10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to

Commission File Number 333-133253

HARLAND CLARKE HOLDINGS CORP.

(formerly Clarke American Corp.)

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

2939 Miller Road, Decatur, GA
(Address of principal executive offices) 84-1696500
(I.R.S. Employer Identification No.)


30035
(Zip code)

770-981-9460

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o *

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

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

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

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o  No x

As of February 27, 2009, there were 100 shares of the registrant’s common stock outstanding, with a par value of $0.01 per share. All outstanding shares are owned by a subsidiary of M & F Worldwide Corp.

*  The registrant is not subject to the filing requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934. The registrant is a voluntary filer.

HARLAND CLARKE HOLDINGS CORP.

INDEX TO ANNUAL REPORT ON FORM 10-K

For the Year Ended December 31, 2008

			Page
PART I
	Item 1.	Business		1
	Item 1A.	Risk Factors		9
	Item 1B.	Unresolved Staff Comments		22
	Item 2.	Properties		22
	Item 3.	Legal Proceedings		24
	Item 4.	Submission of Matters to a Vote of Security Holders		24
PART II
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		25
	Item 6.	Selected Financial Data		25
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		26
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risks		47
	Item 8.	Financial Statements and Supplementary Data		48
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		48
	Item 9A(T).	Controls and Procedures		48
	Item 9B.	Other Information		49
PART III
	Item 10.	Directors, Executive Officers and Corporate Governance		50
	Item 11.	Executive Compensation		52
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		66
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		67
	Item 14.	Principal Accounting Fees and Services		69
PART IV
	Item 15.	Exhibits, Financial Statement Schedules		71
EX-10.14: EMPLOYMENT AGREEMENT
EX-10.15: EMPLOYMENT AGREEMENT
EX-10.16: EMPLOYMENT AGREEMENT
EX-10.18: AMENDMENT TO EMPLOYMENT AGREEMENT
EX-10.19: AMENDMENT TO EMPLOYMENT AGREEMENT
EX-10.20: AMENDMENT TO EMPLOYMENT AGREEMENT
EX-21.1: SUBSIDIARIES
EX-24.1: POWERS OF ATTORNEY
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION

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PART I

Item 1.   Business

Harland Clarke Holdings Corp. (“Harland Clarke Holdings” and, together with its subsidiaries, the “Company”) is a holding company that conducts its operations through its direct and indirect, wholly owned operating subsidiaries and was incorporated in Delaware on October 19, 2005. On December 15, 2005, CA Investment Corp., an indirect wholly owned subsidiary of M & F Worldwide Corp. (“M & F Worldwide”) purchased 100% of the capital stock of Novar USA Inc. (“Novar”) (the “Clarke American Acquisition”) and was renamed Clarke American Corp. (“Clarke American”) which is the successor by merger to Novar, which indirectly wholly owned the operating subsidiaries of the Clarke American business. On May 1, 2007, the Company completed the acquisition of John H. Harland Company (“Harland”), and a subsidiary of the Company was merged with and into Harland, with Harland continuing after the merger as the surviving corporation and as a wholly owned subsidiary of the Company (the “Harland Acquisition”). After the closing of the Harland Acquisition, the Company changed its name on May 2, 2007 from Clarke American to Harland Clarke Holdings.

On December 31, 2008, Harland Clarke Corp., a subsidiary of the Company, acquired Transaction Holdings Inc. (“Transaction Holdings”) for total cash consideration of $8.2 million subject to post-closing working capital adjustments (the “Transaction Holdings Acquisition”). Transaction Holdings produces personal and business checks, payment coupon books, promotional checks and provides direct marketing services to financial institutions as well as individual consumers and small businesses.

On February 22, 2008, the Company’s wholly owned subsidiary, Scantron Corporation, purchased all of the limited liability membership interests of Data Management I LLC (“Data Management”) from NCS Pearson (the “Data Management Acquisition”). Data Management designs, manufactures and services scannable data collection products, including printed forms, scanning equipment and related software, and provides survey consulting and tracking services, including medical device tracking, as well as field maintenance services to corporate and governmental clients.

Subsequent to the acquisition of Harland, the Company reorganized its business and corporate structure along the following three business segments: Harland Clarke (which consists of the combined check business and related products and services of Clarke American and Harland), Harland Financial Solutions and Scantron.

The Harland Clarke segment offers checks and related products, forms and treasury supplies, and related delivery and fraud prevention services. It also provides specialized marketing and contact center services to its financial and commercial institution clients. Harland Clarke’s marketing offerings include turnkey marketing solutions, checkbook messaging and e-mail marketing. Through its contact centers, Harland Clarke provides financial institutions with both inbound and outbound support for their clients, including sales and ordering services for checks and related products and services, customer care and banking support, and marketing services.

The Harland Financial Solutions segment, which is comprised of operations acquired from Harland, provides products and services including lending and mortgage origination and servicing applications, business intelligence solutions, customer relationship management software, branch automation solutions and core processing systems and services, principally targeted to community banks and credit unions.

The Scantron segment, which is comprised of operations acquired from Harland and Data Management, provides testing and assessment solutions to schools in North America, offers specialized data collection solutions to educational, commercial and governmental entities worldwide and collects and manages survey information for a wide variety of Fortune 1000 and other organizations. Scantron’s products and services include scannable forms, scanning equipment, survey services, testing software and related services, and field maintenance services.

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Company Overview

Harland Clarke

Harland Clarke provides checks and related products, marketing and contact center services to financial and commercial institutions as well as directly to individual consumers. In 2008, Harland Clarke generated revenues of $1,290.4 million (72% of the Company’s 2008 consolidated revenues).

Products and Services

Checks and Related Products and Services

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

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

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

Marketing Services

Through Harland Clarke, we also offer financial and commercial institutions the following marketing services:

•   turnkey marketing solutions – a suite of campaigns that uses Stratics, our proprietary predictive modeling software, and is designed around core financial products and services such as CDs, money market accounts, auto loans and mortgages;

•   onboarding – an ongoing, integrated client marketing solution that builds long-term relationships by engaging new checking account holders and growing them into satisfied, profitable and loyal customers;

•   agency services – highly customized direct marketing campaigns that use client-tailored predictive models to support a variety of marketing strategies including acquisition, retention, activation, and cross-selling and up-selling;

•   checkbook messaging – a program that employs digital print technology to insert targeted, intelligence-driven marketing messages into the checkbook; and

•   e-mail marketing – a program that uses market-leading technology as well as high security and filter standards to deliver targeted, intelligence-driven marketing messages to customers who prefer e-mail communication.

Contact Center Services

Our contact centers provide both inbound and outbound support to our financial institution clients. Through the contact centers, Harland Clarke provides its clients with customer support focused on check orders and complete fulfillment of those orders, including delivery to the financial institution account holder. Harland Clarke offers check users the option to place orders directly through contact centers and websites as opposed to placing orders through client branches or by way of mail order forms. In addition to check-related

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support, Harland Clarke offers stand-alone inbound and outbound customer care to its clients. Harland Clarke also provides marketing and promotional support, which includes marketing messages delivered during the check ordering process or stand-alone telemarketing.

Sales and Marketing

Harland Clarke manages relationships with large and complex financial and commercial institutions through dedicated account management teams composed of relationship management, marketing, operations and service oriented skill sets. In addition, Harland Clarke has a nationwide sales force targeting distinct financial institution segments ranging from major nationwide and large regional banks and securities firms to community banks and credit unions.

Harland Clarke also markets its products directly to consumers through personalized check inserts in newspapers, advertisements sent directly to residences, and online advertising. Online shopping, contact center access, mail order and an automated voice response system enable consumers to order their products directly at their convenience.

Clients

The clients of Harland Clarke range from major nationwide and large regional banks and securities firms to community banks, credit unions, brokerage houses and financial software companies. In addition, Harland Clarke clients include retailers and other multi-location businesses, as well as individual check consumers.

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

Competition

Harland Clarke competes with large outsourcing services providers that offer a wide variety of services including those that compete with Harland Clarke’s primary offerings — specifically payment services, marketing services and teleservices. Deluxe Corporation is a significant competitor. Other large competitors include companies such as eFunds Corporation, Harte-Hanks, Inc., R.R. Donnelly & Sons Company, and TeleTech Holdings, Inc. There are also other smaller competitors that specialize in providing one or more of these services. Harland Clarke competes on the basis of service, convenience, quality, product range and price. Management believes that Harland Clarke differentiates itself from its competitors by:

•   improving client satisfaction through consistent product quality and expertise in matching client preferences with the right product and delivery options;

•   expanding client relationships through cross-selling and up-selling both check and related financial products on behalf of financial institution clients;

•   capitalizing on integration with financial institution clients’ checking account processes to improve their customer service and operational efficiencies;

•   being an existing secure and trusted provider to financial institutions in a time when security is of utmost importance to financial institutions; and

•   offering a broad suite of outsourcing services, such as direct marketing, contact center services, treasury management, and analytical modeling.

Environmental Matters

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

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environmental compliance or cleanup, Harland Clarke believes that its facilities are currently in material compliance with such laws and regulations.

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

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

Harland Financial Solutions

Harland Financial Solutions provides products and services including lending and mortgage origination and servicing applications, business intelligence solutions, customer relationship management (“CRM”) software, branch automation solutions and core processing systems and services, principally targeted to community banks and credit unions. Through strategic acquisitions, Harland Financial Solutions has built a full suite of software products to service financial institutions and has grown revenues from $135.6 million for the year ended December 31, 2002 to $293.7 million (16% of the Company’s 2008 consolidated revenues) for the year ended December 31, 2008.

Products and Services

Enterprise Solutions Group Products

Harland Financial Solutions provides host processing systems on both an in-house and outsourced basis to financial institutions, including banks, credit unions and thrifts. Its products centralize customer information and facilitate high speed and reliable processing of transactions from every delivery channel. Harland Financial Solutions has integrated its compliance, branch automation, Internet banking, mobile banking and business intelligence/CRM products into its core processing solutions. Management believes that this integration capability gives Harland Financial Solutions an opportunity to differentiate itself in the market. With respect to its clients’ retail business, Harland Financial Solutions helps financial institutions increase the profitability of customer relationships through CRM and branch automation software.

Harland Financial Solutions also offers Internet banking and branch automation systems designed to enhance the customer experience through integrated teller, platform, call center and self-service tools.

Risk Management and Compliance Products

Harland Financial Solutions sells loan and deposit origination and compliance software to the financial institution market. Harland Financial Solutions offers a complete product suite, Pro Suite, including solutions for lending, account opening, sales management and loan underwriting. Harland Financial Solutions has recently launched a commercial lending risk management, underwriting and portfolio management product suite marketed as CreditQuest. Harland Financial Solutions also provides mortgage loan origination, production and servicing solutions through its Interlinq solution.

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Backlog

Harland Financial Solutions’ backlog, which consists primarily of contracted products and services prior to delivery, was $335.3 million at December 31, 2008. The Company expects to deliver approximately 29% of the backlog at December 31, 2008 within the following twelve months. Due to the long-term nature of certain service contracts, primarily in the service bureau business, the remainder of the backlog will be delivered in 2010 and beyond.

Sales and Marketing

Harland Financial Solutions sells its products and services directly to financial institutions through its own national sales organization. The Harland Financial Solutions product marketing group is responsible for all go-to-market activities and is aligned with the individual major product groups. Product marketing is supported by a centralized marketing services organization that provides efficient consolidated capabilities including website, advertising, creative, event-planning, public relations and tradeshows.

Client support, which is primarily technology-related, is provided within the various product management areas by experienced and product-technology knowledgeable representatives, additionally supported by the product developers if necessary.

Clients

Harland Financial Solutions is a leading supplier of financial software and services to financial institutions, including banks, credit unions and thrifts.

Competition

The market for providing technological solutions to financial institutions is highly competitive and fragmented. Harland Financial Solutions competes with several national competitors, as well as regional and local competitors. There are also other competitors that offer one or more specialized products or services that compete with Harland Financial Solutions. Management believes that competitive factors influencing buying decisions include product features and functionality, client support, price and vendor financial stability.

Scantron

Scantron provides testing and assessment solutions to schools in North America, offers specialized data collection solutions to educational, commercial and governmental entities worldwide and collects and manages survey information for a wide variety of Fortune 1000 and other organizations. Scantron’s products and services include scannable forms, scanning equipment, survey services, testing software and related services and field maintenance services. Management believes the growth in the Scantron business will primarily be generated by testing software and related services, and survey software and related services, while Scantron forms and scanners will continue to provide a stable base of revenue. For the year ended December 31, 2008, Scantron generated revenue of $211.3 million (12% of the Company’s 2008 consolidated revenues).

Products and Services

Education-Related Products

Scantron’s sales to K-12 educational institutions have historically represented the largest portion of Scantron’s revenues, although it also generates revenues from sales to higher educational institutions and

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commercial enterprises. In 2008, Scantron derived approximately 37% of its forms revenues from sales to K-12 educational institutions.

The implementation of the No Child Left Behind Act of 2002 (“NCLB”) has presented Scantron with additional opportunities to generate revenues from its K-12 clients. Under NCLB, every state is required to set standards for grade-level achievement and develop a system to measure the progress of all students and subgroups of students in meeting those state-determined, grade-level standards. States also must develop annual adequate yearly progress objectives, with a federal target that all students achieve proficiency in reading and math within 12 years. As a result, NCLB requires thorough monitoring and reporting of student achievement and progress. Although the majority of all testing is still done via paper and pencil, trends in education, including NCLB, have created demand for quick access to data and the ability to manage, evaluate and report that data. Management believes that Scantron has an opportunity to capitalize on those trends through its web-based education products.

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

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

Since 2005, Scantron has integrated the Achievement Series and the Performance Series to provide an overall diagnostic, achievement testing, monitoring and data reporting solution. These solutions also allow the easy integration of disparate technologies and content. Scantron’s Achievement Series and Performance Series solutions generate subscription revenues and the opportunity for the sale of associated products, including forms and scanner solutions, testing content, testing-based instruction applications and data management tools.

ParSYSTEM is Scantron’s software module that allows educators, primarily in higher education, to create, administer and score tests on paper, via networks or over the Internet. Scantron also provides survey software packages for educators. All of these products are shrink-wrapped for sale directly to educators and are intended for use primarily at higher education institutions.

Scantron offers hand held devices for use in K-12 and higher education classrooms for student/teacher interaction. These devices allow teachers to survey or test students on a real-time basis.

Survey and Other Data Collection Products

In addition to providing testing and survey tools for the education market, Scantron offers its survey and data collection products to governmental entities, and the commercial, healthcare and financial institution markets. Surveys can be delivered by a variety of methods, including traditional paper based as well as through electronic distribution. In addition, Scantron offers various software applications that allow customers to design, print and process their own surveys. As a total solution, Scantron provides outsourcing services for clients using forms-based or electronic data collection methods, including survey development, distribution, processing and reporting.

Scantron offers scanners with both optical mark and full image capabilities. The scanners range in size and speed for various customer applications. Scantron also provides software that converts optical marks and images into digital data for delivery to third-party applications.

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Field Maintenance Services

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

Medical-Related Products and Services

Scantron provides products that assist healthcare providers with the automation of patient billing information. In addition, Scantron offers devices that collect patient data for electronic medical record storage. Scantron also offers services to companies in the healthcare market for compliance tracking of implanted medical devices.

Backlog

Scantron’s backlog, which consists primarily of contracted products and services prior to delivery, was $75.5 million at December 31, 2008. The Company expects to deliver approximately 63% of the backlog at December 31, 2008 within the following twelve months.

Sales, Marketing and Product Support

Forms and scanners are generally sold at the district or school level. Most of Scantron’s educational sales come from the direct sales channel. Software applications are sometimes sold as a package with forms and scanners. Contracts are generally renewable, with an average term of one year. Scantron sells most of its survey services directly to commercial entities. Management intends to capitalize on our presence in the financial institution market to cross-market Scantron survey and data collection products to our financial institution clients.

Scantron provides comprehensive product support to its clients directly and provides on-site and depot support for their scanner products. Scantron’s sales account managers and account executives help to coordinate these client support efforts, which are supplemented with telephone and on-line support to all clients under warranty and maintenance and support services.

Clients

Clients for Scantron’s educational products range from individual educators and institutions to entire districts. Clients for Scantron’s survey products include many Fortune 1000 organizations.

Competition

Scantron competes with education-related software providers at the K-12 and higher education levels. Scantron also faces significant competition from a number of local and regional competitors, which may have better local knowledge and contacts. Scantron faces competition with respect to its forms or scanners from national and regional printers and manufacturers. The survey products market is highly fragmented, and Scantron faces competition from many varied sources, including a number of national organizations.

The Company’s Suppliers

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

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

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The Company’s Foreign Sales

Following the Harland Acquisition and the Peldec asset purchase, the Company conducts business outside the United States in Canada, Israel and Ireland. Its foreign sales totaled $19.1 million in 2008 and $8.4 million for the period subsequent to the Harland Acquisition in 2007. There were no foreign sales for the Company prior to the Harland Acquisition.

The Company’s Employees

As of December 31, 2008, the Company had approximately 7,800 employees. None of the Company’s employees are represented by a labor union. The Company considers its employee relations to be good.

The Company’s Intellectual Property

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

Governmental Regulation Related to the Company

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

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

Congress and many states have passed and are considering additional laws or regulations that, among other things, restrict the use, purchase, sale or sharing of nonpublic personal information about consumers and business customers. For example, legislation has been introduced in Congress to further restrict the sharing of consumer information by financial institutions, as well as to require that a consumer opt-in prior to a financial institution’s use of his or her data in its marketing programs.

New laws and regulations may be adopted in the future with respect to the Internet, e-commerce or marketing practices generally relating to consumer privacy. Such laws or regulations may impede the growth of the Internet and/or use of other sales or marketing vehicles. For example, new privacy laws could decrease traffic to the Company’s websites, decrease telemarketing opportunities and decrease the demand for its products and services. Additionally, the applicability to the Internet of existing laws governing property

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ownership, taxation and personal privacy is uncertain and may remain uncertain for a considerable length of time.

Non-Operating Contingent Claims, Indemnification and Insurance Matters

Honeywell Indemnification

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

Other

In June 2008, Kenneth Kitson, purportedly on behalf of himself and a class of other alleged similarly situated commercial borrowers from the Bank of Edwardsville, an Illinois-based community bank (“BOE”), filed in a Madison County, Illinois state court an amended complaint that re-asserted previously filed claims against BOE and added claims against Harland Financial Solutions, Inc. (“HFS”). Mr. Kitson’s complaint alleges, among other things, that HFS’s Laser Pro software permitted BOE to generate loan documents that were deceptive and usurious in that they failed to disclose properly the effect of the “365/360” method of calculating interest. Mr. Kitson seeks unspecified monetary and injunctive relief. HFS removed the action to the United States District Court for the Southern District of Illinois. Prior to the time HFS removed the case to federal court, Mr. Kitson and BOE reached a tentative settlement of the claims against BOE and received preliminary approval of that settlement from the state court. On February 9, 2009, the District Court entered an order granting with prejudice HFS’s motion to dismiss the claims that Mr. Kitson brought against it. Mr. Kitson has not yet indicated whether he intends to appeal the dismissal. While there can be no assurance, the Company believes that the dismissal will be upheld in any appeal or that it will be able to present a vigorous defense should that become necessary.

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

Availability of Reports

Copies of the Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to these documents, are available without charge upon request to the Chief Financial Officer, Harland Clarke Holdings Corp., 2939 Miller Road, Decatur, GA 30035.

Item 1A.   Risk Factors

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

The economic conditions in late 2008 and early 2009 and the volatility in the financial markets during this period have contributed and may continue to contribute to high unemployment levels, decreased consumer spending, reduced credit availability and/or declining business and consumer confidence. Recently a number of financial institutions have taken significant write-downs of asset values. These write-downs have caused many financial institutions to seek additional capital, to merge with other institutions and, in some cases, to fail. We cannot determine whether the difficult conditions in the economy in general and/or the financial markets will improve or worsen in the near future. Our businesses may be adversely affected by these difficult conditions.

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Harland Clarke may experience reduced revenues due to losses of customers in the event the financial institutions upon which it depends either merge with or are sold to other institutions, or fail, or in the event that consumer spending continues to decline, or checking account openings decrease, resulting in further acceleration in the decline of check usage and the use of Harland Clarke’s other products. Similarly, Harland Financial Solutions, which also depends on its financial institution customers, may be adversely affected due to losses of financial institution customers from mergers, consolidations or failures. Reductions in financial institution IT budgets in response to market difficulties could result in delays or cancellations of Harland Financial Solution client purchases, as well as potential pricing pressure on Harland Financial Solution products. Economic slowdown and liquidity constraints may also cause state and local public and private education budgets to be reduced, which could result in reduced revenues at Scantron, as well as pricing pressure on Scantron products. In addition, disruptions in the credit and other financial markets could, among other things, impair the financial condition of suppliers of the Company, thereby increasing the risk of supplier performance.

Risks Related to Our Substantial Indebtedness

We have substantial indebtedness, which may adversely affect our ability to operate our business and prevent us from fulfilling our obligations under our debt agreements.

As of December 31, 2008, we had total indebtedness of $2,390.6 million (including $2.6 million of capital lease obligations and other indebtedness), and $87.6 million of additional availability under our revolving credit facility (after giving effect to the issuance of $12.4 million of letters of credit). In addition, under certain circumstances, we are permitted to incur additional term loan and/or revolving credit facility indebtedness in an aggregate principal amount of up to $250.0 million, and the terms of our senior secured credit facilities and notes allow us to borrow substantial additional debt, including additional secured debt. Our substantial level of indebtedness could have important consequences. For example, it could:

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

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

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

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

•   limit our ability to borrow additional funds.

Our ability to make payments on our indebtedness depends on our ability to generate sufficient cash in the future.

Our ability to make payments on our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash in the future. This is subject to general economic, financial, competitive, legislative, regulatory and other factors beyond our control.

We are required to make scheduled payments of principal on our senior secured term loan in the amount of $18.0 million per year in equal quarterly installments. In addition, our term loan facility requires that a portion of our excess cash flow be applied to prepay amounts borrowed under that facility, beginning in 2009 with respect to 2008. No such excess cash flow payment is expected to be paid in 2009. We are required to repay our senior secured term loan in full in 2014 and are required to repay our senior notes in 2015. Our revolving credit facility will mature in 2013.

We may not be able to generate sufficient cash flow from operations and future borrowings may not be available to us under our senior secured credit facilities in an amount sufficient to enable us to repay our debt or to fund our other liquidity needs. If our future cash flow from operations and other capital resources are insufficient to pay our obligations as they mature or to fund our liquidity needs, we may be forced to reduce or delay our business activities and capital expenditures, sell assets, obtain additional debt or equity capital or

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restructure or refinance all or a portion of our debt on or before maturity. We may not be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of our existing and future indebtedness, including the notes and our senior secured credit facilities, may limit our ability to pursue any of these alternatives.

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

We may be able to incur substantial additional indebtedness in the future. The terms of our senior secured credit facilities and the indenture governing our senior notes do not fully prohibit us from doing so. In addition, as of December 31, 2008, there was $87.6 million of additional availability under our $100.0 million revolving credit facility (after giving effect to the issuance of $12.4 million of letters of credit). Under certain circumstances, we are permitted to incur additional term loan and/or revolving credit facility indebtedness under our senior secured credit facilities in an aggregate principal amount of up to $250.0 million. In addition, the terms of our senior secured credit facilities and senior notes allow us to borrow substantial additional debt, including additional secured debt. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.

Covenant restrictions under our indebtedness may limit our ability to operate our business.

The indenture governing the notes and the agreement governing our senior secured credit facilities contain, among other things, covenants that restrict our ability to finance future operations or capital needs or to engage in other business activities. The indenture restricts, among other things, our ability to:

•   incur or guarantee additional indebtedness;

•   make certain investments;

•   make restricted payments;

•   pay certain dividends or make other distributions;

•   incur liens;

•   enter into transactions with affiliates; and

•   merge or consolidate or transfer and sell assets.

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

In addition, our credit agreement requires us to maintain a maximum consolidated leverage ratio for the benefit of the lenders under our revolving credit facility only.

These restrictions may limit our ability to operate our businesses and may prohibit or limit our ability to enhance our operations or take advantage of potential business opportunities as they arise.

Risks Related to Our Business

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

We, our clients, and other third parties store customer account information relating to our Harland Clarke segment’s checks. In addition, a number of clients use our Harland Financial Solutions products and Scantron products to store and manage sensitive customer and student information. Scantron also provides services which involve the storage of non-public customer information. Any breach of the systems on which sensitive customer data and account information are stored or archived and any misuse by our own employees, by employees of data archiving services or by other unauthorized users of such data could lead to fraudulent activity involving our clients and our financial institution clients’ customers’ information and/or funds, damage

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the reputation of our brands and result in claims against us. If we are unsuccessful in defending any lawsuit involving such data security breaches or misuse, we may be forced to pay damages, which could materially and adversely affect our profitability and could have a material adverse impact on our transaction volumes, revenue and future growth prospects. In addition, such breaches could adversely affect our financial institution clients’ perception as to our reliability, and could lead to the termination of client contracts.

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

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

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

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

The use of our Scantron products and services to store and manage student and other educational data may be subject to The Family Education Rights and Privacy Act of 1974, commonly known as FERPA, which is a federal law that protects the privacy of student education records in connection with Scantron’s web-based assessment services. Many states have enacted similar laws to protect the privacy of student data. The operation of websites by Scantron that are accessed by children under the age of 13 may be subject to the Children’s Online Privacy Protection Act of 1998, commonly known as COPPA. The collection of patient data through Scantron’s survey services is subject to the Health Insurance Portability and Accountability Act of 1996, commonly known as HIPAA, which protects the privacy of patient data. Scantron is also subject to the Gramm-Leach-Bliley Act.

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

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

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

•   loss of clients;

•   additional development costs;

•   diversion of technical and other resources;

•   negative publicity; or

•   exposure to liability claims.

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

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

We may not be able to fully implement any or all components of our business strategy or realize, in whole or in part or within the timeframes anticipated, the efficiency improvements or expected cost savings from this strategy. Our strategy is subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. Recent financial industry turmoil and the general economic slowdown may adversely affect our ability to implement our business strategy summarized in the first paragraph of this risk factor. Additionally, our business strategy may change from time to time. As a result, we may not be able to achieve our expected results of operations.

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

We rely on a combination of measures to protect our intellectual property, among them, registering trademarks and copyrights, patenting inventions, implementing procedures that afford trade secret status and protection to our proprietary information, such as entering into third-party non-disclosure and intellectual property assignment agreements, and maintaining our intellectual property by entering into licenses that grant only limited rights to third parties. We may be required to spend significant resources to protect, monitor and police our trade secrets, proprietary know-how trademarks and other intellectual property rights. Despite our efforts to protect our intellectual property, third parties or licensees may infringe or misappropriate our intellectual property. The confidentiality agreements that are designed to protect our trade secrets and proprietary know-how could be breached, or our trade secrets and proprietary know-how might otherwise become known by others. We may not have adequate remedies for infringement or misappropriation of our intellectual property rights or for breach of our confidentiality agreements. The loss of intellectual property protection or the inability to enforce our intellectual property rights could harm our business and ability to compete.

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

A significant portion of our revenues are derived from the sale of products by our Harland Clarke segment bearing third-party trademarks or designs pursuant to royalty-bearing licenses. Typically, these licenses are for a term of between two and three years, and some licenses may be terminated at the licensor’s

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option upon a change of control. There can be no guarantee that such licenses will be renewed or will continue to be available to us on terms that would allow us to continue to sell the licensed products profitably.

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

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

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

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

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

Our business is largely driven by the personal relationships of our senior management teams. Despite executing employment agreements with certain members of our senior management team, these individuals may discontinue service with us and we may not be able to find individuals to replace them at the same cost, or at all. We have not obtained “key person” insurance for any member of our senior management team. The loss or interruption of the services of these executives could have a material adverse effect on our business, financial condition and results of operations.

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

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

We also cannot predict whether any acquired products, technology or business will contribute to our revenues or earnings to any material extent or whether cost savings and synergies we expect at the time of an

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acquisition can be realized once the acquisition has been completed. Furthermore, if we incur additional indebtedness to finance an acquisition, we cannot predict whether the acquired business will be able to generate sufficient cash flow to service that additional indebtedness.

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

Our business is exposed to changes in interest rates.

We are exposed to changes in interest rates on our variable-rate debt. A hypothetical 10% increase in the interest rates applicable to debt outstanding at December 31, 2008 would result in an increase to interest expense of approximately $3.8 million per year. Adverse interest rate changes could have a material adverse effect on our business, results of operations and financial condition.

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

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

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

•   price our products competitively;

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

•   obtain necessary regulatory approvals;

•   differentiate our products from competitors’ products; and

•   use our research and development budget efficiently.

The continuous introduction of new products is important to our growth. Our financial condition could deteriorate if it we are unable to successfully develop and commercialize new products.

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

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

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

Our operations are subject to many existing and proposed federal, state, local and foreign laws and regulations pertaining to pollution and protection of human health and the environment, the violation of which can result in substantial costs and liabilities, including material civil and criminal fines and penalties. Such requirements include those pertaining to air emissions; wastewater discharges; occupational safety and health; the generation, handling, treatment, remediation, use, storage, transport, release, and exposure to hazardous substances and wastes. Under certain of these laws and regulations, such as the federal Superfund statute, the obligation to investigate and remediate contamination at a facility may be imposed on current and former

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owners or operators or on persons who may have sent waste to that facility for disposal. In addition, environmental laws and regulations, and interpretation or enforcement thereof, are constantly evolving and any such changes could impact the business, financial condition or results of operations. Enforcement of these laws and regulations may require the expenditure of material amounts for environmental compliance or cleanup.

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

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

M & F Worldwide, our indirect parent company, and its principal stockholder have significant influence over us.

MacAndrews & Forbes Holdings Inc. is a corporation wholly owned by Mr. Ronald O. Perelman. Mr. Perelman, directly and through MacAndrews & Forbes Holdings Inc., beneficially owned, as of December 31, 2008, approximately 43.4% of the outstanding common stock of M & F Worldwide, our indirect parent company, which beneficially owns 100% of our stock. In addition, two of our directors and two of M & F Worldwide’s directors, as well as M & F Worldwide’s senior executives, are affiliated with MacAndrews & Forbes Holdings Inc. As a result, MacAndrews & Forbes Holdings Inc. and its sole stockholder possess significant influence over our business decisions.

Risks Related to our Harland Clarke Segment

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

Check and related products and services, including delivery services, account for most of our revenues. The check industry overall is a mature industry. The number of checks written in the United States has declined in recent years, and we believe that it will continue to decline due to the increasing use of alternative payment methods, including credit cards, debit cards, smart cards, automated teller machines, direct deposit, wire transfers, electronic, home banking applications, Internet based payment services and other bill paying services. The actual rate and extent to which alternative payment methods will achieve consumer acceptance and replace checks, whether as a result of legislative developments, personal preference or otherwise, cannot be predicted with certainty and could decline at a more rapid rate. Changes in technology or the widespread adoption of current technologies may also make alternative payment methods more popular. An increase in the use of any of these alternative payment methods could have a material adverse effect on the demand for checks and a material adverse effect on our business, results of operations and prospects. A 2007 study by the Federal Reserve analyzing check writing patterns determined that the number of checks written declined 4.1% over the period from 2003 to 2006. Whereas in the past, Harland Clarke had experienced declines in check volumes generally consistent with the Federal Reserve study, in recent periods Harland Clarke is experiencing check unit declines slightly higher than those reflected in the Federal Reserve study. Harland Clarke is unable to determine at this time whether such slight declines above Federal Reserve estimates are attributable to

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timing issues, decreased openings of checking accounts, underlying differences in measurement methodologies, recent economic and financial market difficulties, and/or a further acceleration in check unit declines.

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

Mergers, acquisitions and personnel changes at financial institutions, as well as failures or liquidations of such financial institutions, may adversely affect our business, financial condition and results of operations. For the year ended December 31, 2008, financial institutions accounted for approximately 85% of revenues for our Harland Clarke segment. In recent years, the number of financial institutions has declined due to consolidation. Consolidation among financial institutions could cause us to lose current and potential clients as such clients are, for example, acquired by financial institutions with pre-existing relationships with our competitors. This concentration greatly increases the importance of retaining our major financial institution clients and attracting significant additional clients. The increase in general negotiating leverage possessed by such consolidated entities also presents a risk that new and/or renewed contracts with these institutions may not be secured on terms as favorable as those historically negotiated with these clients. Consolidation among financial institutions could therefore decrease our revenues and profitability.

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

The majority of sales from our Harland Clarke segment has been, and very likely will continue to be, concentrated among a small group of clients. For the year ended December 31, 2008 the top 20 clients of our Harland Clarke segment represented approximately 43% of its revenues, with sales to Bank of America representing a significant portion of revenues. A number of contracts with Harland Clarke segment clients may be terminated by the client for convenience upon written notice or “for cause.” A significant decrease or interruption in business from any of our Harland Clarke segment significant clients, or the termination of our contracts with any of our most significant clients could have a material adverse effect on our revenues and profitability.

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

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

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

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

We have strong relationships with many of the country’s largest paper mills and ink suppliers. These relationships afford us certain purchasing advantages, including stable supply and favorable pricing arrangements. Our supplier arrangements are by purchase order and terminable at will at the option of either party. While we have been able to obtain sufficient paper supplies during recent paper shortages and otherwise, in part through purchases from foreign suppliers, we are subject to the risk that we will be unable to purchase

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sufficient quantities of paper to meet our production requirements during times of tight supply. An interruption in our relationship with service providers for our digital printers could compromise our ability to fulfill pending orders for checks and related products. In addition, disruptions in the credit and other financial markets could, among other things, impair the financial condition of suppliers of the Company, thereby increasing the risk of supplier performance. Any interruption in supplies or service from these or other vendors or suppliers or delivery services could result in a disruption to our business if we are unable to readily find alternative service providers at comparable rates.

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

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

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

The direct to consumer business of our Harland Clarke segment has experienced declines in response and retention rates related to direct mail promotional materials. We believe that these declines are attributable to a number of factors, including the decline in check usage, the overall increase in direct mail solicitations received by our target customers, and the multi-box promotional strategies employed by us and our competitors. To offset these factors, we may have to modify and/or increase its marketing efforts, which could result in increased expense.

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

Risks Related to our Harland Financial Solutions and Scantron Segments

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

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

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

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

•   enter new markets; and

•   develop and introduce new products and new services that satisfy increasingly sophisticated client requirements, keep pace with technological and regulatory developments, provide client value and be accepted in the market.

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

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

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

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

Mergers, acquisitions and personnel changes at financial institutions, as well as failures or liquidations of such financial institutions, may adversely affect our Harland Financial Solutions business, financial condition and results of operations. For the year ended December 31, 2008, financial institutions accounted for substantially all of our Harland Financial Solutions segment revenues. In recent years, the number of financial institutions has declined due to consolidation. Consolidation among financial institutions could cause us to lose current and potential clients as such clients are, for example, acquired by financial institutions with pre-existing relationships with our competitors. This concentration greatly increases the importance of retaining our major financial institution clients and attracting significant additional clients. The increase in general negotiating leverage possessed by such consolidated entities also presents a risk that new and/or renewed contracts with these institutions may not be secured on terms as favorable as those historically negotiated with these clients. Consolidation among financial institutions could therefore decrease our revenues and profitability.

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

Our revenues, cash flows and results of operations depend on the overall demand for our products, software and related services. Economic downturns in one or more of the countries in which we do business could result in reductions in the information technology, or IT, budgets for some portion of our clients. Such reductions could result in delays or cancellations of client purchases and could have a material adverse effect on our business, financial position, results of operations and cash flows. Recent financial industry turmoil and the general economic slowdown may adversely affect our financial institution clients’ ability or willingness to commit financial resources to our products, and spending decisions by these clients may continue to be

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delayed. Prolonged economic slowdowns may result in clients requiring us to renegotiate existing contracts on less advantageous terms than those currently in place or default on payments due on existing contracts.

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

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

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

Because our clients may use our products for mission critical applications, errors, defects or other performance problems may cause financial or other damages to our clients and result in claims for substantial damages against us, regardless of our responsibility for such errors, defects or other performance problems. For example, Harland Financial Solutions has been brought into actions challenging certain provisions in Harland Financial Solutions’ lending products. In addition, there is a risk that Harland Financial Solutions clients use Harland Financial Solutions products that may not be up-to-date with regulations or market practice.

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

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

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

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technology professionals may lead to a shortage in the availability of qualified personnel in the markets in which we operate and hire. Failure to hire and train or retain qualified IT professionals in sufficient numbers could have a material adverse effect on our business, results of operations and financial condition.

