 	 	1,833	 	
2016	 	 	1,834	 	
 ​	​	​ 	​ 	​	
Total unvested options as of June 30, 2015	 	 	3,667	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        Compensation expense and unrecorded compensation expense related to the stock options for the three and six month periods ended June 30, 2015 and 2014 were de minimis.
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 15. Stock-Based Compensation (Continued)
        The following table summarizes the changes in the number of outstanding restricted shares of common stock for the six month period ended June 30, 2015:

								
 	 	Shares	 	Weighted-Average
Grant Date
Fair Value	 	
Outstanding as of December 31, 2014	 	 	—	 	 	—	 	
Granted	 	 	 8,712	 	 $	208.60	 	
Vested	 	 	—	 	 	—	 	
Forfeited	 	 	—	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Outstanding as of June 30, 2015	 	 	 8,712	 	 $	208.60	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
        During the three and six months ended June 30, 2015 the Company issued 8,712 restricted shares of common stock to executives of the Company. The awards contain service conditions associated with continued employment or service. The terms of the non-vested restricted shares of common stock provide voting and regular dividend rights to the holders of the restricted shares of common stock. Upon vesting, the restrictions on the restricted shares of common stock lapse and the shares are considered issued and outstanding. The restricted shares vest over one- to three-year periods.
        In measuring compensation expense associated with the grant of non-vested restricted shares of common stock, the Company estimated the fair value of the award on the grant date. Compensation expense is recorded monthly over the vesting periods of the awards. Total compensation expense related to the non-vested restricted shares of common stock awards was de minimis for the three and six month periods ended June 30, 2015. As of June 30, 2015, there was $1,817 of unrecognized compensation expense related to non-vested restricted shares of common stock that will be recognized over a weighted average period of 1.95 years.
 16. Phantom Stock Plan
        Effective January 1, 2012, the Company's Board of Directors adopted the CPI Acquisition, Inc. Phantom Stock Plan to provide incentive compensation to certain key employees. Under the terms of the agreement, holders of an award are entitled to a cash payment equal to the difference between the fair market value of the award, as defined in the agreement, at the time of exercise and the award's exercise price. Each award is issued for a specified number of units at an established base amount per unit of $2,000. In the event of any liquidation, dissolution, or winding up of the Company, the holders of the awards will receive the cash payment as defined above.
        All awards vest on the defined Redemption Date or earlier fixed date pursuant to each award agreement. The Redemption Date is defined as the earlier of a Change-in-Control or seven years from grant. Unvested awards expire upon participant's termination of service.
        Total authorized units under the plan are 100,000. At December 31, 2014, there were 84,297 units issued and outstanding under the terms of the plan, of which 13,088 were fully vested. At June 30, 2015, there were 81,156 units issued and outstanding under the terms of the plan, of which 13,088 were fully vested.
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 16. Phantom Stock Plan (Continued)
        As these awards must be settled in cash, the Company accounts for them as liabilities. As a nonpublic company, the company had elected to measure the liability at intrinsic value; with changes in the intrinsic value of the liability recognized as expense each year in the consolidated statements of operations and comprehensive income. There was $897 and $(193) of compensation expense recognized for the three months ended June 30, 2015 and 2014, respectively, related to this plan. There was $1,503 and $(591) of compensation expense recognized for the six months ended June 30, 2015 and 2014, respectively, related to this plan.
 17. Segment Reporting
        The Company has identified reportable segments as those consolidated subsidiaries that represent 10% or more of its revenue, EBITDA (as defined below), or total assets or subsidiaries which the Company believes information about the segment would be useful to the readers of the financial statements from a qualitative perspective. The Company's chief operating decision maker is its Chief Executive Officer who is charged with management of Company and is responsible for the evaluation of operating performance and decision making about the allocation of resources to operating segments based on measures such as revenue and EBITDA.
        EBITDA is the primary measure used by the Company's chief operating decision maker to evaluate segment operating performance. As the Company uses the term, EBITDA is defined as income from continuing operations before interest expense, income taxes, depreciation and amortization. The Company's chief operating decision maker believes EBITDA is a meaningful measure and is superior to available U.S. GAAP measures as it represents a transparent view of the Company's operating performance that is unaffected by fluctuations in property, equipment, and leasehold improvement additions. The Company's chief operating decision maker uses EBITDA to perform periodic reviews and comparison of operating trends and identify strategies to improve the allocation of resources amongst segments.
        As of June 30, 2015, the Company's reportable segments are as follows:
•
U.S. Debit and Credit 

•
U.S. Prepaid Debit 

•
U.K. Limited
        The U.S. Debit and Credit segment primarily produces Financial Payment Cards and provides integrated card services to card-issuing banks in the United States. Products manufactured by this segment primarily include EMV and non-EMV credit cards, debit cards and prepaid debit cards issued on the networks of the Payment Card Brands, private label credit cards that are not issued on the networks of the Payment Cards Brands and instant issuance systems. This segment also provides a variety of integrated card services, including card personalization and fulfillment services and instant issuance services. The U.S. Debit and Credit segment includes the Company's operations in Colorado, Indiana and Tennessee, which are each certified by multiple global Payment Card Brands and, where required by the Company's customers and the PCI Security Standards Council. These operating segments have been aggregated into a single reportable segment due to similarities in the nature of the
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 17. Segment Reporting (Continued)
products and services sold by these subsidiaries, a common customer base, the substantial degree of integration and redundancy across the segments, and utilization of centrally shared sales, marketing, quality and planning departments. Separate information about these segments would not be useful to the readers of the financial statements.
        The U.S. Prepaid Debit segment primarily provides integrated card services to prepaid debit card issuers in the United States. Services provided include tamper-evident security packaging services and card personalization and fulfillment services. This segment also produces Financial Payment Cards issued on the networks of the Payment Card Brands that are included in the tamper-evident security packages mentioned above. The U.S. Prepaid Debit segment includes the Company's operation in Minnesota which is certified by multiple global Payment Card Brands and the PCI Security Standards Council.
        The U.K. Limited segment primarily produces retail gift and loyalty cards for customers in the United Kingdom and continental Europe. This segment also provides card personalization and fulfillment services. The U.K. Limited segment includes the Company's operations in Colchester, United Kingdom and Liverpool, United Kingdom. Neither of the Company's operations in this segment is certified by any of the Payment Card Brands, nor are they PCI certified.
        The "other" category includes the Company's corporate headquarters and less significant operating segments that derive their revenue from the production of Financial Payment Cards and retail gift cards in Canada (CPI—Canada) and the U.K. (CPI—Petersfield). On February 16, 2015, the Company determined that the Petersfield, United Kingdom operation would be shut down. The shut down and closure of the Petersfield facility was completed in August 2015.
 Performance Measures of Reportable Segments
        Revenue and EBITDA of the Company's reportable segments for the three and six months ended June 30, 2015 and 2014 were as follows:

														
 	 	Revenue	 	
 	 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	 	
 	 	2015	 	2014	 	2015	 	2014	 	
U.S. Debit and Credit (a)	 	 $	73,354	 	 $	28,583	 	 $	123,405	 	 $	49,270	 	
U.S. Prepaid Debit	 	 	12,392	 	 	13,015	 	 	29,823	 	 	23,298	 	
U.K. Limited	 	 	7,679	 	 	9,216	 	 	13,918	 	 	16,330	 	
Other	 	 	5,819	 	 	5,242	 	 	9,922	 	 	11,183	 	
Intersegment eliminations (b)	 	 	(3,708	)	 	(2,820	)	 	(4,222	)	 	(4,314	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total:	 	 $	95,536	 	 $	53,236	 	 $	172,846	 	 $	95,767	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 17. Segment Reporting (Continued)

														
 	 	EBITDA	 	
 	 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	 	
 	 	2015	 	2014	 	2015	 	2014	 	
U.S. Debit and Credit (a)	 	 $	24,012	 	 $	6,508	 	 $	36,593	 	 $	10,990	 	
U.S. Prepaid Debit	 	 	3,776	 	 	4,034	 	 	9,760	 	 	5,978	 	
U.K. Limited	 	 	658	 	 	937	 	 	841	 	 	814	 	
Other	 	 	(4,680	)	 	(1,832	)	 	(7,560	)	 	(2,824	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total:	 	 $	23,766	 	 $	9,647	 	 $	39,634	 	 $	14,958	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(a)
Amounts for the three and six months ended June 30, 2015 include the post-acquisition revenue and EBITDA of EFT Source.
        The following table provides a reconciliation of total segment EBITDA to income before taxes for the three months ended June 30, 2015 and 2014 and the six months ended June 30, 2015 and 2014:

														
 	 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	 	
 	 	2015	 	2014	 	2015	 	2014	 	
Total segment EBITDA from continuing operations	 	 $	23,766	 	 $	9,647	 	 $	39,634	 	 $	14,958	 	
Depreciation and amortization	 	 	(3,979	)	 	(2,788	)	 	(8,040	)	 	(5,614	)	
Interest, net	 	 	(1,616	)	 	(1,761	)	 	(3,505	)	 	(3,444	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income before income taxes	 	 $	18,171	 	 $	5,098	 	 $	28,089	 	 $	5,900	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
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CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 17. Segment Reporting (Continued)
 Balance Sheet Data of Reportable Segments
        Total assets of the Company's reportable segments as of June 30, 2015 and December 31, 2014 were as follows:

								
 	 	June 30,
2015	 	December 31,
2014	 	
U.S. Debit and Credit	 	 $	218,654	 	 $	200,572	 	
U.S. Prepaid Debit	 	 	23,888	 	 	20,183	 	
U.K. Limited	 	 	26,418	 	 	29,740	 	
Other	 	 	18,824	 	 	10,267	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total continuing operations:	 	 	287,784	 	 	260,762	 	
Discontinued operation (a) :	 	 	—	 	 	5,862	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total assets:	 	 $	287,784	 	 $	266,624	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	

(a)
As of December 31, 2014, certain assets of the Nevada operation sold on January 12, 2015 (Note 3) are presented in assets of a discontinued operation in the Company's consolidated balance sheet.
 Plant, Equipment and Leasehold Improvement Additions of Geographic Locations
        Plant, equipment and leasehold improvement additions of the Company's geographical locations for the three months ended June 30, 2015 and 2014 and for the six months ended June 30, 2015 and 2014 were as follows:

														
 	 	Three Months
Ended
June 30,	 	Six Months Ended
June 30,	 	
 	 	2015	 	2014	 	2015	 	2014	 	
U.S.	 	 $	5,799	 	 $	3,046	 	 $	9,973	 	 $	6,295	 	
Canada	 	 	97	 	 	22	 	 	281	 	 	22	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total North America	 	 	5,896	 	 	3,068	 	 	10,254	 	 	6,317	 	
U.K.	 	 	43	 	 	93	 	 	136	 	 	261	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total plant, equipment and leasehold improvement additions	 	 $	5,939	 	 $	3,161	 	 $	10,390	 	 $	6,578	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
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Table of Contents

CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 17. Segment Reporting (Continued)
 Net Sales of Geographic Locations
        Net sales of the Company's geographic locations for the three months ended June 30, 2015 and 2014 and the six months ended June 30, 2015 and 2014 were as follows:

														
 	 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	 	
 	 	2015	 	2014	 	2015	 	2014	 	
U.S. (a)	 	 $	82,676	 	 $	38,986	 	 $	150,511	 	 $	67,186	 	
Canada	 	 	2,972	 	 	2,894	 	 	4,125	 	 	7,764	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total North America	 	 	85,648	 	 	41,880	 	 	154,636	 	 	74,950	 	
U.K.	 	 	7,648	 	 	8,231	 	 	13,853	 	 	15,077	 	
Other (b)	 	 	2,240	 	 	3,125	 	 	4,357	 	 	5,740	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total revenue	 	 $	95,536	 	 $	53,236	 	 $	172,846	 	 $	95,767	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(a)
Amounts for the three and six months ended June 30, 2015 include the post-acquisition revenue of EFT Source.

(b)
Amounts in other include sales to various countries that individually are not material.
 Long-Lived Assets of Geographic Segments
        Long-lived assets of the Company's geographic segments as of June 30, 2015 and December 31, 2014 were as follows:

								
 	 	June 30,
2015	 	December 31,
2014	 	
U.S.	 	 $	162,133	 	 $	160,144	 	
Canada	 	 	2,502	 	 	2,525	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total North America:	 	 	164,634	 	 	162,669	 	
U.K.	 	 	13,991	 	 	14,607	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total long-lived assets	 	 $	178,626	 	 $	177,276	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
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CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 17. Segment Reporting (Continued)
 Net Sales by Product and Services
        Net sales from products and services sold by the Company for the three months ended June 30, 2015 and 2014 and for the six months ended June 30, 2015 and 2014 were as follows:

														
 	 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	 	
 	 	2015	 	2014	 	2015	 	2014	 	
Product net sales (a)	 	 $	67,757	 	 $	33,574	 	 $	112,771	 	 $	58,905	 	
Services net sales (b)	 	 	27,779	 	 	19,662	 	 	60,075	 	 	36,862	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total net sales:	 	 $	95,536	 	 $	53,236	 	 $	172,846	 	 $	95,767	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

(a)
Product net sales include the design and production of Financial Payment Cards, contact-EMV, Dual-Interface EMV, contactless and magnetic stripe card formats. The Company also generates product revenue from the sale of Card@Once® instant issuance systems, private label credit cards and retail gift cards.

(b)
Services net sales include revenue from the personalization and fulfillment of Financial Payment Cards, the provision of tamper-evident security packaging, providing fulfillment services to Prepaid Debit Card program managers, and software as a service personalization of instant issuance debit cards. The Company also generates service revenue from personalizing retail gift cards (primarily in Canada and the United Kingdom) and from click-fees generated from the Company's patented card design software, known as MYCA, which provides customers and cardholders the ability to design cards on the internet and customize cards with individualized digital images.
 18. Subsequent Event
 New Credit Agreement and Series A Preferred Stock Redemption
        On August 17, 2015, the Company entered into a new first lien credit facility. The aggregate principal balance of the term loan under the first lien credit facility totaled $435,000 and the aggregate revolving commitments under the first lien credit facility totaled $40,000. As of August 17, 2015, the Company did not have any outstanding revolving loans other than outstanding letters of credit of approximately $100, which reduced the borrowing capacity under the revolving credit facility by an equivalent amount.
        The term loan and the revolving credit facility under the first lien credit facility have a maturity date of August 17, 2022 and August 17, 2020, respectively. The loans under the first lien credit facility are required to be prepaid in advance of the maturity date upon the occurrence of certain customary events. The Company is also required to prepay $75,000 of the term loans under the first lien credit facility upon the consummation of a qualified initial public offering.
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CPI Card Group Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in Thousands, Except Share and Per Share Amounts or as Otherwise Indicated)
(Unaudited)
 18. Subsequent Event (Continued)
        On August 17, 2015, with the proceeds of the term loan under the first lien credit facility, the Company redeemed 62,140 shares of Series A Preferred Stock with an aggregate redemption value of $276,318, refinanced $142,042 of outstanding indebtedness under the existing term loan and financed the payment of related transaction fees and expenses of $17,646.
        The new first lien credit facility is secured by a first-priority security interest in substantially all of the Company's assets constituting equipment, inventory, receivables, cash and other personal property. Such security excludes certain specified assets, as more fully set forth in the collateral agreement under the first lien credit facility.
        Interest rates under the new first lien credit facility are based, at the Company's election, on a Eurodollar rate plus a margin of 4.50% or a base rate plus a margin of 3.50%. Letters of credit are subject to a 0.125% fronting fee payable to the issuing bank and a fee payable to the revolving lenders equal to the margin applicable to Eurodollar revolving loans. In addition, the Company is required to pay an unused commitment fee ranging from 0.375% per annum to 0.50% per annum of the average unused portion of the revolving commitments. The unused commitment fee is determined on the basis of a grid that results in a lower unused commitment fee as our total net leverage ratio declines.
        The new first lien credit facility contains customary nonfinancial covenants, including among other things, restrictions on indebtedness, issuance of liens, investments, dividends, redemptions and other distributions to equity holders, asset sales, certain mergers or consolidations, sales, transfers, leases or dispositions of substantially all of our assets, and affiliate transactions. The restrictions on dividends, redemptions and other distributions to equity holders contained in the first lien credit facility are subject to certain exceptions.
        The new first lien credit facility also contains a requirement that, as of the last day of any fiscal quarter, if the revolving exposure of the lenders under the first lien credit facility is greater than 50% of the aggregate principal amount of all revolving commitments of the lenders, the Company maintain a first lien net leverage not in excess of 7.0x.
 Closure of Facility
        In August 2015, the Company completed the shut down and closure of its operation in Petersfield, United Kingdom.
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 Independent Auditors' Report
The Board of Directors
CPI Card Group Inc.:
 Report on the Financial Statements
        We have audited the accompanying financial statements of EFT Source, Inc., which comprise the balance sheet as of September 2, 2014, and the related statements of operations, changes in stockholders' equity, and cash flows for the period January 1, 2014 through September 2, 2014, and the related notes to the financial statements.
 Management's Responsibility for the Financial Statements
        Management is responsible for the preparation and fair presentation of these financial statements in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
 Auditors' Responsibility
        Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
        An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
        We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 Opinion
        In our opinion, the financial statements referred to above present fairly in all material respects, the financial position of EFT Source, Inc. as of September 2, 2014, and the results of its operations and its cash flows for the period January 1, 2014 through September 2, 2014 in accordance with U.S. generally accepted accounting principles.

			
 	 	/s/ KPMG LLP	
Denver, Colorado
May 14, 2015
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EFT Source, Inc.

Balance Sheet

As of September 2, 2014

					
Assets	 	 	 	 	
Current assets:	 	 	 	 	
Cash and cash equivalents	 	 $	381,219	 	
Accounts receivable	 	 	5,814,977	 	
Inventories	 	 	1,430,074	 	
Prepaid expenses and other current assets	 	 	1,010,600	 	
Income tax receivable (note 7)	 	 	415,000	 	
Deferred income taxes (note 7)	 	 	9,098	 	
 ​	​	​ 	​ 	​	
Total current assets	 	 	9,060,968	 	
Property and equipment, net (note 4)	 	 	
5,729,758	 	
Goodwill	 	 	6,426,000	 	
Related party mortgage receivables (note 8)	 	 	1,288,667	 	
 ​	​	​ 	​ 	​	
Total assets	 	 $	22,505,393	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
Liabilities and stockholders' equity	 	 	
 	 	
Current liabilities:	 	 	 	 	
Accounts payable	 	 $	575,891	 	
Accrued expenses and other current liabilities	 	 	1,169,248	 	
Deferred income taxes (note 7)	 	 	32,781	 	
Income taxes payable (note 7)	 	 	75,000	 	
Current portion of capital lease obligations (note 9)	 	 	165,685	 	
Current portion of long-term debt (note 5)	 	 	938,574	 	
 ​	​	​ 	​ 	​	
Total current liabilities	 	 	2,957,179	 	
Long-term debt (note 5)	 	 	
4,434,857	 	
Capital lease obligations, excluding current portion (note 9)	 	 	180,463	 	
Deferred income taxes	 	 	52,541	 	
 ​	​	​ 	​ 	​	
Total liabilities	 	 	7,625,040	 	
Commitments and contingencies (note 9)	 	 	
 	 	
Stockholders' equity:	 	 	
 	 	
Common stock; no par value; 2,000 shares authorized; 899 shares issued and outstanding	 	 	608,202	 	
Retained earnings	 	 	14,272,151	 	
 ​	​	​ 	​ 	​	
Total stockholders' equity	 	 	14,880,353	 	
 ​	​	​ 	​ 	​	
Total liabilities and stockholders' equity	 	 $	22,505,393	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
    
See accompanying notes to financial statements
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EFT Source, Inc.

Statement of Operations

For the period January 1, 2014 through September 2, 2014

					
Net sales	 	 $	34,158,030	 	
Cost of sales	 	 	
20,856,661	 	
Selling, general, and administrative	 	 	9,540,654	 	
Depreciation expense (note 4)	 	 	738,788	 	
 ​	​	​ 	​ 	​	
Income from operations	 	 	
3,021,927	 	
Other income (expense):	 	 	
 	 	
Interest expense	 	 	(66,288	)	
Related party interest income (note 8)	 	 	2,145	 	
 ​	​	​ 	​ 	​	
Total other income (expense)	 	 	(64,143	)	
 ​	​	​ 	​ 	​	
Income before income taxes	 	 	
2,957,784	 	
Income tax expense (benefit) (note 7)	 	 	(726,476	)	
 ​	​	​ 	​ 	​	
Net income	 	 $	3,684,260	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
    
See accompanying notes to financial statements
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EFT Source, Inc.

Statement of Stockholders' Equity

For the period January 1, 2014 through September 2, 2014

														
 	 	Common Shares	 	 	 	 	 	
 			 	Accumulated
deficit	 	 	 	
 	 	Shares	 	Amount			 	Total	 	
December 31, 2013	 	 	899	 	 $	608,202	 	 $	10,587,891	 	 $	11,196,093	 	
Net income	 	 	—	 	 	—	 	 	3,684,260	 	 	3,684,260	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
September 2, 2014	 	 	899	 	 $	608,202	 	 $	14,272,151	 	 $	14,880,353	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
    
See accompanying notes to financial statements
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EFT Source, Inc.

Statement of Cash Flows

For the period January 1, 2014 through September 2, 2014

					
Operating activities	 	 	 	 	
Net income	 	 $	3,684,260	 	
Adjustments to reconcile net income from continuing operations to net cash provided by operating activities:	 	 	 	 	
Depreciation expense (note 4)	 	 	738,788	 	
Deferred income tax (note 7)	 	 	(801,476	)	
Changes in operating assets and liabilities:	 	 	 	 	
Accounts receivable	 	 	(1,029,080	)	
Inventory	 	 	(51,801	)	
Prepaid expenses and other current assets	 	 	(59,109	)	
Income tax receivable	 	 	(415,000	)	
Accounts payable	 	 	45,274	 	
Accrued expenses and other current liabilities	 	 	(422,230	)	
Income taxes payable	 	 	(178,147	)	
 ​	​	​ 	​ 	​	
Cash provided by operating activities	 	 	1,511,479	 	
Investing activities	 	 	
 	 	
Purchase of property and equipment (note 4)	 	 	(1,468,589	)	
Loans to related parties (note 8)	 	 	(1,288,667	)	
 ​	​	​ 	​ 	​	
Cash used in investing activities	 	 	(2,757,256	)	
Financing activities	 	 	
 	 	
Borrowings of debt (note 5)	 	 	14,677,477	 	
Repayments of debt (note 5)	 	 	(12,904,800	)	
Repayments of capital lease obligations (note 9)	 	 	(145,685	)	
 ​	​	​ 	​ 	​	
Cash provided by financing activities	 	 	1,626,992	 	
Net increase in cash and cash equivalents	 	 	
381,215	 	
Cash and cash equivalents, beginning of period	 	 	4	 	
 ​	​	​ 	​ 	​	
Cash and cash equivalents, end of period	 	 $	381,219	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
Supplementary information	 	 	
 	 	
Cash paid for interest	 	 $	66,288	 	
Cash paid for income taxes	 	 	415,000	 	
    
See accompanying notes to financial statements
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EFT Source, Inc.

Notes to Financial Statements
 1. Business
        EFT Source, Inc. ("EFT Source" or the "Company") personalizes and fulfills Financial Payment Cards for card issuing banks and other financial institutions located throughout the United States. We define Financial Payment Cards as credit, debit and Prepaid Debit Cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express, and Discover). EFT Source's services include design, card and collateral procurement, encoding, embossing, chip programing, and data processing services related to Financial Payment Card management and issuance. EFT Source also sells its patented Card@Once® instant issuance system and provides ongoing card personalization services to users of this system.
        EFT Source is authorized to personalize Visa and MasterCard products based upon card personalization agreements. The agreements require EFT Source to adhere to certain provisions as stated in the agreements.
 2. Summary of Significant Accounting Policies
 Basis of Presentation
        The accompanying financial statements include the historical financial information of the stand-alone operations of EFT Source that are to be sold to CPI Acquisition, Inc. ("CPI"), a wholly owned subsidiary of CPI Card Group Inc., formerly known as CPI Holdings I, Inc., pursuant to a Purchase and Sale Agreement (the "EFT Sale Agreement") entered into on August 22, 2014 and closed on September 2, 2014.
        Prior to September 2, 2014, EFT Source owned a 100% membership interest in Primadata, LLC ("Primadata"). Pursuant to the terms of the EFT Sale Agreement, EFT Source distributed all rights, title and interest in Primadata to the former owners of EFT Source. In connection with the distribution, EFT Source was released from all obligations with respect to the Primadata. Accordingly, the accompanying financial statements do not include the historical financial information of Primadata.
 Revenue Recognition
        Substantially all revenues of the Company are derived from card personalization, procurement, delivery services and sales of Card@Once® instant issuance systems. It is the Company's policy to recognize revenues as earned when the cards are mailed to the customer or end-user, when the instant issuance systems are shipped to the customer and as customers' instant issuance systems personalize cards within a bank branch. Certain service program revenue for instant issuance systems is recognized over the term of the program.
        The Company has determined that the effects of deferred revenue for extended warranty agreements entered into with customers prior to January 1, 2014 was not material.
        The Company accounts for all governmental taxes associated with revenue transactions on a net basis.
        The Company includes shipping and handling fees billed to customers in service revenues. All shipping and handling costs are included in cost of services.
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EFT Source, Inc.
Notes to Financial Statements (Continued)
 2. Summary of Significant Accounting Policies (Continued)
 Cash and Cash Equivalents
        The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents and they are stated at cost, which approximates fair value.
        The Company generally maintains cash on deposit at banks in excess of federally insured amounts. The Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk related to cash.
 Trade Accounts Receivables and Concentration of Credit Risk
        Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from invoice date. Certain customers have been granted extended payment terms based on business volume or other considerations. Late or interest charges on delinquent accounts are not recorded until collected. The carrying amount of accounts receivable is reduced by a valuation allowance, if necessary, which reflects management's best estimate of the amounts that will not be collected. The allowance is estimated based on management's knowledge of its customers, historical loss experience and existing economic conditions. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. In management's opinion, an allowance for doubtful accounts is not necessary as of September 2, 2014.
        The majority of the Company's revenues and receivables are from sales to commercial financial service organizations located throughout the United States that distribute debit cards to customers and employees. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral.
        Services provided to one customer for the period through September 2, 2014 amounted to approximately 9.9% of the Company's service revenues. Accounts receivable related to this customer was approximately $830,693 as of September 2, 2014.
 Property and Equipment
        Property and equipment are stated at cost. Depreciation and amortization are provided over the assets' estimated useful lives using primarily the straight-line method. Equipment and fixtures are depreciated over five to seven years and leasehold improvements are amortized over the shorter of their estimated lives or the respective lease term.
        Expenditures for maintenance and repairs are expensed when incurred. Expenditures for renewals or betterments are capitalized. When property is retired or sold, the cost and the related accumulated depreciation and amortization are removed from the accounts, and the resulting gain or loss is included in operations.
        Management evaluates the recoverability of the investment in long-lived assets on an ongoing basis and recognizes any impairment in the year of determination. It is reasonably possible that relevant conditions could change in the near term and necessitate a change in management's estimate of the recoverability of these assets.
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EFT Source, Inc.
Notes to Financial Statements (Continued)
 2. Summary of Significant Accounting Policies (Continued)
 Goodwill and Intangible Assets
        Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business combinations recorded as purchases.
 Capitalized Loan Fees
        Loan costs are amortized on a straight-line basis over the terms of the respective note agreements as the difference between interest expense recognized under the effective interest method and the straight-line amortization method is not considered to be material.
 Inventory
        Inventory consists primarily of non-personalized Financial Payment Cards and instant issuance systems held for sale and are stated at the lower of cost, determined on an average cost basis, or market (net realizable value).
        The Company purchased 22% of its production materials and services from one supplier through September 2, 2014. Accounts payable related to this supplier was approximately $145,302 as of September 2, 2014.
 Income Taxes
        On March 14, 2014, the Company filed forms with the Internal Revenue Service to change its tax election from a standard "C" corporation to a Subchapter "S" corporation for federal income tax purposes, effective January 1, 2014. Prior to the Company's conversion to a Subchapter "S" corporation, EFT Source filed U.S. federal and state income tax returns for Tennessee, Colorado, and Wisconsin. Subsequent to the Company's conversion to a Subchapter "S" corporation, the Company will be treated as a pass through entity for federal and state income tax purposes in Colorado and Wisconsin. The Company will continue to file state income tax returns for Tennessee.
        The amount provided for state income taxes is based upon the amounts of current and deferred taxes payable or refundable at the date of the financial statements as a result of all events recognized in the financial statements measured by the provisions of enacted tax laws.
        Under generally accepted accounting principles, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company had no material uncertain tax positions that qualify for either recognition or disclosure in the financial statements.
 Advertising Costs
        Advertising costs are expensed as incurred and amounted to $209,857 for the period January 1, 2014 through September 2, 2014.
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EFT Source, Inc.
Notes to Financial Statements (Continued)
 2. Summary of Significant Accounting Policies (Continued)
 Use of Estimates
        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
 3. Fair Value Measurements
        The Company reports assets and liabilities under the accounting standards for fair value, which define fair value, establish a framework for measuring fair value, and govern disclosures about fair value measurements for financial and non-financial assets and liabilities. Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity including quoted market prices in active markets for identical assets (Level 1), or significant other observable inputs (Level 2) and the reporting entity's own assumptions about market participant assumptions (Level 3). There have been no changes in the methodology used as of September 2, 2014.
 4. Property and Equipment
        Property and equipment as of September 2, 2014 consists of the following:

					
Equipment and fixtures	 	 $	12,888,397	 	
Leasehold improvements	 	 	1,140,200	 	
Construction in progress	 	 	2,500,117	 	
 ​	​	​ 	​ 	​	
	 	 	16,528,714	 	
Accumulated depreciation	 	 	(10,798,956	)	
 ​	​	​ 	​ 	​	
	 	 $	5,729,758	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        Depreciation expense for the period January 1, 2014 through September 2, 2014 was $738,788.
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EFT Source, Inc.
Notes to Financial Statements (Continued)
 5. Long-Term Debt
        Debt as of September 2, 2014 consists of the following:

					
Term note to a financial institution due in monthly installments of $78,214, plus interest at variable rate of 30-day LIBOR plus 2.29% (2.445% as of September 2, 2014), through September 2, 2014; secured by all assets and stock of the Company; cross-collateralized with the revolving line of credit	 	 $	1,251,430	 	
Equipment LOC payable to a financial institution interest only at a variable rate of 30-day LIBOR plus 2.29% (2.445% as of September 2, 2014), secured by specifically identified equipment in process to be termed once equipment installation is complete, projected June 2015	 	 	1,922,001	 	
$2,800,000 revolving line of credit ("LOC") with a financial institution scheduled to mature on June 30, 2016 bearing interest at a variable rate of 30-day LIBOR plus 2.29% (2.445% at September 2, 2014); secured by all assets of the Company, and is cross-collateralized with the term note described above; the LOC has an outstanding balance of $2,200,000 as of September 2, 2014	 	 	2,200,000	 	
 ​	​	​ 	​ 	​	
Total debt	 	 	5,373,431	 	
Less current portion of long-term debt	 	 	(938,574	)	
 ​	​	​ 	​ 	​	
Long-term debt	 	 $	4,434,857	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        The LOC agreement places certain restrictions upon the Company, including capital expenditures and additional borrowings, and requires a mandatory annual payment of 85% of excess cash flow, as defined in the agreement. The Company is also required to maintain a minimum cash flow to debt service ratio. Advances under the LOC are determined based on a defined borrowing base.
        A summary of future maturities of debt as of September 2, 2014 is as follows:

					
2014 (through December 31, 2014)	 	 $	312,856	 	
2015	 	 	2,860,575	 	
2016	 	 	2,200,000	 	
 ​	​	​ 	​ 	​	
	 	 $	5,373,431	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        All of the Company's outstanding indebtedness was repaid on September 2, 2014 in connection with CPI's acquisition of EFT Source.
 6. Profit-Sharing Plan
        The Company sponsors certain defined contribution profit-sharing plans covering all employees over 21 years old with one year of service. Employees may defer up to 10% of their compensation, not to exceed the maximum amount allowable under income tax rules and regulations. Employee salary deferrals are matched 25% by the Company. The Company may also contribute an additional amount determined by its Board of Directors as allowed under the plan. The Company contributed $67,780 to the plan during the period January 1, 2014 through September 2, 2014.
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EFT Source, Inc.
Notes to Financial Statements (Continued)
 7. Income Taxes
        On March 14, 2014, the Company filed forms with the Internal Revenue Service to change its tax election from a standard "C" corporation to a Subchapter "S" corporation for federal income tax purposes, effective January 1, 2014. In connection with the Company's conversion to a Subchapter "S" corporation, deferred taxes previously recorded by EFT Source for timing differences between financial statement and tax accounting for federal income taxes were reversed, resulting in an income tax benefit of $801,476. Subsequent to the Company's conversion to a Subchapter "S" corporation, the Company will be treated as a pass through entity for federal and state income tax purposes in Colorado and Wisconsin. The Company will continue to file state income tax returns in Tennessee.
        For Tennessee state income taxes, deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of the Company's assets and liabilities. The deferred income tax assets result primarily from the tax basis difference in accounting for non-compete agreements and certain accrued expenses which are not deductible for income tax purposes until paid. The deferred income tax liabilities result primarily from depreciation and amortization for financial reporting purposes being less than depreciation and amortization allowed for tax reporting purposes and certain timing differences related to prepaid expenses.
        The Company's provision for income taxes for the period January 1, 2014 through September 2, 2014 is as follows:

					
Current tax expense (benefit):	 	 	 	 	
Federal	 	 $	—	 	
State	 	 	75,000	 	
 ​	​	​ 	​ 	​	
	 	 	75,000	 	
 ​	​	​ 	​ 	​	
Deferred tax expense (benefit):	 	 	 	 	
Federal	 	 	(801,476	)	
State	 	 	—	 	
 ​	​	​ 	​ 	​	
	 	 	(801,476	)	
 ​	​	​ 	​ 	​	
Total tax expense (benefit)	 	 $	(726,476	)	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
Income before income taxes	 	 $	2,957,784	 	
Effective income tax rate	 	 	(24.6	)%	
        The actual income tax expense each year differed from the expected income tax expense due to the Company's conversion to a Subchapter "S" corporation and certain expenses which have been recognized in the financial statements which are not deductible for Tennessee state income tax purposes.
        As of September 2, 2014, the Company has accrued no interest and no penalties related to uncertain tax positions. It is the Company's policy to recognize interest and/or penalties related to income tax matters in income tax expense.
        Prior to the Company's conversion to a Subchapter "S" corporation, EFT Source filed U.S. federal and state income tax returns for Tennessee, Colorado, and Wisconsin. EFT Source is currently open to audit under the statute of limitations by the Internal Revenue Service and the states of Tennessee, Colorado and Wisconsin for all years ended December 31, 2010 onward.
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EFT Source, Inc.
Notes to Financial Statements (Continued)
 7. Income Taxes (Continued)
        Net deferred income taxes in the balance sheet as of September 2, 2014 include the following amounts of deferred income tax assets and liabilities:

					
Current deferred tax assets	 	 $	9,098	 	
Current deferred tax liabilities	 	 	(32,781	)	
 ​	​	​ 	​ 	​	
Net	 	 $	(23,683	)	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
Long-term deferred tax assets	 	 $	—	 	
Long-term deferred tax liabilities	 	 	(52,541	)	
 ​	​	​ 	​ 	​	
Net	 	 $	(52,541	)	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        Following CPI's acquisition of EFT Source, EFT Source will no longer be treated as a Subchapter "S" corporation and will be subject to U.S. federal and state income taxes in Tennessee, Colorado, and Wisconsin.
 8. Related Party Transactions
 Related Party Mortgage Receivables
        On March 3, 2014 and May 20, 2014, EFT Source entered into two related party mortgage receivables with two executives. The outstanding principal balance owed by the executives to EFT Source as of September 2, 2014 is $628,268 and $650,000 and the entire principal balance is to be repaid on April 3, 2017 and June 20, 2017, respectively. The related party mortgage receivables are secured by the real estate purchased by the two executives. Interest on the outstanding principal balance is charged at a yearly rate of 0.33% and is payable on a monthly basis. Interest income recorded on the related party mortgage receivables during the period January 1, 2014 through September 2, 2014 was $2,145. All of the outstanding principal balance was repaid to EFT Source on September 2, 2014 utilizing the proceeds from the sale of EFT Source to CPI.
 9. Commitments and Contingencies
 Operating Leases
        The Company utilizes office space and under non-cancellable operating leases. Rent expense under these leases amounted to $396,636 for the period January 1, 2014 through September 2, 2014. It is expected that in the normal course of business, leases that expire will be renewed or replaced by other leases; thus, it is anticipated that future lease payments will not be less than the expense for 2014.
 Capital Leases
        The Company also leases various equipment under capital leases.
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EFT Source, Inc.
Notes to Financial Statements (Continued)
 9. Commitments and Contingencies (Continued)
        Property and equipment under capital leases included in property, equipment, and leasehold improvements, net as of September 2, 2014 is as follows:

					
Equipment and construction in progress under capital leases	 	 $	3,981,862	 	
Less accumulated depreciation	 	 	(3,576,979	)	
 ​	​	​ 	​ 	​	
Total	 	 $	404,882	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        Depreciation expense related to property and equipment purchased under capital leases is included in depreciation expense in the statement of operations. Depreciation expense for property and equipment purchased under capital leases was $172,182 for the period January 1, 2014 through September 2, 2014.
        Future cash payments with respect to non-cancellable capital leases and operating leases as of September 2, 2014 are as follows:

								
 	 	Capital
Leases	 	Operating
Leases	 	
2014 (through December 31, 2014)	 	 $	59,176	 	 $	198,168	 	
2015	 	 	168,794	 	 	489,990	 	
2016	 	 	99,032	 	 	330,000	 	
2017	 	 	35,813	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total	 	 $	362,815	 	 $	1,018,158	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Less portion representing interest	 	 	(16,667	)	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	
Capital lease obligation	 	 $	346,148	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	
Less current portion of capital lease obligations	 	 	(165,685	)	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	
Capital lease obligations, excluding current portion	 	 $	180,463	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	
        All of the Company's capital lease obligations were repaid on September 2, 2014 in connection with CPI's acquisition of EFT Source.
 10. Employment Agreements
        The Company has entered into employment agreements with certain executives of the Company. The agreements specify annual base salary, annual bonus based upon a specified formula as defined in the agreement and includes provisions for benefits. The agreements are effective through March 2015. Accrued expenses as of September 2, 2014 related to these agreements amounted to $271,853.
 11. Subsequent Events
        On August 22, 2014, EFT Source and its former owners entered into a Purchase and Sale Agreement with CPI pursuant to which CPI agreed to purchase all of the issued and outstanding shares of capital stock of EFT Source from its former owners in exchange for cash consideration of $54,000,000, a subordinated unsecured promissory note of $9,000,000, and $5,000,000 of CPI's preferred and common stock (the "EFT Sale"). The EFT Sale was completed on September 2, 2014.
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 INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
CPI Holdings I, Inc.:
        We have reviewed the accompanying balance sheet of EFT Source, Inc. as of September 2, 2013 and the related statements of operations, changes in stockholders' equity and cash flows for the period January 1, 2013 through September 2, 2013. A review includes primarily applying analytical procedures to management's financial data and making inquiries of Company management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion.
        Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements.
        Our responsibility is to conduct the review in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. Those standards require us to perform procedures to obtain limited assurance that there are no material modifications that should be made to the financial statements. We believe that the results of our procedures provide a reasonable basis for our report.
        Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

			
 	 	/s/ Lattimore Black Morgan & Cain, PC	
Brentwood, Tennessee
June 26, 2015
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EFT SOURCE, INC.

Balance Sheet

As of September 2, 2013

					
Assets	 	 	 	 	
Current assets:	 	 	 	 	
Accounts receivable	 	 $	4,357,835	 	
Inventory	 	 	1,130,871	 	
Income taxes receivable	 	 	50,904	 	
Prepaid expenses and other current assets	 	 	687,910	 	
 ​	​	​ 	​ 	​	
Total current assets	 	 	6,227,520	 	
Property and equipment, net	 	 	
2,900,046	 	
Goodwill	 	 	6,426,000	 	
Loan costs, net of accumulated amortization of $76,872	 	 	9,609	 	
Deposits	 	 	206,753	 	
 ​	​	​ 	​ 	​	
	 	 $	15,769,928	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
Liabilities and Stockholders' Equity	 	 	 	 	
Current liabilities:	 	 	 	 	
Checks written in excess of bank balance	 	 $	343,475	 	
Accounts payable	 	 	369,042	 	
Accrued expenses and other current liabilities	 	 	1,129,327	 	
Deferred income taxes	 	 	17,800	 	
Income taxes payable	 	 	146,302	 	
Current portion of capital lease obligations	 	 	160,384	 	
Current portion of long-term debt	 	 	1,029,384	 	
 ​	​	​ 	​ 	​	
Total current liabilities	 	 	3,195,714	 	
Long-term debt	 	 	
1,251,429	 	
Capital lease obligations, excluding current portion	 	 	350,242	 	
Deferred income taxes	 	 	653,500	 	
 ​	​	​ 	​ 	​	
Total liabilities	 	 	5,450,885	 	
 ​	​	​ 	​ 	​	
Stockholders' equity:	 	 	 	 	
Common stock, no par value; 2,000 shares authorized; 899 shares issued and outstanding	 	 	608,202	 	
Retained earnings	 	 	9,710,841	 	
 ​	​	​ 	​ 	​	
Total stockholders' equity	 	 	10,319,043	 	
 ​	​	​ 	​ 	​	
Total liabilities and stockholders' equity	 	 $	15,769,928	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
    
See accompanying notes to the financial statements.
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EFT SOURCE, INC.

Statement of Operations

For the period January 1, 2013 through September 2, 2013

					
Net sales	 	 $	27,673,034	 	
Cost of sales	 	 	17,070,381	 	
Selling, general, and administrative expenses	 	 	6,662,389	 	
Depreciation expense	 	 	655,196	 	
 ​	​	​ 	​ 	​	
Income from operations	 	 	3,285,068	 	
Interest expense	 	 	(95,781	)	
 ​	​	​ 	​ 	​	
Income before income taxes	 	 	3,189,287	 	
Income tax expense	 	 	(1,128,264	)	
 ​	​	​ 	​ 	​	
Net income	 	 $	2,061,023	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
    
See accompanying notes to the financial statements.
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EFT SOURCE, INC.

Statement of Changes in Stockholders' Equity

For the period January 1, 2013 through September 2, 2013

														
 	 	Common
Shares	 	Common
Stock	 	Retained
Earnings	 	Total
Stockholders'
Equity	 	
Balance at December 31, 2012	 	 	899	 	 $	608,202	 	 $	7,734,431	 	 $	8,342,633	 	
Net contribution to related party	 	 	—	 	 	—	 	 	(84,613	)	 	(84,613	)	
Net income	 	 	—	 	 	—	 	 	2,061,023	 	 	2,061,023	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Balance at December 31, 2013	 	 	899	 	 $	608,202	 	 $	9,710,841	 	 $	10,319,043	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
    
See accompanying notes to the financial statements.
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EFT SOURCE, INC.

Statement of Cash Flows

For the period January 1, 2013 through September 2, 2013

					
 	 	 	 	
Cash flows from operating activities:	 	 	 	 	
Net income	 	 $	2,061,023	 	
 ​	​	​ 	​ 	​	
Adjustments to reconcile net income to cash flows provided by operating activities:	 	 	 	 	
Depreciation of property and equipment	 	 	655,196	 	
Amortization of loan costs	 	 	19,218	 	
Bad debt expense	 	 	7,585	 	
Deferred income tax benefit	 	 	(66,900	)	
(Increase) decrease in operating assets:	 	 	
 	 	
Accounts receivable	 	 	(1,040,740	)	
Inventory	 	 	216,656	 	
Income taxes receivable	 	 	404,439	 	
Prepaid expenses and other current assets	 	 	(110,203	)	
Deposits	 	 	(13,804	)	
Increase (decrease) in operating liabilities:	 	 	
 	 	
Accounts payable	 	 	188,834	 	
Accrued expenses and other current liabilities	 	 	370,354	 	
Income taxes payable	 	 	146,302	 	
 ​	​	​ 	​ 	​	
Total adjustments	 	 	776,937	 	
 ​	​	​ 	​ 	​	
Net cash provided by operating activities	 	 	2,837,960	 	
 ​	​	​ 	​ 	​	
Cash flows from investing activities:	 	 	 	 	
Purchases of property and equipment	 	 	(970,765	)	
 ​	​	​ 	​ 	​	
Net cash used by investing activities	 	 	(970,765	)	
 ​	​	​ 	​ 	​	
Cash flows from financing activities:	 	 	 	 	
Checks written in excess of bank balance	 	 	(756,686	)	
Borrowings of debt	 	 	17,097,318	 	
Repayments of debt	 	 	(17,967,734	)	
Repayments of capital lease obligations	 	 	(155,480	)	
Net contribution to related party	 	 	(84,613	)	
 ​	​	​ 	​ 	​	
Net cash used by financing activities	 	 	(1,867,195	)	
 ​	​	​ 	​ 	​	
Net change in cash and cash equivalents	 	 	—	 	
Cash and cash equivalents at beginning of period	 	 	—	 	
 ​	​	​ 	​ 	​	
Cash and cash equivalents at end of period	 	 $	—	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
Supplementary information:	 	 	 	 	
Cash paid for interest	 	 $	96,689	 	
Cash paid for income taxes, net	 	 	644,423	 	
    
See accompanying notes to the financial statements.
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EFT SOURCE, INC.

Notes to the Financial Statements

September 2, 2013
 (1) Organization and nature of operations
        EFT Source, Inc. ("EFT Source" or the "Company") personalizes and fulfills Financial Payment Cards for card issuing banks and other financial institutions located throughout the United States. We define Financial Payment Cards as credit, debit and Prepaid Debit Cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express, and Discover). EFT Source's services include design, card and collateral procurement, encoding, embossing, chip programming, and data processing services related to Financial Payment Card management and issuance. EFT Source also sells its patented Card@Once® instant issuance system and provides ongoing card personalization services to users of this system.
        EFT Source is authorized to personalize Visa and MasterCard products based upon card personalization agreements. The agreements require EFT Source to adhere to certain provisions as stated in the agreements.
 (2) Summary of significant accounting policies
(a)   Basis of presentation
        The accompanying financial statements include the historical financial information of the stand-alone operations of EFT Source that are to be sold to CPI Acquisition, Inc. ("CPI"), a wholly owned subsidiary of CPI Holdings I, Inc., pursuant to a Purchase and Sale Agreement (the "EFT Sale Agreement") entered into on August 22, 2014 and closed on September 2, 2014. The accompanying financial statements for the period January 1, 2013 through September 2, 2013 were prepared for the purpose of presenting a comparative period to the period separately presented in the year of sale.
        Prior to September 2, 2014, EFT Source owned a 100% membership interest in Primadata, LLC ("Primadata"). Pursuant to the terms of the EFT Sale Agreement, EFT Source distributed all rights, title and interest in Primadata to the former owners of EFT Source. In connection with the distribution, EFT Source was released from all obligations with respect to the Primadata. Accordingly, the accompanying financial statements do not include the historical financial information of Primadata.
(b)   Revenue recognition
        Substantially all revenues of the Company are derived from card personalization, procurement, delivery services and sales of Card@Once® instant issuance systems. It is the Company's policy to recognize revenues as earned when the cards are mailed to the customer or end-user, when the instant issuance systems are shipped to the customer and as customers' instant issuance systems personalize cards within a bank branch. Certain service program revenue for instant issuance systems is recognized over the term of the program.
        The Company has determined that the effects of deferred revenue for extended warranty agreements entered into with customers prior to September 3, 2013 were not material.
        The Company accounts for all governmental taxes associated with revenue transactions on a net basis.
        The Company includes shipping and handling fees billed to customers in net sales. All shipping and handling costs are included in cost of sales.
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
September 2, 2013
 (2) Summary of significant accounting policies (Continued)
(c)   Cash and cash equivalents
        The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents and they are stated at cost, which approximates fair value.
        The Company generally maintains cash on deposit at banks in excess of federally insured amounts. The Company has not experienced any losses in such accounts, and management believes the Company is not exposed to any significant credit risk related to cash.
(d)   Trade accounts receivables and concentration of credit risk
        Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from invoice date. Certain customers have been granted extended payment terms based on business volume or other considerations. Late or interest charges on delinquent accounts are not recorded until collected. The carrying amount of accounts receivable is reduced by a valuation allowance, if necessary, which reflects management's best estimate of the amounts that will not be collected. The allowance is estimated based on management's knowledge of its customers, historical loss experience and existing economic conditions. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. In management's opinion, an allowance for doubtful accounts is not necessary as of September 2, 2013.
        The majority of the Company's revenues and receivables are from sales to commercial financial service organizations located throughout the United States that distribute debit cards to customers and employees. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral.
(e)   Property and equipment
        Property and equipment are stated at cost. Depreciation and amortization are provided over the assets' estimated useful lives using primarily the straight-line method. Equipment and fixtures are depreciated over five to seven years and leasehold improvements are amortized over the shorter of their estimated lives or the respective lease term.
        Expenditures for maintenance and repairs are expensed when incurred. Expenditures for renewals or betterments are capitalized. When property is retired or sold, the cost and the related accumulated depreciation and amortization are removed from the accounts, and the resulting gain or loss is included in operations.
        Management evaluates the recoverability of the investment in long-lived assets on an ongoing basis and recognizes any impairment in the year of determination. It is reasonably possible that relevant conditions could change in the near term and necessitate a change in management's estimate of the recoverability of these assets.
(f)    Goodwill and intangible assets
        Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business combinations recorded as purchases. Goodwill is not amortized, but instead is reviewed for impairment on an annual basis, or more frequently, as impairment indicators are identified.
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
September 2, 2013
 (2) Summary of significant accounting policies (Continued)
(g)   Capitalized loan fees
        Loan costs are amortized on a straight-line basis over the terms of the respective note agreements as the difference between interest expense recognized under the effective interest method and the straight-line amortization method is not considered to be material.
(h)   Inventory
        Inventory consist primarily of non-personalized Financial Payment Cards and instant issuance systems held for sale and are stated at the lower of cost, determined on an average cost basis, or market (net realizable value).
        The Company purchased 24% of its production materials and services from one supplier through September 2, 2013. Accounts payable related to this supplier was approximately $9,500 at September 2, 2013.
(i)    Income taxes
        The amount provided for income taxes is based upon the amounts of current and deferred taxes payable or refundable at the date of the financial statements as a result of all events recognized in the financial statements measured by the provisions of enacted tax laws.
        Under generally accepted accounting principles, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company had no material uncertain tax positions that qualify for either recognition or disclosure in the consolidated financial statements.
(j)    Advertising costs
        Advertising costs are expensed as incurred and amounted to $226,038 for the period January 1, 2013 through September 2, 2013.
(k)   Rebates
        The Company offers certain sales incentives to its customers, in the form of rebates, whereby customers receive a periodic payment from the Company based on certain criteria. The amount of these rebates is estimated by management and recorded as a reduction of net sales on the accrual basis. Accordingly, net sales have been reduced for rebates in the amount of $272,625 for the period January 1, 2013 through September 2, 2013.
(l)    Use of estimates
        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
September 2, 2013
 (2) Summary of significant accounting policies (Continued)
(m)  Events occurring after reporting date
        The Company has evaluated events and transactions that occurred between September 2, 2013 and June 26, 2015, which is the date that the financial statements were available to be issued, for possible recognition or disclosure in the financial statements.
 (3) Fair value measurements
        The Company reports assets and liabilities under the accounting standards for fair value, which define fair value, establish a framework for measuring fair value, and govern disclosures about fair value measurements for financial and non-financial assets and liabilities. Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity including quoted market prices in active markets for identical assets (Level 1), or significant other observable inputs (Level 2) and the reporting entity's own assumptions about market participant assumptions (Level 3). There have been no changes in the methodology used as of September 2, 2013.
 (4) Property and equipment
        A summary of property and equipment as of September 2, 2013 is as follows:

					
Equipment and fixtures	 	 $	9,276,182	 	
Leasehold improvements	 	 	782,539	 	
 ​	​	​ 	​ 	​	
	 	 	10,058,721	 	
Accumulated depreciation	 	 	(7,158,675	)	
 ​	​	​ 	​ 	​	
	 	 $	2,900,046	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        Depreciation expense for the period January 1, 2013 through September 2, 2013 amounted to $655,196.
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
September 2, 2013
 (5) Long-term debt
        A summary of long-term debt as of September 2, 2013 is as follows:

					
Term note to a financial institution due in monthly installments of $78,214, plus interest at variable rate of 30-day LIBOR plus 2.29% (2.47% as of September 2, 2013), through December 2015; secured by all assets and stock of the Company; cross-collateralized with the revolving line of credit. 	 	 $	2,189,997	 	
Equipment note payable to a financial institution due in monthly installments of $13,239, including interest at the bank's rate (6.00% as of September 2, 2013), through March 2014; secured by specifically identified equipment and personal guarantee of majority stockholder. 	 	 	90,816	 	
$2,800,000 revolving LOC with a financial institution scheduled to mature on June 30, 2016 bearing interest at a variable rate of 30-day LIBOR plus 2.29% (2.47% at September 2, 2013); secured by all assets of the Company, and is cross-collateralized with the term note described above. 	 	 	—	 	
 ​	​	​ 	​ 	​	
Total long-term debt	 	 	2,280,813	 	
Less current portion	 	 	(1,029,384	)	
 ​	​	​ 	​ 	​	
Long-term debt	 	 $	1,251,429	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        The LOC agreement placed certain restrictions upon the Company, including capital expenditures and additional borrowings, and required a mandatory annual payment of 85% of excess cash flow, as defined in the agreement. The excess cash flow payment requirement was waived by the financial institution for the year ended December 31, 2013. The Company was also required to maintain a minimum cash flow to debt service ratio. Advances under the LOC were determined based on a defined borrowing base.
        A summary of future maturities of long-term debt as of September 2, 2013 is as follows:

					
Year 	 	 	 	
2013 (through December 31, 2014)	 	 $	364,356	 	
2014	 	 	977,884	 	
2015	 	 	938,573	 	
 ​	​	​ 	​ 	​	
	 	 $	2,280,813	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        All of the Company's outstanding indebtedness was repaid on September 2, 2014 in connection with CPI's acquisition of EFT Source.
 (6) Contribution to related party
        During the period January 1, 2013 through September 2, 2013, EFT Source made cash contributions related to its investment in Primadata. The net $84,613 of contributions through September 2, 2013 consisted of various working capital advances to Primadata for its operations.
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
September 2, 2013
 (7) Profit-sharing plan
        The Company sponsors certain defined contribution profit-sharing plans covering all employees over 21 years old with one year of service. Employees may defer up to 10% of their compensation, not to exceed the maximum amount allowable under income tax rules and regulations. Employee salary deferrals are matched 25% by the Company. The Company may also contribute an additional amount determined by its Board of Directors as allowed under the plan. The Company contributed $58,080 to the plan during the period January 1, 2013 through September 2, 2013.
 (8) Income taxes
        The Company's provision for income taxes for the period January 1, 2013 through September 2, 2013 is as follows:

					
Current tax expense:	 	 	 	 	
Federal	 	 $	1,089,664	 	
State	 	 	105,500	 	
 ​	​	​ 	​ 	​	
Total current tax expense	 	 	1,195,164	 	
 ​	​	​ 	​ 	​	
Deferred tax expense:	 	 	 	 	
Federal	 	 	(60,000	)	
State	 	 	(6,900	)	
 ​	​	​ 	​ 	​	
Total deferred tax expense	 	 	(66,900	)	
 ​	​	​ 	​ 	​	
Total provision for income taxes	 	 $	1,128,264	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        The actual income tax expense differed from the expected income tax expense due to certain expenses which have been recognized in the financial statements which are not deductible for federal and state income tax purposes. The Company also qualified for research and development federal tax credits, and certain other tax credits, which decreased the actual income tax expense for the period January 1, 2013 through September 2, 2013.
        As of September 2, 2013, the Company has accrued no interest and no penalties related to uncertain tax positions. It is the Company's policy to recognize interest and/or penalties related to income tax matters in income tax expense.
        EFT Source files U.S. Federal and states of Tennessee, Colorado and Wisconsin income tax returns. EFT Source is currently open to audit under the statute of limitations by the Internal Revenue Service and the states of Tennessee, Colorado and Wisconsin for the years ended December 31, 2012 through 2014.
        Net deferred income taxes in the balance sheet as of September 2, 2013 include the following amounts of deferred income tax assets and liabilities:

											
 	 	Current	 	Long-term	 	Total	 	
Deferred income tax assets	 	 $	245,600	 	 $	—	 	 $	245,600	 	
Deferred income tax liabilities	 	 	(263,400	)	 	(653,500	)	 	(916,900	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net	 	 $	(17,800	)	 $	(653,500	)	 $	(671,300	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
September 2, 2013
 (8) Income taxes (Continued)
        Deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of the Company's assets and liabilities. The deferred income tax assets result primarily from the tax basis difference in accounting for non-compete agreements and certain accrued expenses which are not deductible for income tax purposes until paid. The deferred income tax liabilities result primarily from depreciation and amortization for financial reporting purposes being less than depreciation and amortization allowed for tax reporting purposes and certain timing differences related to prepaid expenses.
 (9) Operating lease commitments
        The Company utilizes office space and various equipment under non-cancelable operating leases. Rent expense under these leases amounted to $441,044 for the period January 1, 2013 through September 2, 2013. A summary of approximate future minimum payments under these leases as of September 2, 2013 is as follows:

					
Year 	 	 	 	
2013 (through December 31, 2013)	 	 $	150,000	 	
2014	 	 	463,000	 	
2015	 	 	130,000	 	
 ​	​	​ 	​ 	​	
	 	 $	743,000	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
 (10) Capital lease obligations
        The Company has entered into capital lease agreements to finance the acquisition of certain equipment. Equipment utilized under capital lease obligations as of September 2, 2013 is as follows:

					
Equipment and construction in progress	 	 $	3,981,599	 	
Accumulated depreciation	 	 	(3,307,031	)	
 ​	​	​ 	​ 	​	
	 	 $	674,568	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
Depreciation expense	 	 $	264,475	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
September 2, 2013
 (10) Capital lease obligations (Continued)
        The Company's obligations under these non-cancelable capital leases as of September 2, 2013 are as follows:

					
Minimum lease payments payable:	 	 	 	 	
2013 (through December 31, 2014)	 	 $	61,157	 	
2014	 	 	177,529	 	
2015	 	 	173,172	 	
2016	 	 	99,045	 	
2017	 	 	36,953	 	
 ​	​	​ 	​ 	​	
Total minimum lease payments payable	 	 	547,856	 	
Less portion representing interest	 	 	(37,230	)	
 ​	​	​ 	​ 	​	
Capital lease obligations	 	 	510,626	 	
Less current portion	 	 	(160,384	)	
 ​	​	​ 	​ 	​	
Capital lease obligations, excluding current portion	 	 $	350,242	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        All of the Company's capital lease obligations were repaid on September 2, 2014 in connection with CPI's acquisition of EFT Source.
 (11) Employment agreements
        The Company has entered into employment agreements with certain executives of the Company. The agreements specify annual base salary, annual bonus based upon a specified formula as defined in the agreement and includes provisions for benefits. The agreements are effective through March 2015. Accrued expenses as of September 2, 2013 related to these agreements amounted to $439,539.
 (12) Subsequent events
        On March 14, 2014, the Company filed forms with the Internal Revenue Service to change its tax election from a standard "C" corporation to a Subchapter "S" corporation for federal income tax purposes, effective January 1, 2014. In connection with the Company's conversion to a Subchapter "S" corporation, deferred taxes previously recorded by EFT Source for timing differences between financial statement and tax accounting for federal income taxes were reversed, resulting in an income tax benefit of approximately $877,700. Subsequent to the Company's conversion to a Subchapter "S" corporation, the Company will be treated as a pass through entity for federal and state income tax purposes in Colorado and Wisconsin. The Company will continue to file state income tax returns in Tennessee.
        On August 22, 2014, EFT Source and its former owners entered into a Purchase and Sale Agreement with CPI pursuant to which CPI agreed to purchase all of the issued and outstanding shares of capital stock of EFT Source from its former owners in exchange for cash consideration of $54,000,000, a subordinated unsecured promissory note of $9,000,000, and $5,000,000 of CPI's preferred and common stock (the "EFT Sale"). The EFT Sale was completed on September 2, 2014.
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 INDEPENDENT AUDITORS' REPORT
The Board of Directors
CPI Holdings I, Inc.:
        We have audited the accompanying financial statements of EFT Source, Inc. (a Tennessee corporation), which comprise the balance sheets as of December 31, 2013 and 2012, and the related statements of operations, changes in stockholders' equity and cash flows for the years then ended, and the related notes to the financial statements.
 Management's Responsibility for the Financial Statements
        Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
 Auditors' Responsibility
        Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.
        An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting polices used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
        We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
 Opinion
        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of EFT Source, Inc. as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

			
 	 	/s/ Lattimore Black Morgan & Cain, PC	
Brentwood, Tennessee
June 24, 2015
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EFT SOURCE, INC.
Balance Sheets
As of December 31, 2013 and 2012

								
 	 	2013	 	2012	 	
Assets	 	 	 	 	 	 	 	
Current assets:	 	 	

Cash and cash equivalents	 	 $	4	 	 $	—	 	
Accounts receivable	 	 	4,792,651	 	 	3,324,680	 	
Inventories	 	 	1,378,274	 	 	1,347,527	 	
Prepaid expenses and other current assets	 	 	754,173	 	 	577,707	 	
Income taxes receivable	 	 	49,561	 	 	455,343	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total current assets	 	 	6,974,663	 	 	5,705,257	 	
Property and equipment, net	 	 	
4,948,011	 	 	
2,584,477	 	
Goodwill	 	 	6,426,000	 	 	6,426,000	 	
Loan costs, net of accumulated amortization of $86,481 and $57,654 at December 31, 2013 and 2012, respectively	 	 	—	 	 	28,827	 	
Deposits	 	 	192,949	 	 	192,949	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	18,541,623	 	 $	14,937,510	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Liabilities and Stockholders' Equity	 	 	 	 	 	 	 	
Current liabilities:	 	 	

Checks written in excess of bank balance	 	 $	—	 	 $	1,100,161	 	
Accounts payable	 	 	530,617	 	 	180,208	 	
Accrued expenses and other current liabilities	 	 	1,506,821	 	 	758,973	 	
Deferred income taxes	 	 	210,700	 	 	202,700	 	
Income taxes payable	 	 	337,805	 	 	—	 	
Current portion of capital lease obligations	 	 	160,813	 	 	215,170	 	
Current portion of long-term debt	 	 	1,046,377	 	 	1,095,418	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total current liabilities	 	 	3,793,133	 	 	3,552,630	 	
Long-term debt	 	 	
2,593,693	 	 	
2,055,811	 	
Capital lease obligations, excluding current portion	 	 	291,704	 	 	450,936	 	
Deferred income taxes	 	 	667,000	 	 	535,500	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total liabilities	 	 	7,345,530	 	 	6,594,877	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Stockholders' equity:	 	 	 	 	 	 	 	
Common stock, no par value; 2,000 shares authorized; 899 shares issued and outstanding at December 31, 2013 and 2012	 	 	608,202	 	 	608,202	 	
Retained earnings	 	 	10,587,891	 	 	7,734,431	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total stockholders' equity	 	 	11,196,093	 	 	8,342,633	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total liabilities and stockholders' equity	 	 $	18,541,623	 	 $	14,937,510	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
    
See accompanying notes to the financial statements.
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EFT SOURCE, INC.
Statements of Operations
For the years ended December 31, 2013 and 2012

								
 	 	2013	 	2012	 	
Net sales	 	 $	42,171,538	 	 $	37,128,700	 	
Cost of sales	 	 	
25,961,650	 	 	
23,818,218	 	
Selling, general, and administrative expenses	 	 	10,343,462	 	 	8,821,633	 	
Depreciation expense	 	 	996,555	 	 	928,835	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Income from operations	 	 	
4,869,871	 	 	
3,560,014	 	
Interest expense	 	 	(133,852	)	 	(213,402	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Income before income taxes	 	 	
4,736,019	 	 	
3,346,612	 	
Income tax expense	 	 	(1,641,667	)	 	(1,102,889	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Net income	 	 $	3,094,352	 	 $	2,243,723	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
    
See accompanying notes to the financial statements.
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EFT SOURCE, INC.
Statements of Changes in Stockholders' Equity
For the years ended December 31, 2013 and 2012

														
 	 	Common
Shares	 	Common
Stock	 	Retained
Earnings	 	Total
Stockholders'
Equity	 	
Balance at December 31, 2011	 	 	899	 	 $	608,202	 	 $	6,066,384	 	 $	6,674,586	 	
Net contribution to related party	 	 	—	 	 	—	 	 	(575,676	)	 	(575,676	)	
Net income	 	 	—	 	 	—	 	 	2,243,723	 	 	2,243,723	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Balance at December 31, 2012	 	 	899	 	 	608,202	 	 	7,734,431	 	 	8,342,633	 	
Net contribution to related party	 	 	—	 	 	—	 	 	(240,892	)	 	(240,892	)	
Net income	 	 	—	 	 	—	 	 	3,094,352	 	 	3,094,352	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Balance at December 31, 2013	 	 	899	 	 $	608,202	 	 $	10,587,891	 	 $	11,196,093	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
    
See accompanying notes to the financial statements.
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EFT SOURCE, INC.
Statements of Cash Flows
For the years ended December 31, 2013 and 2012

								
 	 	2013	 	2012	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	
Net income	 	 $	3,094,352	 	 $	2,243,723	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Adjustments to reconcile net income to cash flows provided by operating activities:	 	 	 	 	 	 	 	
Depreciation of property and equipment	 	 	996,555	 	 	928,835	 	
Amortization of loan costs	 	 	28,827	 	 	41,322	 	
Bad debt expense	 	 	7,923	 	 	21,328	 	
Deferred income taxes	 	 	139,500	 	 	235,100	 	
(Increase) decrease in operating assets:	 	 	

Accounts receivable	 	 	(1,475,894	)	 	(100,171	)	
Inventories	 	 	(30,747	)	 	(684,521	)	
Income taxes receivable	 	 	405,782	 	 	104,887	 	
Prepaid expenses and other current assets	 	 	(176,466	)	 	(123,395	)	
Increase (decrease) in operating liabilities:	 	 	

Accounts payable	 	 	350,409	 	 	(316,788	)	
Accrued expenses and other current liabilities	 	 	747,848	 	 	40,137	 	
Income taxes payable	 	 	337,805	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total adjustments	 	 	1,331,542	 	 	146,734	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Net cash provided by operating activities	 	 	4,425,894	 	 	2,390,457	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Cash flows from investing activities:	 	 	 	 	 	 	 	
Purchases of property and equipment	 	 	(2,375,167	)	 	(728,289	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Net cash used by investing activities	 	 	(2,375,167	)	 	(728,289	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Cash flows from financing activities:	 	 	 	 	 	 	 	
Checks written in excess of bank balance	 	 	(1,100,161	)	 	914,107	 	
Borrowings of debt	 	 	17,836,009	 	 	16,880,699	 	
Repayments of debt	 	 	(18,332,090	)	 	(18,593,492	)	
Repayments of capital lease obligations	 	 	(213,589	)	 	(287,806	)	
Net contribution to related party	 	 	(240,892	)	 	(575,676	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Net cash used by financing activities	 	 	(2,050,723	)	 	(1,662,168	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Increase in cash and cash equivalents	 	 	4	 	 	—	 	
Cash and cash equivalents at beginning of year	 	 	—	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Cash and cash equivalents at end of year	 	 $	4	 	 $	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Supplementary information:	 	 	 	 	 	 	 	
Cash paid for interest	 	 $	137,831	 	 $	216,264	 	
Cash paid for income taxes, net	 	 	758,580	 	 	762,902	 	
        During 2013, the Company had $984,922 of non-cash borrowings under the equipment line of credit, whereby the lender remitted funds directly to the equipment supplier. During 2012, the Company incurred non-cash capital lease obligations of $388,541 for various acquisitions of equipment.
    