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

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

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

The financial services sector is subject to various federal and state regulations and oversight. As a supplier of services to financial institutions, certain Harland Financial Solutions operations are examined by the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation, among other agencies. These agencies regulate services we provide and the manner in which we operate, and we are required to comply with a broad range of applicable laws and regulations. Current laws and regulations may be amended in the future or interpreted by regulators in a manner which could negatively impact our current Harland Financial Solutions’ operations or limit its future growth.

We may not be able to complete the integration of the Data Management business, and we may not be able to achieve the remainder of the cost savings or synergies we currently expect.

Although we have successfully integrated acquired businesses in the past, we may not be able to complete the successful integration of the Data Management business we acquired on February 22, 2008. We expect the Data Management business to be operated by and integrated with our Scantron business. The process of integrating acquired businesses involves numerous risks, including, among others, difficulties in assimilating operations and products; diversion of management’s attention from other business concerns to focus on new businesses and integration issues; risks of operating businesses in which we have limited or no direct prior experience; potential loss of our key employees or of those of the acquired businesses; potential exposure to unknown liabilities; and possible loss of our clients or of those of the acquired businesses. In addition, it may cost more than we have anticipated to achieve synergies, and we may not be able to achieve the expected cost savings and synergies to the degree or at the times we currently expect, or at all.

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

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

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

Our Scantron segment derives a significant portion of its revenues from public schools and colleges, which are heavily dependent on local, state and federal governments for financial support. Government budget deficits may negatively impact the availability of funding for Scantron products. Budget deficits experienced

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by schools or colleges may also cause those institutions to react negatively to future price increases for Scantron products. The current economic slowdown may have a significant negative effect on educational budgets. If budget deficits significantly reduce funding available for Scantron products and services, our revenue could be negatively impacted.

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

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

Item 1B.   Unresolved Staff Comments

None

Item 2.   Properties

Harland Clarke is headquartered in San Antonio, Texas and has regional headquarters in Atlanta, Georgia. Harland Financial Solutions has regional headquarters in Lake Mary, Florida and Portland, Oregon. Scantron is headquartered in Irvine, California. The principal properties for each segment are as follows:

Harland Clarke

		Approximate Floor
Location	Use	Space (Square Feet)		Leased/owned status
Atlanta, GA	Holding Company Headquarters and Harland Clarke Regional Headquarters for Administration, Sales and Marketing		96,400		Owned
Atlanta, GA	Information Technology		36,000		Owned
Atlanta, GA(a)	Closed		54,000		Owned
Atlanta, GA(a)	Closed		132,300		Owned
Atlanta, GA(c)	Contact Center and Operations Support		47,295		Leased
Atlanta, GA	Operations Support		9,665		Leased
Bolingbrook, IL	Printing		120,000		Leased
Boulder City, NV	Administration and Production		4,000		Leased
Charlotte, NC(b)	Printing		38,120		Leased
Charlotte, NC	Administration		4,906		Leased
Clayton, MO	Services		3,648		Leased
Des Moines, IA	Printing		65,250		Leased
Glen Burnie, MD	Printing and Marketing Services		120,000		Leased
Grapevine, TX	Printing		83,282		Leased
Greensboro, NC(b)	Printing		66,250		Owned
Hato Rey, Puerto Rico	Printing		22,125		Leased
Hato Rey, Puerto Rico	Sales		2,356		Leased
Jeffersonville, IN	Printing		141,332		Leased
Louisville, KY	Printing		50,000		Leased
Memphis, TN	Printing		26,250		Leased
Milton, WA	Printing		87,640		Leased

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		Approximate Floor
Location	Use	Space (Square Feet)		Leased/owned status
Mounds View, MN(c)	Printing, Administration, Development and Support, Sales, Marketing and Contact Center		81,490		Leased
Nashville, TN	Administration		21,309		Leased
New Braunfels, TX	Administration, Printing and Contact Center		98,030		Owned
Phoenix, AZ	Printing		64,000		Leased
Redwood City, CA	Administration		10,000		Leased
Salt Lake City, UT	Printing, Distribution and Contact Center		129,100		Owned
Salt Lake City, UT	Parking Lot		87,120		Leased
San Antonio, TX	Printing		166,000		Leased
San Antonio, TX	Contact Center		68,000		Leased
San Antonio, TX	Contact Center		42,262		Leased
San Antonio, TX	Corporate Headquarters		90,000		Leased
San Antonio, TX	Administration		2,137		Leased
San Antonio, TX	Administration		1,936		Leased
San Antonio, TX	Warehouse		16,166		Leased
San Antonio, TX	Warehouse		18,675		Leased
Syracuse, NY	Printing		28,055		Owned

(a)	Held for sale
(b)	To be closed in 2009 and operations will become part of a new leased facility in High Point, NC comprising 135,000 square feet.
(c)	To be closed in 2009.

Harland Financial Solutions

		Approximate Floor
Location	Use	Space (Square Feet)		Leased/ Owned Status
Atlanta, GA	Development and Support		7,098		Leased
Birmingham, AL	Development and Support		5,500		Leased
Bothell, WA	Development and Support		39,395		Leased
Carmel, IN	Development and Support		5,931		Leased
Cincinnati, OH	Administration and Service Bureau		63,901		Leased
Clive, IA.	Service Bureau		36,466		Leased
Cotuit, MA	Development and Support		3,200		Leased
Denver, CO	Closed		34,167		Leased
Englewood, CO	Development and Support		28,800		Leased
Fargo, ND	Development and Support		19,745		Leased
Grand Rapids, MI	Development and Support		5,703		Leased
Lake Mary, FL	Regional Headquarters, Development and Support		80,390		Leased
Miamisburg, OH	Development and Support		15,286		Leased
Orlando, FL	Processing		14,800		Leased
Pleasanton, CA	Development and Support		49,115		Leased

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		Approximate Floor
Location	Use	Space (Square Feet)		Leased/ Owned Status
Portland, OR	Regional Headquarters, Development and Support		79,089		Leased
Tel Aviv, Israel	Development and Support		4,693		Leased

Scantron

		Approximate Floor
Location	Use	Space (Square Feet)		Leased/Owned Status
Columbia, PA	Printing		121,370		Owned
Eagan, MN	Development and Support		109,500		Owned
Irvine, CA	Corporate Headquarters		110,000		Leased
Lawrence, KS	Administration		21,000		Leased
Markham, Ontario	Field Services		635		Leased
Omaha, NE	Field Services, Administration and Support		50,000		Owned
San Diego, CA	Development and Support		10,175		Leased

Item 3.   Legal Proceedings

In June 2008, Kenneth Kitson, purportedly on behalf of himself and a class of other alleged similarly situated commercial borrowers from the Bank of Edwardsville, an Illinois-based community bank (“BOE”), filed in a Madison County, Illinois state court an amended complaint that re-asserted previously filed claims against BOE and added claims against Harland Financial Solutions, Inc. (“HFS”). Mr. Kitson’s complaint alleges, among other things, that HFS’s Laser Pro software permitted BOE to generate loan documents that were deceptive and usurious in that they failed to disclose properly the effect of the “365/360” method of calculating interest. Mr. Kitson seeks unspecified monetary and injunctive relief. HFS removed the action to the United States District Court for the Southern District of Illinois. Prior to the time HFS removed the case to federal court, Mr. Kitson and BOE reached a tentative settlement of the claims against BOE and received preliminary approval of that settlement from the state court. On February 9, 2009, the District Court entered an order granting with prejudice HFS’s motion to dismiss the claims that Mr. Kitson brought against it. Mr. Kitson has not yet indicated whether he intends to appeal the dismissal. While there can be no assurance, the Company believes that the dismissal will be upheld in any appeal or that it will be able to present a vigorous defense should that become necessary.

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

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

Item 4.   Submission of Matters to a Vote of Security Holders

No matter was submitted to a vote of security holders during the fourth quarter of 2008.

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PART II

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

We are an indirect, wholly owned subsidiary of M & F Worldwide. As such, our common stock is not listed on any stock exchange or traded in any over-the-counter market and is held by only one holder.

Item 6.   Selected Financial Data

The table below reflects historical financial data, which are derived from our consolidated financial statements for the years ended December 31, 2008, 2007, 2006, 2004 and the periods December 15 to December 31, 2005, April 1 to December 14, 2005, and January 1 to March 31, 2005.

We were acquired by M & F Worldwide on December 15, 2005 from Honeywell. Honeywell acquired us effective April 1, 2005 by purchasing all of the outstanding stock of the company that was then our indirect parent, Novar plc. As a result of the changes in ownership, under GAAP, we are required to present separately our operating results for our two predecessors. The period during which we were owned by Honeywell (April 1, 2005 to December 14, 2005) is presented below as “Predecessor (Honeywell).” The period prior to our acquisition by Honeywell (2004 fiscal year and the three months ended March 31, 2005) is presented below as “Predecessor (Novar).” The period subsequent to the Clarke American Acquisition is presented below as “Successor.” Our predecessors were not separate stand-alone companies. The selected financial data for those periods have been prepared as if each of our predecessors had existed as a stand-alone company for the periods presented.

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

													Predecessor			Predecessor			Predecessor
	Successor			Successor			Successor			Successor			(Honeywell)			(Novar)			(Novar)
	Year Ended			Year Ended			Year Ended			Dec 15 to			Apr. 1 to			Jan 1 to			Year Ended
	Dec. 31,			Dec. 31,			Dec. 31,			Dec. 31,			Dec. 14,			Mar. 31,			Dec. 31,
(In millions)	2008(a)			2007(b)			2006			2005			2005			2005			2004(c)
Statement of Operations Data:
Net revenues	$	1,794.6		$	1,369.9		$	623.9		$	24.1		$	439.9		$	154.4		$	607.6
Cost of revenues		1,067.4			833.8			388.4			17.4			285.6			91.1			352.4
Gross profit		727.2			536.1			235.5			6.7			154.3			63.3			255.2
Selling, general and administrative expenses		446.8			336.3			145.2			6.0			99.0			38.8			147.5
Restructuring costs		15.6			5.6			3.3			—			1.8			0.4			0.7
Operating income		264.8			194.2			87.0			0.7			53.5			24.1			107.0
Interest expense, net		(184.6	)		(215.0	)		(60.0	)		(2.8	)		(2.4	)		(5.6	)		(19.1	)
Income (loss) before income taxes		80.2			(20.8	)		27.0			(2.1	)		51.1			18.5			87.9
Provision (benefit) for income taxes		33.0			(5.4	)		7.5			(0.8	)		20.1			7.5			23.5
Net income (loss)	$	47.2		$	(15.4	)	$	19.5		$	(1.3	)	$	31.0		$	11.0		$	64.4

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	December 31,
(In millions)	2008(a)		2007(b)		2006		2005		2004(c)
Balance Sheet Data:
Total assets	$	3,391.8	$	3,447.6	$	1,118.3	$	1,149.9	$	506.8
Long-term debt, including current portion and short-term borrowings(d)		2,390.6		2,409.9		603.8		626.2		474.1
Stockholder’s equity (deficit)		166.3		190.5		219.3		201.2		(101.3	)

(a)	Includes the financial position and results of operations of Data Management from the date of its acquisition on February 22, 2008 (See Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K).
(b)	Includes the financial position and results of operations of Harland from the date of its acquisition on May 1, 2007 (see Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K).
(c)	Includes the financial position and results of operations of Alcott Routon, Inc. from the date of its acquisition in March 2004.
(d)	Includes capital leases of $2.6 million, $3.4 million and $4.6 million at December 31, 2008, 2007 and 2006, respectively.

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

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

Overview of Business

Harland Clarke Holdings Corp. (“Harland Clarke Holdings” and, together with its subsidiaries, the “Company”) is a holding company that conducts its operations through its direct and indirect wholly owned subsidiaries and was incorporated in Delaware on October 19, 2005. On December 15, 2005, CA Investment Corp., an indirect wholly owned operating subsidiary of M & F Worldwide Corp. (“M & F Worldwide”) purchased 100% of the capital stock of Novar USA Inc. (“Novar”) (the “Clarke American Acquisition”) and was renamed Clarke American Corp., which is the successor by merger to Novar, which indirectly wholly owned the operating subsidiaries of the Clarke American Corp. business.

On May 1, 2007, the Company completed the acquisition of John H. Harland Company (“Harland”), and a subsidiary of the Company was merged with and into Harland, with Harland continuing after the merger as the surviving corporation and as a wholly owned subsidiary of the Company (the “Harland Acquisition”). Subsequent to the Harland Acquisition, the Company changed its name on May 2, 2007 from Clarke American Corp. to Harland Clarke Holdings Corp.

Subsequent to the Harland Acquisition, the Company reorganized its business and corporate structure along three business segments: Harland Clarke (which consists of the combined check business and related products and services of Clarke American Corp. and Harland), Harland Financial Solutions and Scantron.

The Harland Clarke segment offers checks and related products, forms and treasury supplies, and related delivery and fraud prevention services. It also provides specialized marketing and contact center services to its financial and commercial institution clients. Harland Clarke’s marketing offerings include turnkey marketing solutions, checkbook messaging and e-mail marketing. Through its contact centers, Harland Clarke provides financial institutions with both inbound and outbound support for their clients, including sales and ordering services for checks and related products and services, customer care and banking support, and marketing services.

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The Harland Financial Solutions segment, which is composed of operations acquired from Harland, provides products and services including lending and mortgage origination and servicing applications, business intelligence solutions, customer relationship management software, branch automation solutions and core processing systems and services, principally targeted to community banks and credit unions.

The Scantron segment, which is composed of operations acquired from Harland and the Data Management Acquisition (as defined below), provides testing and assessment solutions to schools in North America, offers specialized data collection solutions to educational, commercial and governmental entities worldwide and collects and manages survey information for a wide variety of Fortune 1000 and other organizations. Scantron’s products and services include scannable forms, scanning equipment, survey services, testing software and related services, and field maintenance services.

The Transaction Holdings Acquisition

On December 31, 2008, Harland Clarke Corp. acquired Transaction Holdings Inc. for total cash consideration of $8.2 million, subject to post-closing working capital adjustments. Transaction Holdings produces personal and business checks, payment coupon books, promotional checks and provides direct marketing services to financial institutions as well as individual consumers and small businesses.

The Data Management Acquisition

On February 22, 2008, the Company’s wholly owned subsidiary, Scantron Corporation, purchased all of the limited liability membership interests of Data Management I LLC (“Data Management”) from NCS Pearson, for $218.7 million in cash after giving effect to working capital adjustments of $1.6 million (the “Data Management Acquisition”). Data Management designs, manufactures and services scannable data collection products, including printed forms, scanning equipment and related software, and provides survey consulting and tracking services, including medical device tracking, as well as field maintenance services to corporate and governmental clients. The Company financed the Data Management Acquisition and related fees and expenses with cash on hand.

The Harland Acquisition

On May 1, 2007, M & F Worldwide consummated an agreement and plan of merger with Harland, pursuant to which a wholly owned subsidiary of M & F Worldwide merged with and into Harland, with Harland continuing after the merger as the surviving corporation and as a wholly owned subsidiary of the Company. The cash consideration paid was $52.75 per share, or a total of approximately $1,423.0 million, for the outstanding equity of Harland. Subsequent to the completion of the Harland Acquisition, Clarke American was renamed Harland Clarke Holdings on May 2, 2007.

To fund the purchase price in the Harland Acquisition, to refinance the Company’s and Harland’s prior existing indebtedness, and to pay the fees and expenses for the Harland Acquisition and the related financings:

•   The Company entered into a $1,800.0 million senior secured term loan facility and a $100.0 million revolving credit facility; and

•   The Company issued $305.0 million aggregate principal amount of senior floating rate notes due 2015 and $310.0 million aggregate principal amount of 9.50% senior fixed rate notes due 2015.

The Harland Acquisition and related financing transactions have greatly increased the Company’s revenues, cost of revenues, selling, general and administrative expenses and interest expense. As a result of the application of purchase accounting under Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations,” the Company’s depreciation and amortization expense has also increased significantly.

Having completed the Harland Acquisition, the Company is focused on improving operating margins by reducing selling general and administrative expenses, shared services costs and cost of sales.

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Economic and Other Factors Affecting the Businesses of the Company

Harland Clarke

While total non-cash payments — including checks, credit cards, debit cards and other electronic forms of payment — are growing, the number of checks written has declined and is expected to continue to decline. Harland Clarke believes the number of checks printed is driven by the number of checks written, the number of new checking accounts opened and reorders reflecting changes in consumers’ personal situations, such as name or address changes. Checks written remain one of the largest forms of non-cash payment in the United States. A 2007 study by the Federal Reserve analyzing check writing patterns determined that the number of checks written declined 4.1% over the period from 2003 to 2006. Whereas in the past, Harland Clarke had experienced declines in check volumes generally consistent with the Federal Reserve study, in recent periods Harland Clarke is experiencing check unit declines slightly higher than those reflected in the Federal Reserve study. Harland Clarke is unable to determine at this time whether such slight declines above Federal Reserve estimates are attributable to timing issues, decreased openings of checking accounts, underlying differences in measurement methodologies, recent economic and financial market difficulties, and/or a further acceleration in check unit declines. Harland Clarke is focused on growing its business through the addition of a variety of non-check-related products and services and optimizing its existing catalog of offerings to better serve its customers.

The financial institution outsourcing services industry is highly competitive and fragmented with quality and breadth of service offerings and strength of customer relationships among the key competitive factors. Within this category, Harland Clarke competes with large outsourcing service providers that offer a wide variety of services including those that compete with Harland Clarke’s primary offerings — specifically payment services, marketing services, and teleservices. There are also other competitors that specialize in providing one or more of these services.

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

Harland Financial Solutions

Harland Financial Solutions’ operating results are affected by the overall demand for our products, software and related services which is based upon the technology budgets of our clients and prospects. Economic downturns in one or more of the countries in which we do business could result in reductions in the information technology, or IT, budgets for some portion of our clients and potentially longer lead-times for acquiring Harland Financial Solutions products and services. In addition, if Harland Financial Solutions’ financial institution customers fail or merge with other financial institutions, Harland Financial Solutions may lose any or all revenue from such financial institutions and/or experience further pricing pressure, which would negatively affect Harland Financial Solutions’ operating results.

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

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The market for providing technological solutions to financial institutions is highly competitive and fragmented. Harland Financial Solutions competes with several domestic and international companies. There are also other competitors that offer one or more specialized products or services that compete with Harland Financial Solutions. Some of our competitors have advantages over Harland Financial Solutions due to their significant worldwide presence, longer operating and product development history, larger installed client base, and substantially greater financial, technical and marketing resources. In response to competition, Harland Financial Solutions has been required in the past, and may be required in the future, to furnish additional discounts to clients, otherwise modify pricing practices or offer more favorable payment terms or more favorable contractual implementation terms.

Scantron

While the number of tests given annually in K-12 and higher education markets continues to grow, the demand for Optical Mark Reader paper based testing has declined and is expected to continue to decline. Changes in educational funding can affect the rate at which schools adopt new technology thus slowing the decline for paper based testing but also slowing the demand for Scantron’s on-line testing products. Educational funding changes may also reduce the rate of consumption of Scantron’s forms and purchase of additional hardware to process these forms. Economic slowdown in the United States may negatively affect education budgets and spending, which would have an adverse impact on Scantron’s operating results.

Data collection for non-testing applications such as surveys is also experiencing a conversion to non-paper based methods of collection. Scantron believes this trend will also continue as the availability of these alternative technologies becomes more widespread. Changes in the overall economy can impact the demand for surveys as companies look for ways to adjust their expenditures.

Critical Accounting Policies and Estimates

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

Revenue Recognition – The Company considers its revenue recognition policy as critical to its reported results of operations primarily in its Harland Financial Solutions and Scantron segments. Revenue is recognized in accordance with the provisions of Statement of Position (“SOP”) 97-2, “Software Revenue Recognition,” as amended by SOP 98-9, “Software Revenue Recognition, with Respect to Certain Transactions,” and clarified by Staff Accounting Bulletin (“SAB”) 101, “Revenue Recognition in Financial Statements,” SAB 104, “Revenue Recognition,” and Emerging Issues Task Force (“EITF”) Issue 00-21 (“EITF 00-21”), “Revenue Arrangements with Multiple Deliverables.” The application of these pronouncements requires judgment, including amongst other things, whether a software arrangement includes multiple elements, whether any elements are essential to the functionality of any other elements, and whether vendor-specific objective evidence (“VSOE”) of fair value exists for those elements. Customers receive certain elements of the Company’s products and services over time.

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

For software license agreements that do not require significant modification or customization of the software, the Company recognizes software license revenue when persuasive evidence of an arrangement

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exists, delivery of the product has occurred, the license fee is fixed and determinable and collection is probable. The Company’s software license agreements include multiple products and services or “elements.” None of these elements are deemed to be essential to the functionality of the other elements. SOP 97-2, as amended by SOP 98-9, generally requires revenue earned on software arrangements involving multiple elements to be allocated proportionally to each element based on VSOE of fair value. Fair value is determined for license fees based upon the price charged when sold separately. In the event that the Company determines that VSOE does not exist for one or more of the delivered elements of a software arrangement, but does exist for all of the undelivered elements, revenue is recognized using the residual method allowed by SOP 98-9. Under the residual method, a residual amount of the total arrangement fee is recognized as revenue for the delivered elements after the established fair value of all undelivered elements has been deducted.

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

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

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

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

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

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

As part of the process of preparing its consolidated financial statements, the Company is required to calculate the amount of income tax in each of the jurisdictions in which it operates. On a regular basis the amount of taxable income is reviewed by various federal, state and foreign taxing authorities. As such, the Company routinely provides reserves for items that it believes could be challenged by these taxing authorities. On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48 (“FIN 48”), which prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.

Long-Lived Assets – The Company assesses the impairment of property, plant and equipment and amortizable intangible assets whenever events or changes in circumstances indicate that the carrying value

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may not be recoverable. Some factors the Company considers important that could trigger an impairment review include the following:

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

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

•   Significant negative industry or economic trends.

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

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

The goodwill impairment test is a two-step process, which requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of the Company’s reporting units. The Company has five reporting units, which are determined in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Certain of the Company’s reporting units are the same as its reportable segments and certain reporting units are one level below the reportable segment, which is at the operating segment level.

The Company utilizes both the income and market approaches to estimate the fair value of the reporting units. The income approach involves discounting future estimated cash flows. The discount rate used is the value-weighted average of the Company’s estimated cost of equity and debt (“cost of capital”) derived using, both known and estimated, customary market metrics. The Company’s weighted average cost of capital is adjusted by reporting unit to reflect a risk factor, if necessary, for each reporting unit. The Company performs sensitivity tests with respect to growth rates and discount rates used in the income approach. In applying the market approach, valuation multiples are derived from historical and projected operating data of selected guideline companies; evaluated and adjusted, if necessary, based on the strengths and weaknesses of the reporting unit relative to the selected guideline companies; and applied to the appropriate historical and/or projected operating data of the reporting unit to arrive at an indication of fair value. The Company weights the results of the income and market approaches equally. The results of the Company’s tests indicated no impairment as the estimated fair values were greater than the carrying values.

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

The Company measures impairment of its indefinite lived tradenames and trademarks based on the relief-from-royalty-method. Under the relief-from-royalty method of the income approach, the value of an intangible asset is determined by quantifying the cost savings a company enjoys by owning, as opposed to licensing, the intangible asset. Assumptions about royalty rates are based on the rates at which similar tradenames and

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trademarks are licensed in the marketplace. The Company also re-evaluates the useful life of these assets to determine whether events and circumstances continue to support an indefinite useful life.

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

Intangible assets that are deemed to have a finite life are evaluated for impairment as discussed above in “Long-Lived Assets.”

Contingencies and Indemnification Agreements – The Company records the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. These events are “contingencies,” and the accounting for such events follows SFAS No. 5, “Accounting for Contingencies.”

The accrual of a contingency involves considerable judgment by management. The Company uses internal expertise and outside experts, as necessary, to help estimate the probability that the Company has incurred a loss and the amount (or range) of the loss. When evaluating the need for an accrual or a change in an existing accrual, the Company considers whether it is reasonably probable to estimate an outcome for the contingency based on its experience, any experience of others facing similar contingencies of which the Company is aware and the particulars of the circumstances creating the contingency. See Item 3. Legal Proceedings; and Note 14 — Commitments and Contingencies to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Postretirement Benefits – As a result of the Harland Acquisition, the Company sponsors unfunded defined benefit postretirement plans that cover certain salaried and nonsalaried former Harland employees. One postretirement benefit plan provides health care benefits and the other provides life insurance benefits. The Company consults with outside actuaries who use several statistical and other factors that attempt to estimate future events to calculate the expense and liability related to the plans. These factors include assumptions about the discount rate within certain guidelines. In addition, the Company’s actuarial consultants also use subjective factors such as withdrawal and mortality rates and the expected health care cost trend rate to estimate these factors.

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

Derivative Financial Instruments – The Company began using derivative financial instruments in 2006 to manage interest rate risk related to a portion of its long-term debt. The Company recognizes all derivatives at fair value as either assets or liabilities on the consolidated balance sheets and changes in the fair values of such instruments are recognized in earnings unless specific hedge accounting criteria are met. If specific cash flow hedge accounting criteria are met, the Company recognizes the changes in fair value of these instruments in other comprehensive income (loss) until the underlying debt instrument being hedged is settled or the Company determines that the specific hedge accounting criteria are no longer met.

On the date the interest rate derivative contract is entered into, the Company designates the derivative as either a fair value hedge or a cash flow hedge. The Company formally documents the relationship between hedging instruments and the hedged items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. The Company links all hedges that are designated as fair value hedges to specific assets or liabilities on the balance sheet or to specific firm commitments. The Company links all hedges that are designated as cash flow hedges to forecasted transactions or to liabilities on the balance sheet. The Company also assesses, both at the inception of the hedge and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash

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flows of hedged items. If an existing derivative were to become not highly effective as a hedge, the Company would discontinue hedge accounting prospectively. The Company assesses the effectiveness of the hedge based on total changes in the hedge’s cash flows at each payment date as compared to the change in the expected future cash flows on the long-term debt.

New Accounting Pronouncements

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

Off-Balance Sheet Arrangements

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

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

Consolidated Operating Results

Subsequent to the completion of the Harland Acquisition on May 1, 2007, the Company reorganized its business along three reportable segments together with a corporate group for certain support services. The reorganization aligns the Company’s operations on the basis of products, services and industry. The Company’s previously existing Financial Institution and Direct to Consumer segments were combined with Harland’s similar operations; this business segment now operates under the name of Harland Clarke and is referred to as the Harland Clarke segment. The Company also added two new reportable segments for business lines acquired in the Harland Acquisition: the Harland Financial Solutions segment and the Scantron segment. During the first quarter of 2008, the Company transferred its field maintenance services from the Harland Financial Solutions segment to the Scantron segment. This transfer was implemented to align the field maintenance services with Scantron as a result of the Data Management Acquisition. Management measures and evaluates the reportable segments based on operating income. Prior period results in the tables below have been restated to conform to the business segment changes.

In the tables below, dollars are in millions.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007

The operating results for the years ended December 31, 2008 and 2007, as reflected in the accompanying consolidated statements of operations and described below, include the acquired Data Management, Harland and Peldec businesses from their respective dates of acquisition (see Note 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

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Net Revenues:

	Year Ended December 31,
	2008			2007
Consolidated Net Revenues:
Harland Clarke Segment	$	1,290.4		$	1,104.5
Harland Financial Solutions Segment		293.7			183.0
Scantron Segment		211.3			83.6
Eliminations		(0.8	)		(1.2	)
Total	$	1,794.6		$	1,369.9

Net revenues increased by $424.7 million to $1,794.6 million in 2008 from $1,369.9 million in 2007, due to the Harland Acquisition, which accounted for an increase of $345.1 million and the Data Management Acquisition, which accounted for an increase of $88.5 million.

Net revenues for the Harland Clarke segment increased by $185.9 million to $1,290.4 million in 2008 from $1,104.5 million in 2007, due to the Harland Acquisition, which accounted for an increase of $210.9 million. The remaining $25.0 million decrease is primarily due to declines in marketing services products, which were negatively affected by the economic downturn, and volume declines in check and related products. Net revenues in 2007 also included charges of $0.6 million for non-cash fair value purchase accounting adjustments to deferred revenue related to the Harland Acquisition.

Net revenues for the Harland Financial Solutions segment increased by $110.7 million to $293.7 million in 2008 from $183.0 million in 2007, primarily as a result of the Harland Acquisition, which accounted for $94.8 million of the increase. The remaining $15.9 million of the increase was due in part to $6.5 million of organic growth in the risk management and enterprise solutions product lines. The balance of the increase was substantially due to a decrease in charges for non-cash fair value purchase accounting adjustments to deferred revenue related to the Harland Acquisition. Net revenues in 2008 and 2007 included charges of $1.4 million and $9.6 million, respectively, for non-cash fair value purchase accounting adjustments to deferred revenue related to the Harland Acquisition.

Net revenues for the Scantron segment increased by $127.7 million to $211.3 million in 2008 from $83.6 million in 2007, due to the Data Management Acquisition, which accounted for an increase of $88.5 million, and the Harland Acquisition, which accounted for an increase of $40.0 million. Net revenues in 2008 and 2007 also included charges of $1.2 million and $2.0 million, respectively, for non-cash fair value purchase accounting adjustments to deferred revenue related to the Data Management and Harland Acquisitions.

The fair value adjustments are one-time reductions in revenues attributable to the purchase accounting for the Harland Acquisition and the Data Management Acquisition. The Company has recognized substantially all of the reduction in net revenues resulting from the deferred revenue fair value adjustments for the Harland Acquisition and expects to recognize substantially all of the reductions in net revenues resulting from the Data Management deferred revenue fair value adjustments during the twelve-month period following the Data Management Acquisition.

Cost of Revenues:

	Year Ended December 31,
	2008			2007
Consolidated Cost of Revenues:
Harland Clarke Segment	$	823.0		$	711.8
Harland Financial Solutions Segment		124.1			75.7
Scantron Segment		121.1			47.5
Eliminations		(0.8	)		(1.2	)
Total	$	1,067.4		$	833.8

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Cost of revenues increased by $233.6 million to $1,067.4 million in 2008 from $833.8 million in 2007 due to the Harland Acquisition, which accounted for an increase of $207.2 million, and the Data Management Acquisition, which accounted for an increase of $57.2 million.

Cost of revenues for the Harland Clarke segment increased by $111.2 million to $823.0 million in 2008 from $711.8 million in 2007 due to the Harland Acquisition, which accounted for an increase of $146.6 million. Cost reductions and lower expenses due to volume declines were partially offset by increases in delivery, labor and materials costs. Cost of revenues in 2007 also included charges of $1.4 million for non-cash fair value purchase accounting adjustments to inventory related to the Harland Acquisition. Cost of revenues as a percentage of revenues for the Harland Clarke segment was 63.8% in 2008 as compared to 64.4% in 2007.

Cost of revenues for the Harland Financial Solutions segment increased by $48.4 million to $124.1 million in 2008 from $75.7 million in 2007, primarily as a result of the Harland Acquisition, which accounted for $39.7 million of the increase. The remaining $8.7 million of the increase primarily resulted from higher revenues and an increase of $2.9 million in the amortization of intangible assets related to the Harland Acquisition. Cost of revenues as a percentage of revenues for the Harland Financial Solutions segment was 42.3% in 2008 as compared to 41.4% in 2007.

Cost of revenues for the Scantron segment increased by $73.6 million to $121.1 million in 2008 from $47.5 million in 2007 due to the Data Management Acquisition, which accounted for an increase of $57.2 million and the Harland Acquisition, which accounted for an increase of $20.7 million. These increases were partially offset by cost reductions. Cost of revenues in 2008 and 2007 also included charges of $0.4 million and $3.0 million, respectively, for non-cash fair value purchase accounting adjustments to inventory related to the Data Management and Harland acquisitions. Cost of revenues as a percentage of revenues for the Scantron segment was 57.3% in 2008 as compared to 56.8% in 2007.

Selling, General and Administrative Expenses:

	Year Ended December 31,
	2008		2007
Consolidated Selling, General and Administrative Expenses:
Harland Clarke Segment	$	241.0	$	206.0
Harland Financial Solutions Segment		131.6		90.5
Scantron Segment		59.4		23.7
Corporate		14.8		16.1
Total	$	446.8	$	336.3

Selling, general and administrative expenses increased by $110.5 million to $446.8 million in 2008 from $336.3 million in 2007, due to the Harland Acquisition, which accounted for an increase of $91.7 million and the Data Management Acquisition, which accounted for an increase of $20.1 million.

Selling, general and administrative expenses for the Harland Clarke segment increased by $35.0 million to $241.0 million in 2008 from $206.0 million in 2007, primarily due to the Harland Acquisition, which accounted for $26.3 million of the increase. The remaining $8.7 million of the increase was primarily due to an increase in integration expenses related to the Harland Acquisition and a change in vacation policy, partially offset by labor cost reductions. Selling, general and administrative expenses in 2008 and 2007 also included $0.5 million and $3.1 million, respectively, for non-cash impairment charges from the write-down of Alcott Routon intangible assets. Selling, general and administrative expenses as a percentage of revenues for the Harland Clarke segment was 18.7% in 2008 and 2007.

Selling, general and administrative expenses for the Harland Financial Solutions segment increased by $41.1 million to $131.6 million in 2008 from $90.5 million in 2007 due to the Harland Acquisition, which accounted for an increase of $46.9 million. The increase was partially offset by labor cost reductions.

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Selling, general and administrative expenses in 2008 and 2007 also included $8.1 million and $3.3 million, respectively, for compensation expense related to an incentive agreement for the Peldec assets purchase. The Peldec assets purchase was completed on August 15, 2007. Selling, general and administrative expenses as a percentage of revenues for the Harland Financial Solutions segment was 44.8% in 2008 as compared to 49.5% in 2007.

Selling, general and administrative expenses for the Scantron segment increased by $35.7 million to $59.4 million in 2008 from $23.7 million in 2007, primarily due to the Data Management Acquisition, which accounted for $20.1 million of the increase and the Harland Acquisition, which accounted for $12.4 million of the increase. The remaining $3.2 million of the increase was primarily due to integration expenses incurred in connection with the Data Management Acquisition, partially offset by cost reductions. Selling, general and administrative expenses as a percentage of revenues for the Scantron segment was 28.1% in 2008 as compared to 28.3% in 2007.

Corporate selling, general and administrative expenses decreased by $1.3 million to $14.8 million in 2008 from $16.1 million in 2007. The Harland Acquisition accounted for an increase of $5.6 million, which was more than offset by cost reductions. The 2007 period also included $2.4 million of non-recurring retention bonus expenses related to the Harland Acquisition.

Restructuring Costs

During 2007, as a result of the Harland Acquisition, the Company adopted a plan to restructure its business. The plan focuses on improving operating margin through consolidating facilities and reducing duplicative expenses, such as selling, general and administrative, executive and shared services expenses. During 2008, the Company adopted further restructuring plans within the Harland Clarke segment to leverage incremental synergies within the printing plants, contact centers and selling, general and administrative areas. During the first quarter of 2008, as a result of the Data Management Acquisition, the Company adopted plans to restructure the Scantron segment. These plans focus on improving operating margin through consolidating facilities and reducing duplicative selling, general and administrative expenses. During the second quarter of 2008, the Company adopted a plan to restructure certain selling, general and administrative functions within the Harland Financial Solutions segment. This plan focuses on improving operating margin through reducing selling, general and administrative expenses by leveraging the Company’s shared services capabilities.

The Company recorded restructuring costs, net of adjustments, of $9.3 million for the Harland Clarke segment, $3.9 million for the Harland Financial Solutions segment and $2.4 million for the Scantron segment for the year ended December 31, 2008 related to these plans. The Company also recorded $0.6 million, $1.5 million and $2.5 million of restructuring costs in the purchase accounting for the Harland Acquisition, the Transaction Holdings Acquisition and the Data Management Acquisition, respectively, for the year ended December 31, 2008 (see Notes 3 and 13 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K). The Company recorded $5.6 million of restructuring costs for the Harland Clarke segment in the year ended December 31, 2007 related primarily to these plans.

Interest Income

Interest income was $2.2 million in 2008 as compared to $6.0 million in 2007. The decrease in interest income was due to lower cash balances available for investments in cash equivalents in 2008 primarily due to cash used for the Data Management Acquisition and a dividend paid to M & F Worldwide.

Interest Expense

Interest expense was $186.4 million in 2008 as compared to $165.9 million in 2007. The increase in interest expense was primarily due to higher amounts of long-term debt outstanding subsequent to May 1, 2007 as a result of the financing transactions completed in connection with the Harland Acquisition, partially offset by lower interest rates.