See accompanying notes to the financial statements.
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EFT SOURCE, INC.
Notes to the Financial Statements
December 31, 2013 and 2012
 (1) Organization and nature of operations
        EFT Source, Inc. ("EFT Source" or the "Company") personalizes and fulfills Financial Payment Cards for card issuing banks and other financial institutions located throughout the United States. We define Financial Payment Cards as credit, debit and Prepaid Debit Cards issued on the networks of the Payment Card Brands (Visa, MasterCard, American Express, and Discover). EFT Source's services include design, card and collateral procurement, encoding, embossing, chip programming, and data processing services related to Financial Payment Card management and issuance. EFT Source also sells its patented Card@Once® instant issuance system and provides ongoing card personalization services to users of this system.
        EFT Source is authorized to personalize Visa and MasterCard products based upon card personalization agreements. The agreements require EFT Source to adhere to certain provisions as stated in the agreements.
 (2) Summary of significant accounting policies
(a)   Basis of presentation
        The accompanying financial statements include the historical financial information of the stand-alone operations of EFT Source that are to be sold to CPI Acquisition, Inc. ("CPI"), a wholly owned subsidiary of CPI Holdings I, Inc., pursuant to a Purchase and Sale Agreement (the "EFT Sale Agreement") entered into on August 22, 2014 and closed on September 2, 2014.
        Prior to September 2, 2014, EFT Source owned a 100% membership interest in Primadata, LLC ("Primadata"). Pursuant to the terms of the EFT Sale Agreement, EFT Source distributed all rights, title and interest in Primadata to the former owners of EFT Source. In connection with the distribution, EFT Source was released from all obligations with respect to the Primadata. Accordingly, the accompanying financial statements do not include the historical financial information of Primadata.
(b)   Revenue recognition
        Substantially all revenues of the Company are derived from card personalization, procurement, delivery services and sales of Card@Once® instant issuance systems. It is the Company's policy to recognize revenues as earned when the cards are mailed to the customer or end-user, when the instant issuance systems are shipped to the customer and as customers' instant issuance systems personalize cards within a bank branch. Certain service program revenue for instant issuance systems is recognized over the term of the program.
        The Company has determined that the effects of deferred revenue for extended warranty agreements entered into with customers for the years ended December 31, 2013 and 2012 were not material.
        The Company accounts for all governmental taxes associated with revenue transactions on a net basis.
        The Company includes shipping and handling fees billed to customers in net sales. All shipping and handling costs are included in cost of sales.
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
December 31, 2013 and 2012
 (2) Summary of significant accounting policies (Continued)
(c)   Cash and cash equivalents
        The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents and they are stated at cost, which approximates fair value.
        The Company generally maintains cash on deposit at banks in excess of federally insured amounts. The Company has not experienced any losses in such accounts, and management believes the Company is not exposed to any significant credit risk related to cash.
(d)   Trade accounts receivables and concentration of credit risk
        Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from invoice date. Certain customers have been granted extended payment terms based on business volume or other considerations. Late or interest charges on delinquent accounts are not recorded until collected. The carrying amount of accounts receivable is reduced by a valuation allowance, if necessary, which reflects management's best estimate of the amounts that will not be collected. The allowance is estimated based on management's knowledge of its customers, historical loss experience and existing economic conditions. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. In management's opinion, an allowance for doubtful accounts is not necessary as of December 31, 2013 or 2012.
        The majority of the Company's revenues and receivables are from sales to commercial financial service organizations located throughout the United States that distribute debit cards to customers and employees. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral.
        Services provided to one customer in 2012 amounted to approximately 12% of the Company's net sales. Accounts receivable related to this customer was approximately $395,000 at December 31, 2012.
(e)   Property and equipment
        Property and equipment are stated at cost. Depreciation and amortization are provided over the assets' estimated useful lives using primarily the straight-line method. Equipment and fixtures are depreciated over five to seven years and leasehold improvements are amortized over the shorter of their estimated lives or the respective lease term.
        Expenditures for maintenance and repairs are expensed when incurred. Expenditures for renewals or betterments are capitalized. When property is retired or sold, the cost and the related accumulated depreciation and amortization are removed from the accounts, and the resulting gain or loss is included in operations.
        Management evaluates the recoverability of the investment in long-lived assets on an ongoing basis and recognizes any impairment in the year of determination. It is reasonably possible that relevant conditions could change in the near term and necessitate a change in management's estimate of the recoverability of these assets.
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
December 31, 2013 and 2012
 (2) Summary of significant accounting policies (Continued)
(f)    Goodwill and intangible assets
        Goodwill represents the excess of the purchase price over the fair value of the net assets acquired in business combinations recorded as purchases. Goodwill is not amortized, but instead is reviewed for impairment on an annual basis, or more frequently, as impairment indicators are identified.
(g)   Capitalized loan fees
        Loan costs are amortized on a straight-line basis over the terms of the respective note agreements as the difference between interest expense recognized under the effective interest method and the straight-line amortization method is not considered to be material.
(h)   Inventories
        Inventories consist primarily of non-personalized Financial Payment Cards and instant issuance systems held for sale and are stated at the lower of cost, determined on an average cost basis, or market (net realizable value).
        The Company purchased 24% and 25% of its production materials and services from one supplier in 2013 and 2012, respectively. Accounts payable related to this supplier was approximately $102,000 and $4,000 at December 31, 2013 and 2012, respectively.
(i)    Income taxes
        The amount provided for income taxes is based upon the amounts of current and deferred taxes payable or refundable at the date of the financial statements as a result of all events recognized in the financial statements measured by the provisions of enacted tax laws.
        Under generally accepted accounting principles, a tax position is recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit is recorded. The Company had no material uncertain tax positions that qualify for either recognition or disclosure in the consolidated financial statements.
(j)    Advertising costs
        Advertising costs are expensed as incurred and amounted to $399,483 and $320,614 for the years ended December 31, 2013 and 2012, respectively.
(k)   Rebates
        The Company offers certain sales incentives to its customers, in the form of rebates, whereby customers receive a periodic payment from the Company based on certain criteria. The amount of these rebates is estimated by management and recorded as a reduction of net sales on the accrual basis. Accordingly, net sales have been reduced for rebates in the amount of $412,675 and $288,143 in 2013 and 2012, respectively.
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
December 31, 2013 and 2012
 (2) Summary of significant accounting policies (Continued)
(l)    Use of estimates
        The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(m)  Events occurring after reporting date
        The Company has evaluated events and transactions that occurred between December 31, 2013 and June 24, 2015, which is the date that the financial statements were available to be issued, for possible recognition or disclosure in the financial statements.
 (3) Fair value measurements
        The Company reports assets and liabilities under the accounting standards for fair value, which define fair value, establish a framework for measuring fair value, and govern disclosures about fair value measurements for financial and non-financial assets and liabilities. Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, fair value accounting standards establish a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity including quoted market prices in active markets for identical assets (Level 1), or significant other observable inputs (Level 2) and the reporting entity's own assumptions about market participant assumptions (Level 3). There have been no changes in the methodology used as of December 31, 2013 and 2012.
 (4) Property and equipment
        A summary of property and equipment as of December 31, 2013 and 2012 is as follows:

								
 	 	2013	 	2012	 	
Equipment and fixtures	 	 $	9,388,318	 	 $	8,320,756	 	
Leasehold improvements	 	 	1,027,103	 	 	767,200	 	
Construction in progress—equipment	 	 	2,032,625	 	 	—	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
	 	 	12,448,046	 	 	9,087,956	 	
Accumulated depreciation	 	 	(7,500,035	)	 	(6,503,479	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	4,948,011	 	 $	2,584,477	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
        Depreciation expense for the years ended December 31, 2013 and 2012 amounted to $996,555 and $928,835, respectively.
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
December 31, 2013 and 2012
 (5) Long-term debt
        A summary of long-term debt as of December 31, 2013 and 2012 is as follows:

								
 	 	2013	 	2012	 	
Term note to a financial institution due in monthly installments of $78,214, plus interest at variable rate of 30-day LIBOR plus 2.29% (2.46% as of December 31, 2013), through December 2015; secured by all assets and stock of the Company; cross-collateralized with the revolving line of credit. 	 	 $	1,877,141	 	 $	2,815,709	 	
Equipment line of credit ("LOC") payable to a financial institution interest only at a variable rate of 30-day LIBOR plus 2.29% (2.46% as of December 31, 2013), secured by specifically identified equipment in process to be termed once equipment installation is complete, projected June 2015. 	 	 	1,723,613	 	 	—	 	
Equipment note payable to a financial institution due in monthly installments of $13,239, including interest at the bank's rate (6.00% as of December 31, 2013), through March 2014; secured by specifically identified equipment and personal guarantee of majority stockholder. 	 	 	39,316	 	 	190,739	 	
Vehicle note payable due in monthly installments of $1,809, including interest at 1.90% through April 2013; secured by the vehicle. 	 	 	—	 	 	5,427	 	
$2,800,000 revolving LOC with a financial institution scheduled to mature on June 30, 2016 bearing interest at a variable rate of 30-day LIBOR plus 2.29% (2.46% at December 31, 2013); secured by all assets of the Company, and is cross-collateralized with the term note described above. 	 	 	—	 	 	139,354	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total long-term debt	 	 	3,640,070	 	 	3,151,229	 	
Less current portion	 	 	(1,046,377	)	 	(1,095,418	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Long-term debt	 	 $	2,593,693	 	 $	2,055,811	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
        The LOC agreement placed certain restrictions upon the Company, including capital expenditures and additional borrowings, and required a mandatory annual payment of 85% of excess cash flow, as defined in the agreement. The excess cash flow payment requirement was waived by the financial institution for the years ended December 31, 2013 and 2012. The Company was also required to maintain a minimum cash flow to debt service ratio. Advances under the LOC were determined based on a defined borrowing base.
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
December 31, 2013 and 2012
 (5) Long-term debt (Continued)
        A summary of future maturities of long-term debt as of December 31, 2013 is as follows:

					
Year 	 	 	 	
2014	 	 $	1,046,377	 	
2015	 	 	2,593,693	 	
 ​	​	​ 	​ 	​	
	 	 $	3,640,070	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
        All of the Company's outstanding indebtedness was repaid on September 2, 2014 in connection with CPI's acquisition of EFT Source.
 (6) Contributions to related party
        During 2013 and 2012, EFT Source made cash contributions related to its investment in Primadata. The net $240,892 of contributions for 2013 consisted of various working capital advances to Primadata for its operations. The net $575,676 of contributions for 2012 consisted of $225,000 for the purchase of the non-controlling interest in Primadata and $350,676 of various working capital advances to Primadata for its operations.
 (7) Profit-sharing plan
        The Company sponsors certain defined contribution profit-sharing plans covering all employees over 21 years old with one year of service. Employees may defer up to 10% of their compensation, not to exceed the maximum amount allowable under income tax rules and regulations. Employee salary deferrals are matched 25% by the Company. The Company may also contribute an additional amount determined by its Board of Directors as allowed under the plan. The Company contributed $89,605 and $69,641 to the plan for December 31, 2013 and 2012, respectively.
 (8) Income taxes
        The Company's provision for income taxes for the years ended December 31, 2013 and 2012 are as follows:

								
 	 	2013	 	2012	 	
Current tax expense:	 	 	 	 	 	 	 	
Federal	 	 $	1,381,167	 	 $	778,994	 	
State	 	 	121,000	 	 	88,795	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total current tax expense	 	 	1,502,167	 	 	867,789	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Deferred tax expense:	 	 	 	 	 	 	 	
Federal	 	 	126,000	 	 	212,000	 	
State	 	 	13,500	 	 	23,100	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total deferred tax expense	 	 	139,500	 	 	235,100	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Total provision for income taxes	 	 $	1,641,667	 	 $	1,102,889	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
December 31, 2013 and 2012
 (8) Income taxes (Continued)
        The actual income tax expense each year differed from the expected income tax expense due to certain expenses which have been recognized in the financial statements which are not deductible for federal and state income tax purposes. The Company also qualified for research and development federal tax credits, and certain other tax credits, which decreased the actual income tax expense in 2013 and 2012.
        As of December 31, 2013 and 2012, the Company has accrued no interest and no penalties related to uncertain tax positions. It is the Company's policy to recognize interest and/or penalties related to income tax matters in income tax expense.
        EFT Source files U.S. Federal and states of Tennessee, Colorado and Wisconsin income tax returns. EFT Source is currently open to audit under the statute of limitations by the Internal Revenue Service and the states of Tennessee, Colorado and Wisconsin for the years ended December 31, 2012 through 2014.
        Net deferred income taxes in the balance sheet as of December 31, 2013 and 2012 include the following amounts of deferred income tax assets and liabilities:

											
 	 	Current	 	Long-term	 	Total	 	
 	 	2013	 	
Deferred income tax assets	 	 $	78,500	 	 $	—	 	 $	78,500	 	
Deferred income tax liabilities	 	 	(289,200	)	 	(667,000	)	 	(956,200	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net	 	 $	(210,700	)	 $	(667,000	)	 $	(877,700	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	

											
 	 	2012	 	
Deferred income tax assets	 	 $	18,500	 	 $	—	 	 $	18,500	 	
Deferred income tax liabilities	 	 	(221,200	)	 	(535,500	)	 	(756,700	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net	 	 $	(202,700	)	 $	(535,500	)	 $	(738,200	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
        Deferred income taxes are provided for the temporary differences between the financial reporting basis and tax basis of the Company's assets and liabilities. The deferred income tax assets result primarily from the tax basis difference in accounting for non-compete agreements and certain accrued expenses which are not deductible for income tax purposes until paid. The deferred income tax liabilities result primarily from depreciation and amortization for financial reporting purposes being less than depreciation and amortization allowed for tax reporting purposes and certain timing differences related to prepaid expenses.
 (9) Operating lease commitments
        The Company utilizes office space and various equipment under non-cancelable operating leases. Rent expense under these leases amounted to $676,027 and $639,095 for 2013 and 2012, respectively. A
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
December 31, 2013 and 2012
 (9) Operating lease commitments (Continued)
summary of approximate future minimum payments under these leases as of December 31, 2013 is as follows:

					
Year 	 	 	 	
2014	 	 $	463,000	 	
2015	 	 	130,000	 	
 ​	​	​ 	​ 	​	
	 	 $	593,000	 	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	
 (10) Capital lease obligations
        The Company has entered into capital lease agreements to finance the acquisition of certain equipment. Equipment utilized under capital lease obligations as of December 31, 2013 and 2012 is as follows:

								
 	 	2013	 	2012	 	
Equipment and construction in progress	 	 $	3,981,599	 	 $	3,981,599	 	
Accumulated depreciation	 	 	(3,419,065	)	 	(3,042,556	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
	 	 $	562,534	 	 $	939,043	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Depreciation expense	 	 $	376,509	 	 $	421,273	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
        The Company's obligations under these non-cancelable capital leases as of December 31, 2013 and 2012 are as follows:

								
 	 	2013	 	2012	 	
Minimum lease payments payable:	 	 	 	 	 	 	 	
2014	 	 $	177,921	 	 	 	 	
2015	 	 	168,868	 	 	 	 	
2016	 	 	98,866	 	 	 	 	
2017	 	 	37,231	 	 	 	 	
 ​	​	​ 	​ 	​	​	​	​	
Total minimum lease payments payable	 	 	482,886	 	 $	722,575	 	
Less portion representing interest	 	 	(30,369	)	 	(56,469	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Capital lease obligations	 	 	452,517	 	 	666,106	 	
Less current portion	 	 	(160,813	)	 	(215,170	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	
Capital lease obligations, excluding current portion	 	 $	291,704	 	 $	450,936	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	
        All of the Company's capital lease obligations were repaid on September 2, 2014 in connection with CPI's acquisition of EFT Source.
 (11) Employment agreements
        The Company has entered into employment agreements with certain executives of the Company. The agreements specify annual base salary, annual bonus based upon a specified formula as defined in
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EFT SOURCE, INC.
Notes to the Financial Statements (Continued)
December 31, 2013 and 2012
 (11) Employment agreements (Continued)
the agreement and includes provisions for benefits. The agreements are effective through March 2015. Accrued expenses at December 31, 2013 and 2012 related to these agreements amounted to $679,369 and $184,503, respectively.
 (12) Subsequent events
        On March 14, 2014, the Company filed forms with the Internal Revenue Service to change its tax election from a standard "C" corporation to a Subchapter "S" corporation for federal income tax purposes, effective January 1, 2014. In connection with the Company's conversion to a Subchapter "S" corporation, deferred taxes previously recorded by EFT Source for timing differences between financial statement and tax accounting for federal income taxes were reversed, resulting in an income tax benefit of approximately $877,700. Subsequent to the Company's conversion to a Subchapter "S" corporation, the Company will be treated as a pass through entity for federal and state income tax purposes in Colorado and Wisconsin. The Company will continue to file state income tax returns in Tennessee.
        On August 22, 2014, EFT Source and its former owners entered into a Purchase and Sale Agreement with CPI pursuant to which CPI agreed to purchase all of the issued and outstanding shares of capital stock of EFT Source from its former owners in exchange for cash consideration of $54,000,000, a subordinated unsecured promissory note of $9,000,000, and $5,000,000 of CPI's preferred and common stock (the "EFT Sale"). The EFT Sale was completed on September 2, 2014.
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CPI CARD GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2014
(in thousands, except share and per share amounts)
        CPI Card Group Inc. (the "Company") acquired 100% of the outstanding capital of EFT Source, Inc. ("EFT Source") on September 2, 2014. For purposes of the unaudited pro forma condensed consolidated statement of operations set forth below, the Company assumed that the acquisition of EFT Source occurred on January 1, 2014. As a result, the unaudited pro forma consolidated statement of operations data was derived from:
•
the audited historical consolidated statement of operations and comprehensive income for the Company for the year ended December 31, 2014; and 

•
the audited historical statement of operations data for EFT Source for the period from January 1, 2014 to September 2, 2014.
        The unaudited pro forma condensed consolidated statement of operations data set forth below is presented for illustrative purposes only and does not necessarily indicate the operating results that would have been achieved if the acquisition of EFT Source had occurred at the beginning of the period presented, nor is it indicative of future operating results. The unaudited pro forma condensed consolidated statement of operations should be read in conjunction with the Company's and EFT Source's historical consolidated financial statements and accompanying notes included elsewhere in this prospectus.
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CPI CARD GROUP INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2014
(in thousands except share and per share data)

																	
 	 	CPI Card Group Inc.
and Subsidiaries
Historical (AA)	 	EFT Source, Inc.
Historical (BB)	 	Pro Forma Before
Adjustments	 	Pro Forma
Adjustments	 	CPI Card Group Inc.
Pro Forma	 	
Operating revenue:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Product revenue	 	 $	159,220	 	 $	12,124	 	 $	171,344	 	 $	(3,862	) (CC)	 $	167,482	 	
Service revenue	 	 	101,786	 	 	22,034	 	 	123,820	 	 	—	 	 	123,820	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total operating revenue	 	 	261,006	 	 	34,158	 	 	295,164	 	 	(3,862	) (CC)	 	291,302	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Cost of sales	 	 	179,279	 	 	20,857	 	 	200,136	 	 	(3,862	) (CC)	 	196,274	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Gross profit	 	 	81,727	 	 	13,301	 	 	95,028	 	 	—	 	 	95,028	 	
Operating expenses	 	 	47,255	 	 	10,280	 	 	57,535	 	 	233	(DD, EE, FF, GG)	 	57,768	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income from operations	 	 	34,472	 	 	3,021	 	 	37,493	 	 	(233	)	 	37,260	 	
Other income (expenses):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest, net	 	 	(7,508	)	 	(64	)	 	(7,572	)	 	(1,764	) (HH)	 	(9,336	)	
Foreign currency loss	 	 	(124	)	 	—	 	 	(124	)	 	—	 	 	(124	)	
Loss on debt modification and early extinguishment	 	 	(476	)	 	—	 	 	(476	)	 	476 (II)	 	 	—	 	
Other income (expenses), net	 	 	(101	)	 	—	 	 	(101	)	 	—	 	 	(101	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Total other expenses	 	 	(8,209	)	 	(64	)	 	(8,273	)	 	(1,288	)	 	(9,561	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Income before income taxes	 	 	26,263	 	 	2,957	 	 	29,220	 	 	(1,521	)	 	27,699	 	
Provision for income taxes	 	 	(10,291	)	 	727	 	 	(9,564	)	 	(1,219	) (JJ)	 	(10,783	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income from continuing operations	 	 	15,972	 	 	3,684	 	 	19,656	 	 	(2,740	)	 	16,916	 	
Loss from a discontinued operation, net of taxes	 	 	(2,670	)	 	—	 	 	(2,670	)	 	—	 	 	(2,670	)	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income (loss)	 	 $	13,302	 	 $	3,684	 	 $	16,986	 	 $	(2,740	)	 $	14,246	 	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	​ 	​ 	​	
Net income (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and Diluted—Continuing Operations	 	 $	(15.22	)	 	 	 	 	 	 	 	 	 	 $	(14.66	)	
Basic and Diluted—Discontinued Operations	 	 	(1.43	)	 	 	 	 	 	 	 	 	 	 	(1.42	)	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	​	​	​	​ 	​ 	​	
Total	 	 $	(16.65	)	 	 	 	 	 	 	 	 	 	 $	(16.08	)	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	​	​	​	​ 	​ 	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​ 	​ 	​	​	​	​	​	​	​	​	​	​	​ 	​ 	​	
Weighted average shares outstanding	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and Diluted	 	 	1,872,693	 	 	 	 	 	 	 	 	 	 	 	1,880,510	 	

(AA)
Represents CPI Card Group Inc.'s consolidated statement of operations for the year ended December 31, 2014, which includes the operations of EFT Source, Inc. from September 2, 2014 through December 31, 2014.

(BB)
Represents EFT Source, Inc.'s statement of operations for the period January 1, 2014 through September 2, 2014. Revenue and cost of sales reported in the historical financial statements of EFT Source, Inc. have been reclassified to conform with the presentation used in the historical financial statements of CPI Card Group Inc. Specifically, (i) revenue of $34,158 for the period January 1, 2014 through September 2, 2014 has been separated into product revenue of $12,124 and service revenue of $22,034.

(CC)
Represents the elimination of sales from CPI Card Group Inc. to EFT Source, Inc. during the period beginning January 1, 2014 and ended on September 2, 2014 of $3,862 which are included in the reported revenue of CPI Card Group Inc. and subsidiaries for the year ended December 31, 2014 and in the reported cost of sales of EFT Source, Inc. for the period January 1, 2014 through September 2, 2014.

(DD)
Represents the elimination of direct transactions costs of $537 and $24 which were included in the historical financial statements of CPI Card Group Inc. and EFT Source, Inc., respectively.

(EE)
Represents the elimination of non-recurring bonuses of $1,280 paid by EFT Source, Inc. to former executives and owners for personal income taxes incurred in connection with the transaction.

(FF)
Represents adjustments to depreciation expense for the period January 1, 2014 through September 2, 2014 of $337 and attributable to increases in the estimated fair values of acquired tangible assets, which are depreciated over an estimated remaining useful life of 3 years.
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(GG)
Represents adjustments to amortization expense for the period January 1, 2014 through September 2, 2014 of $1,712 attributable to the estimated fair value of acquired intangible assets, including customer relationships, proprietary software, technology and non-compete agreements, which are amortized over estimated useful lives ranging from 5 to 15 years.

(HH)
Represents adjustments to interest expense for the period January 1, 2014 through September 2, 2014 related to (i) additional interest expense of $1,444 on the additional Senior Term Debt borrowed by CPI Card Group Inc. in connection with the EFT Acquisition, (ii) additional interest expense of $300 on the Sellers Note issued to the former owners of EFT Source, Inc. in connection with the EFT Acquisition, (iii) additional interest expense of $84 related to deferred financing costs and debt discounts recorded in connection with the issuance of the additional Senior Term Debt, offset by (iv) a reduction to interest expense of $64 related to the outstanding indebtedness and capital lease obligations of EFT Source, Inc. repaid in connection with the EFT Acquisition.

(II)
Represents the reversal of the loss on debt modification and early extinguishment of $476 related to the issuance of additional indebtedness to existing Senior Term Debt creditors incurred in connection with the EFT Acquisition.

(JJ)
Represents adjustments to income tax expense to reflect (i) the reversal of the income tax benefit recorded by EFT Source, Inc. in connection with their conversion from a taxable "C" corporation to a non-taxable subchapter "S" corporation effective January 1, 2014 offset by (ii) additional income tax expense which would have been incurred by EFT Source, Inc. as a "C" corporation and (iii) the income tax impact of the pro forma adjustments further described above.
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[ADDITIONAL PAGE FOR CANADIAN PROSPECTUS]

 CERTIFICATE OF THE COMPANY
Dated:     ·     , 2015
        This amended and restated prospectus, together with the documents and information incorporated by reference, will, as of the date of the supplemented prospectus providing the information permitted to be omitted from this amended and restated prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by this amended and restated prospectus as required by the securities legislation of each of the provinces and territories of Canada.

			
Steven Montross
(signed) " Steven Montross" 
Chief Executive Officer	 	David Brush
(signed) " David Brush "
Chief Financial Officer	
On behalf of the Board of Directors:

			
Bradley Seaman
(signed) " Bradley Seaman "
Director	 	Nicholas Peters
(signed) " Nicholas Peters "
Director	
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[ADDITIONAL PAGE FOR CANADIAN PROSPECTUS]

 CERTIFICATE OF THE CANADIAN UNDERWRITERS
Dated:     ·     , 2015
        To the best of our knowledge, information and belief, this amended and restated prospectus, together with the documents and information incorporated by reference, will, as of the date of the supplemented prospectus providing the information permitted to be omitted from this amended and restated prospectus, constitute full, true and plain disclosure of all material facts relating to the securities offered by this amended and restated prospectus as required by the securities legislation of each of the provinces and territories of Canada.

					
BMO Nesbitt Burns Inc.
 (signed) " Jamie Rogers "
Managing Director	 	Goldman Sachs Canada Inc.
 (signed) " Michelle Khalili "
Managing Director	 	CIBC World Markets Inc.
 (signed) " Kathy Butler "
Managing Director	
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Shares

CPI Card Group Inc.
Common Stock

PRELIMINARY PROSPECTUS

BMO Capital Markets
Goldman, Sachs & Co.
CIBC
                           , 2015

Until                           , 2015 (25 days after the date of this prospectus), all dealers that buy, sell or trade shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

Table of Contents

 PART II

INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.     Other Expenses of Issuance and Distribution
        The following table sets forth all expenses to be paid by the Registrant, other than estimated underwriting discounts and commissions, in connection with our initial public offering. All amounts shown are estimates except for the SEC registration fee and the FINRA filing fee:

					
SEC registration fee	 	 $	11,620	 	
FINRA filing fee	 	 	15,500	 	
NASDAQ listing fee	 	 	 	*	
Printing and engraving	 	 	 	*	
Legal fees and expenses	 	 	 	*	
Accounting fees and expenses	 	 	 	*	
Blue sky fees and expenses (including legal fees)	 	 	 	*	
Transfer agent and registrar fees	 	 	 	*	
Miscellaneous	 	 	 	*	
 ​	​	​ 	​ 	​	
Total	 	 $	 	*	
 ​	​	​ 	​ 	​	
 ​	​	​	​	​	
 ​	​	​ 	​ 	​	

*
To be filed by amendment
Item 14.     Indemnification of Directors and Officers
        Section 145 of the Delaware General Corporation Law authorizes a corporation's board of directors to grant, and authorizes a court to award, indemnity to officers, directors and other corporate agents.
        As permitted by Section 102(b)(7) of the Delaware General Corporation Law, or DGCL, the registrant's amended and restated certificate of incorporation to be in effect upon the closing of this offering includes provisions that eliminate the personal liability of its directors and officers for monetary damages for breach of their fiduciary duty as directors and officers, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for unlawful payments of dividends or unlawful stock repurchases, redemptions or other distributions or (iv) for any transaction from which the director derived an improper personal benefit. The registrant's amended and restated certificate of incorporation provides for such limitation of liability.
        In addition, as permitted by Section 145 of the DGCL, the bylaws of the registrant to be effective upon completion of this offering provide that:
•
The registrant shall indemnify its directors and officers for serving the registrant in those capacities or for serving other business enterprises at the registrant's request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal action or proceeding, had no reasonable cause to believe such person's conduct was unlawful. 

•
The registrant may, in its discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law. 

•
The registrant is required to advance expenses, as incurred, to its directors and officers in connection with defending a proceeding, except that such director or officer shall undertake to
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repay such advances if it is ultimately determined that such person is not entitled to indemnification.
•
The registrant will not be obligated pursuant to the bylaws to indemnify a person with respect to proceedings initiated by that person, except with respect to proceedings authorized by the registrant's board of directors or brought to enforce a right to indemnification. 

•
The rights conferred in the bylaws are not exclusive, and the registrant is authorized to enter into indemnification agreements with its directors, officers, employees and agents and to obtain insurance to indemnify such persons. 

•
The registrant may not retroactively amend the bylaw provisions to reduce its indemnification obligations to directors, officers, employees and agents.
        Prior to the completion of this offering, we expect to enter into indemnification agreements with each of our directors and executive officers that may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law. These indemnification agreements will require us, among other things, to indemnify our directors and executive officers against liabilities that may arise by reason of their status or service. These indemnification agreements will also require us to advance all expenses incurred by the directors and executive officers in investigating or defending any such action, suit, or proceeding. We believe that these agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers. The registrant will also maintain directors and officers insurance to insure such persons against certain liabilities.
        The underwriting agreement to be filed as Exhibit 1.1 to this registration statement provides for indemnification by the underwriters of the registrant and its officers and directors for certain liabilities arising under the Securities Act and otherwise.
Item 15.     Recent Sales of Unregistered Securities
        Since January 1, 2012, we have issued and sold the following securities:
1.
In January 2012, we issued 17,278 shares of common stock at an issue price of $0.01 per share to certain of our employees.

2.
In January 2012, we issued options to purchase an aggregate of 3,500 shares of common stock to our employees at an exercise price of $0.01 per share.

3.
In January 2012, we issued 107 shares of preferred stock at an issue price of $1,691.72 to a certain employee.

4.
In September 2013, we issued 5,596 shares of common stock at $0.01 per share and 28 shares of our preferred stock at $1,775.87 per share to one of our employees.

5.
In May 2013 and September 2013, we issued options to purchase an aggregate of 4,500 and 1,000 shares of common stock, respectively, to our employees at an exercise price of $0.01 per share.

6.
In September 2014, we issued 11,694 shares of common stock valued at $252.27 per share and 549 shares of preferred stock valued at $3,733.88 per share to the former owners of EFT Source, Inc. as partial consideration for our acquisition of EFT Source, Inc.

7.
In June 2015, we granted 8,712 shares of restricted common stock to certain newly-hired executive officers pursuant to employment agreements. These grants of restricted stock did not involve any cash payments from the recipients.
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        Other than the transactions listed immediately above, we have not issued and sold any unregistered securities in the three years preceding the filing of this registration statement. No underwriters were in involved in the foregoing issuances of securities.
        Unless otherwise stated, the sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act (or Regulation D or Regulation S promulgated thereunder), or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of the securities in each of these transactions represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates issued in these transactions.
Item 16.     Exhibits and Financial Statement Schedules
        (3)    Exhibits.     The following exhibits are included herein or incorporated herein by reference:

						
 	 	Exhibit
Number	 	Description	
 	 	 	1.1*	 	Form of Underwriting Agreement	

 	
 	
2.1†	
 	
Purchase and Sale Agreement, dated as of August 22, 2014, by and among William S. Dinker, Katherine S. Nevill, Bobby Smith and Tom Hedrich, William S. Dinker 2012 Trust for Edward McCullough Dinker, William S. Dinker 2012 Trust for John Walsh Dinker and William S. Dinker 2012 Trust for William S. Dinker III, EFT Source, Inc., CPI Acquisition, Inc. and William S. Dinker, as Sellers' Representative	

 	
 	
3.1*	
 	
Amended and Restated Certificate of Incorporation of CPI Card Group Inc.	

 	
 	
3.2*	
 	
Amended and Restated Bylaws of CPI Card Group Inc.	

 	
 	
4.1*	
 	
Form of Stock Certificate	

 	
 	
5.1*	
 	
Form of opinion of Winston & Strawn LLP	

 	
 	
10.1*+	
 	
Employment and Non-Competition Agreement, dated April 22, 2009, between CPI Acquisition, Inc. and Steven Montross	

 	
 	
10.2+†	
 	
Employment and Non-Competition Agreement, dated October 1, 2008, between Metaca Corporation and Anna Rossetti	

 	
 	
10.3+†	
 	
Termination Letter, dated May 5, 2015 between CPI Acquisition, Inc. and Marvin Press	

 	
 	
10.4*+	
 	
CPI Card Group Inc. Omnibus Incentive Plan	

 	
 	
10.5+†	
 	
CPI Acquisition, Inc. Phantom Stock Plan	

 	
 	
10.6*+	
 	
CPI Holdings I, Inc. 2007 Amended and Restated Stock Option Plan	

 	
 	
10.7*+	
 	
Employment and Non-Competition Agreement, effective June 22, 2015, between CPI Acquisition, Inc. and David Brush	

 	
 	
10.8*	
 	
Form of Indemnification Agreement	

 	
 	
10.9	
 	
First Lien Credit Agreement, dated as of August 17, 2015, by and among CPI Card Group Inc., CPI Acquisition Inc., the lenders from time to time party thereto and the Bank of Nova Scotia, as Administrative Agent and Collateral Agent	

 	
 	
10.10*	
 	
Form of Director Nomination Agreement by and between CPI Card Group Inc. and the Tricor Funds	
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 	 	Exhibit
Number	 	Description	
 	 	 	10.11*	 	Form of Registration Rights Agreement by and betwen CPI Card Group Inc. and the Tricor Funds	

 	
 	
15.1	
 	
Lattimore, Black, Morgan & Cain, P.C. letter re unaudited interim financial information.	

 	
 	
16.1†	
 	
Letter to the Securities and Exchange Commission from Ernst & Young LLP, dated May 21, 2015	

 	
 	
21.1†	
 	
List of subsidiaries of CPI Card Group Inc.	

 	
 	
23.1	
 	
Consent of KPMG LLP	

 	
 	
23.2	
 	
Consent of KPMG LLP	

 	
 	
23.3	
 	
Consent of Lattimore, Black, Morgan & Cain, P.C.	

 	
 	
23.4†	
 	
Consent of First Annapolis Consulting, Inc.	

 	
 	
23.5*	
 	
Consent of Winston & Strawn LLP (included in Exhibit 5.1)	

 	
 	
24.1†	
 	
Powers of Attorney	

+
Indicates exhibits that constitute management contracts or compensatory plans or arrangements

*
Indicates to be filed by amendment.

†
Previously filed.
        (b)    Financial Statement Schedules.     All financial statement schedules are omitted because they are not applicable or the information is included in the Registrant's consolidated financial statements or related notes.
Item 17.     Undertakings
        The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
        Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
        The undersigned registrant hereby undertakes that:
        (1)   for purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and
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        (2)   for the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
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 SIGNATURES
        Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in Littleton, Colorado, on this 1st day of September, 2015.

 	 	CPI CARD GROUP INC.	

 	
By:	
 	
/s/ STEVEN MONTROSS
	
 	 	 	 	Name:	 	Steven Montross	
 	 	 	 	Title:	 	Chief Executive Officer	

							
Signature 	 	Title 	 	Date 	

 	

 	

/s/ STEVEN MONTROSS

Steven Montross	 	President, Chief Executive Officer and Director (Principal Executive Officer)	 	September 1, 2015	

/s/ DAVID BRUSH

David Brush	
 	
Chief Financial Officer (Principal Financial Officer)	
 	
September 1, 2015	

/s/ JERRY DREILING

Jerry Dreiling	
 	
Vice President and Chief Accounting Officer (Principal Accounting Officer)	
 	
September 1, 2015	

*

Bradley Seaman	
 	
Chairman of the Board	
 	
September 1, 2015	

*

Nicholas Peters	
 	
Director	
 	
September 1, 2015	

*

Robert Pearce	
 	
Director	
 	
September 1, 2015	

*

David Rowntree	
 	
Director	
 	
September 1, 2015	

*By:	
 	
/s/ STEVEN MONTROSS

Steven Montross, as attorney-in-fact	

 	
 	
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 EXHIBIT INDEX

						
 	 	Exhibit Number	 	Description	
 	 	 	1.1*	 	Form of Underwriting Agreement	
 	 	 	2.1†	 	Purchase and Sale Agreement, dated as of August 22, 2014, by and among William S. Dinker, Katherine S. Nevill, Bobby Smith and Tom Hedrich, William S. Dinker 2012 Trust for Edward McCullough Dinker, William S. Dinker 2012 Trust for John Walsh Dinker and William S. Dinker 2012 Trust for William S. Dinker III, EFT Source, Inc., CPI Acquisition, Inc. and William S. Dinker, as Sellers' Representative	
 	 	 	3.1*	 	Amended and Restated Certificate of Incorporation of CPI Card Group Inc.	
 	 	 	3.2*	 	Amended and Restated Bylaws of CPI Card Group Inc.	
 	 	 	4.1*	 	Form of Stock Certificate	
 	 	 	5.1*	 	Form of opinion of Winston & Strawn LLP	
 	 	 	10.1*+	 	Employment and Non-Competition Agreement, dated April 22, 2009, between CPI Acquisition, Inc. and Steven Montross	
 	 	 	10.2+†	 	Employment and Non-Competition Agreement, dated October 1, 2008, between Metaca Corporation and Anna Rossetti	
 	 	 	10.3+†	 	Termination Letter, dated May 5, 2015 between CPI Acquisition, Inc. and Marvin Press	
 	 	 	10.4*+	 	CPI Card Group Inc. Omnibus Incentive Plan	
 	 	 	10.5+†	 	CPI Acquisition, Inc. Phantom Stock Plan	
 	 	 	10.6*+	 	CPI Holdings I, Inc. 2007 Amended and Restated Stock Option Plan	
 	 	 	10.7*+	 	Employment and Non-Competition Agreement, effective June 22, 2015, between CPI Acquisition, Inc. and David Brush	
 	 	 	10.8*	 	Form of Indemnification Agreement	
 	 	 	10.9	 	First Lien Credit Agreement, dated as of August 17, 2015, by and among CPI Card Group Inc., CPI Acquisition Inc., the lenders from time to time party thereto and the Bank of Nova Scotia, as Administrative Agent and Collateral Agent	
 	 	 	10.10*	 	Form of Director Nomination Agreement by and between CPI Card Group Inc. and the Tricor Funds	
 	 	 	10.11*	 	Form of Registration Rights Agreement by and betwen CPI Card Group Inc. and the Tricor Funds	
 	 	 	15.1	 	Lattimore, Black, Morgan & Cain, P.C. letter re unaudited interim financial information.	
 	 	 	16.1†	 	Letter to the Securities and Exchange Commission from Ernst & Young LLP, dated May 21, 2015	
 	 	 	21.1†	 	List of subsidiaries of CPI Card Group Inc.	
 	 	 	23.1	 	Consent of KPMG LLP	
 	 	 	23.2	 	Consent of KPMG LLP	
 	 	 	23.3	 	Consent of Lattimore, Black, Morgan & Cain, P.C.	
 	 	 	23.4†	 	Consent of First Annapolis Consulting, Inc.	
 	 	 	23.5*	 	Consent of Winston & Strawn LLP (included in Exhibit 5.1)	
 	 	 	24.1†	 	Powers of Attorney	

+
Indicates exhibits that constitute management contracts or compensatory plans or arrangements

*
Indicates to be filed by amendment.

†
Previously filed.

Exhibit 10.9

 
FIRST LIEN CREDIT AGREEMENT
 
dated as of
 
August 17, 2015
 
among
 
CPI CARD GROUP INC.
as Holdings,
 
CPI ACQUISITION, INC.,
as the Borrower,
 
The Lenders from time to time party hereto,
 
and
 
THE BANK OF NOVA SCOTIA,
as Administrative Agent and Collateral Agent

 
GOLDMAN SACHS LENDING PARTNERS LLC
 
and
 
BNP PARIBAS
 
and
 
THE BANK OF NOVA SCOTIA,
as Joint Lead Arrangers and Joint Bookrunners
 
and
 
BANK OF MONTREAL
 
and
 
CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK BRANCH
as Co-Documentation Agents

 

 
TABLE OF CONTENTS

ARTICLE I	
 	
DEFINITIONS	
 	 	 	
Section 1.01	Defined Terms	1	
Section 1.02	Classification of Loans and Borrowings	62	
Section 1.03	Terms Generally	62	
Section 1.04	Accounting Terms; GAAP	63	
Section 1.05	Exchange Rate Calculations	63	
Section 1.06	Permitted Encumbrances	64	
Section 1.07	Limited Condition Transactions	64	
 	 	 	
ARTICLE II	
 	
THE CREDITS	
 	 	 	
Section 2.01	Commitments	65	
Section 2.02	Loans and Borrowings	65	
Section 2.03	Requests for Borrowings	66	
Section 2.04	Swingline Loans	67	
Section 2.05	Letters of Credit	69	
Section 2.06	Funding of Borrowings	72	
Section 2.07	Interest Elections	73	
Section 2.08	Termination and Reduction of Commitments	75	
Section 2.09	Repayment of Loans; Evidence of Debt	75	
Section 2.10	Amortization of Term Loans	77	
Section 2.11	Prepayment of Loans	77	
Section 2.12	Fees	88	
Section 2.13	Interest	90	
Section 2.14	Alternate Rate of Interest	90	
Section 2.15	Increased Costs	91	
Section 2.16	Break Funding Payments	92	
Section 2.17	Taxes	93	
Section 2.18	Payments Generally; Pro Rata Treatment; Sharing of Setoffs	97	
Section 2.19	Mitigation Obligations; Replacement of Lenders	100	
Section 2.20	Incremental Credit Extensions	101	
Section 2.21	Credit Agreement Refinancing Indebtedness; Maturity Extension	105	
Section 2.22	Defaulting Lenders	109	
Section 2.23	Illegality	112	
 	 	 	
ARTICLE III	
 	
REPRESENTATIONS AND WARRANTIES	
 	 	 	
Section 3.01	Organization; Powers	113	
Section 3.02	Authorization; Enforceability	113	
 
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Section 3.03	Governmental Approvals; No Conflicts	113	
Section 3.04	Financial Condition; No Material Adverse Effect	114	
Section 3.05	Properties	114	
Section 3.06	Litigation and Environmental Matters	115	
Section 3.07	Compliance with Laws and Agreements	115	
Section 3.08	Investment Company Status	115	
Section 3.09	Taxes	115	
Section 3.10	ERISA; Foreign Plan Matters	116	
Section 3.11	Disclosure	116	
Section 3.12	Subsidiaries	117	
Section 3.13	Intellectual Property; Licenses, Etc.	117	
Section 3.14	Solvency	117	
Section 3.15	[Reserved]	117	
Section 3.16	Federal Reserve Regulations	117	
Section 3.17	[Reserved]	118	
Section 3.18	Labor Matters	118	
Section 3.19	Security Documents	118	
Section 3.20	[Reserved]	118	
Section 3.21	Economic Sanctions	118	
Section 3.22	No Unlawful Contributions or Other Payments	119	
 	 	 	
ARTICLE IV	
 	
CONDITIONS	
 	 	 	
Section 4.01	Closing Date	119	
Section 4.02	Each Credit Event	122	
 	 	 	
ARTICLE V	
 	
AFFIRMATIVE COVENANTS	
 	 	 	
Section 5.01	Financial Statements and Other Information	123	
Section 5.02	Notices of Material Events	125	
Section 5.03	Information Regarding Collateral	126	
Section 5.04	Existence; Conduct of Business	126	
Section 5.05	Payment of Taxes, etc.	126	
Section 5.06	Maintenance of Properties	126	
Section 5.07	Insurance	127	
Section 5.08	Books and Records; Inspection and Audit Rights	127	
Section 5.09	Compliance with Laws	128	
Section 5.10	Use of Proceeds and Letters of Credit	128	
Section 5.11	Additional Subsidiaries	128	
Section 5.12	Further Assurances	129	
Section 5.13	Designation of Subsidiaries	129	
Section 5.14	Certain Post-Closing Obligations	130	
Section 5.15	Maintenance of Rating of Facility	130	
 
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Section 5.16	Quarterly Lender Calls	130	
 	 	 	
ARTICLE VI	
 	
NEGATIVE COVENANTS	
 	 	 	
Section 6.01	Indebtedness; Certain Equity Securities	131	
Section 6.02	Liens	134	
Section 6.03	Fundamental Changes	137	
Section 6.04	Investments, Loans, Advances, Guarantees and Acquisitions	139	
Section 6.05	Asset Sales	141	
Section 6.06	[Reserved]	143	
Section 6.07	Restricted Payments; Certain Payments of Indebtedness	143	
Section 6.08	Transactions with Affiliates	147	
Section 6.09	Restrictive Agreements	147	
Section 6.10	Amendment of Material Documents	148	
Section 6.11	First Lien Net Leverage Ratio	148	
Section 6.12	Changes in Fiscal Periods	149	
 	 	 	
ARTICLE VII	
 	
EVENTS OF DEFAULT	
 	 	 	
Section 7.01	Events of Default	149	
Section 7.02	Right to Cure	152	
 	 	 	
ARTICLE VIII	
 	
ADMINISTRATIVE AGENT	
 	 	 	
Section 8.01	Appointment and Authority	154	
Section 8.02	Rights as a Lender	154	
Section 8.03	Exculpatory Provisions	154	
Section 8.04	Reliance by Agents	155	
Section 8.05	Delegation of Duties	156	
Section 8.06	Resignation of Agents	156	
Section 8.07	Non-Reliance on Agents and Other Lenders	157	
Section 8.08	No Other Duties, Etc.	158	
Section 8.09	Administrative Agent May File Proofs of Claim	158	
Section 8.10	No Waiver; Cumulative Remedies; Enforcement	159	
Section 8.11	Withholding Taxes	160	
Section 8.12	Expenses; Indemnity	160	
Section 8.13	[Reserved]	161	
Section 8.14	Concerning the Collateral and the Security Documents	161	
Section 8.15	Collateral Matters Relating to Related Obligations	162	
 
iii 

 

ARTICLE IX	
 	
MISCELLANEOUS	
 	 	 	
Section 9.01	Notices	163	
Section 9.02	Waivers; Amendments	165	
Section 9.03	Expenses; Indemnity; Damage Waiver	171	
Section 9.04	Successors and Assigns	173	
Section 9.05	Survival	180	
Section 9.06	Counterparts; Integration; Effectiveness	181	
Section 9.07	Severability	181	
Section 9.08	Right of Setoff	181	
Section 9.09	Governing Law; Jurisdiction; Consent to Service of Process	182	
Section 9.10	WAIVER OF JURY TRIAL	182	
Section 9.11	Headings	183	
Section 9.12	Confidentiality	183	
Section 9.13	PATRIOT Act	184	
Section 9.14	Release of Liens and Guarantees	184	
Section 9.15	No Advisory or Fiduciary Responsibility	185	
Section 9.16	Interest Rate Limitation	186	
Section 9.17	Currency Indemnity	186	
 
iv 

 
TABLE OF CONTENTS
 
SCHEDULES:

Schedule 1.01(a)	—	Existing Letters of Credit	
Schedule 2.01	—	Commitments	
Schedule 3.12	—	Subsidiaries	
Schedule 6.01	—	Existing Indebtedness	
Schedule 6.02	—	Existing Liens	
Schedule 6.04(e)	—	Existing Investments	
Schedule 6.08	—	Existing Affiliate Transactions	
Schedule 6.09	—	Existing Restrictions	
Schedule 9.01	—	Notices	
 	 	 	
EXHIBITS :	 	 	
 	 	 	
Exhibit A	 	Form of Assignment and Assumption	
Exhibit B	 	Form of Guarantee Agreement	
Exhibit C	 	[Reserved]	
Exhibit D	 	[Reserved]	
Exhibit E	 	Form of Collateral Agreement	
Exhibit F	 	Form of Borrowing Request	
Exhibit G	 	Form of Swingline Request	
Exhibit H	 	Form of LC Request	
Exhibit I	 	[Reserved]	
Exhibit J	 	Form of Notice of Conversion/Continuation	
Exhibit K	 	[Reserved]	
Exhibit L	 	[Reserved]	
Exhibit M	 	Form of Solvency Certificate	
Exhibit N	 	Form of Intercompany Note	
Exhibit O	 	Form of Specified Discount Prepayment Notice	
Exhibit P	 	Form of Specified Discount Prepayment Response	
Exhibit Q	 	Form of Discount Range Prepayment Notice	
Exhibit R	 	Form of Discount Range Prepayment Offer	
Exhibit S	 	Form of Solicited Discounted Prepayment Notice	
Exhibit T	 	Form of Solicited Discounted Prepayment Offer	
Exhibit U	 	Form of Acceptance and Prepayment Notice	
Exhibit V	 	[Reserved]	
Exhibit W-1	 	Form of United States Tax Compliance Certificate 1	
Exhibit W-2	 	Form of United States Tax Compliance Certificate 2	
Exhibit W-3	 	Form of United States Tax Compliance Certificate 3	
Exhibit W-4	 	Form of United States Tax Compliance Certificate 4	
 
v 

 
FIRST LIEN CREDIT AGREEMENT dated as of August 17, 2015 (this “ Agreement ”), among CPI Card Group Inc., a Delaware corporation (“ Holdings ”), CPI Acquisition, Inc., a Delaware corporation (the “ Borrower ”), the Lenders party hereto, The Bank of Nova Scotia (in its individual capacity, “ Scotiabank ”), as Administrative Agent (in such capacity, the “ Administrative Agent ”) for the several financial institutions from time to time party to this Agreement that extend Term Loans or Revolving Loans to the Borrower (collectively, the “ Lenders ” and individually each a “ Lender ”) and as Collateral Agent for the Secured Parties under the Security Documents.
 
WHEREAS, Holdings intends to redeem $276,317,938 of its preferred stock and refinance the indebtedness under the Existing Credit Agreement;
 
WHEREAS, the Borrower has requested that, immediately upon (or contemporaneously with) the satisfaction in full of the applicable conditions precedent set forth in Section 4.01 below, the Lenders and Issuing Banks extend credit to the Borrower in the form of (i) first lien term loans denominated in U.S. Dollars in an aggregate principal amount of $435,000,000 to be borrowed on the Closing Date and (ii) a Revolving Facility consisting of a $40,000,000 revolving credit facility denominated in U.S. Dollars.  The Revolving Facility may include one or more Letters of Credit issued from time to time; and
 
WHEREAS, the Lenders have indicated their willingness to extend such credit, and the Issuing Banks have indicated their willingness to issue Letters of Credit, in each case on the terms and subject to the conditions set forth herein;
 
NOW THEREFORE, the parties hereto agree as follows:
 
ARTICLE I
 
DEFINITIONS
 
Section 1.01                              Defined Terms .  As used in this Agreement, the following terms have the meanings specified below:
 
“ ABR ” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.
 
“ Acceptable Discount ” has the meaning assigned to such term in Section 2.11(a)(ii)(D)(1) .
 
“ Acceptable Prepayment Amount ” has the meaning assigned to such term in Section 2.11(a)(ii)(D)(2) .
 
“ Acceptance and Prepayment Notice ” means an irrevocable written notice from a Term Lender accepting a Solicited Discounted Prepayment Offer to make a Discounted Term .Loan Prepayment at the Acceptable Discount specified therein pursuant to Section 2.11(a)(ii)(D)(1)  substantially in the form of Exhibit P .

 
“ Acceptance Date ” has the meaning specified in Section 2.11(a)(ii)(D)(1) .
 
“ Acquired EBITDA ” means, with respect to any Acquired Entity or Business or any Converted Restricted Subsidiary (any of the foregoing, a “ Pro Forma Entity ”) for any period prior to the applicable acquisition or conversion, the amount for such period of Consolidated EBITDA of such Pro Forma Entity (determined as if references to Holdings, the Borrower and its Restricted Subsidiaries in the definition of the term “Consolidated EBITDA” were references to such Pro Forma Entity and its subsidiaries which will become Restricted Subsidiaries), all as determined on a consolidated basis for such Pro Forma Entity.
 
“ Acquired Entity or Business ” has the meaning given to such term in the definition of “Consolidated EBITDA.”
 
“ Additional Lender ” means any Additional Revolving Lender or any Additional Term Lender, as applicable.
 
“ Additional Revolving Lender ” means, at any time, any bank or other financial institution selected by the Borrower that agrees to provide any portion of any (a) Revolving Commitment Increase pursuant to an Incremental Revolving Facility Amendment in accordance with Section 2.20 or (b) Credit Agreement Refinancing Indebtedness pursuant to a Refinancing Amendment in accordance with Section 2.21(a) ; provided that each Additional Revolving Lender (other than any Person that is a Lender, an Affiliate of a Lender or an Approved Fund of a Lender at such time) shall be subject to the approval of the Administrative Agent, the Swingline Lender and each Issuing Bank (such approval in each case not to be unreasonably withheld or delayed) in the case of a Revolving Commitment Increase with respect to the Revolving Commitments.
 
“ Additional Term Lender ” means, at any time, any bank or other financial institution selected by the Borrower that agrees to provide any portion of any (a) Term Commitment Increase pursuant to an Incremental Term Facility Amendment in accordance with Section 2.20 or (b) Credit Agreement Refinancing Indebtedness pursuant to a Refinancing Amendment in accordance with Section 2.21(a) ; provided that each Additional Term Lender (other than any Person that is a Lender, an Affiliate of a Lender or an Approved Fund of a Lender at such time) shall be subject to the approval of the Administrative Agent (such approval not to be unreasonably withheld or delayed).
 
“ Adjusted Eurodollar Rate ” means, with respect to any Eurodollar Borrowing of Term Loans or Revolving Loans for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1.0%) equal to (i) the Eurodollar Rate for such Interest Period multiplied by (ii) the Statutory Reserve Rate; provided that, notwithstanding the foregoing, in the case of Term Loans, the Adjusted Eurodollar Rate shall at no time be less than 1.00% per annum and in the case of Revolving Loans, the Adjusted Eurodollar Rate shall at no time be less than 0.00% per annum .
 
“ Administrative Agent ” has the meaning given to such term in the preamble to this Agreement.
 
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“ Administrative Questionnaire ” means an administrative questionnaire in a form supplied by the Administrative Agent.
 
“ Affiliate ” means, with respect to a specified Person, another Person that directly or indirectly Controls or is Controlled by or is under common Control with the Person specified.
 
“ Affiliated Debt Funds ” means any Affiliated Lender (other than a natural Person) that is primarily engaged in, or advises funds or other investment vehicles that are engaged in, making, purchasing, holding or otherwise investing in commercial loans, bonds and similar extensions of credit or securities in the ordinary course for which no personnel making investment decisions in respect of any equity fund which has a direct or indirect equity investment in Holdings, the Borrower or the Restricted Subsidiaries has the right to make any investment decisions and with respect to which the Sponsor does not, directly or indirectly, possess the power to direct or cause the direction of the investment policies of such entity.
 
“ Affiliated Lender ” means, at any time, any Lender that is (x) the Sponsor or an Affiliate of Sponsor or (y) Holdings, the Borrower or any of their respective subsidiaries.
 
“ Agent Parties ” has the meaning given to such term in Section 9.01(c) .
 
“ Agents ” means, collectively, the Administrative Agent and the Collateral Agent.
 
“ Agreement ” has the meaning given to such term in the preliminary statements hereto.
 
“ All-In Yield ” means as to any Indebtedness, the yield thereof, whether in the form of interest rate, margin, original issue discount, upfront fees, Eurodollar Rate or ABR floor greater than 2.00%, with respect to an ABR floor, and 1.00% with respect to a Eurodollar Rate floor, or otherwise; provided that (a) original issue discount and upfront fees (which shall be deemed to constitute like amounts of OID) shall be equated to interest rate assuming a 4-year life to maturity (or, if less, the stated life to maturity at the time of its incurrence of the applicable Indebtedness), (b) customary arrangement, structuring or commitment fees or other similar fees and expenses payable in connection with such Indebtedness that are not paid for the account of, or distributed to, all Lenders or holders of such new or replacement Indebtedness shall be excluded and (c) if such Indebtedness includes a Eurodollar Rate or ABR floor greater than 2.00% with respect to an ABR floor and 1.00% with respect to a Eurodollar Rate floor, such increased amount shall be equated to interest margin to the extent an increase in such interest rate floor would cause an increase in the interest rate then in effect.
 
“ Alternate Base Rate ” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate, (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1% and (c) the Adjusted Eurodollar Rate determined on such date (or if such day is not a Business Day, the immediately preceding Business Day) for a deposit in dollars with a maturity of one month plus 1%.  Any change in the Alternate Base Rate due to a change in the “Prime Rate”, the Federal Funds Effective Rate or the Adjusted Eurodollar Rate shall be effective from and including the effective date of such change in the “Prime Rate”, the Federal Funds Effective Rate or the Adjusted Eurodollar Rate, respectively.  Notwithstanding the foregoing, with respect to the
 
3 

 
Term Loans, the Alternate Base Rate will be deemed to be 2.00% per annum if the Alternate Base Rate calculated pursuant to the foregoing provisions would otherwise be less than 2.00% per annum .
 
“ AML Legislation ” means any and all laws, judgments, orders, executive orders, decrees, ordinances, rules, regulations, statutes, case law or treaties of any jurisdiction applicable to the Loan Parties or their Subsidiaries from time to time concerning or relating to terrorism financing or money laundering, including, without limitation, the Bank Secrecy Act, as amended by the PATRIOT Act, and the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) and other applicable anti-money laundering, anti-terrorist financing and “know your client” Laws.
 
“ Anti-Corruption Laws ” means any and all laws, judgments, orders, executive orders, decrees, ordinances, rules, regulations, statutes, case law or treaties of any jurisdiction applicable to the Loan Parties or their Subsidiaries from time to time concerning or relating to bribery or corruption, including, without limitation, the FCPA, any applicable law or regulation implementing the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions and any other applicable anti-corruption or anti-bribery laws and regulations.
 
“ Applicable Account ” means, with respect to any payment to be made to the Administrative Agent hereunder, the account specified by the Administrative Agent from time to time for the purpose of receiving payments of such type.
 
“ Applicable Agent ” means (a) with respect to a Borrowing, Loan, Letter of Credit, and with respect to any payment hereunder that does not relate to a particular Loan, Borrowing, or Letter of Credit, the Administrative Agent and (b) with respect to the Collateral or any Security Document, the Collateral Agent.
 
“ Applicable Commitment Fee Percentage ” shall mean:

Tier	 	Total Net Leverage Ratio	 	Commitment Fee
per annum	 	
I	 	Greater than or equal to 4.50 to 1.00	 	0.50	%	
II	 	Less than 4.50 to 1.00	 	0.375	%	
 
Any increase or decrease in the Applicable Commitment Fee Percentage resulting from a change in the Total Net Leverage Ratio shall become effective as of the second Business Day immediately following each date a Compliance Certificate is required to be delivered pursuant to Section 5.01(d)  for a fiscal quarter; provided , however , that if no Compliance Certificate is delivered when due in accordance with such subsection, then Tier I shall apply as of the date of the failure to deliver such Compliance Certificate until such date as the Borrower
 
4 

delivers such Compliance Certificate and Tier I shall apply from the Closing Date until a Compliance Certificate is delivered by the Borrower pursuant to Section 5.01(d)  for the first full fiscal quarter following the Closing Date.  If the Total Net Leverage Ratio reported in any Compliance Certificate shall be determined to have been incorrectly reported and if correctly reported would have resulted in a higher Applicable Commitment Fee Percentage, then the Applicable Commitment Fee Percentage shall be retroactively adjusted to reflect the higher rate that would have been applicable had the Total Net Leverage Ratio been correctly reported in such Compliance Certificate and the additional amounts resulting therefrom shall be due and payable upon demand from Administrative Agent.
 
“ Applicable Discount ” has the meaning assigned to such term in Section 2.11(a)(ii)(C)(1) .
 
“ Applicable Fronting Exposure ” means, with respect to any Person that is an Issuing Bank at any time, the sum of (a) the aggregate amount of all Letters of Credit issued by such Person in its capacity as an Issuing Bank (if applicable) that remains available for drawing at such time and (b) the aggregate amount of all LC Disbursements made by such Person in its capacity as an Issuing Bank (if applicable) that have not yet been reimbursed by or on behalf of the Borrower at such time.
 
“ Applicable Percentage ” means, at any time, with respect to any Revolving Lender, the percentage of the aggregate Revolving Commitments represented by such Lender’s Revolving Commitment at such time (or, if the Revolving Commitments have terminated or expired, such Lender’s share of the total Revolving Exposure at that time); provided that, at any time any Revolving Lender shall be a Defaulting Lender, “Applicable Percentage” shall mean the percentage of the total Revolving Commitments (disregarding any such Defaulting Lender’s Revolving Commitment) represented by such Lender’s Revolving Commitment.
 
“ Applicable Rate ” means, with respect to ABR Borrowings, 3.50% per annum and, with respect to Eurodollar Borrowings, 4.50% per annum.
 
“ Approved Bank ” has the meaning assigned to such term in the definition of the term “Permitted Investments.”
 
“ Approved Fund ” means, with respect to any Lender or Eligible Assignee, any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or investing in commercial loans and similar extensions of credit in the ordinary course of its activities and that is administered, advised or managed by (a) such Lender or Eligible Assignee, (b) an Affiliate of such Lender or Eligible Assignee or (c) an entity or an Affiliate of an entity that administers, advises or manages such Lender or Eligible Assignee.
 
“ Asset Disposition ”:  a sale, lease, license, transfer or other voluntary disposition of Property of the Borrower or any of its Restricted Subsidiaries, including a disposition of Property in connection with a Sale and Leaseback Transaction, and any casualty or condemnation event regarding such Property.
 
5 

 
“ Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any Person whose consent is required by Section 9.04 ), substantially in the form of Exhibit A or any other form (including electronic documentation generated by MarkitClear or other electronic platform) reasonably approved by the Administrative Agent.
 
“ Auction Agent ” means (a) the Administrative Agent or (b) any other financial institution or advisor employed by the Borrower (whether or not an Affiliate of the Administrative Agent) to act as an arranger in connection with any Discounted Term Loan Prepayment pursuant to Section 2.11(a)(ii)(A) ; provided that the Borrower shall not designate the Administrative Agent as the Auction Agent without the written consent of the Administrative Agent (it being understood that the Administrative Agent shall be under no obligation to agree to act as the Auction Agent).
 
“ Audited Financial Statements ” means the audited consolidated balance sheet of Holdings and its subsidiaries for the fiscal year ended December 31, 2014 and the two most recently completed prior fiscal years, and, in each case, the related consolidated statements of operations and cash flows of such Persons.
 
“ Available Amount ” means, at any time (a) the sum at such time of (i) $15,000,000, plus without duplication (ii) Cumulative Excess Cash Flow for each fiscal year of Holdings in respect of which financial statements have been delivered under Section 5.01(a) , plus (iii) the Net Proceeds from any sale or issuance of any Equity Interests (other than Disqualified Equity Interests and Cure Amounts) by Holdings or from any capital contributions in respect of Equity Interests (other than Disqualified Equity Interests and Cure Amounts) of Holdings, in each case to the extent such Net Proceeds are directly contributed to, and received by, the Borrower, plus (iv) the Net Proceeds of any Disposition of Investments made pursuant to Section 6.04(c), (h) or (t)  in reliance on the Available Amount, plus (v) to the extent not otherwise included, the aggregate amount of cash dividends, distributions, interest, fees, premiums, returns of capital, repayments of principal, income or profit returned to the Borrower or any Restricted Subsidiary in respect of Investments made pursuant to Section 6.04(c), (h) or (t)  in reliance on the Available Amount (up to the amount of the Investment), plus (vi) amounts declined by any Lender and retained by the Borrower pursuant to Section 2.11(f) , plus (vii) the fair market value of all Qualified Equity Interests of the Borrower issued upon conversion or exchange of Indebtedness or Disqualified Equity Interests of the Borrower or any of its Restricted Subsidiaries after the Closing Date, together with the fair market value of any assets constituting Permitted Investments received upon such conversion or exchange minus (b) the sum at such time of (i) all prepayments required to be made under Section 2.11(d)  (without giving effect to the first proviso in such Section) in respect of Excess Cash Flow, (ii) Restricted Payments previously made under Section 6.07(a)(vi)  in reliance on the Available Amount, (iii) prepayments of Indebtedness previously made under Section 6.07(b)(iv)  in reliance on the Available Amount and (iv) Investments previously made under Section 6.04(c), (h) and (t)  in reliance on the Available Amount.
 
“ Bankruptcy Code ” means Title 11 of the United State Code, as amended, or any similar federal or state law for the relief of debtors.
 
6 

 
“ Board of Governors ” means the Board of Governors of the Federal Reserve System of the United States of America.
 
“ Borrower ” means CPI Acquisition, Inc.
 
“ Borrower Materials ” has the meaning assigned to such term in Section 5.01(g) .
 
“ Borrower Notice ” has the meaning assigned to such term in the definition of “Collateral and Guarantee Requirement.”
 
“ Borrower Offer of Specified Discount Prepayment ” means the offer by the Borrower to make a voluntary prepayment of Term Loans at a specified discount to par pursuant to Section 2.11(a)(ii)(B) .
 
“ Borrower Solicitation of Discount Range Prepayment Offers ” means the solicitation by the Borrower of offers for, and the corresponding acceptance by a Term Lender of, a voluntary prepayment of Term Loans at a specified range at a discount to par pursuant to Section 2.11(a)(ii)(C) .
 
“ Borrower Solicitation of Discounted Prepayment Offers ” means the solicitation by the Borrower of offers for, and the subsequent acceptance, if any, by a Term Lender of, a voluntary prepayment of Term Loans at a discount to par pursuant to Section 2.11(a)(ii)(D) .
 
“ Borrowing ” means (a) Loans of the same Class and Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect or (b) a Swingline Loan.
 
“ Borrowing Minimum ” means (a) in the case of a Eurodollar Revolving Borrowing, $250,000 or (b) in the case of an ABR Revolving Borrowing, $250,000.
 
“ Borrowing Multiple ” means (a) in the case of a Eurodollar Revolving Borrowing, $100,000 and (b) in the case of an ABR Revolving Borrowing, $100,000.
 
“ Borrowing Request ” means a request by the Borrower for a Borrowing in accordance with Section 2.03 which, if in writing, shall be substantially in the form of Exhibit F .
 
“ British Pounds Sterling ” means the lawful currency of the United Kingdom.
 
“ Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City or Toronto are authorized or required by law to remain closed; provided that when used in connection with a Eurodollar Loan, the term “ Business Day ” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.
 
“ Calculation Date ” shall mean, as applicable, (a) the Closing Date or (b) the last Business Day of each calendar month.
 
“ Canadian Dollars ” means the lawful money of Canada.
 
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“ Capital Lease Obligations ” of any Person means 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 the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.  For purposes of Section 6.02 , a Capital Lease Obligation shall be deemed to be secured by a Lien on the property being leased and such property shall be deemed to be owned by the lessee.
 
“ Capitalized Leases ” means all leases that have been or should be, in accordance with GAAP, recorded as capitalized leases; provided that for all purposes hereunder the amount of obligations under any Capitalized Lease shall be the amount thereof accounted for as a liability in accordance with GAAP.
 
“ Capitalized Software Expenditures ”:  for any period, the aggregate of all expenditures (whether paid in cash or accrued as liabilities) by a Person and its Restricted Subsidiaries during such period in respect of purchased software or internally developed software and software enhancements that, in conformity with GAAP, are or are required to be reflected as capitalized costs on the consolidated balance sheet of such Person and such Subsidiaries.
 
“ Cash Management Obligations ” means obligations of Holdings, the Borrower or any Subsidiary in respect of any overdraft, custom bonds, payment systems and related liabilities arising from treasury, depository and cash management services or any automated clearing house transfers of funds.
 
“ Cash Restructuring Add-Back ”  has the meaning assigned to such term in the definition of “Consolidated EBITDA.”
 
“ Casualty Event ” means any event that gives rise to the receipt by the Borrower or any Restricted Subsidiary of any insurance proceeds or condemnation awards or in respect of any equipment, fixed assets or real property (including any improvements thereon) to replace or repair such equipment, fixed assets or real property.
 
“ Change in Control ” means (a) prior to a Qualified IPO, the Permitted Holders shall fail to own or control, directly or indirectly, through beneficial ownership or contract rights, equity interests representing more than 50% of the total voting power of Holdings; (b) upon or after the consummation of a Qualified IPO, a Person or “group” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), but excluding any employee benefit plan of Holdings or any of its subsidiaries (or any direct or indirect parent company thereof), and any Person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan, other than the Permitted Holders, shall become the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of Equity Interests representing more than the greater of (x) 35% of the then-outstanding total voting power of Holdings and (y) the percentage of the then-outstanding total voting power of Holdings owned, directly or indirectly, beneficially by the Permitted Holders; (c) Holdings shall fail to own direct beneficial ownership of 100% of the outstanding Equity Interests in the Borrower; or (d) a “change of control” (or analogous term) shall have occurred under any Ratio Debt, Permitted Refinancing, Permitted Refinancing Notes or Replacement Revolving Facility.
 
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“ Change in Law ” means:  (a) the adoption of any rule, regulation, treaty or other law after the date of this Agreement, (b) any change in any rule, regulation, treaty or other law or in the administration, interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided , that notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all rules, regulations, guidelines or directives thereunder or issued in connection therewith and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.
 
“ Class ” when used in reference to (a) any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Other Revolving Loans, Swingline Loans, Term Loans or Other Term Loans of any series, (b) any Commitment, refers to whether such Commitment is a Revolving Commitment, Other Revolving Commitment, Term Commitment or Other Term Commitment of any series and (c) any Lender, refers to whether such Lender has a Loan or Commitment with respect to a particular Class of Loans or Commitments.  Other Term Commitments, Other Revolving Commitments, Other Term Loans, Other Revolving Loans, Revolving Loans made pursuant to any Revolving Commitment Increase and term loans made pursuant to any Term Commitment Increase that have different terms and conditions shall be construed to be in different Classes.
 
“ Closing Date ” means August 17, 2015.
 
“ Co-Documentation Agents ” means Bank of Montreal and Canadian Imperial Bank of Commerce, New York Branch.
 
“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.
 
“ Collateral ” means any and all assets, whether real or personal, tangible or intangible, on which Liens are purported to be granted pursuant to the Security Documents as security for any Secured Obligations.
 
“ Collateral Agent ” means Scotiabank in its capacity as collateral agent for the Secured Parties, and any successor collateral agent.
 
“ Collateral Agreement ” means the Collateral Agreement, dated as of the Closing Date, in the form of Exhibit E among the Loan Parties party thereto and the Collateral Agent to secure the Secured Obligations of such Loan Parties, as the same may be amended, restated, supplemented or otherwise modified from time to time.
 
“ Collateral and Guarantee Requirement ” means, at any time, subject in each case to Section 5.14 , the requirement that:
 
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(a)                                  On or prior to the Closing Date, the Administrative Agent shall have received (i) from Holdings, the Borrower and each Subsidiary (other than an Excluded Tax Subsidiary) existing on the Closing Date, a counterpart of the Collateral Agreement, duly executed and delivered on behalf of such Person, and (ii) from Holdings and each Domestic Subsidiary existing on the Closing Date (other than any Excluded Tax Subsidiary), a counterpart of the Guarantee Agreement duly executed and delivered on behalf of such Person;
 
(b)                                  On or prior to the Closing Date, the Collateral Agent shall have received (i) a pledge of all the issued and outstanding Equity Interests of (A) the Borrower and (B) each Wholly Owned Subsidiary owned directly by Holdings, the Borrower or any Subsidiary (it being understood that (1) no more than 65% of the voting Equity Interests of any “first tier” Excluded Tax Subsidiary owned by a Domestic Subsidiary and (2) no Equity Interests of any Excluded Tax Subsidiary owned by any Excluded Tax Subsidiary shall, in each case, be pledged to secure the Secured Obligations of the Borrower or any Guarantee thereof) and (ii) in the case of certificated Equity Interests required to be pledged pursuant to clause (i)  above, all certificates or other instruments (if any) representing such Equity Interests, together with undated stock powers or other instruments of transfer with respect thereto endorsed in blank;
 
(c)                                   if any Indebtedness for borrowed money (including in respect of cash management arrangements) of Holdings, the Borrower or any Subsidiary in an aggregate principal amount exceeding $5,000,000 is owing by such obligors to one or more Loan Parties, such Indebtedness shall be evidenced by a promissory note on terms at least as favorable to the Lenders as those set forth in the form of intercompany note attached as Exhibit N , that shall have been pledged pursuant to the Collateral Agreement (or other applicable Security Document as reasonably required by the Collateral Agent) and the Collateral Agent shall have received such intercompany note, together with note powers or other undated instruments of transfer with respect thereto endorsed in blank;
 
(d)                                  in the case of any Person that becomes a Domestic Subsidiary after the Closing Date and is not an Excluded Immaterial Subsidiary or an Excluded Tax Subsidiary, the Administrative Agent and the Collateral Agent shall have received within the time periods set forth in Section 5.11  a supplement to (A) the Guarantee Agreement and (B) the Collateral Agreement, in each case in the form specified therein, duly executed and delivered on behalf of such Domestic Subsidiary;
 
(e)                                   [reserved];
 
(f)                                    after the Closing Date, (i) all the outstanding Equity Interests (A) issued or owned by any Person that becomes a Loan Party after the Closing Date and (B) all the Equity Interests that are acquired by a Loan Party after the Closing Date, in each case, to the extent not constituting Excluded Assets, shall have been pledged pursuant to the applicable Security Document; provided, that (A) no more than 65% of the voting Equity Interests of any “first tier” Excluded Tax Subsidiary owned by a Domestic Subsidiary and (B) no Equity Interests of any Excluded Tax Subsidiary owned by any Excluded Tax Subsidiary, in each case, shall be pledged to secure the Secured Obligations of the
 
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Borrower or any Guarantee thereof and (ii) the Collateral Agent shall have received all certificates or other instruments (if any) representing such Equity Interests, together with undated stock powers or other instruments of transfer with respect thereto endorsed in blank;
 
(g)                                   except as otherwise contemplated by any Security Document, all documents and instruments, including UCC financing statements and other similar statements or forms used in other relevant jurisdictions and IP security agreements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create the Liens intended to be created by the Security Documents (in each case, including any supplements thereto) and perfect such Liens to the extent required by, and with the priority required by, the Security Documents, shall have been filed, registered or recorded or delivered to the Collateral Agent for filing, registration or the recording on the Closing Date or, with respect to Collateral acquired after the Closing Date, as required pursuant to Sections 5.03 , 5.11 or 5.12 ;
 
(h)                                  with respect to any fee-owned (but not leased or ground leased) Material Real Property, the Collateral Agent shall have received (i) counterparts of a Mortgage with respect to each Material Real Property duly executed and delivered by the record owner of such Mortgaged Property, (ii) a policy or policies of title insurance in an amount equal to the then fair market value of such Mortgaged Property and fixtures, in form and substance acceptable to the Collateral Agent, issued by a nationally recognized title insurance company in favor of the Collateral Agent and insuring the Lien of each such Mortgage as a first priority Lien on the Mortgaged Property described therein, free of any other Liens (except as expressly permitted by Sections 6.02(ii) - (viii) , (xi) - (xix) , (xxii) , (xxiii)  and (xxiv) ), together with such endorsements as the Collateral Agent may reasonably request, (iii) with respect to Material Real Property located in the United States, no later than three Business Days prior to the date on which a Mortgage is executed and delivered, in order to comply with the Flood Laws, the following documents:  (A) a completed standard “life of loan” flood hazard determination form (a “ Flood Determination Form ”), (B) if the improvement(s) to the applicable improved real property is located in a special flood hazard area, a notification to the Borrower (“ Borrower Notice ”) and (if applicable) notification to the Borrower that flood insurance coverage under the National Flood Insurance Program (“ NFIP ”) is not available because the community does not participate in the NFIP, (C) documentation evidencing the Borrower’s receipt of the Borrower Notice (e.g., countersigned Borrower Notice, return receipt of certified U.S. Mail, or overnight delivery), and (D) if the Borrower Notice is required to be given and flood insurance is available in the community in which the property is located, a copy of one of the following:  the flood insurance policy, the Borrower’s application for a flood insurance policy plus proof of premium payment, a declaration page confirming that flood insurance has been issued, or such other evidence of flood insurance satisfactory to the Collateral Agent (any of the foregoing being “ Evidence of Flood Insurance ”), (iv) such legal opinions as the Collateral Agent may reasonably request with respect to any such Mortgage or Mortgaged Property, in each case, in form and substance reasonably satisfactory to the Collateral Agent, (v) to the extent requested by the Collateral Agent, a survey of such Mortgaged Property in compliance with the 2011 Minimum Standard Detail Requirements for ALTA/ACSM
 
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Land Title Surveys reasonably satisfactory to the Collateral Agent, and (vi) evidence of payment of title insurance premiums and expenses and all recording, mortgage, transfer and stamp taxes and fees payable in connection with recording the Mortgage, any amendments thereto and any fixture filings in appropriate county land office(s).
 
Notwithstanding the foregoing provisions of this definition or anything in this Agreement or any other Loan Document to the contrary, (a) the foregoing provisions of this definition shall not require the creation or perfection of pledges of or security interests in, or the obtaining of title insurance, legal opinions or other deliverables with respect to, particular assets of the Loan Parties, or the provision of Guarantees by any Restricted Subsidiary, if, and for so long as the Collateral Agent and the Borrower reasonably agree in writing that the cost of creating or perfecting such pledges or security interests in such assets, or obtaining such title insurance, legal opinions or other deliverables in respect of such assets, or providing such Guarantees (taking into account any adverse tax consequences to Holdings and its Affiliates (including the imposition of material withholding or other taxes) shall be excessive in view of the benefits to be obtained by the Lenders therefrom, (b) Liens required to be granted from time to time pursuant to the term “Collateral and Guarantee Requirement” shall be subject to exceptions and limitations set forth in the Security Documents, (c) in no event shall control agreements or other control or similar arrangements be required with respect to (i) deposit accounts, (ii) securities accounts or (iii) letter of credit rights, (d) in no event shall the Collateral of any Loan Party include any Excluded Assets of such Loan Party, (e) neither the Borrower nor any Subsidiary will be required to take any action to perfect any security interest in any of its owned Intellectual Property in any jurisdictions other than the United States and any other jurisdiction in which any Loan Party is organized, (f) in no event shall any Excluded Tax Subsidiary Guarantee the First Lien Obligations of the Borrower, (g) in no event shall (A) any Excluded Tax Subsidiary be required to pledge assets as Collateral under any Loan Document and (B) any Equity Interests of an Excluded Tax Subsidiary be pledged as Collateral under any Loan Document, except that 65% of the voting Equity Interests of any “first tier” Excluded Tax Subsidiary owned by a Domestic Subsidiary may be pledged to secure the Secured Obligations of the Borrower or any Guarantee thereof and (h) no foreign law guaranties, pledge agreements or charge agreements shall be required.  The Collateral Agent may grant extensions of time for the creation and perfection of security interests in or the obtaining of title insurance, legal opinions or other deliverables with respect to particular assets or the provision of any Guarantee 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.
 
“ Commitment ” means with respect to any Lender, its Revolving Commitment, Term Commitment of any Class, Other Revolving Commitment of any Class, Other Term Commitment of any Class or any combination thereof (as the context requires).
 
“ Commitment Letter ” means that certain Commitment Letter, dated as of July 26, 2015, by and among the Joint Lead Arrangers, the Co-Documentation Agents and the Borrower.
 
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“ Commodity Exchange Act ” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.) as amended from time to time, and any successor statute.
 
“ Competitors ” shall mean, from time to time, any Person, together with its Affiliates, that is engaged in the production and sale of financial payment cards and gift cards and services, packaging and production equipment with respect to such items, other than any bona fide debt fund or any such Person or its Affiliates that is generally in the business of investing in debt securities or syndicated loans.
 
“ Compliance Certificate ” has the meaning assigned to such term in Section 5.01(d) .
 
“ Compliance Event ” means, as of any Test Date, the Revolving Exposure (other than with respect to LC Exposure that has been cash collateralized in an amount equal to the outstanding amount thereof and other standby Letters of Credit with an aggregate face value of up to $1,500,000) of all Lenders outstanding at such time is greater than 50% of the aggregate principal amount of the Revolving Commitments of all Lenders.
 
“ Connection Income Taxes ” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.
 
“ Consolidated Depreciation and Amortization Expense ” means, with respect to any Person, for any period, the total amount of depreciation and amortization expense, including the amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses and Capitalized Software Expenditures and amortization of unrecognized prior service costs and actuarial gains and losses related to pensions and other post-employment benefits, of such Person and its Restricted Subsidiaries for such period on a consolidated basis and otherwise determined in accordance with GAAP.
 
“ Consolidated EBITDA ”  means, with respect to any period, Consolidated Net Income of Holdings and its Restricted Subsidiaries for such period:
 
(1)                                  increased by (without duplication) the following amounts which have been deducted (and not added back) in computing Consolidated Net Income:
 
(a)                                  provision for taxes of Holdings and its Restricted Subsidiaries, including, without limitation, foreign, federal, state, local, franchise, excise and similar taxes and foreign withholding taxes (including penalties and interest related to such taxes or arising from tax examinations, and including pursuant to any tax sharing arrangements) paid or accrued during such period; plus
 
(b)                                  Consolidated Interest Expense and Charges for such period (including (x) net losses on obligations under Hedging Agreements or other derivative instruments entered into for the purpose of hedging interest rate risk, (y) fees payable in respect of letters of credit and (z) costs of surety bonds in connection with financing activities, in each case, to the extent included in
 
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Consolidated Interest Expense and Charges), together with items excluded from the definition of “Consolidated Interest Expense and Charges” pursuant to clause (1) of the definition thereof, and, in each such case, to the extent the same was deducted (and not added back) in calculating such Consolidated Net Income; plus
 
(c)                                   Consolidated Depreciation and Amortization Expense for such period; plus
 
(d)                                  any fees, expenses or charges (other than depreciation or amortization expense) related to any equity offering, Permitted Acquisition, Permitted Investment, disposition, recapitalization, or the incurrence or repayment of Indebtedness in each case permitted under the Loan Documents (whether or not successful), including (i) such fees, expenses or charges related to the Transactions and (ii) any fees, costs (including call premiums), commissions, expenses and other charges related to any amendment or other modification of any Indebtedness permitted under the Loan Documents; plus
 
(e)                                   the amount of any non-cash restructuring charge, accrual or reserve, including any non-cash restructuring costs incurred in connection with acquisitions after the Closing Date and non-cash costs related to the closure and/or consolidation of facilities; provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period; plus
 
(f)                                    the amount of any cash restructuring charge, accrual or reserve, including any cash restructuring costs incurred in connection with acquisitions after the Closing Date, cash costs related to the implementation of cost savings initiatives and operating expense reductions, closure and/or consolidation of facilities and plants, opening and pre-opening expenses, business optimization and other integration and transition charges (including inventory optimization programs, software development costs, costs relating to curtailments, costs related to entry into new markets, strategic initiatives and contracts, consulting fees, expansion and relocation expenses, modifications to pension and post-retirement employee benefit plans, new systems design and implementation costs and startup costs) and severance and relocation, signing, retention and executive recruiting costs; provided that the aggregate amount of all charges, accruals or reserves for any measurement period under this clause (f) (the “ Cash Restructuring Add- Back ”), shall not exceed 25% of Consolidated EBITDA before giving effect to the Cash Restructuring Add-Back; plus
 
(g)                                   any other non-cash charges, including any write-offs or write- downs, for such period; provided that if any such non-cash charges represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated
 
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EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period; plus
 
(h)                                  the amount of any minority interest expense consisting of Subsidiary income attributable to minority equity interests of third parties in any non-wholly owned Subsidiary deducted; plus
 
(i)                                      the amount of any management, monitoring, consulting, transaction and advisory fees and related expenses paid in such period to the extent otherwise permitted under Section 6.08 ; plus
 
(j)                                     any costs or expense incurred pursuant to any management equity plan or stock option plan (including without limitation any phantom equity plan) or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement to the extent that such cost or expenses are funded with cash proceeds contributed to the capital of the Borrower or net cash proceeds of an issuance of Qualified Equity Interests of the Borrower; and
 
(2)                                  decreased by (without duplication) the following amounts which have been included in computing Consolidated Net Income:  (a) non-cash income or gains for such period, excluding any non-cash gains to the extent they represent the reversal of an accrual or reserve for a potential cash item that reduced Consolidated EBITDA in any prior period and (b)  the minority interest income consisting of Subsidiary losses attributable to minority equity interests of third parties in any non-wholly owned Subsidiary to the extent such minority interest income has not been received in cash by the Borrower or its Restricted Subsidiaries.
 
For purposes of computing Consolidated EBITDA for any fiscal period during which a Permitted Acquisition is consummated, there shall be included in Consolidated EBITDA (without duplication) as if such Permitted Acquisition had been consummated as of the first day of such period, the Acquired EBITDA of any Person or any division, product line and/or business operated by any person, in each case, acquired by the Borrower or any Restricted Subsidiary of the Borrower during such period to the extent not subsequently sold, transferred or otherwise disposed of (but not including the EBITDA of any related Person, property, business or assets to the extent not so acquired) (each such Person or any division, product line and/or business acquired and not subsequently disposed of, an “ Acquired Entity or Business ”), and the Acquired EBITDA of any Unrestricted Subsidiary that is converted into a Restricted Subsidiary during such period (each, a “ Converted Restricted Subsidiary ”), in each case based on the Acquired EBITDA of such Pro Forma Entity for such period (including the portion thereof occurring prior to such acquisition or conversion) determined on a Pro Forma Basis.
 
For purposes of computing Consolidated EBITDA for any fiscal period during which a permitted Disposition of a Subsidiary, division, product line and/or business is consummated, there shall be excluded from Consolidated EBITDA (without duplication) as if such permitted Disposition had been consummated as of the first day of such period, the Disposed EBITDA of any Person, property, business or asset sold, transferred or otherwise
 
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disposed of or, closed or classified as discontinued operations (but if such operations are classified as discontinued due to the fact that they are subject to an agreement to dispose of such operations, only when and to the extent such operations are actually disposed of) by the Borrower or any Restricted Subsidiary during such period (each such Person, division, product line and/or business so sold or disposed of, a “ Sold Entity or Business ”), and the Disposed EBITDA of any Restricted Subsidiary that is converted into an Unrestricted Subsidiary during such period (each, a “ Converted Unrestricted Subsidiary ”), in each case based on the Disposed EBITDA of such Sold Entity or Business or Converted Unrestricted Subsidiary for such period (including the portion thereof occurring prior to such sale, transfer, conversion or disposition) determined on a Pro Forma Basis.
 
“ Consolidated First Lien Secured Indebtedness ” means, as of any date of determination, the total amount of Consolidated Net Debt outstanding on such date that is secured by Liens on any asset of Holdings, the Borrower or any Restricted Subsidiaries that are not subordinated to the Lien securing any Secured Obligations on terms reasonably satisfactory to the Administrative Agent and the Borrower.
 
“ Consolidated Interest Expense and Charges ” means, with respect to any Person for any period, the sum, without duplication, of (1) consolidated interest expense of such Person and its Restricted Subsidiaries for such period, to the extent such expense was deducted (and not added back) in computing Consolidated Net Income (including (a) amortization of original issue discount resulting from the issuance of Indebtedness at less than par, (b) all commissions, discounts and other fees and charges owed with respect to letters of credit or bankers’ acceptances, (c) non-cash interest expense (but excluding any non-cash interest expense attributable to the movement in the mark-to-market valuation of obligations under Hedging Agreements or other derivative instruments pursuant to GAAP), (d) the interest component of Capital Lease Obligations, and (e) net payments, if any, pursuant to obligations under interest rate Hedging Agreements with respect to Indebtedness, and excluding (v) accretion or accrual of discounted liabilities not constituting Indebtedness, (w) any expense resulting from the discounting of Indebtedness in connection with the application of recapitalization accounting or, if applicable, purchase accounting, (x) amortization of deferred financing fees, debt issuance costs, commissions, fees and expenses, and (y) any expensing of bridge, commitment and other financing fees); plus consolidated capitalized interest of such Person and its Restricted Subsidiary for such period (whether paid or accrued); less interest income of such Person and its Restricted Subsidiaries for such period; plus (2) all cash dividends or other distributions paid to any Person other than such Person or any such Subsidiary (excluding items eliminated in consolidation) on any series of any Disqualified Equity Interest, refunding capital stock or any preferred stock of the Borrower or a Restricted Subsidiary during such period; provided that for purposes of this definition, interest on Capital Lease Obligations shall be deemed to accrue at an interest rate reasonably determined by the Borrower to be the rate of interest implicit in such Capital Lease Obligation in accordance with GAAP.
 
“ Consolidated Net Debt ” means, as of any date of determination, (a) the U.S. Dollar Equivalent of the aggregate amount of Indebtedness of Holdings, the Borrower and the Restricted Subsidiaries outstanding on such date, determined on a consolidated basis in accordance with GAAP (but excluding the effects of any discounting of Indebtedness resulting from the application of acquisition method accounting in connection with any Permitted
 
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Acquisition (or other Investment permitted hereunder)) consisting only of Indebtedness for borrowed money, unreimbursed obligations under letters of credit, obligations in respect of Capitalized Leases and debt obligations evidenced by promissory notes or similar instruments, minus (b) U.S. Dollar Equivalent of the aggregate amount of cash and Permitted Investments of Holdings, the Borrower and the Restricted Subsidiaries (in each case, free and clear of all Liens, other than Liens permitted pursuant to Section 6.02 ), excluding cash and Permitted Investments which are listed as “restricted” on the consolidated balance sheet of Holdings, the Borrower and the Restricted Subsidiaries as of such date.
 
“ Consolidated Net Income ” means, with respect to any Person for any period, the aggregate of the Net Income of such Person and its Restricted Subsidiaries for such period, on a consolidated basis, and otherwise determined in accordance with GAAP; provided , however, that, without duplication,
 
(a)                                  any after-tax effect of extraordinary, non-recurring or unusual gains or losses (less all fees and expenses relating thereto) or expenses (including relating to the Transactions and any Qualified IPO) shall be excluded,
 
(b)                                  the Net Income for such period shall not include the cumulative effect of a change in accounting principles during such period,
 
(c)                                   any after-tax effect of income or loss from disposed, abandoned or discontinued operations and any net after-tax gains or losses on disposed, abandoned, transferred, closed or discontinued operations shall be excluded,
 
(d)                                  any after-tax effect of gains or losses (less all fees and expenses relating thereto) attributable to asset dispositions or abandonments, other than in the Ordinary Course of Business, as determined in good faith by the Borrower, shall be excluded,
 
(e)                                   the Net Income for such period of any Person that is not a Subsidiary, or is an Unrestricted Subsidiary or that is accounted for by the equity method of accounting, shall be excluded; provided that Consolidated Net Income of the Borrower shall be increased by the amount of dividends or distributions or other payments that are actually paid in cash (or to the extent converted into cash) to such Person or a Subsidiary thereof that is the Borrower or a Restricted Subsidiary in respect of such period,
 
(f)                                    effects of adjustments (including the effects of such adjustments pushed down to the Borrower and its Restricted Subsidiaries) in such Person’s consolidated financial statements pursuant to GAAP (including in the property, equipment, leases, inventory, software, goodwill and other intangible assets, in-process research and development, deferred revenue, deferred trade incentives and other lease-related items, advanced billings and debt line items (including deferred costs and deferred rent related thereto) resulting from the application of purchase or recapitalization accounting or, if applicable, acquisition method accounting in relation to any consummated acquisition or the amortization or write-off of any amounts thereof, net of taxes, shall be excluded,
 
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(g)                                   any after-tax effect of income or loss from the early extinguishment of Indebtedness or obligations under Hedging Agreements or other derivative instruments shall be excluded,
 
(h)                                  any impairment charge or asset write-off or write-down, including impairment charges or asset write-offs or write-downs related to intangible assets, long-lived assets, investments in debt and equity securities or as a result of a change in law or regulation, in each case, pursuant to GAAP and the amortization of intangibles arising pursuant to GAAP shall be excluded,
 
(i)                                      any non-cash compensation charge or expense recorded from grants of stock appreciation or similar rights, stock options, restricted stock or other rights and any income or loss attributable to deferred compensation plans or trusts, including but not limited to charges and expenses arising under FASB ASC 718 and cash charges associated with the rollover, acceleration or payout of Equity Interests by management of the Borrower or any of its direct or indirect parent companies in connection with the Transactions or any Qualified IPO shall be excluded,
 
(j)                                     any fees and expenses (including any adjustment of estimated payouts on earn-outs) incurred during such period, or any amortization thereof for such period, in connection with the Transactions and any acquisition, Investment, Asset Disposition, issuance or repayment of Indebtedness, issuance of Equity Interests, refinancing transaction or amendment or modification of any debt instrument (in each case, including any such transaction consummated prior to the Closing Date and any such transaction undertaken but not completed) and any charges or non-recurring merger costs incurred during such period as a result of any such transactions shall be excluded,
 
(k)                                  changes as a result of adoption or modification of accounting policies shall be excluded,
 
(l)                                      to the extent covered by insurance and actually reimbursed, or, so long as the Borrower has made a determination that there exists reasonable evidence that such amount will in fact be reimbursed by the insurer and only to the extent that such amount is (1) not denied by the applicable carrier in writing within 180 days and (2) in fact reimbursed within 365 days of the date of such evidence (with a deduction for any amount so added back to the extent not so reimbursed within 365 days), expenses or losses with respect to liability or casualty events or business interruption shall be excluded,
 
(m)                              any gain or loss resulting in such period from obligations under Hedging Agreements and the application of FASB ASC 815 and International Accounting Standards No. 39 and their respective related pronouncements and interpretations shall be excluded, and
 
(n)                                  any gain or loss resulting in such period from currency translation gains or losses related to currency remeasurements of Indebtedness (including any net loss or gain resulting from obligations under Hedging Agreements for currency exchange risk) shall be excluded.
 
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In addition, to the extent not already included in the Consolidated Net Income of such Person and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing and without duplication with any of clauses (a) through (n) above, Consolidated Net Income shall include the amount of proceeds actually received from business interruption insurance and reimbursements actually received of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any Permitted Investment or any sale, conveyance, transfer or other disposition of assets permitted under this Agreement.
 
“ Consolidated Total Secured Indebtedness ” means, as of any date of determination, the total amount of Consolidated Net Debt outstanding on such date that is secured by a Lien on any asset of Holdings, the Borrower or any Restricted Subsidiaries.
 
“ Consolidated Working Capital ” means, at any date, the excess of (a) the sum of the U.S. Dollar Equivalent of all amounts (other than cash and Permitted Investments) 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 Holdings, the Borrower and the Restricted Subsidiaries at such date, excluding the current portion of current and deferred income taxes over (b) the sum of the U.S. Dollar Equivalent of 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 Holdings, the Borrower and the Restricted Subsidiaries on such date, including deferred revenue but excluding, without duplication, (i) the current portion of any Funded Debt, (ii) all Indebtedness consisting of Loans and obligations under Letters of Credit to the extent otherwise included therein, (iii) the current portion of interest and (iv) the current portion of current and deferred income taxes; provided that, for purposes of calculating Excess Cash Flow, increases or decreases in working capital (A) arising from acquisitions or dispositions by Holdings, the Borrower and the Restricted Subsidiaries shall be measured from the date on which such acquisition or disposition occurred until the first anniversary of such acquisition or disposition with respect to the Person subject to such acquisition or disposition and (B) shall exclude (I) the impact of non-cash adjustments contemplated in the Excess Cash Flow calculation, (II) the impact of adjusting items in the definition of Consolidated Net Income and (III) any changes in current assets or current liabilities as a result of (x) any reclassification in accordance with GAAP of assets or liabilities, as applicable, between current and noncurrent, (y) fluctuations in currency exchange rates or (z) the effects of acquisition method accounting.
 
“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies, or the dismissal or appointment of the management, of a Person, whether through the ability to exercise voting power, by contract or otherwise.  “ Controlling ” and “ Controlled ” have meanings correlative thereto.
 
“ Converted Restricted Subsidiary ” has the meaning given such term in the definition of “Consolidated EBITDA.”
 
“ Converted Unrestricted Subsidiary ” has the meaning given such term in the definition of “Consolidated EBITDA.”
 
“ Credit Agreement Refinancing Debt Requirements ” means, with respect to any Indebtedness incurred under a Refinancing Amendment or under Permitted Refinancing Notes,
 
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in each case, issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, replace or refinance, in whole or part, any existing Term Loans (including any successive Credit Agreement Refinancing Indebtedness) (“ Refinanced Debt ”), that the following requirements are met:  (i) such extending, renewing or refinancing Indebtedness is in an original aggregate principal amount not greater than the aggregate principal amount of the Refinanced Debt except by an amount equal to unpaid accrued interest and premium thereon plus fees and expenses incurred in connection with such Indebtedness, (ii) such Indebtedness does not mature, and in the case of Permitted Refinancing Notes, does not require any scheduled repayment, mandatory redemption (except with respect to change in control, asset sale and casualty event redemption offers and acceleration rights after an event of default) or sinking fund obligations prior to the date that is 91 days after the maturity date of such Refinanced Debt, (iii) such Indebtedness has a Weighted Average Life to Maturity equal to or greater than, the Refinanced Debt, (iv) such Refinanced Debt shall be repaid, defeased or satisfied and discharged, and all accrued interest, fees and premiums (if any) in connection therewith shall be paid, on the date such Indebtedness is issued, incurred or obtained, (v) no Affiliated Lender shall hold any such Indebtedness constituting Other Term Loans if, after giving effect to the funding of such Other Term Loans, Affiliated Lenders would hold a greater percentage of Term Loans than is otherwise permitted by Section 9.04(f) , (vi) if secured, such Indebtedness shall only be secured by the Collateral securing the Refinanced Debt on a pari passu basis or junior basis to the First Lien Obligations subject to intercreditor arrangements to be reasonably acceptable to the Administrative Agent and the Borrower and, in the case of loans, subject to MFN Protection consistent with Section 2.20(a), (vii) such Indebtedness shall be pari passu or subordinated as to right of payment to the First Lien Obligations; provided that any Indebtedness so subordinated in right of payment shall be subordinated on the same terms, (viii) such Indebtedness will have such pricing and optional prepayment or redemption terms as may be agreed by the Borrower and the Lenders thereof and will have terms and conditions (other than maturity, pricing and optional prepayment or redemption terms) that are substantially identical to, or no more favorable (as reasonably determined by the Borrower) to the investors providing such Indebtedness than, the Refinanced Debt and will in any event not include any financial maintenance covenant that is not included in (or that is more restrictive than the financial covenants included in) this Agreement (except for covenants or other provisions (A) applicable exclusively to periods commencing after the Latest Maturity Date at the time such Indebtedness is issued, incurred or obtained or (B) or that are on then-current market terms applicable to such type of Indebtedness) and (ix) such Indebtedness will not be guaranteed by any subsidiaries of Holdings that did not guarantee such Refinanced Debt (other than any Subsidiaries acquired in connection with the incurrence of such Indebtedness; provided that any such Subsidiaries Guarantee the First Lien Obligations not constituting Refinanced Debt pursuant to (and to the extent required by) Section 5.11 ).
 
“ Credit Agreement Refinancing Indebtedness ” means Indebtedness satisfying the Credit Agreement Refinancing Debt Requirements incurred under Permitted Refinancing Notes or pursuant to a Refinancing Amendment, in each case, pursuant to Section 2.21 .
 
“ CTA ” means the total assets of Holdings and its Restricted Subsidiaries on a consolidated basis in accordance with GAAP on the most recent balance sheet of Holdings and its Restricted Subsidiaries.
 
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“ Cumulative Excess Cash Flow ” means the sum of Excess Cash Flow (but not less than zero in any period) for the fiscal year ending nearest to December 31, 2016 and Excess Cash Flow for each succeeding completed fiscal year.
 
“ Cure Amount ” has the meaning assigned to such term in Section 7.02(a) .
 
“ Cure Expiration Date ” has the meaning assigned to such term in Section 7.02(a) .
 
“ Cure Right ” has the meaning assigned to such term in Section 7.02(a) .
 
“ Currency Due ” shall have the meaning assigned to such term in Section 9.17 .
 
“ Debtor Relief Laws ” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief Laws of the United States, any state thereof, or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.
 
“ Default ” means any event or condition that constitutes an Event of Default or that upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.
 
“ Defaulting Lender ” means, subject to Section 2.22(d) , any Lender that (a) has failed to perform any of its funding obligations hereunder, including in respect of its Loans or participations in respect of Letters of Credit, within two Business Days of the date required to be funded by it hereunder (unless such failure relates to such Lender’s obligation to fund a Loan timely hereunder and is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with the applicable default, if any, shall be specifically identified in writing by such Lender) cannot be satisfied), (b) has notified the Borrower or the Administrative Agent that it does not intend to comply with its funding obligations or has made a public statement or provided any written notification to any Person to that effect with respect to its funding obligations hereunder (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with the applicable default, if any, shall be specifically identified in such writing or public statement) cannot be satisfied) or under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after request by the Administrative Agent (whether acting on its own behalf or at the reasonable request of the Borrower (it being understood that the Administrative Agent shall comply with any such reasonable request)), to confirm in a manner satisfactory to the Administrative Agent and the Borrower that it will comply with its funding obligations ( provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any Debtor Relief Law, (ii) had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or a custodian appointed for it, other than via an Undisclosed Administration, or (iii) taken any action in furtherance of, or
 
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indicated its consent to, approval of or acquiescence in any such proceeding or appointment; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States of America or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any agreements made by such Lender.  Any such determination by the Administrative Agent as contemplated by preceding clauses (a) through (d) shall be conclusive and binding on all Lenders, and the Administrative Agent shall have no liability to any Person with respect to such determination absent bad faith, gross negligence or willful misconduct, in each case as determined by a court of competent jurisdiction in a final and non-appealable judgment.
 
“ Defaulting Lender Fronting Exposure ” means, at any time there is a Defaulting Lender, with respect to any Issuing Bank or Swingline Lender, such Defaulting Lender’s Applicable Percentage of the outstanding Letter of Credit obligations or Swingline Loans other than Letter of Credit obligations or Swingline Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or cash collateralized in accordance with the terms hereof.
 
“ Designated Non-Cash Consideration ” means the fair market value of non-cash consideration received by the Borrower or a Restricted Subsidiary in connection with a Disposition pursuant to Section 6.05(j)  that is designated as Designated Non-Cash Consideration pursuant to a certificate of a Responsible Officer of Holdings, setting forth the basis of such valuation (which amount will be reduced by the fair market value of the portion of the non-cash consideration converted to cash within 180 days following the consummation of the applicable Disposition).
 
“ Dinker Note ” means the Subordinated Promissory Note, dated as of September 2, 2014, by Borrower and Holdings, as obligors, in favor of William S. Dinker, as sellers’ representative.
 
“ Dinker Subordination Agreement ” means that certain Subordination Agreement, dated as of the Closing Date, among the Subordinated Creditors (as defined therein) and the Administrative Agent.
 
“ Discount Prepayment Accepting Lender ” has the meaning assigned to such term in Section 2.11(a)(ii)(B)(1) .
 
“ Discount Range ” has the meaning assigned to such term in Section 2.11(a)(ii)(C) .
 
“ Discount Range Prepayment Amount ” has the meaning assigned to such term in Section 211(a)(ii)(C) .
 
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“ Discount Range Prepayment Notice ” means a written notice of the Borrower Solicitation of Discount Range Prepayment Offers made pursuant to Section 2.11(a)(ii)(C)  substantially in the form of Exhibit Q .
 
“ Discount Range Prepayment Offer ” means the irrevocable written offer by a Term Lender, substantially in the form of Exhibit R , submitted in response to an invitation to submit offers following the Auction Agent’s receipt of a Discount Range Prepayment Notice.
 
“ Discount Range Prepayment Response Date ” has the meaning assigned to such term in Section 2.11(a)(ii)(C) .
 
“ Discount Range Proration ” has the meaning assigned to such term in Section 2.11(a)(ii)(C)(2) .
 
“ Discounted Prepayment Closing Date ” means in the case of the Borrower Offer of Specified Discount Prepayment or Borrower Solicitation of Discount Range Prepayment Offer, five (5) Business Days following the receipt by each relevant Term Lender of notice from the Auction Agent in accordance with Section 2.11(a)(ii)(B) , Section 2.11(a)(ii)(C)  or Section 2.11(a)(ii)(D) , as applicable unless a shorter period is agreed to between the Borrower and the Auction Agent.
 
“ Discounted Prepayment Determination Date ” has the meaning assigned to such term in Section 2.11(a)(ii)(D)(2) .
 
“ Discounted Term Loan Prepayment ” has the meaning assigned to such term in Section 2.11(a)(ii)(A) .
 
“ Disposed EBITDA ” means, with respect to any Sold Entity or Business or Converted Unrestricted Subsidiary for the period through (but not after) the date of such disposition or conversion, the amount for such period of Consolidated EBITDA of such Sold Entity or Business or Converted Unrestricted Subsidiary (determined as if references to Holdings, the Borrower and the Restricted Subsidiaries in the definition of the term “Consolidated EBITDA” (and in the component financial definitions used therein) were references to such Sold Entity or Business and its subsidiaries or to Converted Unrestricted Subsidiary and its subsidiaries), all as determined on a consolidated basis for such Sold Entity or Business or Converted Unrestricted Subsidiary.
 
“ Disposition ” has the meaning assigned to such term in Section 6.05 .
 
“ Disqualified Equity Interest ” means, with respect to any Person, any Equity Interest in such Person that by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable, either mandatorily or at the option of the holder thereof), or upon the happening of any event or condition:
 
(a)                                  requires the payment of any dividend (other than dividends payable solely in Equity Investments of such Person that do not constitute Disqualified Equity Interests);
 
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(b)                                  matures or is mandatorily redeemable (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interests and cash in lieu of fractional shares of such Equity Interests), whether pursuant to a sinking fund obligation or otherwise;
 
(c)                                   is convertible or exchangeable, either mandatorily or at the option of the holder thereof, for Indebtedness or Equity Interests (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interests and cash in lieu of fractional shares of such Equity Interests); or
 
(d)                                  is redeemable (other than solely for Equity Interests in such Person that do not constitute Disqualified Equity Interests and cash in lieu of fractional shares of such Equity Interests) or is required to be repurchased by such Person or any of its Affiliates, in whole or in part, at the option of the holder thereof;
 
in each case, on or prior to the date 91 days after the Latest Maturity Date; provided , however , that (i) an Equity Interest in any Person that would not constitute a Disqualified Equity Interest but for terms thereof giving holders thereof the right to require such Person to redeem or purchase such Equity Interest upon the occurrence of an “asset sale” or a “change of control” shall not constitute a Disqualified Equity Interest if any such requirement becomes operative only after repayment in full of all the Loans and all other First Lien Obligations that are accrued and payable, the cancellation or expiration of all Letters of Credit and the termination of the Commitments and (ii) if an Equity Interest in any Person is issued pursuant to any plan for the benefit of employees of Holdings (or any direct or indirect parent thereof) or any of its Subsidiaries or by any such plan to such employees, such Equity Interest shall not constitute a Disqualified Equity Interest solely because it may be required to be repurchased by Holdings (or any direct or indirect parent company thereof) or any of its Subsidiaries in order to satisfy applicable statutory or regulatory obligations of such Person.
 
“ Disqualified Lenders ” shall mean (i) those institutions (including those institutions identified as Competitors) set forth on the list provided by the Borrower to the Joint Lead Arrangers prior to the Closing Date and posted to all Lenders, (ii) any other Person identified in writing by the Borrower to the Administrative Agent and the Joint Lead Arrangers as a Competitor from time to time after the date hereof (other than upon and during the continuance of an Event of Default), and posted to all Lenders, and (iii) any Affiliate of any such Person to the extent that such Affiliate is at such time reasonably identifiable by name to be an Affiliate of such Person, which designations, in the case of clauses (ii)  and (iii)  above, shall not apply retroactively to disqualify any Persons that have previously acquired an assignment or participation interest in the Loans (it being agreed by each of the parties hereto that the Administrative Agent and the Joint Lead Arrangers shall be under no duty to monitor or otherwise make any determinations with respect to the foregoing and neither the Administrative Agent nor the Joint Lead Arrangers shall be liable for any losses, damages, penalties, claims, demands, actions, judgments, suits, costs, expenses and disbursements of any kind or nature whatsoever incurred or suffered by any Person (including the Loan Parties) in connection with any compliance or non-compliance with the foregoing).
 
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“ Domestic Subsidiary ” means any Subsidiary that is incorporated, organized or otherwise formed under the laws of the United States, any state thereof or the District of Columbia.
 
“ ECF Percentage ” means, with respect to the prepayment required by Section 2.11(d)  with respect to any fiscal year of Holdings, if the Total Net Leverage Ratio (prior to giving effect to the applicable prepayment pursuant to Section 2.11(d) ) as of the end of such fiscal year is (a) greater than 3.00 to 1.00, 75% of Excess Cash Flow for such fiscal year, (b) less than or equal to 3.00 to 1.00 but greater than 2.50 to 1.00, 50% of Excess Cash Flow for such fiscal year, (c) less than or equal to 2.50 to 1.00 but greater than 2.00 to 1.00, 25% of Excess Cash Flow for such fiscal year, and (d) less than or equal to 2.00 to 1.00, 0% of Excess Cash Flow for such fiscal year.
 
“ Economic Sanctions ” means any and all laws, judgments, orders, executive orders, decrees, ordinances, rules, regulations, statutes, case law or treaties applicable to the Loan Parties and their Subsidiaries from time to time concerning or relating to economic sanctions or terrorism financing, including any sanctions administered or enforced by the U.S. government (including, without limitation, the U.S. Department of State and OFAC), the Department of Foreign Affairs, Trade and Development Canada, the United Nations Security Council, and any other relevant sanctions authority.
 
“ Eligible Assignee ” means (a) a Lender, (b) an Affiliate of a Lender, (c) an Approved Fund and (d) any other Person, other than, in each case, a natural person or a Disqualified Lender.
 
“ Environmental Laws ” means the applicable common law and treaties, rules, regulations, codes, ordinances, judgments, orders, decrees and other applicable Requirements of Law, and all applicable injunctions or binding agreements issued, promulgated or entered into by or with any Governmental Authority, in each instance relating to the protection of the environment, to preservation or reclamation of natural resources, to Release or threatened Release of any Hazardous Material or, to the extent relating to exposure to Hazardous Materials, to human health or safety matters.
 
“ Environmental Liability ” means any liability, obligation, loss, claim, action, order or cost, contingent or otherwise (including any liability for damages, costs of medical monitoring, costs of environmental remediation or restoration, administrative oversight costs, consultants’ fees, fines, penalties and indemnities), of Holdings, the Borrower or any Subsidiary resulting from or based upon (a) any actual or alleged violation of any Environmental Law or permit, license or approval issued thereunder, (b) the generation, use, handling, transportation, storage or treatment of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.
 
“ Equity Interests ” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person.
 
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“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.
 
“ ERISA Affiliate ” means any trade or business (whether or not incorporated) that, together with Holdings, is treated as a single employer under Section 414(b) or 414(c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414(m) or (o) of the Code.
 
“ ERISA Event ” means (a) any “reportable event,” as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30 day notice period is waived pursuant to applicable regulations), (b) any failure by any Plan to satisfy the minimum funding standard (within the meaning of Section 412 of the Code or Section 302 of ERISA) applicable to such Plan, in each case whether or not waived, or the failure to make by its due date a required installment under Section 430(j) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan, (d) a determination that any Plan is, or is reasonably expected to be, in “at-risk” status (as defined in Section 303(i)(4) of ERISA or Section 430(i)(4) of the Code), (e) the incurrence by Holdings, the Borrower, any Restricted Subsidiary or any ERISA Affiliate of any liability under Title IV of ERISA with respect to the termination of any Plan, (f) the receipt by Holdings, the Borrower, any Restricted Subsidiary or any ERISA Affiliate from the PBGC of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, (g) the cessation of operations at a facility of Holdings, the Borrower, any Restricted Subsidiary or any ERISA Affiliate in the circumstances described in Section 4062(e) of ERISA, (h) the incurrence by Holdings, the Borrower any Restricted Subsidiary or any ERISA Affiliate of any liability with respect to its withdrawal or partial withdrawal from any Plan or Multiemployer Plan, (i) the receipt by Holdings, the Borrower, any Restricted Subsidiary or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability on it or a determination that a Multiemployer Plan is, or is reasonably expected to be, insolvent or in “reorganization”, within the meaning of Title IV of ERISA or in “endangered” or “critical” status, within the meaning of Section 305 of ERISA or (j) any Foreign Benefit Event.
 
“ Escrow Account ” has the meaning assigned to such term in Section 5.10(b) .
 
“ Eurodollar ” when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted Eurodollar Rate.
 
“ Eurodollar Rate ” means, for any Interest Period as to any Borrowing, (i) the rate per annum determined by the Administrative Agent to be the offered rate which appears on the page of the Reuters Screen which displays the London interbank offered rate administered by ICE Benchmark Administration Limited (such page currently being the LIBOR01 page) for deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period in Dollars, determined as of approximately 11:00 a.m. (London, England time), two Business Days prior to the commencement of such Interest Period, (ii) in the event the rate referenced in the preceding clause (i) does not appear on such page or service or if such page or
 
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service shall cease to be available, the rate determined by the Administrative Agent to be the offered rate on such other page or other service which displays the Eurodollar Rate for deposits (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period in Dollars, determined as of approximately 11:00 a.m. (London, England time) two Business Days prior to the commencement of such Interest Period, or (iii) in the event the rates referenced in the preceding clauses (i)  and (ii)  are not available, the rate per annum determined by the Administrative Agent to be the average offered quotation rate by major banks in the London interbank market to the Administrative Agent for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the Borrowing for which the Eurodollar Rate is then being determined with maturities comparable to such Interest Period as of approximately 11:00 a.m. (London, England time) two Business Days prior to the commencement of such Interest Period; provided that if Eurodollar Rates are quoted under either of the preceding clauses (i) or (ii), but there is no such quotation for the Interest Period elected, the Eurodollar Rate shall be equal to the Interpolated Rate.  Notwithstanding the foregoing, with respect to the Term Loans, the Eurodollar Rate with respect to any applicable Interest Period will be deemed to be 1.00% per annum if the Eurodollar Rate for such Interest Period determined pursuant to this definition would otherwise be less than 1.00% per annum .
 
“ Eurodollar Rate Borrowing ” means a Borrowing consisting of Eurodollar Rate Loans.
 
“ Event of Default ” has the meaning assigned to such term in Section 7.01 .
 
“ Evidence of Flood Insurance ” has the meaning assigned to such term in the definition of “Collateral and Guarantee Requirement.”
 
“ Excess Cash Flow ” means, for any period, an amount expressed in U.S. Dollars equal to the excess of:
 
(a)                                  the sum, without duplication, of:
 
(i)                                      Consolidated Net Income for such period,
 
(ii)                                   an amount equal to the amount of all Non-Cash Charges to the extent deducted in arriving at such Consolidated Net Income,
 
(iii)                                decreases in Consolidated Working Capital for such period, and
 
(iv)                               an amount equal to the aggregate net non-cash loss on dispositions by Holdings, the Borrower and the Restricted Subsidiaries during such period (other than dispositions in the ordinary course of business) to the extent deducted in arriving at such Consolidated Net Income; less :
 
(b)                                  the sum, without duplication, of:
 
(i)                                      an amount equal to the amount of all non-cash credits included in arriving at such Consolidated Net Income and cash charges included in clauses (a) through (n) of
 
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the definition of Consolidated Net Income (other than cash charges in respect of Transaction Costs paid on or about the Closing Date to the extent financed with the proceeds of Indebtedness incurred on the Closing Date),
 
(ii)                                   without duplication of amounts deducted pursuant to clause (xii) below in prior fiscal years, the amount of capital expenditures made in cash or accrued during such period, except to the extent that such capital expenditures were financed with the proceeds of Indebtedness of Holdings, the Borrower or the Restricted Subsidiaries,
 
(iii)                                the aggregate amount of all principal payments of Indebtedness (other than the payment prior to its stated maturity of any Subordinated Indebtedness of Holdings, the Borrower and the Restricted Subsidiaries) of the Borrower and the Restricted Subsidiaries (including (A) the principal component of payments in respect of Capitalized Leases and (B) the amount of any mandatory prepayment of Term Loans pursuant to Section 2.11(c)  with the Net Proceeds from an event of the type specified in clause (a) of the definition of “Prepayment Event” to the extent required due to a disposition that resulted in an increase to Consolidated Net Income and not in excess of the amount of such increase but excluding (X) all other prepayments of Term Loans and (Y) all prepayments of Revolving Loans) made during such period (other than in respect of any revolving credit facility except to the extent there is an equivalent permanent reduction in commitments thereunder), except to the extent financed with the proceeds of other Indebtedness of Holdings, the Borrower or the Restricted Subsidiaries,
 
(iv)                               an amount equal to the aggregate net non-cash gain on dispositions by Holdings, the Borrower and the Restricted Subsidiaries during such period (other than dispositions in the ordinary course of business) to the extent included in arriving at such Consolidated Net Income,
 
(v)                                  increases in Consolidated Working Capital for such period,
 
(vi)                               cash payments by the Borrower and the Restricted Subsidiaries during such period in respect of long-term liabilities of the Borrower and the Restricted Subsidiaries other than Indebtedness,
 
(vii)                            without duplication of amounts deducted pursuant to clause (xii) below in prior fiscal years, the amount of Investments and acquisitions made by the Borrower and the Restricted Subsidiaries during such period pursuant to Section 6.04 (other than (1)  Section 6.04(a) , (2)  Section 6.04(t) , (3)  Section 6.04(c)(i)  and (ii) , (4)  Section 6.04(c)(iii)(A) , (5)  Section 6.04(c)(iii)(B)  and (C) , and (6)  Section 6.04(c)(iv)  and (v) , in the case of clauses (2) , (5)  and (6) , to the extent made with Cumulative Excess Cash Flow) to the extent that such Investments and acquisitions were financed with internally generated cash flow of the Borrower and the Restricted Subsidiaries,
 
(viii)                         the amount of dividends and other restricted payments paid during such period pursuant to Section 6.07 (other than Section 6.07(a)(vi)  and Section 6.07(b)(iv)  (in each case to the extent made with Cumulative Excess Cash Flow) and Section 6.07(a)(i)  (to the extent paid to the Borrower or any of the Restricted Subsidiaries)) to the extent
 
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such restricted payments were financed with internally generated cash flow of the Borrower and the Restricted Subsidiaries,
 
(ix)                               the aggregate amount of expenditures actually made by the Borrower and the Restricted Subsidiaries in cash during such period (including expenditures for the payment of financing fees) to the extent that such expenditures are not expensed during such period,
 
(x)                                  cash payments by the Borrower and the Restricted Subsidiaries during such period in respect of Non-Cash Charges included in the calculation of Consolidated Net Income in any prior period,
 
(xi)                               the aggregate amount of any premium, make-whole or penalty payments actually paid in cash by the Borrower and the Restricted Subsidiaries during such period that are required to be made in connection with any prepayment of Indebtedness,
 
(xii)                            without duplication of amounts deducted from Excess Cash Flow in prior periods, the aggregate consideration required to be paid in cash by the Borrower or any of the Restricted Subsidiaries pursuant to binding contracts (the “ Contract Consideration ”) entered into prior to or during such period relating to Permitted Acquisitions, other Investments or capital expenditures to be consummated or made during the period of four consecutive fiscal quarters of the Borrower following the end of such period; provided that to the extent the aggregate amount of internally generated cash actually utilized to finance such Permitted Acquisitions, Investments or capital expenditures during such period of four consecutive fiscal quarters is less than the Contract Consideration, the amount of such shortfall shall be added to the calculation of Excess Cash Flow at the end of such period of four consecutive fiscal quarters, and
 
(xiii)                         the amount of cash taxes paid in such period to the extent they exceed the amount of tax expense deducted in determining Consolidated Net Income for such period.
 
“ Exchange Act ” means the United States Securities Exchange Act of 1934, as amended from time to time.
 
“ Exchange Rate ” means, on any day, for purposes of determining the U.S. Dollar Equivalent of either Canadian Dollars or British Pounds Sterling, the rate at which the applicable currency may be exchanged into U.S. Dollars as set forth at approximately 11:00 a.m., Toronto time or London time, as applicable, on such date on the applicable Reuters WRLD Page for Canadian Dollars or British Pounds Sterling, as the case may be.  In the event that such rate does not appear on any Reuters WRLD Page, the Exchange Rate shall be determined by reference to such other publicly available services for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrower, or, at the discretion of the Administrative Agent, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of Canadian Dollars or British Pounds Sterling, as the case may be, are then being conducted, at or about 10:00 a.m., Toronto time or London time, as applicable, on such date for the purchase of
 
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U.S. Dollars for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent may use any reasonable method it deems appropriate to determine such rate, and such determination shall be conclusive absent manifest error.
 
“ Excluded Assets ” means (a) any fee-owned real property that is not Material Real Property and all leasehold (including ground lease) interests in real property, (b) motor vehicles, serial numbered goods and other assets, in each case, subject to certificates of title or ownership or serial number filings except to the extent that the filing of UCC financing statements (without serial numbers or vehicle identification numbers) is sufficient for perfection of security interests in such motor vehicles or other assets, subject to all other clauses of this definition, (c) Equity Interests in any Person (other than any Wholly Owned Restricted Subsidiaries) to the extent the pledge thereof to the Collateral Agent is not permitted by the terms of such Person’s organizational or joint venture documents (but only to the extent any of the foregoing is not rendered ineffective by, or is otherwise unenforceable under the UCC or any Requirement of Law of any jurisdiction), (d) in the case of Collateral securing the Secured Obligations of the Borrower (or the Secured Obligations of any other Loan Party with respect to its Guarantee of the Secured Obligations of the Borrower), voting Equity Interests constituting an amount greater than 65% of the total voting Equity Interests of any Excluded Tax Subsidiary that are held directly by Loan Parties, (e) in the case of Collateral securing the Secured Obligations of the Borrower (or the Secured Obligations of any other Loan Party with respect to its Guarantee of the Secured Obligations of the Borrower), Equity Interests or other assets that are held directly by an Excluded Tax Subsidiary, (f) any lease, license or other agreement with any Person if, to the extent and for so long as, the grant of a Lien thereon or the collateral assignment thereof to secure the Secured Obligations constitutes a breach of or a default under, or creates a right of termination in favor of any party (other than any Loan Party) to, such lease, license or other agreement (but only to the extent any of the foregoing is not rendered ineffective by, or is otherwise unenforceable under, the UCC or any Requirements of Law), (g) any asset subject to a Lien of the type permitted by Section 6.02(iv)  or a Lien permitted by Section 6.02(xi) , in each case if, to the extent and for so long as the grant of a Lien thereon or the assignment thereof to secure any Secured Obligations constitutes a breach of or a default under, or creates a right of termination in favor of any party (other than any Loan Party) to, any agreement pursuant to which such Lien has been created (but only to the extent any of the foregoing is not rendered ineffective by, or is otherwise unenforceable under, the UCC or any Requirements of Law), (h) any intent-to-use trademark applications filed in the United States Patent and Trademark Office, pursuant to Section 1(b) of the Lanham Act, 15 U.S.C. Section 1051, prior to the accepted filing of a “Statement of Use” and issuance of a “Certificate of Registration” pursuant to Section 1(d) of the Lanham Act or an accepted filing of an “Amendment to Allege Use” whereby such intent-to-use trademark application is converted to a “use in commerce” application pursuant to Section 1(c) of the Lanham Act, (i) any asset if, to the extent and for so long as the grant of a Lien thereon to secure any Secured Obligations is prohibited by any Requirements of Law (other than to the extent that any such prohibition would be rendered ineffective pursuant to the UCC or any other applicable Requirements of Law of any jurisdiction), (j) letter of credit rights (other than “Supporting Obligations” as defined in the UCC), (k) commercial tort claims (as defined in the UCC) having an aggregate amount of damages or other recoveries sought of less than $5,000,000; (l) any asset with respect to which the Borrower has reasonably determined that the grant of a Lien thereon to secure the First Lien
 
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Obligations would result in material adverse tax consequences and (m) other assets to the extent the difficulty, time and/or expense of obtaining a security interest therein is excessive in relation to the benefit to the Secured Parties afforded thereby as reasonably agreed by the Borrower and the Administrative Agent in writing.
 
“ Excluded Immaterial Subsidiary ” means (a) any Unrestricted Subsidiary, (b) any Immaterial Subsidiary, (c) any not-for-profit Subsidiary, (d) any Subsidiary that requires any governmental (including regulatory) consent, approval, license or authorization to provide a Guarantee of the Secured Obligations, which has not been obtained after using commercially reasonable efforts to seek such consent, approval, license or authorization and (e) any Restricted Subsidiary acquired pursuant to a Permitted Acquisition (as defined below) to the extent that (x) such Subsidiary is an obligor in respect of Indebtedness permitted under Section 6.01(a)(vii)  secured by Liens permitted under Section 6.02(xi)  and (y) the contractual terms of such Indebtedness prohibit such Subsidiary from becoming a Subsidiary Loan Party; provided that no Excluded Immaterial Subsidiaries shall exist on the Closing Date.
 
“ Excluded Information ” means information (including material nonpublic information) regarding the Loans of the applicable Class or the Loan Parties and their respective securities hereunder that is not known to a Lender participating in a Discounted Term Loan Prepayment, in an assignment to or by an Affiliated Lender or in an assignment to any Loan Party or any of its subsidiaries, that may be material to a decision by such Lender to participate in such Discounted Term Loan Prepayment, assignment to such Affiliated Lender or such assignment to any Loan Party or any of its subsidiaries, as applicable.
 
“ Excluded Swap Obligations ” means, with respect to any Loan Party, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Loan Party of, or the grant by such Loan Party of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal or unlawful under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Party’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Loan Party or the grant of such security interest would otherwise have become effective with respect to such related Swap Obligation but for such Loan Party’s failure to constitute an “eligible contract participant” at such time.
 
“ Excluded Tax Subsidiary ” means (a) any Foreign Subsidiary, (b) any Domestic Subsidiary that has no material assets other than equity and debt interests of one or more direct or indirect Foreign Subsidiaries and (c) any Domestic Subsidiary that is a subsidiary of a Foreign Subsidiary.
 
“ Excluded Taxes ” means, with respect to any Recipient, (a) Taxes imposed on (or measured by) its net income (however denominated) and franchise Taxes imposed on it (in lieu of net income Taxes) by (i) the jurisdiction under the laws of which such Recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located, or (ii) any other jurisdiction that are Other Connection Taxes, (b) any branch profits tax imposed under Section 884(a) of the Code, or any similar Tax, imposed by any jurisdiction described in clause (a) above, (c) any U.S. federal withholding Tax pursuant to
 
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FATCA, (d) any withholding Tax that is attributable to a Lender’s failure to comply with Section 2.17(f)  and (e) except in the case of an assignee pursuant to a request by the Borrower under Section 2.19 hereto, any U.S. federal withholding Taxes imposed due to a Requirement of Law in effect at the time a Lender becomes a party hereto (or designates a new lending office), except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts with respect to such withholding Tax under Section 2.17(a) .
 
“ Existing Class ” has the meaning assigned to such term in Section 2.21(c)(i) .
 
“ Existing Credit Agreement ” means that certain Second Amended and Restated Credit Agreement, dated as of September 2, 2014, by and among CPI Acquisition, Inc., CPI Holding Co., CPI Card Group - Colorado, Inc., CPI Card Group - Minnesota, Inc., CPI Card Group - Indiana, Inc. and EFT Source, Inc., as borrowers, Holdings and CPI Card Group - Nevada, Inc., as obligors, the Bank of Nova Scotia, as administrative agent, and the lenders party thereto.
 
“ Existing Letter of Credit ” means each letter of credit previously issued for the account of the Borrower that (a) is outstanding on the Closing Date and (b) is listed on Schedule 1.01(a) .
 
“ Existing Revolving Commitments ” has the meaning assigned to such term in Section 2.21(c)(iii)(B) .
 
“ Existing Term Loans ” has the meaning assigned to such term in Section 2.21(c)(iii)(B) .
 
“ Extended Maturity Date ” has the meaning assigned to such term in Section 2.21(c)(i) .
 
“ Extended Revolving Commitments ” has the meaning assigned to such term in Section 2.21(c)(iii)(B) .
 
“ Extended Revolving Loans ” means one or more Classes of Revolving Loans that are made pursuant to Extended Revolving Commitments.
 
“ Extended Term Loans ” has the meaning assigned to such term in Section 2.21(c)(iii)(B) .
 
“ Extension ” has the meaning assigned to such term in Section 2.21(c)(i) .
 
“ Extension Amendment ” has the meaning assigned to such term in Section 2.21(c)(vi) .
 
“ Extension Offer ” has the meaning assigned to such term in Section 2.21(c)(i) .
 
“ Facilities ” means the Term Facility and the Revolving Facility.
 
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“ FATCA ” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreements entered into pursuant to Section 1471(b)(1) of the Code and any Law implemented to give effect to any intergovernmental agreements entered with respect thereto.
 
“ FCPA ” means the United States Foreign Corrupt Practices Act of 1977, as amended from time to time, and the rules and regulations thereunder.
 
“ Federal Funds Effective Rate ” means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.
 
“ Fee Letter ” any fee letter entered into by any Loan Party and any of the Joint Lead Arrangers or Agents in connection with this Agreement.
 
“ Financial Officer ” means the chief financial officer, principal accounting officer, treasurer or corporate controller of the Borrower.
 
“ Financial Performance Covenant ” means the covenant set forth in Section 6.11 .
 
“ Financing Transactions ” means the execution, delivery and performance by each Loan Party of the Loan Documents to which it is to be a party, the borrowing of Loans, the use of the proceeds thereof and the issuance of Letters of Credit hereunder.
 
“ First Lien Net Leverage Ratio ” means, as of any date of determination, with respect to Holdings and its Restricted Subsidiaries on a consolidated basis, the ratio, on a Pro Forma Basis, of (a) Consolidated First Lien Secured Indebtedness as of such date to(b) Consolidated EBITDA for the most recently completed Test Period.
 
“ First Lien Obligations ” means (a) the due and punctual payment by the Borrower of (i) the principal of and interest at the applicable rate or rates provided herein (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding (or that would accrue but for the existence of such proceeding), regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, (ii) each payment required to be made by the Borrower hereunder in respect of any Letter of Credit (including the LC Reimbursement Obligations), when and as due, including payments in respect of reimbursement of disbursements, interest thereon and obligations to provide cash collateral, and (iii) all other monetary obligations of the Borrower under or pursuant hereto and each of the other Loan Documents, including obligations to pay fees, expense reimbursement obligations and indemnification obligations, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy,
 
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insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), (b) the due and punctual payment and performance of all other obligations of the Borrower under or pursuant to this Agreement and each of the other Loan Documents and (c) the due and punctual payment and performance of all the obligations of each other Loan Party under or pursuant to this Agreement and each of the other Loan Documents (including monetary obligations accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding (or that would accrue but for the existence of such proceeding), regardless of whether allowed or allowable in such proceeding).
 
“ Fixed Charge Coverage Ratio ” means, as of any date of determination the ratio of (i) Consolidated EBITDA for the period of four consecutive fiscal quarters of the Borrower most recently ended on or prior to such date to (ii) Consolidated Interest Expense and Charges for such four-fiscal quarter period.
 
“ Flood Determination Form ” has the meaning assigned to such term in the definition of “Collateral and Guarantee Requirement.”
 
“ Flood Laws ” means the National Flood Insurance Reform Act of 1994 and related legislation (including the regulations of the Board of Governors of the Federal Reserve System).
 
“ Foreign Benefit Event ” means with respect to any Foreign Plan, (a) the existence of unfunded liabilities of Holdings, the Borrower or any Restricted Subsidiary in excess of the amount permitted under any applicable law, or in excess of the amount that would be permitted absent a waiver from a Governmental Authority, (b) the failure of the Borrower to make its required contributions or payments, under any applicable law, on or before the due date for such contributions or payments, (c) the receipt of a notice from a Governmental Authority relating to the intention to terminate any such Foreign Plan or to appoint a trustee or similar official to administer any Foreign Plan, or alleging the insolvency of any such Foreign Plan, (d) the incurrence of any liability by Holdings, the Borrower or any Restricted Subsidiary under applicable law on account of the complete or partial termination of such Foreign Plan or the complete or partial withdrawal of any participating employer therein, or (e) the occurrence of any transaction that is prohibited under any applicable law and that could reasonably be expected to result in the incurrence of any liability by Holdings, the Borrower or any Restricted Subsidiary, or the imposition on any of Holdings, the Borrower or any Restricted Subsidiary of any fine, excise tax or penalty resulting from any noncompliance with any applicable law.
 
“ Foreign Lender ” means a Lender that is not a “United States person” as defined in Section 7701(a)(30) of the Code.
 
“ Foreign Plan ” shall mean any defined benefit plan (as defined in Section 3(35) of ERISA, but whether or not subject to ERISA) maintained, contributed to, or required to be contributed to, by Holdings, the Borrower or any Restricted Subsidiary with respect to its employees employed outside the United States, other than any statutorily created plan or any such plan sponsored exclusively by any Governmental Authority.
 
“ Foreign Subsidiary ” means any Subsidiary that is not a Domestic Subsidiary.
 
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“ Funded Debt ” means the U.S. Dollar Equivalent of the sum of all Indebtedness of Holdings, the Borrower and the Restricted Subsidiaries for borrowed money that matures more than one year from the date of its creation or matures within one year from such date that is renewable or extendable, 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 Indebtedness in respect of the Loans.
 
“ GAAP ” means generally accepted accounting principles in the United States of America, as in effect from time to time but subject to Section 1.04 .
 
“ Governmental Approvals ” means all authorizations, consents, approvals, permits, licenses and exemptions of, registrations and filings with, and reports to, Governmental Authorities.
 
“ Governmental Authority ” means the government of the United States of America, any other nation or any political subdivision thereof, whether federal, state, provincial, territorial, 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).
 
“ Guarantee ” of or by any Person (the “ Guarantor ”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness; provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business or customary and reasonable indemnity obligations in effect on the Closing Date or entered into in connection with any acquisition or disposition of assets permitted under this Agreement (other than such obligations with respect to Indebtedness).  The amount of any Guarantee shall be deemed to be an amount equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined in good faith by a Financial Officer.  The term “Guarantee” as a verb has a corresponding meaning.  Notwithstanding anything herein to the contrary, no Excluded Tax Subsidiary shall be a Guarantor.
 
“ Guarantee Agreement ” means the guarantee agreement executed by each Loan Party, dated as of the Closing Date, in substantially the form of Exhibit B , as the same may be amended, restated, supplemented or otherwise modified from time to time.
 
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“ Hazardous Materials ” means petroleum or petroleum by-products or distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances, materials, constituents, chemicals, compounds or wastes of any nature regulated as hazardous or toxic, or any other term of similar import, pursuant to any Environmental Law.
 
“ Hedging Agreement ” means an agreement relating to any swap, cap, floor, collar, option, forward, cross right or obligation, or combination thereof or similar transaction, with respect to interest rate, foreign exchange, currency or commodity.
 
“ Holdings ” has the meaning assigned to such term in the preamble.
 
“ Identified Participating Lenders ” has the meaning assigned to such term in Section 2.11(a)(ii)(C)(2) .
 
“ Identified Qualifying Lenders ” has the meaning specified in Section 2.11(a)(ii)(D)(2) .
 
“ Immaterial Subsidiary ” means on any date, any Subsidiary that (i) has less than 2.5% of consolidated assets and 2.5% of annual consolidated revenues of Holdings, the Borrower and its Subsidiaries as reflected on the most recent financial statements delivered pursuant to Section 5.01 prior to such date and (ii) has been designated as such by the Borrower in a written notice delivered to the Administrative Agent (other than any such Subsidiary as to which the Borrower has revoked such designation by written notice to the Administrative Agent); provided , that at no time shall all Immaterial Subsidiaries so designated by the Borrower have in the aggregate consolidated assets or annual consolidated revenues (as reflected on the most recent financial statements delivered pursuant to Section 5.01 prior to such time) in excess of 5.0% of consolidated assets or annual consolidated revenues, respectively, of Holdings and its Subsidiaries.
 
“ Incremental Revolving Facility Amendment ” has the meaning assigned to such term in Section 2.20(b)(ii) .
 
“ Incremental Revolving Facility Closing Date ” has the meaning assigned to such term in Section 2.20(b)(ii) .
 
“ Incremental Term Facility ” has the meaning assigned to such term in Section 2.20(a) .
 
“ Incremental Term Facility Amendment ” has the meaning assigned to such term in Section 2.20(b)(iii) .
 
“ Incremental Term Facility Closing Date ” has the meaning assigned to such term in Section 2.20(b)(iii) .
 
“ Indebtedness ” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all
 
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obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business and any earn-out obligation until such obligation becomes a liability on the balance sheet of such Person in accordance with GAAP), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances and (j) all obligations of such Person in respect of Disqualified Equity Interests; provided that the term “Indebtedness” shall not include (x) deferred or prepaid revenue, (y) purchase price holdbacks in respect of a portion of the purchase price of an asset to satisfy warranty or other unperformed obligations of the seller or (z) for the avoidance of doubt, any Qualified Equity Interests.  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 provide that such Person is not liable therefor.  The amount of Indebtedness of any Person for purposes of clause (e) above shall (unless such Indebtedness has been assumed by such Person) be deemed to be equal to the lesser of (A) the aggregate unpaid amount of such Indebtedness and (B) the fair market value of the property encumbered thereby as determined by such Person in good faith.
 
“ Indemnified Taxes ” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in (a), Other Taxes.
 
“ Indemnitee ” has the meaning assigned to such term in Section 9.03(b) .
 
“ Information ” has the meaning assigned to such term in Section 9.12(a) .
 
“ Information Memorandum ” means the Confidential Information Memorandum dated July 2015, relating to the Loan Parties and the Transactions.
 
“ Intellectual Property ” has the meaning assigned to such term in the Collateral Agreement.
 
“ Interest Election Request ” means a request by the Borrower to convert or continue a Borrowing of Revolving Loans or Term Loans in accordance with Section 2.07 , which shall be, in the case of any such written request, in the form of Exhibit J or any other form approved by the Administrative Agent.
 
“ Interest Payment Date ” means (a) with respect to any ABR Loan (other than a Swingline Loan), the last day of each March, June, September and December, (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more
 
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than three months’ duration, such day or days prior to the last day of such Interest Period as shall occur at intervals of three months’ duration after the first day of such Interest Period, and (c) with respect to any Swingline Loan, the day that such Loan is required to be repaid.
 
“ Interest Period ” means, with respect to any Eurodollar Borrowing, the period commencing on the date such Borrowing is disbursed or converted to or continued as a Eurodollar Borrowing and ending on the date that is one, two, three or six months thereafter as selected by the Borrower in its Borrowing Request (or, if agreed to by each Lender participating therein, twelve months thereafter as the Borrower may elect); provided that (a) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (b) any Interest Period that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month at the end of such Interest Period and (c) no Interest Period shall extend beyond (i) in the case of any Class of Term Loans, the Term Maturity Date applicable to such Class of Term Loans and (ii) in the case of Revolving Loans, the Revolving Maturity Date.  For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the Closing Date of the most recent conversion or continuation of such Borrowing.
 
“ Interpolated Rate ” means, in relation to the Eurodollar Rate, the rate (rounded upwards, if necessary, to the next 1/100 of 1.0%) which results from interpolating on a linear basis between:  (a) the applicable Eurodollar Rate for the longest period (for which that Eurodollar Rate is available) which is less than the Interest Period of that Loan and (b) the applicable Eurodollar Rate for the shortest period (for which that Eurodollar Rate is available) which exceeds the Interest Period of that Loan, each as of approximately 11:00 a.m. (London, England time) two Business Days prior to the commencement of such Interest Period of that Loan.
 
“ Investment ” means, as to any Person, any direct or indirect acquisition or investment by such Person, whether by means of (a) the purchase or other acquisition of Equity Interests or debt or other securities of another Person, (b) a loan, advance or capital contribution to, Guarantee or assumption of Indebtedness of, or purchase or other acquisition of any other debt or equity participation or interest in, another Person, including any partnership or joint venture interest in such other Person (excluding, in the case of the Borrower and the Subsidiaries, intercompany loans, advances, or Indebtedness having a term not exceeding 364 days (inclusive of any roll-over or extensions of terms) and made in the ordinary course of business) or (c) the purchase or other acquisition (in one transaction or a series of transactions) of all or substantially all of the property and assets or business of another Person or assets constituting a business unit, line of business or division of such Person.  The amount, as of any date of determination, of (a) any Investment in the form of a loan or an advance shall be the principal amount thereof outstanding on such date, minus any cash payments actually received by such investor representing interest in respect of such Investment (to the extent any such payment to be deducted does not exceed the remaining principal amount of such Investment), but without any adjustment for write-downs or write-offs (including as a result of forgiveness of any portion thereof) with respect to such loan or advance after the date thereof, (b) any Investment in
 
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the form of a Guarantee shall be equal to the stated or determinable amount of the related primary obligation, or portion thereof, in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof, as determined in good faith by a Financial Officer, (c) any Investment in the form of a transfer of Equity Interests or other non-cash property by the investor to the investee, including any such transfer in the form of a capital contribution, shall be the fair market value (as determined in good faith by a Financial Officer) of such Equity Interests or other property as of the time of the transfer, minus any payments actually received by such investor representing a return of capital of, or dividends or other distributions in respect of, such Investment (to the extent such payments do not exceed, in the aggregate, the original amount of such Investment), but without any other adjustment for increases or decreases in value of, or write-ups, write-downs or write-offs with respect to, such Investment after the date of such Investment, and (d) any Investment (other than any Investment referred to in clause (a), (b) or (c) above) by the specified Person in the form of a purchase or other acquisition for value of any Equity Interests, evidences of Indebtedness or other securities of any other Person shall be the original cost of such Investment (including any Indebtedness assumed in connection therewith), plus (i) the cost of all additions thereto and minus (ii) the amount of any portion of such Investment that has been repaid to the investor in cash as a repayment of principal or a return of capital, and of any cash payments actually received by such investor representing interest, dividends or other distributions in respect of such Investment (to the extent the amounts referred to in clause (ii) do not, in the aggregate, exceed the original cost of such Investment plus the costs of additions thereto), but without any other adjustment for increases or decreases in value of, or write-ups, write-downs or write-offs with respect to, such Investment after the date of such Investment.  For purposes of Section 6.04 , if an Investment involves the acquisition of more than one Person, the amount of such Investment shall be allocated among the acquired Persons in accordance with GAAP; provided that pending the final determination of the amounts to be so allocated in accordance with GAAP, such allocation shall be as reasonably determined by a Financial Officer.
 
“ Investor ” means a holder of Equity Interests in Holdings (or any direct or indirect parent thereof).
 
“ Issue ” means, with respect to any Letter of Credit, to issue, extend the expiration date of, renew (including by failure to object to any automatic renewal on the last day such objection is permitted), increase the face amount of, or reduce or eliminate any scheduled decrease in the face amount of, such Letter of Credit, or to cause any Person to do any of the foregoing.  The terms “Issued” and “Issuance” have correlative meanings.
 
“ Issuing Bank ” means in the case of Letters of Credit, Scotiabank.  Each Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate (it being agreed that such Issuing Bank shall, or shall cause such Affiliate to, comply with the requirements of Section 2.05 with respect to such Letters of Credit).
 