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Loss on Early Extinguishment of Debt

The loss on early extinguishment of debt of $54.6 million in 2007 relates to the refinancing transactions completed in connection with the Harland Acquisition. This loss consists of $37.3 million for prepayment premiums and consent payments on the 2013 Senior Notes, a $3.9 million prepayment penalty on the prior credit facilities, a non-cash expense of $1.5 million for the write off of unamortized original discount on the Prior Credit Facilities, and a non-cash expense of $11.9 million for the write-off of unamortized deferred financing fees related to the 2013 Senior Notes and the prior credit facilities (see Note 11 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

Other Income (Expense), Net

Other expense, net was $0.4 million in 2008 as compared to other expense, net of $0.5 million in 2007. These amounts primarily relate to non-recurring miscellaneous expenses and income.

Provision (Benefit) for Income Taxes

The Company’s effective tax rate was a provision of 41.1% in 2008 and a benefit of 26.0% in 2007. The change is primarily due to the tax benefit in 2007 being lower than the statutory rate (9.0%), 2008 foreign rate differential (2.1%) and 2008 state taxes (3.9%).

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

The operating results for the years ended December 31, 2007 and 2006, as reflected in the accompanying consolidated statements of operations and described below, include the acquired Harland and Peldec businesses from the respective dates of acquisition (see Note 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

Net Revenues:

	Year Ended December 31,
	2007			2006
Consolidated Net Revenues:
Harland Clarke Segment	$	1,104.5		$	623.9
Harland Financial Solutions Segment		183.0			—
Scantron Segment		83.6			—
Eliminations		(1.2	)		—
Total	$	1,369.9		$	623.9

Net revenues increased by $746.0 million in 2007 as compared to 2006, primarily as a result of the Harland Acquisition which occurred on May 1, 2007 and accounted for $699.2 million of the increase.

Net revenues for the Harland Clarke segment increased by $480.6 million to $1,104.5 million in 2007 from $623.9 million in 2006, primarily as a result of the Harland Acquisition which accounted for $433.8 million of the increase. The remaining $46.8 million of the increase was primarily due to higher revenues per unit and an increase in revenues from a large client, partially offset by a decline in units.

Net revenues for 2007 for the Harland Clarke, Harland Financial Solutions and Scantron segments include reductions of $0.6 million, $9.6 million and $2.0 million, respectively, for a fair value adjustment to deferred revenues recorded in the purchase accounting for the Harland Acquisition. The fair value adjustment is a one-time reduction in deferred revenues for these segments attributable to the purchase accounting for the Harland Acquisition. Net revenues will continue to be affected by this adjustment until all acquired deferred revenue is recognized in the consolidated statement of operations. The Company expects that the substantial majority of the reduction in net revenues resulting from the deferred revenue fair value adjustment will be recognized during the twelve month period following the Harland Acquisition.

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Cost of Revenues:

	Year Ended December 31,
	2007			2006
Consolidated Cost of Revenues:
Harland Clarke Segment	$	711.8		$	388.4
Harland Financial Solutions Segment		75.7			—
Scantron Segment		47.5			—
Eliminations		(1.2	)		—
Total	$	833.8		$	388.4

Cost of revenues increased by $445.4 million in 2007 as compared to 2006, primarily as a result of the Harland Acquisition which occurred on May 1, 2007 and accounted for $424.8 million of the increase.

Cost of revenues for the Harland Clarke segment increased by $323.4 million to $711.8 million in 2007 from $388.4 million in 2006, primarily as a result of the Harland Acquisition which accounted for $302.7 million of the increase. The remaining $20.7 million of the increase was primarily due to increased delivery expenses. Cost of revenues in 2007 includes $49.2 million of amortization expense for intangible assets compared to $27.0 million the prior year. The increase in amortization expense resulted from the addition of amortizable intangible assets recorded in connection with the Harland Acquisition. Cost of revenues in 2007 includes $1.4 million for a fair value adjustment to inventory recorded in the purchase accounting for the Harland Acquisition, which will not recur.

Cost of revenues as a percentage of revenues for the Harland Financial Solutions and Scantron segments were 41.4% and 56.8%, respectively, in 2007. Included in cost of revenues for Harland Financial Solutions and Scantron is amortization expense for intangible assets of $11.5 million and $5.6 million, respectively, recorded in connection with the Harland Acquisition. Cost of revenues in 2007 for the Scantron segment includes $3.0 million for a fair value adjustment to inventory recorded in the purchase accounting for the Harland Acquisition, which will not recur.

Selling, General and Administrative Expenses:

	Year Ended December 31,
	2007		2006
Consolidated Selling, General and Administrative Expenses:
Harland Clarke Segment	$	206.0	$	145.2
Harland Financial Solutions Segment		90.5		—
Scantron Segment		23.7		—
Corporate		16.1		—
Total	$	336.3	$	145.2

Selling, general and administrative expenses increased by $191.1 million in 2007 as compared to 2006, primarily as a result of the Harland Acquisition which occurred on May 1, 2007 and accounted for $178.3 million of the increase.

Selling, general and administrative expenses for the Harland Clarke segment increased by $60.8 million to $206.0 million in 2007 from $145.2 million in 2006, primarily as a result of the Harland Acquisition, which accounted for $47.9 million of the increase. The remaining $12.9 million of the increase was primarily due to $8.3 million of incremental incentive compensation expense resulting from improved performance of the business and $3.1 million of impairment adjustments to intangible assets (see Note 7 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K), partially offset by cost reductions. Selling, general and administrative expenses as a percentage of revenues for the Harland Clarke segment were 18.7% in 2007 as compared to 23.3% in 2006.

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Selling, general and administrative expenses were $90.5 million, $23.7 million and $16.1 million for 2007 for the Harland Financial Solutions, Scantron and Corporate segments, respectively, and relate to operations acquired in the Harland Acquisition.

Restructuring Costs

During 2007, as a result of the Harland Acquisition, the Company adopted a plan to restructure its business, focusing on improving operating margins through consolidating facilities and reducing duplicative selling, general and administrative expenses, executive and shared services costs.

The Company recorded $5.6 million of restructuring costs, net of adjustments, for the Harland Clarke segment in 2007 related primarily to this initiative, as well as a restructuring plan implemented prior to the Harland Acquisition, which combined resulted in the closure of two printing plants and a contact center, as well as costs to redefine sales territories and consolidate sales divisions. The Company also recorded $21.9 million of restructuring costs in the purchase accounting for the Harland Acquisition (see Notes 3 and 13 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K). The Company recorded $3.3 million of restructuring costs for the Harland Clarke segment in the 2006 period related to changes in the senior leadership structure and other costs related to reductions in workforce.

Interest Income

Interest income was $6.0 million in 2007 mainly due to higher cash balances available for investments in cash equivalents in 2007 as compared to 2006. The higher cash balances were primarily due to increased cash and cash equivalents on hand subsequent to the closing of the Harland Acquisition resulting from acquisition related financing transactions and cash provided by operating activities.

Interest Expense

Interest expense was $165.9 million in 2007 as compared to $60.0 million in 2006. The increase in interest expense was primarily due to higher amounts of long-term debt outstanding subsequent to May 1, 2007 as a result of the financing transactions completed in connection with the Harland Acquisition.

Loss on Early Extinguishment of Debt

The loss on early extinguishment of debt of $54.6 million in 2007 relates to the refinancing transactions completed in connection with the Harland Acquisition. This loss consists of $37.3 million for prepayment premiums and consent payments on the 2013 Senior Notes, a $3.9 million prepayment penalty on the prior credit facilities, a non-cash expense of $1.5 million for the write-off of unamortized original discount on the prior credit facilities, and a non-cash expense of $11.9 million for the write-off of unamortized deferred financing fees related to the 2013 Senior Notes and the prior credit facilities (see Note 11 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).

Other Income (Expense), Net

Other income (expense), net was an expense of $0.5 million in 2007 as compared to a nominal amount in 2006. These amounts primarily relate to non-recurring miscellaneous expenses and income.

(Benefit) Provision for Income Taxes

The Company’s effective tax rate was a benefit of 26.0% in 2007 and a provision of 27.8% in 2006. The change is primarily due to the effects of changes in 2006 in enacted state tax rates on deferred tax balances (10.8% or $2.9 million), partially offset by foreign losses in 2007 for which no benefits were recorded (7.4% or $1.5 million) and increases in 2007 state taxes and other (5.2% or $0.7 million).

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Related Party Transactions

Notes Receivable

In 2008, the Company acquired the senior secured credit facility and outstanding note of Delphax Technologies, Inc. (“Delphax”), the supplier of Imaggia printing machines and related supplies and service for the Harland Clarke segment. The senior secured credit facility is comprised of a revolving credit facility of up to $14.0 million and a term loan of $0.5 million, subject to borrowing limitations set forth therein, that mature in September 2011. The senior secured credit facility is collateralized by a perfected security interest in substantially all of Delphax’s assets. The revolving facility has a borrowing base calculated based on Delphax’s eligible accounts receivable and inventory. The senior secured credit facility has an interest rate of Wells Fargo N. A. Prime plus 2.5%, payable quarterly. The note, which has a principal amount of $7.0 million, matures in September 2012, and bears interest at an annual rate of 12%, payable quarterly either in cash, or in a combination of cash and up to 25% Delphax stock. As part of this transaction, the Company also received 250,000 shares of Delphax common stock from the previous holder of the Delphax note.

The outstanding balance on the senior secured credit facility and the note are included in other assets in the accompanying consolidated balance sheets. During 2008, the Company received $15.3 million in payments and released $13.5 million in draws on the revolver, bringing the principal balance of the debt to $12.5 million at December 31, 2008. Interest income of $0.4 million was recorded in 2008.

Other

In accordance with SEC Staff Accounting Bulletin 79, “Accounting for Expenses or Liabilities Paid by Principal Stockholder(s),” the Company expensed $2.7 million and $2.1 million during 2008 and 2007, respectively for services provided to the Company by M & F Worldwide. This amount is reflected in selling, general and administrative expenses and accrued expenses. Such expenses during 2006 were not significant.

During 2008, the Company paid a cash dividend of $65.0 million to M & F Worldwide as permitted by restricted payment baskets within the Company’s debt agreements. During 2007 and 2006, the Company paid a cash dividend in the amount of $1.8 million and $1.5 million, respectively, to M & F Worldwide to cover certain public company related expenses.

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

M & F Worldwide paid $10.0 million in June 2007 to MacAndrews & Forbes Holdings Inc. for its service in sourcing, analyzing, negotiating and executing the Harland Acquisition. As discussed in Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the Company reimbursed M & F Worldwide for that payment during the third quarter of 2007 and has included this fee in the purchase price for the Harland Acquisition. As also discussed in Note 3 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, the Company paid $3.0 million to M & F Worldwide to reimburse it for professional fees paid by M & F Worldwide relating to the Harland Acquisition.

Since December 15, 2005, the Company participates in MacAndrews & Forbes Holdings Inc.’s directors and officer’s insurance program, which covers the Company as well as MacAndrews & Forbes Holdings Inc. and its other affiliates. MacAndrews & Forbes Holdings Inc. directly and indirectly beneficially owned, as of December 31, 2008, approximately 43.4% of outstanding common stock of M & F Worldwide. The limits of coverage are available on aggregate losses to any or all of the participating companies and their respective directors and officers. The Company reimburses MacAndrews & Forbes Holdings Inc. for its allocable portion of the premiums for such coverage, which the Company believes is more favorable than the premiums the Company could secure were it to secure its own coverage. At December 31, 2008 and 2007, the Company recorded prepaid expenses of $0.3 million and $0.4 million, respectively, relating to the directors and officers insurance program in the accompanying consolidated balance sheets. The Company paid $0.3 million and $0.4 million to MacAndrews & Forbes Holdings Inc. in 2008 and

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2007, respectively, under the insurance program. No payments to MacAndrews & Forbes Holdings Inc. were made in 2006 under the insurance program.

Liquidity and Capital Resources

Cash Flow Analysis

The Company’s net cash provided by operating activities for the year ended December 31, 2008 was $200.7 million as compared to $209.9 million during the year ended December 31, 2007. The decrease in net cash provided by operating activities of $9.2 million was due to changes in working capital, primarily accounts receivable, accounts payable and accrued liabilities, partially offset by an increase in cash flow from operations.

The Company’s net cash used in investing activities was $290.8 million for year ended December 31, 2008 as compared to $1,476.5 million for the year ended December 31, 2007. The decrease in cash used in investing activities was primarily due to the Harland Acquisition in the 2007 period, partially offset by the Data Management Acquisition and the Transaction Holdings Acquisition in the 2008 period, increased capital expenditures in the 2008 period related to ongoing requirements for the acquired Harland operations and integration projects related thereto and the investment in the Delphax notes receivable in 2008.

The Company’s net cash used in financing activities was $85.0 million for the year ended December 31, 2008 as compared to net cash provided by financing activities of $1,475.8 million during the year ended December 31, 2007. The financing activities during the year ended December 31, 2008 included a $65.0 million dividend paid to M & F Worldwide and net repayments under the Company’s credit agreement. The financing activities during the year ended December 31, 2007 were borrowings to fund the Harland Acquisition, refinance the outstanding 2013 Senior Notes and Harland and Clarke American Corp. credit agreements and pay related fees and expenses.

The Company’s Consolidated Contractual Obligations

The Company has certain cash obligations and other commercial commitments which will affect its short-term liquidity. At December 31, 2008, such obligations and commitments, which do not include options for renewal, were as follows:

	Payments Due by Period
			Less than						After
	Total		1 year		1-3 years		4-5 years		5 years
	(In millions)
Revolving credit facilities(1)(7)	$	—	$	—	$	—	$	—	$	—
Senior secured term loans(2)(7)		1,773.0		18.0		36.0		36.0		1,683.0
Senior notes(3)(7)		615.0		—		—		—		615.0
Interest on long-term debt(4)(7)		929.2		170.6		321.5		314.9		122.2
Capital lease obligations and other indebtedness		2.6		1.8		0.7		0.1		—
Operating lease obligations		92.3		27.1		36.9		17.3		11.0
Raw material purchase obligations		20.2		20.2		—		—		—
Other long-term liabilities		35.9		14.2		13.3		1.7		6.7
Client incentive payments(5)		97.0		43.8		35.8		13.1		4.3
Other purchase obligations(6)		72.1		33.1		20.6		12.6		5.8
Postretirement benefits payments		11.1		1.1		2.1		2.2		5.7
Total	$	3,648.4	$	329.9	$	466.9	$	397.9	$	2,453.7

⁽¹⁾ Consists of our $100.0 million revolving credit facility, which will mature on June 28, 2013. See Note 11 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

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(2)	$1,800.0 million senior secured term loan, which will mature on June 30, 2014. The Company is required to make scheduled payments of principal in the amount of $18.0 million per year in equal quarterly installments. See Note 11 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K.
(3)	The senior notes will mature in 2015 and include $310.0 million of fixed rate notes and $305.0 million of floating rate notes. See Note 11 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K. During the first quarter of 2009 through the date of this Annual Report on Form 10-K, the Company extinguished $60.5 million principal amount of this debt by purchasing the senior notes in individually negotiated transactions. The amount due in the table above as of December 31, 2008 does not reflect this extinguishment of debt.
(4)	Interest on long-term debt assumes that all floating rates of interest remain the same as those in effect at December 31, 2008 and includes the effect of the Company’s interest rate derivative arrangements on future cash payments for the remaining period of those derivatives. The payments noted above also assume that the level of borrowing under the revolving credit facility remains at zero, as it was on December 31, 2008, and all mandatory payments are made.
(5)	Represents unpaid amounts under existing client contracts.
(6)	Purchase obligations include amounts due under contracts with third party service providers. Such contracts are primarily for information technology services including license rights for mainframe software usage, voice and network data services and telecommunication services. We routinely issue purchase orders to numerous vendors for the purchase of inventory and other supplies. These purchase orders are generally cancelable with reasonable notice to the vendor. As such, these purchase orders are not included in the purchase obligations presented in the table above.
(7)	The credit facilities and senior notes include early repayment provisions if certain events occur, including excess cash flow payments with respect to the senior secured credit facilities. See Note 11 to the accompanying consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Payments in the table above assume that only mandatory principal payments will be made and that there will be no prepayments.

At December 31, 2008, the Company had a net deferred tax liability of $414.7 million. Deferred income tax liabilities are temporary differences between tax and financial statement basis of assets and do not directly relate to income taxes to be paid in the future. At December 31, 2008, the Company had unrecognized tax benefits of $18.6 million for which the Company is unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authority. Thus, these liabilities have not been included in the contractual obligations table. The Company expects to contribute $1.1 million to its defined benefit postretirement plans in 2009.

The Company’s Credit Agreement

Concurrent with the completion of the Harland Acquisition, the Company and substantially all of its subsidiaries as co-borrowers entered into senior secured credit facilities, which provided for a revolving credit facility of $100.0 million maturing on June 28, 2013 and a $1,800.0 million term loan maturing on June 30, 2014. Portions of the Company’s revolving credit facility are available for the issuance of letters of credit and swing line loans.

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

The term loan facility has an aggregate principal amount of $1,800.0 million which was drawn in full on May 1, 2007. The term loan facility is required to be repaid in quarterly installments of $4.5 million until maturity. The term loan facility requires that a portion of the Company’s excess cash flow (as defined in the senior secured credit facilities) be applied to prepay amounts borrowed thereunder, beginning in 2009 with

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respect to 2008. No such excess cash flow payment is expected to be paid in 2009. The balance of the term loan facility is due in full in 2014.

Loans under the credit facilities bear, at the Company’s option, interest at:

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

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

The credit facilities have a commitment fee for the unused portion of the revolver and for issued letters of credit of 0.50% and 2.63%, respectively. Interest rate margins and commitment fees under the revolver are subject to reduction in increments based upon Harland Clarke Holdings achieving certain consolidated leverage ratio.

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

As of December 31, 2008, $1,773.0 million principal amount was outstanding under the term loan facility. As of December 31, 2008, no amounts were drawn under the Company’s $100.0 million revolving credit facility, and the Company had $87.6 million available for borrowing (giving effect to the issuance of $12.4 million of letters of credit).

During 2006 and 2007, the Company entered into interest derivative transactions in the form of two- and three-year interest rate swaps with notional amounts totaling $910.0 million, which swap the underlying variable rate for fixed rates ranging from 4.977% to 5.362%. Those derivatives are being accounted for as cash flow hedges. The purpose of the transactions is to limit the Company’s risk on a portion of its variable rate term loan and comply with the terms of the credit facilities.

The Company’s Senior Notes

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

The Senior Notes are guaranteed fully and unconditionally, jointly and severally by all of the Company’s’ subsidiaries, all of which are wholly owned by the Company.

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During the first quarter of 2009 through the date of this Annual Report on Form 10-K, the Company extinguished $60.5 million principal amount of debt by purchasing 2015 Senior Notes in individually negotiated transactions for an aggregate purchase price of $22.8 million.

Impact of Inflation

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

Liquidity Assessment

The Company believes that its cash and cash equivalents, borrowings available under its credit agreements (as further discussed in Note 11 to the Company’s consolidated financial statements included elsewhere in this Annual Report on Form 10-K) and anticipated cash flow from operating activities will be sufficient to meet the Company’s expected operating needs, investment and capital spending requirements and debt service requirements for the foreseeable future.

In addition to the Company’s normal operating cash and working capital requirements and service of its indebtedness, it also requires cash to fund capital expenditures, enable cost reductions through restructuring projects and make contract acquisition payments to financial institution clients as follows:

•   Capital Expenditures.  The Company’s capital expenditures are primarily related to infrastructure investments, internally developed software, cost reduction programs, marketing initiatives and other projects that support future revenue growth. During the years ended December 31, 2008, 2007 and 2006, the Company incurred $48.2 million, $25.5 million and $14.7 million of capital expenditures and $0.7 million, $0.4 million and $1.0 million of capitalized interest, respectively. Capital expenditures for the year ended December 31, 2008 include $21.7 million related to integration projects. Capital expenditures for the year ended December 31, 2008 include $2.0 million related to the acquired Data Management operations subsequent to February 22, 2008. Capital expenditures related to Harland operations are not included in periods prior to May 1, 2007, the date of the Harland Acquisition.

•   Contract Acquisition Payments.  During the years ended December 31, 2008, 2007 and 2006, the Company made $31.1 million, $15.6 million and $15.7 million of contract acquisition payments to its clients, respectively. Payments for the years ended December 31, 2008, 2007 and 2006 include $19.0 million, $2.9 million and $0.0 million, respectively, related to the acquired Harland operations.

•   Restructuring/Cost Reductions.  Restructuring accruals and purchase accounting reserves have been established for anticipated severance payments, costs related to facilities closures and other expenses related to the planned restructuring or consolidation of some of the Company’s historical operations, as well as related to the Harland Acquisition and the Data Management Acquisition. During the years ended December 31, 2008, 2007 and 2006, the Company made $19.2 million, $15.3 million and $4.0 million of payments for restructuring, respectively. Periods prior to May 1, 2007, the date of the Harland Acquisition, do not include payments related to the acquired Harland operations.

The Company anticipates that its future capital expenditures and contract acquisition payments will be largely consistent with the combined historical levels of such payments for Clarke American, Harland and Data Management. The Company expects that payments related to restructuring programs will be largely consistent with historical levels of such payments in the next twelve months to support the achievement of planned cost savings, including actions related to the Data Management Acquisition that was consummated in February 2008. The Company used cash on hand to fund the $223.3 million net purchase price for Data Management after giving effect to working capital adjustments of $1.6 million, and related fees and expenses.

The Company may also, from time to time, seek to retire or purchase its outstanding debt in open market purchases, in privately negotiated transactions, or otherwise. Such retirement or purchase of debt may be

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funded from the operating cash flows of the business or other sources and will depend upon prevailing market conditions, liquidity requirements, contractual restrictions and other factors, and the amounts involved may be material. During the first quarter of 2009 through the date of this Annual Report on Form 10-K, Harland Clarke Holdings extinguished $60.5 million principal amount of debt by purchasing 2015 Senior Notes in individually negotiated transactions for an aggregate purchase price of $22.8 million.

Cash Flow Risks

The Company’s ability to meet its debt service obligations and reduce its total debt will depend upon its ability to generate cash in the future which, in turn, will be subject to general economic, financial, business, competitive, legislative, regulatory and other conditions, many of which are beyond the Company’s control. The Company may not be able to generate sufficient cash flow from operations and future borrowings may not be available to it under its credit facility in an amount sufficient to enable it to repay its debt or to fund its other liquidity needs. As of December 31, 2008, the Company had $87.6 million of additional availability under its revolving credit facility (after giving effect to the issuance of $12.4 million of letters of credit). The Company may also use its revolving credit facility to fund potential future acquisitions. If future cash flow from operations and other capital resources is insufficient to pay the Company’s obligations as they mature or to fund its liquidity needs, the Company may be forced to reduce or delay business activities and capital expenditures, sell assets, obtain additional debt or equity capital or restructure or refinance all or a portion of its debt on or before maturity. The Company may not be able to accomplish any of these alternatives on a timely basis or on satisfactory terms, if at all. In addition, the terms of the Company’s existing and future indebtedness may limit its ability to pursue any of these alternatives.

Honeywell Indemnification

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

Other

In June 2008, Kenneth Kitson, purportedly on behalf of himself and a class of other alleged similarly situated commercial borrowers from the Bank of Edwardsville, an Illinois-based community bank (“BOE”), filed in a Madison County, Illinois state court an amended complaint that re-asserted previously filed claims against BOE and added claims against Harland Financial Solutions, Inc. (“HFS”). Mr. Kitson’s complaint alleges, among other things, that HFS’s Laser Pro software permitted BOE to generate loan documents that were deceptive and usurious in that they failed to disclose properly the effect of the “365/360” method of calculating interest. Mr. Kitson seeks unspecified monetary and injunctive relief. HFS removed the action to the United States District Court for the Southern District of Illinois. Prior to the time HFS removed the case to federal court, Mr. Kitson and BOE reached a tentative settlement of the claims against BOE and received preliminary approval of that settlement from the state court. On February 9, 2009, the District Court entered an order granting with prejudice HFS’s motion to dismiss the claims that Mr. Kitson brought against it. Mr. Kitson has not yet indicated whether he intends to appeal the dismissal. While there can be no assurance, the Company believes that the dismissal will be upheld in any appeal or that it will be able to present a vigorous defense should that become necessary.

In addition, various other legal proceedings, claims and investigations are pending against the Company, including those relating to commercial transactions, product liability, environmental, safety and health matters and other matters. Most of these matters are covered by insurance, subject to deductibles and maximum limits, and by third-party indemnities. In the opinion of management, based upon the information available at this

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time, the outcome of these matters will not have a material adverse effect on the Company’s financial position or results of operations.

Forward-Looking Statements

This Annual Report on Form 10-K for the year ended December 31, 2008, as well as certain of the Company’s other public documents and statements and oral statements, contains forward-looking statements that reflect management’s current assumptions and estimates of future performance and economic conditions. When used in this Annual Report on Form 10-K, the words “believes,” “anticipates,” “plans,” “expects,” “intends,” “estimates” or similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. All forward-looking statements speak only as of the date of this Annual Report on Form 10-K. Although the Company believes that its plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, such plans, intentions or expectations may not be achieved. Such forward-looking statements are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company cautions investors that any forward-looking statements are subject to risks and uncertainties that may cause actual results and future trends to differ materially from those projected, stated or implied by the forward-looking statements. In addition, the Company encourages investors to read the summary of the Company’s critical accounting policies and estimates included in this Annual Report on Form 10-K under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates.”

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

•   our substantial indebtedness;

•   downturns in general economic and market conditions, which could result in more rapid declines in product sales of and/or pricing pressure on the Harland Clarke and Scantron segments, and reductions in information technology budgets, which could result in adverse impacts on the Harland Financial Solutions segment;

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

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

•   covenant restrictions under our indebtedness that may limit our ability to operate our businesses and react to market changes;

•   increases in interest rates;

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

•   consolidation among financial institutions;

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

•   intense competition in all areas of our businesses;

•   our ability to successfully manage future acquisitions;

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

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

•   increased production and delivery costs;

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

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

•   technological improvements that may reduce our competitive advantage over some of our competitors;

•   our ability to protect customer data from account data security breaches;

•   changes in legislation relating to consumer privacy protection which could harm our business;

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

•   our ability to protect our intellectual property rights;

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

•   software defects that could harm our businesses and reputation;

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

•   environmental risks;

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

•   regulations governing the Harland Financial Solutions segment;

•   our ability to develop new products for our Scantron segment;

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

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

•   softness in direct mail response rates;

•   lower than expected cash flow from operations;

•   unfavorable foreign currency fluctuations;

•   the loss of one of our significant customers;

•   work stoppages and other labor disturbances; and

•   unanticipated internal control deficiencies or weaknesses.

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

Item 7A.   Quantitative and Qualitative Disclosures About Market Risks

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

At December 31, 2008, the Company had $1,773.0 million of term loans outstanding under its credit agreement, $12.4 million of letters of credit outstanding under its revolving credit facility, $305.0 million of floating rate senior notes and $310.0 million of 9.50% fixed rate senior notes. All of these outstanding loans bear interest at variable rates, with the exception of the $310.0 million of fixed rate senior notes. Accordingly, the Company is subject to risk due to changes in interest rates. The Company believes that a hypothetical 10% increase or decrease in interest rates applicable to its floating rate debt outstanding as of December 31, 2008 would have resulted in an increase or decrease in its annual interest expense of approximately $3.8 million, excluding the impact of the interest rate derivative transactions discussed below.

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In order to manage its exposure to fluctuations in interest rates on a portion of the outstanding variable rate debt, the Company entered into interest rate derivative transactions in 2006 and 2007 in the form of swaps with notional amounts totaling $910.0 million as further described in the notes to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. These derivatives swap the underlying variable rates for fixed rates ranging from 4.977% to 5.362%.

As of December 31, 2008, the Company’s net foreign currency market exposures were $17.5 million. This is the value of the equity of the investments in the foreign subsidiaries in Ireland, Canada and Israel. Since the exposures are not material, the Company does not generally hedge against foreign currency fluctuations.

A 10% appreciation in foreign currency exchange rates from the prevailing market rates would result in a $1.7 million increase in the related assets or liabilities. Conversely, a 10% depreciation in these currencies from the prevailing market rates would result in a $1.7 million decrease in the related assets or liabilities.

Item 8.   Financial Statements and Supplementary Data

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

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

None.

Item 9A(T).   Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13(a)-15(e) and 15d-(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2008. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2008.

During the fourth quarter of 2008, the Company completed its implementation of a new enterprise resource planning (“ERP”) system for financial reporting for the Scantron segment. As a matter of course in such an implementation, certain procedures surrounding the data input, processing and access of information ultimately used in financial reporting were changed. The Company has taken the necessary steps to monitor and maintain appropriate internal controls and to ensure that the internal controls over financial reporting remain effective after the ERP implementation. Other than the aforementioned implementation of the ERP system, there were no material changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2008 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

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

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

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

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

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

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

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.

Based on its assessment, management believes that as of December 31, 2008, the Company’s internal control over financial reporting was effective.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Item 9B.   Other Information

Not applicable.

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PART III

Item 10.   Directors, Executive Officers and Corporate Governance

The following table sets forth information regarding our directors and executive officers as of February 26, 2009:

Name	Age		Position
Charles T. Dawson		59	President and Chief Executive Officer of Harland Clarke Holdings Corp. and President and Chief Executive Officer of Harland Clarke Corp.; Director
Peter A. Fera, Jr.		40	Executive Vice President and Chief Financial Officer
A. O. Clemons, Jr.		60	President, Risk Management & Compliance Solutions, a division of Harland Financial Solutions
Raju M. Shivdasani		58	President, Enterprise Solutions, a division of Harland Financial Solutions
James D. Singleton		49	Executive Vice President and Chief Operating Officer of Harland Clarke Corp.
Paul G. Savas		45	Director
Barry F. Schwartz		59	Director

Charles T. Dawson was appointed President and Chief Executive Officer of Harland Clarke Holdings Corp. on September 27, 2007 and President and Chief Executive Officer of Harland Clarke on May 1, 2007 and was elected as a director at that time. Mr. Dawson has over 30 years of experience in the security printing industry. Mr. Dawson previously served as President and Chief Executive Officer of Clarke American from April 2005 to May 2007. Mr. Dawson was the Chief Executive Officer for Rocky Mountain Bank Note before joining Clarke American in 1992. His previous roles at Clarke American were Executive Vice President/General Manager of Partnership Development from February 2003 to April 2005 and Senior Vice President/General Manager of the National Account/Securities/Business Development divisions from July 2000 to February 2003. Mr. Dawson holds a BA in Marketing and an MBA from Lamar University. Mr. Dawson is also a director of M & F Worldwide Corp., which is required to file reports under the Securities Exchange Act of 1934.

Peter A. Fera, Jr. was appointed Executive Vice President and Chief Financial Officer of Harland Clarke Holdings Corp. on September 27, 2007. Currently, Mr. Fera also serves as Executive Vice President and Chief Financial Officer of Harland Clarke since May 1, 2007 and Senior Vice President and Chief Financial Officer of Clarke American since April 2005. Previously, Mr. Fera had been with Honeywell for seven years and held a variety of leadership positions in finance and marketing. Most recently he served as Chief Financial Officer for the Aircraft Landing Systems business of Honeywell from October 2003 to April 2005 in South Bend, Indiana. At Honeywell, he also served as Director of Finance — Business Analysis and Planning from February 2002 to October 2003 and Global Marketing Manager from October 2000 to February 2002. Earlier in his career he held operational and engineering roles at General Electric. A graduate of the University of Pennsylvania with a bachelor’s degree in mechanical engineering, Mr. Fera also earned a master’s degree in mechanical engineering from the Massachusetts Institute of Technology and an MBA in management from MIT’s Sloan School of Management.

A.O. Clemons, Jr. was appointed President, Risk Management & Compliance Solutions for Harland Financial Solutions on May 21, 2007. Mr. Clemons joined Harland Financial Solutions in June 2003 as Vice President of Business Development for Lending Solutions and increased his responsibilities to Senior Vice President, Sales, Retail Lending Solutions in 2004 and then Executive Vice President and General Manager, Lending Solutions Group in 2005 until he was appointed President in 2007. Prior to joining Harland Financial Solutions he held various sales management positions with Alterna Technology, Consonus, ABC Technologies, Paladin Consulting and CFI Pro Services, a predecessor company to what is now Harland Financial Solutions. He served as Senior Vice President of Sales and Strategic Relationships at CFI Pro Services from 1994 — 1997. Mr. Clemons earned a Bachelor of Arts in Economics from Washington State University and his Juris

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Doctorate from Gonzaga University. He is a member of the American Bar Association and the Washington State Bar Association.

Raju M. Shivdasani has served as President of Enterprise Solutions for Harland Financial Solutions since August 2001. Prior to joining Harland Financial Solutions, Mr. Shivdasani was with Phoenix International where he served as President and Chief Operating Officer from 1998 to 2001, and as Senior Vice President and President of International Division from July 1996 to January 1998. Other positions held by Mr. Shivdasani include Group Executive Vice President for Fiserv and President of CBS Worldwide for Citicorp Information Resources, Inc. He also served on the IBM AS/400 Strategic Advisory Board from 1992 to 1994. Mr. Shivdasani has a Bachelor’s Degree in Commerce from St. Xavier’s College, India.

James D. Singleton was appointed Executive Vice President and Chief Operating Officer of Harland Clarke on October 5, 2008. Mr. Singleton previously served as Executive Vice President of Harland Clarke from May 2007 until October 2008 with responsibility for Sales, Marketing, and Customer Service and Sales Contact Centers. Other roles at Clarke American included Senior Vice President Partnership Development from January 2006 to May 2007, as well as a variety of positions in Sales and Marketing prior to 2000. Previous roles at Indalex Aluminum Solutions from November 2000 to January 2006 included Vice President and General Manager, Specialty Products, Business Unit President South, and SVP Sales Marketing and International. Mr. Singleton holds a BS in Business Administration from the University of Florida.

Paul G. Savas has been one of our directors since May 1, 2007 and served as our Executive Vice President and Chief Financial Officer from May 1, 2007 to September 27, 2007. Mr. Savas has been Executive Vice President and Chief Financial Officer of M & F Worldwide since May 2006 and previously served as the Senior Vice President of Finance of M & F Worldwide since 2002. He has been Executive Vice President and Chief Financial Officer of MacAndrews & Forbes Holdings Inc. and various affiliates since May 2007, and previously served as Executive Vice President — Finance from April 2006 until May 2007 and was Senior Vice President — Finance of MacAndrews & Forbes Holdings Inc. and various affiliates from 2002 until April 2006. Mr. Savas joined MacAndrews & Forbes Holdings Inc. in 1994 as Director of Corporate Finance and was appointed Vice President — Finance in 1998. Mr. Savas is also a director of SIGA Technologies Inc., which is required to file reports under the Securities Exchange Act of 1934.

Barry F. Schwartz has been one of our directors since the Clarke American acquisition by M & F Worldwide in 2005 and served as our President and Chief Executive Officer from May 1, 2007 to September 27, 2007. Mr. Schwartz has been President and Chief Executive Officer of M & F Worldwide since September 2007 and prior to that time he served as Executive Vice President and General Counsel of M & F Worldwide since 1996. Mr. Schwartz has been Executive Vice Chairman and Chief Administrative Officer of MacAndrews & Forbes Holdings Inc. and various affiliates since October 2007 and has been Executive Vice President and General Counsel of MacAndrews & Forbes Holdings Inc. and various affiliates since 1993 and was Senior Vice President of MacAndrews & Forbes Holdings Inc. and various affiliates from 1989 to 1993. Mr. Schwartz is also a director of the following organizations which are required to file reports under the Securities Exchange Act of 1934: Scientific Games Corporation, Revlon Consumer Products Corporation, Revlon Inc. and M & F Worldwide.

Code of Ethics

Although we do not have a code of ethics, as a wholly owned subsidiary of M & F Worldwide, each of our principal executive officer, principal financial officer and principal accounting officer is subject to M & F Worldwide’s Code of Business Conduct and Ethics. The Code is available on M & F Worldwide’s website at www.mandfworldwide.com.

Board of Directors

Our board of directors is currently composed of three individuals. These members are Charles T. Dawson, Paul G. Savas and Barry F. Schwartz. The exact number of members of our board is to be determined from time to time by resolution of a majority of our full board of directors.

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Board Committees

We do not have standing audit, nominating or compensation committees because we are a wholly owned subsidiary of M & F Worldwide. M & F Worldwide’s Audit Committee serves as our audit committee. The Audit Committee operates under a written charter which is available on M & F Worldwide’s website at www.mandfworldwide.com. The board of directors of M & F Worldwide has determined that each of the members of the Audit Committee is “independent” within the meaning of the NYSE listing standards applicable to audit committee members.

Item 11.   Executive Compensation

Compensation Discussion and Analysis

Organizational Structure.  We completed a significant business acquisition in 2007, the Harland Acquisition, which provides context for our current pay philosophy and practices. After we completed the Harland Acquisition, we changed our name on May 2, 2007 to “Harland Clarke Holdings Corp.” and reorganized our business and corporate structure along the following three business segments: Harland Clarke (which consists of the combined check and related products business of Clarke American and Harland), Harland Financial Solutions and Scantron. We refer to this reorganization as the “Post-Acquisition Corporate Reorganization.”

Named Executive Officers

Our 2008 named executive officers (“NEOs”) are:

•   Mr. Charles T. Dawson, President and CEO of the Company, beginning September 27, 2007;

•   Mr. Peter A. Fera, Jr., CFO of the Company, beginning September 27, 2007;

•   Mr. Jeffrey Heggedahl, President and CEO of Scantron, beginning May 2, 2007 until his resignation on February 17, 2009;

•   Mr. James D. Singleton, Executive Vice President Sales and Marketing of Harland Clarke, from May 31, 2007 to October 4, 2008; and Chief Operating Officer of Harland Clarke, beginning October 5, 2008;

•   Mr. Raju M. Shivdasani, President of Enterprise Solutions, a division of Harland Financial Solutions, beginning May 5, 2008;

•   Mr. A.O. Clemons, Jr., President of Risk Management and Compliance Solutions, a division of Harland Financial Solutions, beginning May 5, 2008; and

•   Mr. John O’Malley, President and CEO of Harland Financial Solutions, beginning May 2, 2007 until his resignation on April 15, 2008.

The M & F Worldwide Compensation Committee serves as our Compensation Committee.

The Compensation Committee and management of M & F Worldwide supervised the design and drafting of each of the long term incentive compensation plans for each NEO. In 2007, with the assistance of Mercer Consulting (“Mercer”), a compensation consultant, the Compensation Committee designed and approved the pay of our CEO, Mr. Dawson, and worked with him to determine the compensation of Messrs. Fera and Singleton. The compensation of Messrs. Heggedahl and O’Malley was determined by M & F Worldwide management, together with the Compensation Committee and Mercer. The compensation of Messrs. Shivdasani and Clemons, each a President of a division of Harland Financial Solutions, was determined by their existing employment agreements, which are discussed under “Employment Contracts for 2008” below. The Compensation Committee generally makes the final determination of each element of compensation for each of the NEOs, including base salary, annual bonus level, and long term incentive compensation awards.

Additionally, the CEO or President of each of our business segments determines the compensation of the senior executives reporting directly to him by using information from external parties such as Mercer and the counsel of Human Resource leaders with specialized expertise in compensation matters. Generally, business

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segments establish compensation levels near the midpoint of the market and adjust for performance and experience, as appropriate. While the Company subscribes to compensation surveys provided by Mercer, it does not conduct any formal compensation benchmarking.

Compensation Philosophy

The objectives of the Company’s compensation programs are to enable the Company to attract, retain, and motivate key talent and to reward achievement of short term and long term strategic business objectives and financial goals.

The material principles underlying the Company’s executive compensation policies and decisions include recognizing that quality talent is attracted and retained with quality pay packages and that our executives recognize through their pay structure that their personal success with us is subject to and conditioned on the success of our business segments. We set pay in a way we think best drives our executives to push the growth of our three principal business segments, Harland Clarke, Harland Financial Solutions and Scantron.

We use cash compensation, not equity compensation. We find a cash compensation system is easy to understand. It avoids the need to deal with cumbersome rules companies must follow when granting equity, and avoids shareholder dilution. We pay at a level that we believe makes up for the absence of equity.

The Compensation Committee (1) ensures that the compensation structure supports the Company’s business strategy and financial objectives, (2) evaluates each NEO’s performance in light of Company goals, (3) evaluates the recommended compensation plans for the Company’s executive officers other than the NEOs, (4) establishes performance objectives for the bonus plans and (5) reviews and approves recommendations on all significant aspects of the Company’s executive pay and benefit programs.

Compensation can increase or decrease materially in the event of a change in scope of position responsibilities, in light of individual and/or Company performance, and in response to business need. We generally do not take one element of pay into account when setting another pay element for the same executive, but we have designed target total compensation opportunities to be competitive. We do calculate target bonus as a percentage of base pay as we explain below. We view base plus bonus as an executive’s core pay, and we deliberately set the mix of base and bonus based on the responsibility the executive has for our financial performance.

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Compensation Elements

Overview of Compensation Components

Our executive compensation program includes the following elements:

Pay Element	What the Pay Element Rewards	Purpose of the Pay Element
Base Salary	•     Recognized leadership skills	•     Provides base level of monthly income not subject to performance risk
	•     Experience and expertise in the position	•     Makes overall pay package more competitive
	•     Demonstrated prior achievement of Company and personal goals
Annual Executive Bonus Plan	•     Executive’s contributions towards our achievement of annual adjusted EBITDA target	•     Focuses executive on achievement of annual goal most important to the Company and investors
	•     Recognizes executive’s direct responsibility for our annual adjusted EBITDA achievements	•     Exposes executive to risk of not receiving pay or receiving diminished pay if Company underperforms
	•     Gives executive direct motivation to help Company achieve annual performance targets with significant upside for achieving exceptional results
Long-Term Incentive Compensation Plan	•     Achievement of sustained growth	•     Keeps executive focused on long term growth of the Company
	•     Achievement of cumulative performance targets over a 3-year period	•     Keeps executive personally invested in the implementation of the Company’s long term growth plan
401(k) and Deferred Compensation Plan	•     Long-term service with the Company	•     Helps executive prepare for retirement
		•     Makes overall pay package more competitive
	•     Provides retention incentive
Additional Benefits and Perquisites	•     Continued service with the Company	•     Makes overall pay package more competitive
	•     Payments in-kind may foster added Company loyalty in a way added cash pay does not
Termination Benefits	•     Continued service in circumstances under which executive’s job is at risk	•     Keeps executive focused on job and performance in best interest of Company even if executive works himself or herself out of a job

Role Of Executive Officers In Compensation Process

Mr. Dawson recommends business performance targets and objectives to the Compensation Committee in his role as CEO. The Compensation Committee evaluates the performances of and recommends compensation for executive officers. Before September 27, 2007, Mr. Dawson did not participate with the Compensation

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Committee in recommending or setting pay for our other NEOs, other than Mr. Fera; however, he has done so for all of our NEOs other than himself in 2008.

The Compensation Committee evaluates all the compensation policies and decisions for all senior executive officers. Targets are set consistent with annual budgets presented to and approved by the Compensation Committee. The Company has a strong history of achieving performance over and above target levels and is confident it can achieve its targets if its management team satisfies individual and collective performance objectives.

Effective January 1, 2008, Mr. Dawson’s base salary increased to $1,000,000 and Mr. Fera’s base salary increased to $450,000. These changes reflect, among other things, the transition of Mr. Dawson from President and CEO of Harland Clarke to President and CEO of the Company and the transition of Mr. Fera from CFO of Harland Clarke to CFO of the Company. As a result of his increased responsibilities following the Data Management Acquisition, Mr. Heggedahl’s salary increased to $600,000, and he received an increased portion of the M & F LTIP bonus pool, described and defined below under “The 2008 M & F Long Term Incentive Compensation Plan”. As a result of, among other things, Mr. Singleton’s transition to Chief Operating Officer, Mr. Singleton’s base salary was increased to $500,000 and his annual cash bonus was increased to 100% of his base salary if target is attained and increases ratably up to a maximum of 150% if 145.1% of the targets are achieved. In addition, in 2009 Mr. Singleton received an increased portion of the M & F LTIP bonus pool, described and defined below under “The 2008 M & F Long Term Incentive Compensation Plan,” which at target would result in an additional $300,000 payment.

Mr. Shivdasani’s and Mr. Clemons’ responsibilities increased. As part of Mr. Shivdasani’s and Mr. Clemons’s increased responsibilities, we increased their base salaries to $375,000 and $360,000, respectively, and increased their bonus potentials and awarded each of them an increased portion of the M & F LTIP bonus pool, as defined and described below.

Compensation Consultants and Benchmarking

The Compensation Committee retained Mercer as a compensation consultant in 2007 in connection with the Harland Acquisition. Mercer identified target total compensation for our NEOs and advised the Compensation Committee on changes to executive compensation during 2007 and 2008. Mercer used publicly available data from comparable companies with revenues of $1.0 billion to $2.5 billion when analyzing our executives’ pay programs. Although the Compensation Committee considered Mercer’s analysis when setting our executives’ pay, it did not specifically benchmark our executives’ pay against the pay provided to executives of any other company or companies; rather, the Compensation Committee referred to Mercer’s analysis only as a general guide in the amount and forms of compensation provided to executives of other companies.

Elements of Compensation

Base Salary  We determine an NEO’s base pay by evaluating the NEO’s individual leadership competencies, achievement of personal goals in support of the Company objectives and position-critical skills. Management of M & F Worldwide conducts this evaluation together with Mr. Dawson, where appropriate, and discusses it with the NEO. Management of M & F Worldwide recommends a pay level to the Compensation Committee, and may supply the Compensation Committee with an analysis provided by Mercer, if a recommended change in pay is significant. The Compensation Committee then decides the base pay level.

We feel that a substantial portion of an executive’s core pay (base and bonus) should be subject to the risk of not being paid if that executive is at least partially responsible for our financial performance. The analysis of how much direct responsibility our executives have for our performance targets determines how much of the executive’s core pay should be at risk.

The Annual Executive Bonus Plan  The amount of bonus paid to our NEOs is tied directly to the Company’s performance and the NEO’s individual performance. The 2008 annual bonus reflected our development and progress following the Harland Acquisition and Post-Acquisition Corporate Reorganization. We want our annual bonus program to properly reward our NEOs for their individual performances and

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contributions to our company. Each NEO’s bonus targets were set based on adjusted EBITDA for the principal business segment for which the NEO is responsible. The definition of adjusted EBITDA varies slightly for each of our business segments, reflecting the appropriate adjustments we make to that business’s costs, earnings and revenue. We discuss adjusted EBITDA in more detail in “Why We Use Adjusted EBITDA As a Performance Measure” below.

We base the bonus plan on achievement of the annual adjusted EBITDA target. As illustrated in the chart below, the amount of bonus opportunity is tied to a percentage of salary increasing incrementally as performance against goal increases incrementally. If at least 90% of target is not achieved, then no bonus will be paid. The bonuses were designed to be compliant with the performance-based exception of Section 162(m) of the Internal Revenue Code (the “Code”). Each NEO earned an executive bonus from the Company during 2007 and 2008 which was paid on March 8, 2008 and anticipated to be paid March 13, 2009, respectively.

The following chart sets forth the base salary, bonus potential and actual bonus paid for 2007 and anticipated to be paid for 2008 for each of our NEOs with respect to the annual bonus plan:

	Base Salary			Target EBITDA		Target Bonus as
NEO	for 2008			%		% of Base Salary		2007 Bonus		2008 Bonus
Charles T. Dawson	$	1,000,000			90-145.1+		90-175	$	901,034		$1,250,000
Peter A. Fera, Jr.	$	450,000			90-145.1+		90-150	$	278,844		$450,000
Jeffrey Heggedahl	$	600,000			90-125.1+		65-100	$	252,404		$450,000
James D. Singleton	$	500,000			90-145.1+		90-150	$	278,629		$500,000
Raju M. Shivdasani	$	375,000			90-125.1+		52-80	$	158,700		$240,000
A.O. Clemons, Jr.	$	360,000			90-125.1+		52-80	$	152,352		$230,400
John O’Malley	$	236,538	(1)		90-150.1+		95-125	$	507,250		$222,643

(1) This represents the amount of base salary Mr. O’Malley received prior to his resignation on April 15, 2008.

Why We Use Adjusted EBITDA As a Performance Measure

Adjusted EBITDA is a non-GAAP measure representing EBITDA (net income before interest expense, income taxes, depreciation and amortization) adjusted to reflect the impact of a number of items the Company does not consider indicative of its ongoing performance such as restructuring costs, certain non-operational items, group management fees, acquisition-related expenses, certain stand-alone costs, and other non-cash adjustments. In certain instances, EBITDA targets are also adjusted slightly depending on the specific business segment. In addition, a measure that is very similar to adjusted EBITDA is used to measure covenant compliance under the Company’s debt agreements, and securities analysts often use adjusted EBITDA (or similar measures) to evaluate the performance of the Company. The Company believes adjusted EBITDA is the best measure of its performance for the foregoing reasons and also because it excludes acquisition-related expenses.

The 2008 M & F Worldwide Long Term Incentive Compensation Plan (the “M & F LTIP”).  The M & F LTIP is a three year cash-based plan tied to multiyear Company and business segment performance, effective January 1, 2008, covering fiscal years 2008, 2009 and 2010. All pay-outs to the executives will be made, assuming the cumulative performance threshold is met, at the end of the three year cycle. While the Company expects the targets under the M & F LTIP to be met, the Company is not certain it will achieve or exceed the targets. All of the NEOs participated in the M & F LTIP in 2008. We consider the best approach going forward is to (a) establish targets within 90 days of the beginning of each year the plan is in effect which demonstrate growth and benefit to shareholders of M & F Worldwide, and (b) compensate executives only if those targets are achieved on a cumulative basis over a three year period, thus providing a clear indication of sustained growth. We established the M & F LTIP to reflect this approach. If the executive is terminated without cause, he would receive a pro rata payment in respect of the time elapsed, only if targets are achieved, and the payments, if any, would be paid out at the end of the three year cycle. No payouts will be made if actual three year results are below 90% of the cumulative adjusted EBITDA targets. If results are between 90% and 100% of cumulative adjusted EBITDA target, the M & F LTIP will pay out a ratable

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amount between 50% and 100%. The M & F LTIP participants will also share in 2.3% and 2.7%, respectively, of cumulative three year excess over target, up to a maximum of 120% of cumulative adjusted EBITDA over target for business segment results and Company-wide results. Targets under the M & F LTIP are bifurcated, granting awards with respect to each executive based 50% on performance of the executive’s individual business segment and 50% on consolidated Company-wide results. This structure is necessary because there are now three separate and distinct business segments, each with their own challenges, risks and opportunities, but there remains the opportunity for the business segments to assist each other in their individual growth. The target payout amount to all participants in the M & F LTIP as approved by the Board of Directors of M & F Worldwide at the end of the three-year cycle, assuming 100% of the target is achieved, is $16.5 million in the aggregate. The target payout amount to our NEOs at the end of the three-year cycle, assuming 100% of the target is achieved, is approximately $9.9 million in the aggregate.

We are not disclosing the performance targets and actual performance measures for these goals because they represent confidential financial information that we do not disclose to the public, and we believe that disclosure of this information would cause us competitive harm because our direct competitors would know our historic financial budgets with respect to each of our business segments. In our industry segments, such information would give our competition a particular advantage over us because we are engaged in highly competitive industries which are very sensitive to pricing decisions, customer wins and losses, and most importantly customer perception. We would be at a significant disadvantage with respect to our customers if our competitors were able to compare themselves to us or draw inferences, particularly with respect to our pricing and profit margins, from our budgets and targets. We believe that these performance goals are difficult to achieve for the following reasons, among others: (i) the industries in which we are involved are mature industries which makes growth more challenging; and (ii) we are subject to both volatile customer wins and losses and customer bidding processes.

Post Employment Compensation.  Payments to be made to executives in connection with termination without cause are in the form of severance and the temporary continuation of other benefits that are set forth in an individual’s employment agreement. We want our executives to always make business decisions that put the Company’s interests before their own. We encourage them to feel comfortable making difficult decisions for us which might not otherwise be in their own long-term best interests by offering severance which would generally replace the income they would have received for the following one to two years after their termination of employment if we terminate them without cause. Our severance elements are designed to offer this basic replacement.

We do not offer change in control protection, and we do not provide tax gross-ups if our NEOs are subject to the so-called “golden parachute excise tax”, a special tax under section 4999 of the Code on unusually large payments (in comparison to historic compensation) made in connection with a change in control.

In the event of termination with cause, post employment compensation is forfeited.

Other benefits and perquisites are a minor part of executive compensation offered in order to provide a competitive total compensation and benefits package. Executive officers participate in benefit plans available to all employees and on the same terms as similarly situated employees, such as group medical insurance and participation in and matching through the Company sponsored 401(k) plan. Executive officers also receive benefits available to other officers such as a monthly car allowance, life insurance, annual physicals and a cell phone. Some executive officers are also provided private country club membership. Mr. Dawson and no other NEO is provided a leased company car rather than a car allowance. Mr. Singleton is permitted to travel first class, and Mr. Dawson is permitted to travel first class or by charter aircraft.

Tax Considerations Relating to Executive Compensation

Section 162(m) of the Internal Revenue Code

The Compensation Committee’s general policy is that compensation should qualify to be tax deductible to the Company for federal income tax purposes. Under Section 162(m) of the Code, compensation paid to

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certain members of senior management in excess of $1 million per year is not deductible unless the compensation is “performance-based” as described in the regulations under Section 162(m) of the Code. Compensation is generally “performance-based” if it is determined using pre-established objective formulas and criteria approved by stockholders. The compensation awards under our annual bonus program and the M & F LTIP are generally designed to be tax deductible to us under the performance-based compensation exception to Section 162(m) of the Code, if and to the extent we become subject to Section 162(m) of the Code.

Report of the Board Of Directors

We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board of Directors that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

Submitted by:	Charles T. Dawson
	Paul G. Savas
	Barry F. Schwartz

SUMMARY COMPENSATION TABLE FOR FISCAL YEAR 2008

										Change In
										Pension
										Value and
										Nonqualified
								Non-Equity		Deferred
								Incentive Plan		Compensation		All Other
			Salary		Bonus			Compensation		Earnings		Compensation		Total
Name and Principal Position	Year		($)		($)			($)(ii)		($)		($)(iv)		($)
Charles T. Dawson President & Chief Executive Officer		2008		993,654		—			1,250,000		—		248,682		2,492,336
		2007		840,192		—			5,085,508		40		151,820		6,077,560
		2006		587,500		—			1,002,750		—		63,520		1,653,770
Peter A. Fera, Jr. Executive Vice President & Chief Financial Officer		2008		445,769		—			450,000		—		63,937		959,706
		2007		348,077		—			1,115,738		5		47,228		1,511,048
		2006		292,308		—			322,450		—		142,000		756,758
Jeffrey Heggedahl, Former President of Scantron		2008		565,385		—			555,263		—		94,042		1,214,690
		2007		326,384		1,079,568	(i)		252,404		—		134,480		1,792,836
James D. Singleton, Chief Operating Officer of Harland Clarke		2008		493,654		—			500,000		—		71,999		1,065,653
Raju M. Shivdasani, President Enterprise Solutions, a division of Harland Financial Solutions		2008		375,000		—			270,075		—		35,721		680,796
A.O. Clemons, Jr., President, Risk Management & Compliance Solutions, a division of Harland Financial Solutions		2008		360,000		—			254,460		—		25,708		640,168
John O’Malley Former President and CEO of Harland Financial Solutions		2008		236,538		—			90,225		—		592,132		918,895
		2007		489,148		300,000	(iii)		507,250		—		24,689		1,321,087

(i) Mr. Heggedahl received a one-time post-Harland Acquisition payment equal to three times his base salary at the time of the Harland Acquisition which was paid in May 2007 pursuant to his previous employment agreement in effect with Harland.

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(ii) The compensation listed in this column for 2008 consists of amounts earned during 2008, and anticipated to be paid by March 13, 2009, under the annual Harland Clarke Senior Management Bonus Plan. Additionally, on April 25, 2008, Messrs. Heggedahl, Shivdasani, Clemons and O’Malley each received payments under the legacy John H. Harland 2007 Long-Term Cash Incentive Plan. Such amounts are included in this table and are as follows: Mr. Heggedahl, $105,263; Mr. Shivdasani, $30,075; Mr. Clemons, $24,060; and Mr. O’Malley, $90,225. An additional $105,262, $30,075 and $24,060 will be paid to Messrs. Heggedahl, Shivdasani and Clemons under the legacy John H. Harland 2007 Long-Term Cash Incentive Plan on each of the three anniversaries of April 25, 2008, subject to the executive’s continued employment on each of the payout dates.

With respect to Messrs. Dawson and Fera, this column for 2007 also consists of amounts paid out in connection with the early termination and payout of the 2005 M & F Long Term Incentive Compensation Plan, which amounts are as follows: Mr. Dawson, $4,184,474, and Mr. Fera, $836,894.

In addition, as a result of his termination of employment, Mr. O’Malley will receive a payment of $222,643, anticipated to be paid on March 13, 2009 with respect to the annual bonus for 2008, provided he complies with the post-employment restrictive covenants and other provisions of his employment agreement. This amount is not included in the column for 2008.

(iii)	Mr. O’Malley received a one-time post-Harland Acquisition signing bonus.
(iv)	All Other Compensation:

All Other Compensation for Fiscal Year 2008

											Employer
									Term Life		Contributions to
									& Exec		401(k) plan and
							Country		AD&D		Supplemental
			Car		Relocation		Club		Insurance		Excess Benefit		Tax		All Other
			Allowance		Costs		Fees		Premiums		Plan		Gross-Up		Compensation		Severance		Total
Name	Year		($)(i)		($)		($)(ii)		($)(iii)		($)(iv)		($)(v)		($)(vi)		($)		($)
Charles T. Dawson		2008		29,305		—		6,748		2,296		197,931		12,402		—		—		248,682
		2007		17,126		—		4,822		2,163		119,767		7,942		—		—		151,820
		2006		15,843		—		3,880		2,162		33,783		7,852		—		—		63,520
Peter A. Fera, Jr.		2008		5,940		—		4,051		632		53,314		—		—		—		63,937
		2007		5,940		—		4,726		595		35,967		—		—		—		47,228
		2006		5,940		102,914		1,993		572		14,048		16,533		—		—		142,000
Jeffrey Heggedahl		2008		3,960		45,898		—		7,262		36,922		—		—		—		94,042
		2007		—		128,447		—		785		—		5,248		—		—		134,480
James D. Singleton		2008		5,940		—		5,340		632		60,087		—		—		—		71,999
Raju M. Shivdasani		2008		—		—		—		11,504		24,217		—		—		—		35,721
A.O. Clemons, Jr.		2008		—		—		—		3,199		22,509		—		—		—		25,708
John O’Malley		2008		—		—		—		3,397		36,307		12,137		49,906		490,385		592,132
		2007		—		—		6,452		1,227		—		—		17,010		—		24,689

(i)	Comprised of (i) car allowance in the case of Messrs. Fera, Singleton and Heggedahl and (ii) the aggregate incremental cost to the Company of the leased vehicle and fuel in the case of Mr. Dawson, which is calculated as the total cost of the lease payments on the car, the insurance and insurance deductibles relating to the car, and the cost of gasoline used in the car. Messrs. Fera, Singleton and Heggedahl are eligible to receive a pre-set amount per month as a car allowance. Mr. Dawson’s employment agreement states that the Company will provide him with a leased vehicle at the Company’s expense.
(ii)	The Company reimburses each executive’s monthly country club dues if there is a business reason for the executive to use the club.
(iii)	For 2008, amounts include (i) executive life premiums, (ii) executive AD&D premiums and (iii) supplemental LTD premiums.
(iv)	For 2008 consists of (i) employer contributions to the 401(k) plan of $9,200 for each NEO and (ii) employer contributions to a supplemental non-qualified excess benefit plan, the Benefits Equalization Plan described below in the Nonqualified Deferred Compensation Table, in the following amounts: Mr. Dawson $188,731, Mr. Fera $44,114, Mr. Heggedahl $27,722, Mr. Singleton $50,887, Mr. Shivdasani $15,017, Mr. Clemons $13,309 and Mr. O’Malley $27,107.
(v)	For 2008 consists of the tax gross-up on the personal use of a company vehicle by Mr. Dawson, and sporting event tickets for Mr. O’Malley.
(vi)	Consists of COBRA subsidy and outplacement for 2008, and tickets to sporting events for 2007 and 2008.

The elements of NEO compensation are based upon the applicable employment contract, each NEO’s M & F LTIP agreement, Company policy regarding employee benefit plan participation (401(k) benefits, welfare and group insurance benefits), car allowance, cell phone use, or application of past practice. Specifically, the salaries are set under the terms of the respective employment contracts. During 2008 each of our NEOs had an

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employment contract in effect. The material terms of these employment contracts during 2008 are detailed below under “Employment Contracts for 2008.” Bonus plans for each of our NEOs are outlined within their respective employment contract and M & F LTIP agreement. Participation in the 401(k) and our nonqualified deferred compensation plan, the Benefits Equalization Plan, is pursuant to the plan documents. All other compensation is provided pursuant to written Company policy or practice according to their respective positions.

Employment Contracts for 2008

Mr. Dawson

On February 13, 2008, Harland Clarke Holdings entered into an employment agreement with Mr. Dawson, effective as of January 1, 2008, which superseded his prior employment agreement with Harland Clarke Holdings dated as of May 29, 2007. This employment agreement, whereby Mr. Dawson is employed by Harland Clarke Holdings as President and Chief Executive Officer of Harland Clarke Holdings and the Harland Clarke Business (as defined in the employment agreement), will continue until December 31, 2010, subject to earlier termination as described in the “Potential Payments upon Termination or Change-in-Control” section below. Under this employment agreement, Mr. Dawson’s annual base salary is $1,000,000 and he is entitled to receive annual bonuses based on the attainment of a certain percentage of Harland Clarke Business EBITDA targets. Pursuant to this agreement, Mr. Dawson participates in the M & F LTIP, for which he is eligible to receive a portion of the bonus pool attributed to the Harland Clarke Business and a portion of the bonus pool attributed to the Company. Mr. Dawson was also granted an additional portion of the bonus pool under the M & F LTIP that is based solely on Company-wide results, in recognition of his increased responsibility for Company results after taking the additional position as President and Chief Executive Officer of Harland Clarke Holdings. As a result of his new employment agreement, Mr. Dawson’s annual bonus was raised from 105% to 125% of his base salary if target is attained and increases ratably up to a maximum of 175% of his base salary if 145.1% of the targets are attained.

Mr. Fera

On February 13, 2008, Harland Clarke Holdings entered into an employment agreement with Mr. Fera, effective as of January 1, 2008, for a term which expires on December 31, 2009, subject to earlier termination as described in the “Potential Payments upon Termination or Change-in-Control” section below. This employment agreement supercedes his prior employment agreement with Harland Clarke Holdings dated May 2, 2007. Under his employment agreement, pursuant to which Mr. Fera serves as Executive Vice President and Chief Financial Officer of the Harland Clarke Business and Chief Financial Officer of Harland Clarke Holdings, Mr. Fera receives an annual base salary of $450,000. Mr. Fera is also entitled to receive annual bonuses based on the attainment of certain percentages of EBITDA targets. He is also entitled to receive a portion of the M & F LTIP bonus pool attributable to the Harland Clarke Business and a portion of the bonus pool attributed to the Company, and he receives other standard officer benefits. As a result of his new employment agreement, Mr. Fera’s annual cash bonus was increased from 78.75% to 100% of his base salary if target is attained and increases ratably up to a maximum of 150% if 145.1% of the targets are attained.

Mr. Heggedahl

On May 5, 2008, Harland Clarke Holdings and Scantron entered into an agreement with Mr. Heggedahl effective as of January 1, 2008, which superseded his prior employment agreement with Harland Clarke Holdings dated as of May 29, 2007. This employment agreement, whereby Mr. Heggedahl served as President and Chief Executive Officer of Scantron was terminated February 17, 2009, upon Mr. Heggedahl’s resignation. Under this employment agreement, Mr. Heggedahl’s annual base salary was $600,000. He was entitled to receive annual bonuses based on the attainment of a certain percentage of Scantron EBITDA targets. Mr. Heggedahl participates in the M & F LTIP, for which he is eligible to receive a portion of the bonus pool attributed to Scantron and a portion of the bonus pool attributed to the Company. Mr. Heggedahl receives other standard officer benefits. Mr. Heggedahl’s employment agreement superseded all his prior employment agreements with Scantron and its affiliates. Mr. Heggedahl resigned his employment with the Company and Scantron and as a director of the Company effective February 17, 2009.

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Mr. Singleton

On February 7, 2008, Harland Clarke Holdings entered into an employment agreement with Mr. Singleton, effective as of January 1, 2008, which superseded his prior employment agreement with Harland Clarke Corp. dated May 2, 2007. This employment agreement, whereby Mr. Singleton is employed by Harland Clarke Holdings as Executive Vice President of the Harland Clarke Business, will continue until December 31, 2009, subject to earlier termination as described in the “Potential Payments upon Termination or Change-in-Control” section below. Under this employment agreement, Mr. Singleton receives an annual base salary of $500,000, effective January 1, 2008. He is entitled to receive annual bonuses based on the attainment of a certain percentage of Company EBITDA targets. Mr. Singleton is also entitled to receive a portion of the M & F LTIP bonus pool attributable to the Harland Clarke Business and a portion of the bonus pool attributed to the Company, and he receives other standard officer benefits. As a result of his new employment agreement, Mr. Singleton’s annual cash bonus was increased from 78.75% to 100% of his base salary if target is attained and increases ratably up to a maximum of 150% if 145.1% of the targets are attained.

Mr. Shivdasani

On May 5, 2008, Harland Clarke Holdings and Harland Financial Solutions entered into an employment agreement with Mr. Shivdasani, effective as of January 1, 2008. This employment agreement, whereby Mr. Shivdasani is employed by Harland Financial Solutions as President of the Enterprise Solutions Group, will continue until December 31, 2010, subject to earlier termination as described in the “Potential Payments upon Termination or Change-in-Control” section below. Under this employment agreement, Mr. Shivdasani receives an annual base salary of $375,000. He is entitled to receive annual bonuses based on the attainment of a certain percentage of Harland Financial Solutions EBITDA targets. Mr. Shivdasani is also entitled to receive a portion of the M & F LTIP attributable to the Harland Financial Solutions business and a portion of the bonus pool attributed to the Company, and he receives other standard officer benefits.

Mr. Clemons

On May 5, 2008, Harland Clarke Holdings and Harland Financial Solutions entered into an employment agreement with Mr. Clemons, effective as of January 1, 2008. This employment agreement, whereby Mr. Clemons is employed by Harland Financial Solutions as President of Risk Management and Compliance Solutions, will continue until December 31, 2010, subject to earlier termination as described in the “Potential Payments upon Termination or Change-in-Control” section below. Under this employment agreement, Mr. Clemons receives an annual base salary of $360,000. He is entitled to receive annual bonuses based on the attainment of a certain percentage of Harland Financial Solutions EBITDA targets. Mr. Clemons is also entitled to receive a portion of the M & F LTIP attributable to the Harland Financial Solutions business and a portion of the bonus pool attributed to the Company, and he receives other standard officer benefits.

Mr. O’Malley

On May 29, 2007, Harland Clarke Holdings and Harland Financial Solutions entered into an employment agreement with Mr. O’Malley under which Mr. O’Malley served as President and Chief Executive Officer of Harland Financial Solutions. Mr. O’Malley’s employment agreement superseded all his prior employment agreements with Harland Financial Solutions and its affiliates including the agreement between him and Harland, dated as of December 21, 2005 (as amended). This employment agreement became effective as of May 2, 2007 and was terminated effective April 15, 2008, upon Mr. O’Malley’s resignation. Under his employment agreement, Mr. O’Malley received an annual base salary of $750,000. He was entitled to receive annual bonuses based on the attainment of a certain percentage of Harland Financial Solutions EBITDA targets. Mr. O’Malley was eligible to participate in the M & F LTIP under which he was eligible to receive a portion of the bonus pool attributed to Harland Financial Solutions and a portion of the bonus pool attributable to the Company. Mr. O’Malley received other standard officer benefits.

As discussed below, Mr. O’Malley resigned his employment with Harland Financial Solutions and as a director of the Company effective as of April 15, 2008. As a result of his termination of employment, Mr. O’Malley will receive a payment of $222,643, anticipated to be paid on March 13, 2009 with respect to

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the annual bonus for 2008, and he may receive a payment ranging from $0 to $232,117 with respect to the M & F LTIP, payable after 2010.

Amendments to Employment Contracts and Compensation Plans for 2008

Section 409A of the Code

On December 31, 2008, we amended certain compensatory plans, contracts and arrangements in order to implement changes to comply with or be exempt from Section 409A of the Code (“Section 409A”). Those plans, contracts and arrangements included (i) the M & F LTIP and (ii) employment agreements with our NEOs, each of which are described above under “Employment Contracts for 2008.” The changes made to these plans, contracts and arrangements have been made for the purpose of conforming to the requirements of Section 409A.

GRANTS OF PLAN-BASED AWARDS
FOR FISCAL YEAR 2008

	Award Type	Threshold		Target		Maximum (iv)
Name	(i),(ii)	($)		($)		($)
Charles T. Dawson	Annual Bonus		900,000		1,250,000		1,750,000
	Segment 2008-2010 LTIP		787,500		1,575,000
	Consolidated 2008-2010 LTIP		787,500		1,575,000
	Consolidated 2008-2010 LTIP (iii)		300,000		600,000
Peter A. Fera, Jr.	Annual Bonus		405,000		450,000		675,000
	Segment 2008-2010 LTIP		247,500		495,000
	Consolidated 2008-2010 LTIP		247,500		495,000
Jeffrey Heggedahl	Annual Bonus		390,000		450,000		600,000
	Segment 2008-2010 LTIP		450,000		900,000
	Consolidated 2008-2010 LTIP		450,000		900,000
James D. Singleton	Annual Bonus		450,000		500,000		750,000
	Segment 2008-2010 LTIP		247,500		495,000
	Consolidated 2008-2010 LTIP		247,500		495,000
Raju M. Shivdasani	Annual Bonus		195,000		225,000		300,000
	Segment 2008-2010 LTIP		262,500		525,000
	Consolidated 2008-2010 LTIP		262,500		525,000
A.O. Clemons, Jr.	Annual Bonus		187,200		216,000		288,000
	Segment 2008-2010 LTIP		262,500		525,000
	Consolidated 2008-2010 LTIP		262,500		525,000

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(i)	The amounts listed in this column under the heading Annual Bonus represent the threshold, target and maximum amount which may be payable to each NEO pursuant to the annual executive bonus plan, as described in more detail above under “Elements of Compensation — The Annual Executive Bonus Plan.”
(ii)	The amounts listed in this column under the heading LTIP represent the threshold and target amount which may be payable in 2011 to each NEO at the end of the three year performance period (2008-2010) pursuant to the M & F LTIP, as described in more detail above under “Elements of Compensation — The 2008 M & F Worldwide Long Term Incentive Compensation Plan (the “M & F LTIP).” The first row in each column labeled LTIP represents the amount of the LTIP attributable to the performance of each NEO’s individual business segment at the end of the three year performance period and the second row in each column represents the amount attributable to consolidated Company results at the end of the three year performance period.
(iii)	Mr. Dawson received an additional grant under the M & F LTIP which represents the amount attributable to consolidated Company results at the end of the three year performance period as a result of increased responsibilities for the Company after taking the additional position as President and Chief Executive Officer of Harland Clarke Holdings.
(iv)	The M & F LTIP, which was designed to meet the requirements of Section 162(m) of the Code, was approved by the shareholders of M & F Worldwide in 2008. Under the terms of the LTIP, the maximum payout to any participant is $10 million. The actual payout to any participant is expected to be substantially lower than the maximum potential payout, which was provided for purposes of Section 162(m) of the Code.

NONQUALIFIED DEFERRED COMPENSATION TABLE FOR FISCAL YEAR 2008

	Registrant		Aggregate		Aggregate			Aggregate
	Contributions		Earnings		Withdrawals/			Balance
	in Last FY		in Last FY		Distributions			at Last FYE
Name	($)(i)		($)		($)			($)(ii)
Charles T. Dawson		188,731		20,102		—			429,820
Peter A. Fera, Jr.		44,114		3,612		—			81,155
Jeffrey Heggedahl		27,722		627		—			28,349
James D. Singleton		50,887		3,849		—			86,777
Raju M. Shivdasani		15,017		430		—			15,447
A. O. Clemons, Jr.		13,309		371		—			13,680
John O’Malley		27,107		682		(27,789	)		—

(i)

The amounts reported are included as part of “All Other Compensation” in the Summary Compensation Table.