“ Joint Bookrunners ” mean each of Goldman Sachs Lending Partners LLC, BNP Paribas, and The Bank of Nova Scotia.
 
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“ Joint Lead Arrangers ” mean each of Goldman Sachs Lending Partners LLC, BNP Paribas, and The Bank of Nova Scotia.
 
“ Judgment Currency ” shall have the meaning assigned to such term in Section 9.17 .
 
“ Junior Indebtedness ” shall have the meaning assigned to such term in Section 6.07(b).
 
“ Latest Maturity Date ” means, at any date of determination, the latest maturity or expiration date applicable to any Loan or Commitment hereunder at such time, including the latest maturity or expiration date of any Other Term Loan or any Other Term Commitment, Other Revolving Loan, Other Revolving Commitment, in each case as extended in accordance with this Agreement from time to time.
 
“ LC Disbursement ” means a payment made by an Issuing Bank pursuant to a Letter of Credit.
 
“ LC Exposure ” means, at any time, the sum of (a) the aggregate amount of all Letters of Credit issued for the account of the Borrower or for the account of any Subsidiary (in accordance with Section 2.05(a) ) that remains available for drawing at such time and (b) the aggregate amount of all LC Disbursements that have not yet been reimbursed by or on behalf of the Borrower or the applicable Subsidiary at such time.  The LC Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.
 
“ LC Reimbursement Obligation ” means, for any Letter of Credit, the obligation of the Borrower to the Issuing Bank thereof, as and when matured, to pay all amounts drawn under such Letter of Credit.
 
“ LCT Election ” shall have the meaning assigned to such term in Section 1.07 .
 
“ LCT Test Date ” shall have the meaning assigned to such term in Section 1.07 .
 
“ Lenders ” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, an Incremental Revolving Facility Amendment, an Incremental Term Facility Amendment or a Refinancing Amendment, in each case, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.  Unless the context otherwise requires, the term “Lenders” includes the Swingline Lender.
 
“ Letter of Credit ” means any letter of credit denominated in U.S. Dollars issued for the account of the Borrower or any Subsidiary pursuant to this Agreement and any Existing Letter of Credit, other than any such letter of credit that shall have ceased to be a “Letter of Credit” outstanding hereunder pursuant to Section 9.05 .
 
“ Letter of Credit Obligations ” means all outstanding obligations incurred by the Administrative Agent and Lenders at the request of the Borrower, whether direct or indirect, continent or otherwise due or not due, in connection with the issuance of Letters of Credit by
 
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Issuing Banks or the purchase of participations in Letters of Credit pursuant to the terms hereof.  The amount of such Letter of Credit Obligation shall equal the maximum amount that may be payable by the Administrative Agent and the Lenders thereupon or pursuant thereto.
 
“ Letter of Credit Sublimit ” means an amount equal to $5,000,000.  The Letter of Credit Sublimit is part of and not in addition to the aggregate Revolving Commitments.
 
“ Lien ” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset and (b) 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) relating to such asset.
 
“ Limited Condition Transaction ” shall have the meaning assigned to such term in Section 1.07 .
 
“ Loan Documents ” means this Agreement, any Fee Letter, any Incremental Term Facility Amendment, any Incremental Revolving Facility Amendment, any Refinancing Amendment, any Extension Amendment, any Replacement Agreement, the Guarantee Agreements, the Collateral Agreement, the other Security Documents, and, except for purposes of Section 9.02 , any promissory notes delivered pursuant to Section 2.09(h) .
 
“ Loan Parties ” means Holdings, the Borrower and the Subsidiary Loan Parties.
 
“ Loans ” means the loans made by the Lenders to the Borrower pursuant to this Agreement.
 
“ Majority in Interest ,” when used in reference to Lenders of any Facility, means, at any time, (a) in the case Revolving Lenders with respect to any Revolving Facility, Lenders having Revolving Exposures and unused Revolving Commitments with respect to such Revolving Facility representing more than 50% of the sum of the Revolving Exposure and the unused aggregate Revolving Commitments with respect to such Facility at such time and (b) in the case of Term Lenders with respect to any Term Facility, Lenders holding outstanding Term Loans of such Term Facility representing more than 50% of all Term Loans of such Facility outstanding at such time; provided that (a) the Revolving Exposures, Term Loans and unused Commitments of the Borrower or any Affiliate thereof and (b) whenever there are one or more Defaulting Lenders, the total outstanding Term Loans and Revolving Exposures of, and the unused Revolving Commitments of, each Defaulting Lender, shall in each case be excluded for purposes of making a determination of the Majority in Interest.
 
“ Management Investors ” means the directors, officers and employees of the Borrower and/or the Subsidiaries who are (directly or indirectly through one or more investment vehicles) investors in Holdings (or any direct or indirect parent thereof).
 
“ Material Acquisition ” means an acquisition with respect to which the incremental senior Indebtedness borrowed in connection therewith to fund the consummation thereof exceeds $250,000,000.
 
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“ Material Adverse Effect ” means any event, circumstance or condition that has had, or would reasonably be expected to have, a materially adverse effect on (a) the business, assets, financial condition, or results of operations of Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole, (b) the ability of the Borrower and the other Loan Parties, taken as a whole, to perform their payment obligations under the Loan Documents or (c) the rights and remedies of the Administrative Agent and the Lenders under the Loan Documents.
 
“ Material Indebtedness ” means Indebtedness (other than the First Lien Obligations), or obligations in respect of one or more Swap Agreements, of any one or more of Holdings, the Borrower and the Restricted Subsidiaries in an aggregate outstanding principal amount the U.S. Dollar Equivalent of which exceeds $15,000,000.  For purposes of determining Material Indebtedness, the “principal amount” of the obligations in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that Holdings, the Borrower or such Restricted Subsidiary would be required to pay if such Swap Agreement were terminated at such time.
 
“ Material Real Property ” means real property (including fixtures) owned by Borrower or any other Loan Party with a fair market value greater than or equal to an amount the U.S. Dollar Equivalent of which is equal to $5,000,000, as determined by the Borrower in good faith.
 
“ Maximum Rate ” has the meaning assigned to such term in Section 9.16 .
 
“ MFN Protection ” has the meaning assigned to such term in Section 2.20(a).
 
“ Moody’s ” means Moody’s Investors Service, Inc. and any successor to its rating agency business.
 
“ Mortgage ” means a mortgage, deed of trust, assignment of leases and rents, leasehold mortgage or other security document granting a Lien on any Mortgaged Property to secure the Secured Obligations.  Each Mortgage shall be in form and substance reasonably satisfactory to the Collateral Agent and the Borrower.
 
“ Mortgaged Property ” means each parcel of real property with respect to which a Mortgage is granted pursuant to the Collateral and Guarantee Requirement, Section 5.11 , Section 5.12 or Section 5.14 .
 
“ Multiemployer Plan ” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.
 
“ Net Income ” means, with respect to any Person, the net income (loss) of such Person and its Subsidiaries that are Restricted Subsidiaries, determined in accordance with GAAP and before any reduction in respect of preferred stock dividends.
 
“ Net Proceeds ” means, with respect to any event, (a) the U.S. Dollar Equivalent of the proceeds received in respect of such event in cash or Permitted Investments, including (i) any cash or Permitted Investments received in respect of any non-cash proceeds (including any cash payments received by way of deferred payment of principal pursuant to a note or
 
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installment receivable or purchase price adjustment or earn-out, but excluding any interest payments), but only as and when received, (ii) in the case of a casualty, insurance proceeds, and (iii) in the case of a condemnation or similar event, condemnation awards and similar payments, minus (b) the sum of the U.S. Dollar Equivalent of (i) all fees and out-of-pocket expenses paid by Holdings, the Borrower and the Restricted Subsidiaries in connection with such event (including attorney’s fees, investment banking fees, survey costs, title insurance premiums, and related search and recording charges, transfer taxes, deed or mortgage recording taxes, underwriting discounts and commissions, other customary expenses and brokerage, consultant, accountant and other customary fees), (ii) in the case of a sale, transfer or other disposition of an asset (including pursuant to a Sale and Leaseback Transaction or a casualty or a condemnation or similar proceeding), (x) the amount of all payments that are permitted hereunder and are made by Holdings, the Borrower and the Restricted Subsidiaries as a result of such event to repay Indebtedness (other than the Loans or any Subordinated Indebtedness) secured by such asset or otherwise subject to mandatory prepayment as a result of such event, (y) the pro rata portion of net cash proceeds thereof (calculated without regard to this clause (y)) attributable to minority interests and not available for distribution to or for the account of Holdings, the Borrower or the Restricted Subsidiaries as a result thereof and (z) the amount of any liabilities directly associated with such asset that are retained by the Borrower or any Restricted Subsidiary and are recorded on the consolidated balance sheet of Holdings and its subsidiaries in accordance with GAAP and (iv) the amount of all taxes paid (or reasonably estimated to be payable in accordance with GAAP), and the amount of any reserves established by Holdings, the Borrower or the Restricted Subsidiaries in accordance with GAAP to fund contingent liabilities reasonably estimated to be payable, that are directly attributable to such event; provided that any reduction at any time in the amount of any such reserves (other than as a result of payments made in respect thereof) shall be deemed to constitute the receipt by the Borrower at such time of Net Proceeds in the amount of such reduction.
 
“ NFIP ” has the meaning assigned to such term in the definition of “Collateral and Guarantee Requirement.”
 
“ Non-Cash Charges ” means (a) any non-cash impairment charge or asset write-off or write-down related to intangible assets (including goodwill), long-lived assets, and Investments in debt and equity securities pursuant to GAAP, (b) all non-cash losses from Investments recorded using the equity method, (c) all Non-Cash Compensation Expenses, (d) the non-cash impact of acquisition method accounting, (e) depreciation and amortization (including amortization of deferred financing fees or costs), and (f) other non-cash charges ( provided , in each case, that if any non-cash charges represent an accrual or reserve for potential cash items in any future period, the cash payment in respect thereof in such future period shall be subtracted from Consolidated EBITDA to such extent, and excluding amortization of a prepaid cash item that was paid in a prior period).
 
“ Non-Cash Compensation Expense ” means any non-cash expenses and costs that result from the issuance of stock-based awards, partnership interest-based awards and similar incentive based compensation awards or arrangements.
 
“ Non-Consenting Lender ” has the meaning assigned to such term in Section 9.02(c) .
 
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“ Non-Defaulting Lender ” means, at any time, any Revolving Lender that is not a Defaulting Lender at such time.
 
“ Non-Loan Party Investment Amount ” means, at any time, the sum of (a) an amount equal to the greater of $25,000,000 and 30% of Consolidated EBITDA for the most recently ended Test Period and (b) the Available Amount.
 
“ Non-Wholly Owned Subsidiary ” of any Person means any Subsidiary of such Person other than a Wholly Owned Subsidiary.
 
“ OFAC ” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.
 
“ Offered Amount ” has the meaning assigned to such term in Section 2.11(a)(ii)(D) .
 
“ Offered Discount ” has the meaning assigned to such term in Section 2.11(a)(ii)(D) .
 
“ Ordinary Course of Business ” means the ordinary course of business of any Person.
 
“ Organizational Documents ” means, with respect to any Person, the charter, articles or certificate of organization or incorporation and bylaws or other organizational or governing documents of such Person.
 
“ Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than a connection arising solely from such Recipient having executed, delivered, or become a party to, performed its obligations or received payments under, received or perfected a security interest under, sold or assigned an interest in, engaged in any other transaction pursuant to, or enforced, any Loan or Loan Document).
 
“ Other Revolving Commitments ” means one or more Classes of Revolving Commitments hereunder or extended Revolving Commitments that result from an Extension Amendment or a Replacement Amendment, as the case may be.
 
“ Other Revolving Loans ” means the Revolving Loans made pursuant to any Other Revolving Commitment.
 
“ Other Taxes ” means any and all present or future recording, filing, stamp, court, documentary, intangible, excise, transfer, sales, property or similar Taxes arising from any payment made under any Loan Document or from the execution, delivery, performance, registration or enforcement of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.17(b) ).
 
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“ Other Term Commitments ” means one or more Classes of term loan commitments hereunder that result from a Refinancing Amendment or Extension Amendment, as the case may be.
 
“ Other Term Loans ” means one or more Classes of Term Loans that result from a Refinancing Amendment or Extension Amendment, as the case may be.
 
“ Participant ” has the meaning assigned to such term in Section 9.04(c)(i) .
 
“ Participant Register ” has the meaning assigned to such term in Section 9.04(c)(ii) .
 
“ Participating Lender ” has the meaning assigned to such term in Section 2.11(a)(ii)(C)(1) .
 
“ PATRIOT Act ” means the USA PATRIOT Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
 
“ PBGC ” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.
 
“ Permitted Acquisition ” means the purchase or other acquisition, by merger or otherwise, by the Borrower or any Restricted Subsidiary of Equity Interests 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; provided that (a) in the case of any purchase or other acquisition of Equity Interests in a Person, such Person, upon the consummation of such acquisition, will be a Restricted Subsidiary (including as a result of a merger or consolidation between any Restricted Subsidiary and such Person) unless such Person is concurrently with such acquisition designated as an Unrestricted Subsidiary in accordance with Section 5.13 ; (b) all transactions related thereto are consummated in accordance with all material applicable Requirements of Law, (c) the business of such Person, or such assets, as the case may be, constitute a business permitted by Section 6.03(b) , (d) the Borrower shall comply with Section 5.11 with respect to each such Person, (d) after giving effect to any such purchase or other acquisition and the incurrence or assumption of any Indebtedness in connection therewith, no Event of Default under Section 7.01(a) , (b) , (i)  or (j)  shall have occurred and be continuing, (e)  to the extent any Material Real Property is being acquired in connection with such acquisition, and on request by the Administrative Agent, the Borrower shall have delivered to the Administrative Agent copies of all third party environmental reports received in connection therewith, and (f) for acquisitions with a cash purchase price in excess of $5,000,000, the Borrower shall have delivered to the Administrative Agent a certificate of a Financial Officer certifying that all the requirements set forth in this definition have been satisfied with respect to such purchase or other acquisition, together with reasonably detailed calculations demonstrating satisfaction of the requirements set forth, if applicable, in Section 6.01(a)(vii) ; provided the U.S. Dollar Equivalent of the aggregate amount of consideration paid or provided by the Borrower or any other Loan Party after the Closing Date (together with any Investments made in Persons that are not Loan Parties pursuant to Section 6.04(c) ) for Permitted Acquisitions (including the aggregate principal amount of all Indebtedness assumed in connection with Permitted
 
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Acquisitions) for any Subsidiaries (or with respect to any asset acquisition, for any assets to be held by any Subsidiaries) that are not, shall not be, or, after giving effect to such Permitted Acquisition, shall not become, Loan Parties, shall not exceed the Non-Loan Party Investment Amount.
 
“ Permitted Encumbrances ” means:
 
(a)                                  Liens for Taxes that are not overdue for a period of more than 30 days or that are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP;
 
(b)                                  Liens imposed by law, such as carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or construction contractors’ Liens and other similar Liens and deemed trusts arising in the ordinary course of business that secure amounts not overdue for a period of more than 30 days or, if more than 30 days overdue, are unfiled and no other action has been taken to enforce such Lien or that are being contested in good faith and by appropriate proceedings diligently conducted, if adequate reserves with respect thereto are maintained on the books of the applicable Person in accordance with GAAP, in each case so long as such Liens do not individually or in the aggregate have a Material Adverse Effect;
 
(c)                                   Liens incurred or deposits made in the ordinary course of business (i) in connection with workers’ compensation, unemployment insurance and other social security legislation and (ii) securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty or liability insurance to the Borrower or any Restricted Subsidiary;
 
(d)                                  Liens incurred or deposits made to secure the performance of bids, trade contracts, governmental contracts and leases, statutory obligations, surety, stay, customs and appeal bonds, performance bonds and other obligations of a like nature (including those to secure health, safety and environmental obligations) incurred in the ordinary course of business;
 
(e)                                   easements, covenants, land use contracts, rent charges, building schemes, declarations of covenants, conditions and restrictions, servicing agreements in favor of any Governmental Authority, rights-of-way, restrictions, encroachments, protrusions, zoning restrictions and other similar encumbrances and minor title defects affecting real property that, in each case, in the aggregate, (i) do not materially detract from the value of the affected property or (ii) interfere with the ordinary conduct of the business of the Borrower and the Restricted Subsidiaries, taken as a whole;
 
(f)                                    with respect to real property, zoning, land use and building restrictions, by laws, regulations and ordinances of Governmental Authorities, including municipal bylaws and regulations, airport zoning regulations, restrictive covenants and other land use limitations, public or private, by-laws and regulations and other restrictions as to the
 
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use of any real property provided the same have been complied with in all material respects and do not materially impair the use of the real property for the purposes for which it is presently used;
 
(g)                                   with respect to real property, if arising as a result of alleged failure to comply with a government requirement, such failure, requirement, right, interest or privilege is being contested in good faith by appropriate proceedings and are subject to adequate reserves;
 
(h)                                  subdivision agreements, site plan control agreements, servicing agreements and other similar agreements with Governmental Authorities affecting the development or use of any real property so long as the same have been complied with in all material respects and do not materially impair the use of such real property for the purposes for which it is presently used;
 
(i)                                      Liens on goods the purchase price of which is financed by a documentary letter of credit issued for the account of the Borrower or any of the Subsidiaries; provided that such Lien secures only the obligations of the Borrower or such Subsidiaries in respect of such letter of credit to the extent such obligations are permitted by Section 6.01 ; and
 
(j)                                     precautionary UCC financing statements or similar filings made in respect of operating leases entered into by the Borrower or any of the Subsidiaries;
 
provided that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness for borrowed money.
 
“ Permitted Holders ” means (a) the Sponsor and (b) the Management Investors; provided that in no event shall the Management Investors constitute Permitted Holders of more than 20% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of Holdings, at any one time.
 
“ Permitted Investments ” means any of the following, to the extent owned by the Borrower or any Restricted Subsidiary:
 
(a)                                  dollars, Canadian Dollars, British Pounds Sterling or such other currencies held by it from time to time in the ordinary course of business;
 
(b)                                  readily marketable obligations issued or directly and fully guaranteed or insured by the government or any agency or instrumentality of the United States, Canada or the United Kingdom having average maturities of not more than 12 months from the date of acquisition thereof; provided that the full faith and credit of the United States, Canada or the United Kingdom, as the case may be, is pledged in support thereof;
 
(c)                                   time deposits with, or insured certificates of deposit or bankers’ acceptances of, any commercial bank that (i) is a Lender or (ii) has combined capital and surplus of at least $1,000,000,000 (any such bank in the foregoing clauses (i) or (ii) being
 
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an “ Approved Bank ”), in each case with average maturities of not more than 12 months from the date of acquisition thereof;
 
(d)                                  commercial paper and variable or fixed rate notes issued by an Approved Bank (or by the parent company thereof) or any variable or fixed rate note issued by, or guaranteed by, a corporation rated A-1 (or the equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or better by Moody’s, in each case with average maturities of not more than 12 months from the date of acquisition thereof;
 
(e)                                   repurchase agreements entered into by any Person with an Approved Bank, a bank or trust company (including any of the Lenders) or recognized securities dealer, in each case, having capital and surplus in excess of $250,000,000 for direct obligations issued by or fully guaranteed or insured by the government or any agency or instrumentality of the United States, Canada or the United Kingdom in which such Person shall have a perfected first priority security interest (subject to no other Liens) or title to which shall have been transferred to such Person and having, on the date of purchase thereof, a fair market value of at least 100% of the amount of the repurchase obligations;
 
(f)                                    marketable short-term money market and similar highly liquid funds either (i) having assets in excess of $250,000,000 or (ii) having a rating of at least A-1 or P-1 from either S&P or Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized rating service);
 
(g)                                   securities with average maturities of 12 months or less from the date of acquisition issued or fully guaranteed by any state, province, commonwealth or territory of the United States, Canada or the United Kingdom by any political subdivision or taxing authority of any such state, province, commonwealth or territory having an investment grade rating from either S&P or Moody’s (or the equivalent thereof);
 
(h)                                  investments with average maturities of 12 months or less from the date of acquisition in mutual funds rated AAA- (or the equivalent thereof) or better by S&P or Aaa3 (or the equivalent thereof) or better by Moody’s;
 
(i)                                      instruments equivalent to those referred to in clauses (a) through (h) above denominated in euros or any other foreign currency comparable in credit quality and tenor to those referred to above and customarily used by corporations for cash management purposes in any jurisdiction outside the United States to the extent reasonably required in connection with any business conducted by any Subsidiary organized in such jurisdiction; and
 
(j)                                     investments, classified in accordance with GAAP as current assets of the Borrower or any Subsidiary, in money market investment programs that are registered under the Investment Company Act of 1940 or that are administered by financial institutions having capital of at least $250,000,000, and, in either case, the portfolios of which are limited such that substantially all of such investments are of the character, quality and maturity described in clauses (a) through (i) of this definition.
 
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“ Permitted Junior Secured Debt ” means Indebtedness incurred by the Borrower or any Restricted Subsidiary in the form of one or more series of notes or loans that are secured on a junior basis to the First Lien Obligations; provided that (a) such Indebtedness does not mature or have scheduled amortization or payments of principal due prior to the date that is 91 days after the Latest Maturity Date of any Term Loans outstanding at the time such Indebtedness is incurred, (b) such Indebtedness does not require any mandatory commitment reduction, repayment, redemption, repurchase or defeasance (other than customary change of control, asset sale event or casualty or condemnation event offers and customary acceleration any time after an event of default) prior to the date that is 91 days after the Latest Maturity Date of any Term Loans outstanding at the time such Indebtedness is incurred, (c) such Indebtedness does not have a Weighted Average Life to Maturity shorter than the Weighted Average Life to Maturity of any Term Loans then outstanding, (d) the covenants and events of default of such Indebtedness are substantially identical to or less favorable to the lenders or holders providing such Indebtedness than those applicable to the Indebtedness incurred under the Loan Documents (other than covenants or other provisions applicable only to periods after the Latest Maturity Date at the time such Indebtedness is incurred), (e) such Indebtedness shall not include any financial maintenance covenants, (f) such Indebtedness is not secured by any Lien on any property or assets of the Borrower or Restricted Subsidiary that does not also secure the Secured Obligations of the Borrower or Restricted Subsidiary, (g) such Indebtedness is not incurred or Guaranteed by any Restricted Subsidiary that does not equally and ratable Guarantee the Secured Obligations and (h) such Indebtedness is subject to a customary intercreditor arrangements reasonably acceptable to the Administrative Agent.
 
“ Permitted Refinancing ” means, with respect to any Person, any modification, refinancing, refunding, renewal or extension of any Indebtedness of such Person; provided that (a) the principal amount (or accreted value, if applicable) thereof does not exceed the principal amount (or accreted value, if applicable) of the Indebtedness so modified, refinanced, refunded, renewed or extended except by an amount equal to unpaid accrued interest and premium thereon plus other amounts paid, and fees and expenses incurred, in connection with such modification, refinancing, refunding, renewal or extension, and by an amount equal to any existing commitments unutilized thereunder (b) other than with respect to a Permitted Refinancing in respect of Indebtedness permitted pursuant to Section 6.01(a)(v) , Indebtedness resulting from such modification, refinancing, refunding, renewal or extension has a final maturity date equal to or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, the Indebtedness being modified, refinanced, refunded, renewed or extended, (c) immediately after giving effect thereto, no Event of Default shall have occurred and be continuing, (d) if the Indebtedness being modified, refinanced, refunded, renewed or extended is subordinated in right of payment to the First Lien Obligations, the Indebtedness resulting from such modification, refinancing, refunding, renewal or extension is subordinated in right of payment to the First Lien Obligations on terms at least as favorable to the Lenders as those contained in the documentation governing the Indebtedness being modified, refinanced, refunded, renewed or extended, (e) if the Indebtedness being modified, refinanced, refunded, renewed or extended is secured, (i) the Indebtedness resulting from such modification refinancing, refunding, renewal or extension shall only be secured on the same basis (including relative priority) as the Indebtedness being modified, refinanced, refunded, renewed or extended and in the case of Permitted Refinancings incurred pursuant to Section 6.01(a)(i) , shall only be secured in the Collateral, and subject to intercreditor
 
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arrangements on terms reasonably acceptable to the Administrative Agent and (ii) no Lien relating thereto shall be expanded to cover any additional property of the Borrower or any Restricted Subsidiary, (f) the terms and conditions (including, if applicable, as to collateral but excluding (except as provided in the preceding clauses (d) and (e)) as to subordination, interest rate (including whether such interest is payable in cash or in kind) and redemption premium) of the Indebtedness resulting from such modification, refinancing, refunding, renewal or extension are not, taken as a whole, materially less favorable to the Loan Parties or the Lenders than the terms and conditions of the Indebtedness being modified, refinanced, refunded, renewed or extended (except for covenants or other provisions applicable exclusively to periods commencing after the Latest Maturity Date at the time such Indebtedness is incurred); provided that a certificate of a Responsible Officer delivered to the Administrative Agent at least five Business Days prior to such modification, refinancing, refunding, renewal or extension, together with a reasonably detailed description of the material terms and conditions of such resulting Indebtedness or drafts of the documentation relating thereto, stating that the Borrower has determined in good faith that such terms and conditions are not, taken as a whole, materially less favorable shall satisfy the requirements in this clause (f), (g) the primary obligor in respect of, and the Persons (if any) that Guarantee, Indebtedness resulting from such modification, refinancing, refunding, renewal or extension are the primary obligor in respect of, and Persons (if any) that Guaranteed, respectively, the Indebtedness being modified, refinanced, refunded, renewed or extended and (h) in the case of Permitted Refinancings incurred pursuant to Section 6.01(a)(i) , such Indebtedness is not incurred or Guaranteed by any Restricted Subsidiary that does not, or did not, equally and ratably Guarantee the Secured Obligations.  For the avoidance of doubt, it is understood that a Permitted Refinancing may constitute a portion of an issuance of Indebtedness in excess of the amount of such Permitted Refinancing; provided that such excess amount is otherwise permitted to be incurred under Section 6.01 .
 
“ Permitted Refinancing Notes ” means Indebtedness incurred by the Borrower in the form of one or more series of senior unsecured notes or loans, senior secured notes or loans, senior subordinated notes or loans, or subordinated notes or loans, in each case, issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, renew, replace or refinance, in whole or part, any existing Term Loans hereunder; provided that (x) such Indebtedness is pari passu or junior in right of payment to the First Lien Obligations, (y) if secured, shall be secured only by the Collateral securing the Refinanced Debt and (z) is subject to customary subordination or intercreditor agreements reasonably acceptable to the Administrative Agent.
 
“ Permitted Unsecured Debt ” means unsecured Indebtedness incurred by the Borrower or any Restricted Subsidiary in the form of one or more series of unsecured notes or loans; provided that (a) such Indebtedness does not mature or have scheduled amortization or payments of principal due prior to the date that is 91 days after the Latest Maturity Date of any Term Loans outstanding at the time such Indebtedness is incurred (provided that if such Indebtedness is in the form of a bridge loan financing (such Indebtedness, “ Bridge Indebtedness ”), such Bridge Indebtedness may provide for an initial maturity date (the “ Initial Maturity Date ”) that is earlier than the date that is 91 days after the Latest Maturity Date of any Term Loans outstanding at the time such Bridge Indebtedness is incurred so long as such Bridge Indebtedness automatically converts on or prior to the Initial Maturity Date (without such conversion being subject to any conditions) to Indebtedness maturing at least 91 days after the
 
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Latest Maturity Date of any Term Loans outstanding at the time such Bridge Indebtedness is incurred), (b) such Indebtedness does not require any mandatory commitment reduction, repayment, redemption, repurchase or defeasance (other than customary change of control, asset sale event or casualty or condemnation event offers and customary acceleration any time after an event of default or in the case of Bridge Indebtedness a mandatory prepayment with the proceeds of other Permitted Unsecured Debt upon incurrence thereof)) prior to the date that is 91 days after the Latest Maturity Date of any Term Loans outstanding at the time such Indebtedness is incurred, (c) such Indebtedness does not have a Weighted Average Life to Maturity shorter than the Weighted Average Life to Maturity of any Term Loans then outstanding, (d) the covenants and events of default of such Indebtedness are substantially identical to or less favorable to the lenders or holders providing such Indebtedness than those applicable to the Indebtedness incurred under the Loan Documents (other than covenants or other provisions applicable only to periods after the Latest Maturity Date at the time such Indebtedness is incurred), (e) such Indebtedness shall not include any financial maintenance covenants, (f) if incurred by the Borrower or any Domestic Subsidiary, such Indebtedness is not incurred or guaranteed by any Person other than the Loan Parties and (g) such Indebtedness is not secured by any Lien on any property or assets of the Borrower or any Restricted Subsidiary.  Permitted Unsecured Debt will include any Registered Equivalent Notes issued in exchange therefor.
 
“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.
 
“ Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA that is sponsored, maintained, contributed to, or required to be contributed to, by Holdings, the Borrower, any Restricted Subsidiary or any ERISA Affiliate or to which the Borrower, any Restricted Subsidiary or any ERISA Affiliate has any ongoing obligation.
 
“ Platform ” has the meaning assigned to such term in Section 5.01 .
 
“ Pledged Collateral ” has the meaning assigned to such term in the Collateral Agreement.
 
“ Post-Transaction Period ” means, with respect to any Specified Transaction, the period beginning on the date such Specified Transaction is consummated and ending on the last day of the fourth full consecutive fiscal quarter immediately following the date on which such Specified Transaction is consummated.
 
“ Prepayment Event ” means:
 
(a)                                  any sale, transfer or other disposition (including (w) sales of equity interests of any subsidiary of Holdings, (x) pursuant to a Sale and Leaseback Transaction, (y) by way of merger or consolidation and (z) any casualty or other insured damage to, or any taking under power of eminent domain or by condemnation or similar proceeding of) of any property or asset of Holdings or any of the Restricted Subsidiaries other than (i) dispositions permitted under Section 6.05 (other than Section 6.05(f) , (i) , (j)  and (k) ) and (ii) dispositions resulting in aggregate Net Proceeds the U.S. Dollar Equivalent of
 
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which does not exceed $4,000,000 for all such transactions during any fiscal year of Holdings; or
 
(b)                                  the incurrence by Holdings or any of the Restricted Subsidiaries of any Indebtedness, other than Indebtedness (x) permitted under Section 6.01 , (y) constituting a Refinancing Amendment or Refinancing Notes or (z) permitted by the Required Lenders pursuant to Section 9.02 .
 
“ Prime Rate ” means the rate of interest per annum publicly announced from time to time by the Person acting as the Administrative Agent as its prime rate in effect at its principal office in New York City.  The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer.  The Administrative Agent or any Lender may make commercial loans or other loans at rates of interest at, above or below the Prime Rate.  Any change in the Prime Rate shall take effect at the opening of business on the day specified in the public announcement of such change.
 
“ Pro Forma Basis ” and “ Pro Forma Effect ” means, as to any calculation of the First Lien Net Leverage Ratio, the Total Net Leverage Ratio, the Total Secured Net Leverage Ratio, the Fixed Charge Coverage Ratio and CTA for any events as described below that occur subsequent to the commencement of any Test Period for which the financial effect of such events is being calculated, and giving effect to the events for which such calculation is being made, such calculation as will give pro forma effect to such events as if such events occurred on the first day of the Test Period (for income statement items) or the last day of the Test Period (for balance sheet items), after giving effect thereto (it being understood and agreed that (x) such pro forma adjustments shall be excluded to the extent already accounted for in the calculation of Consolidated EBITDA for such period and (y) if any person that became a Restricted Subsidiary or was merged, amalgamated or consolidated with or into the Borrower or any Restricted Subsidiary shall have experienced any event requiring adjustments pursuant to this definition, then such calculation shall give pro forma effect thereto for such period as if such event occurred at the beginning of such period):  (i) in making any determination of Consolidated EBITDA, pro forma effect shall be given to any Asset Disposition of a Restricted Subsidiary, manufacturing facility or line of business, to any asset acquisition, any discontinued operation (but if such operations are classified as discontinued due to the fact that they are subject to an agreement to dispose of such operations, only when and to the extent such operations are actually disposed of) or any operational change and any Subsidiary designation as an Unrestricted Subsidiary or redesignation as a Restricted Subsidiary in each case that occurred during the Test Period or thereafter and through and including the date of such determination) and (ii) in making any determination on a Pro Forma Basis, all Indebtedness (including Indebtedness incurred or assumed and for which the financial effect is being calculated, whether incurred under this Agreement or otherwise, but excluding normal fluctuations in revolving Indebtedness incurred for working capital purposes) incurred or permanently repaid, returned, redeemed or extinguished following the first day of such Test Period shall be deemed to have been incurred or repaid, returned, redeemed or extinguished on the last day of such Test Period.
 
Pro forma calculations or determinations made pursuant to the definition of the term “Pro Forma Basis” shall be determined in good faith by a Responsible Officer of the Borrower and, for any fiscal period ending on or prior to the last day of the four full consecutive
 
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fiscal quarters ended after the occurrence of any such event described above, may include (a) adjustments calculated in accordance with Regulation S-X under the Exchange Act; and (b) adjustments to give effect to any Pro Forma Cost Savings in an amount pursuant to this clause (b) not to exceed 25% of Consolidated EBITDA for the applicable Test Period before giving effect to such Pro Forma Cost Savings.
 
“ Pro Forma Cost Savings ” means, with respect to the 18-month period ended after the date of any pro forma event, the net reduction in costs, operating expenses and other operating improvements or synergies for which specified actions have been taken or are reasonably expected to be taken (in the good faith determination of the Borrower) during such period that are reasonably identifiable, factually supportable and projected by the Borrower in good faith to result from such actions, as if all such reductions in costs had been effected as of the beginning of such period, net of the amount of actual benefits realized during such period from such actions.
 
“ Pro Forma Entity ” has the meaning given to such term in the definition of “Acquired EBITDA.”
 
“ Pro Forma Financial Statements ” has the meaning assigned to such term in Section 3.04(c) .
 
“ Projections ” has the meaning given to such term in Section 3.04(d) .
 
“ Property ” means any property or asset, whether real, personal or mixed, or tangible or intangible.
 
“ Proposed Change ” has the meaning assigned to such term in Section 9.02(c) .
 
“ Public Lender ” has the meaning assigned to such term in Section 5.01 .
 
“ Qualified Equity Interests ” means Equity Interests of Holdings or the Borrower other than Disqualified Equity Interests.
 
“ Qualified IPO ” means the issuance by Holdings of its common stock in an underwritten public offering pursuant to an effective registration statement filed with the SEC in accordance with the Securities Act (whether alone or in connection with a secondary public offering) resulting in net proceeds that are contributed to the Borrower of at least $125,000,000.
 
“ Qualifying Lender ” has the meaning assigned to such term in Section 2.11(a)(ii)(D)(2) .
 
“ Ratio Debt ” has the meaning assigned to such term in Section 6.01(a)(xxii) .
 
“ Recipient ” means (a) the Administrative Agent, (b) any Lender and (c) any Issuing Bank, as applicable.
 
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“ Redemption ” means the redemption by Holdings of $276,317,938 of its preferred stock within thirty days of the Closing Date.
 
“ Refinanced Debt ” has the meaning assigned to such term in the definition of “Credit Agreement Refinancing Debt Requirements.”
 
“ Refinancing ” means the repayment of the obligations under the Existing Credit Agreement and the discharge (or the making of arrangements for discharge) of all Liens granted in connection therewith.
 
“ Refinancing Amendment ” means an amendment to this Agreement in form and substance reasonably satisfactory to the Administrative Agent and the Borrower executed by each of (a) the Borrower and Holdings, (b) the Administrative Agent and (c) each Additional Lender and Lender that agrees to provide any portion of the Indebtedness being incurred pursuant thereto, in accordance with Section 2.21(a) .
 
“ Register ” has the meaning assigned to such term in Section 2.09(c) .
 
“ Registered Equivalent Notes ” means, with respect to any notes originally issued in a Rule 144A or other private placement transaction under the Securities Act of 1933, substantially identical notes (having the same Guarantees) issued in a dollar-for-dollar exchange therefor pursuant to an exchange offer registered with the SEC.
 
“ Related Obligations ” has the meaning assigned to such term in Section 8.15 .
 
“ Related Parties ” means, with respect to any specified Person, such Person’s Affiliates and the partners, directors, officers, employees, trustees, agents, controlling persons, advisors and other representatives of such Person and of each of such Person’s Affiliates and permitted successors and assigns.
 
“ Release ” means any release, spill, emission, leaking, dumping, injection, emptying, pumping, escaping, pouring, deposit, disposal, discharge, leaching or migration into or through the environment (including ambient air, indoor air, surface water, groundwater, land surface or subsurface strata).
 
“ Replacement Amendment ” has the meaning assigned to such term in Section 9.02(h) .
 
“ Replacement Revolving Facility ” has the meaning assigned to such term in Section 9.02(h) .
 
“ Repricing Premium ” means, in connection with a Repricing Transaction, a premium (expressed as a percentage of the principal amount of such Loans to be prepaid) equal to the amount set forth below:
 
(a)                                  during the period from the Closing Date to the date occurring six months following the Closing Date, 1.0%;
 
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(b)                                  thereafter, 0%.
 
“ Repricing Transaction ” means the prepayment or refinancing of all or a portion of the Term Loans with the incurrence by any Loan Party of any Indebtedness (including, without limitation, any new or additional term loans, whether incurred directly or by way of the conversion of Term Loans into a new Class of replacement term loans or Other Term Loans) having an All-In-Yield that is less than the All-In-Yield of the Term Loans, including without limitation, as may be effected through any amendment to this Agreement relating to the interest, fees or other pricing terms related to the Term Loans (it being understood that any prepayment premium with respect to a Repricing Transaction shall apply to any required assignment by a non-consenting Lender in connection with any such amendment pursuant to so-called yank-a-bank provisions); provided that, in no event shall any such prepayment, repayment, refinancing, substitution or replacement in connection with (x) a transaction resulting in a Change in Control, (y) a full refinancing and increase of the Term Loans in connection with a Material Acquisition, or (z) a Qualified IPO, constitute a Repricing Transaction.  For the avoidance of doubt it is understood and agreed that the required repayment (or any other amount) of a portion of the Term Loan in connection with a Qualified IPO shall not be a Repricing Transaction.
 
“ Required Lenders ” means, at any time, Lenders having Revolving Exposures, Term Loans and unused Commitments representing more than 50% of the Revolving Exposure, outstanding Term Loans and unused Commitments at such time; provided that to the extent set forth in Section 9.02 or Section 9.04 , (a) the total Revolving Exposures, Term Loans and unused Commitments of the Borrower or any Affiliated Lender (other than Affiliated Debt Funds) thereof and (b) whenever there are one or more Defaulting Lenders, the total outstanding Term Loans and Revolving Exposures of, and the unused Revolving Commitments of, each Defaulting Lender shall, in each case described in clauses (a) and (b), be excluded for purposes of making a determination of Required Lenders.
 
“ Required Revolving Lenders ” means, at any time, Lenders having more than 50% of all (a) the Revolving Commitments or (b) after the termination or expiration of the Revolving Commitments, the Revolving Exposure; provided that the Revolving Commitment and the Revolving Exposure of any Defaulting Lender shall be excluded for the purposes of making a determination of Required Revolving Lenders.
 
“ Requirements of Law ” means, with respect to any Person, any statutes, laws, treaties, rules, regulations, orders, decrees, writs, injunctions or determinations of any arbitrator or court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
 
“ Responsible Officer ” means the chief executive officer, president, vice president, chief financial officer, treasurer or assistant treasurer, or other similar officer, manager or a director of a Loan Party and with respect to certain limited liability companies or partnerships that do not have officers, any manager, sole member, managing member or general partner thereof.  Any document delivered hereunder that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.
 
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“ Restricted Payment ” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Restricted Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Equity Interests in the Borrower or any Restricted Subsidiary or any option, warrant or other right to acquire any such Equity Interests in the Borrower or any Restricted Subsidiary.
 
“ Restricted Subsidiary ” means any Subsidiary other than an Unrestricted Subsidiary.
 
“ Revolving Availability Period ” means the period from and including the Closing Date to but excluding the earlier of the Revolving Maturity Date and the date of termination of all of the Revolving Commitments.
 
“ Revolving Borrowing ” means a Borrowing of Revolving Loans.
 
“ Revolving Commitment ” means, with respect to each Lender, the commitment, if any, of such Lender to make Revolving Loans from time to time hereunder, expressed as the maximum aggregate permitted amount of such Lender’s Revolving Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to (i) assignments by or to such Lender pursuant to an Assignment and Assumption or (ii) a Revolving Commitment Increase.  The amount of each Lender’s Revolving Commitment is set forth on Schedule 2.01 , or in the Assignment and Assumption or Refinancing Amendment pursuant to which such Lender shall have assumed its Revolving Commitment, as the case may be.  The initial aggregate amount of the Lenders’ Revolving Commitments on the Closing Date is $40,000,000.
 
“ Revolving Commitment Increase ” has the meaning assigned to such term in Section 2.20(a)(i) .
 
“ Revolving Commitment Increase Lender ” has the meaning assigned to such term in Section 2.20(c)(i) .
 
“ Revolving Exposure ” means, with respect to the Revolving Lenders, at any time, the sum of the aggregate principal amount of (a) the Lenders’ Revolving Loans at such time, (b) the Lenders’ LC Exposure at such time and (c) the Lenders’ Swingline Exposure at such time.  The Revolving Exposure of any Lender at any time shall be such Lender’s Applicable Percentage of the aggregate Revolving Exposure at such time.
 
“ Revolving Facility ” means the Revolving Commitments and the provisions herein related to Revolving Loans, Swingline Loans and Letters of Credit.
 
“ Revolving Lender ” means a Lender with a Revolving Commitment or, if the Revolving Commitments have terminated or expired, a Lender with Revolving Exposure.
 
“ Revolving Loans ” shall have the meaning attributed to such term in (x)  Section 2.01 and (y) each loan made with respect to an Other Revolving Loan or a Revolving
 
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Commitment Increase, in each case of clauses (x) and (y), to the U.S. Borrower in dollars, as the context requires.
 
“ Revolving Maturity Date ” means August 17, 2020.
 
“ S&P ” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor to its rating agency business.
 
“Sale and Leaseback Transaction ” means an arrangement with any Person relating to Property used or useful in the business of the Borrower or its Subsidiaries, whether now owned or acquired after the Closing Date, whereby the Borrower or a Subsidiary sells or transfers such Property to a Person and thereafter rents or leases such Property or other Property which it intends to use for substantially the same purpose or purposes as the Property being sold or transferred.
 
“ SEC ” means the Securities and Exchange Commission or any Governmental Authority succeeding to any of its principal functions.
 
“ Secured Obligations ” means, (a) in the case of the Borrower, the First Lien Obligations and (b) in the case of any Loan Party (including the Borrower), (i) the First Lien Obligations of such Loan Party under any Guarantee Agreement and the other Loan Documents to which it is a party (other than any Excluded Swap Obligations), (ii) all Secured Swap Obligations of such Loan Party and (iii) all Cash Management Obligations of such Loan Party owing to one or more Lenders or their respective Affiliates (or any Person who was a Lender or an Affiliate thereof at the time of the incurrence of such obligation).
 
“ Secured Parties ” means the Lenders, the Issuing Banks, each Agent and any other holder of any Secured Obligation.
 
“ Secured Swap Obligations ” means the due and punctual payment and performance of all obligations of Holdings, the Borrower and the Subsidiary Loan Parties under each Swap Agreement that (a) is with a counterparty that is an Agent or any of its Affiliates or (b) is entered into with any counterparty that is a Lender, a Joint Lead Arranger or an Affiliate of a Lender or a Joint Lead Arranger at the time such Swap Agreement is entered into.
 
“ Securities Act ” means the Securities Act of 1933.
 
“ Security Documents ” means the Collateral Agreement, the Guarantee Agreements, each Mortgage and each other security agreement or pledge agreement executed and delivered pursuant to the Collateral and Guarantee Requirement, Section 5.11 , Section 5.12 or Section 5.14 to secure any of the Secured Obligations.
 
“ Scotiabank ” has the meaning assigned to such term in the preamble to this Agreement.
 
“ Sold Entity or Business ” has the meaning assigned to such term in the definition of the term “Consolidated EBITDA.”
 
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“ Solicited Discount Proration ” has the meaning assigned to such term in Section 2.11(a)(ii)(D)(2) .
 
“ Solicited Discounted Prepayment Amount ” has the meaning assigned to such term in Section 2.11(a)(ii)(D) .
 
“ Solicited Discounted Prepayment Notice ” means an irrevocable written notice of the Borrower Solicitation of Discounted Prepayment Offers made pursuant to Section 2.11(a)(ii)(C)  substantially in the form of Exhibit S .
 
“ Solicited Discounted Prepayment Offer ” means the irrevocable written offer by each Term Lender, substantially in the form of Exhibit T , submitted following the Administrative Agent’s receipt of a Solicited Discounted Prepayment Notice.
 
“ Solicited Discounted Prepayment Response Date ” has the meaning assigned to such term in Section 2.11(a)(ii)(D) .
 
“ Specified Discount ” has the meaning assigned to such term in Section 2.11(a)(ii)(B) .
 
“ Specified Discount Prepayment Amount ” has the meaning assigned to such term in Section 2.11(a)(ii)(B) .
 
“ Specified Discount Prepayment Notice ” means an irrevocable written notice of the Borrower of Specified Discount Prepayment made pursuant to Section 2.11(a)(ii)(B)  substantially in the form of Exhibit O .
 
“ Specified Discount Prepayment Response ” means the irrevocable written response by each Term Lender, substantially in the form of Exhibit P , to a Specified Discount Prepayment Notice.
 
“ Specified Discount Prepayment Response Date ” has the meaning assigned to such term in Section 2.11(a)(ii)(B) .
 
“ Specified Discount Proration ” has the meaning assigned to such term in Section 2.11(a)(ii)(B)(2) .
 
“ Specified Transaction ” means, with respect to any period, any Investment, sale, transfer or other disposition of assets, incurrence or repayment of Indebtedness, Restricted Payment, subsidiary designation or other event that by the terms of the Loan Documents requires “Pro Forma Compliance” with a test or covenant hereunder or requires such test or covenant to be calculated on a Pro Forma Basis.
 
“ Sponsor ” means Tricor Pacific Capital, Inc. and /or its Affiliates, but excluding any operating portfolio companies of Tricor Pacific Capital, Inc. and /or its Affiliates.
 
“ Statutory Reserve Rate ” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus
 
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the aggregate of the maximum reserve, liquid asset or similar percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by any Governmental Authority of the United States.  Such reserve, liquid asset or similar percentages shall include those imposed pursuant to Regulation D of the Board of Governors.  Eurodollar Loans shall be deemed to be subject to such reserve, liquid asset or similar requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under Regulation D or any other applicable law, rule or regulation.  The Statutory Reserve Rate shall be adjusted automatically on and as of the Closing Date of any change in any reserve percentage.
 
“ Submitted Amount ” has the meaning assigned to such term in Section 2.11(a)(ii)(C) .
 
“ Submitted Discount ” has the meaning assigned to such term in Section 2.11(a)(ii)(C) .
 
“ Subordinated Indebtedness ” means (a)  any Indebtedness that is subordinated in right of payment to the First Lien Obligations and (b) any Permitted Refinancing in respect of any of the foregoing.
 
“ subsidiary ” means, with respect to any Person (the “ parent ”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.
 
“ Subsidiary ” means any subsidiary of the Borrower (unless otherwise specified).
 
“ Subsidiary Loan Party ” means each Subsidiary that is required to enter into a Guarantee Agreement pursuant to the Collateral and Guarantee Requirement.  Unless the context requires otherwise, the term “Subsidiary Loan Party” shall include the Borrower.
 
“ Successor Borrower ” has the meaning assigned to such term in Section 6.03(a)(iv) .
 
“ Swap Agreement ” means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement or contract involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by
 
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current or former directors, officers, employees or consultants of Holdings, the Borrower or the Subsidiaries shall be a Swap Agreement.
 
“ Swap Obligation ” means, with respect to any Loan Party, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.
 
“ Swingline Exposure ” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time.  The Swingline Exposure of any Revolving Lender at any time shall be its Applicable Percentage of the total Swingline Exposure at such time.
 
“ Swingline Lender ” means Scotiabank, in its capacity as lender of Swingline Loans hereunder for the applicable currency.
 
“ Swingline Loan ” means a Loan denominated in U.S. Dollars made to the Borrower pursuant to Section 2.04 .  The Swingline Loans are part of, and not in addition to, the aggregate Revolving Commitments.
 
“ Swingline Request ” has the meaning assigned to such term in Section 2.04(b) .
 
“ Syndication Agent ” means Goldman Sachs Lending Partners LLC.
 
“ Taxes ” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
 
“ Term Commitment ” means, with respect to each Lender, the commitment, if any, of such Lender to make a Term Loan on the Closing Date, expressed as an amount representing the maximum principal amount of the Term Loan to be made by such Lender, as such commitment may be (a) reduced from time to time pursuant to Section 2.08 and (b) reduced or increased from time to time pursuant to assignments by or to such Lender pursuant to Section 9.04 .  The initial amount of each Lender’s Term Commitment is set forth on Schedule 2.01 , or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Term Commitment, as applicable.  The initial aggregate amount of the Lenders’ Term Commitments is $435,000,000.
 
“ Term Commitment Increase ” has the meaning assigned to such term in Section 2.20(a)(ii) .
 
“ Term Facility ” means, the Term Commitments and the provisions herein related to the Term Loans.
 
“ Term Lender ” means a Lender that has a Term Commitment or that extends Term Loans to the Borrower.
 
“ Term Loan ” shall have the meaning attributed to such term in Section 2.01 .
 
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“ Term Maturity Date ” means (i) August 17, 2022 and (ii) with respect to Other Term Loans or term loans made pursuant to a Term Commitment Increase, the maturity date thereof set forth in the applicable Refinancing Amendment or Incremental Term Facility Amendment, as applicable.
 
“ Test Date ” means the last day of any fiscal quarter of Holdings.
 
“ Test Period ” means, at any date of determination, the period of four consecutive fiscal quarters of Holdings then last ended as of such time for which financial statements have been delivered pursuant to Sections 5.01(a)  or (b) ; provided that (i) for any date of determination before the delivery of the first financial statements pursuant to Sections 5.01(a)  or (b) , the Test Period shall be the period of four consecutive fiscal quarters of Holdings ending June 30, 2015 and (ii) for any Test Date referenced in Section 6.11 , the Test Period shall be the most recent period of four consecutive fiscal quarters ended on such Test Date.
 
“ Total Net Leverage Ratio ” means on any date, the ratio, on a Pro Forma Basis, of (a) Consolidated Net Debt as of such date to (b) Consolidated EBITDA for the most recently ended Test Period.
 
“ Total Secured Net Leverage Ratio ” means, as of any date of determination, the ratio, on a Pro Forma Basis, of (a) Consolidated Total Secured Indebtedness as of such date to (b) Consolidated EBITDA for the most recently completed Test Period.
 
“ Transaction Costs ” means all fees, costs and expenses incurred or payable by Holdings, the Borrower or any other Subsidiary in connection with the Transactions.
 
“ Transactions ” means (a)  the Financing Transactions, (b) the Refinancing, (c) the Redemption, and (d) the payment of the Transaction Costs.
 
“ Type ,” when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted Eurodollar Rate or the Alternate Base Rate.
 
“ UCC ” has the meaning attributed to such term in the Collateral Agreement.
 
“ Undisclosed Administration ” means in relation to a Lender or a Person that directly or indirectly controls such Lender, the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official by a supervisory authority or regulator under or based on the law in the country where such Lender or Person, as the case may be, is subject to home jurisdiction supervision if applicable law requires that such appointment is not to be publicly disclosed.
 
“ U.S. Dollar Equivalent ” means, on any date of determination, (a) with respect to any amount in U.S. Dollars, such amount, and (b) with respect to any amount in Canadian Dollars or British Pounds Sterling, the equivalent in U.S. Dollars of such amount, determined by the Administrative Agent using the Exchange Rate with respect to such currency at that time.
 
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“ U.S. Dollars ” “ dollars ” or “ $ ” refers to lawful money of the United States of America.
 
“ U.S. Person ” means a “ United States person ” within the meaning of Section 7701(a)(30) of the Code.
 
“ United States Tax Compliance Certificate ” has the meaning set forth in Section 2.17(f)(ii)(C) .
 
“ United States ” and “ U.S. ” each means the United States of America.
 
“ Unrestricted Subsidiary ” means any Subsidiary designated by the Borrower as an Unrestricted Subsidiary pursuant to Section 5.13 subsequent to the Closing Date.
 
“ Weighted Average Life to Maturity ” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:  (a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (b) the then outstanding principal amount of such Indebtedness.
 
“ Wholly Owned Restricted Subsidiary ” means any Restricted Subsidiary that is a Wholly Owned Subsidiary.
 
“ Wholly Owned Subsidiary ” means, with respect to any Person at any date, a subsidiary of such Person of which securities or other ownership interests representing 100% of the Equity Interests (other than (a) directors’ qualifying shares and (b) nominal shares issued to foreign nationals to the extent required by applicable Requirements of Law) are, as of such date, owned, controlled or held by such Person or one or more Wholly Owned Subsidiaries of such Person or by such Person and one or more Wholly Owned Subsidiaries of such Person.
 
“ Withdrawal Liability ” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
 
Section 1.02                              Classification of Loans and Borrowings .  For purposes of this Agreement, Loans may be classified and referred to by Class (e.g., a “Revolving Loan”) or by Type (e.g., a “Eurodollar Loan” or “ABR Loan”) or by Class and Type (e.g., a “Eurodollar Revolving Loan”).  Borrowings also may be classified and referred to by Class (e.g., a “Revolving Borrowing” or “ABR Borrowing”) or by Type (e.g., a “Eurodollar Borrowing”) or by Class and Type (e.g., a “Eurodollar Revolving Borrowing”).
 
Section 1.03                              Terms Generally .  The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined.  Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”  The word “will” shall be construed to have the same meaning and effect as the word
 
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“shall.”  Unless the context requires otherwise, (a) any definition of or reference to any agreement (including this Agreement and the other Loan Documents), instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, amended and restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or other modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignment set forth herein) and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all functions thereof, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (d) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, (e) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement and (f) 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.
 
Section 1.04                              Accounting Terms; GAAP .  Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided , however , that if the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision (including any definitions) hereof to eliminate the effect of any change occurring after the Closing Date in GAAP or in the application thereof on the operation of such provision (or if the Administrative Agent notifies the Borrower that the Required Lenders 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 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.  Notwithstanding any other provision contained herein, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made, without giving effect to any election under Financial Accounting Standards Accounting Standards Codification No. 825—Financial Instruments, or any successor thereto (including pursuant to the Accounting Standards Codification), to value any Indebtedness of Holdings, the Borrower or any Subsidiary at “fair value” as defined therein.  Notwithstanding any other provision contained herein, any lease that is treated as an operating lease for purposes of GAAP as of the Closing Date shall continue to be treated as an operating lease (and any future lease, if it were in effect on the Closing Date, that would be treated as an operating lease for purposes of GAAP as of the Closing Date shall be treated as an operating lease), in each case for purposes of this Agreement, notwithstanding any change in GAAP after the Closing Date.
 
Section 1.05                              Exchange Rate Calculations .  On each Calculation Date, the Administrative Agent shall (a) determine the Exchange Rate as of such Calculation Date and (b) give notice thereof to the Borrower and to any Lender that shall have requested a copy of such notice (it being understood that a Lender shall not have the right to independently request a
 
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determination of the Exchange Rate).  The Exchange Rate so determined shall become effective on such Calculation Date and shall remain effective until the next succeeding Calculation Date, and shall for all purposes of this Agreement (other than any other provision expressly requiring the use of a current Exchange Rate) be the Exchange Rate employed in converting amounts between U.S. Dollars and any other currency.
 
Section 1.06                              Permitted Encumbrances .  Any reference in any of the Loan Documents to a Permitted Encumbrance is not intended to subordinate or postpone, and shall not be interpreted as subordinating or postponing, or as any agreement to subordinate or postpone, any Lien created by any of the Loan Documents to any Permitted Encumbrance.
 
Section 1.07                              Limited Condition Transactions.  Notwithstanding anything to the contrary in this Agreement, to the extent that the terms of the Loan Documents require (i) compliance with any financial ratio or test and/or the amount of Consolidated EBITDA or CTA or (ii) the absence of a Default or Event of Default (or any type of default or event of default) in each case as a condition to (A) the consummation of any transaction in connection with any Permitted Acquisition or similar Investment (including the assumption or incurrence of Indebtedness), (B) the making of any Restricted Payment and/or (C) the making of any restricted repayment of Indebtedness (such action pursuant to clause (A), (B) or (C), a “ Limited Condition Transaction ”), the determination of whether the relevant condition is satisfied may be made, at the election of the Borrower (a “ LCT Election ”), (1) in the case of any Permitted Acquisition or similar Investment, at the time of (or on the basis of the financial statements for the most recently ended fiscal quarter at the time of) either (x) the execution of the definitive agreement with respect to such Permitted Acquisition or Investment or (y) the consummation of such Permitted Acquisition or Investment, (2) in the case of any Restricted Payment, at the time of (or on the basis of the financial statements for the most recently ended fiscal quarter at the time of) (x) the declaration of such Restricted Payment or (y) the making of such Restricted Payment and (3) in the case of any restricted repayment of Indebtedness, at the time of (or on the basis of the financial statements for the most recently ended fiscal quarter at the time of) (x) delivery of irrevocable (which may be conditional) notice with respect to such restricted repayment of Indebtedness or (y) the making of such restricted repayment of Indebtedness (the applicable date pursuant to clause (1), (2) or (3), as applicable, the “ LCT Test Date ”), in each case, after giving effect to the relevant Permitted Acquisition, Restricted Payment and/or restricted repayment of Indebtedness on a Pro Forma Basis. If the Borrower has made a LCT Election for any Limited Condition Transaction, then in connection with any subsequent determination of compliance with any financial ratio or test and/or the amount of Consolidated EBITDA or CTA with respect to the incurrence of Indebtedness or Liens, or the making of Restricted Payments or restricted repayment of Indebtedness on or following the relevant LCT Test Date and prior to the earlier of the date on which such Limited Condition Transaction is consummated or the definitive agreement for such Limited Condition Transaction is terminated or expires without consummation of such Limited Condition Transaction, compliance with any such financial ratio or test and/or the amount of Consolidated EBITDA or CTA shall be tested by calculating the availability under such financial ratio or test and/or the amount of Consolidated EBITDA or CTA, as applicable, (i) on a Pro Forma Basis assuming such Limited Condition Transaction and any other transactions in connection therewith have been consummated (including any incurrence of Indebtedness and the use of proceeds thereof), and (ii) with respect to clauses (B)
 
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and (C) above, on a non-Pro Forma Basis assuming such transactions have not been consummated.
 
ARTICLE II
 
THE CREDITS
 
Section 2.01                              Commitments .  Subject to the terms and conditions set forth herein and in reliance upon the representations and warranties of the Loan Parties contained herein, (a) each Term Lender severally and not jointly agrees to make a term loan denominated in U.S. Dollars (each, a “ Term Loan ”) to the Borrower on the Closing Date in the principal amount not exceeding the amount of its Term Commitment set forth on Schedule 2.01 and (b) each Revolving Lender severally and not jointly agrees to make loans denominated in U.S. Dollars (each, a “ Revolving Loan ”) to the Borrower from time to time during the Revolving Availability Period in an aggregate principal amount at any time outstanding that will not result in (i) such Lender’s Revolving Exposure exceeding such Lender’s Revolving Commitment or (ii) the aggregate Revolving Exposure of all Revolving Lenders exceeding the aggregate Revolving Commitments of all Revolving Lenders.  Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans.  Amounts repaid or prepaid in respect of Term Loans may not be reborrowed.
 
Section 2.02                              Loans and Borrowings .
 
(a)                                  Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class.  The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required hereby.
 
(b)                                  Subject to Section 2.14 , (i) each Revolving Borrowing and Term Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith; provided that all Borrowings made on the Closing Date must be made as ABR Borrowings, unless the Borrower shall have given the notice required for a Eurodollar Borrowing under Section 2.03 and provided, unless waived, an indemnity letter, in form and substance reasonably satisfactory to the Administrative Agent, extending the benefits of Section 2.16 to Lenders in respect of such Borrowings.  Each Swingline Loan shall be an ABR Loan.  Each Lender at its option may make any Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.
 
(c)                                   At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided that a Eurodollar Borrowing that results from a continuation of an outstanding Eurodollar Borrowing may be in an aggregate amount that is equal to such outstanding Borrowing.  At the time that each ABR
 
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Borrowing is made (other than a Swingline Loan), such Borrowing shall be in an aggregate amount that is an integral multiple of the Borrowing Multiple and not less than the Borrowing Minimum; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the aggregate Revolving Commitments of all Lenders or that is required to finance the reimbursement of a LC Disbursement as contemplated by Section 2.05(f)  or a Swingline Loan as contemplated by Section 2.04(c) .  Each Swingline Loan shall be in an amount that is an integral multiple of the Borrowing Multiple and not less than $250,000.  Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of six (6) (or such greater number as may be agreed to by the Administrative Agent) Eurodollar Borrowings of Term Loans and Revolving Loans outstanding.
 
(d)                                  Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert to or continue, any Eurodollar Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date applicable thereto.
 
Section 2.03                              Requests for Borrowings .  To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by written notice in the form of a Borrowing Request (a) in the case of a Eurodollar Borrowing of Term Loans or Revolving Loans, not later than 12:00 p.m., New York City time, three (3) Business Days before the date of the proposed Borrowing (or, in the case of any Eurodollar Borrowing of Term Loans or Revolving Loans to be made on the Closing Date, such shorter period of time as may be agreed to by the Administrative Agent and the Joint Lead Arrangers) or (b) in the case of an ABR Borrowing, not later than 12:00 p.m., New York City time, one (1) Business Day before the date of the proposed Borrowing.  Each such written Borrowing Request shall specify the following information in compliance with Section 2.02 :
 
(i)                                      whether the requested Loans are to be Term Loans, Revolving Loans, or a Borrowing of any other Class (specifying the Class thereof);
 
(ii)                                   the aggregate principal amount of each such Borrowing;
 
(iii)                                the date of such Borrowing, which shall be a Business Day;
 
(iv)                               whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;
 
(v)                                  in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”;
 
(vi)                               the location and number of the Borrower’s account to which funds are to be disbursed, which shall comply with the requirements of Section 2.06 , or, in the case of any ABR Revolving Borrowing requested to finance the reimbursement of an LC Disbursement as provided in Section 2.05(f) , the identity of the Issuing Bank that made such LC Disbursement; and
 
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(vii)                            that as of the date of such Borrowing, the conditions set forth in Section 4.02(a) , Section 4.02(b)  and Section 4.02(c)  are satisfied.
 
If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing.  If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.  Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall notify each Lender of such Borrowing Request and of the amount of such Lender’s Applicable Percentage of the requested Borrowing.
 
Section 2.04                              Swingline Loans .
 
(a)                                  Availability .  Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of the Loan Parties contained herein, the Swingline Lender may, in its sole discretion, make Swingline Loans to the Borrower under the Revolving Commitments from time to time on any Business Day during the period from the Closing Date until the Revolving Maturity Date in an aggregate principal amount at any time outstanding not to exceed $5,000,000; provided however that the Swingline Lender may not make any Swingline Loan (x) to the extent that after giving effect to such Swingline Loan, the aggregate principal amount of all Revolving Exposure would exceed the aggregate Revolving Commitments and (y) during the period commencing on the first (1st) Business Day after it receives notice from the Administrative Agent or the Required Revolving Lenders that one or more of the conditions precedent contained in Section 4.02 are not satisfied and directing it not to make Swingline Loans and ending when such conditions are satisfied or duly waived.  In connection with the making of any Swingline Loan, the Swingline Lender may but shall not be required to determine that, or take notice whether, the conditions precedent set forth in Section 4.02 have been satisfied or waived.  Each Swingline Loan shall be an ABR Loan and must be repaid in full on the earliest of (x) the funding date of any Borrowing of Revolving Loans and (y) the date of the termination of the Revolving Commitments.  Within the limits set forth in this clause (a), amounts of Swingline Loans repaid may be reborrowed under this clause (a).
 
(b)                                  Borrowing Procedures .  In order to request a Swingline Loan, the Borrower shall give to the Administrative Agent a notice to be received not later than 12:00 p.m. New York City time on the day of the proposed Borrowing, which may be made in a writing substantially in the form of Exhibit G duly completed (a “ Swingline Request ”) or by telephone if confirmed promptly but, in any event, prior to such Borrowing, with such a Swingline Request.  In addition, if any Borrowing Request of Revolving Loans requests a Borrowing of ABR Loans (other than a Borrowing to refinance outstanding Swingline Loans), the Swingline Lender may, notwithstanding anything else to the contrary herein, make a Swingline Loan available to the Borrower in an aggregate amount not to exceed such proposed Borrowing, and the aggregate amount of the corresponding proposed Borrowing shall be reduced accordingly by the principal amount of such Swingline Loan.  The Administrative Agent shall promptly notify the Swingline Lender of the details of the requested Swingline Loan.  Upon receipt of such notice and subject to the terms of this Agreement, the Swingline Lender may make a Swingline Loan available to the Borrower by making the proceeds thereof available to the Administrative Agent and, in turn,
 
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the Administrative Agent shall make such proceeds available to the Borrower on the date set forth in the relevant Swingline Request or Borrowing Request.
 
(c)                                   Refinancing Swingline Loans .  (i) The Swingline Lender may at any time forward a demand to the Administrative Agent (which the Administrative Agent shall, upon receipt, forward to each Revolving Lender) that each Revolving Lender pay to the Administrative Agent, for the account of the Swingline Lender, such Revolving Lender’s ratable portion of the outstanding Swingline Loans (as such amount may be increased pursuant to Section 2.20 ).
 
(ii)                                   Each Revolving Lender shall pay the amount owing by it to the Administrative Agent for the account of the Swingline Lender on the Business Day such Revolving Lender receives a notice or demand therefor.  Payments received by the Administrative Agent after 11:00 a.m. New York City time may, in the Administrative Agent’s discretion, be deemed to be received on the next Business Day.  Upon receipt by the Administrative Agent of such payment (other than during the continuation of any Event of Default under subsection 7.01(i)  or 7.01(j) ), such Revolving Lender shall be deemed to have made a Revolving Loan to the Borrower, which, upon receipt of such payment by the Swingline Lender from the Administrative Agent, the Borrower shall be deemed to have used in whole to refinance such Swingline Loan.  In addition, regardless of whether any such demand is made, upon the occurrence of any Event of Default under subsection 7.01(i)  or 7.01(j) , each Revolving Lender shall be deemed to have acquired, without recourse or warranty, an undivided interest and participation in each Swingline Loan in an amount equal to such Lender’s ratable portion of such Swingline Loan.  If any payment made by any Revolving Lender as a result of any such demand is not deemed a Revolving Loan, such payment shall be deemed a funding by such Lender of such participation.  Upon receipt by the Swingline Lender of any payment from any Revolving Lender pursuant to this clause (ii) with respect to any portion of any Swingline Loan, the Swingline Lender shall promptly pay over to such Revolving Lender all payments of principal (to the extent received after such payment by such Lender) and interest (to the extent accrued with respect to periods after such payment) on account of such Swingline Loan received by the Swingline Lender with respect to such portion.
 
(d)                                  Obligation to Fund Absolute .  Each Revolving Lender’s obligations pursuant to clause (c)(ii) above shall be absolute, unconditional and irrevocable and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever, including (A) the existence of any setoff, claim, abatement, recoupment, defense or other right that such Lender, any Affiliate thereof or any other Person may have against the Swingline Lender, the Administrative Agent, any other Lender or Issuing Bank or any other Person, (B) the failure of any condition precedent set forth in Section 4.02 to be satisfied or the failure of the Borrower to deliver a Borrowing Request (each of which requirements the Revolving Lenders hereby irrevocably waive) and (C) any adverse change in the condition (financial or otherwise) of any Loan Party.
 
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Section 2.05                              Letters of Credit .
 
(a)                                  Letters of Credit .  On the terms and subject to the conditions contained herein, each Issuing Bank agrees to Issue, at the request of the Borrower, in accordance with such Issuing Bank’s usual and customary business practices, and for the account of the Borrower (or, as long as the Borrower remains responsible for the payment in full of all amounts drawn thereunder and related fees, costs and expenses, for the account of any Subsidiary of the Borrower), Letters of Credit (denominated in U.S. Dollars) from time to time on any Business Day during the period from the Closing Date (including any issuances of Letters of Credit on the Closing Date) through the earlier of the date of the termination of the Revolving Commitments and five (5) Business Days prior to the date of the Revolving Maturity Date; provided , however , that such Issuing Bank shall not be under any obligation to Issue any Letter of Credit upon the occurrence of any of the following, after giving effect to such Issuance:
 
(i)                                      (A) the Aggregate Revolving Exposure would exceed the Aggregate Revolving Commitment or (B) the LC Exposure would exceed the Letter of Credit Sublimit;
 
(ii)                                   the expiration date of such Letter of Credit (A) is not a Business Day, (B) is more than one (1) year after the date of issuance thereof or (C) is later than five (5) Business Days prior to the Revolving Maturity Date; provided, however, that any Letter of Credit with a term not exceeding one (1) year may provide for its automatic renewal for additional periods not exceeding one (1) year as long as (x) the Borrower and such Issuing Bank have the option to prevent such renewal before the expiration of such term or any such period and (y) neither such Issuing Bank nor the Borrower shall permit any such renewal to extend such expiration date beyond the date set forth in clause (C) above; or
 
(iii)                                (A) any fee due in connection with, and on or prior to, such Issuance has not been paid, (B) such Letter of Credit is requested to be issued in a form that is not reasonably acceptable to such Issuing Bank or (C) such Issuing Bank shall not have received, each in form and substance reasonably acceptable to it and duly executed by the Borrower (and, if such Letter of Credit is issued for the account of any Subsidiary of the Borrower that is a Loan Party, such Person), the documents that such Issuing Bank generally uses in the ordinary course of its business for the Issuance of letters of credit of the type of such Letter of Credit (collectively, the “ L/C Reimbursement Agreement ”).
 
In no event shall Scotiabank as Issuing Bank be obligated to issue trade Letters of Credit.
 
The Existing Letters of Credit shall be deemed to have been issued pursuant hereto, and from and after the Closing Date shall be subject to and governed by the terms and conditions hereof.
 