(ii)

Reflects the total balance of the executive’s account as of the end of the Company’s 2008 fiscal year. Company contributions to the Benefits Equalization Plan reported in the Summary Compensation Table for the 2007 fiscal year are as follows: Mr. Dawson $110,767; and Mr. Fera $26,967. With respect to Messrs. Dawson and Fera, these amounts were reported in the “All Other Compensation — Employer Contributions to 401(k) plan and Supplemental Excess Benefit Plan” column.

Material Features of the Deferred Compensation Plan

Our deferred compensation plan is a non-elective, nonqualified deferred compensation plan known as the Benefits Equalization Plan, or BEP. It serves as a supplemental benefit program for employees whose Company contributions to the 401(k) plan are limited due to IRS annual qualified plan compensation limits. All employees whose eligible earnings are greater than the IRS qualified plan compensation limit are automatically eligible for this benefit.

Employees may not defer income into this plan. We do not match contributions under our tax-qualified 401(k) plan in respect of pay above the tax-qualified plan compensation limits. Instead, we credit a notional contribution in respect of pay above the tax-qualified plan limits to the employee’s BEP account.

The BEP is an unfunded deferred compensation plan. Interest is compounded quarterly and credited to each participant’s account based upon the 10-Year U.S. Treasury Bond yield as in effect on the first business day of the plan year rounded to the next higher one-half percent, plus one percent. For plan year 2008, the rate was 5.0%. This methodology of applying interest is based on the language outlined in the BEP. Interest rates are provided annually by Mercer.

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Distributions are allowed only at termination, retirement, death, or disability and are paid in a single lump sum on the first day of the seventh month following the occurrence of such a qualifying event.

Potential Payments upon Termination or Change-in-Control

Each of our NEOs is entitled to certain payments and benefits in the event of termination of his employment. These payments and benefits are set forth in each of our NEO’s respective employment agreements, described herein. In the case of each employment agreement, the terms of these arrangements were set through the course of arms-length negotiations with each of the NEOs.

Each of Messrs. Dawson and Heggedahl will be entitled to continued payment of his base salary respectively for a period of two years after termination in the event he is terminated without cause or resigns for good reason.

Each of Messrs. Fera, Singleton, Shivdasani and Clemons will be entitled to continued payment of his base salary respectively for a period of 18 months after termination in the event he is terminated without cause or resigns for good reason.

In the case of termination without cause, or due to death or disability, or in the event of resignation for good reason, each of our NEOs would be entitled to receive: (i) a pro rata annual bonus for the year in which termination occurred, if it would have otherwise been payable but for the termination; (ii) any earned but unpaid annual bonus for the year prior to the year in which termination occurred; and (iii) a pro rata amount payable, if any, under the M & F LTIP in accordance with its terms, in each case, paid at the time and in the manner the bonus or M & F LTIP amount, as applicable, is paid to other executives.

In addition, in the case of termination of the employment of an NEO without cause, if the executive resigns for good reason, the executive will be entitled to receive:

•   continued participation in applicable welfare benefit plans for 12 months after termination; and

•   employer-subsidized welfare plan benefits for a period of 12 months after termination.

If the employment of any of our NEOs is terminated for cause, further compensation is forfeited, except for accrued and unpaid base salary.

Pursuant to the terms of the employment agreements of each of our NEOs, good reason means, without the advance written consent of the executive: (i) a reduction in the executive’s base salary; or (ii) a material and continuing reduction in the executive’s responsibilities, in each case which the Company fails to cure within 30 days of receiving notice from the executive of such an event.

In order to receive any of the payments or benefits described above which are payable upon termination of employment, the NEO must execute an irrevocable release of claims in favor of the Company.

Each NEO is also bound by a two-year non-competition covenant as well as a two-year non-solicitation covenant following termination of his employment. Breach of either the non-competition or the non-solicitation covenants will result in a cessation of payment of salary continuation and premium rates under the group health benefits. If the executive’s employment term is not renewed and the executive’s employment is terminated after the end of the term, other than for cause or disability, under certain circumstances the NEO will be subject to a one-year non-competition covenant and a one-year non-solicitation covenant.

None of our NEOs will receive any additional payments or benefits in the event there is a change in control of the Company, or his employment is terminated following a change in control of the Company.

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The following table sets forth payments which will be made to our NEOs in the event each is terminated without cause, or he resigns for good reason.

TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON
AS OF DECEMBER 31, 2008

							Executive
					Health/		Annual				Deferred
	Separation				Welfare		bonus				Compensation
Name &	Pay(i)		Vacation(ii)		Plans(iii)		Plan(iv)		Outplacement		Plan Balance(vi)		Total
Principal Position	($)		($)		($)		($)		Assistance(v)		($)		($)
Charles T. Dawson, President & CEO		2,000,000		11,077		6,583		1,250,000		30,000		429,820		3,727,480
Peter A. Fera, Jr. EVP & CFO		675,000		—		8,588		450,000		30,000		81,155		1,244,743
Jeffrey Heggedahl, Former President of Scantron		1,200,000		—		3,665		450,000		30,000		28,349		1,712,014
James D. Singleton Chief Operating Officer of Harland Clarke		750,000		—		8,588		500,000		30,000		86,777		1,375,365
Raju M. Shivdasani President Enterprise Solutions Group of Harland Financial Solutions		562,500		—		7,676		225,000		30,000		15,447		840,623
A. O. Clemons, Jr. President, Risk Management & Compliance Solutions of Harland Financial Solutions		540,000		—		7,676		216,000		30,000		13,680		807,356

(i) For each NEO, upon termination of the executive without cause or resignation for good reason (each as defined in each employment agreement), the executive is entitled to receive continued payment of base salary for the following periods: 24 months in the case of Messrs. Dawson and Heggedahl; and 18 months in the case of Messrs. Fera, Singleton, Shivdasani and Clemons.

(ii)	Upon termination, the executive is entitled to his earned and unused vacation for the current year. Effective January 1, 2008, we established a policy pursuant to which up to 40 hours of vacation may be carried over from year to year. Mr. Dawson is also entitled to his balance of frozen vacation of $11,077.
(iii)	For each NEO, upon termination of the executive without cause, or resignation for good reason, the executive is entitled to continued participation in applicable welfare benefit plans for 12 months after the termination and continued contribution by the Company to the employer portion of the employee premiums of welfare benefit plans for 12 months after the termination. The employer portion reflects employer cost for 2008 based on the employee’s enrollment in Dental, Medical, and Vision plans as of December 31, 2008.
(iv)	For each NEO, upon termination of the executive without cause, due to death or disability, or in the event the NEO resigns for good reason, the executive is entitled to receive a prorated annual bonus for the year in which the termination occurred if the executive would have been eligible to receive such bonus hereunder (including due to satisfaction of the Company of performance milestones) had the executive been employed at the time such annual bonus is normally paid. The amounts provided in this column assume that the bonus is paid at a level at which 100% of the target is achieved.
(v)	Upon termination, each executive is entitled to standard outplacement assistance for the key executive level of up to $30,000 which would be paid to a mutually agreed provider of outplacement services for a 12-month outplacement program.
(vi)	Upon termination, retirement, death, or disability, the executive’s total balance in the BEP is to be paid in a single lump sum on the first day of the seventh month following the occurrence of such an event. These amounts reflect the executive’s account balance as of December 31, 2008.

Mr. Heggendahl resigned from his employment effective February 17, 2009. In accordance with his employment agreement, he is entitled to receive severance payments in continuing installments over a two year period, provided he complies with the restrictive covenants and other provisions of his employment agreement. He will also be eligible for prorated bonus, outplacement services, COBRA and benefit subsidies and payment of his deferred compensation balance, provided he complies with the restrictive covenants and other provisions of his employment agreement.

Mr. O’Malley resigned from his employment effective April 15, 2008. In accordance with his employment agreement, he is entitled to receive severance payments in continuing installments over a two year period. He

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received cash severance payments of $490,385 during 2008, outplacement assistance of $9,000, COBRA and benefit subsidies of $7,156 and the payment of his deferred compensation balance of $27,789. Mr. O’Malley will continue to receive severance payments of $1,009,615 in continuing installments until April 2010, provided he complies with the restrictive covenants and other provisions of his employment agreement.

DIRECTORS’ COMPENSATION TABLE FOR FISCAL YEAR 2008

Change in

Pension Value

and Nonqualified

Non-Equity

Deferred

Fees Earned

Stock

Option

Incentive Plan

Compensation

All Other

Name

or Paid in Cash

Awards

Awards

Compensation

Earnings

Compensation

Total

Barry F. Schwartz(i)

—

—

—

—

—

—

—

Paul G. Savas(i)

—

—

—

—

—

—

—

Charles T. Dawson(ii)

—

—

—

—

—

—

—

Jeffrey Heggedahl(ii)

—

—

—

—

—

—

—

John O’Malley(ii)

—

—

—

—

—

—

—

(i)

Messrs. Schwartz and Savas received no compensation directly or indirectly from the Company. They provided services to the Company under the terms of a Second Amended and Restated Management Services Agreement between M & F Worldwide and MacAndrews & Forbes. Pursuant to the Second Amended and Restated Management Services Agreement, M & F Worldwide paid to MacAndrews & Forbes a fee of $2.5 million per calendar quarter, beginning as of May 1, 2007. The total amount paid to MacAndrews & Forbes in 2008 pursuant to the Second Amended and Restated Management Services Agreement was $10 million. In addition, M & F Worldwide paid to MacAndrews & Forbes a fee of $2 million in 2008 for services related to sourcing, analyzing, negotiating and executing the Data Management Acquisition.

(ii)

Messrs. Dawson, Heggedahl and O’Malley did not receive any compensation for their service as directors in 2008. Mr. O’Malley resigned as a director and an employee of the Company on April 15, 2008. Mr. Heggedahl resigned as a director and an employee effective February 17, 2009.

Item 12.   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

M & F Worldwide beneficially owns all the outstanding shares of our common stock. None of our executive officers or directors beneficially owns any of our common stock. The following table sets forth the total number of shares of M & F Worldwide’s common stock that each director, NEO or person known to us to be the beneficial owner of more than 5% of M & F Worldwide’s outstanding common stock beneficially owned as of February 26, 2009, and the percent of such common stock so owned. M & F Worldwide’s common stock is M & F Worldwide’s only outstanding voting stock. “Ownership” for this purpose is “beneficial ownership” as determined under the rules of the SEC, and such information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, a person beneficially owns a share if the person has sole or shared voting power or investment power with respect to the share or the person has the right to acquire the share within 60 days through the exercise of any option, warrant or right, through

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conversion of any security or under the automatic termination of any power of attorney or revocation of trust, discretionary account or similar arrangement.

	Number of Shares			Percent of
Name of Beneficial Owner	Beneficially Owned			Outstanding Shares
MFW Holdings One LLC 35 East 62 St., New York, NY 10065		7,248,000	(1)		37.5	%
Bay Harbour Management, L.C. 375 Park Avenue, New York, NY 10152		1,909,306	(2)		9.9	%
Dimensional Fund Advisors LP Palisades West, Building One 6300 Bee Cave Road, Austin, TX 78746		1,639,048	(3)		8.5	%
MFW Holdings Two LLC 35 East 62 St., New York, NY 10065		946,000	(1)		4.9	%
Ronald O. Perelman		200,000	(1)		1.0	%
Barry F. Schwartz		5,000			0.0	%
Charles T. Dawson		0			0.0	%
Jeffrey Heggedahl		0			0.0	%
Paul G. Savas		1,000			0.0	%
James D. Singleton		0			0.0	%
Raju M. Shivdasani		0			0.0	%
A. O. Clemons, Jr.		0			0.0	%
All directors and executive officers as a group (8 persons)		8,400,000	(4)		43.4	%

(1)	All of such shares of common stock are beneficially owned by Ronald O. Perelman. MFW Holdings One LLC and MFW Holdings Two LLC are wholly owned subsidiaries of MacAndrews & Forbes Holdings Inc., of which Mr. Perelman owns 100%. In addition, MacAndrews & Forbes Holdings Inc. may be deemed to share beneficial ownership of the 8,194,000 shares of common stock beneficially owned by MFW Holdings One LLC and MFW Holdings Two LLC and the 200,000 shares of common stock deemed beneficially owned by Mr. Perelman as a result of Mr. Perelman’s grant of restricted stock (an aggregate of 8,394,000 shares of common stock, representing approximately 43.4% of the common stock outstanding or deemed outstanding under the rules of the SEC), by virtue of MacAndrews & Forbes Holdings Inc.’s ownership of 100% of the common stock of MFW Holdings One LLC and MFW Holdings Two LLC and Mr. Perelman’s 100% ownership of MacAndrews & Forbes Holdings Inc.’s common stock. The shares so owned and shares of intermediate holding companies are, or may from time to time be, pledged to secure obligations of MacAndrews & Forbes Holdings Inc. or its affiliates.
(2)	Beneficial ownership is based on a statement on Schedule 13G filed by Bay Harbour Management, L.C. on February 13, 2009.
(3)	Beneficial ownership is based on a statement on Schedule 13G filed by Dimensional Fund Advisors LP on February 9, 2009.
(4)	Includes shares of common stock indirectly owned by Mr. Perelman through MacAndrews & Forbes Holdings Inc.

Item 13.   Certain Relationships and Related Transactions and Director Independence

Related Person Transactions Policy

As a wholly owned subsidiary of M & F Worldwide, we are subject to M & F Worldwide’s Code of Business Conduct and Ethics (the “Code”), which covers transactions and other activities by employees of M & F Worldwide and its subsidiaries (including our directors and officers) that give rise to conflicts of interest. The conflicts of interest policy in the Code limits or prohibits, among other things, transactions between the employee and M & F Worldwide and transactions by the employee with (and employment with or

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substantial investments in) an enterprise that is a present or potential supplier, customer or competitor, or that engages or may engage in any other business with M & F Worldwide. In addition, the policy also prohibits employees from appropriating for personal benefit business opportunities that should be first offered to M & F Worldwide. The Code also limits similar transactions by family members of employees. Any waivers of the Code must be approved by either the Board of Directors or the Audit Committee of M & F Worldwide. As a Delaware corporation, we are also subject to the requirement for disinterested director or shareholder approval of transactions by us with our directors and officers, as set forth in Section 144 of the Delaware General Corporation Law.

All of the transactions reported under Item 13 of this Annual Report on Form 10-K that occurred during our last completed fiscal year were not subject to the Code because they were not transactions involving conflicts of interest covered by the Code. All of the reported transactions were approved by our Board of Directors, and all such transactions entered into after the date of the Indenture governing our Senior Notes complied with the limitations on affiliate transactions contained in that Indenture.

Management Services Agreement

During 2008, 2007 and 2006, certain executive officers of M & F Worldwide were executives of MacAndrews & Forbes. M & F Worldwide did not compensate such executive officers, but, in 2008, 2007 and 2006 M & F Worldwide paid to MacAndrews & Forbes $10 million, $8.33 million, and $3.25 million, respectively, for the value of the services provided by such officers to M & F Worldwide pursuant to a management services agreement. Under the terms of this management services agreement, MacAndrews & Forbes provides the services of M & F Worldwide’s Chief Executive Officer and Chief Financial Officer, as well as other management, advisory, transactional, corporate finance, legal, risk management, tax and accounting services. On May 24, 2006, M & F Worldwide and MacAndrews & Forbes entered into the Amended Management Services Agreement to reflect the increased scope of the management services provided by MacAndrews & Forbes to M & F Worldwide and the increased size of M & F Worldwide after the acquisition of Clarke American. Under the Amended Management Services Agreement, M & F Worldwide paid to MacAndrews & Forbes a pro rata portion of an annual fee of $5.0 million in respect of the period of 2007 prior to May 1, 2007.

On June 20, 2007, M & F Worldwide and MacAndrews & Forbes entered into the Second Amended and Restated Management Services Agreement to reflect the increased scope of the management services provided by MacAndrews & Forbes to M & F Worldwide and the increased size of M & F Worldwide after the Harland Acquisition. Under the Second Amended and Restated Management Services Agreement, M & F Worldwide paid to MacAndrews & Forbes a pro rata portion of an annual fee of $10.0 million, paid quarterly, beginning as of May 1, 2007.

The Second Amended and Restated Management Services Agreement automatically renewed on January 1, 2009 and extended for a one-year renewal period terminating on December 31, 2009 unless either party gives the other party written notice at least 90 days prior to the end of the renewal period. The Second Amended and Restated Management Services Agreement will also terminate in the event that MacAndrews & Forbes Inc. or its affiliates no longer in the aggregate retain beneficial ownership of 10% or more of the outstanding common stock of M & F Worldwide. The Second Amended and Restated Management Services Agreement also contains customary indemnities covering MacAndrews & Forbes Inc. and its affiliates and personnel.

M & F Worldwide paid $10.0 million to MacAndrews and Forbes in the second quarter of 2007 for services related to sourcing, analyzing, negotiating and executing the Harland Acquisition. In addition, in February 2008, M & F Worldwide purchased all of the membership interests of Data Management LLC from Pearson Inc. in the Data Management Acquisition. M & F Worldwide paid $2.0 million to MacAndrews & Forbes for services related to sourcing, analyzing, negotiating and executing the Data Management Acquisition.

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Insurance

We participate in MacAndrews & Forbes Holdings Inc.’s directors’ and officers’ insurance program, which covers M & F Worldwide as well as MacAndrews & Forbes Holdings Inc. and certain of its other affiliates. The limits of coverage are available on aggregate losses to any or all of the participating companies and their respective directors and officers. We bear an allocation of the premiums for such coverage, which we believe is more favorable than the premiums we could secure under stand alone coverage. The Company paid MacAndrews & Forbes Holdings Inc. $0.3 million and $0.4 million in 2008 and 2007, respectively, in respect of such insurance coverage.

Tax Sharing Agreement

The Company, M & F Worldwide and another subsidiary of M & F Worldwide entered into a tax sharing agreement in 2005 whereby M & F Worldwide files consolidated federal income tax returns on our and our affiliated subsidiaries’ behalf, as well as on behalf of certain other subsidiaries of M & F Worldwide. Under the tax sharing agreement, we make periodic payments to M & F Worldwide. These payments are based on the applicable federal income tax liability that we and our affiliated subsidiaries would have had for each taxable period if we had not been included in the M & F Worldwide consolidated group. Similar provisions apply with respect to any foreign, state or local income or franchise tax returns filed by any M & F Worldwide consolidated, combined or unitary group for each year that we or any of our subsidiaries are included in any such group for foreign, state or local tax purposes. During 2008, 2007 and 2006, the Company made payments totaling $57.4 million, $5.3 million and $19.3 million, respectively to M & F Worldwide pursuant to the terms of the tax sharing agreement.

To the extent that we have losses for tax purposes, the tax sharing agreement permits us to carry those losses back to periods beginning on or after December 15, 2005 and forward for so long as we are included in the affiliated group of which M & F Worldwide is the common parent (in both cases, subject to federal, state and local rules on limitation and expiration of net operating losses) to reduce the amount of the payments we otherwise would be required to make to M & F Worldwide in years in which it has current income for tax purposes. If the loss is carried back to the previous period, M & F Worldwide shall pay us an amount equal to the decrease of the taxes we would have benefited as a result of the carry back.

Predecessors

As a wholly owned subsidiary of M & F Worldwide, we receive certain financial, administrative and risk management oversight from M & F Worldwide. Additionally, during the periods prior to the Clarke American Acquisition, certain amounts of corporate expenses of the relevant predecessor parent companies that were incurred while the relevant predecessor was not a stand-alone company, including legal, tax, accounting, risk management, personnel, infrastructure and other costs, were allocated to the relevant predecessor company. These fees are allocations of shared service costs from our parent, former parent and affiliated companies and are included in selling, general and administrative expenses in the consolidated statements of operations. The Company recorded $2.7 million, $2.1 million and $0.5 million during the years ended December 31, 2008, 2007 and 2006, respectively, related to such fees.

Director Independence

Because we are not listed on any exchange, we are not subject to any listing standards for director independence. Under the NYSE listing standards, however, none of our directors are independent because each of our directors is either one of our officers or an officer of M & F Worldwide.

Item 14.   Principal Accounting Fees and Services

The M & F Worldwide Audit Committee selected Ernst & Young LLP as the independent auditors for its subsidiaries, including Harland Clarke Holdings, for the years ended December 31, 2008, 2007, and 2006.

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Audit Fees.  The aggregate fees and expenses that Ernst & Young LLP billed to us for professional services rendered for the audits of our financial statements and reviews of the financial statements included in our quarterly reports on Form 10-Q were $3.1 million, $3.4 million, and $0.8 million for 2008, 2007 and 2006, respectively. Audit services include fees associated with the annual audit and reviews of our 2008 quarterly reports on Form 10-Q.

Audit-Related Fees.  The aggregate fees and expenses that Ernst & Young LLP billed to us for audit-related services rendered in 2008, 2007, and 2006 were $0.1 million, $0.8 million, and $0.1 million, respectively. Audit-related services include due diligence and consulting services performed for the Harland Acquisition, the Clarke American Acquisition, assistance with compliance requirements under Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC rules promulgated pursuant thereto.

Tax Fees.  The aggregate fees and expenses that Ernst & Young LLP billed us for assistance with property and income taxes were $0.2 million and $0.1 million during 2008 and 2007, respectively.

All Other Fees.  No such fees were incurred by us in 2008, 2007, and 2006.

The Audit Committee of M & F Worldwide considered whether any audit-related and non-audit service that Ernst & Young LLP provided were comparable with maintaining the auditor’s independence from management and Harland Clarke Holdings. It has been the policy of M & F Worldwide’s Audit Committee to approve in advance the plan of audit services to be provided and an estimate of the cost for such audit services. M & F Worldwide’s Audit Committee has also adopted a policy of approving in advance for each calendar year a plan of the expected services and a related budget, submitted by management, for audit-related services, tax services and other services that Harland Clarke Holdings expects the auditors to render during the year. Throughout the year, M & F Worldwide’s Audit Committee is provided with updates on the services provided and the expected fees associated with each service. Any expenditure in excess of the approval limits for approved services, and any engagement of the auditors to render services in addition to those previously approved, requires advance approval by M & F Worldwide’s Audit Committee. M & F Worldwide’s Audit Committee approved the audit plan, all of the fees disclosed above and the non-audit services that Harland Clarke Holdings expects Ernst & Young LLP to provide in 2008.

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PART IV

Item 15.   Exhibits and Financial Statement Schedules

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

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

(3) Exhibits.

Exhibit
Number			Description
	2	.1	Stock Purchase Agreement by and between M & F Worldwide Corp. and Honeywell International Inc., dated October 31, 2005 (incorporated by reference to Exhibit 2.1 of M & F Worldwide Corp.’s Current Report on Form 8-K dated October 31, 2005).
	2	.2	Membership Interest Purchase Agreement by and among M & F Worldwide Corp., NCS Pearson Inc. and Pearson Inc., dated as of February 13, 2008 (incorporated by reference to Exhibit 2.1 of M & F Worldwide Corp.’s Current Report on Form 8-K, dated February 14, 2008).
	2	.3	Agreement and Plan of Merger by and among John H. Harland Company, M & F Worldwide Corp. and H Acquisition Corp., dated as of December 19, 2006 (incorporated by reference to Exhibit 2.1 of M & F Worldwide Corp.’s Current Report on Form 8-K, dated December 20, 2006).
	3	.1	Certificate of Incorporation of Harland Clarke Holdings Corp., as amended (incorporated by reference to Exhibit 3.1(i) of Harland Clarke Holdings Corp.’s Registration Statement on Form S-4, Commission File No. 333-133253).
	3	.2	By-laws of Harland Clarke Holdings Corp. (incorporated by reference to Exhibit 3.1(ii) of Harland Clarke Holdings Corp.’s Registration Statement on Form S-4, Commission File No. 333-133253).
	4	.1	Indenture dated as of May 1, 2007 among Harland Clarke Holdings Corp., the co-issuers and guarantors party thereto and Wells Fargo Bank, N.A., as trustee. (incorporated by reference to Exhibit 4.1 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.2	Registration Rights Agreement (relating to the initial notes) dated as of May 1, 2007 by and among Harland Clarke Holdings Corp., the Guarantors (listed therein), Credit Suisse Securities (USA) LLC, Bear, Stearns & Co., Inc., Citigroup Global Markets Inc. and J.P. Morgan Securities Inc. (incorporated by reference to Exhibit 4.4 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.3	Credit Agreement dated as of December 8, 2005 among Flavors Holdings Inc., Mafco Worldwide Corporation, the several lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as administrative agent, Bear Stearns Corporate Lending Inc., as syndication agent, and Natexis Banques Populaires and National City Bank, as co-documentation agents (incorporated by reference to Exhibit 4.4 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
	4	.4	Guarantee and Collateral Agreement made by Flavors Holdings Inc., Mafco Worldwide Corporation, and certain of its subsidiaries in favor of JPMorgan Chase Bank, N.A., as administrative agent, dated as of December 8, 2005 (incorporated by reference to Exhibit 4.5 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
	4	.5	Mortgage, Security Agreement, Assignment of Leases and Rents, and Fixture Filing, made by Mafco Worldwide Corporation, Mortgagor, to JPMorgan Chase Bank, N.A., as Administrative Agent, Mortgagee, dated as of December 8, 2005 (incorporated by reference to Exhibit 4.6 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).

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Exhibit
Number			Description
	4	.6	Credit Line Deed of Trust, Security Agreement, Assignment of Leases and Rents, and Fixture Filing, made by Mafco Worldwide Corporation, Grantor, in favor of Kanawha Land Title Services, LLC, as Trustee, for the use and benefit of, JP Morgan Chase Bank, N.A., as Administrative Agent, Beneficiary, dated as of December 8, 2005 (incorporated by reference to Exhibit 4.7 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
	4	.7	Notice of Grant of Security Interest in Trademarks, dated as of January 30, 2006, made by Mafco Worldwide Corporation in favor of JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 4.8 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
	4	.8	Credit Agreement, dated as of April 4, 2007 among Harland Clarke Holdings Corp., the Subsidiary Borrowers (listed therein), the Lenders (listed therein) and Credit Suisse, Cayman Islands Branch, as administrative agent. (incorporated by reference to Exhibit 4.5 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.9	First Amendment to Credit Agreement, dated as of May 4, 2007, by and among Harland Clarke Holdings Corp., the lender parties (listed therein) and Credit Suisse, Cayman Islands Branch, as administrative and collateral agent. (incorporated by reference to Exhibit 4.6 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.10	Guarantee and Collateral Agreement, dated as of May 1, 2007, by and among Harland Clarke Holdings Corp. and certain subsidiaries in favor of Credit Suisse, Cayman Islands Branch. (incorporated by reference to Exhibit 4.7 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.11	Assumption Agreement, dated as of May 1, 2007 by and among Harland Clarke Corp., Harland Checks and Services, Inc., Scantron Corporation, Harland Financial Solutions, Inc., HFS Core Systems, Inc., Centralia Holding Corp. and John H. Harland Company of Puerto Rico in favor of Credit Suisse, Cayman Islands Branch, as administrative and collateral agent. (incorporated by reference to Exhibit 4.8 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.12	Intellectual Property Security Agreement, dated as of May 1, 2007, by and among B2Direct, Inc., Checks in the Mail, Inc. and Clarke American Checks, Inc., the Grantors, in favor of Credit Suisse, Cayman Islands Branch, as administrative and collateral agent. (incorporated by reference to Exhibit 4.9 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.13	Intellectual Property Security Agreement, dated as of May 1, 2007, by and among Harland Clarke Corp., Harland Checks and Services, Inc., Scantron Corporation, Harland Financial Solutions, Inc. and HFS Core Systems, Inc., the Grantors, in favor of Credit Suisse, Cayman Islands Branch, as administrative and collateral agent. (incorporated by reference to Exhibit 4.10 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.14	Joinder Agreement, dated as of May 1, 2007, by and among B2Direct, Inc., Checks in the Mail, Inc., Clarke American Checks, Inc., New CS, Inc., New SCSFH, Inc., H Acquisition Corp., New SCH, Inc., New SFH, Inc. and Credit Suisse, Cayman Islands Branch. (incorporated by reference to Exhibit 4.11 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.15	Joinder Agreement, dated as of May 1, 2007, by and among Harland Clarke Corp., Harland Checks and Services, Inc., Scantron Corporation, Harland Financial Solutions, Inc., HFS Core Systems, Inc. and Credit Suisse, Cayman Islands Branch. (incorporated by reference to Exhibit 4.12 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.16	Deed to Secure Debt by Harland Clarke Corp. to Credit Suisse, Cayman Islands Branch (5096 Panola Industrial Blvd, Decatur, Georgia and 2933-2939 Miller Road, Decatur, Georgia). (incorporated by reference to Exhibit 4.14 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).

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Exhibit
Number			Description
	4	.17	Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing by Scantron Corporation in favor of First American Title Insurance Company, as trustee for the benefit of Credit Suisse, Cayman Islands Branch (2020 South 156 Circle, Omaha, Nebraska). (incorporated by reference to Exhibit 4.15 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.18	Mortgage by Clarke American Checks, Inc. to Credit Suisse, Cayman Islands Branch (124 Metropolitan Avenue, Salina, New York). (incorporated by reference to Exhibit 4.16 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.19	Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing by Checks In The Mail Inc. in favor of Peter Graf, Esq., as trustee for the benefit of Credit Suisse, Cayman Islands Branch (2435 Goodwin Lane, New Braunfels, Texas). (incorporated by reference to Exhibit 4.18 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.20	Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing by Clarke American Checks, Inc. in favor of Peter Graf, Esq., as trustee for the benefit of Credit Suisse, Cayman Islands Branch (5734 Farinon Drive, San Antonio, Texas). (incorporated by reference to Exhibit 4.19 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	4	.21	Deed of Trust, Security Agreement, Assignment of Rents and Leases and Fixture Filing by Harland Clarke Corp. in favor of First American Title Insurance Agency, LLC, as trustee for the benefit of Credit Suisse, Cayman Islands Branch (4867-4883 West Harold Gatty Road, Salt Lake City, Utah). (incorporated by reference to Exhibit 4.20 to Harland Clarke Holdings Corp. Registration Statement on Form S-4, Commission File No. 333-143717).
	10	.1	Tax Sharing Agreement, dated as of December 15, 2005, by and among M & F Worldwide Corp., Harland Clarke Holdings Corp. and PCT International Holdings Inc. (incorporated by reference to Exhibit 10.15 of M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005).
	10	.2+	M & F Worldwide Corp. 2005 Long Term Incentive Plan (incorporated by reference to Exhibit 10.1 to M & F Worldwide Corp.’s Form 8-K filed on May 24, 2006).
	10	.3+	M & F Worldwide Corp. 2005 Long Term Incentive Plan — Form of Award Agreement for Participating Executives of Clarke American Corp. (incorporated by reference to Exhibit 10.2 to M & F Worldwide Corp.’s Form 8-K filed on May 24, 2006).
	10	.4+	M & F Worldwide Corp. 2008 Long Term Incentive Plan (incorporated by reference to Exhibit 10.15 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
	10	.5+	Amendment No. 1 to the M & F Worldwide Corp. 2008 Long Term Incentive Plan, dated as of December 31, 2008 (incorporated by reference to Exhibit 10.2 to M & F Worldwide Corp.’s Current Report on Form 8-K filed on January 7, 2009).
	10	.6+	M & F Worldwide Corp. 2008 Long Term Incentive Plan — Award Agreement for Participating Executives (incorporated by reference to Exhibit 10.16 to M & F Worldwide Corp.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007).
	10	.7+	Employment Agreement, dated as of February 13, 2008, between Harland Clarke Holdings Corp. and Charles T. Dawson (incorporated by reference to Exhibit 10.1 to Harland Clarke Holdings Corp.’s Current Report on Form 8-K filed on February 15, 2008).
	10	.8+	Amendment, dated as of December 31, 2008, to the Employment Agreement, dated as of February 13, 2008, between Harland Clarke Holdings Corp. and Charles T. Dawson (incorporated by reference to Exhibit 10.2 to M & F Worldwide Corp.’s Current Report on Form 8-K filed on January 7, 2009).
	10	.9+	Employment Agreement dated February 13, 2008 between Harland Clarke Corp. and Peter A. Fera, Jr. (incorporated by reference to Exhibit 10.2 to Harland Clarke Holdings Corp.’s Current Report on Form 8-K filed on February 15, 2008).

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Exhibit
Number			Description
	10	.10+	Amendment, dated as of December 31, 2008, to the Employment Agreement, dated as of February 13, 2008, between Harland Clarke Corp. and Peter A. Fera, Jr. (incorporated by reference to Exhibit 10.3 to Harland Clarke Holdings Corp.’s Current Report on Form 8-K filed on January 7, 2009).
	10	.11+	Employment Agreement dated as of May 29, 2007 among Harland Clarke Holdings Corp., Harland Financial Solutions and John O’Malley (incorporated by reference to Exhibit 10.2 to M & F Worldwide Corp.’s Current Report on Form 8-K filed on June 1, 2007).
	10	.12+	Employment Agreement, dated as of May 5, 2008, among Harland Clarke Holdings Corp., Scantron Corporation and Jeffrey Heggedahl.
	10	.13+	Amendment, dated as of December 31, 2008, to the Employment Agreement, dated as of May 5, 2008, among Harland Clarke Holdings Corp., Scantron Corporation and Jeffrey Heggedahl (incorporated by reference to Exhibit 10.4 to Harland Clarke Holdings Corp.’s Current Report on Form 8-K filed on January 7, 2009).
	10	.14+*	Employment Agreement, dated as of February 7, 2008, between Harland Clarke Holdings Corp. and Daniel Singleton.
	10	.15+*	Employment Agreement, dated as of May 5, 2008, between Harland Clarke Holdings Corp., Harland Financial Solutions and Raju M. Shivdasani.
	10	.16+*	Employment Agreement, dated as of May 5, 2008, between Harland Clarke Holdings Corp., Harland Financial Solutions and A. O. Clemons, Jr.
	10	.17	Second Amended and Restated Management Services Agreement, dated as of June 30, 2007, by and between MacAndrews & Forbes Inc. and M & F Worldwide Corp. (incorporated by reference to Exhibit 10.1 to M & F Worldwide Corp.’s Current Report on Form 8-K dated June 25, 2007).
	10	.18+*	Amendment, dated as of December 31, 2008, to the Employment Agreement, dated as of February 7, 2008, between Harland Clarke Holdings Corp. and Daniel Singleton.
	10	.19+*	Amendment, dated as of December 31, 2008, to the Employment Agreement, dated as of May 5, 2008, among Harland Clarke Holdings Corp., Harland Financial Solutions and Raju Shivdasani.
	10	.20+*	Amendment, dated as of December 31, 2008, to the Employment Agreement, dated as of May 5, 2008, among Harland Clarke Holdings Corp., Harland Financial Solutions and A. O. Clemons, Jr.
	21	.1*	Subsidiaries of Harland Clarke Holdings Corp.
	24	.1*	Powers of attorney executed by Messrs. Schwartz, Dawson and Savas.
	31	.1*	Certification of Charles T. Dawson, Chief Executive Officer, dated February 27, 2009.
	31	.2*	Certification of Peter A. Fera, Jr., Chief Financial Officer, dated February 27, 2009.

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

74

SIGNATURES

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

	HARLAND CLARKE HOLDINGS CORP.
Dated: February 27, 2009	By: /s/  Charles T. Dawson
	Charles T. Dawson President, Chief Executive Officer and Director (Principal Executive Officer)
Dated: February 27, 2009	By: /s/  Peter A. Fera, Jr.
	Peter A. Fera, Jr. Executive Vice President and Chief Financial Officer (Principal Financial Officer)
Dated: February 27, 2009	By: /s/  J. Michael Riley
	J. Michael Riley Vice President and Controller (Principal Accounting Officer)

75

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

Signature	Title	Date
/s/  Charles T. Dawson Charles T. Dawson	President, Chief Executive Officer and Director	February 27, 2009
/s/  Paul G. Savas* Paul G. Savas	Director	February 27, 2009
/s/  Barry F. Schwartz* Barry F. Schwartz	Director	February 27, 2009

* The undersigned by signing his name hereto does hereby execute this Form 10-K pursuant to powers of attorney filed as exhibits to this Form 10-K.

Dated: February 27, 2009 By: /s/  Peter A. Fera, Jr.
Peter A. Fera, Jr.
Attorney-in-Fact

76

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
YEAR ENDED DECEMBER 31, 2008

The following consolidated financial statements of Harland Clarke Holdings Corp. and Subsidiaries are included in Item 8:

As of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006.

	Pages
Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheets		F-2
Consolidated Statements of Operations		F-3
Consolidated Statements of Stockholder’s Equity		F-4
Consolidated Statements of Cash Flows		F-5
Notes to Consolidated Financial Statements		F-6
Schedule II — Valuation and Qualifying Accounts and Reserves		F-38

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

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder of

Harland Clarke Holdings Corp.

We have audited the accompanying consolidated balance sheets of Harland Clarke Holdings Corp. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholder’s equity, and cash flows for each of the three years in the period ended December 31, 2008. Our audits also included the financial statement schedule II listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule 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. We were not engaged to perform an audit of the Harland Clarke Holdings Corp. and Subsidiaries’ internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Harland Clarke Holdings Corp. and Subsidiaries’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Harland Clarke Holdings Corp. and Subsidiaries at December 31, 2008 and 2007 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2008, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 2 to the consolidated financial statements, the Company adopted Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109” effective January 1, 2007.

/s/ Ernst & Young LLP

San Antonio, Texas

February 24, 2009

F-1

Harland Clarke Holdings Corp. and Subsidiaries
Consolidated Balance Sheets
(in millions, except share data)

	December 31,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	64.6		$	239.7
Accounts receivable (net of allowance of $2.8 and $2.4 at December 31, 2008 and 2007)		128.8			100.3
Inventories		38.4			31.3
Income taxes receivable		8.0			16.8
Deferred tax assets		21.0			20.3
Assets held for sale		2.7			—
Prepaid expenses and other current assets		39.9			41.7
Total current assets		303.4			450.1
Property, plant and equipment, net		177.6			186.3
Goodwill		1,465.5			1,346.9
Other intangible assets, net		1,328.3			1,340.7
Contract acquisition payments, net		39.8			51.6
Other assets		77.2			72.0
Total assets	$	3,391.8		$	3,447.6
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Accounts payable	$	54.4		$	64.2
Deferred revenues		103.8			86.3
Current maturities of long-term debt		19.8			20.1
Accrued liabilities:
Salaries, wages and employee benefits		68.4			71.9
Income and other taxes payable		13.9			11.1
Customer incentives		25.7			26.0
Acquisition-related payments		—			2.9
Payable to parent		0.7			2.1
Other current liabilities		54.7			33.5
Total current liabilities		341.4			318.1
Long-term debt		2,370.8			2,389.8
Deferred tax liabilities		435.7			472.6
Other liabilities		77.6			76.6
Commitment and contingencies
Stockholder’s equity:
Common stock – 200 shares authorized; par value $0.01; 100 shares issued and outstanding at December 31, 2008 and 2007		—			—
Additional paid-in capital		157.0			202.5
Retained earnings (deficit)		27.2			(0.5	)
Accumulated other comprehensive (loss) income, net of taxes:
Derivative fair-value adjustments		(16.8	)		(14.1	)
Currency translation adjustments		(0.4	)		1.7
Funded status of benefit plans		(0.7	)		0.9
Total stockholder’s equity		166.3			190.5
Total liabilities and stockholder’s equity	$	3,391.8		$	3,447.6

See Notes to Consolidated Financial Statements

F-2

Harland Clarke Holdings Corp. and Subsidiaries
Consolidated Statements of Operations
(in millions)

	Year Ended December 31,
	2008			2007			2006
Product revenues, net	$	1,491.8		$	1,199.3		$	622.3
Service revenues, net		302.8			170.6			1.6
Total net revenues		1,794.6			1,369.9			623.9
Cost of products sold		910.9			753.1			387.2
Cost of services provided		156.5			80.7			1.2
Total cost of revenues		1,067.4			833.8			388.4
Gross profit		727.2			536.1			235.5
Selling, general and administrative expenses		446.8			336.3			145.2
Restructuring costs		15.6			5.6			3.3
Operating income		264.8			194.2			87.0
Interest income		2.2			6.0			—
Interest expense		(186.4	)		(165.9	)		(60.0	)
Loss on early extinguishment of debt		—			(54.6	)		—
Other (expense) income, net		(0.4	)		(0.5	)		—
Income (loss) before income taxes		80.2			(20.8	)		27.0
Provision (benefit) for income taxes		33.0			(5.4	)		7.5
Net income (loss)	$	47.2		$	(15.4	)	$	19.5

See Notes to Consolidated Financial Statements

F-3

Harland Clarke Holdings Corp. and Subsidiaries
Consolidated Statements of Stockholder’s Equity
(in millions, except share data)

									Accumulated
	Shares of		Additional			Retained			Other
	Common		Paid-In			Earnings			Comprehensive
	Stock		Capital			(Deficit)			(Loss) Income			Total
Balance, December 31, 2005		100	$	202.5		$	(1.3	)	$	—		$	201.2
Net income							19.5						19.5
Derivative fair-value adjustment, net of taxes of $0.0										0.1			0.1
Total comprehensive income													19.6
Dividend paid to parent							(1.5	)					(1.5	)
Balance, December 31, 2006		100	$	202.5		$	16.7		$	0.1		$	219.3
Net loss							(15.4	)					(15.4	)
Foreign currency translation adjustments, net of taxes of $0.0										1.7			1.7
Derivative fair-value adjustment, net of tax benefit of $8.9										(14.1	)		(14.1	)
Change in unrecognized amounts included in postretirement obligations, net of taxes of $0.7										0.8			0.8
Unrealized losses on investments, net of tax benefit of $0.3										(0.5	)		(0.5	)
Reclassification for investment write-down included in net income, net of tax benefit of $0.3										0.5			0.5
Total comprehensive loss													(27.0	)
Dividend paid to parent							(1.8	)					(1.8	)
Balance, December 31, 2007		100	$	202.5		$	(0.5	)	$	(11.5	)	$	190.5
Net income							47.2						47.2
Foreign currency translation adjustments, net of taxes of $0.0										(2.1	)		(2.1	)
Derivative fair-value adjustment, net of tax benefit of $2.0										(2.7	)		(2.7	)
Change in unrecognized amounts included in postretirement obligations, net of tax benefit of $0.9										(1.6	)		(1.6	)
Unrealized losses on investments, net of tax benefit of $0.3										(0.5	)		(0.5	)
Reclassification for investment write-downs, net of tax benefit of $0.3										0.5			0.5
Total comprehensive income													40.8
Dividend paid to parent				(45.5	)		(19.5	)					(65.0	)
Balance, December 31, 2008		100	$	157.0		$	27.2		$	(17.9	)	$	166.3

See Notes to Consolidated Financial Statements

F-4

Harland Clarke Corp. and Subsidiaries
Consolidated Statements of Cash Flows
(in millions)

	Year Ended December 31,
	2008			2007			2006
Operating activities
Net income (loss)	$	47.2		$	(15.4	)	$	19.5
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		66.6			58.5			25.9
Amortization of intangible assets		97.9			67.7			28.6
Amortization of deferred financing fees and original discount		7.8			7.0			3.2
Loss on early extinguishment of debt		—			54.6			—
Deferred income taxes		(31.9	)		(7.6	)		(13.5	)
Asset impairments		3.1			3.1			—
Changes in operating assets and liabilities, net of effect of businesses acquired:
Accounts receivable		(13.1	)		3.5			3.4
Inventories		0.6			4.9			0.3
Prepaid expenses and other assets		1.9			(11.6	)		5.2
Contract acquisition payments, net		11.8			20.6			6.4
Accounts payable and accrued liabilities		(14.4	)		1.8			1.3
Deferred revenues		11.2			12.1			(0.5	)
Income and other taxes		12.7			7.0			(1.1	)
Payable to parent		(1.4	)		2.1			—
Cash overdrafts		—			(0.1	)		(13.2	)
Other, net		0.7			1.7			0.5
Net cash provided by operating activities		200.7			209.9			66.0
Investing activities
Purchase of Harland, net of cash acquired of $23.8		(2.9	)		(1,438.9	)		—
Purchase of Data Management, net of cash acquired		(223.3	)		—			—
Purchase of Peldec assets		—			(14.3	)		—
Purchase of Transaction Holdings, net of cash acquired		(8.2	)		—			—
Investment in related party notes receivable		(14.4	)		—			—
Net repayments of related party notes receivable		1.8			—			—
Proceeds from sale of property, plant and equipment		5.7			3.3			—
Capital expenditures		(48.2	)		(25.5	)		(14.7	)
Capitalized interest		(0.7	)		(0.4	)		(1.0	)
Other, net		(0.6	)		(0.7	)		—
Net cash used in investing activities		(290.8	)		(1,476.5	)		(15.7	)
Financing activities
Dividend to parent		(65.0	)		(1.8	)		(1.5	)
Issuance of notes		—			615.0			—
Redemption of notes		—			(175.0	)		—
Borrowings on credit agreements		62.0			1,800.0			3.3
Repayments of credit agreements and other borrowings		(82.0	)		(664.6	)		(27.8	)
Premiums, penalties and consent payments related to extinguishment of debt		—			(41.2	)		—
Debt issuance cost		—			(56.6	)		—
Net cash (used in) provided by financing activities		(85.0	)		1,475.8			(26.0	)
Net (decrease) increase in cash and cash equivalents		(175.1	)		209.2			24.3
Cash and cash equivalents at beginning of period		239.7			30.5			6.2
Cash and cash equivalents at end of period	$	64.6		$	239.7		$	30.5
Supplemental disclosure of cash paid for:
Interest, net of amounts capitalized	$	171.2		$	152.5		$	59.3
Income taxes, net of refunds		54.9			(4.3	)		22.3

See Notes to Consolidated Financial Statements

F-5

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements
(dollars in millions)

1.   Description of the Business and Basis of Presentation

Harland Clarke Holdings Corp. (“Harland Clarke Holdings” and, together with its subsidiaries, the “Company”) is a holding company that conducts its operations through its direct and indirect wholly owned operating subsidiaries and was incorporated in Delaware on October 19, 2005. On December 15, 2005, CA Investment Corp., an indirect wholly owned subsidiary of M & F Worldwide Corp. (“M & F Worldwide”) purchased 100% of the capital stock of Novar USA Inc. (“Novar”) (the “Clarke American Acquisition”) and was renamed Clarke American Corp. (“Clarke American”) which is the successor by merger to Novar, which indirectly wholly owned the operating subsidiaries of the Clarke American business. On May 1, 2007, the Company completed the acquisition of John H. Harland Company (“Harland”), and a subsidiary of the Company was merged with and into Harland, with Harland continuing after the merger as the surviving corporation and as a wholly owned subsidiary of the Company (the “Harland Acquisition”) (see Note 3). After the closing of the Harland Acquisition, the Company changed its name on May 2, 2007 from Clarke American to Harland Clarke Holdings.

Subsequent to the acquisition of Harland, the Company reorganized its business and corporate structure along the following three business segments: Harland Clarke (which consists of the combined check business and related products and services of Clarke American and Harland), Harland Financial Solutions and Scantron.

On December 31, 2008, Harland Clarke Corp., a subsidiary of the Company, acquired Transaction Holdings Inc. (“Transaction Holdings”) for total cash consideration of $8.2 subject to post-closing working capital adjustments (the “Transaction Holdings Acquisition”) (see Note 3). Transaction Holdings produces personal and business checks, payment coupon books, promotional checks and provides direct marketing services to financial institutions as well as individual consumers and small businesses.

On February 22, 2008, the Company’s wholly owned subsidiary, Scantron Corporation, purchased all of the limited liability membership interests of Data Management I LLC (“Data Management”) from NCS Pearson for $218.7 in cash after giving effect to working capital adjustments of $1.6 (the “Data Management Acquisition”) (see Note 3). Data Management designs, manufactures and services scannable data collection products, including printed forms, scanning equipment and related software, and provides survey consulting and tracking services, including medical device tracking, as well as field maintenance services to corporate and governmental clients.

The Harland Clarke segment offers checks and related products, forms and treasury supplies, and related delivery and fraud prevention services. It also provides specialized marketing and contact center services to its financial and commercial institution clients. Harland Clarke’s marketing offerings include turnkey marketing solutions, checkbook messaging and e-mail marketing. Through its contact centers, Harland Clarke provides financial institutions with both inbound and outbound support for their clients, including sales and ordering services for checks and related products and services, customer care and banking support, and marketing services.

The Harland Financial Solutions segment provides products and services including lending and mortgage origination and servicing applications, business intelligence solutions, customer relationship management software, Internet banking solutions, mobile banking, branch automation solutions and core processing systems and services, principally targeted to community banks and credit unions.

The Scantron segment provides testing and assessment solutions to schools in North America, offers specialized data collection solutions to educational, commercial and governmental entities worldwide and collects and manages survey information for a wide variety of Fortune 1000 and other organizations. Scantron’s products and services include scannable forms, scanning equipment, survey services, testing software and related services, and field maintenance services.

F-6

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries after the elimination of all material intercompany accounts and transactions. The Company has consolidated the results of operations and accounts of businesses acquired from the date of acquisition.

The Company and each of its existing subsidiaries other than unrestricted subsidiaries and certain immaterial subsidiaries which were acquired from Harland, are guarantors and may also be co-issuers under the 2015 Senior Notes (as hereinafter defined) (see Note 11). The Company is a holding company, and has no independent assets at December 31, 2008, and no operations. The guarantees and the obligations of the subsidiaries of the Company are full and unconditional and joint and several, and any subsidiaries of the Company other than the subsidiary guarantors and obligors are minor.

2.   Summary of Significant Accounting Policies

Use of Estimates

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

Revenue Recognition

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

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

For multiple-element software arrangements, total revenue is allocated to each element based on the fair value method or the residual method when applicable. Under the fair value method, the total revenue is allocated among the elements based upon the relative fair value of each element as determined through vendor-specific objective evidence. Under the residual method, the fair value of the undelivered maintenance, training and other service elements, as determined based on vendor-specific objective evidence (the price of a bundled element when sold separately), is deferred and the remaining (residual) arrangement is recognized as revenue at the time of delivery. Maintenance fees are deferred and recognized ratably over the maintenance period, which is usually twelve months. Training revenue is recognized as the services are performed. For multiple-element arrangements that do not include software, total revenue is allocated to contract elements based on the provisions of the Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force (“EITF”) 00-21, “Revenue Arrangements with Multiple Elements.”

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

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

F-7

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

arrangements that are subject to substantive customer acceptance provisions is deferred until the acceptance conditions have been met.

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

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

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

Customer Incentives

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

Shipping and Handling

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

Cash and Cash Equivalents

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

Accounts Receivable and Allowance for Doubtful Accounts

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

Inventories

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

Contract Acquisition Payments

Certain contracts with customers of the Company’s Harland Clarke segment involve upfront payments to the customer. These payments are capitalized and amortized on a straight-line basis as a reduction of revenue over the life of the related contract and are generally refundable from the customer on a prorated basis if the contract is canceled prior to the contract termination date. When such a termination occurs, the amounts repaid are offset against any unamortized contract acquisition payment balance related to the terminating customer,

F-8

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

with any resulting excess reported as an increase in revenue. The Company recorded revenue related to contract terminations of $2.2, $1.7 and $1.1 in 2008, 2007 and 2006, respectively.

Advertising

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

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

At December 31, 2008 and 2007, the Company had prepaid advertising costs of $3.8 and $4.1, respectively, which are included in prepaid expenses and current assets in the accompanying consolidated balance sheets. The Company’s advertising expense was $23.7, $19.3 and $15.5 for 2008, 2007 and 2006, respectively.

Property, Plant and Equipment

The Company states property, plant and equipment at cost. Maintenance and repairs are charged to expense as incurred. Additions, improvements and replacements that extend the asset life are capitalized. Depreciation is provided on a straight-line basis over the estimated useful lives of such assets. The Company amortizes leasehold improvements over the shorter of the useful life of the related asset or the lease term. Certain leases also contain tenant improvement allowances, which are recorded as a leasehold improvement and deferred rent and amortized over the lease term. The Company eliminates cost and accumulated depreciation applicable to assets retired or otherwise disposed of from the accounts and reflects any gain or loss on such disposition in operating results. As further discussed below, the Company capitalizes the qualifying costs incurred during the development stage on software to be sold, leased or otherwise marketed, internally developed software and software obtained for internal use and amortizes the costs over the estimated useful life of the software. The Company capitalizes interest on qualified long-term projects and depreciates it over the life of the related asset.

The useful lives for computing depreciation are as follows:

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

Software and Other Development Costs

The Company expenses research and development expenditures as incurred, including expenditures related to the development of software products that do not qualify for capitalization. The amounts expensed totaled $17.7 and $12.6 during 2008 and 2007, respectively, and were primarily costs incurred related to the development of software. Research and development costs were not significant in 2006.

Software development costs incurred prior to the establishment of technological feasibility are expensed as incurred. Software development costs incurred after establishing the technological feasibility of the subject

F-9

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

software product and before its availability for sale are capitalized in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 86, “Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed.” Capitalized software development costs are amortized on a product-by-product basis using the estimated economic life of the product on a straight-line basis over three years. Unamortized software development costs in excess of estimated net realizable value from a particular product are written down to their estimated net realizable value.

The Company accounts for costs to develop or obtain computer software for internal use in accordance with American Institute of Certified Public Accountants (“AICPA”) Statement of Position 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use,” which requires certain costs to be capitalized.

Goodwill and Acquired Intangible Assets

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

The goodwill impairment test is a two-step process, which requires management to make judgments in determining what assumptions to use in the calculation. The first step of the process consists of estimating the fair value of the Company’s reporting units. The Company has five reporting units, which are determined in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets.” Certain of the Company’s reporting units are the same as its reportable segments and certain reporting units are one level below the reportable segment, which is at the operating segment level.

The Company utilizes both the income and market approaches to estimate the fair value of the reporting units. The income approach involves discounting future estimated cash flows. The discount rate used is the value-weighted average of the Company’s estimated cost of equity and debt (“cost of capital”) derived using, both known and estimated, customary market metrics. The Company’s weighted average cost of capital is adjusted by reporting unit to reflect a risk factor, if necessary, for each reporting unit. The Company performs sensitivity tests with respect to growth rates and discount rates used in the income approach. In applying the market approach, valuation multiples are derived from historical and projected operating data of selected guideline companies; evaluated and adjusted, if necessary, based on the strengths and weaknesses of the reporting unit relative to the selected guideline companies; and applied to the appropriate historical and/or projected operating data of the reporting unit to arrive at an indication of fair value. The Company weights the results of the income and market approaches equally. The results of the Company’s tests indicated no impairment as the estimated fair values were greater than the carrying values.

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

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

F-10

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

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

Intangible assets that are deemed to have a finite life are evaluated for impairment as discussed below in “Long-Lived Assets.”

Long-Lived Assets

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

Income and Other Taxes

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

On January 1, 2007 the Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). The adoption of FIN 48 did not have a significant impact on the Company’s consolidated financial statements (see Note 8).

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

Pensions and Other Postretirement Benefits

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

Effective December 31, 2006, the Company adopted the provisions of SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R).” SFAS No. 158 requires an entity to recognize in its balance sheet the funded status of its defined benefit pension and postretirement benefit plans, measured as the difference between the fair value of the plan assets and the benefit obligation. SFAS No. 158 also requires an entity to recognize changes in the funded status of a defined benefit pension and postretirement benefit plan within accumulated comprehensive income (loss), net of tax, to the extent such changes are not recognized in earnings as components of periodic net benefit cost. The adoption of SFAS No. 158 did not change the amount of actuarially determined expense that is recorded in the consolidated statements of operations (see Note 10).

F-11

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

Translation of Foreign Currencies

The functional currency for the Company’s foreign subsidiaries is their local currency. The Company translates all assets and liabilities denominated in foreign functional currencies into United States dollars at rates of exchange in effect at the balance sheet date and statement of operations items at the average rates of exchange prevailing during the period. The Company records translation gains and losses as a component of accumulated other comprehensive income (loss) in the stockholder’s equity section of the Company’s balance sheets. Gains and losses resulting from transactions in other than functional currencies are reflected in operating results, except for transactions of a long-term nature. The Company considers undistributed earnings of certain foreign subsidiaries to be permanently invested. As a result, no income taxes have been provided on these undistributed earnings or on the foreign currency translation adjustments recorded as a part of other comprehensive income (loss).

Self-Insurance

The Company is self-insured for certain workers’ compensation and group medical costs. Provisions for losses expected under these programs are recorded based on the Company’s estimates of the aggregate liabilities for the claims incurred. Payments for estimated claims beyond one year have been discounted. As of December 31, 2008 and 2007, the combined liabilities for self-insured workers compensation and group medical liability were $10.9 and $11.9, respectively.

Derivative Financial Instruments

The Company began using derivative financial instruments in 2006 to manage interest rate risk related to a portion of its long-term debt. The Company recognizes all derivatives at fair value as either assets or liabilities in the consolidated balance sheets and changes in the fair values of such instruments are recognized in earnings unless specific hedge accounting criteria are met. If specific cash flow hedge accounting criteria are met, the Company recognizes the changes in fair value of these instruments in other comprehensive income (loss) until the underlying debt instrument being hedged is settled or the Company determines that the specific hedge accounting criteria are no longer met.

On the date the interest rate derivative contract is entered into, the Company designates the derivative as either a fair value hedge or a cash flow hedge. The Company formally documents the relationship between hedging instruments and the hedged items, as well as its risk-management objectives and strategy for undertaking various hedge transactions. The Company links all hedges that are designated as fair value hedges to specific assets or liabilities on the balance sheet or to specific firm commitments. The Company links all hedges that are designated as cash flow hedges to forecasted transactions or to liabilities on the balance sheet. The Company also assesses, both at the inception of the hedge and on an on-going basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. If an existing derivative were to become not highly effective as a hedge, the Company would discontinue hedge accounting prospectively. The Company measures ineffectiveness in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

Deferred Financing Fees

Deferred financing fees are being amortized to interest expense using the effective interest method over the term of the respective financing agreements. Unamortized balances are reflected in other assets in the accompanying consolidated balance sheets and were $43.6 and $51.4 as of December 31, 2008 and 2007, respectively.

F-12

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

Restructuring Charges

The Company has restructuring costs related primarily to facility consolidations and workforce rationalization. A portion of these costs relate to plans to exit activities acquired from Harland, Data Management and Transaction Holdings (see Note 3) and have been included in purchase accounting in accordance with EITF 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.” The remaining costs relate to other exit activities and have been accounted for in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Additional restructuring charges related to the Company’s existing operations will be incurred as the Company completes its restructuring plans.

Reclassifications

Certain amounts in previously issued financial statements have been reclassified to conform to the 2008 presentation. These reclassifications primarily relate to the inclusion of internally developed intangible assets in other intangible assets, net in the consolidated balance sheets.

Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141R changed the accounting for business combinations. Under the requirements of SFAS No. 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141R changed the accounting treatment for certain specific items, including acquisition costs, noncontrolling interests, acquired contingent liabilities, in-process research and development, restructuring costs associated with a business combination, deferred tax valuation allowances changes, and income tax uncertainties after the acquisition date. SFAS No. 141R also includes a substantial number of new disclosure requirements. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of SFAS No. 141R will affect the Company’s accounting for any acquisition in 2009 and beyond.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.” SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity and the recognition of the amount of net income attributable to the noncontrolling interest to be included in results of operations. SFAS No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. SFAS No. 160 also requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. Such gain or loss will be measured using the fair value of the noncontrolling equity investment on the deconsolidation date. SFAS No. 160 also includes expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008, and interim periods within those fiscal years. Since the Company currently has no material noncontrolling interest in any of its subsidiaries, the adoption of SFAS No. 160 will not have a significant impact on the Company’s consolidated results of operations and financial condition.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133.” The new standard requires enhanced disclosures about the effects of derivative instruments and hedging activities on an entity’s financial condition, financial performance and cash flows. It is effective for financial statements issued for fiscal years and interim periods

F-13

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

beginning after November 15, 2008. SFAS No. 161 will increase disclosure requirements and will not have an impact on the Company’s consolidated financial condition, results of operations or cash flows.

3.   Acquisitions

Acquisition of Data Management

On February 22, 2008, the Company’s wholly owned subsidiary, Scantron Corporation, purchased all of the limited liability membership interests of Data Management for $218.7 in cash after giving effect to working capital adjustments of $1.6. Data Management’s results of operations have been included in the Company’s operations since February 22, 2008, the date of the Data Management Acquisition. Fees and expenses of $4.6 related to the Data Management Acquisition were capitalized in the purchase price. The capitalized fees and expenses include $2.0 paid to MacAndrews & Forbes Holdings Inc. (which, as of December 31, 2008, beneficially owned approximately 43.4% of the outstanding M & F Worldwide common stock) for its services related to sourcing, analyzing, negotiating and executing the Data Management Acquisition (see Note 15). The acquisition combined complementary products and services of Scantron and Data Management, resulting in an expanded offering of products and services to their respective customers. The Company financed the Data Management Acquisition and related fees and expenses with cash on hand.

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

Accounts receivable			$	16.0
Inventories				7.5
Property, plant and equipment				25.5
Goodwill				115.9
Other intangible assets:
Customer relationships	$	65.4
Trademarks and tradenames		2.4
Patented technology and software		7.5
Total other intangible assets				75.3
Other assets				0.6
Total assets acquired				240.8
Deferred revenues				7.6
Other liabilities				9.9
Net assets acquired			$	223.3

The above purchase price allocation is preliminary and the amount allocated to goodwill is subject to refinement as the Company finalizes the valuation of certain assets and liabilities. Goodwill in the amount of approximately $114.5 and intangible assets in the amount of approximately $75.3 related to Data Management are deductible for tax purposes. The principal factor affecting the purchase price, which resulted in the recognition of goodwill, was the fair value of the going-concern element of Data Management, which includes the assembled workforce and synergies that are expected to be achieved.

As a result of the Data Management Acquisition, the Company adopted formal plans to terminate certain employee functions and exit duplicative facilities, which are subject to further refinement. The Company recorded $2.5 of severance and severance-related costs for the termination of certain Data Management employees in the above purchase price allocation in accordance with EITF 95-3. See Note 13 for additional disclosures regarding restructuring.

F-14

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

As part of the application of purchase accounting, inventory of Data Management was increased by $0.4 due to a fair value adjustment. The amount of the inventory fair value adjustment was expensed as additional non-cash cost of products sold as the related inventory was sold (of which $0.4 was expensed during the period from February 22, 2008 to December 31, 2008).

Also as part of the application of purchase accounting, deferred revenue of Data Management was decreased by $1.4 due to a fair value adjustment. This non-cash fair value adjustment results in lower revenue being recognized over the related earnings period (of which $1.0 was reflected as reduced revenues during the period from February 22, 2008 to December 31, 2008). The Company expects that the substantial majority of the reduction in net revenues resulting from the deferred revenue fair value adjustment will be recognized during the twelve-month period following the Data Management Acquisition.

Acquisition of Harland and Related Financing Transactions

On May 1, 2007, the Company purchased 100% of the outstanding shares of Harland for $1,423.0 in cash. The acquisition combined complementary products and services of Harland and Clarke American to create a more effective and efficient strategic partner to financial institutions. Harland’s results of operations have been included in the Company’s operations since May 1, 2007, the date of the Harland Acquisition. Fees and expenses of $42.5 related to the Harland Acquisition were capitalized in the purchase price. The capitalized fees and expenses include $10.0 paid by M & F Worldwide to MacAndrews & Forbes Holdings Inc. for services related to sourcing, analyzing, negotiating and executing the Harland Acquisition (see Note 15). The Company reimbursed M & F Worldwide for that payment during 2007. The capitalized fees and expenses also include $3.0 paid by the Company to M & F Worldwide to reimburse it for professional fees paid related to the Harland Acquisition.

The Company and certain of its subsidiaries borrowed the following amounts on May 1, 2007 in order to fund the purchase price for Harland, to repay debt under its previously outstanding senior secured credit facilities, to repay its previously outstanding 11.75% Senior Notes, to repay Harland’s existing indebtedness and to pay fees and expenses (see Note 11):

$1,800.0 Senior Secured Term Loan	$	1,800.0
Senior Floating Rate Notes due 2015		305.0
9.50% Senior Fixed Rate Notes due 2015		310.0
	$	2,415.0

F-15

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

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

Cash			$	23.8
Accounts receivable				84.4
Property, plant and equipment				125.6
Goodwill				992.7
Other intangible assets:
Customer relationships	$	675.2
Trademarks and tradenames		114.7
Patented technology		12.2
Software		50.8
Total other intangible assets				852.9
Other assets				144.7
Total assets acquired				2,224.1
Deferred revenues				77.9
Long-term debt				229.1
Deferred tax liabilities				267.0
Other liabilities				184.6
Net assets acquired			$	1,465.5

The above purchase price allocation is complete. Goodwill in the amount of approximately $95.0 and intangible assets in the amount of approximately $107.0 related to Harland are deductible for tax purposes.

As a result of the Harland Acquisition, the Company adopted a formal plan to terminate certain employees and exit duplicative facilities. The Company recorded $19.7 of severance and severance-related costs for the termination of certain Harland employees and $2.8 of costs for the closure of certain Harland facilities in the above purchase price allocation in accordance with EITF 95-3. See Note 13 for additional disclosures regarding restructuring.

As part of the application of purchase accounting, inventory was increased by $4.6 due to a fair value adjustment. The amount of the inventory fair value adjustment is being expensed as additional non-cash cost of products sold as the fair-valued inventory is sold (of which $4.4 was expensed during the period from May 1, 2007 to December 31, 2007).

Also as part of the application of purchase accounting, deferred revenue was decreased by $15.0 due to a fair value adjustment. This non-cash fair value adjustment results in lower revenue being recognized over the related earnings period (of which $1.6 and $12.2 were reflected as reduced revenues during 2008 and the period from May 1, 2007 to December 31, 2007, respectively). The total reduction in revenues from May 1, 2007 to December 31, 2008 was $13.8.

Pro Forma Financial Information

The unaudited financial information in the table below summarizes the results of operations of the Company, on a pro forma basis, as though the Harland Acquisition and related financing transactions and the Data Management Acquisition had occurred as of the beginning of each of the periods presented. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of

F-16

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

the results of operations that would have been achieved if these transactions had taken place at the beginning of each of the periods presented, nor does it purport to represent results of operations for future periods.

	Unaudited Pro Forma
	December 31,
	2008		2007
Net revenues	$	1,811.9	$	1,836.1
Operating income		272.0		187.7
Net income (loss)		51.5		(54.1	)
Depreciation and amortization (excluding amortization of deferred financing fees)		166.7		171.6

In the pro forma information above, the results prior to the Harland Acquisition and the Data Management Acquisition were adjusted to include the pro forma impact of: the adjustment of amortization of intangible assets and depreciation of fixed assets based on the purchase price allocations; the adjustment of interest expense reflecting the extinguishment of Harland Clarke Holdings’ and Harland’s former debt and the issuance of $2,415.0 of new debt in connection with the Harland Acquisition; and to reflect the impact of income taxes with respect to the pro forma adjustments, utilizing an estimated effective tax rate of 39%. In the pro forma information above, the results prior to the Harland Acquisition were not adjusted for non-recurring employee retention bonuses, stock-based compensation and other non-recurring merger related expenses incurred by Harland prior to the acquisition totaling $115.9 during 2007.

The pro forma information above for 2008 includes the impact of the non-recurring fair value adjustments to inventory and deferred revenue resulting from the application of purchase accounting of $0.4 and $2.6, respectively.

The pro forma information above for 2007 includes the impact of the loss on early extinguishment of debt of $54.6; a commitment fee related to the financing transactions; the non-recurring fair value adjustments to inventory and deferred revenue resulting from the application of purchase accounting of $4.4 and $12.2, respectively; and non-recurring employee retention bonuses of $2.4.

The pro forma information also gives effect to certain identified cost savings as if they had been implemented in their entirety at the beginning of each period presented ($90.0 reflected in 2008 and 2007 for the Harland Acquisition, and $5.2 reflected in 2008 and 2007 for the Data Management Acquisition). These cost savings pertain to the termination of certain Harland and Data Management employees and the closure of certain Harland facilities and were estimated pursuant to EITF 95-3. There can be no assurance that all of such cost savings will be accomplished during any particular period, or at all.

The pro forma information does not include adjustments for additional expected cost savings resulting from the termination of certain of the Company’s historical employees, the closure of certain of the Company’s historical facilities, procurement savings or the elimination of certain duplicate corporate costs to the extent not yet realized in the Company’s operating results. There can be no assurance that all of such cost savings will be accomplished during any particular period, or at all.

Acquisition of Transaction Holdings

On December 31, 2008, Harland Clarke Corp., a subsidiary of the Company, acquired Transaction Holdings for total cash consideration of $8.2, subject to post-closing working capital adjustments. Transaction Holdings produces personal and business checks, payment coupon books, promotional checks and provides direct marketing services to financial institutions as well as individual consumers and small businesses. As a result of the December 31, 2008 acquisition date, Transaction Holdings had no effect on the Company’s results of operations. The preliminary allocation of the purchase price above resulted in identified intangible assets of

F-17

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

$9.5 and goodwill of $2.8. The Company recorded $2.8 of net deferred tax liabilities in connection with the purchase accounting related to this acquisition.

As a result of the Transaction Holdings Acquisition, the Company adopted a formal plan to terminate certain employees and exit duplicative facilities, which are subject to further refinement. The Company recorded $0.9 of severance and severance-related charges for the termination of certain Transaction Holdings employees and $0.6 of charges for the closure of certain Transaction Holdings facilities in accordance with the EITF 95-3. See Note 13 for additional disclosures regarding restructuring.

The pro forma effects on the results of operations for the Transaction Holdings acquisition was not material and is not included in the pro forma information presented above.

Peldec Assets Purchase

On August 15, 2007, the Company’s indirect wholly owned Irish subsidiary, Harland Financial Solutions Worldwide Limited, purchased certain intellectual property (the “Products”) and operations related to software products developed by Peldec Decision Systems Ltd. (“Peldec”), an Israeli corporation, including related contracts, documents, permits and agreements, and the assumption of certain related liabilities and contractual obligations, for aggregate consideration of $30.0. Peldec’s results of operations have been included in the Company’s operations since August 15, 2007. Harland Financial Solutions, Inc., a wholly owned subsidiary of the Company, had distributed the Products since August 2005 pursuant to a reseller agreement with Peldec.

Of the total consideration of $30.0, $14.0 was paid at closing, $6.0 was paid on the first anniversary of the closing date, and $5.0 is due on each of the second and third anniversaries of the closing date. The time-based payments are treated as an incentive agreement and are being recorded as compensation expense ratably over the service period. Each time-based payment is subject to forfeiture if certain key employees terminate employment prior to such payment date for certain reasons. The time-based payments are also subject to acceleration in certain instances, including a change in control, as defined in the related agreements. Fees and expenses of $0.4 were capitalized in the purchase price. Allocation of the purchase price above resulted in identified intangible assets of $7.2.

The pro forma effects on the results of operations for the Peldec assets purchase were not material and are not included in the pro forma information presented above.

4.   Inventories

Inventories consisted of the following:

	December 31,
	2008		2007
Finished goods	$	13.3	$	7.8
Work-in-progress		9.5		7.1
Raw materials		15.6		16.4
	$	38.4	$	31.3

F-18

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

5.   Property, Plant and Equipment

Property, plant and equipment consisted of the following:

	December 31,
	2008			2007
Machinery and equipment	$	115.8		$	109.6
Computer software and hardware		102.1			75.9
Leasehold improvements		22.4			10.6
Buildings and improvements		36.8			38.0
Furniture, fixtures and transportation equipment		15.7			18.5
Land		10.8			8.3
Construction-in-progress		15.1			9.2
		318.7			270.1
Accumulated depreciation		(141.1	)		(83.8	)
	$	177.6		$	186.3

Depreciation expense was $66.6, $58.5 and $25.9 for the years ended December 31, 2008, 2007 and 2006, respectively, and includes the depreciation of the Company’s capital leases. Capitalized lease equipment was $6.7 and $6.3 at December 31, 2008 and 2007, and the related accumulated depreciation was $4.5 and $3.0 at December 31, 2008 and 2007, respectively.

Construction-in-progress mainly consists of investments in Harland Clarke’s information technology infrastructure, contact centers, production bindery and delivery systems.

6.   Assets Held For Sale

At December 31, 2008, assets held for sale consisted of the Harland Clarke segment’s printing facility and operations support facility in Atlanta, Georgia. These facilities were closed in 2008 as part of the Company’s plan to exit duplicative facilities related to the Harland Acquisition. The Company is actively marketing the sale of these facilities and believes they will be sold within twelve months.