For each such Issuance, the applicable Issuing Bank may, but shall not be required to, determine that, or take notice whether, the conditions precedent set forth in Section 4.02 have been satisfied or waived in connection with the Issuance of any Letter of Credit; provided , however , that no Letter of Credit shall be Issued during the period starting on the first (1st) Business Day after the receipt by such Issuing Bank of notice from the Administrative Agent or the Required Revolving
 
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Lenders that any condition precedent contained in Section 4.02 is not satisfied and directing Issuing Bank not to issue a Letter of Credit and ending on the date all such conditions are satisfied or duly waived in accordance with this Agreement.  Notwithstanding anything else to the contrary herein, if any Lender with a Revolving Commitment is a Defaulting Lender, no Issuing Bank shall be obligated to Issue any Letter of Credit unless (w) the Defaulting Lender has been replaced in accordance with Section 2.19(b) , (x) the Defaulting Lender Fronting Exposure has been cash collateralized, (y) the Revolving Commitments of the other Lenders with a Revolving Commitment have been increased by an amount sufficient to satisfy the Administrative Agent that all future Letter of Credit Obligations will be covered by all Revolving Lenders that are non-Defaulting Lenders, or (z) the Letter of Credit Obligations of such Defaulting Lender have been reallocated to other Revolving Lenders in a manner consistent with Section 2.22(b) ).
 
(b)                                  Notice of Issuance .  The Borrower shall give the relevant Issuing Bank and the Administrative Agent a notice of any requested Issuance of any Letter of Credit, which shall be effective only if received by such Issuing Bank and the Administrative Agent not later than 12:00 p.m. New York City time on the third (3rd) Business Day prior to the date of such requested Issuance or, in each case such shorter period as may be agreed to by the Administrative Agent and the Issuing Bank in any particular instance.  Such notice shall be made in a writing or Electronic Transmission substantially in the form of Exhibit H duly completed or in a writing in any other form reasonably acceptable to such Issuing Bank (an “ LC Request ”).
 
(c)                                   Reporting Obligations of Issuing Banks .  Each Issuing Bank agrees to provide the Administrative Agent (which, after receipt, the Administrative Agent shall provide to each Revolving Lender), in form and substance satisfactory to the Administrative Agent, each of the following on the following dates:  (A) (i) on or prior to any Issuance of any Letter of Credit by such Issuing Bank, (ii) immediately after any drawing under any such Letter of Credit or (iii) immediately after any payment (or failure to pay when due) by the Borrower of any related L/C Reimbursement Obligation, notice thereof, which shall contain a reasonably detailed description of such Issuance, drawing or payment; (B) upon the request of the Administrative Agent (or any Revolving Lender through the Administrative Agent), copies of any Letter of Credit Issued by such Issuing Bank and any related L/C Reimbursement Agreement and such other documents and information as may reasonably be requested by the Administrative Agent; and (C) on the first (1st) Business Day of each calendar week, a schedule of the Letters of Credit Issued by such Issuing Bank, in form and substance reasonably satisfactory to the Administrative Agent, setting forth the Letter of Credit Obligations for such Letters of Credit outstanding on the last Business Day of the previous calendar week.
 
(d)                                  Acquisition of Participations .  Upon any Issuance of a Letter of Credit in accordance with the terms of this Agreement resulting in any increase in the Letter of Credit Obligations, each Revolving Lender shall be deemed to have acquired, without recourse or warranty, an undivided interest and participation in such Letter of Credit and the related Letter of Credit Obligations in an amount equal to its ratable portion of such Letter of Credit Obligations.
 
(e)                                   Reimbursement Obligations of the Borrower .  The Borrower agrees to pay to the Issuing Bank of any Letter of Credit each LC Reimbursement Obligation owing with respect to such Letter of Credit on the Business Day the Borrower receives notice from such
 
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Issuing Bank that payment has been made under such Letter of Credit or that such LC Reimbursement Obligation is otherwise due if such notice shall have been received by the Borrower before 11:00 a.m., New York City time on such Business Day or if not received by the Borrower before 11:00 a.m., New York City time, then no later than 3:00 p.m., New York City time, on the next Business Day (the “ LC Reimbursement Date ”) with interest thereon computed as set forth in clause (A) below.  In the event that any LC Reimbursement Obligation is not repaid by the Borrower as provided in this clause (e) (or any such payment by the Borrower is rescinded or set aside for any reason), such Issuing Bank shall promptly notify the Administrative Agent of such failure (and, upon receipt of such notice, the Administrative Agent shall forward a copy to each Revolving Lender) and, irrespective of whether such notice is given, such LC Reimbursement Obligation shall be payable on demand by the Borrower with interest thereon computed (A) from the date on which such LC Reimbursement Obligation arose to the LC Reimbursement Date, at the interest rate applicable during such period to Revolving Loans that are ABR Loans and (B) thereafter until payment in full, at the interest rate applicable during such period to past due Revolving Loans that are ABR Loans.
 
(f)                                    Reimbursement Obligations of the Revolving Lenders.
 
(i)                                      Upon receipt of the notice described in clause (b) above from the Administrative Agent, each Revolving Lender shall pay to the Administrative Agent for the account of such Issuing Bank its ratable portion of such Letter of Credit Obligations (as such amount may be increased pursuant to Section 2.20 ).
 
(ii)                                   By making any payment described in clause (i) above (other than during the continuation of an Event of Default under subsection 7.01(i)  or 7.01(j) ), such Lender shall be deemed to have made a Revolving Loan to the Borrower, which, upon receipt thereof by the Administrative Agent for the benefit of such Issuing Bank, the Borrower shall be deemed to have used in whole to repay such LC Reimbursement Obligation.  Any such payment that is not deemed a Revolving Loan shall be deemed a funding by such Revolving Lender of its participation in the applicable Letter of Credit and the Letter of Credit Obligation in respect of the related LC Reimbursement Obligations.  Such participation shall not otherwise be required to be funded.  Following receipt by any Issuing Bank of any payment from any Lender pursuant to this clause (ii) with respect to any portion of any LC Reimbursement Obligation, such Issuing Bank shall promptly pay to the Administrative Agent, for the benefit of such Lender all amounts received by such Issuing Bank (or to the extent such amounts shall have been received by the Administrative Agent for the benefit of such Issuing Bank, the Administrative Agent shall promptly pay to such Lender all amounts received by the Administrative Agent for the benefit of such Issuing Bank) with respect to such portion.
 
(g)                                   Obligations Absolute .  The obligations of the Borrower and the Revolving Lenders pursuant to clauses (b) , (e)  and (f)  above shall be absolute, unconditional and irrevocable and performed strictly in accordance with the terms of this Agreement irrespective of (A) (i) the invalidity or unenforceability of any term or provision in any Letter of Credit, any document transferring or purporting to transfer a Letter of Credit, any Loan Document (including the sufficiency of any such instrument), or any modification to any provision of any of the foregoing, (ii) any document presented under a Letter of Credit being forged, fraudulent, invalid,
 
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insufficient or inaccurate in any respect or failing to comply with the terms of such Letter of Credit or (iii) any loss or delay, including in the transmission of any document, (B) the existence of any setoff, claim, abatement, recoupment, defense or other right that any Person (including any Loan Party) may have against the beneficiary of any Letter of Credit or any other Person, whether in connection with any Loan Document or any other contractual obligation or transaction, or the existence of any other withholding, abatement or reduction, (C) in the case of the obligations of any Revolving Lender, (i) the failure of any condition precedent set forth in Section 4.02 to be satisfied (each of which conditions precedent the Revolving Lenders hereby irrevocably waive) or (ii) any adverse change in the condition (financial or otherwise) of any Loan Party and (D) any other act or omission to act or delay of any kind of Administrative Agent, any Lender or any other Person or any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.05(g) , constitute a legal or equitable discharge of any obligation of the Borrower or any Revolving Lender hereunder.  No provision hereof shall be deemed to waive or limit the Borrower’s right to seek repayment of any payment of any LC Reimbursement Obligations from the Issuing Bank under the terms of the applicable LC Reimbursement Agreement or applicable law.
 
Section 2.06                              Funding of Borrowings .
 
(a)                                  Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 12:00 p.m., New York City time, to the Applicable Account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders; provided that Swingline Loans shall be made as provided in Section 2.04 .  The Administrative Agent will make such Loans available to the Borrower by promptly remitting the amounts so received, in like funds, to an account of the Borrower or, in the case of ABR Revolving Loans or Swingline Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(f) , to the Issuing Bank specified by the Borrower in the applicable Borrowing Request; provided that ABR Revolving Loans that are Revolving Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.05(f)  shall be remitted by the Administrative Agent to the applicable Issuing Bank or, to the extent that Revolving Lenders have made payments pursuant to Section 2.05(f)  to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear.
 
(b)                                  Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with paragraph (a)  of this Section and may, in reliance on 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 Borrowing 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 rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation (or, in the case of an amount relating to a Borrowing by the Borrower, the Federal
 
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Funds Effective Rate, if greater) and (ii) in the case of a payment to be made by the Borrower, the interest rate applicable to ABR Revolving Loans.  If such Lender does not pay such corresponding amount forthwith upon demand of the Administrative Agent therefor, the Administrative Agent shall promptly notify the Borrower, and the Borrower agrees to pay such corresponding amount to the Administrative Agent forthwith on demand.
 
(c)                                   The obligations of the Lenders hereunder to make Loans of any Class, to fund participations in Letters of Credit and to make payments pursuant to Section 9.03(c)  are several and not joint.  The failure of any Lender to make any Loan, to fund any such participation or to make any payment under Section 9.03(c)  on any date required hereunder shall not relieve any other Lender of its corresponding obligation to do so on such date, and no Lender shall be responsible for the failure of any other Lender to so make its Loan, to purchase its participation or to make its payment under Section 9.03(c) .
 
Section 2.07                              Interest Elections .
 
(a)                                  The Borrower shall have the option to (i) request that any Revolving Loan or any Term Loan be made as a Eurodollar Loan, (ii) convert at any time all or any part of Revolving Loans or the Term Loans from ABR Loans to Eurodollar Loans, (iii) convert any Revolving Loan or any Term Loan, in each case, that is a Eurodollar Loan to an ABR Loan, subject to Section 2.16 if such conversion is made prior to the expiration of the Interest Period applicable thereto, or (iv) continue all or any portion of any Revolving Loan or any Term Loan, in each case, that are Eurodollar Loans upon the expiration of the applicable Interest Period.  Any Term Loan, Revolving Loan or group of Term Loans and/or Revolving Loans having the same proposed Interest Period to be made or continued as, or converted into, a Eurodollar Loan must be in a minimum amount of $500,000.  Any such election must be made by the Borrower by 12:00 p.m. New York City time at least three (3) Business Days prior to (1) the proposed conversion date in the case of a conversion of a Eurodollar Loan to an ABR Loan, (2) the date of any proposed Revolving Loan or Term Loan which is to be a Eurodollar Loan, (3) the end of each Interest Period with respect to any Eurodollar Loans to be continued as such, or (4) the date on which the Borrower wishes to convert any ABR Loan to a Eurodollar Loan for an Interest Period designated by the Borrower in such election.  Except as provided clause (g) of this Section 2.07 , if no election is received with respect to a Eurodollar Loan by 12:00 p.m., New York City time on the third (3rd) Business Day prior to the end of the Interest Period with respect thereto, that Eurodollar Loan shall be converted to an ABR Loan at the end of its Interest Period.  The Borrower must make such election by notice to the Administrative Agent in writing, by fax, overnight courier, or by electronic transmission (or by telephone, to be confirmed in writing on such day).  In the case of any conversion or continuation, such election must be made pursuant to a written notice (a “ Notice of Conversion/Continuation ”) in the form of Exhibit J .  No Loan shall be made, converted into or continued as a Eurodollar Loan, if an Event of Default has occurred and is continuing and the Administrative Agent or the Required Lenders have determined not to make or continue any Loan as a Eurodollar Loan as a result thereof.
 
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(b)                                  [reserved];
 
(c)                                   [reserved];
 
(d)                                  Upon receipt of a Notice of Conversion/Continuation, the Administrative Agent will promptly notify each applicable Lender thereof.  In addition, the Administrative Agent will, with reasonable promptness, notify the Borrower and the applicable Lenders of each determination of Eurodollar Rate; provided that any failure to do so shall not relieve the Borrower of any liability hereunder or provide the basis for any claim against the Administrative Agent.  All conversions and continuations shall be made pro rata according to the respective outstanding principal amounts of the Loans held by each Lender with respect to which the notice was given;
 
(e)                                   Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.03 :
 
(i)                                      the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii)  and (iv)  below shall be specified for each resulting Borrowing);
 
(ii)                                   the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;
 
(iii)                                whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and
 
(iv)                               if the resulting Borrowing is to be a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.
 
If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.
 
(f)                                    Promptly following receipt of an Interest Election Request in accordance with this Section, the Administrative Agent shall advise each Lender of the applicable Class of the details thereof and of such Lender’s portion of each resulting Borrowing.
 
(g)                                   If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Eurodollar Borrowing is repaid as provided herein, at the end of such Interest Period applicable thereto, such Eurodollar Borrowing shall (i) in the case of a Term Borrowing, be continued as a Eurodollar Borrowing, as the case may be, for an additional Interest Period of one month or (ii) in the case of a Eurodollar Borrowing of Revolving Loans, be converted to an ABR Borrowing.  Notwithstanding any contrary provision hereof, if an Event of Default under clause (h) or (i) of Article VII has occurred and is continuing with respect to Holdings or the
 
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Borrower, or if any other Event of Default has occurred and is continuing and the Administrative Agent, at the request of a Majority in Interest of Lenders of any Facility, has notified the Borrower of the election to give effect to this sentence on account of such other Event of Default, then, in each such case, so long as such Event of Default is continuing, (i) no outstanding Borrowing of such Class may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing of such Class shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.
 
Section 2.08                              Termination and Reduction of Commitments .
 
(a)                                  Unless previously terminated, (i) the Term Commitments shall terminate at 5:00 p.m., New York City time, on the Closing Date and (ii) the Revolving Commitments shall terminate on the Revolving Maturity Date.
 
(b)                                  The Borrower may at any time terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $250,000 and not less than $250,000, unless such amount represents all of the remaining Commitments of such Class, (ii) the Borrower shall not terminate or reduce the Revolving Commitments if, after giving effect to any concurrent prepayment of the Revolving Loans or Swingline Loans in accordance with Section 2.11 , the aggregate Revolving Exposure would exceed the aggregate Revolving Commitments of all Lenders and (iii) if, after giving effect to any reduction of the Revolving Commitments, the Letter of Credit Sublimit exceeds the aggregate amount of Revolving Commitments of all Lenders, the Letter of Credit Sublimit shall be automatically reduced by the amount of such excess.
 
(c)                                   The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three (3) Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof.  Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the applicable Class of the contents thereof.  Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination or reduction of the Revolving Commitments under paragraph (b) of this Section may state that such notice is conditioned upon the consummation of an acquisition or sale transaction or upon the effectiveness of other credit facilities or the receipt of proceeds from the issuance of other Indebtedness, 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.  Any termination or reduction of the Commitments of any Class shall be permanent.  Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.
 
Section 2.09                              Repayment of Loans; Evidence of Debt .
 
(a)                                  The Borrower hereby unconditionally promises to pay to the Administrative Agent (i) for the account of each Revolving Lender the then unpaid principal amount of each Revolving Loan of such Revolving Lender on the Revolving Maturity Date and
 
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(ii) for the account of each Term Lender the then unpaid principal amount of each Term Loan of such Term Lender as provided in Section 2.10 .
 
(b)                                  Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.
 
(c)                                   The Administrative Agent, acting solely for this purpose as a non-fiduciary agent for the Borrower, shall maintain a register (the “ Register ”) in its usual practice in which it shall record (i) the amount of each Term Loan and Revolving Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Term Lender and each Revolving Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Term Lenders and the Revolving Lenders and each Term Lender’s and each Revolving Lenders share thereof.  Notwithstanding anything to the contrary contained in this Agreement, the Term Loans and the Revolving Loans (including any notes evidencing such Loans and, in the case of Revolving Loans, the corresponding obligations to participate in Letter of Credit Obligations and Swingline Loans), the right, title and interest of the Lenders and the Issuing Banks and their assignees in and to such Loans, as the case may be, shall be transferable subject to Section 9.04 only upon notation of such transfer in the Register and no assignment thereof shall be effective until recorded therein.  This Section 2.09(c)  and Section 9.04 shall be construed so that the Loans are at all times maintained in “registered form” within the meaning of Sections 163(f), 871(h)(2) and 881(c)(2) of the Code.
 
(d)                                  [Reserved].
 
(e)                                   [Reserved].
 
(f)                                    The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein absent manifest error; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to pay any amounts due hereunder in accordance with the terms of this Agreement.  In the event of any inconsistency between the entries made pursuant to paragraphs (b) and (c) of this Section, the accounts maintained by the Administrative Agent pursuant to paragraphs (c) of this Section shall control.
 
(g)                                   The Loan Parties, the Administrative Agent, the Lenders and the Issuing Banks shall treat each Person whose name is recorded in the Register as a Lender or Issuing Bank, as applicable, for all purposes of this Agreement.  Information contained in the Register with respect to any Lender or any Issuing Bank shall be available for access by the Borrower, the Administrative Agent, such Lender or such Issuing Bank at any reasonable time and from time to time upon reasonable prior notice.  No Lender or Issuing Bank shall, in such capacity, have access to or be otherwise permitted to review any information in the Register other than information with respect to such Lender or Issuing Bank unless otherwise agreed by the Administrative Agent.
 
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(h)                                  Any Lender may request through the Administrative Agent that Loans of any Class made by it be evidenced by a promissory note.  In such event, Borrower shall execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form provided by the Administrative Agent and approved by the Borrower.
 
Section 2.10                              Amortization of Term Loans .
 
(a)                                  Subject to adjustments pursuant to paragraph (c) of this Section, the Borrower shall repay the Term Loans on the last Business Day of each March, June, September and December (commencing on December 31, 2015) in the principal amount of Term Loans equal to the aggregate outstanding principal amount of Term Loans immediately after closing on the Closing Date multiplied by 0.25%.
 
(b)                                  To the extent not previously paid, all Term Loans shall be due and payable on the Term Maturity Date, except as otherwise provided in any Refinancing Amendment, pursuant to the corresponding section regarding maturity of such Refinancing Amendment.
 
(c)                                   Any prepayment of a Term Borrowing of any Class pursuant to Section 2.11 shall be applied to reduce the subsequent scheduled and outstanding repayments of the Term Borrowings of such Class to be made pursuant to this Section as directed by the Borrower (and absent such direction in direct order of maturity).
 
(d)                                  Prior to any repayment of any Term Loans of any Class hereunder, the Borrower shall select the Borrowing or Borrowings of the applicable Class to be repaid and shall notify the Administrative Agent by telephone (confirmed by hand delivery or facsimile) of such election not later than 2:00 p.m., New York City time, one Business Day before the scheduled date of such repayment.  In the absence of a designation by the Borrower as described in the preceding sentence, the Administrative Agent shall make such designation in its reasonable discretion with a view, but no obligation, to minimize breakage costs owing under Section 2.16 .  Each repayment of a Borrowing shall be applied ratably to the Loans included in the repaid Borrowing.  Repayments of Term Borrowings shall be accompanied by accrued interest on the amount repaid.
 
Section 2.11                              Prepayment of Loans .
 
(a)                                  (i) The Borrower shall have the right at any time and from time to time to prepay any Borrowing, in whole or in part, subject to the requirements of this Section 2.11 ; provided that all prepayments under this Section 2.11(a)  shall be accompanied by the Repricing Premium, if applicable.
 
(ii)                                   Notwithstanding anything in any Loan Document to the contrary, so long as no Default or Event of Default has occurred and is continuing, the Borrower may offer to prepay the outstanding Term Loans on the following basis:
 
(A)                                The Borrower shall have the right to make a voluntary prepayment of Term Loans at a discount to par (such prepayment, the “ Discounted Term Loan Prepayment ”) pursuant to the Borrower Offer of Specified Discount Prepayment,
 
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Borrower Solicitation of Discount Range Prepayment Offers or Borrower Solicitation of Discounted Prepayment Offers, in each case made in accordance with this Section 2.11(a)(ii)(A) ; provided that (x) the Borrower shall not make any Borrowing of Revolving Loans (including Swingline Loans) to fund any Discounted Term Loan Prepayment and (y) the Borrower shall not initiate any action under this Section 2.11(a)(ii)(A)  in order to make a Discounted Term Loan Prepayment unless (1) at least ten (10) Business Days shall have passed since the consummation of the most recent Discounted Term Loan Prepayment as a result of a prepayment made by the Borrower on the applicable Discounted Prepayment Closing Date; or (2) at least three (3) Business Days shall have passed since the date the Borrower was notified that no Term Lender was willing to accept any prepayment of any Term Loan at the Specified Discount, within the Discount Range or at any discount to par value, as applicable, or in the case of Borrower Solicitation of Discounted Prepayment Offers, the date of the Borrower’s election not to accept any Solicited Discounted Prepayment Offers; provided , further , that any Term Loan that is so prepaid will be automatically and irrevocably cancelled.
 
(B)                                Subject to the first proviso to subsection (A)  above, the Borrower may from time to time offer to make a Discounted Term Loan Prepayment by providing the Auction Agent with three (3) Business Days’ notice in the form of a Specified Discount Prepayment Notice; provided that (i) any such offer shall be made available, at the sole discretion of the Borrower, to each Term Lender and/or each Lender with respect to any Class of Term Loans on an individual tranche basis, (ii) any such offer shall specify the aggregate principal amount offered to be prepaid (the “ Specified Discount Prepayment Amount ”) with respect to each applicable tranche, the tranche or tranches of Term Loans subject to such offer and the specific percentage discount to par (the “ Specified Discount ”) of such Term Loans to be prepaid (it being understood that different Specified Discounts and/or Specified Discount Prepayment Amounts may be offered with respect to different tranches of Term Loans and, in such an event, each such offer will be treated as a separate offer pursuant to the terms of this Section), (iii) the Specified Discount Prepayment Amount shall be in an aggregate amount not less than $1,000,000 and whole increments of $500,000 in excess thereof and (iv) each such offer shall remain outstanding through the Specified Discount Prepayment Response Date.  The Auction Agent will promptly provide each relevant Term Lender with a copy of such Specified Discount Prepayment Notice and a form of the Specified Discount Prepayment Response to be completed and returned by each such Lender to the Auction Agent (or its delegate) by no later than 5:00 p.m., New York City time, on the third Business Day after the date of delivery of such notice to the relevant Term Lenders (the “ Specified Discount Prepayment Response Date ”).
 
(1)                                  Each relevant Term Lender receiving such offer shall notify the Auction Agent (or its delegate) by the Specified Discount Prepayment Response Date whether or not it agrees to accept a prepayment of any of its relevant then outstanding Term Loans at the Specified Discount and, if so (such accepting Term Lender, a “ Discount Prepayment Accepting
 
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Lender ”), the amount and the tranches of such Lender’s Term Loans to be prepaid at such offered discount.  Each acceptance of a Discounted Term Loan Prepayment by a Discount Prepayment Accepting Lender shall be irrevocable.  Any Term Lender whose Specified Discount Prepayment Response is not received by the Auction Agent by the Specified Discount Prepayment Response Date shall be deemed to have declined to accept the Borrower Offer of Specified Discount Prepayment.
 
(2)                                  If there is at least one Discount Prepayment Accepting Lender, the Borrower will make prepayment of outstanding Term Loans pursuant to this paragraph (B) to each Discount Prepayment Accepting Lender in accordance with the respective outstanding amount and tranches of Term Loans specified in such Lender’s Specified Discount Prepayment Response given pursuant to subsection (2) ; provided that, if the aggregate principal amount of Term Loans accepted for prepayment by all Discount Prepayment Accepting Lenders exceeds the Specified Discount Prepayment Amount, such prepayment shall be made pro-rata among the Discount Prepayment Accepting Lenders in accordance with the respective principal amounts accepted to be prepaid by each such Discount Prepayment Accepting Lender and the Auction Agent (in consultation with the Borrower and subject to rounding requirements of the Auction Agent made in its reasonable discretion) will calculate such proration (the “ Specified Discount Proration ”).  The Auction Agent shall promptly, and in any case within three (3) Business Days following the Specified Discount Prepayment Response Date, notify (i) the Borrower of the respective Term Lenders’ responses to such offer, the Discounted Prepayment Closing Date and the aggregate principal amount of the Discounted Term Loan Prepayment and the tranches to be prepaid, (ii) each Term Lender of the Discounted Prepayment Closing Date, and the aggregate principal amount and the tranches of Term Loans to be prepaid at the Specified Discount on such date and (iii) each Discount Prepayment Accepting Lender of the Specified Discount Proration, if any, and confirmation of the principal amount, tranche and Type of Loans of such Lender to be prepaid at the Specified Discount on such date.  Each determination by the Auction Agent of the amounts stated in the foregoing notices to the Borrower and Lenders shall be conclusive and binding for all purposes absent manifest error.  The payment amount specified in such notice to the Borrower shall be due and payable by the Borrower on the Discounted Prepayment Closing Date in accordance with subsection (F)  below (subject to subsection (J)  below).
 
(C)                                Subject to the first proviso to subsection (A)  above, the Borrower may from time to time solicit Discount Range Prepayment Offers by providing the Auction Agent with three (3) Business Days’ notice in the form of a Discount Range Prepayment Notice; provided that (i) any such solicitation shall be extended, at the sole discretion of the Borrower, to each Term Lender and/or each Lender with respect to any Class of Loans on an individual tranche basis, (ii) any
 
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such notice shall specify the maximum aggregate principal amount of the relevant Term Loans (the “ Discount Range Prepayment Amount ”), the tranche or tranches of Term Loans subject to such offer and the maximum and minimum percentage discounts to par (the “ Discount Range ”) of the principal amount of such Term Loans with respect to each relevant tranche of Term Loans willing to be prepaid by the Borrower (it being understood that different Discount Ranges and/or Discount Range Prepayment Amounts may be offered with respect to different tranches of Term Loans and, in such an event, each such offer will be treated as a separate offer pursuant to the terms of this Section), (iii) the Discount Range Prepayment Amount shall be in an aggregate amount not less than $1,000,000 and whole increments of $500,000 in excess thereof and (iv) each such solicitation by the Borrower shall remain outstanding through the Discount Range Prepayment Response Date.  The Auction Agent will promptly provide each relevant Term Lender with a copy of such Discount Range Prepayment Notice and a form of the Discount Range Prepayment Offer to be submitted by a responding relevant Term Lender to the Auction Agent (or its delegate) by no later than 5:00 p.m., New York City time, on the third Business Day after the date of delivery of such notice to the relevant Term Lenders (the “Discount Range Prepayment Response Date”).  Each relevant Term Lender’s Discount Range Prepayment Offer shall be irrevocable and shall specify a discount to par within the Discount Range (the “ Submitted Discount ”) at which such Term Lender is willing to allow prepayment of any or all of its then outstanding Term Loans of the applicable tranche or tranches and the maximum aggregate principal amount and tranches of such Lender’s Term Loans (the “ Submitted Amount ”) such Lender is willing to have prepaid at the Submitted Discount.  Any Term Lender whose Discount Range Prepayment Offer is not received by the Auction Agent by the Discount Range Prepayment Response Date shall be deemed to have declined to accept a Discounted Term Loan Prepayment of any of its Term Loans at any discount to their par value within the Discount Range.
 
(1)                                  The Auction Agent shall review all Discount Range Prepayment Offers received on or before the applicable Discount Range Prepayment Response Date and shall determine (in consultation with the Borrower and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) the Applicable Discount and Term Loans to be prepaid at such Applicable Discount in accordance with this subsection (C) .  The Borrower agrees to accept on the Discount Range Prepayment Response Date all Discount Range Prepayment Offers received by Auction Agent by the Discount Range Prepayment Response Date, in the order from the Submitted Discount that is the largest discount to par to the Submitted Discount that is the smallest discount to par, up to and including the Submitted Discount that is the smallest discount to par within the Discount Range (such Submitted Discount that is the smallest discount to par within the Discount Range being referred to as the “ Applicable Discount ”) which yields a Discounted Term Loan Prepayment in an aggregate principal amount equal to the lower of (I) the Discount Range Prepayment Amount and (II) the sum of all Submitted
 
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Amounts.  Each Lender that has submitted a Discount Range Prepayment Offer to accept prepayment at a discount to par that is larger than or equal to the Applicable Discount shall be deemed to have irrevocably consented to prepayment of Term Loans equal to its Submitted Amount (subject to any required proration pursuant to the following subsection (3) ) at the Applicable Discount (each such Lender, a “ Participating Lender ”).
 
(2)                                  If there is at least one Participating Lender, the Borrower will prepay the respective outstanding Term Loans of each Participating Lender in the aggregate principal amount and of the tranches specified in such Lender’s Discount Range Prepayment Offer at the Applicable Discount; provided that if the Submitted Amount by all Participating Lenders offered at a discount to par greater than the Applicable Discount exceeds the Discounted Range Prepayment Amount, prepayment of the principal amount of the relevant Term Loans for those Participating Lenders whose Submitted Discount is a discount to par greater than or equal to the Applicable Discount (the “ Identified Participating Lenders ”) shall be made pro-rata among the Identified Participating Lenders in accordance with the Submitted Amount of each such Identified Participating Lender and the Auction Agent (in consultation with the Borrower and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) will calculate such proration (the “ Discount Range Proration ”).  The Auction Agent shall promptly, and in any case within five (5) Business Days following the Discount Range Prepayment Response Date, notify (I) the Borrower of the respective Term Lenders’ responses to such solicitation, the Discounted Prepayment Closing Date, the Applicable Discount, and the aggregate principal amount of the Discounted Term Loan Prepayment and the tranches to be prepaid, (II) each Term Lender of the Discounted Prepayment Closing Date, the Applicable Discount, and the aggregate principal amount and tranches of Term Loans to be prepaid at the Applicable Discount on such date, (III) each Participating Lender of the aggregate principal amount and tranches of such Lender to be prepaid at the Applicable Discount on such date, and (z) if applicable, each Identified Participating Lender of the Discount Range Proration.  Each determination by the Auction Agent of the amounts stated in the foregoing notices to the Borrower and Lenders shall be conclusive and binding for all purposes absent manifest error.  The payment amount specified in such notice to the Borrower shall be due and payable by the Borrower on the Discounted Prepayment Closing Date in accordance with subsection (F)  below (subject to subsection (J)  below).
 
(D)                                Subject to the first proviso to subsection (A)  above, the Borrower may from time to time solicit Solicited Discounted Prepayment Offers by providing the Auction Agent with three (3) Business Days’ notice in the form of a Solicited Discounted Prepayment Notice; provided that (I) any such solicitation shall be extended, at the sole discretion of the Borrower, to each Term Lender and/or each Lender with respect to any Class of Term Loans on an individual
 
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tranche basis, (II) any such notice shall specify the maximum aggregate amount of the Term Loans (the “ Solicited Discounted Prepayment Amount ”) and the tranche or tranches of Term Loans the Borrower is willing to prepay at a discount (it being understood that different Solicited Discount Prepayment Amounts may be offered with respect to different tranches of Term Loans and, in such an event, each such offer will be treated as a separate offer pursuant to the terms of this Section), (III) the Solicited Discounted Prepayment Amount shall be in an aggregate amount not less than $1,000,000 and whole increments of $500,000 in excess thereof and (IV) each such solicitation by the Borrower shall remain outstanding through the Solicited Discounted Prepayment Response Date.  The Auction Agent will promptly provide each relevant Term Lender with a copy of such Solicited Discounted Prepayment Notice and a form of the Solicited Discounted Prepayment Offer to be submitted by a responding Term Lender to the Auction Agent (or its delegate) by no later than 5:00 p.m., New York City time on the third Business Day after the date of delivery of such notice to the relevant Term Lenders (the “ Solicited Discounted Prepayment Response Date ”).  Each Term Lender’s Solicited Discounted Prepayment Offer shall (x) be irrevocable, (y) remain outstanding until the Acceptance Date, and (z) specify both a discount to par (the “ Offered Discount ”) at which such Term Lender is willing to allow prepayment of its then outstanding Term Loan and the maximum aggregate principal amount and tranches of such Term Loans (the “ Offered Amount ”) such Lender is willing to have prepaid at the Offered Discount.  Any Term Lender whose Solicited Discounted Prepayment Offer is not received by the Auction Agent by the Solicited Discounted Prepayment Response Date shall be deemed to have declined prepayment of any of its Term Loans at any discount.
 
(1)                                  The Auction Agent shall promptly provide the Borrower with a copy of all Solicited Discounted Prepayment Offers received on or before the Solicited Discounted Prepayment Response Date.  The Borrower shall review all such Solicited Discounted Prepayment Offers and select the smallest of the Offered Discounts specified by the relevant responding Term Lenders in the Solicited Discounted Prepayment Offers that is acceptable to the Borrower (the “ Acceptable Discount ”), if any.  If the Borrower elects to accept any Offered Discount as the Acceptable Discount, then as soon as practicable after the determination of the Acceptable Discount, but in no event later than by the third Business Day after the date of receipt by the Borrower from the Auction Agent of a copy of all Solicited Discounted Prepayment Offers pursuant to the first sentence of this subsection (1)  (the “ Acceptance Date ”), the Borrower shall submit an Acceptance and Prepayment Notice to the Auction Agent setting forth the Acceptable Discount.  If the Auction Agent shall fail to receive an Acceptance and Prepayment Notice from the Borrower by the Acceptance Date, the Borrower shall be deemed to have rejected all Solicited Discounted Prepayment Offers.
 
(2)                                  Based upon the Acceptable Discount and the Solicited Discounted Prepayment Offers received by Auction Agent by the Solicited
 
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Discounted Prepayment Response Date, within three (3) Business Days after receipt of an Acceptance and Prepayment Notice (the “ Discounted Prepayment Determination Date ”), the Auction Agent will determine (in consultation with the Borrower and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) the aggregate principal amount and the tranches of Term Loans (the “ Acceptable Prepayment Amount ”) to be prepaid by the Borrower at the Acceptable Discount in accordance with this Section 2.11(a)(ii)(D) .  If the Borrower elects to accept any Acceptable Discount, then the Borrower agrees to accept all Solicited Discounted Prepayment Offers received by Auction Agent by the Solicited Discounted Prepayment Response Date, in the order from largest Offered Discount to smallest Offered Discount, up to and including the Acceptable Discount.  Each Lender that has submitted a Solicited Discounted Prepayment Offer with an Offered Discount that is greater than or equal to the Acceptable Discount shall be deemed to have irrevocably consented to prepayment of Term Loans equal to its Offered Amount (subject to any required pro-rata reduction pursuant to the following sentence) at the Acceptable Discount (each such Lender, a “ Qualifying Lender ”).  The Borrower will prepay outstanding Term Loans pursuant to this subsection (D)  to each Qualifying Lender in the aggregate principal amount and of the tranches specified in such Lender’s Solicited Discounted Prepayment Offer at the Acceptable Discount; provided that if the aggregate Offered Amount by all Qualifying Lenders whose Offered Discount is greater than or equal to the Acceptable Discount exceeds the Solicited Discounted Prepayment Amount, prepayment of the principal amount of the Term Loans for those Qualifying Lenders whose Offered Discount is greater than or equal to the Acceptable Discount (the “ Identified Qualifying Lenders ”) shall be made pro-rata among the Identified Qualifying Lenders in accordance with the Offered Amount of each such Identified Qualifying Lender and the Auction Agent (in consultation with the Borrower and subject to rounding requirements of the Auction Agent made in its sole reasonable discretion) will calculate such proration (the “ Solicited Discount Proration ”).  On or prior to the Discounted Prepayment Determination Date, the Auction Agent shall promptly notify (I) the Borrower of the Discounted Prepayment Closing Date and Acceptable Prepayment Amount comprising the Discounted Term Loan Prepayment and the tranches to be prepaid, (II) each Term Lender of the Discounted Prepayment Closing Date, the Acceptable Discount, and the Acceptable Prepayment Amount of all Term Loans and the tranches to be prepaid to be prepaid at the Applicable Discount on such date, (III) each Qualifying Lender of the aggregate principal amount and the tranches of such Lender to be prepaid at the Acceptable Discount on such date, and (IV) if applicable, each Identified Qualifying Lender of the Solicited Discount Proration.  Each determination by the Auction Agent of the amounts stated in the foregoing notices to the Borrower and Lenders shall be conclusive and binding for all purposes absent manifest
 
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error.  The payment amount specified in such notice to the Borrower shall be due and payable by the Borrower on the Discounted Prepayment Closing Date in accordance with subsection (F)  below (subject to subsection (J)  below).
 
(E)                                 In connection with any Discounted Term Loan Prepayment, the Borrower and the Lenders acknowledge and agree that the Auction Agent may require as a condition to any Discounted Term Loan Prepayment, the payment of customary fees and expenses from the Borrower in connection therewith as may be agreed between the Auction Agent and the Borrower.
 
(F)                                  If any Term Loan is prepaid in accordance with paragraphs (B) through (D) above, the Borrower shall prepay such Term Loans on the Discounted Prepayment Closing Date.  The Borrower shall make such prepayment to the Auction Agent, for the account of the Discount Prepayment Accepting Lenders, Participating Lenders, or Qualifying Lenders, as applicable, at the Administrative Agent’s Office in immediately available funds not later than 11:00 a.m. (New York City time) on the Discounted Prepayment Closing Date and all such prepayments shall be applied to the remaining principal installments of the relevant tranche of Term Loans on a pro rata basis across such installments.  The Term Loans so prepaid shall be accompanied by all accrued and unpaid interest on the par principal amount so prepaid up to, but not including, the Discounted Prepayment Closing Date.  Each prepayment of the outstanding Term Loans pursuant to this Section 2.11(a)(ii)  shall be paid to the Discount Prepayment Accepting Lenders, Participating Lenders, or Qualifying Lenders, as applicable.  The aggregate principal amount of the tranches and installments of the relevant Term Loans outstanding shall be deemed reduced by the full par value of the aggregate principal amount of the tranches of Term Loans prepaid on the Discounted Prepayment Closing Date in any Discounted Term Loan Prepayment.
 
(G)                                To the extent not expressly provided for herein, each Discounted Term Loan Prepayment shall be consummated pursuant to procedures consistent, with the provisions in this Section 2.11(a)(ii) , established by the Auction Agent acting in its reasonable discretion and as reasonably agreed by the Borrower.
 
(H)                               Notwithstanding anything in any Loan Document to the contrary, for purposes of this Section 2.11(a)(ii) , each notice or other communication required to be delivered or otherwise provided to the Auction Agent (or its delegate) shall be deemed to have been given upon Auction Agent’s (or its delegate’s) actual receipt during normal business hours of such notice or communication; provided that any notice or communication actually received outside of normal business hours shall be deemed to have been given as of the opening of business on the next Business Day.
 
(I)                                    The Borrower and the Lenders acknowledge and agree that the Auction Agent may perform any and all of its duties under this Section 2.11(a)(ii)
 
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by itself or through any Affiliate of the Auction Agent and expressly consents to any such delegation of duties by the Auction Agent to such Affiliate and the performance of such delegated duties by such Affiliate.  The exculpatory provisions pursuant to this Agreement shall apply to each Affiliate of the Auction Agent and its respective activities in connection with any Discounted Term Loan Prepayment provided for in this Section 2.11(a)(ii)  as well as activities of the Auction Agent.
 
(J)                                    The Borrower shall have the right, by written notice to the Auction Agent, to revoke in full (but not in part) its offer to make a Discounted Term Loan Prepayment and rescind the applicable Specified Discount Prepayment Notice, Discount Range Prepayment Notice or Solicited Discounted Prepayment Notice therefor at its discretion at any time on or prior to the applicable Specified Discount Prepayment Response Date, Discount Range Prepayment Response Date or Solicited Discounted Prepayment Response Date, as applicable (and if such offer is revoked pursuant to the preceding clauses, any failure by the Borrower to make any prepayment to a Term Lender, as applicable, pursuant to this Section 2.11(a)(ii)  shall not constitute a Default or Event of Default under Section 7.01 or otherwise).
 
(K)                                Notwithstanding anything to the contrary contained in this Agreement or any other Loan Document, the Borrower shall not be permitted to consummate any prepayment transaction described in this Section 2.11(a)(ii)  if after giving effect thereto, the Affiliated Lenders would hold a greater aggregate principal amount of Term Loans than is permitted by Section 9.04(f) .
 
(L)                                 Each Lender participating in any Discounted Term Loan Prepayment acknowledges and agrees that in connection with such prepayment, (1) the Borrower then may have, and later may come into possession of, Excluded Information, (2) such Lender has independently, and without reliance on Holdings, the Borrower or any of their respective subsidiaries, the Administrative Agent or any other Agent Party, made its own analysis and determination to participate in such prepayment, notwithstanding such Lender’s lack of knowledge of the Excluded Information, (3) none of Holdings, the Borrower or their respective subsidiaries, the Administrative Agent or any other Agent Party shall have any liability to such Lender, and such Lender hereby waives and releases, to the extent permitted by law, any claims such Lender may have against Holdings, the Borrower and their respective subsidiaries, the Administrative Agent and any other Agent Parties, under applicable laws or otherwise, with respect to the nondisclosure of the Excluded Information and (4) that the Excluded Information may not be available to the Administrative Agent or the other Lenders.
 
(b)                                  In the event and on each occasion that the aggregate Revolving Exposure of all Revolving Lenders exceeds the aggregate Revolving Commitments of all Revolving Lenders, the Borrower shall prepay Revolving Borrowings or Swingline Borrowings (or, in each case, if no such Borrowings are outstanding, deposit cash collateral in an account with the Collateral Agent in an aggregate amount equal to such excess).
 
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(c)                                   In the event and on each occasion that any Net Proceeds are received by or on behalf of the Borrower or any of its Restricted Subsidiaries in respect of any Prepayment Event, the Borrower shall, within five Business Days after such Net Proceeds are received (or, in the case of a Prepayment Event described in clause (b) of the definition of the term “Prepayment Event,” on the date of such Prepayment Event), prepay the Term Loans in an aggregate amount equal to 100% of the amount of such Net Proceeds; if the Borrower and the Restricted Subsidiaries invest (or commit to invest) the Net Proceeds from such event (or a portion thereof) within 12 months after receipt of such Net Proceeds in assets useful in the business of the Borrower and the other Restricted Subsidiaries (including any acquisitions permitted under Section 6.04 ), then no prepayment shall be required pursuant to this paragraph in respect of such Net Proceeds in respect of such event (or the applicable portion of such Net Proceeds, if applicable) except to the extent of any such Net Proceeds therefrom that have not been so invested (or committed to be invested) by the end of such 12-month period (or if committed to be so invested within such 12 month period, have not been so invested within 18 months after receipt thereof), at which time a prepayment shall be required in an amount equal to such Net Proceeds that have not been so invested (or committed to be invested).
 
(d)                                  Following the end of each fiscal year of Holdings, commencing with the fiscal year ending nearest December 31, 2016, the Borrower shall prepay the Term Loans in an aggregate amount equal to the ECF Percentage of Excess Cash Flow for such fiscal year; provided that such amount shall be reduced by the aggregate amount of prepayments of Term Loans (and, to the extent the Revolving Commitments are reduced in a corresponding amount pursuant to Section 2.08 , Revolving Loans) made pursuant to Section 2.11(a)  (in the case of Section 2.11(a)(ii) , to the extent of the cash consideration paid by the Borrower in respect of such prepayments) during such fiscal year (excluding all such prepayments funded with the proceeds of other Indebtedness).  Each prepayment pursuant to this paragraph shall be made on or before the date that is five Business Days after the date on which financial statements are required to be delivered pursuant to Section 5.01 with respect to the fiscal year for which Excess Cash Flow is being calculated.
 
(e)                                   Within five (5) Business Days of the consummation of a Qualified IPO, the Borrower shall prepay the Term Loans in an amount not less than $75,000,000.
 
(f)                                    Prior to any optional prepayment of Borrowings pursuant to Section 2.11(a)(ii) , the Borrower shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (g)  of this Section.  In the event of any mandatory prepayment of Term Borrowings made at a time when Term Borrowings of more than one Class remain outstanding, the Borrower shall select Term Borrowings to be prepaid so that the aggregate amount of such prepayment is allocated between Term Borrowings (and, to the extent provided in the Refinancing Amendment for any Class of Other Term Loans, the Borrowings of such Class) pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class; provided that any Term Lender (and, to the extent provided in the Refinancing Amendment for any Class of Other Term Loans, any Lender that holds Other Term Loans of such Class) may elect, by notice to the Administrative Agent by telephone (confirmed by facsimile) at least two Business Days prior to the prepayment date, to decline all (but not part) of any prepayment of its Term Loans or Other Term Loans of any such Class pursuant to this Section (other than an optional prepayment pursuant to
 
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paragraph (a)(i)  of this Section, which may not be declined), in which case the aggregate amount of the prepayment that would have been applied to prepay Term Loans or Other Term Loans of any such Class but was so declined shall be retained by the Borrower.  Optional prepayments of Term Borrowings shall be allocated among Term Borrowings as directed by the Borrower.  In the absence of a designation by the Borrower as described in the preceding provisions of this paragraph of the Type of Borrowing of any Class, the Administrative Agent shall make such designation in its reasonable discretion with a view, but no obligation, to minimize breakage costs owing under Section 2.16 ; provided that, in connection with any mandatory prepayments by the Borrower of the Term Loans pursuant to Section 2.11(c)  or (d) , such prepayments shall be applied on a pro rata basis to the then outstanding Term Loans being prepaid irrespective of whether such outstanding Term Loans are ABR Loans or Eurodollar Loans; provided that if no Lenders exercise the right to waive a given mandatory prepayment of the Term Loans pursuant to this Section 2.11(f) , then, with respect to such mandatory prepayment, the amount of such mandatory prepayment shall be applied first to Term Loans that are ABR Loans to the full extent thereof before application to Term Loans that are Eurodollar Loans in a manner that minimizes the amount of any payments required to be made by the Borrower pursuant to Section 2.16 .  Notwithstanding the foregoing, no amounts received from any Loan Party shall be applied to any Excluded Swap Obligations of such Loan Party.
 
(g)                                   The Borrower shall notify the Administrative Agent (and, in the case of prepayment of a Swingline Loan, the Swingline Lender) by telephone (confirmed by hand delivery or facsimile) of any optional prepayment and, to the extent practicable, any mandatory prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 2:00 p.m., New York City time, three (3) Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 1:00 p.m., New York City time, one (1) Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 12:00 p.m., New York City time, on the date of prepayment.  Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount of such prepayment; provided that a notice of optional prepayment may state that such notice is conditional upon the effectiveness of other credit facilities or the receipt of the proceeds from the issuance of other Indebtedness or the occurrence of some other identifiable event or condition, in which case such notice of prepayment may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified date of prepayment) if such condition is not satisfied; provided further that, any notice of mandatory prepayment pursuant to Section 2.11(c)  or (d) must be delivered not later than 2:00 p.m., New York City time, three (3) Business Days before the date of prepayment.  Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof.  Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02 , except as necessary to apply fully the required amount of a mandatory prepayment.  Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing.  Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13 .
 
(h)                                  Notwithstanding any provision under Section 2.11 to the contrary, if the Borrower determines in good faith that the repatriation by any Restricted Subsidiary that is
 
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organized under the laws of a jurisdiction other than the jurisdiction in which the Borrower is organized (an “ Other Jurisdiction Subsidiary ”), of any amounts required to mandatorily prepay the Loans pursuant to Sections 2.11(c)  or (d)  above would result in material and adverse tax consequences (including a deemed dividend pursuant to Section 956 of the Internal Revenue Code), taking into account any foreign tax credit or benefit actually realized in connection with such repatriation, or that any such funds are prohibited or delayed by any applicable local requirements of law from being repatriated, in either case, if all or portion of the funds required to make a mandatory prepayment were up-streamed or transferred from a foreign subsidiary as a distribution or dividend (such amount, a “ Restricted Amount ”), as reasonably determined by the Borrower, the amount that any such Restricted Subsidiary shall be required to mandatorily prepay pursuant to Sections 2.11(c)  or (d)  above, as applicable, shall be reduced by the Restricted Amount until such time as it may repatriate to the Borrower the Restricted Amount without incurring such material and adverse tax liability or violating such local requirement of law; provided that (A) Holdings, the Borrower and its Restricted Subsidiaries will use commercially reasonable efforts to cause the Restricted Amount to be repatriated without incurring such material tax liability or violating any local requirements of law and (B) if and to the extent that the repatriation of any Net Proceeds or Excess Cash Flow from the relevant Other Jurisdiction Subsidiary would no longer have an adverse tax consequence or violate local requirements of law at any time during the one year period immediately following the date on which the applicable mandatory repayment was required to be made, an amount equal to the Net Proceeds or Excess Cash Flow, as applicable, not previously applied pursuant to the immediately preceding clause shall be promptly applied to the repayment of the Term Loans pursuant to Section 2.11(c)  or (d)  as otherwise required above (without regard to this clause (g)).  The non-application of any prepayment amount as a consequence of this clause (g) will not, for the avoidance of doubt, constitute an Event of Default, and, upon expiration of the one year period in clause (B) in the proviso above, such amounts shall be available (A) first, to repay local foreign indebtedness, if any and (B) thereafter, for working capital purposes of Holdings’ Foreign Subsidiaries (so long as not required to be prepaid in accordance with this Section 2.11 ).
 
Section 2.12                              Fees .
 
(a)                                  The Borrower agrees to pay to the Administrative Agent in Dollars for the account of each Revolving Lender a commitment fee, which shall accrue at the Applicable Commitment Fee Percentage on the average daily unused amount of the Revolving Commitment of such Lender (reduced by the amount of Letters of Credit issued and outstanding) during the period from and including the Closing Date to but excluding the date on which the Revolving Commitments terminate.  In all cases, accrued commitment fees shall be payable in arrears on the last Business Day of March, June, September and December of each year and on the date on which the Revolving Commitments terminate, commencing on the first such date to occur after the Closing Date.  All commitment fees payable for the account of any Revolving Lender shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).  For purposes of computing commitment fees, a specific Class of Revolving Commitment of a Lender shall be deemed to be used to the extent of the outstanding Revolving Loans and LC Exposure of such Lender in such Class (and the Swingline Exposure of such Lender shall be disregarded for such purpose).
 
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(b)                                  The Borrower agrees to pay (i) to the Administrative Agent in U.S. Dollars for the account of each Revolving Lender (other than any Defaulting Lender) a participation fee with respect to its participations in Letters of Credit, which shall accrue at the Applicable Rate used to determine the interest rate applicable to Eurodollar Revolving Loans on the daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements), during the period from and including the Closing Date to and including the later of the date on which such Lender’s Revolving Commitment terminates and the date on which such Lender ceases to have any LC Exposure; which participation fees shall be payable on the last Business Day of each March, June, September and December of each year, commencing on the first such date to occur after the Closing Date; provided that all such fees shall be payable on the date on which the Revolving Commitments terminate and any such fees accruing after the date on which the Revolving Commitments terminate shall be payable on demand, and (ii) to each Issuing Bank, on demand, in U.S. Dollars (A) such reasonable fees, without duplication of fees otherwise payable hereunder (including all per annum fees), charges and expenses of such Issuing Bank in respect of the issuance, negotiation, acceptance, amendment, transfer and payment of such Letter of Credit or otherwise payable pursuant to the application and related documentation under which such Letter of Credit is issued; and (B) a fronting fee of 0.125%.  All participation fees and other fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
 
(c)                                   The Borrower agrees to pay on the Closing Date to the Administrative Agent for the ratable benefit of each Term Lender party to this Agreement as a Term Lender on the Closing Date as fee compensation for the funding of such Lender’s Term Loans, an upfront fee in an amount equal to 1.50% of the stated principal amount of the Term Loans made on the Closing Date.  Such fees shall be payable to each Term Lender out of the proceeds of the such Term Lender’s Term Loans as and when funded on the Closing Date and shall be treated (and reported) by the Borrower and Term Lenders as a reduction in issue price of the Term Loans for U.S. federal, and applicable state and local income tax purposes.  All such closing fees payable under this Section 2.12(c)  will be in all respects fully earned, due and payable on the Closing Date and non-refundable and non-creditable thereafter.
 
(d)                                  The Borrower agrees to pay to the Administrative Agent, the Joint Lead Arrangers and the Co-Documentation Agents for their own account, fees payable in the amounts and at the times separately agreed in writing upon between such parties.
 
(e)                                   All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to an Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Revolving Lenders or Term Lenders entitled thereto.  Fees paid shall not be refundable under any circumstances.
 
(f)                                    Notwithstanding the foregoing, and subject to Section 2.22 , the Borrower shall not be obligated to pay any amounts to any Defaulting Lender pursuant to this Section 2.12 .
 
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Section 2.13                              Interest .
 
(a)                                  The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.
 
(b)                                  The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted Eurodollar Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.
 
(c)                                   Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by any Loan Party hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall, to the extent permitted under applicable law, bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2.00% per annum plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other overdue amount, 2.00% per annum plus the rate applicable to ABR Revolving Loans as provided in paragraph (a)  of this Section; provided that no amount shall be payable pursuant to this Section 2.13(c)  to a Defaulting Lender so long as such Lender shall be a Defaulting Lender; provided further that no amounts shall accrue pursuant to this Section 2.13(c)  on any overdue amount, reimbursement obligation in respect of any LC Disbursement or other amount payable to a Defaulting Lender so long as such Lender shall be a Defaulting Lender.
 
(d)                                  Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan and, in the case of any Class of Revolving Loans, upon termination of such Class of Revolving Commitments; provided that (i) interest accrued pursuant to paragraph (c)  of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Revolving Loan prior to the end of the Revolving Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the Closing Date of such conversion.
 
(e)                                   All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day).
 
Section 2.14                              Alternate Rate of Interest .  If at least two Business Days prior to the commencement of any Interest Period for a Eurodollar Borrowing:
 
(i)                                      the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted Eurodollar Rate for Loans in Dollars for such Interest Period; or
 
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(ii)                                   the Administrative Agent is advised by the Lenders holding a Majority in Interest of the outstanding Term Loans and Revolving Commitments that the Adjusted Eurodollar Rate applicable to such Loans for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Borrowing for such Interest Period;
 
then the Administrative Agent shall give notice (which may be telephonic) thereof to the Borrower, the Term Lenders and the Revolving Lenders as promptly as practicable and, until the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (i) any Interest Election Request that requests the conversion of any Borrowing of such Class to, or continuation of any Borrowing of such Class as, a Eurodollar Borrowing shall be ineffective, and such Borrowing shall be continued as an ABR Borrowing, and (ii) any Borrowing Request for a Eurodollar Borrowing of such Class shall be treated as a request for an ABR Borrowing.
 
Section 2.15                              Increased Costs .
 
(a)                                  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 by, any Lender or any Issuing Bank (except any such reserve requirement reflected in the Adjusted Eurodollar Rate); or
 
(ii)                                   subject any Lender or any Issuing Bank to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (b) through (e) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or
 
(iii)                                impose on any Lender or any Issuing Bank or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement, Eurodollar Loans 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 or other Recipient of making, converting to, continuing or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan), to increase the cost to such Lender, Issuing Bank or other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or issue any Letter of Credit) or to reduce the amount of any sum received or receivable by such Lender, Issuing Bank or other Recipient hereunder (whether of principal, interest or otherwise), then, from time to time upon request of such Lender, Issuing Bank or other Recipient, the Borrower will pay to such Lender, Issuing Bank or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, Issuing Bank or other Recipient, as the case may be, for such additional costs or expenses incurred or reduction suffered.
 
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(b)                                  If any Lender or Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has the effect of reducing the rate of return on such Lender’s or Issuing Bank’s capital or on the capital of such Lender’s or Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit or Swingline Loans held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or Issuing Bank’s policies and the policies of such Lender’s or Issuing Bank’s holding company with respect to capital adequacy or liquidity), then, from time to time upon request of such Lender or Issuing Bank, the Borrower will pay to such Lender or Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company for any such reduction actually suffered.
 
(c)                                   A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or Issuing Bank or its holding company in reasonable detail, as the case may be, as specified in paragraph (a) or (b) of this Section delivered to the Borrower shall be conclusive absent manifest error.  The Borrower shall pay such Lender or Issuing Bank, as the case may be, the amount shown as due on any such certificate within 15 days after receipt thereof.
 
(d)                                  Failure or delay on the part of any Lender or Issuing Bank to demand compensation pursuant to this Section shall not constitute a waiver of such Lender’s or Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or Issuing Bank pursuant to this Section for any increased costs or expenses incurred or reductions suffered more than 180 days prior to the date that such Lender or Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs, expenses or reductions and of such Lender’s or Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs, expenses or reductions is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.
 
(e)                                   Notwithstanding any other provision of this Section, no Lender or Issuing Bank shall demand compensation for any increased cost or reduction pursuant to this Section 2.15 if it shall not at the time be the general policy or practice of such Lender or Issuing Bank to demand such compensation in similar circumstances under comparable provisions of other credit agreements.
 
Section 2.16                              Break Funding Payments .  In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Revolving Loan or Term Loan for acceptance and purchase on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.11(g)  and is revoked in accordance therewith) or (d) the assignment of any Eurodollar Loan for acceptance and purchase other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19 or
 
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Section 9.02(c) , then, in any such event, the Borrower shall, after receipt of a written request by any Lender affected by any such event (which request shall set forth in reasonable detail the basis for requesting such amount), compensate each Lender for the loss, cost and expense attributable to such event.  For purposes of calculating amounts payable by the Borrower to the Lenders under this Section 2.16 , each Term Lender and each Revolving Lender shall be deemed to have funded each Eurodollar Loan made by it at the Adjusted Eurodollar Rate for such Loan by a matching deposit or other borrowing in the applicable interbank eurodollar market for a comparable amount and for a comparable period, whether or not such Eurodollar Loan was in fact so funded.  A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section delivered to the Borrower shall be conclusive absent manifest error.  The Borrower shall pay such Lender the amount shown as due on any such certificate within 15 days after receipt of such demand.  Notwithstanding the foregoing, this Section 2.16 will not apply to losses, costs or expenses resulting from Taxes, as to which Section 2.17 shall govern.
 
Section 2.17                              Taxes .
 
(a)                                  Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if the Borrower, withholding agent or other payor shall be required by applicable Requirements of Law (as determined in the good faith discretion of the applicable withholding agent) to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the amount payable by the applicable Loan Party shall be increased as necessary so that after all required deductions for any Indemnified Taxes or Other Taxes have been made (including deductions applicable to additional amounts payable under this Section 2.17 ), the Administrative Agent or Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions for Indemnified Taxes or Other Taxes have been made, (ii) the applicable withholding agent shall make such deductions for Indemnified Taxes or Other Taxes and (iii) the applicable withholding agent shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable Requirements of Law.
 
(b)                                  Without limiting the provisions of paragraph (a) above, the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with Requirements of Law.
 
(c)                                   Without duplication of any additional amounts paid under Section 2.17(a)  or (b), the Borrower jointly and severally shall indemnify the Administrative Agent and each Lender within 10 days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of any Loan Party under, or otherwise with respect to, any Loan Document or activities related thereto, (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any 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 Governmental Authority.  A certificate setting forth in reasonable detail the basis and calculation of the amount of such payment or liability delivered to the Borrower by
 
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a Lender with a copy to the Administrative Agent, or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
 
(d)                                  Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that any Loan Party has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Loan Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.04(c)(ii)  relating to the maintenance of the Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error.  Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this paragraph (d).
 
(e)                                   As soon as practicable after any payment of Indemnified Taxes or Other Taxes by a Loan Party to a Governmental Authority, the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.
 
(f)                                    Each Lender shall, at such times as are reasonably requested by the Borrower or the Administrative Agent, provide the Borrower and the Administrative Agent with any properly completed and executed documentation prescribed by law, or reasonably requested by the Borrower or the Administrative Agent, certifying as to any entitlement of such Lender to an exemption from, or reduction in, any withholding Tax with respect to any payments to be made to such Lender under the Loan Documents.  In addition, any Lender, if reasonably 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.  Each such Lender shall, whenever a lapse in time or change in circumstances renders such documentation expired, obsolete or inaccurate in any material respect, deliver promptly to the Borrower and the Administrative Agent updated or other appropriate documentation (including any new documentation reasonably requested by the applicable withholding agent) or promptly notify the Borrower and the Administrative Agent of its inability to do so.  Unless the applicable withholding agent has received forms or other documents satisfactory to it indicating that payments under any Loan Document to or for a Lender are not subject to withholding tax or are subject to Tax at a rate reduced by an applicable tax treaty, the Borrower, Administrative Agent or other applicable withholding agent shall withhold amounts required to be withheld by applicable law from such payments at the applicable statutory rate.  Notwithstanding anything to the contrary in the preceding clause (f), the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.17(f)((i) , (ii)(A)  through
 
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(ii)(D)  and (iii)  below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.
 
Without limiting the generality of the foregoing:
 
(i)                                      Each Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent) as a Lender two properly completed and duly signed copies of Internal Revenue Service Form W-9 (or any successor form) certifying that such Lender is exempt from U.S. federal backup withholding.
 
(ii)                                   Each Lender that is a Foreign Lender shall deliver to the Borrower and the Administrative Agent on or before the date on which it becomes a party to this Agreement as a Lender (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent) whichever of the following is applicable:
 
(A)                                two properly completed and duly signed copies of Internal Revenue Service Form W-8BEN or W-8BEN-E (or any successor forms) claiming eligibility for benefits of an income tax treaty to which the United States of America is a party and such other documentation as required under the Code,
 
(B)                                two properly completed and duly signed copies of Internal Revenue Service Form W-8ECI (or any successor forms),
 
(C)                                in the case of a Foreign Lender, (x) two properly completed and duly signed certificates, substantially in the form of Exhibit W-1 claiming the benefits of the exemption for portfolio interest under Section 871(h) or Section 881(c) of the Code (any such certificate a “ United States Tax Compliance Certificate ”), and (y) two properly completed and duly signed copies of Internal Revenue Service Form W-8BEN or W-8BEN-E (or any successor forms),
 
(D)                                to the extent a Foreign Lender is not the beneficial owner, two properly completed and duly signed originals of Internal Revenue Service Form W-8IMY (or any successor forms) of the Foreign Lender, accompanied by a Form W-8ECI, W-8BEN or W-8BEN-E, a United States Tax Compliance Certificate substantially in the form of Exhibit W-3 or Exhibit W-4 , Form W-9, Form W-8IMY (or other successor forms) or any other required information from each beneficial owner ( provided that, if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, a United States Tax Compliance Certificate substantially in the form of Exhibit W-2 may be provided by such Foreign Lender on behalf of such partner(s)), or
 
(E)                                 any other form prescribed by applicable Requirements of Law as a basis for claiming exemption from or a reduction in U.S. federal withholding tax
 
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duly completed together with such supplementary documentation as may be prescribed by applicable Requirements of Law to permit the Borrower and the Administrative Agent to determine the withholding or deduction required to be made.
 
(iii)                                If a payment made to any 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), as applicable), such Lender shall deliver to the relevant 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 as prescribed by 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 and the Administrative Agent to comply with their obligations under FATCA and to determine whether such Lender has or has not complied with such Lender’s obligations under such Sections and, if necessary, to determine the amount to deduct and withhold from such payment.  Solely for the purposes of this paragraph, “FATCA” shall include any amendments to FATCA after the date of this Agreement.
 
Notwithstanding any other provision of this clause (f), a Lender shall not be required to deliver any form that such Lender is not legally eligible to deliver.
 
(g)                                   [Reserved].
 
(h)                                  If the Administrative Agent or a Lender determines, in its sole discretion exercised in good faith, that it has received a refund of any Indemnified 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 2.17 , it shall pay over such refund to the Borrower (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section 2.17 with respect to the Indemnified Taxes or Other Taxes giving rise to such refund), net of all reasonable out-of-pocket expenses (including Taxes) of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund); provided that the Borrower, upon the request of the Administrative Agent or such Lender, agrees promptly to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent or such Lender in the event the Administrative Agent or such Lender is required to repay such refund to such Governmental Authority.  The Administrative Agent or such Lender, as the case may be, shall, at the Borrower’s request, provide the Borrower with a copy of any notice of assessment or other evidence of the requirement to repay such refund received from the relevant taxing authority (provided that the Administrative Agent or such Lender may delete any information therein that the Administrative Agent or such Lender deems confidential).  Notwithstanding anything to the contrary in this paragraph (h), in no event will the Administrative Agent or such Lender be required to pay any amount to the Borrower pursuant to this paragraph (h) the payment of which would place the Administrative Agent or such Lender in a less favorable net after-Tax position than the Administrative Agent or such Lender would have been in if the Tax subject to
 
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indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid.  This paragraph shall not be construed to require the Administrative Agent or any Lender to make available its Tax returns (or any other information relating to Taxes which it deems confidential) to any Loan Party or any other person.
 
(i)                                      The agreements in this Section 2.17 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.
 
(j)                                     For purposes of this Section 2.17 , the term “Lender” shall include any Issuing Bank and the term “Requirements of Law’ shall include FATCA.
 
Section 2.18                              Payments Generally; Pro Rata Treatment; Sharing of Setoffs .
 
(a)                                  The Borrower shall make each payment required to be made by it under any Loan Document (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15 , 2.16 or 2.17 , or otherwise) prior to the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 2:00 p.m., New York City time), on the date when due, in immediately available funds without condition or deduction for any counterclaim, recoupment or setoff.  Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon.  All such payments shall be made to such account as may be specified by the Administrative Agent, except payments to be made directly to any Issuing Bank shall be made as expressly provided herein and except that payments pursuant to Sections 2.15 , 2.16 , 2.17 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein.  The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof.  Except as otherwise provided herein, if any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day.  If any payment on a Eurodollar Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day.  In the case of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate for the period of such extension.  All payments under each Loan Document of principal or interest in respect of any Loan (or of any breakage indemnity in respect of any Loan) shall be made in U.S. Dollars, except as otherwise expressly provided herein.  If the Administrative Agent determines at any time that any amount received by the Administrative Agent under this Agreement must be returned to any Loan Party or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of this Agreement or any other Loan Document, the Administrative Agent will not be required to distribute any portion thereof to any Lender.  In addition, each Lender will repay to the Administrative Agent on demand any portion of such amount the Administrative Agent has distributed to such Lender, together with interest at such rate, if any, as the Administrative Agent
 
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is required to pay to the Borrower or such other Person, without setoff, counterclaim or deduction of any kind.
 
(b)                                  If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, unreimbursed LC Disbursements, interest and fees then due hereunder, such funds shall be applied (i)  first , towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii)  second , towards payment of principal and unreimbursed LC Disbursements then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal and unreimbursed LC Disbursements then due to such parties.
 
(c)                                   [Reserved].
 
(d)                                  If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the amount of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amounts of principal of and accrued interest on their Loans and participations in LC Disbursements and Swingline Loans; 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, without interest and (ii) the provisions of this paragraph shall not be construed to apply to (A) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender), (B) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements or Swingline Loans to any assignee or participant or (C) any disproportionate payment obtained by a Lender of any Class as a result of the extension by Lenders of the maturity date or expiration date of some but not all Loans or Revolving Commitments of that Class or any increase in the Applicable Rate in respect of Loans of Lenders that have consented to any such extension.  The Borrower 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 the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.
 
(e)                                   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 Banks 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 and in its sole discretion, distribute to the Lenders or Issuing Banks, as the case may be, the amount due.  In
 
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such event, if the Borrower has not in fact made such payment, then each of applicable Lenders or Issuing Banks, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or Issuing Bank with 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 (i) the Federal Funds Effective Rate and (ii) a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.
 
(f)                                    The Borrower hereby irrevocably waives the right to direct the application of any and all payments in respect of the First Lien Obligations and any proceeds of Collateral after the occurrence and during the continuance of an Event of Default and agrees that, notwithstanding any provision herein to the contrary, (i) all amounts collected or received by the Administrative Agent after any or all of the First Lien Obligations have been accelerated, (ii) all proceeds received by the Administrative Agent as a result of the exercise of the Administrative Agent’s remedies under the Security Documents and (iii) upon direction of the Required Lenders, all payments in respect of any First Lien Obligations received by the Administrative Agent after the occurrence and during the continuance of an Event of Default, shall in each case be applied as follows:
 
first , to pay interest on and then principal of any portion of the Revolving Loans that the Administrative Agent may have advanced on behalf of any Lender for which the Administrative Agent has not then been reimbursed by such Lender or the Borrower;
 
second , to pay Secured Obligations in respect of any expense reimbursements or indemnities then due to any Agent;
 
third , to pay Secured Obligations in respect of any expense reimbursements or indemnities then due to the Lenders and the Issuing Banks;
 
fourth , to pay Secured Obligations in respect of all accrued unpaid interest and fees then due to any Agent, the Lenders and the Issuing Banks;
 
fifth , to pay or prepay principal amounts on the Loans, the LC Reimbursement Obligations, the Secured Swap Obligations, the Cash Management Obligations and to cash collateralize all outstanding Letters of Credit at 103% of the face value of each such Letter of Credit;
 
sixth , to pay any other amounts constituting Secured Obligations; and
 
seventh , any remainder shall be for the account of and paid to the Borrower or any other Person lawfully entitled thereto.
 
In carrying out the foregoing, (i) amounts received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, (ii) each of the Lenders or other Persons entitled to payment shall receive an amount equal to its pro rata share of amounts available to be applied pursuant to clauses fourth, fifth and sixth above and (iii) proceeds of Collateral of any Loan Party shall only be applied to the Secured Obligations of such Loan Party.
 
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(g)                                   Notwithstanding the foregoing provisions of this Section 2.18 , no amounts received from any Loan Party, or from proceeds of Collateral of any Loan Party, shall be applied to any Excluded Swap Obligations of such Loan Party.
 
Section 2.19                              Mitigation Obligations; Replacement of Lenders .
 
(a)                                  If any Lender requests compensation under Section 2.15 , or if the Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17 or any event gives rise to the operation of Section 2.23 , then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or its participation in any Letter of Credit affected by such event, or to assign and delegate its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Lender, such designation or assignment and delegation (i) would eliminate or reduce amounts payable pursuant to Section 2.15 or Section 2.17 or mitigate the applicability of Section 2.23 , as the case may be, and (ii) would not subject such Lender to any unreimbursed cost or expense reasonably deemed by such Lender to be material and would not be inconsistent with the internal policies of, or otherwise be disadvantageous in any material economic, legal or regulatory respect to, such Lender.  The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment and delegation.
 