Assets held for sale at December 31, 2008 consisted of the following:

Land	$	1.0
Buildings and improvements		1.7
Total	$	2.7

In 2008, the Company recorded $0.5 in impairments related to print facilities held for sale which are included in cost of products sold in the accompanying consolidated statement of operations. One of the facilities was subsequently sold for its carrying value of $2.8. In 2008, the Company also recorded $0.2 in impairment related to the operations support facility, which is included in selling, general and administrative expenses in the accompanying consolidated statement of operations.

F-19

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

7.   Goodwill and Other Intangible Assets

The change in carrying amount of goodwill for the years ended December 31, 2008 and 2007 are as follows:

Balance as of December 31, 2006	$	346.8
Harland Acquisition		992.2
Peldec assets purchase		7.2
Effect of exchange rate changes		0.7
Balance as of December 31, 2007		1,346.9
Data Management Acquisition		115.9
Transaction Holdings Acquisition		2.8
Adjustments to goodwill		0.4
Effect of exchange rate changes		(0.5	)
Balance as of December 31, 2008	$	1,465.5

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

			Gross Carrying Amount				Accumulated Amortization
	Useful Life		December 31,		December 31,		December 31,		December 31,
	(in years)		2008		2007		2008		2007
Amortized intangible assets:
Customer relationships		3-30	$	1,230.6	$	1,155.6	$	170.2	$	86.0
Trademarks and tradenames		2-15		8.3		11.9		1.1		1.6
Covenants not to compete		3		—		0.4		—		0.4
Software and other		2-10		60.6		60.1		18.2		7.6
Patented technology		4-20		19.6		12.2		2.3		0.8
				1,319.1		1,240.2		191.8		96.4
Indefinite lived intangible assets:
Trademarks and tradenames				201.0		196.9		—		—
Total other intangible assets			$	1,520.1	$	1,437.1	$	191.8	$	96.4

Amortization expense was $97.9, $67.7, and $28.6 for the years ended December 31, 2008, 2007 and 2006, respectively.

The weighted average amortization period for the acquired Transaction Holdings customer relationship intangible asset was 7.0 years as of December 31, 2008. The weighted average amortization period for all amortizable intangible assets recorded in connection with the Data Management Acquisition was 15.2 years as of February 22, 2008. The weighted average amortization period for each major class of these amortizable intangible assets as of February 22, 2008 was as follows: customer relationships – 14.7 years, trademarks and tradenames – 14.9 years, software – 9.9 years and patented technology – 19.9 years.

F-20

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

Estimated annual aggregate amortization expense for intangible assets through December 31, 2013 is as follows:

2009	$	102.4
2010		99.7
2011		92.2
2012		85.5
2013		76.4

During 2007, the Company continued to experience greater revenue attrition than expected from Alcott Routon operations within the Harland Clarke segment. As a result, as well as management’s decision to change the business model for this operation, the Company assessed whether portions of the related acquired tradename and customer relationship intangible assets were impaired. An analysis of the sum of the forecasted undiscounted future cash flows based on then current expectations indicated an impairment and the intangible assets were written down to their estimated fair value at that time. As a result, an impairment charge of $3.1 was recorded and included in selling, general and administrative expenses in the accompanying consolidated statements of operations for 2007.

During 2008, the Company experienced further declines in customer revenues from Alcott Routon operations and assessed the customer relationship intangible asset for impairment. As a result, the Company calculated the estimated fair value and wrote off the customer relationship intangible asset, which was in excess of fair value. The associated impairment charge of $0.5 was included in selling, general and administrative expenses in the accompanying consolidated statements of operations for 2008.

8.   Income Taxes

Information pertaining to the Company’s income (loss) before income taxes and the applicable provision (benefit) for income taxes is as follows:

	Year Ended December 31,
	2008			2007			2006
Income (loss) before income taxes:
Domestic	$	88.4		$	(16.4	)	$	27.0
Foreign		(8.2	)		(4.4	)		—
Total income (loss) before income taxes	$	80.2		$	(20.8	)	$	27.0
Provision (benefit) for income taxes:
Current:
Federal	$	58.1		$	—		$	18.0
State and local		6.7			2.2			3.0
Foreign		0.1			—			—
		64.9			2.2			21.0
Deferred:
Federal		(29.5	)		(5.9	)		(7.5	)
State and local		(0.9	)		(1.7	)		(6.0	)
Foreign		(1.5	)		—			—
		(31.9	)		(7.6	)		(13.5	)
Total provision (benefit) for income taxes	$	33.0		$	(5.4	)	$	7.5

F-21

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

	December 31,
	2008			2007
Current:
Prepaid advertising	$	(1.5	)	$	(1.5	)
Deferred revenues		6.6			3.8
Net operating loss carryforwards		0.8			4.9
Accrued expenses and other liabilities		17.5			16.7
Net current deferred tax asset		23.4			23.9
Valuation allowance		(2.4	)		(3.6	)
		21.0			20.3
Long-term:
Property, plant and equipment		(11.1	)		(20.3	)
Postretirement benefits obligation		7.5			6.9
Deferred compensation		2.9			2.6
Intangible assets		(459.5	)		(481.2	)
Net operating loss carryforwards		5.6			6.9
Interest rate swap liability		10.2			8.9
Other		12.3			8.5
Net long-term tax liability		(432.1	)		(467.7	)
Valuation allowance		(3.6	)		(4.9	)
		(435.7	)		(472.6	)
Net deferred tax liabilities	$	(414.7	)	$	(452.3	)

At December 31, 2008, the Company had domestic federal net operating loss (“NOL”) carryforwards of $7.3 (gross), which expire between 2020 and 2022. The federal NOL carryforwards relate to an acquisition in 2004 and therefore are subject to annual limitations under Internal Revenue Code Section 382, which generally restricts the amount of a corporation’s taxable income that can be offset by a taxpayer’s NOL carryovers in taxable years after a change in ownership has occurred.

The Company had domestic state net operating loss carryforwards totaling $2.1 (tax effected), with $0.1 expiring in 2009-2010, $0.5 expiring in 2011-2019, and the remainder expiring beyond 2019.

The Company had domestic tax credits of $1.7 (tax effected) of which $0.1 expires in 2009-2010, $1.0 expires in 2020-2027 and $0.6 that do not expire. In addition, the Company had foreign net operating loss carryforwards of $8.7 for Ireland, which have no expiration dates.

The Company has established a valuation allowance for certain federal and state net operating loss carryovers, federal and state tax credit carryforwards. Management believes that, based on a number of factors, the available objective evidence creates uncertainty regarding the utilization of these carryforwards. At December 31, 2008 there was a valuation allowance of $6.0 for such items. The valuation allowance for deferred tax assets decreased by $2.5. The decrease in this allowance was primarily due to a reduction in the allowance on the Ireland losses of $0.5 and a reduction in the valuation allowance on pre-acquisition state net operating loss carryovers of $2.0.

F-22

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

The effective tax rate before income taxes varies from the current statutory federal income tax rate as follows:

	Year Ended December 31,
	2008			2007			2006
Statutory rate		35.0	%		35.0	%		35.0	%
State and local taxes		3.9	%		0.5	%		3.8	%
Foreign rate differential		2.1	%		—			—
Foreign loss for which no benefit was recorded		—			(7.4	)%		—
Effect of changes in state tax rates on deferred taxes		—			—			(10.8	)%
Other		0.1	%		(2.1	)%		(0.2	)%
		41.1	%		26.0	%		27.8	%

The Company, M & F Worldwide and another subsidiary of M & F Worldwide entered into a tax sharing agreement in 2005 whereby M & F Worldwide files consolidated federal income tax returns on the Company’s behalf, as well as on behalf of certain other subsidiaries of M & F Worldwide. Under the tax sharing agreement, the Company makes periodic payments to M & F Worldwide. These payments are based on the applicable federal income tax liability that the Company would have had for each taxable period if the Company had not been included in the M & F Worldwide consolidated group. Similar provisions apply with respect to any foreign, state or local income or franchise tax returns filed by any M & F Worldwide consolidated, combined or unitary group for each year that the Company is included in any such group for foreign, state or local tax purposes. During 2008, 2007 and 2006, the Company made net payments to M & F Worldwide of $57.4, $5.3 and $19.3, respectively under the tax sharing agreement. At the end of 2008 and 2007, the Company had net receivables of $6.0 and $6.3, respectively, relating to the tax sharing agreements.

To the extent that the Company has losses for tax purposes, the tax sharing agreement permits the Company to carry those losses back to periods beginning on or after December 15, 2005, and forward for so long as the Company is included in the affiliated group of which M & F Worldwide is the common parent (in both cases, subject to federal, state and local rules on limitation and expiration of net operating losses) to reduce the amount of the payments the Company otherwise would be required to make to M & F Worldwide in years in which it has current income for tax purposes. If the loss is carried back to the previous period, M & F Worldwide shall pay the Company an amount equal to the decrease of the taxes the Company would have benefited as a result of the carry back.

In connection with the Clarke American Acquisition, Honeywell has agreed to indemnify M & F Worldwide and its affiliates, including the Company, for certain income tax liabilities that arose prior to the acquisition of Clarke American and M & F Worldwide has agreed to reimburse to the Company an amount equal to 100% of any payment received (unless M & F Worldwide incurs any such liabilities directly).

F-23

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2008			2007
Balance at January 1	$	19.3		$	9.9
Additions from acquisitions		—			9.6
Additions based on tax positions related to the current year		—			—
Additions for tax positions for prior years		—			—
Reductions for tax positions for prior years		(0.7	)		(0.2	)
Settlements		—			—
Balance at December 31	$	18.6		$	19.3

Of the amounts reflected in the table above at December 31, 2008, there are no tax benefits that if recognized in 2008, would reduce the Company’s annual effective tax rate. The Company had accrued interest and penalties of approximately $6.1 and $5.8 as of December 31, 2008 and 2007, respectively. The Company records both accrued interest and penalties related to income tax matters in the provision for income taxes in the accompanying consolidated statements of operations. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

The Company’s federal tax returns for the 2004 through 2007 tax years generally remain subject to examination by federal and most state tax authorities. The Internal Revenue Service is currently examining Novar for the tax year 2005, Harland for the tax years 2005 through May 1, 2007, and for Harland’s amended tax returns filed for claims of research and development credits relating to tax years 2002 through 2005. In addition, open tax years related to foreign jurisdictions remain subject to examination but are not considered material.

9.   Retirement Plans

The Company, through its subsidiaries, sponsors certain defined contribution benefit plans whereby it generally matches employee contributions up to 4% of base wages. Contributions to the plans totaled $15.9, $11.4 and $5.2, for the years ended December 31, 2008, 2007 and 2006, respectively.

Primarily as a result of the Harland Acquisition, the Company has deferred compensation agreements with certain former officers. The present value of the cash benefits payable under these agreements was $6.4 and $6.5 at December 31, 2008 and 2007, respectively. Accretion expense recognized for these agreements was not significant.

10.   Other Postretirement Benefit Plans

As a result of the Harland Acquisition, the Company currently sponsors two unfunded postretirement benefit plans that cover certain salaried and non-salaried employees who were formerly employees of Harland. One plan provides health care benefits and the other provides life insurance benefits. The medical plan is contributory and contributions are adjusted annually based on actual claims experience. For retirees who retired prior to December 31, 2002 with twenty or more years of service at December 31, 2000, the Company contributes approximately 50% of the cost of the medical plan. For all other retirees, the Company’s intent is that the retirees provide the majority of the actual cost of the medical plan. The life insurance plan is noncontributory for those employees that retired by December 31, 2002.

As of December 31, 2008 and 2007, the accrued postretirement benefit obligation (“APBO”) was $17.5 and $15.6, respectively. For the years ended December 31, 2008 and 2007, the Company contributed $1.5 and $0.8, respectively, to these plans. The Company expects to contribute $1.1 to these plans in 2009.

F-24

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

The following table presents the beginning and ending balances of the APBO, the changes in the APBO, and reconciles the plans’ status to the accrued postretirement health care and life insurance liability reflected on the accompanying consolidated balance sheets as of December 31, 2008 and 2007:

	2008			2007
APBO at beginning of year	$	15.6		$	—
Changes in APBO:
Acquisition of Harland on May 1, 2007		—			17.3
Interest cost		0.9			0.6
Benefits paid		(2.7	)		(1.6	)
Retiree contributions		1.2			0.8
Actuarial loss (gain)		2.5			(1.5	)
APBO at end of year	$	17.5		$	15.6
Included in accrued salaries, wages and employee benefits	$	1.1		$	0.9
Included in other liabilities		16.4			14.7
APBO at end of year	$	17.5		$	15.6

The following table presents the changes in the fair value of plan assets and the funded status for the periods presented:

	2008			2007
Fair value of plan assets at beginning of year	$	—		$	—
Employer contributions		1.5			0.8
Retiree contributions		1.2			0.8
Benefits paid		(2.7	)		(1.6	)
Fair value of plan assets at end of year	$	—		$	—
Funded status	$	(17.5	)	$	(15.6	)
Unrecognized actuarial net loss (gain)		1.0			(1.5	)
Cumulative (charge) benefit to other comprehensive income		(1.0	)		1.5
Benefit obligation at end of year	$	(17.5	)	$	(15.6	)

Net periodic postretirement benefit costs for these plans were as follows:

	Year Ended December 31,
	2008		2007
Interest on accumulated postretirement benefit obligation	$	0.9	$	0.6
Net amortization		—		—
Net postretirement benefit cost	$	0.9	$	0.6

The weighted average discount rate used to determine benefit obligations as of December 31, 2008 and December 31, 2007 were 6.0% and 5.75%, respectively. The weighted average discount rate used to determine the net periodic postretirement benefit cost for the 2008 and 2007 periods was 5.75%. The annual health care cost trend rate used for 2009 to determine benefit obligations at December 31, 2008 was assumed to be 9.0%. The estimated annual health care cost trend rates grade down proportionally to 4.75% at 2016, the year that

F-25

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

the ultimate trend rate is reached. Participant contributions are assumed to increase with health care cost trend rates.

The health care cost trend rate assumptions, which are net of participant contributions and subsidies, could have a significant effect on amounts reported. A change in the assumed trend rate of 1 percentage point would have the following effects:

	1 Percentage		1 Percentage
	Point Increase		Point Decrease
Effect on total interest cost for 2008	$	0.1	$	(0.1	)
Effect on postretirement benefit obligation at December 31, 2008		1.2		(1.1	)

The following reflects the estimated future benefit payments, net of estimated participant contributions and subsidies:

2009	$	1.1
2010		1.1
2011		1.1
2012		1.1
2013		1.1
2014-2018		5.7

The Company recognized a net actuarial (loss) gain of ($2.5) and $1.5 in other comprehensive income in 2008 and 2007, respectively. During 2008 and 2007, there were no reclassification adjustments or amortization of the actuarial (loss) gain. The Company does not expect any net amortization will be included in 2009 net periodic postretirement benefit costs.

11.   Long-Term Debt

	December 31,
	2008			2007
$1,900.0 Senior Secured Credit Facilities	$	1,773.0		$	1,791.0
Senior Floating Rate Notes due 2015		305.0			305.0
9.50% Senior Fixed Rate Notes due 2015		310.0			310.0
Capital lease obligations and other indebtedness		2.6			3.9
		2,390.6			2,409.9
Less: current maturities		(19.8	)		(20.1	)
Long-term debt, net of current maturities	$	2,370.8		$	2,389.8

$1,900.0 Senior Secured Credit Facilities

In connection with the Harland Acquisition, on April 4, 2007, the Company and substantially all of its subsidiaries as co-borrowers entered into a credit agreement (the “Credit Agreement”).

The Credit Agreement provides for a $1,800.0 senior secured term loan (the “Term Loan”), which was fully drawn at closing on May 1, 2007 and matures on June 30, 2014. The Company is required to repay the Term Loan in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount. In addition, the Credit Agreement requires that a portion of the Company’s excess cash flow be applied to prepay amounts borrowed, as further described below. The Credit Agreement also provides for a

F-26

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

$100.0 revolving credit facility (the “Revolver”) that matures on June 28, 2013. The Revolver includes an up to $60.0 subfacility in the form of letters of credit and an up to $30.0 subfacility in the form of short-term swing line loans. The weighted average interest rate on borrowings outstanding under the Term Loan was 4.3% at December 31, 2008. As of December 31, 2008, there were no outstanding borrowings under the Revolver and there was $87.6 available for borrowing (giving effect to the issuance of $12.4 of letters of credit).

Under certain circumstances, the Company is permitted to incur additional term loan and/or revolving credit facility indebtedness in an aggregate principal amount of up to $250.0. In addition, the terms of the Credit Agreement and the 2015 Senior Notes (as defined below) allow the Company to incur substantial additional debt.

Loans under the Credit Agreement bear at the Company’s option, interest at:

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

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

The Credit Agreement has a commitment fee for the unused portion of the Revolver and for issued letters of credit of 0.50% and 2.63%, respectively. Interest rate margins and commitment fees under the Revolver are subject to reduction in increments based upon the Company achieving certain consolidated leverage ratios.

The Company and each of its existing and future domestic subsidiaries, other than unrestricted subsidiaries and certain immaterial subsidiaries, are guarantors and may also be co-borrowers under the Credit Agreement. In addition, the Company’s direct parent, CA Acquisition Holdings, Inc., is a guarantor under the Credit Agreement. The senior secured credit facilities are secured by a perfected first priority security interest in substantially all of the Company’s, each of the co-borrowers’ and the guarantors’ tangible and intangible assets and equity interests (other than voting stock in excess of 65.0% of the outstanding voting stock of each direct foreign subsidiary and certain other excluded property).

The Credit Agreement contains customary affirmative and negative covenants including, among other things, restrictions on indebtedness, liens, mergers and consolidations, sales of assets, loans, acquisitions, restricted payments, transactions with affiliates, dividends and other payment restrictions affecting subsidiaries and sale-leaseback transactions. The Credit Agreement requires the Company to maintain a maximum consolidated leverage ratio for the benefit of lenders under the Revolver only. The Company has the right to prepay the Term Loan at any time without premium or penalty, subject to certain breakage costs, and the Company may also reduce any unutilized portion of the Revolver at any time, in minimum principal amounts set forth in the Credit Agreement. The Company is required to prepay the Term Loan with 50% of excess cash flow (as defined in the Credit Agreement, commencing in 2009 with respect to the fiscal year 2008, with certain reductions set forth in the Credit Agreement, based on achievement and maintenance of leverage ratios) and 100% of the net proceeds of certain issuances, offerings or placements of debt obligations of the Company or any of its subsidiaries (other than permitted debt). No such excess cash flow payment is expected to be paid in 2009. Each such prepayment will be applied first to the next eight unpaid quarterly amortization installments on the term loans and second to the remaining amortization installments on the term loans on a pro rata basis.

The Credit Agreement also contains certain customary affirmative covenants and events of default. Such events of default include, but are not limited to: non-payment of amounts when due; violation of covenants; material inaccuracy of representations and warranties; cross default and cross acceleration with respect to other

F-27

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

material debt; bankruptcy and other insolvency events; certain ERISA events; invalidity of guarantees or security documents; and material judgments. Some of these events of default allow for grace periods.

If a change of control (as defined in the Credit Agreement) occurs, the Company will be required to make an offer to prepay all outstanding term loans under the Credit Agreement at 101% of the outstanding principal amount thereof plus accrued and unpaid interest, and lenders holding a majority of the revolving credit commitments may elect to terminate the revolving credit commitments in full. The Company is also required to offer to prepay outstanding term loans at 100% of the principal amount to be prepaid, plus accrued and unpaid interest, with the proceeds of certain asset sales under certain circumstances.

Under the terms of the Credit Agreement, the Company is required to ensure that, until no earlier than May 1, 2009, at least 40% of the aggregate principal amount of its long-term indebtedness bears interest at a fixed rate, either by its terms or through entering into hedging agreements within 180 days of the effectiveness of the Credit Agreement. In order to comply with this requirement, the Company has entered into interest rate derivative arrangements described in “Interest Rate Hedges” below.

Senior Notes due 2015

Additionally, in connection with the Harland Acquisition, on May 1, 2007, the Company issued $305.0 aggregate principal amount of Senior Floating Rate Notes due 2015 (the “Floating Rate Notes”) and $310.0 aggregate principal amount of 9.50% Senior Fixed Rate Notes due 2015 (the “Fixed Rate Notes” and, together with the Floating Rate Notes, the “2015 Senior Notes”). The 2015 Senior Notes mature on May 15, 2015. The Fixed Rate Notes bear interest at a rate per annum of 9.50%, payable on May 15 and November 15 of each year. The Floating Rate Notes bear interest at a rate per annum equal to the Applicable LIBOR Rate (as defined in the indenture governing the 2015 Senior Notes (the “Indenture”)) plus 4.75%, payable on February 15, May 15, August 15 and November 15 of each year. The interest rate on the floating rate notes was 6.9% at December 31, 2008. The Senior Notes are unsecured and are therefore effectively subordinated to all of the Company’s senior secured indebtedness, including outstanding borrowings under the Credit Agreement. The Indenture contains customary restrictive covenants, including, among other things, restrictions on the Company’s ability to incur additional debt, pay dividends and make distributions, make certain investments, repurchase stock, incur liens, enter into transactions with affiliates, enter into sale and lease back transactions, merge or consolidate and transfer or sell assets. The Company must offer to repurchase all of the 2015 Senior Notes upon the occurrence of a “change of control,” as defined in the Indenture, at a purchase price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest. The Company must also offer to repurchase the 2015 Senior Notes with the proceeds from certain sales of assets, if it does not apply those proceeds within a specified time period after the sale, at a purchase price equal to 100% of their aggregate principal amount, plus accrued and unpaid interest.

In accordance with the deadlines and other provisions of a registration rights agreement that the Company executed in connection with the issuance of the 2015 Senior Notes, the Company filed a registration statement on June 13, 2007 registering an offer to exchange for publicly registered 2015 Senior Notes with substantially equivalent terms as those of the 2015 Senior Notes originally issued, which was declared effective by the Securities and Exchange Commission on June 20, 2007. The Company commenced an exchange offer on June 21, 2007 and closed the offer on August 3, 2007, with $614.5 of the total $615.0 principal amount of the 2015 Senior Notes having been exchanged.

During the first quarter of 2009 through the date of this Annual Report on Form 10-K, the Company extinguished $60.5 principal amount of debt by purchasing 2015 Senior Notes in individually negotiated transactions for an aggregate purchase price of $22.8.

F-28

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

Prior Credit Facilities

Concurrent with the completion of M & F Worldwide’s acquisition of Clarke American (since renamed Harland Clarke Holdings) in December 2005, the Company, as Borrower, entered into senior secured credit facilities (the “Prior Credit Facilities”), which provided for a revolving credit facility (the “Prior Revolver”) in the amount of $40.0 maturing on December 15, 2010 and a $440.0 term loan maturing on December 15, 2011 (the “Prior Term Loan”). The outstanding principal balance under the Prior Credit Facilities of $393.7 was repaid on May 1, 2007 in connection with the Harland Acquisition and related financing transactions, along with accrued interest through the date of repayment of $2.9 and prepayment penalties of $3.9.

The Prior Term Loan had an aggregate principal amount at maturity of $440.0. The Company assumed $437.8 of net obligations from its issuance, net of original discount of 0.5%. The original discount was being amortized as non-cash interest expense over the life of the term loan facility using the effective interest method.

Senior Notes due 2013

Concurrent with the completion of M & F Worldwide’s acquisition of Clarke American (since renamed Harland Clarke Holdings) in December 2005, the Company issued $175.0 principal amount of 11.75% Senior Notes due December 15, 2013 (the “2013 Senior Notes”). All of these notes were either repurchased in a tender offer that closed on May 3, 2007 or redeemed on June 4, 2007 for total consideration of $220.1, including prepayment premiums and consent payments totaling $37.3 and accrued interest of $7.8.

Loss on Early Extinguishment of Debt

In connection with the extinguishment of the Company’s Prior Credit Facilities and the 2013 Senior Notes, the Company recorded a total loss on early extinguishment of debt of $54.6, consisting of the following: the $37.3 prepayment premiums and consent payments on the 2013 Senior Notes, the $3.9 prepayment penalty on the Prior Credit Facilities, a non-cash expense of $1.5 for the write-off of unamortized original discount on the Prior Credit Facilities, and a non-cash expense of $11.9 for the write-off of unamortized deferred financing fees related to the 2013 Senior Notes and the Prior Credit Facilities.

Capital Lease Obligations and Other Indebtedness

The Company has outstanding capital lease obligations with principal balances totaling $2.6 and $3.4 at December 31, 2008 and 2007, respectively. These obligations have imputed interest rates ranging from 7.3% to 8.5% and have required payments, including interest, of $1.9 in 2009, $0.6 in 2010, and $0.1 in 2011, 2012 and 2013. The Company also had $0.0 and $0.5 outstanding under an information technology financing obligation at December 31, 2008 and 2007, respectively.

Interest Rate Hedges

During February 2006, the Company entered into interest rate hedge transactions in the form of three-year interest rate swaps with a total notional amount of $150.0, which became effective on July 1, 2006 and are accounted for as cash flow hedges. The hedges were designed to swap the underlying variable rate for a fixed rate of 4.992%. The purpose of the hedge transactions was to limit the Company’s risk on a portion of its variable interest rate Prior Credit Facilities. On May 1, 2007, the Company’s Prior Credit Facilities were repaid in full. The Company redesignated the swaps as a hedge against the variable interest rate on a portion of its Term Loan. In accordance with SFAS No. 133, as amended and interpreted, the Company is amortizing the fair value of the derivative liability of $0.4 as of May 1, 2007 in interest expense in the consolidated statements of operations over the remaining life of the derivative contract using the straight-line method.

During June 2007, the Company entered into additional interest rate derivative transactions in the form of a two-year interest rate swap with a notional amount of $255.0 and a three-year interest rate swap with a

F-29

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

notional amount of $255.0, which became effective on June 29, 2007. The two-year hedge swaps the underlying variable rate for a fixed rate of 5.323% and the three-year hedge swaps the underlying variable rate for a fixed rate of 5.362%. During August 2007, the Company entered into an additional interest rate derivative transaction in the form of a two-year interest rate swap with a notional amount of $250.0, which became effective on September 28, 2007. The hedge swaps the underlying variable rate for a fixed rate of 4.977%. The purpose of these hedge transactions, which are accounted for as cash flow hedges, is to limit the Company’s risk on a portion of the Company’s variable-rate Term Loan and comply with the terms of the Credit Agreement.

As of December 31, 2008, the Company recorded a liability of $27.5 related to these derivative instruments ($13.8 in current liabilities and $13.7 in other liabilities in the accompanying consolidated balance sheet). As of December 31, 2007, the Company recorded a liability of $22.7 related to these derivative instruments in other liabilities in the accompanying consolidated balance sheet. As a result of these hedges, the Company recognized additional interest expense of $15.4 during 2008 and a $0.3 reduction of interest expense during 2007. The Company expects to reclassify approximately $25.0 into earnings as additional interest expense during the next twelve months.

Annual Maturities

Annual maturities of long-term debt during the next five years are as follows:

2009	$	19.8
2010		18.5
2011		18.1
2012		18.1
2013		18.1

12.   Financial Instruments

Most of the Company’s clients are in the financial services and educational industries. The Company performs ongoing credit evaluations of its clients and maintains allowances for potential credit losses. The Company does not generally require collateral. Actual losses and allowances have been within management’s expectations.

The carrying amounts for cash and cash equivalents, trade accounts receivable, accounts payable and accrued liabilities approximate fair value. The estimated fair value of long-term debt at December 31, 2008 was approximately $1,096.3 based on bid prices available at that date. The estimated fair value of long-term debt at December 31, 2007 was approximately $2,139.6 based on bid prices available at that date.

As discussed in Note 2, the Company adopted SFAS No. 157 effective January 1, 2008. SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. As of December 31, 2008, the Company held two types of financial instruments subject to valuation under SFAS No. 157, marketable securities and interest rate swaps. The marketable securities are included in other assets in the accompanying consolidated balance sheets. The interest rate swaps are included in current liabilities and other liabilities in the accompanying consolidated balance sheets. Fair value of interest

F-30

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

rate swaps is based on forward-looking interest rate curves as provided by the counterparties, adjusted for our credit risk. Fair values as of December 31, 2008 were calculated as follows:

	Balance at
	December 31, 2008		(Level 1)		(Level 2)		(Level 3)
Marketable securities	$	0.2	$	0.2	$	—	$	—
Liability for interest rate swaps		27.5		—		27.5		—

13.   Restructuring

Prior to the Harland Acquisition

Prior to the Harland Acquisition, the Company developed a restructuring plan for its checks and related products business, which is now contained in the Harland Clarke segment, to streamline and redesign the manufacturing plant and contact center network in order to take advantage of high-capacity technology and economies of scale, to redefine sales territories and consolidate sales divisions, and to restructure the segment’s corporate staff.

During the year ended December 31, 2006, the Company established $3.3 in reserves with respect to the checks and related products business related to the closure of two production facilities and a reduction in force of the segment’s corporate staff. In connection with the facilities closures, the Company sold $0.5 of assets in January 2007 and recognized an insignificant gain.

During the period January 1, 2007 through April 30, 2007, the Company established $1.5 in reserves with respect to the checks and related products business related to the closure of one contact center and one printing plant. These facilities were closed in 2007 with ongoing lease commitments through 2009. The total expected expenditures for these closures are $3.1.

In connection with and subsequent to the Harland Acquisition

During the second quarter of 2007, as a result of the Harland Acquisition, the Company adopted a plan to restructure its business. This plan focuses on improving operating margin through consolidating facilities and reducing duplicative expenses, such as selling, general and administrative, executive and shared services expenses. The Company’s planned initiatives primarily include the following:

•   consolidation of various facilities in the Harland Clarke segment;

•   workforce rationalization in sales and marketing, information technology, production support, executive, finance, human resources, legal and other support functions; and

•   consolidation of certain redundant outsourcing and other professional services, such as consulting.

As discussed in Note 3, the Company recorded $19.7 of severance and severance-related costs for the termination of certain former Harland employees and $2.8 of costs for the closure of certain Harland facilities in purchase accounting in accordance with EITF 95-3. Of the liabilities recorded in purchase accounting, $13.8 related to the Harland Clarke segment, $7.1 related to the Harland Financial Solutions segment and $1.6 related to Corporate.

In addition to restructuring liabilities recorded in purchase accounting for the Harland Acquisition, the Company has adopted plans to realize incremental synergies in the Harland Clarke segment by further consolidating printing plants, contact centers and selling, general and administrative areas. These expenditures consisted of severance and severance-related charges of $7.0 in 2008 and $1.4 in 2007 and facilities closure and other charges of $2.3 in 2008 and $2.7 in 2007.

F-31

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

In the first half of 2009, the Company expects to expense an additional $4.8 for the termination of certain employees. Ongoing lease commitments related to these restructuring plans continue through 2011. The Company expects to expense an additional $5.4 for facilities closure and other charges.

The following table details the components of the Company’s restructuring accruals related to the Harland Acquisition and other restructuring activities for the Harland Clarke segment and Corporate for 2008, 2007 and 2006:

			Established in
	Beginning		Purchase								Non-cash			Ending
	Balance		Accounting			Expensed		Paid in Cash			utilization			Balance
Year Ended December 31, 2008:
Severance and severance related	$	9.2	$	1.5		$	7.0	$	(10.5	)	$	—		$	7.2
Facilities closures and other costs		4.6		(0.9	)		2.3		(2.3	)		(2.0	)		1.7
	$	13.8	$	0.6		$	9.3	$	(12.8	)	$	(2.0	)	$	8.9
Year Ended December 31, 2007:
Severance and severance related	$	1.7	$	18.2		$	2.9	$	(13.6	)	$	—		$	9.2
Facilities closures and other costs		1.0		3.7			2.7		(1.7	)		(1.1	)		4.6
	$	2.7	$	21.9		$	5.6	$	(15.3	)	$	(1.1	)	$	13.8
Year Ended December 31, 2006:
Severance and severance related	$	1.8	$	—		$	3.2	$	(3.3	)	$	—		$	1.7
Facilities closures and other costs		1.6		—			0.1		(0.7	)		—			1.0
	$	3.4	$	—		$	3.3	$	(4.0	)	$	—		$	2.7

In the fourth quarter of 2008, the Company announced it would consolidate certain printing operations, which includes the closing of two printing facilities in 2009, one facility is owned by the Company and the other is leased. Due to this action, the Company recorded an impairment charge of $1.0 to adjust the carrying value of the owned facility to its estimated fair value. This impairment charge is included in restructuring costs in the accompanying consolidated statement of operations for 2008. The non-cash utilization of $2.0 in 2008 in the above table includes this impairment charge as well as adjustments to the carrying value of other property, plant and equipment. The non-cash utilization of $1.1 in 2007 in the above table includes adjustments to the carrying value of other property, plant and equipment.

Also, in addition to restructuring accruals, the Company incurred other expenses related to the facility closures, such as inventory write-offs, training, hiring and travel.

Transaction Holdings Acquisition

As discussed in Note 3, as a result of the Transaction Holdings Acquisition, the Company recorded $0.9 of severance and severance-related charges for the termination of certain Transaction Holdings employees and $0.6 of charges for the closure of certain Transaction Holdings facilities in purchase accounting in accordance with EITF 95-3.

Data Management Acquisition

During the first quarter of 2008, as a result of the Data Management Acquisition, the Company adopted plans to restructure the Scantron segment, which are subject to further refinement. These plans focus on improving operating margin through consolidating manufacturing and printing operations and reducing duplicative selling, general and administrative expenses. The Company’s planned initiatives primarily include the following:

•   consolidation of printing and manufacturing operations;

F-32

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

•   workforce rationalization in sales and marketing, information technology, production support, executive, finance, human resources, legal and other support functions; and

•   consolidation of certain redundant outsourcing and other professional services, such as consulting.

As discussed in Note 3, the Company recorded $2.5 of severance and severance-related costs for the termination of certain former Data Management employees in purchase accounting in accordance with EITF 95-3. In addition to these restructuring liabilities recorded in purchase accounting for the Data Management Acquisition, the Company expensed $2.3 for severance and severance-related costs for the termination of certain Scantron employees and $0.1 of facilities and other costs for the consolidation of certain printing operations during 2008. All of the Data Management Acquisition restructuring costs expensed during 2008 were in the Scantron segment. The Company expects to complete the planned employee terminations and consolidation of printing and manufacturing operations by March 31, 2009. The Company expects to expense approximately $2.4 for the termination of Scantron employees and $3.9 for facilities and other costs.

The following table details the components of the Company’s restructuring accruals related to the Data Management Acquisition in 2008:

			Established in
	Beginning		Purchase							Ending
	Balance		Accounting		Expensed		Paid in Cash			Balance
Year Ended December 31, 2008:
Severance and severance related	$	—	$	2.5	$	2.3	$	(3.8	)	$	1.0
Facilities closures and other costs		—		—		0.1		(0.1	)		—
	$	—	$	2.5	$	2.4	$	(3.9	)	$	1.0

In addition to the amounts disclosed in the table above, the Company also incurred other expenses related to the initiatives including inventory write-offs, training, hiring, relocation and travel.

Harland Financial Solutions

During the second quarter of 2008, the Company implemented and completed a plan to restructure certain selling, general and administrative functions within the Harland Financial Solutions segment. The plan focuses on improving operating margin through reducing selling, general and administrative expenses by leveraging the Company’s shared services capabilities.

As a result of the plan, the Company expensed $3.9 of severance and severance-related costs for the termination of certain employees during 2008. In the first half of 2009, the Company expects to expense an additional $0.8 for the termination of certain employees and $1.1 related to facilities consolidation. The total cost of the plan is estimated to be $5.8. The Company expects to make severance payments related to the plan through April 2010.

The following table details the Company’s restructuring accruals related to the Harland Financial Solutions plan in 2008:

	Beginning							Ending
	Balance		Expensed		Paid in Cash			Balance
Year Ended December 31, 2008:
Severance and severance related	$	—	$	3.9	$	(2.5	)	$	1.4

Restructuring accruals are reflected in other current liabilities and other liabilities in the accompanying consolidated balance sheets. The Company expects to pay the remaining severance, facilities and other costs related to these restructuring plans through 2010.

F-33

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

14.   Commitments and Contingencies

Lease and Purchase Commitments

The Company leases property and equipment under operating leases that expire at various dates through 2018. Certain leases contain renewal options for one- to five-year periods. Rental payments are typically fixed over the initial term of the lease and usually contain escalation factors for the renewal term. At December 31, 2008, future minimum lease payments under non-cancelable operating leases with terms of one year or more are as follows:

2009	$	27.1
2010		20.4
2011		16.5
2012		11.1
2013		6.2
Thereafter		11.0

Minimum annual rental payments in the above table have not been reduced by minimum sublease rentals of $1.8.