(b)                                  If (i) any Lender requests compensation under Section 2.15 or gives notice under Section 2.23 , (ii) the Borrower is required to pay any additional amount to any Lender or to any Governmental Authority for the account of any Lender pursuant to Section 2.17 or (iii) any Lender is a Defaulting Lender, then the Borrower may, at its sole expense and effort, 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 Section 9.04 ), all its interests, rights and obligations under this Agreement and the other Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment and delegation); provided that (A) the Borrower shall have received the prior written consent of the Administrative Agent to the extent such consent would be required under Section 9.04(b)  for an assignment of Loans or Commitments, as applicable (and if a Revolving Commitment is being assigned and delegated, each Issuing Bank and the Swingline Lender), which consents, in each case, shall not unreasonably be withheld or delayed, (B) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and unreimbursed participations in LC Disbursements and Swingline Loans, accrued but unpaid interest thereon, accrued but unpaid fees and all other amounts payable to it hereunder from the assignee or the Borrower, (C) the Borrower or such assignee shall have paid (unless waived) to the Administrative Agent the processing and recordation fee specified in Section 9.04(b)(ii)  and (D) in the case of any such assignment resulting from a claim for compensation under Section 2.15 , or payments required to be made pursuant to Section 2.17 or a notice given under Section 2.23 , such assignment will result in a material reduction in such compensation or payments.  A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise (including as a result of any action taken by such Lender under paragraph (a) above), the circumstances entitling the Borrower to require such assignment and delegation cease to apply.  Each party hereto agrees that an assignment required pursuant to this
 
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paragraph may be effected pursuant to an Assignment and Assumption executed by the Borrower, the Administrative Agent and the assignee and that the Lender required to make such assignment need not be a party thereto.
 
Section 2.20                              Incremental Credit Extensions .
 
(a)                                  At any time and from time to time after the date that is the earlier of (x) the date on which the Joint Lead Arrangers shall have advised the Borrower that the primary syndication of the Facilities has been completed and (y) the date that is 60 days following the Closing Date, subject to the terms and conditions set forth herein, the Borrower may, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly make available to each of the Lenders), request to effect (i) prior to the Revolving Maturity Date, one or more increases in the aggregate amount of the Revolving Commitments (each such increase, a “ Revolving Commitment Increase ”) from Additional Revolving Lenders and (ii) one or more new term loan commitments which may be of the same Class as existing Term Loans (a “ Term Commitment Increase ”) or a separate Class of new term loans (collectively with any Term Commitment Increase, the “ New Term Commitments ” and the New Term Commitments, collectively with any Revolving Commitment Increase, the “ Incremental Commitments ”), in each case, from one or more Additional Term Lenders; provided that (A) no Lender will be required to become an Additional Revolving Lender or Additional Term Lender and no Lender with respect to any Revolving Commitment Increase shall be an Affiliated Lender, (B) upon the effectiveness of any such Incremental Commitments, (1) no Event of Default shall have occurred and be continuing or shall result therefrom and (2) the representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as of such date (provided, that (x) to the extent such representations and warranties specifically refer to an earlier date, they shall be true and correct in all matter respects as of such earlier date and (y) any representation and warranty that is qualified as to “materiality”, “Material Adverse Effect” or similar language shall be true and correct in all respects), (C) any such Incremental Commitments shall be denominated in U.S. Dollars, (D) the aggregate amount of all such Incremental Commitments shall not exceed $100,000,000 plus  the maximum amount of Incremental Commitments such that the First Lien Net Leverage Ratio on a Pro Forma Basis (assuming a borrowing of the maximum amount of Loans available hereunder after giving effect to such Incremental Commitments, assuming that any Indebtedness under Incremental Commitments is senior indebtedness secured on pari passu basis with the Collateral and excluding, for the purposes of clause (b) of the definition of Consolidated Net Debt, the cash proceeds from the borrowing of the proposed Incremental Commitments) would not exceed 4.75 to 1.00; (E) the maturity date of any term loans incurred pursuant to any New Term Commitment shall not be earlier than Latest Maturity Date then effect with respect to any Class of Term Loans outstanding at such time and the Weighted Average Life to Maturity of any such term loans incurred pursuant to any New Term Commitment shall not be shorter than the remaining Weighted Average Life to Maturity of any Class of Term Loans outstanding at such time, (F) any loans incurred pursuant to any Incremental Commitments shall not be secured by any assets other than Collateral (and, subject to subclause (J)  below, if so secured, shall be secured on a pari passu basis) and not be guaranteed by Persons other than those Persons Guaranteeing the corresponding Class of Loans, (G) subject to subclause (J)  below, the interest rate margins and, subject to subclause (E) , the amortization schedule for any term loans incurred pursuant to any New Term Commitment shall be determined by the Borrower and the Additional Term
 
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Lenders with the applicable New Term Commitments; provided that in the event that the All-in Yield for any term loans pursuant to any New Term Commitments is higher than the All-in Yield applicable to any Class of Term Loans by more than 50 basis points, then the interest rate margins for Term Loans in each such Class shall be increased to the extent necessary so that the All-in Yield with respect to each such Class of Term Loans is equal to the All-in Yield for such term loans incurred pursuant to such New Term Commitments minus 50 basis points, provided that, if any term loan incurred pursuant to any New Term Commitment (an “ Incremental Term Facility ”) includes an interest rate floor greater than the interest rate floor applicable to the existing Term Facility, such increased amount shall be equated to interest margin for purposes of determining whether an increase to the applicable interest margin under the existing Term Facility shall be required, to the extent an increase in the interest rate floor in the then-existing Term Facility would cause an increase in the interest rate then in effect thereunder, and in such case the interest rate floor (but not the interest rate margin) applicable to the then-existing Term Facility shall be increased by such increased amount (the margin and floor increases described this clause (G) being referred to as “ MFN Protection ”); (H) any Incremental Term Facility Amendment entered into after the Closing Date shall be on the terms and pursuant to documentation to be determined by the Borrower and the Additional Term Lenders with the applicable Term Commitment Increases; provided that to the extent such terms and documentation are not substantially identical to this Agreement (except to the extent permitted by subclauses (B) , (E) , (F) , (G) , (H)  and (J)  of this clause (a) ), they shall be reasonably satisfactory to the Administrative Agent, the Borrower and the Additional Term Lenders and shall be no more favorable (as reasonably determined by the Borrower) to the Additional Term Lenders than to the relevant Lenders under the Term Loans then outstanding (except for covenants or other provisions applicable exclusively to periods commencing after the Latest Maturity Date); provided further that, any such Additional Term Lenders will participate on a pro rata basis or on a less than pro rata basis (but not on a greater than pro rata basis) (or, if junior in right of payment or security, shall be on a junior basis with respect thereto) in any voluntary or mandatory prepayments (other than scheduled amortization payments) of the Term Loans; (I) no Affiliated Lenders shall hold New Term Loan Commitments if, after giving effect to the fundings thereunder, Affiliated Lenders would hold a greater percentage of Term Loans than is otherwise permitted under Section 9.04(f) , (J) any term loans incurred under New Term Commitments may either (I) rank junior in right of security to the Term Loans then outstanding, in which case such term loans shall be subject to customary intercreditor arrangements reasonably satisfactory to the Administrative Agent or (II) be unsecured, in which case the relevant New Term Commitments, as applicable, shall be established as a separate facility to which the preceding subclause (G)  shall not apply, and (K) notwithstanding anything to the contrary in this Section 2.20 or in any other provision of any Loan Document, if the proceeds of any term loans made pursuant to any Incremental Commitment are intended to finance a Permitted Acquisition or any other Investment that is permitted hereunder and the Lenders or Additional Term Lenders providing such Incremental Commitment so agree, the availability thereof may be subject to customary “SunGard” or “certain funds” conditionality.  Each Revolving Commitment Increase denominated in U.S. Dollars shall be in a minimum principal amount of $1,000,000 and integral multiples of $500,000 in excess thereof unless such amount represents all the remaining availability under the aggregate principal amount of Incremental Commitments set forth above.  Each New Term Commitment shall be in a minimum principal amount of $2,500,000 and integral multiples of $500,000 in excess thereof unless such amount
 
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represents all the remaining availability under the aggregate principal amount of Incremental Commitments set forth above.  Furthermore, the Borrower will use the proceeds of any Incremental Commitment for any purpose not prohibited by this Agreement.
 
(b)                                  (i) Each notice from the Borrower pursuant to this Section shall set forth the requested amount of the relevant Revolving Commitment Increase or New Term Commitment.
 
(ii)                                   Commitments in respect of any Revolving Commitment Increase shall become Revolving Commitments (or in the case of any Revolving Commitment Increase to be provided after the Closing Date by an existing Revolving Lender, an increase in such Revolving Lender’s Revolving Commitment) under this Agreement with, except as provided in Section 2.20(a) , the exact same terms as the applicable Class of Revolving Loans pursuant to an amendment (an “ Incremental Revolving Facility Amendment ”) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, such Additional Revolving Lender and the Administrative Agent.  Revolving Commitment Increases may be provided, subject to the prior written consent of the Borrower (not to be unreasonably withheld), by any existing Lender other than an Affiliated Lender (it being understood that no existing Lender shall have the right to participate in any Revolving Commitment Increase or, unless it agrees, be obligated to provide any Revolving Commitment Increase) or by any other Additional Revolving Lender.  An Incremental Revolving Facility Amendment may, without the consent of any other Lenders, effect such amendments to any Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent, to effect the provisions of this Section.  The effectiveness of any Incremental Revolving Facility Amendment shall, unless otherwise agreed to by the Administrative Agent and the Additional Revolving Lenders, be subject to the satisfaction on the date thereof (each, an “ Incremental Revolving Facility Closing Date ”) of each of the conditions set forth in Section 4.02 (it being understood that all references to “the date of such Borrowing” in Section 4.02 shall be deemed to refer to the Incremental Revolving Facility Closing Date) and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of legal opinions, board resolutions, officers’ certificates and/or reaffirmation agreements consistent with those delivered on the Closing Date under Section 4.01 (other than changes to such legal opinions resulting from a change in law, change in fact or change to counsel’s form of opinion reasonably satisfactory to the Administrative Agent).
 
(iii)                                Commitments in respect of any Term Commitment Increase shall become Commitments under this Agreement pursuant to an amendment (an “ Incremental Term Facility Amendment ”) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, such Additional Term Lender and the Administrative Agent.  Term Commitment Increases may be provided, subject to the prior written consent of the Borrower (not to be unreasonably withheld), by any existing Lender (it being understood that no existing Lender shall have any right to participate in any Term Commitment Increase or, unless it agrees, be obligated to provide any Term Commitment Increases) or by any other Additional Term Lender.  An Incremental Term Facility Amendment may, without the consent of any other Lenders, effect such amendments to any Loan
 
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Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent, to effect the provisions of this Section.  The effectiveness of any Incremental Term Facility Amendment shall, unless otherwise agreed to by the Administrative Agent and the Additional Term Lenders, be subject to the satisfaction on the date thereof (each, an “ Incremental Term Facility Closing Date ”) of each of the conditions set forth in Section 4.02 (it being understood that all references to “the date of such Borrowing” in Section 4.02 shall be deemed to refer to the Incremental Term Facility Closing Date) and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of legal opinions, board resolutions, officers’ certificates and/or reaffirmation agreements consistent with those delivered on the Closing Date under Section 4.01 (other than changes to such legal opinions resulting from a change in law, change in fact or change to counsel’s form of opinion reasonably satisfactory to the Administrative Agent).
 
(c)                                   (i) Upon each Revolving Commitment Increase pursuant to this Section, each Revolving Lender with respect to the Class of Revolving Commitments to be increased immediately prior to such increase will automatically and without further act be deemed to have assigned to each Additional Revolving Lender providing a portion of such Revolving Commitment Increase (each a “ Revolving Commitment Increase Lender ”), and each such Revolving Commitment Increase Lender will automatically and without further act be deemed to have assumed, a portion of such Revolving Lender’s participations hereunder in outstanding Letters of Credit of the applicable Class such that, after giving effect to such Revolving Commitment Increase and each such deemed assignment and assumption of participations, the percentage of the aggregate outstanding participations hereunder in Letters of Credit of the applicable Class held by each Revolving Lender with respect to such Class (including each such Revolving Commitment Increase Lender) will equal such Revolving Lender’s Applicable Percentage with respect to such Class.  Any Revolving Loans outstanding immediately prior to the date of such Revolving Commitment Increase that are Eurodollar Loans will (except to the extent otherwise repaid in accordance herewith) continue to be held by, and all interest thereon will continue to accrue for the accounts of, the Revolving Lenders holding such Loans immediately prior to the date of such Revolving Commitment Increase, in each case until the last day of the then-current Interest Period applicable to any such Loan, at which time it will be repaid or refinanced with new Revolving Loans made pursuant to Section 2.01 in accordance with the Applicable Percentages of the Revolving Lenders of the applicable Class after giving effect to the Revolving Commitment Increase; provided , however , that upon the occurrence of any Event of Default, each Revolving Commitment Increase Lender will promptly purchase (for cash at face value) assignments of portions of such outstanding Revolving Loans of the applicable Class of other Revolving Lenders so that, after giving effect thereto, all Revolving Loans that are Eurodollar Loans are held by the Revolving Lenders in accordance with their then-current Applicable Percentages.  Any such assignments shall be effected in accordance with the provisions of Section 9.04 ; provided that the parties hereto hereby consent to such assignments and the minimum assignment amounts and processing and recordation fee set forth in Section 9.04(b)(ii)  shall not apply thereto.  If there are any ABR Revolving Loans outstanding on the date of such Revolving Commitment Increase, such Loans shall either be prepaid by the Borrower on such date or refinanced on such date (subject to satisfaction of applicable borrowing conditions) with Revolving Loans of the same Class made on such date by the Revolving Lenders (including the Revolving Commitment Increase Lenders) in accordance with their
 
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Applicable Percentages.  In order to effect any such refinancing, (i) each Revolving Commitment Increase Lender will make ABR Revolving Loans to the Borrower by transferring funds to the Administrative Agent in an amount equal to the aggregate outstanding amount of such Loans of such Type and Class times a percentage obtained by dividing the amount of such Revolving Commitment Increase Lender’s Revolving Commitment Increase by the aggregate amount of the Revolving Commitments (after giving effect to the Revolving Commitment Increase on such date) of such Class and (ii) such funds will be applied to the prepayment of outstanding ABR Revolving Loans, as applicable, held by the Revolving Lenders of the applicable Class other than the Revolving Commitment Increase Lenders, and transferred by the Administrative Agent to the Revolving Lenders of the applicable Class other than the Revolving Commitment Increase Lenders, in such amounts so that, after giving effect thereto, all ABR Revolving Loans will be held by the Revolving Lenders in accordance with their then-current Applicable Percentages.  On the date of such Revolving Commitment Increase, the Borrower will pay to the Administrative Agent, for the accounts of the Revolving Lenders receiving such prepayments, accrued and unpaid interest on the principal amounts of their Revolving Loans being prepaid.  The Administrative Agent and the Lenders hereby agree that the minimum borrowing, pro rata borrowing and pro rata payment requirements contained elsewhere in this Agreement shall not apply to the transactions effected pursuant to the immediately preceding sentence.
 
(ii)                                   Upon each Term Commitment Increase pursuant to this Section, each Additional Term Lender with shall make an additional term loan to the Borrower, in the applicable currency, in a principal amount equal to such Lender’s Term Commitment Increase.  Any such term loan shall be a “Term Loan” for all purposes of this Agreement and the other Loan Documents.
 
(d)                                  This Section 2.20 shall supersede any provisions in Section 2.18 or Section 9.02 to the contrary.
 
Section 2.21                              Credit Agreement Refinancing Indebtedness; Maturity Extension .
 
(a)                                  At any time after the Closing Date, the Borrower may obtain, from any Lender or any Additional Term Lender, Indebtedness in respect of a renewal, replacement or refinancing of all or any portion of the Term Loans then outstanding under this Agreement (which for purposes of this clause (a) will be deemed to include any then outstanding Other Term Loans) in the form of Other Term Loans or Other Term Commitments, in each case pursuant to a Refinancing Amendment satisfying the Credit Agreement Refinancing Debt Requirements. The effectiveness of any Refinancing Amendment shall be subject to the satisfaction on the date thereof of each of the conditions set forth in Section 4.02 and, to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of legal opinions, board resolutions, officers’ certificates and/or reaffirmation agreements consistent with those delivered on the Closing Date under Section 4.01 (other than changes to such legal opinions resulting from a change in law, change in fact or change to counsel’s form of opinion reasonably satisfactory to the Administrative Agent).  Each Class of Credit Agreement Refinancing Indebtedness incurred under this Section 2.21(a)  shall be in an aggregate principal amount that is not less than $25,000,000 and an integral multiple of $1,000,000 in excess thereof unless such amount represents the total outstanding amount of the Refinanced Debt.  The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Refinancing Amendment.  Each of
 
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the parties hereto hereby agrees that, upon the effectiveness of any Refinancing Amendment, this Agreement shall be deemed amended to the extent (but only to the extent) necessary to reflect the existence and terms of the Credit Agreement Refinancing Indebtedness incurred pursuant thereto (including any amendments necessary to treat the Loans and Commitments subject thereto as Other Term Loans and/or Other Term Commitments).  Any Refinancing Amendment or Permitted Refinancing Notes may allow for the ability to participate on a pro rata basis or on a less than pro rata basis (but not on a greater than pro rata basis) (or, if junior in right of payment or security, shall be on a junior basis with respect thereto) in any voluntary or mandatory prepayments (other than scheduled amortization payments) of Term Loans then outstanding under this Agreement (which for purposes of this sentence will be deemed to include any then outstanding Other Term Loans).  Any Refinancing Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to effect the provisions of this Section.  The Borrower shall have the right to require the applicable Lenders to assign their Term Loans to the investors providing any Credit Agreement Refinancing Indebtedness pursuant to any Refinancing Amendment.
 
(b)                                  At any time after the Closing Date, the Borrower may obtain Indebtedness in respect of a renewal, replacement or refinancing of all or any portion of the Term Loans then outstanding under this Agreement (which for purposes of this clause (i) will be deemed to include any then outstanding Other Term Loans) in the form of Permitted Refinancing Notes satisfying the Credit Agreement Refinancing Debt Requirements.
 
(c)
 
(i)                                      The Borrower may from time to time, pursuant to the provisions of this Section 2.21(c) , agree with one or more Lenders holding Loans and Commitments of any Class (“ Existing Class ”) to extend the maturity date and to provide for other terms consistent with this Section 2.21(c)  (each such modification, an “ Extension ”) pursuant to one or more written offers (each an “ Extension Offer ”) made from time to time by the Borrower to all Lenders under any Class that is proposed to be extended under this Section 2.21(c) , in each case on a pro rata basis (based on the relative principal amounts of the outstanding Loans of each Lender in such Class) and on the same terms to each such Lender.  In connection with each Extension, the Borrower will provide notification to the Administrative Agent (for distribution to the Lenders of the applicable Class), no later than 30 days prior to the maturity of the applicable Class or Classes to be extended of the requested new maturity date for the extended Loans of each such Class (each an “ Extended Maturity Date ”) and the due date for Lender responses.  In connection with any Extension, each Lender of the applicable Class wishing to participate in such Extension shall, prior to such due date, provide Administrative Agent with a written notice thereof in a form reasonably satisfactory to Administrative Agent.  Any Lender that does not respond to an Extension Offer by the applicable due date shall be deemed to have rejected such Extension.  In connection with any Extension, the Borrower shall agree to such procedures, if any, as may be reasonably established by, or acceptable to, the Administrative Agent to accomplish the purposes of this Section 2.21(c) .
 
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(ii)                                   After giving effect to any Extension, the Term Loans or Revolving Commitments so extended shall cease to be a part of the Class that they were a part of immediately prior to the Extension and shall be a new Class hereunder; provided that in the case of any Extension Amendment relating to Revolving Commitments or Revolving Loans, (I) all borrowings and all prepayments of Revolving Loans shall continue to be made on a ratable basis among all Revolving Lenders, based on the relative amounts of their Revolving Commitments, until the repayment of the Revolving Loans attributable to the non-extended Revolving Commitments on the Revolving Maturity Date, (II) the allocation of the participation exposure with respect to any then-existing or subsequently issued or made Letter of Credit or Swingline Loan as between the Revolving Commitments of such new “Class” and the remaining Revolving Commitments shall be made on a ratable basis in accordance with the relative amounts thereof until Revolving Maturity Date relating to such non-extended Revolving Commitments has occurred, (III) no termination of Extended Revolving Commitments and no repayment of Extended Revolving Loans accompanied by a corresponding permanent reduction in Extended Revolving Commitments shall be permitted unless such termination or repayment (and corresponding reduction) is accompanied by at least a pro rata termination or permanent repayment (and corresponding pro rata permanent reduction), as applicable, of the Existing Revolving Loans and Existing Revolving Commitments (or all Existing Revolving Commitments of such Class and related Existing Revolving Loans shall have otherwise been terminated and repaid in full) and (IV) with respect to Letters of Credit and Swingline Loans, the Revolving Maturity Date may not be extended without the prior written consent of the Issuing Bank and the Swingline Lender.  If the Revolving Exposure exceeds the Revolving Commitment as a result of the occurrence of a Revolving Maturity Date with respect to any Class of Revolving Commitments while an extended Class of Revolving Commitments remains outstanding, Borrower shall make such payments as are necessary in order to eliminate such excess on such Revolving Maturity Date.
 
(iii)                                The consummation and effectiveness of each Extension shall be subject to the following:
 
(A)                                no Default or Event of Default shall have occurred and be continuing at the time any Extension Offer is delivered to the Lenders or at the time of such Extension;
 
(B)                                the Term Loans or Revolving Commitments, as applicable, of any Lender extended pursuant to any Extension (as applicable, “ Extended Term Loans ” or “ Extended Revolving Commitments ”) shall have the same terms as the Class of Term Loans or Revolving Commitments, as applicable, subject to the related Extension Amendment (as applicable, “ Existing Term Loans ” or “ Existing Revolving Commitments ”); except (A) the final maturity date of any Extended Term Loans or Extended Revolving Commitments of a Class to be extended pursuant to an Extension shall be later than the Maturity Date of the Class of Existing Term Loans or Existing Revolving Commitments, as applicable, subject to the related Extension Amendment, and the weighted average life to maturity of any Extended Term Loans or Extended Revolving Commitments of a Class to be
 
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extended pursuant to an Extension shall be no shorter than the weighted average life to maturity of the Class of Existing Term Loans or Existing Revolving Commitments, as applicable, subject to the related Extension Amendment; (B) the all-in pricing (including, without limitation, margins, fees and premiums) with respect to the Extended Term Loans or Extended Revolving Commitments, as applicable, may be higher or lower than the all-in pricing (including, without limitation, margins, fees and premiums) for the Existing Term Loans or Existing Revolving Commitments, as applicable; (C) the revolving credit commitment fee rate with respect to the Extended Revolving Commitments may be higher or lower than the revolving credit commitment fee rate for Existing Revolving Commitments, in each case, to the extent provided in the applicable Extension Amendment; (D) no repayment of any Extended Term Loans or Extended Revolving Commitments, as applicable, shall be permitted unless such repayment is accompanied by an at least pro rata repayment of all earlier maturing Loans (including previously extended Loans) (or all earlier maturing Loans (including previously extended Loans) shall otherwise be or have been terminated and repaid in full); (E) the Extended Term Loans and/or Extended Revolving Commitments may contain a “most favored nation” provision for the benefit of Lenders holding Extended Term Loans or Extended Revolving Commitments, as applicable; and (F) the other terms and conditions applicable to Extended Term Loans and/or Extended Revolving Commitments may be terms different than those with respect to the Existing Term Loans or Existing Revolving Commitments, as applicable, so long as such terms and conditions only apply after the Latest Maturity Date; provided further , each Extension Amendment may, without the consent of any Lender other than the applicable extending Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the opinion of the Administrative Agent and the Borrower, to give effect to the provisions of this Section 2.21(c) , including any amendments necessary to treat the applicable Loans and/or Commitments of the extending Lenders as a new “Class” of loans and/or commitments hereunder; provided , however , no Extension Amendment may provide for any Class of Extended Term Loans or Extended Revolving Commitments to be secured by any Collateral or other assets of any Loan Party that does not also secure the Existing Term Loans or Existing Revolving Commitments;
 
(C)                                all documentation in respect of such Extension shall be consistent with the foregoing, and all written communications by the Borrower generally directed to the applicable Lenders under the applicable Class in connection therewith shall be in form and substance consistent with the foregoing and otherwise reasonably satisfactory to Administrative Agent; and
 
(D)                                a minimum amount in respect of such Extension (to be determined in Borrower’s discretion and specified in the relevant Extension Offer, but in no event less than $5,000,000, unless another amount is agreed to by Administrative Agent) shall be satisfied.
 
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(iv)                               For the avoidance of doubt, it is understood and agreed that the provisions of Section 2.18 and Section 9.02 will not apply to Extensions of Term Loans or Revolving Commitments, as applicable, pursuant to Extension Offers made pursuant to and in accordance with the provisions of this Section 2.21(c) , including to any payment of interest or fees in respect of any Extended Term Loans or Extended Revolving Commitments, as applicable, that have been extended pursuant to an Extension at a rate or rates different from those paid or payable in respect of Loans of any other Class, in each case as is set forth in the relevant Extension Offer.
 
(v)                                  No Lender who rejects any request for an Extension shall be deemed a Non-Consenting Lender for purposes of Section 9.02(c) .
 
(vi)                               The Lenders hereby irrevocably authorize the Administrative Agent to enter into amendments (collectively, “ Extension Amendments ”) to this Agreement and the other Loan Documents as may be necessary in order to establish new Classes of Term Loans or Revolving Commitments, as applicable, created pursuant to an Extension, in each case on terms consistent with this Section 2.21(c) .  Without limiting the foregoing, in connection with any Extension, (i) the appropriate Loan Parties shall (at their expense) amend (and the Administrative Agent is hereby directed to amend) any Mortgage (or any other Security Document that the Administrative Agent reasonably requests to be amended to reflect an Extension) that has a maturity date prior to the latest Extended Maturity Date so that such maturity date is extended to the then latest Extended Maturity Date (or such later date as may be advised by local counsel to the Administrative Agent) and (ii) the Borrower shall deliver board resolutions, secretary’s certificates, officer’s certificates and other documents as shall reasonably be requested by the Administrative Agent in connection therewith and a legal opinion of counsel reasonably acceptable to the Administrative Agent.
 
(vii)                            Promptly following the consummation and effectiveness of any Extension, the Borrower will furnish to the Administrative Agent (who shall promptly furnish to each Lender) written notice setting forth the Extended Maturity Date and material economic terms of the Extension and the aggregate principal amount of each class of Loans and Commitments after giving effect to the Extension and attaching a copy of the fully executed Extension Amendment.
 
(d)                                  This Section 2.21 shall supersede any provisions in Section 2.18 or Section 9.02 to the contrary.
 
Section 2.22                              Defaulting Lenders .
 
(a)                                  Adjustments .  Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable law:
 
(i)                                      Waivers and Amendments .  Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be
 
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restricted as set forth in the definition of “Required Lenders”, the definition of “Required Revolving Lender” and Section 9.02 .
 
(ii)                                   Reallocation of Payments .  Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of that Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to Article VII or otherwise, and including any amounts made available to the Administrative Agent by that Defaulting Lender pursuant to Section 9.08 ), shall be applied at such time or times as may be determined by the Administrative Agent as follows:  first , to the payment of any amounts owing by that Defaulting Lender to the Administrative Agent hereunder; second , in the case of a Revolving Lender, to the payment on a pro rata basis of any amounts owing by that Defaulting Lender to any applicable Issuing Bank and Swingline Lender; third , to cash collateralize the Defaulting Lender Fronting Exposure of any applicable Issuing Bank and Swingline Lender; fourth , as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent; fifth , in the case of a Revolving Lender, if so determined by the Administrative Agent and the Borrower, to be held in a non-interest bearing deposit account and released in order to satisfy obligations of that Defaulting Lender to fund Loans under this Agreement; sixth , to the payment of any amounts owing to the Lenders or the Issuing Banks or Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender or such Issuing Bank or Swingline Lender against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Agreement; seventh , so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Agreement; and eighth , to that Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if such payment is a payment of the principal amount of any Loans or LC Disbursements and such Lender is a Defaulting Lender under clause (a) of the definition thereof, such payment shall be applied solely to pay the Loans of, and LC Disbursements owed to, the relevant non-Defaulting Lenders on a pro rata basis prior to being applied pursuant to Section 2.05(f) ; provided further that any payment for the account of a Defaulting Lender that is a Foreign Lender shall not be applied to the account of a Lender that is a U.S. Person.  Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post cash collateral pursuant to Section 2.05(a)  shall be deemed paid to and redirected by that Defaulting Lender, and each Lender irrevocably consents hereto.
 
(iii)                                Certain Fees .  That Defaulting Lender (x) shall not be entitled to receive or accrue any commitment fee pursuant to Section 2.12(a)  for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender) and (y) shall be limited in its right to receive Letter of Credit Fees as provided in Section 2.12(b) .
 
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(b)                                  Reallocation of Applicable Percentages to Reduce Fronting Exposure .  If any Swingline Exposure or LC Exposure exists at the time such Revolving Lender becomes a Defaulting Lender then, so long as no Event of Default has occurred and is continuing:
 
(i)                                      the Swingline Exposure and LC Exposure of such Defaulting Lender shall be reallocated among the Non-Defaulting Lenders of the applicable Revolving Facility in accordance with their respective Applicable Percentages but only to the extent that such recollection does not cause any Non-Defaulting Lender’s Revolving Exposure to exceed such Non-Defaulting Lender’s Revolving Commitments;
 
(ii)                                   if the reallocation described in clause (i)  above cannot, or can only partially, be effected, the Borrower shall within one Business Day following notice by the Administrative Agent (A) first, prepay the portion of such Defaulting Lender’s Swingline Exposure that has not been reallocated and (B) second, cash collateralize for the benefit of the Issuing Banks the portion of such Defaulting Lender’s LC Exposure with respect to the applicable Revolving Facility that has not been reallocated in accordance with the procedures set forth in Section 2.05 for so long as such LC Exposure is outstanding;
 
(iii)                                if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to clause (ii)  above, the Borrower shall not be required to pay participation fees to such Defaulting Lender pursuant to Section 2.12(b)  with respect to such portion of such Defaulting Lender’s LC Exposure with respect to the applicable Revolving Facility for so long as such Defaulting Lender’s LC Exposure is cash collateralized;
 
(iv)                               if any portion of the LC Exposure of such Defaulting Lender is reallocated pursuant to clause (i)  above, then the fees payable to the Lenders pursuant to Sections 2.12(a)  and  2.12(b)  shall be adjusted to give effect to such reallocation;
 
(v)                                  if all or any portion of such Defaulting Lender’s LC Exposure is neither reallocated nor cash collateralized pursuant to clauses (i)  or (ii)  above, then, without prejudice to any rights or remedies of any Issuing Bank or any other Lender hereunder, all commitment fees that otherwise would have been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting Lender’s Commitment utilized by such LC Exposure) and participation fees payable under Section 2.12(b)  with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Banks of each applicable Class (and allocated among them ratably based on the amount of such Defaulting Lender’s LC Exposure attributable to Letters of Credit issued by each Issuing Bank) until and to the extent that such LC Exposure is reallocated and/or cash collateralized; and
 
(vi)                               no reallocation hereunder shall constitute a waiver or release of any claim of any party hereunder against a Defaulting Lender arising from that Lender having become a Defaulting Lender, including any claim of a non-Defaulting Lender as a result of such non-Defaulting Lender’s increased exposure following such reallocation.
 
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(c)                                   Limitations on Swingline Loans and Letters of Credit .  So long as any Lender is Defaulting Lender, the Swingline Lender shall not be required to fund any Swingline Loan, and no Issuing Bank shall be required to issue, amend, renew or extend any Letter of Credit, unless the Swingline Lender or such Issuing Bank, as the case may be, shall have entered into arrangements with Holdings and the Borrower or such Revolving Lender satisfactory to the Swingline Lender or such Issuing Bank, as the case may be, to defease any risk to it in respect of such Lender hereunder.
 
(d)                                  Defaulting Lender Cure .  If the Borrower, the Administrative Agent and each Issuing Bank agree in writing in their sole discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the Closing Date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any cash Collateral), such Lender will, to the extent applicable, purchase that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Loans and funded and unfunded participations in Letters of Credit to be held on a pro rata basis by the Lenders in accordance with their Applicable Percentages (without giving effect to Section 2.22(b) ), whereupon that Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided , further , that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.
 
Section 2.23                              Illegality .  If any Lender determines that any law has made it unlawful, or that any Governmental Authority has asserted that it is unlawful, for any Lender to make, maintain or fund Loans whose interest is determined by reference to the Adjusted Eurodollar Rate, or to determine or charge interest rates based upon the Adjusted Eurodollar Rate, then, on notice thereof by such Lender to the Borrower through the Administrative Agent, any obligation of such Lender to make or continue Eurodollar Loans or to convert ABR Loans to Eurodollar Loans shall be suspended until such Lender notifies the Administrative Agent and the Borrower that the circumstances giving rise to such determination no longer exist.  Upon receipt of such notice, (x) the Borrower shall, upon three (3) Business Days’ notice from such Lender (with a copy to the Administrative Agent), prepay or, if applicable, convert all Eurodollar Loans of such Lender to ABR Loans, either on the last day of the Interest Period therefor, if such Lender may lawfully continue to maintain such Eurodollar Loans, to such day, or immediately, if such Lender may not lawfully continue to maintain such Eurodollar Loans, and (y) if such notice asserts the illegality of such Lender determining or charging interest rates based upon the Adjusted Eurodollar Rate, the Administrative Agent shall during the period of such suspension compute the Alternate Base Rate applicable to such Lender without reference to the Adjusted Eurodollar Rate component thereof until the Administrative Agent is advised in writing by such Lender that it is no longer illegal for such Lender to determine or charge interest rates based upon the Adjusted Eurodollar Rate.  Each Lender agrees to notify the Administrative Agent and the Borrower in writing promptly upon becoming aware that it is no longer illegal for such Lender to determine or charge interest rates based upon the Adjusted Eurodollar Rate.  Upon any such prepayment or conversion, the Borrower shall also pay accrued interest on the amount so prepaid or converted.
 
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ARTICLE III
 
REPRESENTATIONS AND WARRANTIES
 
Holdings and the Borrower hereby represent and warrant to the Lenders that:
 
Section 3.01                              Organization; Powers .  Each of Holdings, the Borrower and the Restricted Subsidiaries is duly organized, validly existing and in good standing (to the extent such concept exists in the relevant jurisdictions) under the laws of the jurisdiction of its organization, has the corporate or other organizational power and authority to carry on its business as now conducted and as proposed to be conducted and to execute, deliver and perform its obligations under each Loan Document to which it is a party and to effect the Financing Transactions and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.
 
Section 3.02                              Authorization; Enforceability .  The Financing Transactions to be entered into by each Loan Party have been duly authorized by all necessary corporate or other action and, if required, action by the holders of such Loan Party’s Equity Interests.  This Agreement has been duly executed and delivered by each of Holdings and the Borrower and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will be duly executed and delivered by such Loan Party.  This Agreement constitutes, and each other Loan Document to which any Loan Party is to be a party, when executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of Holdings, the Borrower or such Loan Party, as the case may be, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.
 
Section 3.03                              Governmental Approvals; No Conflicts .  The Financing Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or material third party, except such as have been obtained or made and are in full force and effect and except filings necessary to perfect Liens created under the Loan Documents, (b) will not violate (i) the Organizational Documents of, or (ii) any Requirements of Law applicable to Holdings, the Borrower or any Restricted Subsidiary, (c) will not violate or result in a default under any indenture or other agreement or instrument binding upon Holdings, the Borrower or any Restricted Subsidiary or their respective assets, or give rise to a right thereunder to require any payment, repurchase or redemption to be made by Holdings, the Borrower or any Restricted Subsidiary, or give rise to a right of, or result in, termination, cancellation or acceleration of any obligation thereunder or (d) will not result in the creation or imposition of any Lien on any asset of Holdings, the Borrower or any Restricted Subsidiary, except Liens created under the Loan Documents, except (in the case of each of clauses (a), (b)(ii) and (c)) to the extent that the failure to obtain or make such consent, approval, registration, filing or action, or such violation, as the case may be, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.
 
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Section 3.04                              Financial Condition; No Material Adverse Effect .
 
(a)                                  The Audited Financial Statements (i) were prepared, as applicable, in accordance with GAAP, consistently applied throughout the period covered thereby, except as otherwise expressly noted therein and (ii) fairly present the financial condition of such Persons as of the date thereof and their results of operations for the period covered thereby in accordance with GAAP, consistently applied throughout the period covered thereby, except as otherwise expressly noted therein.
 
(b)                                  The unaudited consolidated balance sheet of Holdings and its subsidiaries dated June 30, 2015 and the related consolidated statements of income or operations and cash flows for the fiscal quarter ended on that date (i) were prepared in accordance with GAAP consistently applied throughout the period covered thereby, except as otherwise expressly noted therein, and (ii) fairly present the financial condition of Holdings and its subsidiaries as of the date thereof and their results of operations for the period covered thereby, subject, in the case of clauses (i) and (ii), to the absence of footnotes and to normal year-end audit adjustments.
 
(c)                                   As of the Closing Date, Holdings has furnished to the Lenders the consolidated pro forma balance sheet of Holdings and its subsidiaries as at June 30, 2015, and the related consolidated pro forma statement of income of Holdings and the Borrower as of and for the twelve-month period then ended (such pro forma balance sheet and statement of operations, the “ Pro Forma Financial Statements ”), which have been prepared giving effect to the Transactions as if such transactions had occurred on such date or at the beginning of such period, as the case may be.  The Pro Forma Financial Statements have been prepared in good faith, based on assumptions believed by Holdings to be reasonable as of the date of delivery thereof, and present fairly in all material respects on a pro forma basis and in accordance with GAAP the estimated financial position of Holdings and its subsidiaries as at June 30, 2015, and their estimated results of operations for the periods covered thereby, assuming that the Transactions had actually occurred at such date or at the beginning of such period.
 
(d)                                  On and as of the Closing Date, the projections of Holdings and its Subsidiaries for the period of Fiscal Year 2015 through and including Fiscal Year 2020 (the “ Projections ”) are based on good faith estimates and assumptions made by the management of Holdings; provided the Projections are not to be viewed as facts and that actual results during the period or periods covered by the Projections may differ from such Projections and that the differences may be material.
 
(e)                                   Since the Closing Date, there has been no Material Adverse Effect.
 
Section 3.05                              Properties .
 
(a)                                  Each of Holdings, the Borrower and the Restricted Subsidiaries has good and marketable title to, or valid interests in, all its real and personal property material to its business, if any (including all the Mortgaged Properties), (i) free and clear of all Liens except for Liens permitted by Section 6.02 and (ii) except for minor defects in title that do not interfere with its ability to conduct its business as currently conducted or as proposed to be conducted or to utilize such properties for their intended purposes, in each case, except where the failure to do so
 
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could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
 
(b)           Each of Holdings, the Borrower and the Restricted Subsidiaries owns, or is licensed to use, all Intellectual Property material to the conduct of its business, if any, and the use thereof by Holdings, the Borrower and the Restricted Subsidiaries does not infringe upon the Intellectual Property rights of any other Person, in each case except where the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
 
Section 3.06          Litigation and Environmental Matters .
 
(a)           There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of Holdings or the Borrower, threatened in writing against or affecting Holdings, the Borrower or any Restricted Subsidiary that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
 
(b)           Except with respect to any matters that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, none of Holdings, the Borrower or any Restricted Subsidiary (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has, to the knowledge of Holdings or the Borrower, become subject to any Environmental Liability, (iii) has received written notice of any claim with respect to any Environmental Liability or (iv) has, to the knowledge of Holdings or the Borrower, any basis to reasonably expect that Holdings, the Borrower or any Restricted Subsidiary will become subject to any Environmental Liability.
 
Section 3.07          Compliance with Laws and Agreements .  Each of Holdings, the Borrower and the Restricted Subsidiaries has been and continues to be in material compliance with (a) its Organizational Documents, (b) all Requirements of Law applicable to it or its property, (c) all indentures and other agreements and instruments binding upon it or its property, and (d) AML Legislation, Anti-Corruption Laws and Economic Sanctions, except for, in the case of clauses (b)  and (c)  of this Section, where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
 
Section 3.08          Investment Company Status .  None of Holdings, the Borrower or any Restricted Subsidiary is required to register as an “investment company” as defined in, or is subject to regulation under, the Investment Company Act of 1940, as amended from time to time.
 
Section 3.09          Taxes .  Except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, Holdings, the Borrower and each Restricted Subsidiary (a) have timely filed or caused to be filed all Tax returns and reports required to have been filed and (b) have paid or caused to be paid all Taxes levied or imposed on their properties, income or assets (whether or not shown on a Tax return) including in their capacity as tax withholding agents, except any Taxes that are being contested in good faith by
 
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appropriate proceedings; provided that Holdings or such Subsidiary, as the case may be, has set aside on its books adequate reserves therefore in accordance with GAAP.
 
There is no proposed Tax assessment, deficiency or other claim against Holdings, the Borrower or any Restricted Subsidiary except (i) those being actively contested by a Loan Party or such Subsidiary in good faith and by appropriate proceedings diligently conducted that stay the enforcement of the Tax in question and for which adequate reserves have been provided in accordance with GAAP or (ii) those that would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect.
 
Section 3.10          ERISA; Foreign Plan Matters .
 
(a)           Except as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect, each Plan is in compliance with the applicable provisions of ERISA, the Code and other federal or state laws.
 
(b)           Except as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, (i) no ERISA Event has occurred or is reasonably expected to occur, (ii) neither Holdings, the Borrower, any Restricted Subsidiary nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA), (iii) neither Holdings, the Borrower, any Restricted Subsidiary nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 of ERISA with respect to a Multiemployer Plan and (iv) neither Holdings, the Borrower, any Restricted Subsidiary nor any ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
 
(c)           Except as could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, each Foreign Plan has been maintained, funded and administered in compliance with all requirements of law applicable thereto and the respective requirements of the governing documents for such plan.
 
Section 3.11          Disclosure .  None of the other reports, financial statements, certificates or other written information (including the Information Memorandum) furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the negotiation of any Loan Document or delivered thereunder (as modified or supplemented by other information so furnished) when taken as a whole contains any material misstatement of fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not materially misleading; provided that, with respect to projected financial information, Holdings and the Borrower represent only that such information was prepared in good faith based upon assumptions believed by them to be reasonable at the time delivered and, if such projected financial information was delivered prior to the Closing Date, as of the Closing Date, it being understood that any such projected financial information may vary from actual results and such variations could be material.
 
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Section 3.12          Subsidiaries .  As of the Closing Date, Schedule 3.12 sets forth the name of, and the ownership interest of Holdings and each of its subsidiaries in, each subsidiary of Holdings.
 
Section 3.13          Intellectual Property; Licenses, Etc .  Holdings, the Borrower and the Restricted Subsidiaries own, license or possess the right to use, all Intellectual Property that is reasonably necessary for the operation of their businesses, without infringing or otherwise violating the Intellectual Property of any Person, except to the extent such violations, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect.  No Intellectual Property used by Holdings, the Borrower or any Restricted Subsidiary in the operation of its business infringes upon any rights held by any Person except for such infringements, individually or in the aggregate, which could not reasonably be expected to have a Material Adverse Effect.  No claim or litigation regarding any of such Intellectual Property is pending or, to the knowledge of Holdings and the Borrower, threatened against Holdings, the Borrower or any Restricted Subsidiary, which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect.
 
Section 3.14          Solvency .  After giving effect to the Transactions, including the Redemption regardless of whether the Redemption occurs on the Closing Date, and after taking into account all applicable rights of indemnity and contribution, (a) the fair value of the assets of Holdings and its Restricted Subsidiaries, taken as a whole, at a fair valuation, will exceed their debts and liabilities, subordinated, contingent or otherwise, (b) the present fair saleable value of the property of Holdings and its Restricted Subsidiaries, taken as a whole, will be greater than the amount that will be required to pay the probable liability of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured, (c) Holdings and its Restricted Subsidiaries, taken as a whole, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured, and (d) Holdings and its Restricted Subsidiaries, taken as a whole, will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Closing Date.  For purposes of this Section 3.14 , the amount of any contingent liability at any time shall be computed as the amount that, in the light of all of the facts and circumstances existing at such time, represents the amount that could reasonably be expected to become an actual or matured liability.
 
Section 3.15          [Reserved] .
 
Section 3.16          Federal Reserve Regulations .  None of Holdings, the Borrower or any other Restricted Subsidiary is engaged or will engage, principally or as one of its important activities, in the business of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors), or extending credit for the purpose of purchasing or carrying margin stock.  No part of the proceeds of the Loans will be used, directly or indirectly, to purchase or carry any margin stock or to refinance any Indebtedness originally incurred for such purpose, or for any other purpose that entails a violation (including on the part of any Lender) of the provisions of Regulations U or X of the Board of Governors.
 
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Section 3.17          [Reserved] .
 
Section 3.18          Labor Matters .  Except as could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, there are no strikes or other labor disputes against any of Holdings, the Borrower or the Restricted Subsidiaries pending or, to the knowledge of Holdings, the Borrower or the Restricted Subsidiaries, overtly threatened in writing.
 
Section 3.19          Security Documents .  Except as otherwise contemplated hereby or under any other Loan Documents, the provisions of the Security Documents, together with such filings and other actions required to be taken hereby or by the applicable Security Documents (including the delivery to Collateral Agent of any Pledged Collateral required to be delivered pursuant to the applicable Security Documents), are effective to create in favor of the Collateral Agent for the benefit of the Lenders a legal, valid and enforceable first priority perfected Lien (subject only to Liens permitted by Sections 6.02(ii) - (viii) , (xi) - (xix) , (xxii)  in the case of pari passu secured Credit Agreement Refinancing Indebtedness, (xxiii)  and (xxiv) ) on all right, title and interest of the respective Loan Parties in the Collateral described therein, with respect to perfection, to the extent perfection is required by the applicable Security Documents.
 
Section 3.20          [Reserved] .
 
Section 3.21          Economic Sanctions .
 
(a)           None of Holdings, the Borrower or any of the Restricted Subsidiaries nor any director or officer of the Borrower or any of the Restricted Subsidiaries nor, to the knowledge of Holdings or the Borrower, any employee or controlled Affiliate of the Borrower or any of the Restricted Subsidiaries that is acting in any capacity in connection with, or benefiting in any manner from, the Loans:  (i) is, or is an agent, department or instrumentality of, or is otherwise beneficially owned by, controlled by or acting on behalf of, directly or indirectly, a person that is the subject of any Economic Sanctions; or (ii) is located, organized or resident in a country or territory that is, or whose government is, the subject of Economic Sanctions (including, without limitation, Cuba, Iran, North Korea, Sudan and Syria).
 
(b)           None of Holdings, the Borrower or any of the Restricted Subsidiaries nor any director or officer of the Borrower or any of the Restricted Subsidiaries nor, to the knowledge of Holdings or the Borrower, any employee or controlled Affiliate of the Borrower or any of the Restricted Subsidiaries that is acting in any capacity in connection with, or benefiting in any manner from, the Loans:  (i) has conducted or conducts any business, or has engaged or engages in making or receiving any contribution of funds, goods or services, to or for the benefit of any person that is the subject of any Economic Sanctions; (ii) has dealt in or deals in, or otherwise has engaged in or engages in any transaction related to, any property or interests in property blocked pursuant to any Economic Sanctions; or (iii) has engaged in, or has conspired to engage in, any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate any Economic Sanctions.
 
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(c)           No part of the proceeds of the Loans or Letters of Credit will be used, directly or indirectly, for the purpose of financing any activities or business of or with any Person or in any country or territory that at such time is the subject of any Economic Sanctions.
 
Section 3.22          No Unlawful Contributions or Other Payments .
 
(a)           Each of Holdings, the Borrower, the Restricted Subsidiaries, and each director and officer of the Borrower and the Restricted Subsidiaries and, to the knowledge of Holdings and the Borrower, each employee and controlled Affiliate of the Borrower and the Restricted Subsidiaries that is acting in any capacity in connection with, or benefiting in any manner from, the Loans is compliance in all material respects with the FCPA and other Anti-Corruption Laws and the Patriot Act.  No part of the proceeds of the Loans or Letters of Credit will be used, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of in violation of any Anti-Corruption Law.
 
ARTICLE IV
 
CONDITIONS
 
Section 4.01          Closing Date .  The obligations of the Lenders to make Loans and of each Issuing Bank to issue Letters of Credit hereunder shall not become effective until the date on which each of the following conditions shall be satisfied (or waived in accordance with Section 9.02 ):
 
(a)           The Administrative Agent and each Joint Lead Arranger (or its counsel) shall have received (x) from each party hereto either (i) a counterpart of this Agreement signed on behalf of such party or (ii) written evidence satisfactory to each Joint Lead Arranger (which may include facsimile or other electronic transmission of a signed counterpart of this Agreement) that such party has signed a counterpart of this Agreement.
 
(b)           The Administrative Agent and each Joint Lead Arranger shall have received favorable written opinions (addressed to each Agent, the Lenders and the Issuing Banks and dated the Closing Date) of Winston & Strawn LLP, Campbell Killin Brittan & Ray, LLC, Taft Stettinius & Hollister LLP, and Waller Lansden Dortch & Davis, LLP, counsel for the Loan Parties, in form and substance reasonably satisfactory to the Administrative Agent and each Joint Lead Arranger.  Each of Holdings and the Borrower hereby requests that Winston & Strawn LLP, Campbell Killin Brittan & Ray, LLC, Taft Stettinius & Hollister LLP, and Waller Lansden Dortch & Davis, LLP deliver such opinions.
 
(c)           The Administrative Agent and each Joint Lead Arranger shall have received a certificate of each Loan Party, dated the Closing Date, executed by any Responsible Officer of such Loan Party, and including or attaching the documents referred to in paragraph (d) of this Section.
 
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(d)           The Administrative Agent and each Joint Lead Arranger shall have received a copy of (i) each Organizational Document of each Loan Party certified, to the extent applicable, as of a recent date by the applicable Governmental Authority, (ii) signature and incumbency certificates of the Responsible Officers of each Loan Party executing the Loan Documents to which it is a party, (iii) resolutions of the board of directors and/or similar governing bodies of each Loan Party approving and authorizing the execution, delivery and performance of Loan Documents to which it is a party, certified as of the Closing Date by its secretary, an assistant secretary or a Responsible Officer as being in full force and effect without modification or amendment, and (iv) a good standing certificate from the applicable Governmental Authority of each Loan Party’s jurisdiction of incorporation, organization or formation to the extent applicable.
 
(e)           The Administrative Agent, each Joint Lead Arranger and each Co-Documentation Agent shall have received all fees and other amounts (which may, at the option of the Joint Lead Arrangers in consultation with the Borrower, be offset against the initial Loans on the Closing Date) previously agreed in writing by the Administrative Agent, any Joint Lead Arranger, certain of their respective Affiliates and the Borrower to be due and payable on or prior to the Closing Date, including, to the extent invoiced at least two Business Days prior to the Closing Date, reimbursement or payment of all out-of-pocket expenses (including reasonable fees, charges and disbursements of counsel) required to be reimbursed or paid by any Loan Party under any Loan Document.
 
(f)            The Collateral and Guarantee Requirement (other than in accordance with Section 5.14 ) with respect to actions that are required to be completed on or prior to the Closing Date shall have been satisfied.
 
(g)           Since December 31, 2014, there shall have occurred no changes, events, circumstances, effects, developments, occurrences or state of facts that, individually or in the aggregate, have had or would reasonably be expected to have a material adverse effect on the business, assets, financial condition or results of operations, in each case, of Holdings, the Borrower and its Restricted Subsidiaries, taken as a whole.
 
(h)           Certificates of insurance shall be delivered to the Administrative Agent and each Joint Lead Arranger evidencing the existence of insurance to be maintained by Holdings, the Borrower and the Subsidiaries pursuant to Section 5.07 and, if applicable, each Joint Lead Arranger shall have received endorsements designating the Collateral Agent as an additional insured and loss payee or mortgagee (if applicable) as its interest may appear thereunder, or solely as the additional insured, as the case may be, thereunder ( provided that if, notwithstanding the use by Holdings and the Borrower of commercially reasonable efforts to deliver such endorsements, such endorsements have not been delivered as of the Closing Date, such endorsements shall be delivered as promptly as practicable after the Closing Date in accordance with Section 5.14 ).
 
(i)            Each Joint Lead Arranger shall have received, as described in Section 3.04 , (a) the Audited Financial Statements and (b) unaudited consolidated balance sheets and related statements of income and, in the case of clause (ii) only, cash flows of Holdings and
 
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its subsidiaries for each the fiscal quarter ended June 30, 2015 and each subsequent fiscal quarter ended at least 45 days prior to the Closing Date.
 
(j)            Each Joint Lead Arranger shall have received the Pro Forma Financial Statements and the Projections.
 
(k)           [Reserved.]
 
(l)            The Refinancing shall have been consummated or shall be consummated substantially simultaneously with the initial funding of Loans on the Closing Date.  After giving effect to the Transactions, Holdings, the Borrower and the Restricted Subsidiaries shall have no outstanding Indebtedness other than (a) Indebtedness permitted pursuant to Section 6.01(a)(ii)  and the Dinker Note and (b) Indebtedness incurred under this Agreement and Holdings shall have no more than $19,350,000 of preferred equity (other than such preferred equity that will be redeemed pursuant to the Redemption following the Closing Date, if any).
 
(m)          The Lenders shall have received a certificate from a Financial Officer, substantially in the form attached hereto as Exhibit M , certifying as to the solvency of Holdings and its Restricted Subsidiaries on a consolidated basis after giving effect to the Transactions.
 
(n)           The Administrative Agent and the Joint Lead Arrangers shall have received, at least two Business Days prior to the Closing Date, all documentation and other information about the Borrower and Restricted Subsidiaries as shall have been reasonably requested in writing at least 10 calendar days prior to the Closing Date by the Administrative Agent or any Joint Lead Arranger that they shall have reasonably determined is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the PATRIOT Act.
 
(o)           The Collateral Agent and each Joint Lead Arranger shall have received UCC lien searches with respect to each Person that is a Loan Party as of the Closing Date from such Person’s jurisdiction of formation.
 
(p)           The Administrative Agent and each Joint Lead Arranger shall have received a certificate executed by a Responsible Officer of Holdings certifying as to the satisfaction of the conditions referred to in paragraph (g) of this Section 4.01 and in Section 4.02(a) .
 
(q)           Parent shall have provided notice of the Redemption to the holders of at least $265,000,000 of its preferred stock.
 
(r)            The Administrative Agent shall have received a Borrowing Request in accordance with the requirements hereof.
 
The Joint Lead Arrangers notified Holdings, the Borrower and the Lenders of the Closing Date, and such notice was conclusive and binding.
 
Without limiting the generality of the provisions of Section 8.03(e) , for purposes of determining compliance with the conditions specified in this Section 4.01 , each Lender that has signed this
 
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Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Joint Lead Arrangers shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.
 
Section 4.02          Each Credit Event .  The obligation of each Lender to make a Loan on the occasion of any Borrowing, and of each Issuing Bank to issue, amend, renew or extend any Letter of Credit, is subject to the satisfaction of the following conditions:
 
(a)           The representations and warranties of each Loan Party set forth in the Loan Documents shall be true and correct in all material respects on and as of the date of such Borrowing or the date of issuance, amendment, renewal or extension of such Letter of Credit, as the case may be; provided , however , that to the extent that such representations and warranties specifically refer to an earlier date, they shall be true and correct in all material respects as of such earlier date and any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct in all respects on the date of such credit extension or on such earlier date, as the case may be.
 
(b)           At the time of and immediately after giving effect to such Borrowing and the use of proceeds thereof or the issuance, amendment, renewal or extension of such Letter of Credit, as the case may be, no Default or Event of Default shall have occurred and be continuing.
 
(c)           [Reserved.]
 
(d)           The Administrative Agent and, if applicable, the relevant Issuing Bank, shall have received a Borrowing Request or notice requesting the issuance of a Letter of Credit (or the amendment, renewal or replacement thereof) in accordance with the requirements of Section 2.03 , Section 2.04(b)  or Section 2.05(b) , as applicable.
 
Each Borrowing ( provided that a conversion or a continuation of a Borrowing shall not constitute a “Borrowing” for purposes of this Section) and each issuance, amendment, renewal or extension of a Letter of Credit (other than any Borrowing or issuance of Letter of Credit on the Closing Date) shall be deemed to constitute a representation and warranty by Holdings and the Borrower on the date thereof as to the accuracy of the matters specified in paragraphs (a) and (b) of this Section 4.02 .
 
ARTICLE V
 
AFFIRMATIVE COVENANTS
 
Until the Commitments shall have expired or been terminated, the principal of and interest on each Loan and all fees, expenses and other amounts (other than contingent amounts not yet due) payable under any Loan Document shall have been paid in full and all Letters of Credit shall have expired or been terminated and all LC Disbursements shall have been reimbursed, each of Holdings and the Borrower covenants and agrees with the Lenders that:
 
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Section 5.01          Financial Statements and Other Information .  Holdings and the Borrower will furnish to the Joint Lead Arrangers and the Administrative Agent, on behalf of each Lender:
 
(a)           on or before the date on which such financial statements are required or permitted to be filed with the SEC (or, if such financial statements are not required to be filed with the SEC, as soon as available and in any event on or before the date that is 120 days after the end of each fiscal year of Holdings), audited consolidated balance sheet and audited consolidated statements of operations and comprehensive income, stockholders’ equity and cash flows of Holdings, the Borrower and the Subsidiaries as of the end of and for such year, and related notes thereto, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by KPMG LLP or other independent public accountants of recognized national standing (without a “going concern” or like qualification or exception (other than an exception or explanatory paragraph, but not a qualification, solely with respect to, or resulting solely from, any potential inability to satisfy the Financial Performance Covenant in a future date or period of due to the impending maturity of any Indebtedness under this Agreement) and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition as of the end of and for such year and results of operations and cash flows of Holdings and the Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, together with a customary “management discussion and analysis” provision;
 
(b)           commencing with the financial statements for the fiscal quarter ending September 30, 2015, as soon as available and in any event on or before the date on which such financial statements are required or permitted to be filed with the SEC with respect to each of the first three fiscal quarters of Holdings (or, if such financial statements are not required to be filed with the SEC, as soon as available and in any event, on or before the date that is 60 days after the end of each such fiscal quarter of Holdings), unaudited consolidated balance sheet and unaudited consolidated statements of operations and comprehensive income and cash flows of Holdings, the Borrower and the Subsidiaries as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by a Financial Officer as presenting fairly in all material respects the financial condition as of the end of and for such fiscal quarter and such portion of the fiscal year and results of operations and cash flows of Holdings, the Borrower and the Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes, together with a customary “management discussion and analysis” provision;
 
(c)           simultaneously with the delivery of each set of consolidated financial statements referred to in clauses (a) and (b) above, the related consolidating financial statements reflecting adjustments necessary to eliminate the accounts of Unrestricted Subsidiaries (if any) from such consolidated financial statements;
 
(d)           not later than five days after delivery of financial statements under paragraph (a) or (b) above, a certificate of a Financial Officer (a “ Compliance Certificate ”) (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the
 
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details thereof and any action taken or proposed to be taken with respect thereto, and (ii) setting forth reasonably detailed calculations (A) beginning with the delivery of the financial statements for the fiscal quarter ending nearest September 30, 2015, of Consolidated EBITDA, the Available Amount, the First Lien Net Leverage Ratio, the Total Secured Net Leverage Ratio and the Total Net Leverage Ratio for the Test Period most recently ended and (B) in the case of financial statements delivered under paragraph (a) above, beginning with the financial statements for the fiscal year of the Borrower ending nearest December 31, 2015, of Excess Cash Flow for such fiscal year;
 
(e)           not later than 90 days after the commencement of each fiscal year of the Borrower, a detailed consolidated budget for Holdings, the Borrower and the Subsidiaries, a detailed consolidated budget for Holdings, the Borrower and the Subsidiaries for such fiscal year (including a projected consolidated balance sheet and consolidated statements of projected operations, comprehensive income and cash flows as of the end of and for such fiscal year and setting forth the material assumptions used for purposes of preparing such budget);
 
(f)            promptly after the same become publicly available, copies of any proxy statements, financial statements or reports that the Borrower has made generally available to its shareholders in their capacities as such; copies of any regular, periodic and special reports or registration statements or prospectuses that the Borrower files with the SEC or any other Governmental Authority, or any securities exchange; and copies of any press releases or other statements made available by the Borrower to the public concerning material changes to or developments in the business of the Borrower;
 
(g)           promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of Holdings, the Borrower or any of the Restricted Subsidiaries (including, without limitation, officer’s certificates and the amount of the Available Amount at any time), or compliance with the terms of any Loan Document, as the Administrative Agent on its own behalf or on behalf of any Lender may reasonably request in writing.
 
Documents required to be delivered pursuant to Section 5.01 may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which the Borrower posts such documents, or provides a link thereto on the Borrower’s website on the Internet at the website address listed on Schedule 9.01 (or otherwise notified pursuant to Section 9.01(d) ); or (ii) on which such documents are posted on behalf of the Borrower on an Internet or intranet website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent); provided that:  (i) the Borrower shall deliver paper copies of such documents to the Administrative Agent upon their reasonable request until a written notice to cease delivering paper copies is given by the Administrative Agent and (ii) the Borrower shall notify the Administrative Agent (by telecopier or electronic mail) of the posting of any such documents and upon its reasonable request, provide to the Administrative Agent by electronic mail electronic versions (i.e., soft copies) of such documents.  The Administrative Agent shall have no obligation to request the delivery of or maintain paper copies of the documents referred to above, and each Lender shall be solely responsible for timely accessing posted documents and maintaining its copies of such documents.
 
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The Borrower hereby acknowledges that (a) the Administrative Agent and/or the Joint Bookrunners will make available to the Lenders and the Issuing Bank materials and/or information provided by or on behalf of the Borrower hereunder (collectively, “ Borrower Materials ”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “ Platform ”) and (b) certain of the Lenders (each, a “ Public Lender ”) may have personnel who do not wish to receive material non-public information with respect to the Borrower or their Affiliates, or the respective securities of any of the foregoing, and who may be engaged in investment and other market-related activities with respect to such Persons’ securities.  The Borrower hereby agrees that it will use commercially reasonable efforts to identify that portion of the Borrower Materials that may be distributed to the Public Lenders and that (w) all the Borrower Materials shall be clearly and conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word “PUBLIC” shall appear prominently on the first page thereof; (x) by marking Borrower Materials “PUBLIC,” the Borrower shall be deemed to have authorized the Administrative Agent, the Joint Bookrunners, the Issuing Bank and the Lenders to treat the Borrower Materials as not containing any material non-public information (although it may be sensitive and proprietary) with respect to the Borrower or its securities for purposes of United States Federal and state securities laws ( provided , however , that to the extent the Borrower Materials constitute Information, they shall be treated as set forth in Section 9.12 ); (y) all Borrower Materials marked “PUBLIC” are permitted to be made available through a portion of the Platform designated “Public Side Information”; and (z) the Administrative Agent and the Joint Lead Arrangers shall be entitled to treat the Borrower Materials that are not marked “PUBLIC” as being suitable only for posting on a portion of the Platform not designated “Public Side Information.”  Notwithstanding the foregoing, the Borrower (i) acknowledges and agrees that the financial information required to be delivered pursuant to Section 5.01(a) , (b) , (c)  and (d)  shall be treated as if marked “PUBLIC” for purposes of this paragraph and (ii) shall be under no obligation to mark any other Borrower Materials “PUBLIC.”
 
Section 5.02                              Notices of Material Events .  Promptly after any Responsible Officer of Holdings or the Borrower obtains actual knowledge thereof, Holdings or the Borrower will furnish to the Administrative Agent (for distribution to each Lender through the Administrative Agent) written notice of the following:
 
(a)                                  the occurrence of any Default;
 
(b)                                  to the extent permissible by applicable law, the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or, to the knowledge of a Financial Officer or another executive officer of Holdings, the Borrower or any Subsidiary, affecting Holdings, the Borrower or any Subsidiary or the receipt of a notice of an Environmental Liability, in each case, that could reasonably be expected to result in a Material Adverse Effect; and
 
(c)                                   the occurrence of any ERISA Event that could reasonably be expected, either alone or together with all other ERISA Events, to result in a Material Adverse Effect.
 
Each notice delivered under this Section shall be accompanied by a written statement of a Responsible Officer of Holdings or either Borrower setting forth the details of the event or
 
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development requiring such notice and any action taken or proposed to be taken with respect thereto.
 
Section 5.03                              Information Regarding Collateral .
 
(a)                                  Holdings will furnish to the Administrative Agent prompt (and in any event within 30 days or such longer period as reasonably agreed to by the Administrative Agent) written notice of any change (i) in any Loan Party’s legal name (as set forth in its certificate of organization or like document), (ii) in the jurisdiction of incorporation or organization of any Loan Party or in the form of its organization or (iii) in any Loan Party’s organizational identification number.
 
(b)                                  Not later than five days after delivery of financial statements pursuant to Section 5.01(a)  or (b) , Holdings shall deliver to the Administrative Agent a certificate executed by a Responsible Officer of Holdings (i)  identifying any Subsidiary that has become, or ceased to be, Immaterial Subsidiary during the most recently ended fiscal quarter and (ii) certifying that all notices required to be given prior to the date of such certificate by Section 5.03 have been given.
 
Section 5.04                              Existence; Conduct of Business .  Each of Holdings and the Borrower will, and will cause each Restricted Subsidiary to, do or cause to be done all things necessary to obtain, preserve, renew and keep in full force and effect its legal existence and the rights, licenses, permits, privileges, franchises, patents, copyrights, trademarks and trade names material to the conduct of its business, except to the extent (other than with respect to the preservation of the existence of Holdings and the Borrower) that the failure to do so could not reasonably be expected to have a Material Adverse Effect; provided that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 or any Disposition permitted by Section 6.05 .
 
Section 5.05                              Payment of Taxes, etc .  Each of Holdings and the Borrower will, and will cause each Restricted Subsidiary to, pay its obligations and liabilities in respect of Taxes imposed upon it or its income or properties or in respect of its property or assets, before the same shall become delinquent or in default, except to the extent (i) any such Taxes are being contested in good faith and by appropriate proceedings diligently conducted that stay the enforcement of the Tax in question and for which adequate reserves have been provided in accordance with GAAP or (ii) the failure to make payment could not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.
 
Section 5.06                              Maintenance of Properties .  Each of Holdings and the Borrower will, and will cause each Restricted Subsidiary to, keep and maintain all property material to the conduct of its business in good working order and condition (subject to casualty, condemnation and ordinary wear and tear), except where the failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
 
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Section 5.07                              Insurance .
 
(a)                                  Each of Holdings and the Borrower will, and will cause each Restricted Subsidiary to, maintain, with insurance companies that Holdings believes (in the good faith judgment of the management of Holdings) are financially sound and responsible at the time the relevant coverage is placed or renewed, insurance in at least such amounts (after giving effect to any self-insurance which Holdings believes (in the good faith judgment of management of Holdings) is reasonable and prudent in light of the size and nature of its business) and against at least such risks (and with such risk retentions) as Holdings believes (in the good faith judgment or the management of Holdings) are reasonable and prudent in light of the size and nature of its business, and will furnish to the Lenders, upon written request from the Administrative Agent, information presented in reasonable detail as to the insurance so carried.  Each such policy of insurance shall (i) name the Collateral Agent, on behalf of the Secured Parties, as an additional insured thereunder as its interests may appear and (ii) in the case of each casualty insurance policy, contain a loss payable clause or mortgagee endorsement that names the Collateral Agent, on behalf of the Secured Parties as the loss payee or mortgagee thereunder.
 
(b)                                  Notwithstanding anything herein to the contrary, with respect to each Mortgaged Property, if at any time the area in which the buildings and other improvements (as described in the applicable Mortgage) are located is designated a “special flood hazard area” in any Flood Insurance Rate Map published by the Federal Emergency Management Agency (or any successor agency), obtain flood insurance in such reasonable total amount as the Collateral Agent may from time to time reasonably require, and otherwise to ensure compliance with the NFIP as set forth in the Flood Laws.  Following the Closing Date, the Borrower shall deliver to the Collateral Agent annual renewals of each flood insurance policy or annual renewals of each force-placed flood insurance policy, as applicable.  In connection with any amendment to this Agreement pursuant to which any increase, extension, or renewal of Loans is contemplated, the Borrower shall cause to be delivered to the Collateral Agent for any Mortgaged Property, a Flood Determination Form, Borrower Notice and Evidence of Flood Insurance, as applicable.
 
Section 5.08                              Books and Records; Inspection and Audit Rights .  Each of Holdings and the Borrower will, and will cause each Restricted Subsidiary to, maintain proper books of record and account in which entries that are full, true and correct in all material respects and are in conformity with GAAP consistently applied shall be made of all material financial transactions and matters involving the assets and business of Holdings, the Borrower or any Restricted Subsidiary, as the case may be.  Each of Holdings and the Borrower will, and will cause each Restricted Subsidiary to permit, at the Borrower’s expense, any representatives designated by the Administrative Agent, upon reasonable prior notice, to visit and inspect its properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times and as often as reasonably requested; provided that, the Administrative Agent shall not exercise such rights more often than one time during any calendar year absent the existence of an Event of Default; provided further that (a) when an Event of Default exists, the Administrative Agent (or any of its representatives or independent contractors) may do any of the foregoing at the expense of the Borrower at any time during normal business hours and upon reasonable advance notice, (b) the Administrative Agent shall give Holdings and the Borrower the opportunity to participate in any discussions with Holdings’ or the Borrower’s independent public accountants,
 
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and (c) any Lender (and its representatives and independent contractors) may accompany the Administrative Agent on any such visits and inspections.
 
Section 5.09                              Compliance with Laws .
 
(a)                                  Each of Holdings and the Borrower will, and will cause each Restricted Subsidiary to (a) comply with its Organizational Documents, all applicable Requirements of Law (including, without limitation, ERISA, the Code and Environmental Laws) and all rules, regulations and orders applicable to it, its property and operations, and (b) maintain in effect all governmental approvals or authorizations required to conduct its business, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.
 
Neither Holdings nor the Borrower nor any Restricted Subsidiary nor any of Holdings’ or the Borrower’s or any Restricted Subsidiary’s officers or directors nor, to the knowledge of Holdings and the Borrower, any of Holdings’ or the Borrower’s or any Restricted Subsidiary’s employees, agents or Controlled Affiliates that is acting or benefiting in any capacity in connection with the Loans has taken or will take any action in connection with or as a result of the Loans that constitutes or will give rise to a violation under any AML Legislation, Anti-Corruption Laws or Economic Sanctions.
 
Section 5.10                              Use of Proceeds and Letters of Credit .
 
(a)                                  The Borrower will use the proceeds of (i) the Term Loans made on the Closing Date to consummate the Refinancing, to finance the Redemption, to pay Transaction Costs and otherwise for working capital or other general corporate purposes and (ii) the Revolving Loans made and Letters of Credit issued after the Closing Date for working capital or other general corporate purposes.
 
(b)                                  To the extent the Redemption does not occur within five days of the Closing Date, $276,317,938 of proceeds of the Term Loans shall be deposited into an escrow account (the “ Escrow Account ”) on or before five days after the Closing Date, which account shall be subject to the control of (and a first priority lien in favor of) the Administrative Agent and which proceeds shall only be released to Borrower in order to fund the Redemption so long as no Event of Default has occurred and is continuing.
 
Section 5.11                              Additional Subsidiaries .
 
(a)                                  If (i) any additional Restricted Subsidiary is formed or acquired after the Closing Date or (ii) if any Restricted Subsidiary ceases to be an Excluded Immaterial Subsidiary, Holdings and the Borrower will, within 30 days (or such longer period as may be agreed to by the Collateral Agent in its reasonable discretion) after such newly formed or acquired Restricted Subsidiary is formed or acquired or such Restricted Subsidiary ceases to be an Excluded Immaterial Subsidiary, notify the Administrative Agent thereof, and will cause such Restricted Subsidiary (unless such Restricted Subsidiary is an Excluded Immaterial Subsidiary) to satisfy the Collateral and Guarantee Requirement with respect to such Restricted Subsidiary and with respect to any Equity Interest in or Indebtedness of such Restricted Subsidiary owned by or on
 
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behalf of any Loan Party within 30 days after such notice (or such longer period as the Collateral Agent shall reasonably agree).
 
(b)                                  Within 30 days (or such longer period as the Collateral Agent may reasonably agree) after Holdings or the Borrower identify that any Subsidiary has ceased to be an Immaterial Subsidiary pursuant to Section 5.03(b) , all actions (if any) required to be taken with respect to such Subsidiary in order to satisfy the Collateral and Guarantee Requirement shall be taken with respect to such Subsidiary.
 
Section 5.12                              Further Assurances .
 
(a)                                  Subject to the proviso to Section 4.01(f)  solely with respect to the Closing Date, each of Holdings and the Borrower will, and will cause each Loan Party to, execute any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings, mortgages, deeds of trust and other documents), that may be required under any applicable law and that the Administrative Agent or the Required Lenders may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the expense of the Loan Parties.
 
(b)                                  If, after the Closing Date, any material assets (including any owned (but not leased or ground leased) Material Real Property or improvements thereto or any interest therein) are acquired or otherwise held by the Borrower or any other Loan Party or are held by any Subsidiary on or after the time it becomes a Loan Party pursuant to Section 5.11 (other than assets constituting Collateral under a Security Document that became subject to the Lien created by such Security Document upon acquisition thereof or constituting Excluded Assets), the Borrower will notify the Administrative Agent thereof, and, if requested by the Collateral Agent, the Borrower will cause such assets to be subjected to a Lien securing the Secured Obligations and will take and cause the other Loan Parties to take, such actions as shall be reasonably requested by the Collateral Agent to grant and perfect (to the extent perfection could be achieved by such actions) such Liens, including actions described in paragraph (a) of this Section and as required pursuant to the “Collateral and Guarantee Requirement,” all at the expense of the Loan Parties and subject to the last paragraph of the definition of the term “Collateral and Guarantee Requirement.”  In the event any real property is mortgaged pursuant to this Section 5.12(b) , the Borrower or such other Loan Party, as applicable, shall not be required to comply with the “Collateral and Guarantee Requirement” and paragraph (a) of this Section until a reasonable time following the acquisition of such real property, and in no event shall compliance be required until 90 days following such acquisition or such longer time period as agreed to by the Collateral Agent in its reasonable discretion.
 
Section 5.13                              Designation of Subsidiaries .  The Borrower may at any time after the Closing Date designate any Restricted Subsidiary as an Unrestricted Subsidiary or any Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) immediately before and after such designation on a Pro Forma Basis, no Default or Event of Default shall have occurred and be continuing, (ii) immediately after giving effect to such designation and on a Pro Forma Basis, the Total Net Leverage Ratio shall not exceed 5.00 to 1.00, (iii) Holdings shall have delivered an officer’s certificate executed by a Responsible Officer of Holdings, notifying the Administrative
 
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Agent in writing of any such designation and certifying compliance with the requirements of this Section and (iv) no Subsidiary may be designated as an Unrestricted Subsidiary or continue as an Unrestricted Subsidiary if (x) such Subsidiary or any of its subsidiaries (A) owns any Equity Interests or Indebtedness of, or owns or holds a Lien on, any property of any Loan Party or (B) is directly or indirectly liable for other Indebtedness of Holdings, the Borrower or any Restricted Subsidiary or (y) such Subsidiary is a “restricted subsidiary” for the purposes of any other Indebtedness of Holdings or the Borrower.  The designation of any Subsidiary as an Unrestricted Subsidiary after the Closing Date shall constitute an Investment by the Borrower therein at the date of designation in an amount equal to the fair market value of the Borrower’s or the Subsidiary’s (as applicable) investment therein.  The designation of any Unrestricted Subsidiary as a Restricted Subsidiary shall constitute (i) the incurrence at the time of designation of any Investment, Indebtedness or Liens of such Subsidiary existing at such time and (ii) a return on any Investment by the Borrower in Unrestricted Subsidiaries pursuant to the preceding sentence in an amount equal to the fair market value at the date of such designation of the Borrower’s or the Subsidiary’s (as applicable) Investment in such Subsidiary.
 
Notwithstanding the foregoing, any Unrestricted Subsidiary that has been re-designated a Restricted Subsidiary may not be subsequently re-designated as an Unrestricted Subsidiary.
 
Section 5.14                              Certain Post-Closing Obligations .  Holdings or the Borrower shall, and shall cause each of the Subsidiaries to, take the actions set forth in Schedule 5.14 within the time frames set forth therein or such longer period as the Collateral Agent may agree in its sole discretion.
 
Section 5.15                              Maintenance of Rating of Facility .  The Loan Parties shall use commercially reasonable efforts to maintain (i) a public corporate credit rating (but not any particular rating) from S&P and a public corporate family rating (but not any particular rating) from Moody’s, in each case in respect of the Borrower and (ii) a public rating (but not any particular rating) in respect of the Loans from each of S&P and Moody’s.
 
Section 5.16                              Quarterly Lender Calls .  Upon the written request of the Required Lenders prior to a Qualified IPO, quarterly, at a time mutually agreed with the Administrative Agent that is promptly after the delivery of the information required pursuant to Section 5.01(b) , participate in a conference call with Lenders to discuss the financial condition and results of operations of the Borrower and the Subsidiaries for the most recently-ended fiscal quarter for which financial statements have been delivered.
 
ARTICLE VI
 
NEGATIVE COVENANTS
 
Until the Commitments have expired or been terminated and the principal of and interest on each Loan and all fees, expenses and other amounts payable (other than contingent amounts not yet due) under any Loan Document have been paid in full and all Letters of Credit have expired or been terminated and all LC Disbursements shall have been reimbursed, each of
 
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Holdings (with respect to Sections 6.03(a) , 6.03(c) , 6.03(d) , 6.07(b) , 6.10 , 6.11 and 6.12 only) and the Borrower covenants and agrees with the Lenders that:
 
Section 6.01                              Indebtedness; Certain Equity Securities .
 
(a)                                  The Borrower will not, and will not permit any Restricted Subsidiary to, create, incur, assume or permit to exist any Indebtedness, except:
 
(i)                                      Indebtedness of the Borrower and any of the Restricted Subsidiaries under the Loan Documents (including any Indebtedness incurred pursuant to Section 2.20 , 2.21 or 9.02(h) );
 
(ii)                                   Indebtedness (A) outstanding on the Closing Date and listed on Schedule 6.01 and any Permitted Refinancing thereof and (B) intercompany Indebtedness outstanding on the Closing Date and listed on Schedule 6.01 ;
 
(iii)                                Guarantees by the Borrower and the Restricted Subsidiaries in respect of Indebtedness of the Borrower or any Restricted Subsidiary otherwise permitted hereunder (other than Indebtedness permitted under Section 6.01(a)(xx) ); provided that such Guarantee is otherwise permitted by Section 6.04 ; provided further that (A) no Guarantee by any Restricted Subsidiary of any Subordinated Indebtedness shall be permitted unless such Restricted Subsidiary shall have also provided a Guarantee of the First Lien Obligations pursuant to the applicable Guarantee Agreement, and (B) if the Indebtedness being Guaranteed is subordinated to the First Lien Obligations, such Guarantee shall be subordinated to the Guarantee of the First Lien Obligations on terms at least as favorable to the Lenders as those contained in the subordination of such Indebtedness
 
(iv)                               Indebtedness of the Borrower owing to any Restricted Subsidiary or of any Restricted Subsidiary owing to any other Restricted Subsidiary or the Borrower; provided that (1) all such Indebtedness of any Loan Party owing to any Restricted Subsidiary that is not a Loan Party shall be unsecured and subordinated to the First Lien Obligations (but only to the extent permitted by applicable law and not giving rise to material adverse tax consequences) on terms (A) at least as favorable to the Lenders as those set forth in the form of intercompany note attached as Exhibit N or (B) otherwise reasonably satisfactory to the Administrative Agent, and (2) the U.S. Dollar Equivalent of the aggregate amount of intercompany loans funded and outstanding to Subsidiaries that are not, shall not be, or, after giving effect to any such intercompany loan, shall not become, Loan Parties, shall not exceed $30,000,000;
 
(v)                                  (A) Indebtedness (including Capital Lease Obligations) of the Borrower or any Restricted Subsidiaries financing the acquisition, construction, repair, replacement or improvement of fixed or capital assets; provided that such Indebtedness is incurred concurrently with or within 270 days after the applicable acquisition, construction, repair, replacement or improvement, and (B) any Permitted Refinancing of any Indebtedness set forth in the immediately preceding clause (A); provided further that, at the time of any such incurrence of Indebtedness and after giving Pro Forma Effect thereto and the use of the proceeds thereof, the U.S. Dollar Equivalent of the aggregate principal amount of
 
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Indebtedness that is outstanding in reliance on this clause (v) shall not exceed the greater of $15,000,000 and 5.0% of CTA, the Borrower and the Restricted Subsidiaries for the most recently ended Test Period;
 
(vi)                               Indebtedness in respect of Swap Agreements incurred in the ordinary course of business and not for speculative purposes;
 
(vii)                            Indebtedness of any Person that becomes a Restricted Subsidiary (or of any Person not previously a Restricted Subsidiary that is merged or consolidated with or into the Borrower or a Restricted Subsidiary) as a result of a Permitted Acquisition, or Indebtedness of any Person that is assumed by the Borrower or any Restricted Subsidiary in connection with an acquisition of assets by the Borrower or such Restricted Subsidiary in a Permitted Acquisition, and Permitted Refinancings thereof; provided that (A) such Indebtedness is not incurred in contemplation of such Permitted Acquisition, (B) no Loan Party shall be an obligor in respect of such Indebtedness that was not an obligor of such Indebtedness prior to such Permitted Acquisition other than as a result of any merger or consolidation in connection with such Permitted Acquisition, (C)  no Lien securing such Indebtedness shall spread to cover any additional property of Holdings and its Restricted Subsidiaries that did not secure such Indebtedness prior to such Permitted Acquisition, and (D) no Default or Event of Default shall exist or immediately result therefrom;
 
(viii)                         Indebtedness representing deferred compensation owed to employees of Holdings, the Borrower and the Restricted Subsidiaries incurred in the ordinary course of business;
 
(ix)                               Indebtedness consisting of unsecured promissory notes issued by any Loan Party to current or former officers, directors and employees or their respective estates, spouses or former spouses to finance the purchase or redemption of Equity Interests of Holdings (or any direct or indirect parent thereof) permitted by Section 6.07(a) ;
 
(x)                                  Indebtedness constituting indemnification obligations or obligations in respect of purchase price or other similar adjustments incurred in any Permitted Acquisition, any other Investment or any Disposition, in each case permitted under this Agreement;
 
(xi)                               Indebtedness consisting of (a) obligations under deferred compensation or other similar arrangements or (b) earn-out obligations, in each case incurred in connection with any Permitted Acquisition or other Investment permitted hereunder; provided that the U.S. Dollar Equivalent of the aggregate principal amount of Indebtedness outstanding under the preceding clause (b) shall not exceed $10,000,000 at any time;
 
(xii)                            Cash Management Obligations and other Indebtedness in respect of netting services, overdraft protections and similar arrangements, in each case, in connection with deposit accounts;
 
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(xiii)                         Permitted Unsecured Debt; provided that (A) at the time of incurrence thereof and immediately after giving effect thereto and the use of the proceeds thereof, on a Pro Forma Basis, the Fixed Charge Coverage Ratio for the Test Period then last ended shall be not less than 2.00 to 1.00 (“ Unsecured Ratio Debt ”), and (B) the U.S. Dollar Equivalent of the aggregate principal amount of all such Indebtedness of a Person that is not a Loan Party shall not exceed $15,000,000 at any time;
 
(xiv)                        Permitted Junior Secured Debt; provided that at the time of incurrence thereof and immediately after giving effect thereto and the use of the proceeds thereof (and excluding, for the avoidance of doubt, for the purposes of clause (b) of the definition of Consolidated Net Debt, the cash proceeds of such Indebtedness), on a Pro Forma Basis, the Total Secured Net Leverage Ratio for the Test Period then last ended shall be less than or equal to 5.95 to 1.00 (“ Junior Ratio Debt ”);
 
(xv)                           Indebtedness consisting of (A) the financing of insurance premiums or (B) take-or-pay obligations contained in supply arrangements, in each case in the ordinary course of business;
 
(xvi)                        Indebtedness incurred by the Borrower or any of the Restricted Subsidiaries in respect of letters of credit, bankers’ acceptances, bank guarantees or similar instruments issued or created in the ordinary course of business, in respect of workers compensation claims, health, disability or other employee benefits or property, casualty or liability insurance or self-insurance or other reimbursement-type obligations regarding workers compensation claims;
 
(xvii)                     obligations in respect of performance, bid, appeal and surety bonds and performance and completion guarantees and similar obligations provided by the Borrower or any of the Restricted Subsidiaries or obligations in respect of letters of credit, bank guarantees or similar instruments related thereto, in each case in the ordinary course of business or consistent with past practice;
 
(xviii)                  Indebtedness in an aggregate principal amount the U.S. Dollar Equivalent of which shall not exceed the greater of $15,000,000 and 5.0% of CTA for the most recently ended Test Period at any time outstanding;
 
(xix)                        Indebtedness supported by a Letter of Credit, in a principal amount not to exceed the face amount of such Letter of Credit;
 
(xx)                           Credit Agreement Refinancing Indebtedness incurred under Permitted Refinancing Notes and other Term Loans and any Guarantee thereof by a Subsidiary Loan Party, and any Permitted Refinancing thereof;
 
(xxi)                        Indebtedness of Restricted Subsidiaries that are not Loan Parties in an aggregate principal amount the U.S. Dollar Equivalent of which shall not exceed at any date $30,000,000;
 
(xxii)                     Indebtedness of the Loan Parties that is secured pari passu to the Indebtedness incurred under the Facilities; provided that at the time of incurrence thereof
 
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and immediately after giving effect thereto and the use of the proceeds thereof (and excluding, for the avoidance of doubt, for the purposes of clause (b) of the definition of Consolidated Net Debt, the cash proceeds of such Indebtedness) on a Pro Forma Basis, the First Lien Net Leverage Ratio for the Test Period then last ended shall not exceed 4.75 to 1.00 (“ Pari Passu Ratio Debt ” and, together with Junior Ratio Debt and Unsecured Ratio Debt, “ Ratio Debt ”); provided , further, in the case of any such Indebtedness in the form of loans, the Term Loans shall be entitled to (and the Applicable Margin applicable interest rate floors shall be adjusted to reflect) MFN Protection as if such pari passu loans were incurred under Section 2.20; provided , further that any such pari passu Indebtedness shall meet the requirements of clauses (E)  and (F)  of Section 2.20 and be subject to a customary intercreditor agreement (which leaves remedies controlled by the Administrative Agent) the terms of which shall be reasonably satisfactory to the Administrative Agent and the Borrower;
 
(xxiii)                  Indebtedness under the Dinker Note;
 
(xxiv)                 all premiums (if any), interest (including post-petition interest), fees, expenses, charges and additional or contingent interest on obligations described in clauses (i) through (xxiii) above.
 
Section 6.02                              Liens .  The Borrower will not, and will not permit any Restricted Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, except:
 
(i)                                      (x) Liens created under the Loan Documents and (y) Liens on cash or deposits granted in favor of the Collateral Agent, the Swingline Lender or the Issuing Bank to cash collateralize any Defaulting Lender’s participation in Letters of Credit or Swingline Loans as contemplated by this Agreement;
 
(ii)                                   Permitted Encumbrances;
 
(iii)                                Liens existing on the Closing Date and set forth on Schedule 6.02 and, except as otherwise provided in Section 5.14 , any modifications, replacements, renewals or extensions thereof; provided that (A) such modified, replacement, renewal or extension Lien does not extend to any additional property other than (1) after-acquired property that is affixed or incorporated into the property covered by such Lien and (2) proceeds and products thereof, and (B) the obligations secured or benefited by such modified, replacement, renewal or extension Lien are permitted by Section 6.01 ;
 
(iv)                               Liens securing Indebtedness permitted under Section 6.01(a)(v) ; provided that (A) such Liens attach concurrently with or within 270 days after the acquisition, repair, replacement, construction or improvement (as applicable) of the property subject to such Liens, (B) such Liens do not at any time encumber any property other than the property financed by such Indebtedness except for accessions to such property and the proceeds and the products thereof and (C) with respect to Capital Lease Obligations, such Liens do not at any time extend to or cover any assets (except for accessions to or proceeds of such assets) other than the assets subject to such Capital Lease Obligations;
 
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provided further that individual financings of equipment provided by one lender may be cross collateralized to other financings of equipment provided by such lender;
 
(v)                                  leases, licenses, subleases or sublicenses granted to others that do not (A) interfere in any material respect with the business of the Borrower and the Restricted Subsidiaries, taken as a whole, or (B) secure any Indebtedness;
 
(vi)                               Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;
 
(vii)                            Liens arising in the ordinary course of business (A) of a collection bank arising under Section 4-210 of the UCC on items in the course of collection and (B) in favor of a banking institution arising as a matter of law encumbering deposits (including the right of setoff) and that are within the general parameters customary in the banking industry;
 
(viii)                         Liens (A) on cash advances or escrow deposits in favor of the seller of any property to be acquired in an Investment permitted pursuant to Section 6.04 to be applied against the purchase price for such Investment or otherwise in connection with any escrow arrangements with respect to any such Investment or any Disposition permitted under Section 6.05 (including any letter of intent or purchase agreement with respect to such Investment or Disposition), or (B) consisting of an agreement to dispose of any property in a Disposition permitted under Section 6.05 , in each case, solely to the extent such Investment or Disposition, as the case may be, would have been permitted on the date of the creation of such Lien;
 
(ix)                               Liens on property of any Restricted Subsidiary that is not a Loan Party, which Liens secure Indebtedness of such Restricted Subsidiary permitted under Section 6.01 ;
 
(x)                                  (A) Liens granted by a Restricted Subsidiary that is not a Loan Party in favor of any Loan Party, (B) Liens granted by a Loan Party in favor of any other Loan Party and (C) Liens granted by a Restricted Subsidiary that is not a Loan Party in favor of any other Restricted Subsidiary that is not a Loan Party;
 
(xi)                               Liens existing on property at the time of its acquisition or existing on the property of any Person at the time such Person becomes a Restricted Subsidiary, in each case after the Closing Date (other than Liens on the Equity Interests of any Person that becomes a Restricted Subsidiary); provided that (A) such Lien was not created in contemplation of such acquisition or such Person becoming a Restricted Subsidiary, (B) such Lien does not extend to or cover any other assets or property (other than the proceeds or products thereof and other than after-acquired property subject to a Lien securing Indebtedness and other obligations incurred prior to such time and which Indebtedness and other obligations are permitted hereunder that require or include, pursuant to their terms at such time, a pledge of after-acquired property, it being understood that such requirement shall not be permitted to apply to any property to which
 
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such requirement would not have applied but for such acquisition) and (C) the Indebtedness secured thereby is permitted under Section 6.01(a)(vii) ;
 
(xii)                            any interest or title of a lessor under leases (other than leases constituting Capital Lease Obligations) entered into by any of the Borrower or any Restricted Subsidiaries in the ordinary course of business;
 
(xiii)                         Liens arising out of conditional sale, title retention, consignment or similar arrangements for sale of goods by any of the Borrower or any Restricted Subsidiaries in the ordinary course of business and purchase money security interests arising under contracts for the supply of goods and materials entered into in the ordinary course which secure the unpaid balance of the purchase price for any goods and materials purchased thereunder
 
(xiv)                        Liens deemed to exist in connection with Investments in repurchase agreements under clause (e) of the definition of the term “Permitted Investments”;
 
(xv)                           Liens encumbering reasonable customary initial deposits and margin deposits and similar Liens attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business and not for speculative purposes;
 
(xvi)                        Liens that are contractual rights of setoff (A) relating to the establishment of depository relations with banks not given in connection with the incurrence of Indebtedness, (B) relating to pooled deposit or sweep accounts to permit satisfaction of overdraft or similar obligations incurred in the ordinary course of business of the Borrower and the Restricted Subsidiaries or (C) relating to purchase orders and other agreements entered into with customers of the Borrower or any Restricted Subsidiary in the ordinary course of business;
 
(xvii)                     ground leases in respect of real property on which facilities owned or leased by the Borrower or any of the Restricted Subsidiaries are located;
 
(xviii)                  Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto;
 
(xix)                        Liens on real property other than the Mortgaged Properties or any other Material Real Property;
 
(xx)                           Liens securing Indebtedness permitted under Section 6.01(a)(xiv) , Section 6.01(a)(xxi ), and Section 6.01(a)(xxii) ;
 
(xxi)                        Liens securing, or otherwise arising from, judgments not constituting an Event of Default under Section 7.01(k) ;
 
(xxii)                     Liens securing any Credit Agreement Refinancing Indebtedness and liens securing any loans incurred pursuant to any Incremental Commitments;
 
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(xxiii)                  with respect to any real property, any reservations, limitations, provisos and conditions as a Requirement of Law; and
 
(xxiv)                 other Liens; provided that at the time of the granting of and after giving Pro Forma Effect to any such Lien and the obligations secured thereby (including the use of proceeds thereof) the Dollar Equivalent of the aggregate face amount of obligations secured by Liens existing in reliance on this clause (xxiv) shall not exceed the greater of $15,000,000 and 5.0% of CTA of Holdings, the Borrower and the Restricted Subsidiaries for the most recently ended Test Period.
 
Section 6.03                              Fundamental Changes .
 
(a)                                  Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except that:
 
(i)                                      any Restricted Subsidiary that is a Loan Party may merge with (x) the Borrower; provided that the Borrower shall be the continuing or surviving Person, or (y) any one or more other Restricted Subsidiaries; provided that when any Loan Party is merging with another Restricted Subsidiary (1) the continuing or surviving Person shall be a Loan Party or (2) if the continuing or surviving Person is not a Loan Party, the acquisition of such Loan Party by such surviving Restricted Subsidiary is otherwise permitted under Section 6.04 (other than Section 6.04(c) );
 
(ii)                                   (A) any Restricted Subsidiary that is not a Loan Party may merge, amalgamate or consolidate with or into any other Restricted Subsidiary that is not a Loan Party and (B) any Restricted Subsidiary may liquidate or dissolve or change its legal form if the Administrative Agent determine in good faith that such action is in the best interests of the Borrower and the Restricted Subsidiaries and is not materially disadvantageous to the Lenders;
 
(iii)                                any Restricted Subsidiary may make a Disposition of all or substantially all of its assets (upon voluntary liquidation or otherwise) to another Restricted Subsidiary; provided that (A) if the transferor in such a transaction is a Loan Party, then the transferee must be a Loan Party, (B) to the extent constituting an Investment, such Investment must be a permitted Investment in a Restricted Subsidiary that is not a Loan Party in accordance with Section 6.04 and (C) to the extent constituting a Disposition to a Restricted Subsidiary that is not a Loan Party, such Disposition is for fair value and any promissory note or other non-cash consideration received in respect thereof is a permitted Investment in a Restricted Subsidiary that is not a Loan Party in accordance with Section 6.04 ;
 
(iv)                               the Borrower may merge or consolidate with any other Person; provided that (A) the Borrower shall be the continuing or surviving Person or (B) if the Person formed by or surviving any such merger or consolidation is not the Borrower (any such Person, the “ Successor Borrower ”), (1) the Successor Borrower shall be an entity organized or existing under the laws of the United States, any State thereof or the District
 
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of Columbia, (2) the Successor Borrower shall expressly assume all the obligations of the Borrower under this Agreement and the other Loan Documents to which the Borrower is a party pursuant to a supplement hereto or thereto in form and substance reasonably satisfactory to the Administrative Agent, (3) each Loan Party other than the Borrower, unless it is the other party to such merger or consolidation, shall have reaffirmed, pursuant to an agreement in form and substance reasonably satisfactory to the Administrative Agent, that its Guarantee of, and grant of any Liens as security for, the Secured Obligations shall apply to the Successor Borrower’s obligations under this Agreement and (4) the Borrower shall have delivered to the Administrative Agent a certificate of a Responsible Officer and an opinion of counsel, each stating that such merger or consolidation complies with this Agreement; provided further that (y) if such Person is not a Loan Party, no Default exists after giving effect to such merger or consolidation and (z) if the foregoing requirements are satisfied, the Successor Borrower will succeed to, and be substituted for, the Borrower under this Agreement and the other Loan Documents; provided further that the Borrower shall have delivered to the Administrative Agent any documentation and other information about the Successor Borrower as shall have been reasonably requested in writing by any Lender through the Administrative Agent that such Lender shall have reasonably determined is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the PATRIOT Act;
 
(v)                                  any Domestic Restricted Subsidiary may merge, consolidate or amalgamate with any other Person in order to effect an Investment permitted pursuant to Section 6.04 ; provided that (1) the continuing or surviving Person shall be a Restricted Subsidiary, which together with each of the Restricted Subsidiaries, shall have complied with the requirements of Sections 5.11 and 5.12 and (2) if the other party to such transaction is not a Loan Party, no Default exists after giving effect to such transaction;
 
(vi)                               any Restricted Subsidiary may effect a merger, dissolution, liquidation consolidation or amalgamation to effect a Disposition permitted pursuant to Section 6.05 (other than Section 6.05(e) ); provided that if the other party to such transaction is not a Loan Party, no Default exists after giving effect to the transaction; and
 
(b)                                  The Borrower will not, and will not permit any Restricted Subsidiary to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and the Restricted Subsidiaries on the Closing Date and businesses reasonably related or ancillary thereto.
 
(c)                                   Holdings will not conduct, transact or otherwise engage in any business or operations other than (i) the ownership and/or acquisition of the Equity Interests of the Borrower, (ii) the maintenance of its legal existence, including the ability to incur fees, costs and expenses relating to such maintenance, (iii) participating in tax, accounting and other administrative matters as a member of the consolidated group of Holdings and the Borrower, (iv) the performance of its obligations under and in connection with the Loan Documents and the other agreements contemplated hereby, (v) any public offering of its common stock or any other issuance or registration of its Equity Interests for sale or resale not prohibited by this Agreement, including the costs, fees and expenses related thereto, (vi) the payment of any dividend or other
 
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distribution not prohibited by Section 6.07 , or any Investment permitted under Section 6.03(d) , (vii) incurring fees, costs and expenses relating to overhead and general operating including professional fees for legal, tax and accounting issues and paying taxes, (viii) providing indemnification to officers and directors, (ix) the Transactions and activities incidental to the consummation thereof, (x) the redemption of the preferred stock of Holdings to the extent not redeemed in connection with the Redemption and otherwise permitted by this Agreement and (xi) activities incidental to the businesses or activities described in clauses (i) to (x) of this paragraph.
 
(d)                                  Holdings will not own or acquire any material assets (other than Equity Interests as referred to in paragraph (c)(i) above, cash and Permitted Investments or intercompany Investments in the Borrower permitted hereunder) or incur any liabilities (other than liabilities as referred to in paragraph (c) above, liabilities imposed by law, including tax liabilities, and other liabilities incidental to its existence and business and activities permitted by this Agreement).  Without limiting the foregoing, Holdings shall not at any time own the Equity Interests of any subsidiary other than the Borrower.
 
Section 6.04                              Investments, Loans, Advances, Guarantees and Acquisitions .  The Borrower will not, and will not permit any Restricted Subsidiary to, make or hold any Investment, except:
 
(a)                                  Permitted Investments;
 
(b)                                  loans or advances to officers, directors and employees of Holdings, the Borrower and the Restricted Subsidiaries (i) for reasonable and customary business-related travel, entertainment, relocation and analogous ordinary business purposes, (ii) in connection with such Person’s purchase of Equity Interests of Holdings (or any direct or indirect parent thereof) ( provided that the amount of such loans and advances made in cash to such Person shall be contributed to the Borrower in cash as common equity or Qualified Equity Interests) and (iii) for purposes not described in the foregoing clauses (i) and (ii), in an aggregate principal amount outstanding at any time the U.S. Dollar Equivalent of which does not exceed $7,000,000;
 
(c)                                   Investments (i) by the Borrower or any Restricted Subsidiary in the Borrower or any Loan Party (excluding any new Restricted Subsidiary that becomes a Loan Party pursuant to such Investment), (ii) by any Restricted Subsidiary that is not a Loan Party in any other Restricted Subsidiary that is also not a Loan Party, (iii) by the Borrower or any Restricted Subsidiary (A) in any Restricted Subsidiary; (B) in any Restricted Subsidiary that is not a Loan Party, constituting an exchange of Equity Interests of such Restricted Subsidiary for Indebtedness of such Subsidiary or (C) constituting Guarantees of Indebtedness or other monetary obligations of Restricted Subsidiaries that are not Loan Parties owing to any Loan Party, (iv) by the Borrower or any Restricted Subsidiary in Restricted Subsidiaries that are not Loan Parties so long as such Investment is part of a series of simultaneous Investments that result in the proceeds of the initial Investment being invested in one or more Loan Parties, and (v) by the Borrower or any Restricted Subsidiary in any Restricted Subsidiary that is not a Loan Party, consisting of the contribution of Equity Interests of any other Restricted Subsidiary that is not a Loan Party so long as the Equity Interests of the transferee Restricted Subsidiary are pledged to secure the Secured Obligations; provided the U.S. Dollar Equivalent of the aggregate amount of
 
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consideration paid or provided by the Borrower or any other Loan Party after the Closing Date pursuant to this Section 6.04(c)  for Investments in Subsidiaries that are not, shall not be, or, after giving effect to any such Investment, shall not become, Loan Parties, shall not exceed $10,000,000;
 
(d)                                  Investments consisting of extensions of trade credit and accommodation guarantees in the ordinary course of business;
 
(e)                                   Investments (i) existing or contemplated on the Closing Date and set forth on Schedule 6.04(e)  and any modification, replacement, renewal, reinvestment or extension thereof and (ii) Investments existing on the Closing Date by the Borrower or any Restricted Subsidiary in the Borrower or any Restricted Subsidiary and any modification, renewal or extension thereof; provided that the amount of the original Investment is not increased except by the terms of such Investment to the extent set forth on Schedule 6.04(e)  or as otherwise permitted by this Section 6.04 ;
 
(f)                                    Investments in Swap Agreements incurred in the ordinary course of business and not for speculative purposes;
 
(g)                                   promissory notes and other non-cash consideration received in connection with Dispositions permitted by Section 6.05 ;
 
(h)                                  Permitted Acquisitions;
 
(i)                                      Investments in the ordinary course of business consisting of UCC Article 3 endorsements for collection or deposit and UCC Article 4 customary trade arrangements with customers consistent with past practices;
 
(j)                                     Investments (including debt obligations and Equity Interests) received in connection with the bankruptcy or reorganization of suppliers and customers or in settlement of delinquent obligations of, or other disputes with, customers and suppliers or upon the foreclosure with respect to any secured Investment or other transfer of title with respect to any secured Investment;
 
(k)                                  loans and advances to Holdings (or any direct or indirect parent thereof) in lieu of, and not in excess of the amount of (after giving effect to any other loans, advances or Restricted Payments in respect thereof), Restricted Payments to the extent permitted to be made to Holdings (or such parent) in accordance with Section 6.07(a)(iii) , (iv) , (v)  or (vii) ;
 
(l)                                      advances of payroll payments to employees in the ordinary course of business;
 
(m)                              Investments and other acquisitions to the extent that payment for such Investments is made solely with Qualified Equity Interests (excluding Cure Amounts) of Holdings (or any direct or indirect parent thereof);
 
(n)                                  Investments of a Subsidiary acquired after the Closing Date or of a Person merged, amalgamated or consolidated with any Subsidiary in accordance with this Section 6.04
 
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and Section 6.03 after the Closing Date or that otherwise becomes a Subsidiary (provided that if such Investment is made under Section 6.04(h) , existing Investments in subsidiaries of such Subsidiary or Person shall comply with the requirements of Section 6.04(h)  or any other paragraph of this Section 6.04 ) to the extent that such Investments were not made in contemplation of or in connection with such acquisition, merger, amalgamation or consolidation and were in existence on the date of such acquisition, merger or consolidation;
 
(o)                                  receivables (other than in respect of Indebtedness for borrowed money) owing to the Borrower or any Restricted Subsidiary, if created or acquired in the ordinary course of business;
 
(p)                                  non-cash Investments in connection with tax planning and reorganization activities; provided that, in the reasonable judgment of the Administrative Agent (following consultation with the Borrower), after giving effect to any such activities, the security interests of the Lenders in the Collateral, taken as a whole, would not be materially impaired;
 
(q)                                  Investments (A) for utilities, security deposits, leases and similar prepaid expenses incurred in the ordinary course of business and (B) trade accounts created, or prepaid expenses accrued, in the ordinary course of business;
 
(r)                                     Investments in joint ventures in an aggregate amount outstanding not to exceed the greater of $30,000,000 and 10.0% of CTA;
 
(s)                                    other Investments in an aggregate amount outstanding not to exceed the greater of $30,000,000 and 10.0% of CTA; and
 
(t)                                     so long as after giving effect to any such Investment no Default or Event of Default is continuing or would result therefrom, Investments by the Borrower or any Restricted Subsidiary not otherwise permitted hereby in an aggregate amount not to exceed at the time of such Investment the Available Amount.
 
Section 6.05                              Asset Sales .  The Borrower will not, and will not permit any Restricted Subsidiary to, (i) sell, transfer, lease or otherwise dispose of any asset, including any Equity Interest owned by it or (ii) permit any Restricted Subsidiary to issue any additional Equity Interest in such Restricted Subsidiary (other than issuing directors’ qualifying shares, nominal shares issued to foreign nationals to the extent required by applicable Requirements of Law and other than issuing Equity Interests to the Borrower or a Restricted Subsidiary in compliance with Section 6.04(c) ) (each, a “ Disposition ”), except:
 
(a)                                  Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business and Dispositions of property no longer used or useful in the conduct of the business of the Borrower and the Restricted Subsidiaries;
 
(b)                                  Dispositions of inventory and other assets in the ordinary course of business;
 
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(c)                                   Dispositions of property to the extent that (i) such property is exchanged for credit against the purchase price of similar replacement property or (ii) the proceeds of such Disposition are promptly applied to the purchase price of such replacement property;
 
(d)                                  Dispositions of property to the Borrower or a Restricted Subsidiary; provided that if the transferor in such a transaction is a Loan Party, then (i) the transferee must be a Loan Party, (ii) to the extent constituting an Investment, such Investment must be a permitted Investment in a Restricted Subsidiary in accordance with Section 6.04 or (iii) to the extent constituting a Disposition to a Restricted Subsidiary that is not a Loan Party, such Disposition is for fair value and any promissory note or other non-cash consideration received in respect thereof is a permitted investment in a Restricted Subsidiary that is not a Loan Party in accordance with Section 6.04 ;
 
(e)                                   Dispositions permitted by Section 6.03 and, to the extent constituting Dispositions, Liens permitted by Section 6.02 , Investments permitted by Section 6.04 and Restricted Payments permitted by Section 6.07 ;
 
(f)                                    Dispositions of property pursuant to Sale and Leaseback Transactions; provided that the fair market value of all property so disposed of after the Closing Date shall not exceed the greater of $10,000,000 and 3.4% of CTA;
 
(g)                                   Dispositions of Permitted Investments;
 
(h)                                  leases, subleases, licenses or sublicenses (including the provision of software under an open source license), in each case in the ordinary course of business and that do not materially interfere with the business of the Borrower and the Restricted Subsidiaries, taken as a whole;
 
(i)                                      transfers of property subject to Casualty Events upon receipt of the Net Proceeds of such Casualty Event;
 
(j)                                     Dispositions of property to Persons other than the Borrower and the Restricted Subsidiaries (including the sale or issuance of Equity Interests of a Restricted Subsidiary) not otherwise permitted under this Section 6.05 ; provided that (i) no Event of Default shall exist at the time of, or would result from, such Disposition (other than any such Disposition made pursuant to a legally binding commitment entered into at a time when no Event of Default existed or would have resulted from such Disposition), (ii) the Net Proceeds of any such Disposition are used in accordance with Section 2.11(c) , and (iii) with respect to any Disposition pursuant to this clause (j) for a purchase price the U.S. Dollar Equivalent of which is in excess of $5,000,000, the Borrower or a Restricted Subsidiary shall receive not less than 75% of such consideration in the form of cash or Permitted Investments; provided , however , that for the purposes of this clause (iii) (A) any liabilities (as shown on the most recent balance sheet of Holdings provided hereunder or in the footnotes thereto) of the Borrower or Restricted Subsidiary, other than liabilities that are by their terms subordinated in right of payment to the First Lien Obligations, that are assumed by the transferee with respect to the applicable Disposition and for which the Borrower and all of the Restricted Subsidiaries shall have been validly released by all applicable creditors in writing, shall be deemed to be cash, (B) any
 
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securities received by the Borrower or Restricted Subsidiary from such transferee that are converted by the Borrower or Restricted Subsidiary into cash or Permitted Investments (to the extent of the cash or Permitted Investments received) within 180 days following the closing of the applicable Disposition, shall be deemed to be cash and (C) any Designated Non-Cash Consideration received by the Borrower or Restricted Subsidiary in respect of such Disposition having an aggregate fair market value, taken together with all other Designated Non-Cash Consideration received pursuant to this clause (j) that is at that time outstanding, not in excess of the U.S. Dollar Equivalent of $5,000,000 at the time of the receipt of such Designated Non-Cash Consideration, with the fair market value of each item of Designated Non-Cash Consideration being measured at the time received and without giving effect to subsequent changes in value, shall be deemed to be cash;
 
(k)                                  Dispositions of Investments in joint ventures to the extent required by, or made pursuant to customary buy/sell arrangements between, the joint venture parties set forth in joint venture arrangements and similar binding arrangements; and
 
(l)                                      Dispositions or forgiveness of accounts receivable in the ordinary course of business in connection with the collection or compromise thereof;
 
provided that any Disposition of any property pursuant to this Section 6.05 (except pursuant to Section 6.05(e)  and except for Dispositions by a Loan Party to Loan Party), shall be for no less than the fair market value of such property at the time of such Disposition.
 
Section 6.06                              [Reserved] .
 
Section 6.07                              Restricted Payments; Certain Payments of Indebtedness .
 
(a)                                  The Borrower will not, and will not permit any Restricted Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except:
 
(i)                                      each Restricted Subsidiary may make Restricted Payments to the Borrower or any other Restricted Subsidiary and to each other owner of Equity Interests of such Restricted Subsidiary based on their relative ownership interests of the relevant class of Equity Interests;
 
(ii)                                   the Borrower and each Restricted Subsidiary may declare and make dividend payments or other distributions payable solely in the Qualified Equity Interests of such Person so long as the Borrower complies with the Collateral and Guarantee Requirement; provided that in the case of any such Restricted Payment by a Restricted Subsidiary that is not a Wholly Owned Subsidiary of the Borrower, such Restricted Payment is made to the Borrower, any Restricted Subsidiary and to each other owner of Equity Interests of such Restricted Subsidiary based on their relative ownership interests of the relevant class of Equity Interests;
 
(iii)                                repurchases of Equity Interests in Holdings or any Restricted Subsidiary deemed to occur upon exercise of stock options or warrants if such Equity Interests represent a portion of the exercise price or withholding taxes payable in connection with the exercise of such options or warrants;
 
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(iv)                               Restricted Payments to Holdings which Holdings shall use to redeem, acquire, retire, repurchase or settle its Equity Interests (or any options or warrants or stock appreciation rights issued with respect to any of such Equity Interests) or to service Indebtedness incurred by Holdings to finance the redemption, acquisition, retirement, repurchase or settlement of such Equity Interests (or make Restricted Payments to allow any of Holdings’ direct or indirect parent companies to so redeem, retire, acquire or repurchase their Equity Interests or to service Indebtedness incurred to finance the redemption, retirement, acquisition or repurchase of such Equity Interests) held by current or former officers, managers, consultants, directors and employees (or their respective spouses, former spouses, successors, executors, administrators, heirs, legatees or distributees) of Holdings (or any direct or indirect parent thereof), the Borrower and the Restricted Subsidiaries, upon the death, disability, retirement or termination of employment of any such Person or otherwise in accordance with any stock option or stock appreciation rights plan, any management, director and/or employee stock ownership or incentive plan, stock subscription plan, employment termination agreement or any other employment agreements or equity holders’ agreement in an aggregate amount together with the aggregate amount of loans and advances to Holdings made pursuant to Section 6.04(k)  in lieu of Restricted Payments permitted by this clause (iv) not to exceed an amount the U.S. Dollar Equivalent of which is equal to $5,000,000 in any fiscal year with unused amounts in any fiscal year being carried over to succeeding fiscal years subject to a maximum amount the U.S. Dollar Equivalent of which is equal to $10,000,000 in any fiscal year (without giving effect to the following proviso); provided that such amount in any calendar year may be increased by an amount not to exceed the cash proceeds of key man life insurance policies received by the Borrower or the Restricted Subsidiaries (or by Holdings and contributed to Borrower) after the Closing Date;
 
(v)                                  the Borrower and the Restricted Subsidiaries may make Restricted Payments in cash to Holdings:
 
(A)                                the proceeds of which shall be used by Holdings (or any direct or indirect equity owner of Holdings) to pay Tax liability of Holdings to the relevant jurisdiction in respect of consolidated, combined, unitary or affiliated returns, if any, attributable to the income of the Borrower and the Subsidiaries; provided that Restricted Payments made pursuant to this clause (a)(vii)(A) shall not exceed the Tax liability that the Borrower and/or the Subsidiaries (as applicable) would have incurred were such Taxes determined as if such entity(ies) were a stand-alone taxpayer or a stand-alone group; and provided , further , that Restricted Payments under this clause (A) in respect of any Taxes attributable to the income of any Unrestricted Subsidiaries of the Borrower may be made only to the extent that such Unrestricted Subsidiaries have made cash payments for such purpose to the Borrower or the Restricted Subsidiaries;
 
(B)                                the proceeds of which shall be used by Holdings to pay (or to make Restricted Payments to allow any direct or indirect parent of Holdings to pay) (1) its operating expenses incurred in the ordinary course of business and other corporate overhead costs and expenses (including administrative, legal,
 
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accounting, board of director fees, and similar expenses payable to third parties) that are reasonable and customary and incurred in the ordinary course of business, in an aggregate amount together with the aggregate amount of loans and advances to Holdings made pursuant to Section 6.04(k)  in lieu of Restricted Payments permitted by this clause (a)(vii)(B) not to exceed an amount the U.S. Dollar Equivalent of which is equal to $2,500,000 in any fiscal year; plus any reasonable and customary indemnification claims made by directors or officers of Holdings (or any parent thereof) attributable to the ownership or operations of Holdings and the Restricted Subsidiaries and (2) amounts permitted to be paid pursuant to Section 6.08(iv) ;
 
(C)                                the proceeds of which shall be used by Holdings to pay franchise Taxes and other fees, Taxes and expenses required to maintain its corporate existence;
 
(D)                                to finance any Investment permitted to be made pursuant to Section 6.04(b) ;
 
(E)                                 after a Qualified IPO, to pay regular dividends subject to an annual limitation equal to 6% of the net cash proceeds received by the Borrower from such Qualified IPO and any subsequent public offering of Qualified Equity;
 
(F)                                  up to $276,317,938 to fund the Redemption within thirty days of the Closing Date; and
 
(G)                                the proceeds of which shall be used to pay (or to allow any direct or indirect parent thereof to pay) fees and expenses (other than to Affiliates) related to any unsuccessful equity or debt offering permitted by this Agreement;
 
(vi)                               dividends and distributions funded substantially contemporaneously with proceeds of Qualified Equity offerings not otherwise applied, other than Cure Amounts;
 
(vii)                            Borrower and its Restricted Subsidiaries may make Restricted Payments not to exceed the greater of $15,000,000 and 5.0% of CTA so long as no Event of Default under Section 7.01(a) , (b) , (i)  or (j)  shall have occurred and be continuing at the time such Restricted Payments are made;
 
(viii)                         Borrower and its Restricted Subsidiaries may make cashless exchanges of unsecured notes and/or Subordinated Indebtedness meeting standards for Permitted Refinancing Indebtedness pursuant to Section 6.01(ii)(A) ;
 
(ix)                               in addition to the foregoing Restricted Payments and so long as (a) no Event of Default shall have occurred and be continuing or would result therefrom and (b) the Total Net Leverage Ratio on a Pro Forma Basis after giving effect to such Restricted Payment as of the end of the most recent Test Period is less than 4.50 to 1.00, the Borrower may make additional Restricted Payments to Holdings, in an aggregate amount not to exceed the Available Amount at such time;
 
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(x)                                  in addition to the foregoing Restricted Payments and so long as (a) no Default shall have occurred and be continuing or would result therefrom and (b) the Total Net Leverage Ratio on a Pro Forma Basis after giving effect to such Restricted Payment as of the end of the most recent Test Period is less than 2.50 to 1.00, the Borrower may make additional Restricted Payments to Holdings; and
 
(xi)                               redemptions in whole or in part of any of its Equity Interests for another class of its Equity Interests or with proceeds from substantially concurrent equity contributions or issuances of new Equity Interests; provided that such new Equity Interests contain terms and provisions at least as advantageous to the Lenders in all respects material to their interests as those contained in the Equity Interests redeemed thereby.
 
(b)                                  Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Subordinated Indebtedness or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any unsecured Indebtedness, Subordinated Indebtedness or Indebtedness secured by a lien junior to the Secured Obligations (collectively, the “ Junior Indebtedness ”), or any other payment (including any payment under any Swap Agreement) that has a substantially similar effect to any of the foregoing, except:
 
(i)                                      payment of regularly scheduled interest, as and when due, other than payments in respect of any Subordinated Indebtedness prohibited by the subordination provisions thereof;
 
(ii)                                   [reserved];
 
(iii)                                refinancings of Indebtedness to the extent permitted by Section 6.01 ;
 
(iv)                               payments on the Dinker Note subject to the Dinker Subordination Agreement;
 
(v)                                  additional payments in respect of any Junior Indebtedness in an aggregate amount not to exceed the Available Amount at such time; provided that (a) no Event of Default shall have occurred and be continuing or would result therefrom and (b) solely with respect to clauses (a)(i)  and (a)(ii)  of the definition of “Available Amount,” the Total Net Leverage Ratio on a Pro Forma Basis as of the most recent Test Period is not more than 4.50 to 1.00;
 
(vi)                               payments of or in respect of any Junior Indebtedness made solely with Equity Interests in Holdings or any of its direct or indirect parent companies (other than Disqualified Equity Interests or Qualified Equity Interests issued in connection with the exercise of a Cure Right); and
 
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(vii)                            in addition to the foregoing payments on Junior Indebtedness and so long as (a) no Default shall have occurred and be continuing or would result therefrom and (b) the Total Net Leverage Ratio on a Pro Forma Basis as of the end of the most recent Test Period is less than 3.75 to 1.00, the Borrower may make additional payments on Junior Indebtedness
 
Section 6.08                              Transactions with Affiliates .  The Borrower will not, and will not permit any Restricted Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (i) transactions with the Borrower or any Restricted Subsidiary in the ordinary course of business, (ii) on terms substantially as favorable to the Borrower or such Restricted Subsidiary as would be obtainable by such Person at the time in a comparable arm’s-length transaction with a Person other than an Affiliate, (iii) the payment of fees and expenses related to the Transactions, (iv) (A) so long as no Event of Default under Section 7.01(a) , (b) , (i)  or (j)  shall have occurred and be continuing, the payment of management and monitoring fees to the Investors (or management companies of the Investors) in an aggregate amount in any fiscal year the U.S. Dollar Equivalent of which does not exceed $1,500,000 and (B) the payment of related indemnities and reasonable expenses, (v) issuances of Equity Interests of the Borrower to the extent otherwise permitted by this Agreement, (vi) employment and severance arrangements between the Borrower and the Restricted Subsidiaries and their respective officers and employees in the ordinary course of business or otherwise in connection with the Transactions (including loans and advances pursuant to Sections 6.04(b)  and 6.04(l) , (vii) payments by the Borrower and the Restricted Subsidiaries pursuant to tax sharing agreements among Holdings (and any such parent thereof), the Borrower and the Restricted Subsidiaries on customary terms to the extent attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries, to the extent payments are permitted by Section 6.07 , (viii) the payment of customary fees and reasonable out-of-pocket costs to, and indemnities provided on behalf of, directors, officers and employees of Holdings, the Borrower and the Restricted Subsidiaries in the ordinary course of business to the extent attributable to the ownership or operation of the Borrower and the Restricted Subsidiaries, (ix) transactions pursuant to permitted agreements in existence or contemplated on the Closing Date and set forth on Schedule 6.08 or any amendment thereto to the extent such an amendment is not adverse to the Lenders in any material respect, (x) Restricted Payments permitted under Section 6.07 , (xi) customary payments by the Borrower and any Restricted Subsidiaries to the Sponsors made for any financial advisory, consulting, financing, underwriting or placement services or in respect of other investment banking activities (including in connection with acquisitions or divestitures), which payments are approved by the majority of the disinterested members of the board of directors of Holdings in good faith and (xii) licenses of Intellectual Property among Loan Parties.
 
Section 6.09                              Restrictive Agreements .  The Borrower will not, and will not permit any Restricted Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Borrower or any Subsidiary Loan Party to create, incur or permit to exist any Lien upon any of its property or assets to secure the Secured Obligations or (b) the ability of any Loan Party or any Restricted Subsidiary that is not a Loan Party to pay dividends or other distributions with respect to any of its Equity Interests or to make or repay loans or advances to the Borrower
 
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or any Restricted Subsidiary or to Guarantee Indebtedness of any Restricted Subsidiary; provided that the foregoing clauses (a) and (b) shall not apply to any such restrictions applicable to the Borrower and Restricted Subsidiaries that (i)(x) exist on the Closing Date and (to the extent not otherwise permitted by this Section 6.09 ) are listed on Schedule 6.09 , and (y) any renewal or extension of a restriction permitted by clause (i)(x)  or any agreement evidencing such restriction so long as such renewal or extension does not expand the scope of such restrictions, (ii)(x) are binding on a Person at the time such Subsidiary first becomes a Restricted Subsidiary, so long as such restrictions were not entered into solely in contemplation of such Person becoming a Restricted Subsidiary and (y) any renewal or extension of a restriction permitted by clause (ii)(x) or any agreement evidencing such restriction so long as such renewal or extension does not expand the scope of such restrictions, (iii) represent Indebtedness of a Restricted Subsidiary that is not a Loan Party that is permitted by Section 6.01 , (iv) are customary restrictions that arise in connection with any Disposition permitted by Section 6.05 applicable pending such Disposition solely to the assets subject to such Disposition, (v) are customary provisions in joint venture agreements and other similar agreements applicable to joint ventures permitted under Section 6.04 , (vi) are imposed by Requirements of Law, (vii) are customary restrictions contained in leases, subleases, licenses, sublicenses or asset sale agreements otherwise permitted hereby so long as such restrictions relate only to the assets subject thereto, (viii) comprise restrictions imposed by any agreement relating to secured Indebtedness permitted pursuant to Sections 6.01(a)(v)  and (a)(xviii)  to the extent that such restrictions apply only to the property or assets securing such Indebtedness, (ix) are customary provisions restricting subletting or assignment of any lease governing a leasehold interest of Holdings, the Borrower or any Restricted Subsidiary, (x) are customary provisions restricting assignment of any license, lease or other agreement, (xi) are restrictions on cash (or Permitted Investments) or deposits imposed by customers under contracts entered into in the ordinary course of business (or otherwise constituting Permitted Encumbrances on such cash or Permitted Investments or deposits) or (xii) are customary net worth provisions contained in real property leases or licenses of intellectual property entered into by the Borrower or any Restricted Subsidiary, so long as the Borrower has determined in good faith that such net worth provisions could not reasonably be expected to impair the ability of the Borrower and its subsidiaries to meet their ongoing obligation.
 
Section 6.10                              Amendment of Material Documents .  Neither Holdings nor the Borrower will, nor will they permit any Restricted Subsidiary to, amend, modify, waive, terminate or release (a)  its certificate of incorporation, bylaws or other organizational documents, or (b) the documentation governing any Junior Indebtedness, in each case if the effect of such amendment, modification, waiver, termination or release is materially adverse to the Lenders (as reasonably determined by the Administrative Agent).
 
Section 6.11                              First Lien Net Leverage Ratio .  With respect to the Revolving Facilities only, except with the written consent of the Required Revolving Lenders, Holdings and the Borrower will not permit on or after December 31, 2015 the First Lien Net Leverage Ratio as of any Test Date to exceed 7.00 to 1.00 if a Compliance Event has occurred and is continuing on such Test Date.
 
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Section 6.12                              Changes in Fiscal Periods .  Holdings and the Borrower will not make any change in fiscal year; provided , however, that Holdings may change the fiscal year of the Borrower and the Subsidiaries to match Holdings’ fiscal year.
 
ARTICLE VII
 
EVENTS OF DEFAULT
 
Section 7.01                              Events of Default .  If any of the following events (any such event, an “Event of Default”) shall occur:
 
(a)                                  any Loan Party shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;
 
(b)                                  any Loan Party shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in paragraph (a) of this Section) payable under any Loan Document, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five Business Days;
 
(c)                                   any representation or warranty made or deemed made by or on behalf of Holdings, the Borrower or any of the Restricted Subsidiaries in or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been incorrect in any material respect when made or deemed made;
 
(d)                                  Holdings, the Borrower or any of the Restricted Subsidiaries shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(a) , Section 5.04 (with respect to the existence of Holdings, the Borrower or such Restricted Subsidiaries), Section 5.10 or in Article VI (other than the Financial Performance Covenant);
 
(e)                                   Holdings, the Borrower or any of the Restricted Subsidiaries shall fail to observe or perform any covenant, condition or agreement contained in Sections 5.01(a), (b), (c)  or (d)  and such failure shall continue unremedied for a period of ten days after notice thereof from the Administrative Agent to the Borrower;
 
(f)                                    Holdings, the Borrower or any of the Restricted Subsidiaries shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in paragraph (a), (b), (d) or (e) of this Section or the Financial Performance Covenant), and such failure shall continue unremedied for a period of 30 days after notice thereof from the Administrative Agent to the Borrower;
 
(g)                                   [reserved];
 
(h)                                  any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with all applicable grace
 
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periods having expired) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this paragraph (h) shall not apply to (i) secured Indebtedness that becomes due as a result of the sale, transfer or other disposition (including as a result of a casualty or condemnation event) of the property or assets securing such Indebtedness (to the extent such sale, transfer or other disposition is not prohibited under this Agreement) or (ii) termination events or similar events occurring under any Swap Agreement that constitutes Material Indebtedness (it being understood that paragraph (f) of this Section will apply to any failure to make any payment required as a result of any such termination or similar event);
 
(i)                                      an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, court protection, reorganization or other relief in respect of Holdings, the Borrower or any Restricted Subsidiary that is not an Immaterial Subsidiary or its debts, or of a material part of its assets, under any federal, state, provincial, territorial or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, examiner, sequestrator, conservator or similar official for Holdings, the Borrower or any Restricted Subsidiary or for a material part of its assets, and, in any such case, such proceeding or petition shall continue undismissed or unstayed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;
 
(j)                                     Holdings, the Borrower or any Restricted Subsidiary that is not an Immaterial Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, court protection, reorganization or other relief under any federal, state, provincial, territorial or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in paragraph (h) of this Section, (iii) apply for or consent to the appointment of a receiver, trustee, examiner, custodian, sequestrator, conservator or similar official for Holdings, the Borrower or any Restricted Subsidiary that is not an Immaterial Subsidiary or for a material part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding or (v) make a general assignment for the benefit of creditors;
 
(k)                                  one or more enforceable judgments for the payment of money in an aggregate U.S. Dollar Equivalent amount in excess of $15,000,000 (to the extent not covered by insurance as to which the insurer has been notified of such judgment or order and has not denied coverage) shall be rendered against Holdings, the Borrower and any of the Restricted Subsidiaries or any combination thereof and the same shall remain undischarged for a period of 60 consecutive days during which execution shall not be effectively stayed, or any judgment creditor shall legally attach or levy upon assets of such Loan Party that are material to the businesses and operations of Holdings, the Borrower and the Restricted Subsidiaries, taken as a whole, to enforce any such judgment;
 
(l)                                      (i) an ERISA Event occurs, either alone or together with all other ERISA Events, that has resulted or could reasonably be expected to result in a Material Adverse Effect, or (ii) any Loan Party or any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under
 
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Section 4201 of ERISA under a Multiemployer Plan that has resulted or could reasonably be expected to result in a Material Adverse Effect;
 
(m)                              any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party not to be, a valid and perfected (to the extent such Lien was required to be perfected by the Security Documents) Lien on any material portion of the Collateral, with the priority required by the applicable Security Document, except (i) as a result of the sale or other disposition of the applicable Collateral in a transaction permitted under the Loan Documents, (ii) as to Collateral consisting of real property to the extent that such losses are covered by a lender’s title insurance policy and such insurer has not denied coverage or (iii) as to Collateral consisting of Intellectual Property, as a result of the expiration of such Intellectual Property at the end of its statutory term or the abandonment or lapse of such Intellectual Property as permitted under Section 5.04 , or (iv) as a result of acts or omissions of the Administrative Agent, any Lender or their agents;
 
(n)                                  any material provision of any Loan Document or any Guarantee of the First Lien Obligations shall for any reason be asserted by any Loan Party not to be a legal, valid and binding obligation of any Loan Party thereto other than as expressly permitted hereunder or thereunder;
 
(o)                                  any Guarantees of the First Lien Obligations by any Loan Party pursuant to any Guarantee Agreement shall cease to be in full force and effect (in each case, other than in accordance with the terms of the Loan Documents);
 
(p)                                  [Reserved];
 
(q)                                  a Change in Control shall occur;
 
(r)                                     subject to the Cure Right, solely with respect to the Revolving Loans, Swingline Loans and the Letters of Credit, the Borrower shall fail to observe or perform the Financial Performance Covenant (“ Financial Covenant Event of Default ”); it being understood and agreed that any Default under this paragraph (r)  may be remedied by the (i) prepayment in full of all outstanding Revolving Borrowings and Swingline Borrowings and the cash collateralization of all outstanding Letters of Credit (at 103% of the face value of each such Letter of Credit) in a manner reasonably satisfactory to the Collateral Agent and the applicable Issuing Bank and (ii) the termination of all Revolving Commitments then outstanding); provided that notwithstanding anything to the contrary in this Agreement or the other Loan Documents, a Financial Covenant Event of Default shall not constitute an Event of Default with respect to any Term Loans except as set forth in clause (s) below;
 
(s)                                    subject to the Cure Right, with respect to Term Loans, any event specified in paragraph (r)  of this Section shall have occurred and the Majority in Interest of the Revolving Lenders shall, as a result of such event and prior to the prepayment in full of all outstanding Revolving Borrowings and Swingline Borrowings and the cash collateralization of all outstanding Letters of Credit (at 103% of face value of each such Letter of Credit) in a manner reasonably satisfactory to the Collateral Agent and the applicable Issuing Bank, (i) terminate the Revolving Commitments or (ii) declare the Revolving Loans then outstanding to be due and
 
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payable prior to the Revolving Maturity Date, in whole or in part (a “ Financial Covenant Cross Default ”); provided that no Event of Default shall remain continuing under this clause upon the Required Revolving Lenders rescinding such acceleration and/or waiving such Financial Covenant Cross Default with respect to the Revolving Loans; or
 
(t)                                     failure to complete the Redemption on or prior to the date that is thirty days after the Closing Date and such failure shall continue unremedied for a period of thirty days.
 
then, and in every such event (other than an event with respect to Holdings or the Borrower described in paragraph (i) or (j) of this Section), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times:  (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to Holdings or the Borrower described in paragraph (i) or (j) of this Section, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.
 
Section 7.02                              Right to Cure .
 
(a)                                  Notwithstanding anything to the contrary contained in Section 7.01 , in the event that Holdings, the Borrower and the Restricted Subsidiaries fail to comply with the requirements of the Financial Performance Covenant as of the last day of any fiscal quarter of Holdings, at any time after the beginning of such fiscal quarter until the expiration of the 10th Business Day subsequent to the earlier of (i) the date on which a Compliance Certificate with respect to such fiscal quarter (or the fiscal year ended on the last day of such fiscal quarter) is delivered in accordance with Section 5.01(d)  and (ii) the date on which the financial statements with respect to such fiscal quarter (or the fiscal year ended on the last day of such fiscal quarter) are required to be delivered pursuant to Section 5.01(a)  or (b) , as applicable (such date, the “ Cure Expiration Date ”), Holdings shall have the right to issue Qualified Equity Interests for cash or otherwise receive cash contributions to the capital of Holdings as cash common equity (or otherwise in a form reasonably acceptable to the Administrative Agent) or other Qualified Equity Interests (which Holdings shall contribute to the Borrower as cash common equity) (collectively, the “ Cure Right ”), and upon the receipt by the Borrower of the Net Proceeds of such issuance (the “ Cure Amount ”) pursuant to the exercise by Holdings of such Cure Right the Financial Performance Covenant shall be recalculated giving effect to the following pro forma adjustment:
 
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(i)                                      Consolidated EBITDA shall be increased with respect to such applicable fiscal quarter and any four fiscal quarter period that contains such fiscal quarter, solely for the purpose of measuring the Financial Performance Covenant and not for any other purpose under this Agreement, by an amount equal to the Cure Amount; and
 
(ii)                                   if, after giving effect to the foregoing pro forma adjustment (without giving effect to any repayment of any Indebtedness with any portion of the Cure Amount or any portion of the Cure Amount on the balance sheet of Holdings, the Borrower and the Restricted Subsidiaries (in each case, with respect to such fiscal quarter only), the Borrower and the Restricted Subsidiaries shall then be in compliance with the requirements of the Financial Performance Covenant, Holdings, the Borrower and the Restricted Subsidiaries shall be deemed to have satisfied the requirements of the Financial Performance Covenant as of the relevant date of determination with the same effect as though there had been no failure to comply therewith at such date, and the applicable breach or default of the Financial Performance Covenant that had occurred shall be deemed cured for the purposes of this Agreement;
 
provided that the Borrower shall have notified the Administrative Agent of the exercise of such Cure Right within five Business Days of the issuance of the relevant Qualified Equity Interests for cash or the receipt of the cash contributions by Holdings.
 
(b)                                  Notwithstanding anything herein to the contrary, (i) in each four consecutive fiscal quarter period of the Borrower there shall be at least two fiscal quarters in which the Cure Right is not exercised, (ii) during the term of this Agreement, the Cure Right shall not be exercised more than five times and (iii) for purposes of this Section 7.02 , the Cure Amount shall be no greater than the amount required for purposes of complying with the Financial Performance Covenant and any amounts in excess thereof shall not be deemed to be a Cure Amount.  Notwithstanding any other provision in this Agreement to the contrary, the Cure Amount received pursuant to any exercise of the Cure Right shall be disregarded for all other purposes, such as for purposes of determining the Applicable Rate, for purposes of determining Pro Forma Compliance in connection with any transaction and for purposes of determining any financial ratio-based condition or available basket under Article VI of this Agreement.
 
(c)                                   Notwithstanding anything to the contrary in this Agreement or the other Loan Documents, upon the occurrence and continuation of an Event of Default under Section 7.01(s) , only the Required Revolving Lenders may exercise rights and remedies in respect of such Event of Default, and the Required Revolving Lenders may, upon written notice to the Borrower, either (x) terminate the Revolving Commitments and/or (y) take the actions specified in Section 7.01 in respect of the Revolving Commitments, the Revolving Loans, Letters of Credit and Swingline Loans; provided that neither the Administrative Agent, any Revolving Lender or other Secured Party may exercise any right of foreclosure or take possession of the Collateral or exercise any other remedy hereunder solely on the basis such an Event of Default occurring at any time prior to the exercise of the Cure Right (except to the extent that the Borrower has confirmed in writing that it does not intend to exercise the Cure Right; provided further that the Borrower shall not be permitted to request any extension of credit during such period unless and until the Cure Amount is actually received.
 
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ARTICLE VIII
 
ADMINISTRATIVE AGENT
 
Section 8.01                              Appointment and Authority .
 
(a)                                  Each of the Lenders and the Issuing Banks hereby irrevocably appoints Scotiabank 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 Article VIII are solely for the benefit of the Agents, the Lenders and the Issuing Banks, and the Borrower shall not have rights as a third party beneficiary of any of such provisions.
 
(b)                                  Each of the Lenders and the Issuing Banks hereby irrevocably appoints Scotiabank to act on its behalf as the Collateral Agent hereunder and under the other Loan Documents for purposes of acquiring, holding and enforcing any and all Liens on Collateral granted by any of the Loan Parties to secure any of the Secured Obligations and authorizes the Collateral Agent to take such actions on its behalf and to exercise such powers as are delegated to the Collateral Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto.  The Collateral Agent and any co-agents, subagents and attorneys-in-fact appointed by the Collateral Agent pursuant to Section 8.05 for purposes of holding or enforcing any Lien on the Collateral (or any portion thereof) granted under the Security Documents, or for exercising any rights and remedies thereunder at the direction of the Collateral Agent, shall be entitled to the benefits of all provisions of this Article VIII and Article IX (including Section 9.03 as though such co-agents, sub-agents and attorneys-in-fact were the “collateral agent” under the Loan Documents) as if set forth in full herein with respect thereto.
 
Section 8.02                              Rights as a Lender .  Any Person serving as any 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 an Agent and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as such Agent hereunder in its individual capacity.  Such Person and its Affiliates may accept deposits from, lend money to, own securities of, 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 an Agent hereunder and without any duty to account therefor to the Lenders.
 
Section 8.03                              Exculpatory Provisions .  The Agents shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents and its duties hereunder and under the other Loan Documents shall be administrative in nature.  Without limiting the generality of the foregoing, the Agents or any of their Related Parties:
 
(a)                                  shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;
 
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(b)                                  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 no Agent shall be required to take any action that, in its opinion or the opinion of its counsel, may expose such Agent to liability or that is contrary to any Loan Document or applicable law, including for the avoidance of doubt any action that may be in violation of the automatic stay under any Debtor Relief Law or that may affect a forfeiture, modification or termination of property of a Defaulting Lender in violation of any Debtor Relief Law;
 
(c)                                   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 any Person serving as an Agent or any of its Affiliates in any capacity;
 
(d)                                  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 Section 9.02 and in the last paragraph of Section 7.01 ) or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by a final and non-appealable judgment; provided that the Administrative Agent shall be deemed not to have knowledge or notice of the occurrence of any Default unless and until written notice describing such Default is given to the Administrative Agent by the Borrower, a Lender or an Issuing Bank; and
 
(e)                                   shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) 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 Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document, or the creation, perfection or priority of any Lien purported to be created by the Security Documents, (v) the value or the sufficiency of any Collateral, (vi) the satisfaction of any condition set forth in Article IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to an Agent, or (vii) compliance by any Lender or other Person with the limitations, restrictions or prohibitions on assignments and participations contemplated by the definitions of “Eligible Assignee” and “Disqualified Lenders” and the related provisions of Section 9.04 .
 
Section 8.04                              Reliance by Agents .  The Agents 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 Agents 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
 
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shall not incur any liability for relying thereon.  In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an Issuing Bank, the Applicable Agent may presume that such condition is satisfactory to such Lender or Issuing Bank unless the Applicable Agent shall have received notice to the contrary from such Lender or Issuing Bank prior to the making of such Loan or the issuance of such Letter of Credit.  The Agents 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.
 
Section 8.05                              Delegation of Duties .  Each 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 such Agent.  When acting as a representative of the Secured Parties (including the Lenders and/or the Issuing Banks), each Agent shall be released from any restrictions of self-dealing and shall be authorized to delegate its rights and powers hereunder by way of a substitution of such rights and powers, and each Agent and any such subagent 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 Article shall apply to any such sub-agent and to the Related Parties of the Agents 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 Agent.  No Agent shall be responsible for the negligence or misconduct of any sub-agents except to the extent that a court of competent jurisdiction determines in a final and non-appealable judgment that such Agent acted with gross negligence or willful misconduct in the selection of such sub-agents.
 
Section 8.06                              Resignation of Agents .  The Administrative Agent may resign at any time upon 10 days’ notice to the Lenders, the Issuing Banks and the Borrower.  If the Administrative Agent becomes a Defaulting Lender and is not performing its role hereunder as Administrative Agent, the Administrative Agent may be removed as the Administrative Agent hereunder at the request of the Borrower and the Majority in Interest with respect to Loans upon 10 days’ notice (and upon any such removal, the removed 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 Bank under any of the Loan Documents, the removed Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed)).  Upon receipt of any such notice of resignation or upon such removal, the Majority in Interest with respect to Loans shall have the right, with the consent of the Borrower (such consent not to be unreasonably withheld or delayed) (provided that no consent of the Borrower shall be required if an Event of Default under Section 7.01(a) , (b) , (i)  or (j)  has occurred and is continuing), to appoint a successor.  If no such successor shall have been so appointed by the Majority in Interest with respect to Loans and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may (but shall not be obligated to) on behalf of the Lenders and the Issuing Bank, appoint a successor Administrative Agent, which shall be an Approved Bank with an office in the United States, or any Affiliate of any such Approved Bank; provided that if the Administrative Agent shall notify the Borrower and the Lenders that no qualifying Person has accepted such appointment, then such resignation shall nonetheless
 
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become effective in accordance with such notice and (a) 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 Bank 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 (b) 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 Bank directly, until such time as the Majority in Interest with respect to Loans appoint a successor Administrative Agent as provided for above in this Section.  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 (other than any rights to indemnity payments or other amounts owed to the retiring or removed 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 or removed Administrative Agent’s resignation or removal hereunder and under the other Loan Documents, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring or removed Administrative Agent, its subagents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring or removed Administrative Agent was acting as Administrative Agent.  Any successor Administrative Agent appointed pursuant to this Section shall, upon its acceptance of such appointment, become the successor Collateral Agent for all purposes hereunder.  In addition, any resignation or removal of the Administrative Agent pursuant to this Section shall also constitute the resignation or removal of the Administrative Agent in its capacity as Swingline Lender and in its capacity as Issuing Bank, and any successor Administrative Agent appointed pursuant to this Section shall, upon its acceptance of such appointment, become the successor Swingline Lender and Issuing Bank for all purposes hereunder.  In such event the Borrower shall prepay any outstanding Swingline Loans made by the retiring or removed Administrative Agent in its capacity as Swingline Lender and, at the time such removal or resignation shall become effective, the Borrower shall pay all accrued and unpaid fees pursuant to Section 2.12(b)  and the retiring Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of the Issuing Bank under this Agreement and the other Loan Documents with respect to Letters of Credit issued by it prior to such resignation or removal, but shall not be required to issue additional Letters of Credit, or extend or renew any existing Letters of Credit issued by it prior to such resignation or removal beyond their stated expiry date.
 
Section 8.07                              Non-Reliance on Agents and Other Lenders .  Each Lender and Issuing Bank acknowledges that it has, independently and without reliance upon any Agent, Joint Lead Arranger, Joint Bookrunner 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 Issuing Bank acknowledges that it has, independently and without reliance upon any Agent, Joint Lead Arranger, Joint Bookrunner 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
 
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Agreement.  Each Lender and Issuing Bank also acknowledges that it will, independently and without reliance upon any Agent, Joint Lead Arranger, Joint Bookrunner 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.  Except for notices, reports and other documents expressly required to be furnished hereunder, the Agent Parties shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of any Agent Party.
 
Section 8.08                              No Other Duties, Etc .  Anything herein to the contrary notwithstanding, neither the Joint Lead Arrangers, the Joint Bookrunners nor any person named on the cover page hereof as a Documentation Agent or Syndication Agent shall have any rights, powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as an Agent, a Lender or an Issuing Bank hereunder.
 
Section 8.09                              Administrative Agent May File Proofs of Claim .  In case of the pendency of any proceeding under any Debtor Relief Law or any other judicial proceeding relative to any Loan Party, the Administrative Agent (irrespective of whether the principal of any Loan or outstanding Letter of Credit shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise:
 
(a)                                  to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Letters of Credit outstanding and all other Secured Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders, the Issuing Banks and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders, the Issuing Banks and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders, the Issuing Bank and the Administrative Agent under Sections 2.12 and 9.03 ) allowed in such judicial proceeding; and
 
(b)                                  to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same;
 
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender and Issuing Bank to make such payments to the Administrative Agent and, if the Administrative Agent shall consent to the making of such payments directly to the Lenders and the Issuing Bank, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent under Section 2.12 and Section 9.03 .
 
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Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender or Issuing Bank any plan of reorganization, arrangement, adjustment or composition affecting the Secured Obligations or the rights of any Lender or Issuing Bank to authorize the Administrative Agent to vote in respect of the claim of any Lender or Issuing Bank or in any such proceeding.
 
Section 8.10                              No Waiver; Cumulative Remedies; Enforcement .  No failure by any Lender, any Issuing Bank or the Administrative Agent to exercise, and no delay by any such Person in exercising, any right, remedy, power or privilege hereunder or under any other Loan Document shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.  The rights, remedies, powers and privileges herein provided, and provided under each other Loan Document, are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.
 
Notwithstanding anything to the contrary contained herein or in any other Loan Document, the authority to enforce rights and remedies hereunder and under the other Loan Documents against the Loan Parties or any of them shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Administrative Agent or the Collateral Agent in accordance with the applicable Loan Document for the benefit of all the Lenders and the Issuing Banks; provided , however , that the foregoing shall not prohibit (a) any Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as an Agent) hereunder and under the other Loan Documents, (b) the Issuing Banks from exercising the rights and remedies that inure to its benefit (solely in its capacity as Issuing Bank) hereunder and under the other Loan Documents, (c) any Lender from exercising setoff rights in accordance with Section 9.08 (subject to the terms of Section 2.18 ), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to any Loan Party under any Debtor Relief Law; and provided , further , that if, with respect to any Class of Loans, at any time there is no Person acting as the Administrative Agent hereunder and under the other Loan Documents, then (i) with respect to such Class of Loans, the Majority in Interest of such Class shall have the rights otherwise ascribed to the Administrative Agent pursuant to Article VII and (ii) in addition to the matters set forth in clauses (b) , (c)  and (d)  of the preceding proviso and subject to Section 2.18 , any Lender may, with the consent of the Majority in Interest with respect to such Class, enforce any rights and remedies available to it and as authorized by such Majority in Interest.  Notwithstanding anything to the contrary set forth in this Article VIII, no Affiliated Lender acting in its capacity as a Lender may make or bring any claim against any Agent or any other Lender with respect to the duties and obligations of such Person under the Loan Documents (other than claims arising from the failure of any Agent or any Lender to make any payment to such Affiliated Lender required to be made by such Person pursuant to the terms hereof).
 
Each of the Lenders and Issuing Banks hereby agrees that after the exercise of remedies provided for in Section 7.01 (or after the Loans have automatically become immediately due and payable as set forth in Section 7.01 ), any amounts received on account of the Secured Obligations shall be applied by the Administrative Agent, first, to the payment of all Secured Obligations constituting fees, indemnities, expenses and other amounts (including fees,
 
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charges and disbursements of counsel to the Administrative Agent) payable to the Administrative Agent in its capacity as such and, second, as set forth herein or such other Loan Documents as applicable.
 
Section 8.11                              Withholding Taxes .  To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender an amount equivalent to any applicable withholding tax.  Without limiting or expanding the provisions of Section 2.17 , each Lender shall, and does hereby, indemnify the Administrative Agent against, and shall make payable in respect thereof within 30 days after demand therefor, any and all Taxes and any and all related losses, claims, liabilities and expenses (including fees, charges and disbursements of any counsel for the Administrative Agent) incurred by or asserted against the Administrative Agent by the Internal Revenue Service or any other Governmental Authority as a result of the failure of the Administrative Agent to properly withhold tax from amounts paid to or for the account of such Lender for any reason (including, without limitation, because the appropriate form was not delivered or not property executed, or because such Lender failed to notify the Administrative Agent of a change in circumstance that rendered the exemption from, or reduction of withholding tax ineffective).  A certificate as to the amount of such payment or liability delivered to such Lender by the Administrative Agent shall be conclusive absent manifest error.  Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under this Agreement or any other Loan Document against any amount due the Administrative Agent under this paragraph.  For the avoidance of doubt, for purposes of this Section 8.11 , the term “Lender” shall include any Issuing Bank.  The agreements in this paragraph shall survive the resignation and/or replacement of the Administrative Agent, any assignment of rights by, or the replacement of, a Lender and the repayment, satisfaction or discharge of all other obligations under any Loan Document.
 
Section 8.12                              Expenses; Indemnity .
 
(a)                                  Each Lender agrees to reimburse the Administrative Agent and each of its Related Parties, and each Lender agrees to reimburse the Collateral Agent and each of its Related Parties (in each case, to the extent not reimbursed by any Loan Party), promptly upon demand, severally and ratably, of any reasonable out-of-pocket costs and expenses (including fees, charges and disbursements of financial, legal and other advisors and taxes paid in the name of, or on behalf of, any Loan Party) that may be incurred by such Agent or any of its Related Persons in connection with the preparation, syndication, execution, delivery, administration, modification, consent, waiver or enforcement (whether through negotiations, through any workout, bankruptcy, restructuring or other legal or other proceeding or otherwise) of, or legal advice in respect of its rights or responsibilities under, any Loan Document.
 
(b)                                  Each Lender further agrees to indemnify the Applicable Agent and each of its Related Parties (to the extent not reimbursed by any Loan Party), severally and ratably, from and against Liabilities (including taxes, interests and penalties imposed for not properly withholding or backup withholding on payments made to on or for the account of any Lender but excluding any claims for annual administrative fees owing to the Administrative Agent) that may be imposed on, incurred by or asserted against such Agent or any of its Related Parties in any matter relating to or arising out of, in connection with or as a result of any Loan Document, the Transactions or any other act, event or transaction related, contemplated in or attendant to any
 
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such document, or, in each case, any action taken or omitted to be taken by such Agent or any of its Related Parties under or with respect to any of the foregoing; provided , however , that no Lender shall be liable to such Agent or any of its Related Parties to the extent such liability has resulted primarily from the gross negligence or willful misconduct of the Applicable Agent or, as the case may be, such Related Party, as determined by a court of competent jurisdiction in a final non-appealable judgment or order.
 
(c)                                   To the extent required by any applicable law, the Administrative Agent may withhold from any payment to any Lender under a Loan Document an amount equal to any applicable withholding tax.  If the Internal Revenue Service or any other Governmental Authority asserts a claim that the Administrative Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate certification form was not delivered, was not properly executed, or fails to establish an exemption from, or reduction of, withholding tax with respect to a particular type of payment, or because such Lender failed to notify the Administrative Agent or any other Person of a change in circumstances which rendered the exemption from, or reduction of, withholding tax ineffective, or for any other reason), or the Administrative Agent reasonably determines that it was required to withhold taxes from a prior payment but failed to do so, such Lender shall promptly indemnify the Administrative Agent fully for all amounts paid, directly or indirectly, by the Administrative Agent as tax or otherwise, including penalties and interest, and together with all expenses incurred by the Administrative Agent, including legal expenses, allocated internal costs and out-of-pocket expenses.  The Administrative Agent may offset against any payment to any Lender under a Loan Document, any applicable withholding tax that was required to be withheld from any prior payment to such Lender but which was not so withheld, as well as any other amounts for which the Administrative Agent is entitled to indemnification from such Lender under this Section 8.12(c) .
 
Section 8.13                              [Reserved] .
 
Section 8.14                              Concerning the Collateral and the Security Documents .
 
(a)                                  Each Lender agrees that any action taken by the Applicable Agent or the Required Lenders (or, where required by the express terms of this Agreement, a greater proportion of the Lenders) in accordance with the provisions of this Agreement or of the other Loan Documents, and the exercise by the Applicable Agent or the Required Lenders (or, where so required, such greater proportion of the Lenders) of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all of the Lenders, the Issuing Banks and other Secured Parties.  Without limiting the generality of the foregoing, (i) the Administrative Agent shall have the sole and exclusive right and authority to act as the disbursing and collecting agent for the Lenders and the Issuing Banks with respect to all payments and collections arising in connection herewith and with the Security Documents and (ii) the Collateral Agent shall have the sole and exclusive right and authority (x) to execute and deliver each Security Document and accept delivery of each such agreement delivered by any Loan Party (y) and to act as collateral agent for the Lenders, the Issuing Banks and the other Secured Parties for purposes of the perfection of all security interests and Liens created by such agreements and all other purposes stated therein; provided , that the Collateral Agent hereby appoints, authorizes and directs each Lender and Issuing Bank to act as
 
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collateral sub-agent for the Collateral Agent, the Issuing Banks and the Lenders for purposes of the perfection of all security interests and Liens with respect to the Collateral, including any deposit accounts maintained by a Loan Party with, and cash and cash equivalents held by, such Lender or such Issuing Bank, (iv) manage, supervise and otherwise deal with the Collateral, (v) take such action as is necessary or desirable to maintain the perfection and priority of the security interests and Liens created or purported to be created by the Security Documents and (vi) except as may be otherwise specifically restricted by the terms hereof or of any other Loan Document, exercise all remedies given to the Administrative Agent, the Lenders, the Issuing Banks and the other Secured Parties with respect to the Collateral under the Loan Documents relating thereto, applicable law or otherwise.
 
(b)                                  Anything contained in any of the Loan Documents to the contrary notwithstanding, the Borrower, the Agents and each Secured Party hereby agree that (i) no Secured Party (other than the Administrative Agent) shall have any right individually to realize upon any of the Collateral under the Collateral Agreement or to enforce any Guarantee under the Guarantee Agreement, it being understood and agreed that all powers, rights and remedies hereunder and under any of the Loan Documents may be exercised solely by the Administrative Agent for the benefit of the Secured Parties in accordance with the terms hereof and thereof and all powers, rights and remedies under the Security Documents may be exercised solely by the Administrative Agent for the benefit of the Secured Parties in accordance with the terms thereof, and (ii) in the event of a foreclosure or similar enforcement action by the Administrative Agent on any of the Collateral pursuant to a public or private sale or other disposition (including, without limitation, pursuant to Section 363(k), Section 1129(b)(2)(a)(ii) or otherwise of the Bankruptcy Code), the Administrative Agent (or any Lender, except with respect to a “credit bid” pursuant to Section 363(k), Section 1129(b)(2)(a)(ii) or otherwise of the Bankruptcy Code), may be the purchaser or licensor of any or all of such Collateral at any such sale or other disposition and the Administrative Agent, as agent for and representative of Secured Parties (but not any Lender or Lenders in its or their respective individual capacities) shall be entitled, upon instructions from the Required Lenders, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such sale or disposition, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by the Administrative Agent at such sale or other disposition.
 
Section 8.15                              Collateral Matters Relating to Related Obligations .
 
The benefit of the Loan Documents and of the provisions of this Agreement relating to the Collateral shall extend to and be available in respect of any Secured Obligation arising under any Hedging Agreements or Cash Management Obligation or that is otherwise owed to Persons other than the Agents, the Issuing Banks and the Lenders (collectively, “ Related Obligations ”) solely on the condition and understanding, as among the Administrative Agent and all Secured Parties, that (a) the Related Obligations shall be entitled to the benefit of the Loan Documents and the Collateral to the extent expressly set forth in this Agreement and the other Loan Documents and to such extent the Collateral Agent shall hold, and have the right and power to act with respect to, the Guarantee Agreement and the Collateral Agreement and the Collateral on behalf of and as agent for the holders of the Related Obligations, but the Collateral Agent is otherwise acting solely as agent for the Lenders and the Issuing Banks and shall have no fiduciary duty, duty of loyalty, duty of care, duty of disclosure or other obligation whatsoever to
 
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any holder of Related Obligations, (b) all matters, acts and omissions relating in any manner to the Guarantee Agreement, the Collateral Agreement, the Collateral, or the omission, creation, perfection, priority, abandonment or release of any Lien, shall be governed solely by the provisions of this Agreement and the other Loan Documents and no separate Lien, right, power or remedy shall arise or exist in favor of any Secured Party under any separate instrument or agreement or in respect of any Related Obligation, (c) each Secured Party shall be bound by all actions taken or omitted, in accordance with the provisions of this Agreement and the other Loan Documents, by the Administrative Agent and the Required Lenders, each of whom shall be entitled to act at its sole discretion and exclusively in its own interest given its own Commitments and its own interest in the Loans, Letter of Credit Obligations and other Obligations to it arising under this Agreement or the other Loan Documents, without any duty or liability to any other Secured Party or as to any Related Obligation and without regard to whether any Related Obligation remains outstanding or is deprived of the benefit of the Collateral or becomes unsecured or is otherwise affected or put in jeopardy thereby, (d) no holder of Related Obligations and no other Secured Party (except the Administrative Agent, the Collateral Agent, the Lenders and the Issuing Banks, to the extent set forth in this Agreement) shall have any right to be notified of, or to direct, require or be heard with respect to, any action taken or omitted in respect of the Collateral or under this Agreement or the Loan Documents and (e) no holder of any Related Obligation shall exercise any right of setoff, banker’s lien or similar right except to the extent provided in Section 9.08 and then only to the extent such right is exercised in compliance with Section 2.18 .
 
ARTICLE IX
 
MISCELLANEOUS
 
Section 9.01                              Notices .
 
(a)                                  Except in the case of notices and other communications expressly permitted to be given by telephone, 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 fax or other electronic transmission, as follows:
 
(i)                                      if to Holdings, the Borrower, any Agent, or an Issuing Bank, to the address, fax number, e-mail address or telephone number specified for such Person on Schedule 9.01 ;
 
(ii)                                   if to the Administrative Agent or Collateral Agent, to the address, fax number, e-mail address to telephone number specified for such Person on Schedule 9.01 ; and
 
(iii)                                if to any other Lender, to it at its address (or fax number, telephone number or e-mail address) set forth in its Administrative Questionnaire (including, as appropriate, notices delivered solely to the Person designated by a Lender on its Administrative Questionnaire then in effect for the delivery of notices that may contain material non-public information relating to the Borrower).
 
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Notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices and other communications 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 and other communications delivered through electronic communications to the extent provided in subsection (b)  below shall be effective as provided in such subsection (b) .
 
(b)                                  Electronic Communications .  Notices and other communications to the Lenders and any Issuing Bank hereunder may be delivered or furnished by electronic communication (including e-mail and Internet or intranet websites) pursuant to procedures reasonably approved by the Administrative Agent; provided that the foregoing shall not apply to notices to any Lender or Issuing Bank pursuant to Article II if such Lender or Issuing Bank, as applicable, has notified the Administrative Agent that it is incapable of receiving notices under such Article by electronic communication.
 
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.
 
Each Public Lender agrees to cause at least one individual at or on behalf of such Public Lender to have selected the “Private Side Information” or similar designation on the content declaration screen of the Platform in order to enable such Public Lender or its delegate, in accordance with such Public Lender’s compliance procedures and applicable law, including the U.S. federal and state securities laws, to make reference to Borrower Materials that are not made available through the “Public Side Information” portion of the Platform and that may contain material non-public information with respect to the Borrower or its Affiliates or their securities for purposes of the U.S. federal or state securities laws.  In the event that any Public Lender has elected for itself to not access any information disclosed through the Platform or otherwise, such Public Lender acknowledges that (i) the Agents and other Lenders may have access to such information and (ii) neither the Borrower nor any Agent or other Lender with access to such information shall have (x) any responsibility for such Public Lender’s decision to limit the scope of information it has obtained in connection with this Agreement and the other Loan Documents or (y) any duty to disclose such information to such electing Lender or to use such information on behalf of such electing Lender, and shall not be liable for the failure to so disclose or use, such information.
 
(c)                                   The Platform .  THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE
 
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ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.  In no event shall the Agents or any of their Related Parties (collectively, the “ Agent Parties ”) have any liability to Holdings, the Borrower, any Lender, either Issuing Bank or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of Holdings’, the Borrower’s or the Administrative Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses are determined by a court of competent jurisdiction by a final and non-appealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of such Agent Party; provided , however , that in no event shall any Agent Party have any liability to Holdings, the Borrower, any Lender, the Issuing Bank or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).
 
(d)                                  Change of Address, Etc .  Each of Holdings, the Borrower, the Agents and the Issuing Banks may change its address, electronic mail address, fax or telephone number for notices and other communications or website hereunder by notice to the other parties hereto.  Each other Lender may change its address, fax or telephone number for notices and other communications hereunder by notice to the Borrower, the Applicable Agent and any Issuing Bank.  In addition, each Lender agrees to notify the Administrative Agent from time to time to ensure that the Administrative Agent has on record (i) an effective address, contact name, telephone number, fax number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.
 
(e)                                   Reliance by Administrative Agent, Issuing Banks and Lenders .  The Administrative Agent, the Issuing Banks and the Lenders shall be entitled to rely and act upon any notices given by or on behalf of the Borrower and believed by such Person in good faith to be genuine even if (i) such notices were not made in a manner specified herein, were incomplete or were not preceded or followed by any other form of notice specified herein, or (ii) the terms thereof, as understood by the recipient, varied from any confirmation thereof.  The Borrower shall indemnify the Administrative Agent, the applicable Issuing Bank, each applicable Lender and the Related Parties from all losses, costs, expenses and liabilities resulting from the reliance by such Person on each notice believed by such Person in good faith to be genuine given by or on behalf of the Borrower in the absence of gross negligence, bad faith or willful misconduct as determined in a final and non-appealable judgment by a court of competent jurisdiction.  All telephonic notices to and other telephonic communications with the Administrative Agent may be recorded by the Administrative Agent and each of the parties hereto hereby consents to such recording.
 
Section 9.02                              Waivers; Amendments .
 
(a)                                  No failure or delay by the Administrative Agent, any Issuing Bank or any Lender in exercising any right or power under this Agreement or any Loan Document shall
 
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operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power.  The rights and remedies of the Collateral Agent, the Administrative Agent, the Issuing Banks and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have.  No waiver of any provision of this Agreement or any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given.  Without limiting the generality of the foregoing, the making of a Loan or the issuance, amendment, renewal or extension of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time.  No notice or demand on the Borrower or Holdings in any case shall entitle the Borrower or Holdings to any other or further notice or demand in similar or other circumstances.
 
(b)                                  Except as provided in Section 2.20 with respect to any Incremental Revolving Facility Amendment, Incremental Term Facility Amendment, Section 2.21 with respect to any Refinancing Amendment or Extension Amendment and except as otherwise provided in clause (h)  of this Section 9.02 with respect to any Replacement Revolving Facility, neither this Agreement, any Loan Document (other than any Fee Letter) nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Holdings, the Borrower and the Required Lenders (or, in respect of any amendment of Section 4.02(c)  only, the Required Revolving Lenders) or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are parties thereto, in each case with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender (it being understood that a waiver of any condition precedent set forth in Section 4.02 or the waiver of any Default, mandatory prepayment or mandatory reduction of the Commitments shall not constitute an extension or increase of any Commitment of any Lender), (ii) reduce the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender directly and adversely affected thereby; provided , further , that only the consent of the Required Lenders shall be necessary to waive any obligation of the Borrower to pay default interest pursuant to Section 2.13(c) , (iii) postpone the maturity of any Loan, or the date of any scheduled amortization payment of the principal amount of any Term Loan under Section 2.10 or the applicable Refinancing Amendment, or the reimbursement date with respect to any LC Disbursement, or any date for the payment of any interest or fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender directly and adversely affected thereby, (iv) change Section 2.18(b)  in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each of the Lenders of each adversely affected Class, (v) change any of the provisions of this Section without the written consent of each Lender directly and adversely affected thereby, (vi) change the percentage set forth in the definition of “Required Lenders”, “Required Revolving Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders (or Lenders of any Class)
 
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required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (or each Lender of such Class, as the case may be), (vii) release all or substantially all the value of the Guarantees under any Guarantee Agreement (taking into account the value of the Borrower) (except as expressly provided in such Guarantee Agreement) without the written consent of each Lender, (viii) release all or substantially all the Collateral from the Liens of the Security Documents, without the written consent of each Lender (except as expressly provided in the Security Documents), (ix) change any provisions of any Loan Document in a manner that by its terms adversely affects the rights in respect of payments due to Lenders holding Loans of any Class differently than those holding Loans of any other Class (including any amendments to any payment waterfall provisions), without the written consent of each Lender of each affected Class or (x) amend or waive the rights of the Term Lenders to decline mandatory prepayments as provided in Section 2.11 or the rights of any Additional Lenders of any Class, as provided in the applicable Refinancing Amendment, to decline mandatory prepayments of Term Loans of such Class, or any other provisions of any Loan Document with respect to the Collateral and Guarantee Requirement or the Collateral in a manner that by its terms adversely affects the rights of the Lenders holding Term Loans of any Class differently than those holding Loans of any other Class, without the written consent of a Majority in Interest of the Term Lenders or Additional Lenders of such Class, as applicable; provided further that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, any Issuing Bank or Swingline Lender without the prior written consent of the Administrative Agent or such Issuing Bank or Swingline Lender, as the case may be, and (B) any provision of this Agreement or any other Loan Document may be amended by an agreement in writing entered into by Holdings, the Borrower and the Administrative Agent to cure any ambiguity, omission, defect or inconsistency jointly identified by the Borrower and the Administrative Agent as such so long as, in each case, the Lenders shall have received at least five Business Days’ prior written notice thereof and the Administrative Agent shall not have received, within five Business Days of the date of such notice to the Lenders, a written notice from the Required Lenders stating that the Required Lenders object to such amendment.  Notwithstanding the foregoing, (a) this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent, Holdings and the Borrower (i) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents and (ii) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders on substantially the same basis as the Lenders prior to such inclusion and (b) any guarantees, collateral security documents and related documents executed by Foreign Subsidiaries in connection with this Agreement (if any) may be in a form reasonably determined by the Administrative Agent and may be, together with this Agreement, amended and waived with the consent of the Administrative Agent at the request of the Borrower without the need to obtain the consent of any other Lender if such amendment or waiver is delivered in order (i) to comply with local law or advice of local counsel, (ii) to cure ambiguities or defects or (iii) to cause such guarantees, collateral security document or other document to be consistent with this Agreement and the other Loan Documents.
 
(c)                                   In connection with any proposed amendment, modification, waiver or termination (a “ Proposed Change ”) requiring the consent of all Lenders or all directly and
 
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adversely affected Lenders, if the consent of the Required Lenders (and, to the extent any Proposed Change requires the consent of Lenders holding Loans of any Class pursuant to clause (iv)  or (ix)  of paragraph (b) of this Section, the consent of a Majority in Interest of the outstanding Loans and unused Commitments of such Class) to such Proposed Change is obtained, but the consent to such Proposed Change of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained as described in paragraph (b) of this Section being referred to as a “ Non-Consenting Lender ”), then, the Borrower may, at its sole expense and effort, upon notice to such Non-Consenting Lender and the Administrative Agent, either (x) require such Non-Consenting Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04 ), all its interests, rights and obligations under this Agreement to an Eligible Assignee that shall assume such obligations (which Eligible Assignee may be another Lender, if a Lender accepts such assignment) or (y) with the express written consent of the Required Lenders, terminate the Commitments of such Non-Consenting Lender; provided , in each case, that (a) the Borrower shall have received the prior written consent of the Administrative Agent to the extent such consent would be required under Section 9.04(b)  for an assignment of Loans or Commitments, as applicable (and, if a Revolving Commitment is being assigned, each Issuing Bank), which consent shall not unreasonably be withheld, (b) such Non-Consenting Lender shall have received payment of an amount equal to the outstanding par principal amount of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder from the Eligible Assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) (c) if the consent, amendment or waiver in question contemplates a Repricing Transaction in respect of any Term Loans held by such Non-Consenting Lender, the Borrower shall pay to such Non-Consenting Lender the Repricing Premium (if any) as if the outstanding Term Loans of such Non-Consenting Lender were prepaid or repriced in their entirety in connection with a Repricing Transaction on the date of the consummation of such assignment and (d) unless waived, the Borrower or such Eligible Assignee shall have paid to the Administrative Agent the processing and recordation fee specified in Section 9.04(b) .
 
(d)                                  Notwithstanding anything in this Agreement or the other Loan Documents to the contrary, the Revolving Commitments, Term Loans and Revolving Exposure of any Lender that is at the time a Defaulting Lender shall not have any voting or approval rights under the Loan Documents and shall be excluded in determining whether all Lenders (or all Lenders of a Class), all affected Lenders (or all affected Lenders of a Class), a Majority in Interest of Lenders of any Class or the Required Lenders have taken or may take any action hereunder (including any consent to any amendment or waiver pursuant to this Section 9.02 ); provided that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that affects any Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender.
 
(e)                                   [Reserved.]
 
(f)                                    Notwithstanding anything in this Agreement or the other Loan Documents to the contrary, each Affiliated Lender (other than an Affiliated Debt Fund) hereby agrees that, if a proceeding under the United States Bankruptcy Code or any other Federal, state or foreign
 
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bankruptcy, insolvency, receivership or similar law shall be commenced by or against the Borrower or any other Loan Party at a time when such Lender is an Affiliated Lender, such Affiliated Lender irrevocably (x) waives its right to take any step or action (whether directly or indirectly) in such proceeding to object to, impede, or delay the exercise of any right or the taking of any action by the Administrative Agent (or the taking of any action by a third party to which the Administrative Agent has consented with respect to any disposition of assets by the Borrower or any equity or debt financing to be made to the Borrower), including, without limitation, the filing of any pleading by the Administrative Agent) in (or with respect to any matters related to) the proceeding so long as the Administrative Agent is not taking any action to treat such Affiliated Lender’s Loans in a manner that is less favorable to such Affiliated Lender in any material respect than the proposed treatment of similar First Lien Obligations held by other Lenders (including, without limitation, objecting to any debtor-in-possession financing, use of cash collateral, grant of adequate protection, sale or disposition, compromise or plan of reorganization) and (y) authorizes and empowers the Administrative Agent to vote, on behalf of such Affiliated Lender, with respect to the Loans held by such Affiliated Lender in the same proportion as those Lenders that are not Affiliated Lenders shall have voted, unless the Administrative Agent instructs such Affiliated Lender to vote in such manner, in which case such Affiliated Lender shall vote with respect to the Loans held by it in such manner; provided that such Affiliated Lender shall be entitled to vote in accordance with its sole discretion (and not in accordance with the foregoing) in connection with any plan of reorganization to the extent any such plan of reorganization proposes to treat any Secured Obligations held by such Affiliated Lender in a manner that is less favorable in any material respect to such Affiliated Lender than the proposed treatment of similar Secured Obligations held by Lenders that are not Affiliates of the Borrower.
 
(g)                                   Notwithstanding Section 9.02(b)  or the proviso thereto, (A) any amendment, modification or waiver regarding the Financial Performance Covenant (including the defined terms used in such covenant as they pertain to compliance with Section 6.11 ) shall require only the consent of the Required Revolving Lenders, Holdings and the Borrower and (B) if the Administrative Agent and the Borrower have jointly identified an obvious error or any error or omission of a technical nature, in each case, in any provision of the Loan Documents, then the Administrative Agent and the Borrower shall be permitted to amend such provision, and, in each case, such amendment shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders to the Administrative Agent within ten Business Days following receipt of notice thereof.
 
(h)                                  Notwithstanding any of the foregoing, this Agreement may be amended with the written consent of the Administrative Agent (such consent not to be unreasonably withheld), the Borrower and the lenders providing the relevant Replacement Revolving Facility to permit the refinancing or replacement of the Revolving Facility in its entirety with a replacement revolving facility (a “ Replacement Revolving Facility ”) (any such amendment, a “ Replacement Amendment ”); provided that:
 
(A)                                the aggregate principal amount of such Replacement Revolving Facility shall not exceed the aggregate outstanding principal amount of the Revolving Facility, plus the amount of accrued interest and premium thereon, any
 
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committed but undrawn amounts and underwriting discounts, fees, commissions and expenses associated therewith,
 
(B)                                no Replacement Revolving Facility shall have a final maturity date (or require commitment reductions) prior to the Revolving Maturity Date at the time of such refinancing,
 
(C)                                the Replacement Revolving Facility shall be pari passu or junior in right of payment and pari passu or junior in right of security with the remaining portion of the relevant Revolving Facility (provided that if pari passu or junior as to payment or Collateral, such Replacement Revolving Facility shall be subject to an intercreditor agreement on terms reasonably satisfactory to the Administrative Agent and the Borrower and may be, at the option of the Administrative Agent and the Borrower, documented in a separate agreement or agreements, subject to clause I below, on then-current market terms), or be unsecured,
 
(D)                                if any such Replacement Revolving Facility is secured, it shall not be secured by any assets other than the Collateral,
 
(E)                                 if any Replacement Revolving Facility is guaranteed, it shall not be guaranteed by any Person other than one or more Loan Parties,
 
(F)                                  such Replacement Revolving Facility shall have pricing (including interest, fees and premiums) and optional prepayment and redemption terms as may be agreed to by the Borrower and the lenders providing such Replacement Revolving Facility,
 
(G)                                no Default under Sections 7.01(a) , 7.01(b) , 7.01(i)  or 7.01(j)  or Event of Default shall exist immediately prior to or after giving effect to the effectiveness of such replacement, and
 
(H)                               the other terms and conditions of such Replacement Revolving Facility (excluding pricing, interest, fees, rate floors, premiums, optional prepayment or redemption terms, security and maturity date, subject to preceding clauses (B)  through (F) ) shall be substantially identical to, or (taken as a whole) no more favorable (as reasonably determined by the Borrower) to the lenders providing such Replacement Revolving Facility than those applicable to the Revolving Facility (other than any covenants or other provisions applicable only to periods after the Latest Maturity Date (in each case, as of the date of incurrence of such Replacement Revolving Facility)) or such Replacement Revolving Facility shall be on then-current market terms for such type of Indebtedness, and the Revolving Facility commitments shall be terminated, all Loans outstanding thereunder and all fees in connection therewith shall be paid in full, on the date such Replacement Revolving Facility is issued, incurred or obtained;
 
provided , further , that any no Affiliated Lender (other than Affiliated Debt Funds) may provide any Replacement Revolving Facility.
 
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Each of the parties hereto hereby agrees that, upon the effectiveness of any Replacement Amendment, this Agreement shall be amended by the Borrower, the Administrative Agent and the lenders providing the relevant Replacement Revolving Facility to the extent (but only to the extent) necessary to reflect the existence and terms of the Replacement Revolving Facility, incurred pursuant thereto (including any amendments necessary to treat the loans and commitments subject thereto as a separate “tranche” and “Class” of Revolving Loans and/or Revolving Commitments hereunder).  The Borrower shall extend the opportunity to refinance or replace the then outstanding Revolving Loans and/or Revolving Commitments under the applicable Class to all applicable Lenders on a pro rata basis pursuant to a Replacement Amendment and in accordance with this Section 9.02(h) .  It is understood that any Lender approached to provide any Replacement Revolving Facility may elect or decline, in its sole discretion, to provide such Replacement Revolving Facility.
 
Section 9.03                              Expenses; Indemnity; Damage Waiver .
 
(a)                                  The Borrower shall pay, if the Closing Date occurs, (i) all reasonable and documented or invoiced out-of-pocket costs and expenses incurred by the Agents, the Joint Lead Arrangers and their respective Affiliates (without duplication), including the reasonable fees, charges and disbursements of (x) Latham & Watkins LLP, counsel to the Agents, Joint Lead Arrangers and Joint Bookrunners, and (y) to the extent reasonably determined by the Administrative Agent to be necessary, one local counsel in each applicable jurisdiction (exclusive of any reasonably necessary special counsel) and, in the case of an actual or reasonably perceived conflict of interest, one additional counsel for all such affected parties taken as a whole, in each case for the Agents, the Issuing Banks, the Joint Bookrunners and the Joint Lead Arrangers in connection with the syndication of the credit facilities provided for herein, and the preparation, execution, delivery and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof, (ii) all reasonable and documented or invoiced out-of-pocket costs and expenses incurred by each Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all reasonable and documented or invoiced out-of-pocket expenses incurred by the Agents, each Issuing Bank or any Lender, including the fees, charges and disbursements of counsel for the Agents, the Issuing Banks and the Lenders, in connection with the enforcement or protection of any rights or remedies (A) in connection with the Loan Documents (including all such costs and expenses incurred during any legal proceeding, including any proceeding under any Debtor Relief Laws), including its rights under this Section or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocket costs and expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit; provided that such counsel shall be limited to one lead counsel and such local counsel (exclusive of any reasonably necessary special counsel) as may reasonably be deemed necessary by the Agents in each relevant jurisdiction and, in the case of an actual or reasonably perceived conflict of interest, one additional counsel for all such affected parties taken as a whole.
 
(b)                                  The Borrower shall indemnify the Agents, each Issuing Bank, each Lender, the Documentation Agent, the Syndication Agent, each Joint Lead Arranger, each Joint Bookrunners 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,
 
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claims, damages, liabilities and related expenses (including reasonable and documented or invoiced out-of-pocket fees and expenses of any counsel for any Indemnitee), incurred by or asserted against any Indemnitee by any third party or by Holdings, the Borrower or any Subsidiary arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any Loan Document or any other agreement or instrument contemplated hereby or thereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated thereby, (ii) any Loan or Letter of Credit or the use of the proceeds therefrom (including any refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) to the extent in any way arising from or relating to any of the foregoing, any actual or alleged presence or Release or threat of Release of Hazardous Materials on, at, to or from any Mortgaged Property or any other property currently or formerly owned or operated by Holdings, the Borrower or any Subsidiary, or any other Environmental Liability related in any way to Holdings, the Borrower or any Subsidiary, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by Holdings, the Borrower or any Subsidiary or any of their respective equity holders or creditors or any other Person 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, costs or related expenses (x) resulted from the gross negligence, bad faith or willful misconduct of such Indemnitee or its Related Parties (but in the case of advisors or representatives of an Indemnitee, only to the extent such advisor or representative was acting at the direction of such Indemnitee) (as determined by a court of competent jurisdiction in a final and non-appealable judgment), (y) resulted from a material breach of the Loan Documents by such Indemnitee or its Related Parties (but in the case of advisors or representatives of an Indemnitee, only to the extent such advisor or representative was acting at the direction of such Indemnitee) (as determined by a court of competent jurisdiction in a final and non-appealable judgment) or (z) arise from disputes between or among Indemnitees that do not involve an act or omission by (1) Holdings, the Borrower or any Restricted Subsidiary or (2) any of the Agents, Joint Lead Arrangers and Joint Bookrunners in its capacity as such.
 
(c)                                   To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent, any Lender or any Issuing Bank or Swingline Lender under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to the Administrative Agent, such Lender or such Issuing Bank or Swingline Lender, as the case may be, such Lender’s pro rata 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, such Lender or such Issuing Bank or Swingline Lender in its capacity as such.  For purposes hereof, a Lender’s “pro rata share” shall be determined based upon its share of the Revolving Exposure, outstanding Term Loans and unused Commitments at such time.  The obligations of the Lenders under this paragraph (c) are subject to the last sentence of Section 2.02(a)  (which shall apply mutatis mutandis to the Lenders’ obligations under this paragraph (c)).
 
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(d)                                  To the extent permitted by applicable law, neither Holdings nor the Borrower shall assert, and each hereby waives, any claim against any Indemnitee (i) for any direct or actual damages arising from the use by unintended recipients of information or other materials distributed to such unintended recipients by such Indemnitee through telecommunications, electronic or other information transmission systems (including the Internet) in connection with this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such direct or actual damages are determined by a court of competent jurisdiction by final, non-appealable judgment to have resulted from the gross negligence, bad faith or willful misconduct of, or a material breach of the Loan Documents by, such Indemnitee or its Related Parties or (ii) 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 or thereby, the Transactions, any Loan or Letter of Credit or the use of the proceeds thereof; provided that, notwithstanding the foregoing, nothing in the preceding sentence shall limit the indemnification obligations of the Borrower under Section 9.03(b)  with respect to special, indirect, consequential or punitive damages arising in a third party claim against an Indemnitee.
 
(e)                                   All amounts due under this Section shall be payable not later than ten (10) Business Days after written demand therefor; provided , however , that any Indemnitee shall promptly refund an indemnification payment received hereunder to the extent that there is a final judicial determination that such Indemnitee was not entitled to indemnification with respect to such payment pursuant to this Section 9.03 .
 
Section 9.04                              Successors and Assigns .
 
(a)                                  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 (including any Affiliate of the Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void), (ii) no assignment shall be made to any Defaulting Lender or any of its subsidiaries, or any Persons who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (ii)  and (iii)  no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section.  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 (including any Affiliate of the Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in paragraph (c) of this Section), the Indemnitees and, to the extent expressly contemplated hereby, the Related Parties of each of the Agents, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.
 
(b)                                  (i) Subject to the conditions set forth in paragraphs (b)(ii) and (f) below, any Lender may assign to one or more Eligible 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) with the prior written consent (such consent not to be unreasonably
 
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withheld or delayed) of (A) the Borrower; provided that no consent of the Borrower shall be required for an assignment (x) by a Term Lender to any Lender, an Affiliate of any Lender or an Approved Fund, (y) by a Revolving Lender to any Revolving Lender or an Affiliate of any Revolving Lender or an Approved Fund of a Revolving Lender or (z) if an Event of Default under Section 7.01(a) , (b) , (i)  or (j)  has occurred and is continuing; provided further that no assignee contemplated by the immediately preceding proviso shall be entitled to receive any greater payment under Section 2.15 or Section 2.17 than the applicable assignor would have been entitled to receive with respect to the assignment made to such assignee, unless (i) the assignment to such assignee is made with the Borrower’s prior written consent or (ii) such greater payment obligation results from a Change in Law that occurs after such assignment; and provided further that the Borrower shall have the right to withhold its consent to any assignment if in order for such assignment to comply with applicable law, the Borrower would be required to obtain the consent of, or make any filing or registration with, any Governmental Authority, (B) the Administrative Agent (such consent shall not be unreasonably withheld or delayed); provided that no consent of the Administrative Agent shall be required for an assignment of a Term Loan to (x) a Lender, an Affiliate of a Lender or an Approved Fund or (y) an Affiliated Lender, the Borrower or any of the Subsidiaries, (C) solely in the case of Revolving Loans and Revolving Commitments of any Revolving Facility, each Issuing Bank with respect to such Revolving Facility; provided that, for the avoidance of doubt, no consent of any Issuing Bank shall be required for an assignment of all or any portion of a Term Loan or Term Commitment and (D) the Swingline Lender, in the case of any assignment of all or a portion of a Revolving Commitment or any Lender’s obligations in respect of its Swingline Exposure.  Notwithstanding anything in this Section 9.04 to the contrary, if the Borrower has not given the Administrative Agent written notice of its objection to an assignment within ten (10) Business Days after written notice of such assignment, the Borrower shall be deemed to have consented to such assignment.
 
(ii)                                   Assignments shall be subject to the following additional conditions:  (A) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans of any Class, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the trade date specified in the Assignment and Assumption with respect to such assignment or, if no trade date is so specified, as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall, (1) in the case of Revolving Loans, not be less than $2,500,000 (and integral multiples thereof), (2) in the case of a Term Loan, $1,000,000 (and integral multiples thereof); provided that no such consent of the Borrower shall be required if an Event of Default under Section 7.01(a) , (b) , (i)  or (j)  has occurred and is continuing and contemporaneous assignments by or two or more Approved Funds of any Lender or Eligible assignee shall be aggregated for purposes of determining such minimum transfer amounts, (B) 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; provided that this clause (B)  shall not be construed to prohibit assignment of a proportionate part of all the assigning Lender’s rights and obligations in respect of one Class of Commitments or Loans, (C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption via an electronic settlement system acceptable to the Administrative Agent or, if previously agreed with the Administrative Agent, manually execute and deliver to
 
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the Administrative Agent an Assignment and Assumption, and, in each case, together (unless waived or reduced by the Administrative Agent) with a processing and recordation fee of $3,500; provided that (1) the Administrative Agent, in its sole discretion, may elect to waive or reduce such processing and recordation fee, (2) if an assignment is made by a Lender to an Affiliate or an Approved Fund of such assigning Lender, then no such processing and recordation fee shall be due in connection with such assignment, (3) no such processing and recordation fee shall be due in connection with any assignment made by any Joint Lead Arranger and (4) if an assignment is made by a Lender to an assignee that is not an Affiliate or Approved Fund of such assigning Lender, and concurrently to one or more Affiliates or Approved Funds of such assignee, then only one processing and recordation fee of $3,500 shall be due in connection with such assignment; provided further that assignments made pursuant to Section 2.19(b)  or Section 9.02(c)  shall not require the signature of the assigning Lender to become effective, (D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent any tax forms required by Section 2.17(f)  and an Administrative Questionnaire in which the assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Borrower, the Loan Parties and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable laws, including Federal and state securities laws and (E) unless the Borrower otherwise consents, no assignment of all or any portion of the Revolving Commitment of a Lender that is also an Issuing Bank may be made unless (1) the assignee shall be or become an Issuing Bank and assume a ratable portion of the rights and obligations of such assignor in its capacity as Issuing Bank, or (2) the assignor agrees, in its discretion, to retain all of its rights with respect to and obligations to issue Letters of Credit hereunder in which case the Applicable Fronting Exposure of such assignor may exceed such assignor’s Revolving Commitment for purposes of Section 2.05(b)  by an amount not to exceed the difference between the assignor’s Revolving Commitment prior to such assignment and the assignor’s Revolving Commitment following such assignment; provided that no such consent of the Borrower shall be required if an Event of Default under Section 7.01(a) , (b) , (i)  or (j)  has occurred and is continuing.
 
(iii)                                Subject to acceptance and recording thereof pursuant to paragraph (b)(v) of this Section, from and after the Closing Date specified in each Assignment and Assumption, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, 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, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption 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 (and subject to the obligations and limitations of) Section 2.15 , Section 2.16 , Section 2.17 and Section 9.03 and to any fees payable hereunder that have accrued for such Lender’s account but have not yet been paid).  Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be
 
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treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c)(i) of this Section.
 
(iv)                               The Administrative Agent, acting solely for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption and a Register in accordance with Section 2.09 .
 
(v)                                  Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire and any tax forms required by Section 2.17(f)  (unless the assignee shall already be a Lender hereunder), the processing and recordation fee (if any) referred to in paragraph (b) of this Section 9.04 and any written consent to such assignment required by paragraph (b) of this Section 9.04 , the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register.  No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.
 
(vi)                               The words “execution,” “signed,” “signature” and words of like import in any Assignment and Assumption shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act.
 
(c)                                   (i) Any Lender may, at any time, without the consent of the Borrower, the Administrative Agent or the Issuing Banks, sell participations to one or more banks or other Persons other than a natural person, a Defaulting Lender, Holdings or any of its subsidiaries (a “ Participant ”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) Holdings, the Borrower, the Administrative Agent, the Issuing Banks and the other Lenders 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 any other Loan Documents and to approve any amendment, modification or waiver of any provision of this Agreement and any other Loan Documents; 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 described in the first proviso to Section 9.02(b)  that directly and adversely affects such Participant.  The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15 , 2.16 and 2.17 (subject to the obligations and limitations of such Sections, including Section 2.17(f)  (it being understood that the documentation requirement under Section 2.17(f)  shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section; provided that such Participant (A) agrees to
 
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be subject to the provisions of Section 2.19 as if it were an assignee under paragraph (b) of this Section; and (B) shall not be entitled to receive any greater payment under Section 2.15 or Section 2.17 , with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation.  Each Lender that sells a participation agrees, at the request and expense of the Borrower, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.19 with respect to any Participant.  To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender; provided that such Participant agrees to be subject to Section 2.18(d)  as though it were a Lender.
 
(ii)                                   Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and related interest amounts) of each participant’s interest in the Loans or other obligations under this Agreement (the “ Participant Register ”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations.  The entries in the Participant Register shall be conclusive, absent manifest error, and such Lender shall treat each person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary.  For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.
 
(d)                                  Any Lender may, without the consent of the Borrower or the Administrative Agent, 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 or other “central” bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.
 
(e)                                   In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the applicable pro rata share of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (x) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent or any Lender hereunder (and interest accrued thereon) and (y) acquire (and fund as appropriate) its full pro rata
 
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share of all Loans and participations in Letters of Credit in accordance with its Applicable Percentage.  Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under applicable law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.
 
(f)                                    Any Lender may, at any time, assign all or a portion of its rights and obligations under this Agreement to an Affiliated Lender on a non- pro rata basis (A) through Dutch auctions open to all applicable Lenders on a pro rata basis or (B) through open market purchases, in each case with respect to clauses (A)  and (B) , without the consent of the Administrative Agent, subject to the following limitations:
 
(i)                                      Affiliated Lenders (other than Affiliated Debt Funds) will not receive information provided solely to Lenders by the Administrative Agent or any Lender and will not be permitted to attend or participate in meetings attended solely by the Lenders and the Administrative Agent, other than the right to receive notices of Borrowings, notices of prepayments and other administrative notices in respect of its Loans or Commitments required to be delivered to Lenders pursuant to Article II;
 
(ii)                                   for purposes of any amendment, waiver or modification of any Loan Document (including such modifications pursuant to Section 9.02 ), or, subject to Section 9.02(f) , any plan of reorganization pursuant to the U.S. Bankruptcy Code, that in either case does not require the consent of each Lender or each affected Lender or does not adversely affect such Affiliated Lender in any material respect as compared to other Lenders that are not Affiliated Lenders, Affiliated Lenders will be deemed to have voted in respect to its Loans in the same proportion as the Lenders that are not Affiliated Lenders voting on such matter; and each Affiliated Lender hereby acknowledges, agrees and consents that if, for any reason, its vote to accept or reject any plan pursuant to the U.S. Bankruptcy Code is not deemed to have been so voted, then such vote will be (x) deemed not to be in good faith and (y) “designated” pursuant to Section 1126(e) of the U.S. Bankruptcy Code such that the vote is not counted in determining whether the applicable class has accepted or rejected such plan in accordance with Section 1126(c) of the U.S. Bankruptcy Code; provided that subject to clause (g)  below, Affiliated Debt Funds will not be subject to such voting limitations and will be entitled to vote as any other Lender;
 
(iii)                                (a) Affiliated Lenders may not purchase Revolving Loans or Revolving Commitments by assignment, including pursuant to this Section 9.04 , (b) proceeds of Revolving Loans may not be used to fund a purchase pursuant to this Section 9.04(f), and (c) in the case of a purchase by Holdings, the Borrower or a Restricted Subsidiary, no Default or Event of Default shall have occurred and be continuing at the time of the acceptance of bids for any Dutch auction or at the time of entry into a binding agreement for an open market purchase;
 
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(iv)                               the aggregate principal amount of Term Loans of any Class held at any one time by Affiliated Lenders (other than Affiliated Debt Funds) may not exceed 20% of the original outstanding principal amount of all Term Loans of such Class;
 
(v)                                  Each Lender participating in any assignment to Affiliated Lenders pursuant to this clause (f) , acknowledges and agrees that in connection with such assignment, (1) the Affiliated Lenders then may have, and later may come into possession of, Excluded Information, (2) such Lender has independently, and without reliance on the Affiliated Lenders, the Administrative Agent or any other Agent Party, made its own analysis and determination to participate in such assignment notwithstanding such Lender’s lack of knowledge of the Excluded Information, (3) none of the Affiliated Lenders or any of their Subsidiaries, Holdings, the Borrower or their respective Subsidiaries, the Administrative Agent or any other Agent Party, as the case may be, shall have any liability to such Lender, and such Lender hereby waives and releases, to the extent permitted by law, any claims such Lender may have against the Affiliated Lenders, the Administrative Agent and any other Agent Parties, as the case may be, under applicable laws or otherwise, with respect to the nondisclosure of the Excluded Information and (4) that the Excluded Information may not be available to the Administrative Agent or the other Lenders;
 
(vi)                               Affiliated Lenders will not be permitted to vote on matters requiring a Required Lender vote, and the Term Loans held by Affiliated Lenders shall be disregarded in determining (x) other Lenders’ commitment percentages or (y) matters submitted to Lenders for consideration that do not require the consent of each Lender or each affected Lender or do not adversely affect such Affiliated Lender in any material respect as compared to other Lenders that are not Affiliated Lenders; provided that the commitments of any Affiliated Lender shall not be increased, the Interest Payment Dates and the dates of any scheduled amortization payments (including at maturity) owed to any Affiliated Lender hereunder will not be extended and the amounts owning to any Affiliated Lender hereunder will not be reduced without the consent of such Affiliated Lender; provided further that no amendment, modification, waiver or consent shall affect any Affiliated Lender (in its capacity as a Lender) in a manner that is disproportionate to the effect on any Lender of the same Class or that would deprive such Affiliated Lender of its pro rata share of any payments with respect to such Class of Loans to which it is entitled; provided further that subject to clause (g)  below, Affiliated Debt Funds will not be subject to such voting limitations and will be entitled to vote as any other Lender;
 
(vii)                            any Term Loans acquired by any Affiliated Lender (other than an Affiliated Debt Fund or Holdings, Borrower or any Restricted Subsidiary) may (but shall not be required to) be contributed to Holdings, the Borrower or any of their subsidiaries for purposes of cancellation of such Indebtedness (it being understood that such Term Loans shall be retired and cancelled immediately upon such contribution) and any Term Loans acquired by Holdings, Borrower or any Restricted Subsidiary shall be immediately contributed to Borrower (if necessary) and shall be immediately retired and cancelled upon such acquisition (and, if necessary, contribution); provided that, in each case, upon such cancellation of Indebtedness, the aggregate outstanding principal amount of the Term Loans shall be deemed reduced, as of the date of such contribution, by the full par
 
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value of the aggregate principal amount of the Term Loans so contributed and cancelled, and each principal repayment installment with respect to the Term Loans pursuant to Section 2.10(a)  shall be reduced in direct order of maturity by the full par value of the aggregate principal amount of Term Loans so contributed and cancelled.  For the avoidance of any doubt, no assignment pursuant to this Section 9.04(f)  shall be to a natural person.
 
(g)                                   Notwithstanding anything in Section 9.02 or the definition of “Required Lenders” to the contrary, for purposes of determining whether the Required Lenders have (i) consented (or not consented) to any amendment, modification, waiver, consent or other action with respect to any of the terms of any Loan Document or any departure by any Loan Party therefrom, (ii) otherwise acted on any matter related to any Loan Document, or (iii) directed or required the Administrative Agent or any Lender to undertake any action (or refrain from taking any action) with respect to or under any Loan Document, in each case, (x) all Term Loans held by any Affiliated Lenders that are not Affiliated Debt Funds shall be deemed to have voted in respect to its Loans in the same proportion as the Lenders that are not Affiliated Lenders voting on such matter for all purposes of calculating whether the Required Lenders have taken any actions and (y) all Term Loans, Revolving Commitments and Revolving Exposure held by Affiliated Debt Funds may not account for more than 49.9% of the Term Loans, Revolving Commitments and Revolving Exposure of consenting Lenders included in determining whether the Required Lenders have consented to any action (or inaction) pursuant to Section 9.02 .
 
Section 9.05                              Survival .  All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to any Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that any Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated.  The provisions of Section 2.15 , Section 2.16 , Section 2.17 and Section 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans and all other amounts payable hereunder, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any provision hereof.  Notwithstanding the foregoing or anything else to the contrary set forth in this Agreement, in the event that, in connection with the refinancing or repayment in full of the credit facilities provided for herein, an Issuing Bank shall have provided to the Administrative Agent a written consent to the release of the Revolving Lenders from their obligations hereunder with respect to any Letter of Credit issued by such Issuing Bank (whether as a result of the obligations of the Borrower (and any other account party) in respect of such Letter of Credit having been collateralized in full by a deposit of cash with such Issuing Bank or being supported by a letter of credit that names such Issuing Bank as the beneficiary thereunder, or otherwise), then from and after such time such Letter of Credit shall cease to be a “Letter of Credit” outstanding hereunder for all purposes of this Agreement
 
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and the other Loan Documents, and the Revolving Lenders shall be deemed to have no participations in such Letter of Credit, and no obligations with respect thereto, under Section 2.05 .
 
Section 9.06                              Counterparts; Integration; Effectiveness .  This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.  This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to any Agent or the syndication of the Loans and Commitments 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.  This Agreement shall become effective when it shall have been executed by the Agents and when the Administrative Agent shall have received counterparts hereof that, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.  Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Agreement.
 
Section 9.07                              Severability .  Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.  Without limiting the foregoing provisions of this Section 9.07 , if and to the extent that the enforceability of any provisions in this Agreement relating to Defaulting Lenders shall be limited by Debtor Relief Laws, as determined in good faith by the Administrative Agent or Issuing Banks, as applicable, then such provisions shall be deemed to be in effect only to the extent not so limited.
 
Section 9.08                              Right of Setoff .  If an Event of Default shall have occurred and be continuing, each Lender, each Issuing Bank and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by 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, any such Issuing Bank or any such Affiliate to or for the credit or the account of the Borrower against any of and all the obligations of the Borrower then due and owing under this Agreement held by such Lender or Issuing Bank, irrespective of whether or not such Lender or Issuing Bank shall have made any demand under this Agreement and although (i) such obligations may be contingent or unmatured and (ii) such obligations are owed to a branch or office of such Lender or Issuing Bank different from the branch or office holding such deposit or obligated on such Indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (x) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.22 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent and the Lenders and (y) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Secured Obligations owing to such Defaulting Lender as to which it
 
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exercised such right of setoff.  The applicable Lender and applicable Issuing Bank shall notify the Borrower and the Administrative Agent of such setoff and application; provided that any failure to give or any delay in giving such notice shall not affect the validity of any such setoff and application under this Section.  The rights of each Lender, each Issuing Bank and their respective Affiliates under this Section are in addition to other rights and remedies (including other rights of setoff) that such Lender, such Issuing Bank and their respective Affiliates may have.  Notwithstanding the foregoing, no amounts setoff from any Loan Party shall be applied to any Excluded Swap Obligations of such Loan Party.
 
Section 9.09                              Governing Law; Jurisdiction; Consent to Service of Process .
 
(a)                                  This Agreement shall be construed in accordance with and governed by the laws of the State of New York.
 
(b)                                  Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York 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 any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby 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 extent permitted by 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 any Loan Document shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to any Loan Document against Holdings or the Borrower or their respective properties in the courts of any jurisdiction.
 
(c)                                   Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to any Loan Document in any court referred to in paragraph (b) of this Section.  Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.
 
(d)                                  Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01 .  Nothing in any Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.
 
Section 9.10                              WAIVER OF JURY TRIAL .  EACH PARTY HERETO HEREBY 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 ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).  EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
 
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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 BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
 
Section 9.11                              Headings .  Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.
 
Section 9.12                              Confidentiality .
 
(a)                                  Each of the Agents, the Issuing Banks and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (i) to its and its Affiliates’ directors, officers, employees, trustees and agents, including accountants, legal counsel, administration and settlement service providers and other agents, experts and advisors (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 and any failure of such Persons acting at the direction of the Administrative Agent, any Issuing Bank or the relevant Lender to comply with this Section 9.12 shall constitute a breach of this Section 9.12 by the Administrative Agent, such Issuing Bank or the relevant Lender, as applicable), (ii) to the extent requested by any regulatory authority or self-regulatory authority, required by applicable law or by any subpoena or similar legal process; provided that solely to the extent permitted by law and other than in connection with routine audits and reviews by regulatory and self-regulatory authorities, each Lender and the Administrative Agent shall notify the Borrower as promptly as practicable of any such requested or required disclosure in connection with any legal or regulatory proceeding; provided further that in no event shall any Lender or any Agent be obligated or required to return any materials furnished by Holdings, the Borrower or any of their subsidiaries, (iii) to any other party to this Agreement, (iv) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or the enforcement of rights hereunder, (v) subject to an agreement containing confidentiality undertakings substantially similar to 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, (B) any actual or prospective counterparty (or its advisors) to any Swap Agreement or derivative transaction relating to any Loan Party or its Subsidiaries and its obligations under the Loan Documents or (C) any pledgee referred to in Section 9.04(d) , (vi) if required by any rating agency ( provided that prior to any such disclosure, such rating agency shall have agreed in writing to maintain the confidentiality of such Information), (vii) to the extent such Information (x) becomes publicly available other than as a result of a breach of this Section 9.12 , (y) becomes available to any Agent, any Issuing Bank, any Lender or any of their respective Affiliates on a nonconfidential basis from a source other than Holdings or the Borrower or (z) is independently developed by the Agents, the Issuing Banks or the Lenders or (viii) to the extent the Borrower consents to such disclosure in writing.  For the purposes hereof, “ Information ” means all information received from Holdings, the Borrower or the Sponsor relating to Holdings, the Borrower, any other Subsidiary or their business, other than any such information that is available to the Agents, any Issuing Bank or any Lender on a nonconfidential basis prior to disclosure by Holdings, the Borrower or any Subsidiary; provided that, in the case of information received from Holdings, the Borrower or
 
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any Subsidiary after the Closing Date, such information is clearly identified at the time of delivery as confidential.  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.
 
(b)                                  EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN SECTION 9.12(a)  FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING HOLDINGS, THE BORROWER, THE LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.
 
(c)                                   ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS FURNISHED BY THE BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT, WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NONPUBLIC INFORMATION ABOUT HOLDINGS, THE BORROWER, THE LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES.  ACCORDINGLY, EACH LENDER REPRESENTS TO THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.
 
Section 9.13                              PATRIOT Act .  Each Lender that is subject to the PATRIOT Act and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the PATRIOT Act, it is required to obtain, verify and record information that identifies each Loan Party, which information includes the name and address of each Loan Party and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Loan Party in accordance with the PATRIOT Act.
 
Section 9.14                              Release of Liens and Guarantees .
 
(a)                                  A Subsidiary Loan Party shall automatically be released from its obligations under the Loan Documents, and all security interests created by any Security Documents in Collateral owned by such Subsidiary Loan Party shall be automatically released, upon the consummation of any transaction permitted by this Agreement as a result of which such Subsidiary Loan Party ceases to be a Restricted Subsidiary (including pursuant to a permitted merger with a Subsidiary that is not a Loan Party); provided that, if so required by this Agreement, the Required Lenders shall have consented to such transaction and the terms of such consent shall not have provided otherwise.  Upon any sale or other transfer by any Loan Party
 
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(other than to Holdings, the Borrower or any Subsidiary Loan Party) of any Collateral in a transaction permitted under this Agreement, or upon the effectiveness of any written consent to the release of the security interest created under any Security Document in any Collateral in accordance with Section 9.02(b) , the security interest in such Collateral created by the Security Documents shall be automatically released.  Upon the release of any Subsidiary Loan Party from its Guarantee in compliance with this Agreement, the security interest in any Collateral owned by such Subsidiary Loan Party created by the Security Documents shall be automatically released.  Upon the designation of a Restricted Subsidiary as an Unrestricted Subsidiary in compliance with this Agreement, the security interest created by the Security Documents in the Equity Interests of such Subsidiary shall automatically be released.  Upon termination of the aggregate Commitments and payment in full of all Secured Obligations (other than contingent indemnification obligations) and the expiration or termination of all Letters of Credit (including as a result of obtaining the consent of the applicable Issuing Bank as described in Section 9.05 ), all obligations under the Loan Documents and all security interests created by the Security Documents shall be automatically released.  In connection with any termination or release pursuant to this Section, the Administrative Agent shall execute and deliver to any Loan Party, at such Loan Party’s expense, all documents that such Loan Party shall reasonably request to evidence such termination or release so long as the Borrower or applicable Loan Party shall have provided the Administrative Agent such certifications or documents as the Administrative Agent shall reasonably request in order to demonstrate compliance with this Agreement.
 
(b)                                  The Collateral Agent will, at the Borrower’s expense, execute and deliver to the applicable Loan Party such documents as such Loan Party may reasonably request to subordinate the Collateral Agent’s Lien on any property granted to or held by the Collateral Agent under any Loan Document to the holder of any Lien on such property that is permitted by Section 6.02(iv) .
 
(c)                                   Each of the Lenders, the Issuing Bank and the Swingline Lender irrevocably authorizes the Collateral Agent to provide any release, termination or subordination or evidence of release, termination or subordination contemplated by this Section 9.14 or, with respect to Foreign Subsidiaries, by the definition of “Collateral and Guarantee Requirement”.  Upon request by the Collateral Agent at any time, the Required Lenders will confirm in writing the Collateral Agent’s authority to release, terminate or subordinate its interest in particular types or items of property, or to release any Loan Party from its obligations under any Loan Document, in each case in accordance with the terms of the Loan Document and this Section 9.14 .
 
(d)                                  The Lenders irrevocably authorize the Agents, and the Agents agree, to enter into any applicable intercreditor agreements in connection with any Credit Agreement Refinancing Indebtedness or other Indebtedness permitted under Section 6.01 .
 
Section 9.15                              No Advisory or Fiduciary Responsibility .  In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), each of the Borrower and Holdings acknowledges and agrees that (i) (A) the arranging and other services regarding this Agreement provided by the Agents, the Documentation Agents, the Syndication Agent, the Lenders and the Joint Lead Arrangers and Joint Bookrunners are arm’s-length commercial transactions between the Borrower, Holdings and their respective Affiliates, on the one hand, and
 
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the Agents, the Documentation Agents, the Syndication Agent, the Lenders and the Joint Lead Arrangers and Joint Bookrunners, on the other hand, (B) each of the Borrower and Holdings has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) each of the Borrower and Holdings is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) each of the Agents, the Documentation Agents, the Syndication Agent, the Lenders and the Joint Lead Arrangers and Joint Bookrunners is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not and will not be acting as an advisor, agent or fiduciary for the Borrower, Holdings, any of their respective Affiliates or any other Person and (B) none of the Agents, the Documentation Agents, the Syndication Agent, the Lenders and the Joint Lead Arrangers and Joint Bookrunners has any obligation to the Borrower, Holdings or any of their respective Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Loan Documents; and (iii) the Agents, the Documentation Agents, the Lenders and the Joint Lead Arrangers and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower, Holdings and their respective Affiliates, and none of the Agents, the Documentation Agents, the Syndication Agent, the Lenders and the Joint Lead Arrangers and Joint Bookrunners has any obligation to disclose any of such interests to the Borrower, Holdings or any of their respective Affiliates.  To the fullest extent permitted by law, each of the Borrower and Holdings hereby waives and releases any claims that it may have against any Agent, the Documentation Agents, the Syndication Agent, the Lenders and the Joint Lead Arrangers and Joint Bookrunners with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.
 
Section 9.16                              Interest Rate Limitation .  Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the “ Maximum Rate ”).  If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower.  In determining whether the interest contracted for, charged or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable law, (a) characterize any payment that is not principal as an expense, fee or premium rather than interest, (b) exclude voluntary prepayments and the effects thereof, and (c) amortize, prorate, allocate and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the obligations hereunder.
 
Section 9.17                              Currency Indemnity .  If, for the purposes of obtaining judgment in any court in any jurisdiction with respect to this Agreement or any other Loan Document, it becomes necessary to convert into a particular currency (the “Judgment Currency”) any amount due under this Agreement or under any other Loan Document in any currency other than the Judgment Currency (the “Currency Due”), then conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which judgment is given.  For this purpose “rate of exchange” means the rate at which the Administrative Agent is able, on the relevant date, to purchase the Currency Due with the Judgment Currency in accordance with its normal practice at its head office.  In the event that there is a change in the rate of exchange prevailing
 
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between the Business Day before the day on which the judgment is given and the date of receipt by the Administrative Agent of the amount due, the Borrower will, on the date of receipt by the Administrative Agent, pay such additional amounts, if any, or be entitled to receive reimbursement of such amount, if any, as may be necessary to ensure that the amount received by the Administrative Agent on such date is the amount in the Judgment Currency which when converted at the rate of exchange prevailing on the date of receipt by the Administrative Agent is the amount then due under this Agreement or such other Loan Document in the Currency Due.  If the amount of the Currency Due which the Administrative Agent is so able to purchase is less than the amount of the Currency Due originally due to it, the Borrower shall indemnify and save the Administrative Agent and the Lenders harmless from and against all loss or damage arising as a result of such deficiency.  This indemnity shall constitute an obligation separate and independent from the other obligations contained in this Agreement and the other Loan Documents, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by the Administrative Agent from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due under this Agreement or any other Loan Document or under any judgment or order.
 
[ Remainder of Page Intentionally Left Blank ]
 
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.

 	CPI CARD GROUP INC.,	
 	as Holdings	

 	By:	/s/ David Brush	
 	Name:	David Brush	
 	Title:	Chief Financial Officer	

 	CPI ACQUISITION, INC. ,	
 	as Borrower	

 	By:	/s/ David Brush	
 	Name:	David Brush	
 	Title:	Chief Financial Officer	
 
[ Signature Page to First Lien Credit Agreement ]

 

 	THE BANK OF NOVA SCOTIA , as	
 	Administrative Agent, Collateral Agent, Revolving	
 	Lender, Issuing Bank, and Swingline Lender	

 	By:	/s/ James Rhee	
 	Name:	James Rhee	
 	Title:	Managing Director	

 	By:	/s/ Katherine Hogg	
 	Name:	Katherine Hogg	
 	Title:	Associate Director	
 
[ Signature Page to First Lien Credit Agreement ]

 

 	GOLDMAN SACHS LENDING PARTNERS	
 	LLC , as a Term Lender and Revolving Lender	

 	By:	/s/ Charles D. Johnson	
 	Name:	Charles D. Johnson	
 	Title:	Authorized Signatory	

 	BNP PARIBAS , as a Revolving Lender	

 	By:	/s/ Michael C. Collas	
 	Name:	Michael C. Collas	
 	Title:	Managing Director	

 	By:	/s/ Davin Engelson	
 	Name:	Davin Engelson	
 	Title:	Director	

 	BANK OF MONTREAL , as a Revolving Lender	

 	By:	/s/ Tomasz Milewski	
 	Name:	Tomasz Milewski	
 	Title:	Vice President	

 	CANADIAN IMPERIAL BANK OF	
 	COMMERCE, NEW YORK BRANCH , as a	
 	Revolving Lender	

 	By:	/s/ Joshua Hogarth	
 	Name:	Joshua Hogarth	
 	Title:	Authorized Signatory	

 	By:	/s/ Iian MacInnis	
 	Name:	Iian MacInnis	
 	Title:	Authorized Signatory	
 
[ Signature Page to First Lien Credit Agreement ]

Exhibit 15.1

September 1, 2015
 
CPI Card Group Inc.
Littleton, Colorado
 
Re: Registration Statement on Form S-1 of CPI Card Group Inc.
 
With respect to the subject registration statement, we acknowledge our awareness of the use therein of our report dated June 26, 2015 related to our review of interim financial information.
 
Pursuant to Rule 436 under the Securities Act of 1933 (the Act), such report is not considered part of a registration statement prepared or certified by an independent registered public accounting firm, or a report prepared by an independent registered public accounting firm within the meaning of Sections 7 and 11 of the Act.

 	/s/ LBMC, PC	

Nashville, Tennessee	 	

Exhibit 23.1
 
Consent of Independent Registered Public Accounting Firm
 
The Board of Directors
CPI Card Group Inc.:
 
We consent to the use of our report dated July 7, 2015, with respect to the consolidated balance sheets of CPI Card Group Inc. as of December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive income (loss), stockholders’ deficit, and cash flows for each of the years in the three year period ended December 31, 2014, included herein and to the reference to our firm under the heading “Experts” in the prospectus.

 	/s/ KPMG LLP	
 
Denver, Colorado
August 31, 2015

Exhibit 23.2
 
Consent of Independent Auditors
 
The Board of Directors
CPI Card Group Inc.:
 
We consent to the use of our report dated May 14, 2015, with respect to the balance sheet of EFT Source, Inc. as of September 2, 2014 and the related statements of operations, stockholders’ equity, and cash flows for the period January 1, 2014 through September 2, 2014, included herein and to the reference to our firm under the heading “Experts” in the prospectus.

 	/s/ KPMG LLP	
 
Denver, Colorado
August 31, 2015

Exhibit 23.3

 
Consent of Independent Public Accounting Firm
 
We consent to the reference to our firm under the caption “Experts” and to the use of our report dated June 24, 2015 pertaining to EFT Source, Inc. in the Registration Statement (Form S-1) and related Prospectus of CPI Card Group Inc. for the registration of shares of its common stock.

 	/s/ LBMC, PC	
 
Nashville, Tennessee
September 1, 2015