Total lease expense for all operating leases was $24.6, $20.7 and $8.2 for the years ended December 31, 2008, 2007 and 2006, respectively.

At December 31, 2008, the Company had obligations to purchase approximately $20.2 of raw materials.

Honeywell Indemnification

Certain of the intermediate holding companies of the predecessor of the Company had issued guarantees on behalf of operating companies formerly owned by these intermediate holding companies, which operating companies are not part of the Company’s business. In the stock purchase agreement executed in connection with the acquisition of the Company by M & F Worldwide, Honeywell agreed to use its commercially reasonable efforts to assume, replace or terminate such guarantees and indemnify M & F Worldwide and its affiliates, including the Company and its subsidiaries, with respect to all liabilities arising under such guarantees. See Note 8 for certain tax matters indemnified by Honeywell.

Other

In June 2008, Kenneth Kitson, purportedly on behalf of himself and a class of other alleged similarly situated commercial borrowers from the Bank of Edwardsville, an Illinois-based community bank (“BOE”), filed in a Madison County, Illinois state court an amended complaint that re-asserted previously filed claims against BOE and added claims against Harland Financial Solutions, Inc. (“HFS”). Mr. Kitson’s complaint alleges, among other things, that HFS’s Laser Pro software permitted BOE to generate loan documents that were deceptive and usurious in that they failed to disclose properly the effect of the “365/360” method of calculating interest. Mr. Kitson seeks unspecified monetary and injunctive relief. HFS removed the action to the United States District Court for the Southern District of Illinois. Prior to the time HFS removed the case to federal court, Mr. Kitson and BOE reached a tentative settlement of the claims against BOE and received preliminary approval of that settlement from the state court. On February 9, 2009, the District Court entered an order granting with prejudice HFS’s motion to dismiss the claims that Mr. Kitson brought against it. Mr. Kitson has not yet indicated whether he intends to appeal the dismissal. While there can be no assurance, the Company believes that the dismissal will be upheld in any appeal or that it will be able to present a vigorous defense should that become necessary.

F-34

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

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

15.   Transactions with Related Parties

Since December 15, 2005, the Company participates in MacAndrews & Forbes Holdings Inc.’s directors and officer’s insurance program, which covers the Company as well as MacAndrews & Forbes Holdings Inc. and its other affiliates. MacAndrews & Forbes Holdings Inc. directly and indirectly beneficially owned, as of December 31, 2008, approximately 43.4% of outstanding common stock of M & F Worldwide. The limits of coverage are available on aggregate losses to any or all of the participating companies and their respective directors and officers. The Company reimburses MacAndrews & Forbes Holdings Inc. for its allocable portion of the premiums for such coverage, which the Company believes is more favorable than the premiums the Company could secure were it to secure its own coverage. At December 31, 2008 and 2007, the Company recorded prepaid expenses of $0.3 and $0.4, respectively, relating to the directors and officers insurance program in the accompanying consolidated balance sheets. The Company paid $0.3 and $0.4 to MacAndrews & Forbes Holdings Inc. in 2008 and 2007, respectively, under the insurance program. No payments to MacAndrews & Forbes Holdings Inc. were made in 2006 under the insurance program.

Notes Receivable

In 2008, the Company acquired the senior secured credit facility and outstanding note of Delphax Technologies, Inc. (“Delphax”), the supplier of Imaggia printing machines and related supplies and service for the Harland Clarke segment. The senior secured credit facility is comprised of a revolving credit facility of up to $14.0 and a term loan of $0.5, subject to borrowing limitations set forth therein, that mature in September 2011. The senior secured credit facility is collateralized by a perfected security interest in substantially all of Delphax’s assets. The revolving facility has a borrowing base calculated based on Delphax’s eligible accounts receivable and inventory. The senior secured credit facility has an interest rate of Wells Fargo N.A. Prime plus 2.5%, payable quarterly. The note, which has a principal amount of $7.0, matures in September 2012, and bears interest at an annual rate of 12%, payable quarterly either in cash, or in a combination of cash and up to 25% Delphax stock. As part of this transaction, the Company also received 250,000 shares of Delphax common stock from the previous holder of the Delphax note.

The outstanding balance on the senior secured credit facility and the note are included in other assets in the accompanying consolidated balance sheet. During 2008, the Company received $15.3 in payments and released $13.5 in draws on the revolver, bringing the principal balance of the debt to $12.5 at December 31, 2008. Interest income of $0.4 was recorded in 2008.

Other

In accordance with SEC Staff Accounting Bulletin 79, “Accounting for Expenses or Liabilities Paid by Principal Stockholder(s),” the Company expensed $2.7, $2.1 and $0.5 during 2008, 2007 and 2006, respectively, for services provided to the Company by M & F Worldwide. These amounts are reflected in selling, general and administrative expenses.

In 2008, the Company paid a cash dividend of $65.0, to M & F Worldwide as permitted by restricted payment baskets within the Company’s debt agreements. In 2007 and 2006, the Company paid a cash dividend in the amount of $1.8 and $1.5, respectively, to M & F Worldwide to cover certain public company related expenses.

F-35

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

As discussed in Note 3, the Company paid $2.0 in February 2008 to MacAndrews & Forbes Holdings Inc. for its services related to sourcing, analyzing, negotiating and executing the Data Management Acquisition.

M & F Worldwide paid $10.0 in June 2007 to MacAndrews & Forbes Holdings Inc. for its service in sourcing, analyzing, negotiating and executing the Harland Acquisition. As discussed in Note 3, the Company reimbursed M & F Worldwide for that payment during the third quarter of 2007 and has included this fee in the purchase price for the Harland Acquisition. As also discussed in Note 3, the Company paid $3.0 to M & F Worldwide to reimburse it for professional fees paid by M & F Worldwide relating to the Harland Acquisition.

16.   Significant Customers

The Company’s top 20 clients accounted for approximately 31%, 33%, and 53% of the Company’s consolidated net revenues during the years ended December 31, 2008, 2007 and 2006, respectively, with sales to Bank of America representing a significant portion of such revenues in the Harland Clarke segment.

17.   Business Segment Information

Subsequent to the completion of the Harland Acquisition on May 1, 2007, the Company reorganized its business along three reportable segments together with a corporate group for certain support services. The reorganization aligned the Company’s operations on the basis of products, services and industry. The Company’s previously existing Financial Institution and Direct to Consumer segments were combined with Harland’s similar operations; this business segment now operates under the name of Harland Clarke and is referred to as the Harland Clarke segment. The Company also added two new reportable segments for business lines acquired in the Harland Acquisition: the Harland Financial Solutions segment and the Scantron segment. The acquired Data Management operations are included in the Scantron segment. During 2008, the Company transferred its field maintenance services from the Harland Financial Solutions segment to the Scantron segment. This transfer was implemented to align the field maintenance services with Scantron as a result of the Data Management Acquisition. Management measures and evaluates the reportable segments based on operating income. The current segments and their principal activities consist of the following:

•   Harland Clarke segment – Provides checks and related products, direct marketing and contact center services to financial and commercial institutions, as well as to individual consumers and small businesses. This segment operates in the United States and Puerto Rico.

•   Harland Financial Solutions segment – Provides core processing, retail and lending solutions to financial and other institutions. This segment operates primarily in the United States, Israel and Ireland.

•   Scantron segment – Provides data collection, testing and assessment products and services as well as field maintenance services which are sold primarily to educational and commercial customers. This segment operates in the United States and Canada.

Prior period results in the tables below have been restated to conform to the business segment changes as described above. See Note 3 for additional disclosures regarding the Harland Acquisition.

F-36

Harland Clarke Holdings Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(dollars in millions)

Selected summarized financial information for 2008, 2007 and 2006 is as follows:

			Harland
	Harland		Financial				Corporate
	Clarke(1)(4)		Solutions(1)(2)		Scantron(1)(3)		and Other(1)(5)			Total
Product revenues, net:
2008	$	1,285.4	$	79.9	$	126.5		—		$	1,491.8
2007		1,101.4		50.0		47.9		—			1,199.3
2006		622.3		—		—		—			622.3
Service revenues, net:
2008	$	4.7	$	213.8	$	84.3		—		$	302.8
2007		2.5		133.0		35.1		—			170.6
2006		1.6		—		—		—			1.6
Intersegment revenues:
2008	$	0.3	$	—	$	0.5	$	(0.8	)	$	—
2007		0.6		—		0.6		(1.2	)		—
2006		—		—		—		—			—
Operating income (loss):
2008	$	217.2	$	34.1	$	28.3	$	(14.8	)	$	264.8
2007		181.1		16.8		12.4		(16.1	)		194.2
2006		87.0		—		—		—			87.0
Depreciation and amortization (excluding amortization of deferred financing fees and original discount):
2008	$	112.5	$	28.7	$	23.3		—		$	164.5
2007		98.2		17.3		10.6		0.1			126.2
2006		54.5		—		—		—			54.5
Capital expenditures (excluding capital leases):
2008	$	32.2	$	4.0	$	12.0		—		$	48.2
2007		18.0		5.6		1.9		—			25.5
2006		14.7		—		—		—			14.7
Total assets:
December 31, 2008	$	1,184.2	$	335.4	$	307.0	$	1,565.2		$	3,391.8
December 31, 2007		1,304.8		360.7		171.5		1,610.6			3,447.6

(1)	Includes results of the acquired Harland businesses from the date of acquisition.
(2)	Includes results of the acquired Peldec business from the date of acquisition.
(3)	Includes results of the acquired Data Management businesses from the date of acquisition.
(4)	Includes results of acquired Transaction Holdings business from the date of acquisition.
(5)	Total assets include goodwill of $1,465.5 and $1,346.9 as of December 31, 2008 and 2007, respectively, which is not assigned to the operating segments.

18.   Subsequent Event

During the first quarter of 2009 through the date of this Annual Report on Form 10-K, the Company extinguished $60.5 principal amount of debt by purchasing 2015 Senior Notes in individually negotiated transactions for an aggregate purchase price of $22.8.

F-37

Schedule II — Valuation and Qualifying Accounts and Reserves
(in millions)

The following is a summary of the valuation and qualifying accounts and reserves for the years ended December 31, 2008, 2007 and 2006.

	Beginning		Amounts		Balance		Ending
	Balance		Reserved		Written Off		Balance
Allowance for Doubtful Accounts and Sales Returns and Allowance Reserves
December 31, 2008	$	2.4	$	8.0	$	7.6	$	2.8
December 31, 2007	$	—	$	5.4	$	3.0	$	2.4
December 31, 2006	$	—	$	—	$	—	$	—

F-38

EX-10.14

Exhibit 10.14

EMPLOYMENT AGREEMENT

          EMPLOYMENT AGREEMENT, dated as of February 7, 2008, between Harland Clarke Holdings Corp., a Delaware corporation (the “Company”), and Daniel Singleton (the “Executive”).

          WHEREAS, on May 2, 2007, Harland Clarke Corp. (“Harland Clarke”), the Company and the Executive entered into a new Employment Agreement (the “Existing Employment Agreement”); and

          WHEREAS, the Company and the Executive wish to modify the terms of employment set forth in the Existing Employment Agreement.

          Accordingly, the Company and the Executive hereby agree as follows:

          1. Employment, Duties and Acceptance.

               1.1 Employment, Duties. The Company hereby employs the Executive for the Term (as defined in Section 2.1), to render exclusive and full-time services to the Company as Executive Vice President of the “Harland Clarke Business”, or in such other executive position as may be mutually agreed upon by the Company and the Executive, and to perform such other duties consistent with such position as may be assigned to the Executive by the Board of Directors of Harland Clarke Holdings Corp. (the “Board”). During the Term, the Executive shall report solely to the CEO (or his designee). For purposes of this Agreement, the term “Harland Clarke Business” shall mean the business of the provision of checks and related products, direct marketing and contract center services to financial and commercial institutions and individuals, and any future businesses from time to time included in or added to such businesses.

               1.2 Acceptance. The Executive hereby accepts such employment and agrees to render the services described above. During the Term, the Executive agrees to serve the Company faithfully and to the best of the Executive’s ability, to devote the Executive’s entire business time, energy and skill to such employment, and to use the Executive’s best efforts, skill and ability to promote the Company’s interests. The Executive further agrees to accept election, and to serve during all or any part of the Term, as an officer or director of the Company and of any subsidiary or affiliate of the Company, without any compensation therefor other than that specified in this Agreement, if elected to any such position by the shareholders or by the Board or of any subsidiary or affiliate, as the case may be.

               1.3 Location. The duties to be performed by the Executive hereunder shall be performed primarily at the offices of the Company in Atlanta, Georgia, subject to reasonable travel requirements on behalf of the Company.

          2. Term of Employment; Certain Post-Term Benefits.

               2.1 The Term. This Agreement and the term of the Executive’s employment under this Agreement (the “Term”) shall become effective as of January 1, 2008 (the “Effective Date”) and will continue until December 31, 2009 (the “Termination Date”), subject to earlier termination pursuant to Section 4.

               2.2 End-of-Term Provisions. Prior to the end of the Term, the Company and the Executive shall meet to discuss whether the Term should be extended. The Company shall have the right at any time, however, to give written notice of non-renewal of the Term. In the event of non-renewal of the Term by the Company and the Executive’s employment is terminated after the end of the Term, other than for Cause (as defined below), or Disability (as defined below) following such notice of non-renewal, then such termination shall be treated as a termination without Cause and the Restricted Period (as defined below) shall be reduced to a period of nine months post termination of employment (the “Reduced Restricted Period”). During such Restricted Period, the Executive shall receive 50% of the payments set forth in Sections 4.4(i) and 4.4(ii), subject to Executive’s signing and not revoking the release of claims as set forth in Section 4.6. For the avoidance of doubt, if the Company is willing to extend the Term and Executive does not agree to extend the Term, then upon such termination of employment at the end of the Term, the Executive shall be bound by the restrictive covenants set forth in Section 5 below, the Restricted Period shall not be reduced and Executive shall not be entitled to receive any severance benefits with respect to such termination. Notwithstanding the foregoing, the terms of this Section 2.2 will not impact any payments or other benefits to which the Executive would then be entitled under normal Company policies or the LTIP (as defined below) pursuant to the terms thereof.

          3. Compensation; Benefits.

               3.1 Salary. As compensation for all services to be rendered pursuant to this Agreement, the Company agrees to pay the Executive a base salary, payable in accordance with the Company’s normal payroll practices, at the annual rate of not less than $500,000 (effective January 1, 2008) less such deductions or amounts to be withheld as required by applicable law and regulations (the “Base Salary”). In the event that the Company, in its sole discretion, from time to time determines to increase the Base Salary, such increased amount shall, from and after the effective date of the increase, constitute “Base Salary” for purposes of this Agreement.

               3.2 Incentive Compensation.

               3.2.1 Annual Bonus. Commencing with the 2008 fiscal year, the Executive will be eligible to receive a bonus with respect to 2008 and each later fiscal year ending during the Term computed in accordance with the provisions hereafter. If, with respect to any such fiscal year, the Harland Clarke Business achieves “Consolidated EBITDA” (as defined below) of at least the percentage set forth in the table below of its business plan for such fiscal year, such bonus shall be the percentage set forth in the table below of Base Salary with respect

to the fiscal year for which the bonus (any such bonus, an “Annual Bonus”) was earned:

Percentage of Consolidated	Percentage of Base
EBITDA in Business Plan	Salary
89.9% and below	Nil
90 - 94.9	90
95 - 99.9	95
100 – 105	100
105.1 – 110	105.56
110.1 – 115	111.11
115.1 – 120	116.67
120.1 – 125	122.22
125.1 – 130	127.78
130.1 – 135	133.33
135.1 – 140	138.89
140.1 – 145	144.44
145.1 and over	150

     An Annual Bonus if earned in accordance with this Agreement shall be paid no later than the fifteenth day of the third month next following the year with respect to which such bonus was earned, provided that, except as otherwise specifically provided in this Agreement (including, without limitation, Section 4.4), as a condition precedent to any bonus entitlement the Executive must remain in employment with the Company at the time that the Annual Bonus is paid. Notwithstanding the foregoing, to the extent that Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), may be applicable, such Annual Bonus shall be subject to, and contingent upon, such shareholder approval as is necessary to cause the Annual Bonus to qualify as “performance-based compensation” under Section 162(m) of the Code and the regulations promulgated thereunder as well as approval of this Section 3.2.1 by the MFW Compensation Committee and any other required committees.

     For the purposes of this Agreement, “Consolidated EBITDA” means for any fiscal year of the Company, consolidated operating income for such fiscal year of the Harland Clarke Business plus, without duplication, the sum of (i) depreciation and amortization expense (excluding amounts of prepaid incentives under customer contracts), (ii) any extraordinary non-cash expenses or losses, (iii) any costs and expenses incurred in connection with the Transaction, (iv) allocation of fees charged by MFW or a subsidiary to the Company relating to the operation of the Harland Clarke Business and (v) all restructuring costs (as defined under U.S. generally accepted accounting principles), in the case of clauses (i) through (v) above, solely with respect to the Harland Clarke Business, and minus (x) to the extent included in the statement of such consolidated net income for such period, the sum of any extraordinary or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such consolidated operating income for such period, gains on the sales of assets outside of the ordinary course of business), and (y) any cash payments made during such period

in respect of items described in clause (ii) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of consolidated operating income, in the case of clauses (x) and (y) above, solely with respect to the Harland Clarke Business, all as determined on a consolidated basis, all of the foregoing to be determined by the Board or the MFW Compensation Committee, as applicable. For the purposes of determining compensation milestones for any fiscal year, Consolidated EBITDA will be adjusted by the Board or the MFW Compensation Committee, as applicable, as appropriate for material acquisitions or dispositions of any business or assets of or by the Harland Clarke Business or its subsidiaries for such fiscal year and thereafter.

               3.2.2 New Long Term Incentive Plan. During the Term, the Executive shall participate in the M&F Worldwide Corp. 2008 Long Term Incentive Plan Award Agreement for Participating Executives of the “Harland Clarke business” (the “LTIP”). The specific terms of such award shall be set forth in an Award Agreement entered into with the Executive on or about the date hereof. If the Term is extended, the Executive shall participate in a new Long Term Incentive Plan that shall commence after the LTIP ends. Notwithstanding the foregoing, to the extent that Section 162(m) of the Code may be applicable, the LTIP (and any subsequent Long Term Incentive Plan) shall be subject to, and contingent upon, such shareholder approval as is necessary to cause the LTIP to qualify as “performance-based compensation” under Section 162(m) of the Code and the regulations promulgated thereunder

               3.2.3 Existing Long Term Incentive Plan. The Executive’s existing Long Term Incentive Plan Award pursuant to the MFW 2005 Long Term Incentive Plan (the “Prior LTIP”) shall be cancelled in exchange for the cash payments in the next sentence. For fiscal year 2006, Executive shall receive a cash payment of $350,829 (based on reported results for 2006) and for fiscal year 2007 Executive shall receive a cash payment in an amount approved by the MFW Compensation Committee (collectively, the “Prior LTIP Payments”). The Prior LTIP Payments shall be paid to Executive as soon as practicable in order to avoid application of an additional or accelerated tax under Section 409A of the Code (as more fully set forth in Section 4.7 herein). For the avoidance of doubt, after Executive receives the Prior Plan Payments, Executive shall have no further right to any payment in respect of his Award under the Prior LTIP and the Prior LTIP shall be cancelled, effective not later than December 31, 2007.

               3.3 Business Expenses. The Company shall pay or reimburse the Executive for all reasonable expenses actually incurred or paid by the Executive during the Term in the performance of the Executive’s services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as the Company customarily may require of its officers provided, however, that the maximum amount available for such expenses during any period may be fixed in advance by the Board.

               3.4 Vacation. During the Term, the Executive shall be entitled to a vacation period or periods of five (5) weeks during any fiscal year taken in accordance with the vacation policy of the Company during each year of the Term. Vacation time not used by the end of a year shall be forfeited.

               3.5 Fringe Benefits. During the Term, the Executive shall be entitled to all benefits for which the Executive shall be eligible under any qualified pension plan, 401(k) plan, group insurance or other so-called “fringe” benefit plan which the Company provides to its executive employees generally, which benefits may be subject to change to reflect the objectives and requirements of the Transaction.

          4. Termination.

               4.1 Death. If the Executive dies during the Term, the Term shall terminate forthwith upon the Executive’s death. The Company shall pay to the Executive’s estate: (i) any Base Salary earned but not paid; (ii) a pro rated Annual Bonus based on the number of days of the fiscal year worked by the Executive; (iii) amounts payable under the LTIP in accordance with the terms thereof and (iv) Annual Bonus for the year prior to the year in which the Executive dies if at the time of death the Executive has earned an Annual Bonus payment for such prior year and has not yet been paid such Annual Bonus. The Executive shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement, except to the extent already earned and vested as of the day immediately prior to his death, or as earned, vested, or accrued by virtue of his death.

               4.2 Disability. If, during the Term the Executive is unable to perform his duties hereunder due to a physical or mental incapacity for a period of 6 months within any 12 month period (hereinafter a “Disability”), the Company shall have the right at any time thereafter to terminate the Term upon sending written notice of termination to the Executive. If the Company elects to terminate the Term by reason of Disability, the Company shall pay to the Executive promptly after the notice of termination: (i) any Base Salary earned but not paid, (ii) a pro rated Annual Bonus based on the number of days of the fiscal year worked by the Executive until the date of the notice of termination, (iii) amounts payable under the LTIP in accordance with the terms thereof, in each case less any other benefits payable to the Executive under any disability plan provided for hereunder or otherwise furnished to the Executive by the Company and (iv) Annual Bonus for the year prior to the year in which the Executive is terminated if at the time of termination the Executive has earned an Annual Bonus payment for such prior year and has not yet been paid such Annual Bonus. The Executive shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement except to the extent already earned and vested as of the day immediately prior to his termination by reason of Disability, or as earned, vested, or accrued by virtue of his Disability.

               4.3 Cause. The Company may at any time by written notice to the Executive terminate the Term for “Cause” (as defined below) and, upon such termination, this Agreement shall terminate and the Executive shall be entitled to receive

no further amounts or benefits hereunder, except for any Base Salary earned but not paid prior to such termination. For the purposes of this Agreement, “Cause” means: (i) continued neglect by the Executive of the Executive’s duties hereunder, (ii) continued incompetence or unsatisfactory attendance, (iii) conviction of any felony, (iv) violation of the rules, regulations, procedures or instructions relating to the conduct of employees, directors, officers and/or consultants of the Company, (v) willful misconduct by the Executive in connection with the performance of any material portion of the Executive’s duties hereunder, (vi) breach of fiduciary obligation owed to the Company or commission of any act of fraud, embezzlement, disloyalty or defalcation, or usurpation of a Company opportunity, (vii) breach of any provision of this Agreement, including any non-competition, non-solicitation and/or confidentiality provisions hereof, (viii) any act that has a material adverse effect upon the reputation of and/or the public confidence in the Company, (ix) failure to comply with a reasonable order, policy or rule that constitutes material insubordination, (x) engaging in any discriminatory or sexually harassing behavior, or (xi) using, possessing or being impaired by or under the influence of illegal drugs or the abuse of controlled substances or alcohol on the premises of the Company or any of its subsidiaries or affiliates or while working or representing the Company or any of its subsidiaries or affiliates. A termination for Cause by the Company of any of the events described in clauses (i), (ii), (iv), (ix), (x) and (xi) shall only be effective on 15 days advance written notification, providing Executive the opportunity to cure, if reasonably capable of cure within said 15-day period; provided, however, that no such notification is required if the Cause event is not reasonably capable of cure or the Board determines that its fiduciary obligation requires it to effect a termination of Executive for Cause immediately.

               4.4 Termination by Company without Cause or by the Executive for Good Reason. If the Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability) or by the Executive for Good Reason (as defined below), the Executive shall receive: (i) as severance pay, an amount equal to one and one-half times the Base Salary payable in installments in accordance with the Company’s normal payroll practices, (ii) continuation for a 12-month period following the date of termination of group health plan benefits to the extent authorized by and consistent with 29 U.S.C. § 1161 et seq. (commonly known as “COBRA”), with the cost of the regular premium for such benefits shared in the same relative proportion by the Company and the Employee as in effect on the date of termination, (iii) pro-rated Annual Bonus for the year in which termination occurred if the Executive would have been eligible to receive such bonus hereunder (including due to satisfaction by the Company of performance milestones) had the Executive been employed at the time such Annual Bonus is normally paid, which pro-rated Annual Bonus will be paid at the time and in the manner such Annual Bonus is paid to other executives receiving such bonus payment, (iv) Annual Bonus for the year prior to the year in which the Executive is so terminated if at the time of termination the Executive has earned an Annual Bonus payment for such prior year and has not yet been paid such due to such termination, which prior year Annual Bonus will be paid at the time and in the manner such prior year Annual Bonus is paid to other executives receiving such prior year Annual Bonus and (v) amounts payable, if any, under the LTIP in accordance with the terms thereof. The Executive shall have no further rights to any compensation

(including any Base Salary or Annual Bonus) or any other benefits under this Agreement. For purposes of this Agreement, “Good Reason” means, without the advance written consent of the Executive: (i) a reduction in Base Salary or (ii) a material and continuing reduction in the Executive’s responsibilities, provided, that a termination by the Executive for Good Reason shall be effective only if the Executive provides the Company with written notice specifying the event which constitutes Good Reason within thirty (30) days following the occurrence of such event or date Executive became aware or should have become aware of such event and the Company fails to cure the circumstances giving rise to Good Reason within 30 days after such notice.

               4.5 Termination by Executive other than for Good Reason. The Executive is required to provide the Company with 30 days’ prior written notice of termination to the Company. Subject to Section 4.4, upon termination of employment by the Executive, the Executive shall receive any Base Salary earned but not paid prior to such termination and shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement, except to the extent already earned and vested as of the day immediately prior to such termination.

               4.6 Release. Notwithstanding any other provision of this Agreement to the contrary, the Executive acknowledges and agrees that any and all payments, other than payment of any accrued and unpaid Base Salary to which the Executive is entitled under this Section 4 are conditioned upon and subject to the Executive’s execution of a general waiver and release (for the avoidance of doubt, the restrictive covenants contained in Section 5 of this Agreement shall survive the termination of this Agreement), in such form as may be prepared by the Company, of all claims, except for such matters covered by provisions of this Agreement which expressly survive the termination of this Agreement.

               4.7 Section 409A. Notwithstanding the foregoing provisions of this Section 4, if any payments or benefits due to the Executive hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code such payments or benefits shall be restructured in a manner which does not cause such an accelerated or additional tax. Without limiting the application of the preceding sentence, any payment of money due hereunder which is delayed in order to avoid the application of Section 409A of the Code (e.g., a six-month delay in the commencement of severance pay, if necessary, if at the time of the Executive’s termination of employment he is a “specified employee,” as defined in Section 409A of the Code) shall be paid as soon as possible without causing the application of Section 409A of the Code.

          5. Protection of Confidential Information; Restrictive Covenants.

               5.1 From the Effective Date, the Company will share with Executive confidential and trade secret information regarding not only the Company but also its subsidiaries and affiliates. In view of the fact that the Executive’s work for the Company will bring the Executive into close contact with many confidential affairs of the Company not readily available to the public, trade secret information and plans for future developments, the Executive agrees:

               5.1.1 To keep and retain in the strictest confidence all confidential matters of the Company, including, without limitation, “know how”, trade secrets, customer lists, pricing policies, operational methods, technical processes, formulae, inventions and research projects, other business affairs of the Company, and any material confidential information whatsoever concerning any director, officer, employee, shareholder, partner, customer or agent of the Company or their respective family members learned by the Executive heretofore or hereafter, and not to disclose them to anyone outside of the Company, either during or after the Executive’s employment with the Company, except in the course of performing the Executive’s duties hereunder or with the Company’s express written consent. The foregoing prohibitions shall include, without limitation, directly or indirectly publishing (or causing, participating in, assisting or providing any statement, opinion or information in connection with the publication of) any diary, memoir, letter, story, photograph, interview, article, essay, account or description (whether fictionalized or not) concerning any of the foregoing, publication being deemed to include any presentation or reproduction of any written, verbal or visual material in any communication medium, including any book, magazine, newspaper, theatrical production or movie, or television or radio programming or commercial; and

               5.1.2 To deliver promptly to the Company on termination of the Executive’s employment by the Company, or at any time the Company may so request, all memoranda, notes, records, reports, manuals, drawings, blueprints and other documents (and all copies thereof), including data stored in computer memories or on other media used for electronic storage or retrieval, relating to the Company’s business and all property associated therewith, which the Executive may then possess or have under the Executive’s control, and not retain any copies, notes or summaries; provided Executive shall be entitled to keep a copy of this Agreement and compensation and benefit plans to which Executive is entitled to receive benefits thereunder.

               5.2 In support of Executive’s commitments to maintain the confidentiality of the Company’s confidential and trade secret information, during (i) the Term, and (ii) for a period of eighteen months following termination of the Executive’s employment for any reason (the “Restricted Period”), the Executive shall not in the United States and in any non-US jurisdiction where the Company may then do business: (a) directly or indirectly, enter the employ of, or render any services to, any person, firm or corporation engaged in any business competitive with the business of the Company or of any of its subsidiaries or affiliates; (b) engage in such business on the Executive’s own account; and the Executive shall not become interested in any such business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity; (c) solicit or encourage (or cause to be solicited or encouraged) or cause any client, customer or supplier of the Company to cease doing business with the Company, or to reduce the amount of business such client, customer or supplier does with the Company or (d) solicit or encourage (or cause to be solicited or encouraged) to cease to work with the Company, or hire (or cause to be hired), any person who is an employee of or consultant then under contract with the Company or who was an employee of or consultant then under contract

with the Company within the six month period preceding such activity without the Company’s written consent, provided however that this clause (d) shall not apply during the Restricted Period to a consulting or advisory firm which is also then currently engaged or under a retainer relationship (in each case, without any action by the Executive, whether directly or indirectly) by a subsequent employer of the Executive.

               5.3 If the Executive commits a breach, or poses a serious and objective threat to commit a breach, of any of the provisions of Sections 5.1 or 5.2 hereof, the Company shall have the following rights and remedies:

               5.3.1 The right and remedy to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company;

               5.3.2 The right and remedy to require the Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by the Executive as the result of any transactions constituting a breach of any of the provisions of the preceding paragraph, and the Executive hereby agrees to account for and pay over such benefits to the Company. Each of the rights and remedies enumerated above shall be independent of the other, and shall be severally enforceable, and all of such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity; and

               5.3.3 In addition to any other remedy which may be available (i) at law or in equity, or (ii) pursuant to any other provision of this Agreement, the payments by the Company of Base Salary and the regular premium for group health benefits pursuant to Section 4.4 will cease as of the date on which such violation first occurs. In addition, if the Executive breaches any of the covenants contained in Sections 5.1 and 5.2 and the Company obtains injunctive relief with respect thereto (that is not later reversed or otherwise terminated or vacated by judicial order), the period during which the Executive is required to comply with that particular covenant shall be extended by the same period that the Executive was in breach of such covenant prior to the effective date of such injunctive relief.

               5.4 If any of the covenants contained in Sections 5.1 or 5.2, or any part thereof, hereafter are held by a court to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to those portions found invalid.

               5.5 If any of the covenants contained in Sections 5.1 or 5.2, or any part thereof, are held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall

have the power to reduce the duration and/or area of such provision and, in its reduced form, said provision shall then be enforceable.

               5.6 The Executive agrees (whether during or after the Executive’s employment with the Company) not to issue, circulate, publish or utter any false or disparaging statements, remarks or rumors about the Company or its affiliates or the officers, directors, managers, customers, partners, or shareholders of the Company or its affiliates unless giving truthful testimony under subpoena.

               5.7 For purposes of this Section 5 only, the term “Company” includes the Company and its subsidiaries and affiliates which are related to the businesses of Harland Clarke Holdings.

          6. Inventions and Patents.

               6.1 The Executive agrees that all processes, technologies and inventions (collectively, “Inventions”), including new contributions, improvements, ideas and discoveries, whether patentable or not, conceived, developed, invented or made by him during the Term shall belong to the Company, provided that such Inventions grew out of the Executive’s work with the Company or any of its subsidiaries or affiliates, are related in any manner to the business (commercial or experimental) of the Company or any of its subsidiaries or affiliates or are conceived or made on the Company’s time or with the use of the Company’s facilities or materials. The Executive shall further: (a) promptly disclose such Inventions to the Company; (b) assign to the Company, without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries; (c) sign all papers necessary to carry out the foregoing; and (d) give testimony in support of the Executive’s inventorship.

               6.2 If any Invention is described in a patent application or is disclosed to third parties, directly or indirectly, by the Executive within two years after the termination of the Executive’s employment by the Company, it is to be presumed that the Invention was conceived or made during the Term.

               6.3 The Executive agrees that the Executive will not assert any rights to any Invention as having been made or acquired by the Executive prior to the date of this Agreement, except for Inventions, if any, disclosed to the Company in writing prior to the date hereof.

          7. Intellectual Property.

          The Company shall be the sole owner of all the products and proceeds of the Executive’s services hereunder, including, but not limited to, all materials, ideas, concepts, formats, suggestions, developments, arrangements, packages, programs and other intellectual properties that the Executive may acquire, obtain, develop or create in connection with and during the Term, free and clear of any claims by the Executive (or anyone claiming under the Executive) of any kind or character whatsoever (other than the Executive’s right to receive payments hereunder). The Executive shall, at the request of

the Company, execute such assignments, certificates or other instruments as the Company may from time to time deem necessary or desirable to evidence, establish, maintain, perfect, protect, enforce or defend its right, title or interest in or to any such properties.

          8. Notices.

          All notices, requests, consents and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, sent by overnight courier or mailed first class, postage prepaid, by registered or certified mail (notices mailed shall be deemed to have been given on the date mailed), as follows (or to such other address as either party shall designate by notice in writing to the other in accordance herewith):

If to the Company, to:

If to Harland Clarke Holdings Corp.
c/o M&F Worldwide Corp.
35 E. 62^nd Street
New York, NY 10021
Attention: General Counsel

If to the Executive, to:

Such address as shall most currently appear on the records of the Company.

          9. Governing Law; Dispute Resolution.

               9.1 It is the intent of the parties hereto that all questions with respect to the construction of this Agreement and the rights and liabilities of the parties hereunder shall be determined in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof that would call for the application of the substantive law of any jurisdiction other than the State of Delaware.

               9.2 Each party irrevocably agrees for the exclusive benefit of the other that any and all suits, actions or proceedings relating to Section 5 of this Agreement (a “Proceeding”) shall be maintained in either the courts of the State of Delaware or the federal District Courts sitting in Bexar County, Texas or Wilmington, Delaware (collectively, the “Chosen Courts”) and that the Chosen Courts shall have exclusive jurisdiction to hear and determine or settle any such Proceeding and that any such Proceedings shall only be brought in the Chosen Courts. Each party irrevocably waives any objection that it may have now or hereafter to the laying of the venue of any Proceedings in the Chosen Courts and any claim that any Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any Proceeding brought in the Chosen Courts shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction.

               9.3 Each of the parties hereto agrees that this Agreement involves at least $100,000 and that this Agreement has been entered into in express reliance on Section 2708 of Title 6 of the Delaware Code. Each of the parties hereto irrevocably and unconditionally agrees (i) that, to the extent such party is not otherwise subject to service of process in the State of Delaware, it will appoint (and maintain an agreement with respect to) an agent in the State of Delaware as such party’s agent for acceptance of legal process and notify the other parties hereto of the name and address of said agent, (ii) that service of process may also be made on such party by pre-paid certified mail with a validated proof of mailing receipt constituting evidence of valid service sent to such party at the address set forth in Section 8 of this Agreement, as such address may be changed from time to time pursuant hereto, and (iii) that service made pursuant to clause (i) or (ii) above shall, to the fullest extent permitted by applicable law, have the same legal force and effect as if served upon such party personally within the State of Delaware.

               9.4 Any controversy or claim arising out of or related to any other provision of this Agreement shall be settled by final, binding and non-appealable arbitration in Bexar County, Texas or Wilmington, Delaware by a single arbitrator. Subject to the following provisions, the arbitration shall be conducted in accordance with the applicable rules of JAMS then in effect. Any award entered by the arbitrator shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrator shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. Each party shall be responsible for its own expenses relating to the conduct of the arbitration or litigation (including reasonable attorneys’ fees and expenses) and shall share the fees of JAMS and the arbitrator, if applicable, equally.

          10. General.

               10.1 JURY TRIAL WAIVER. THE PARTIES EXPRESSLY AND KNOWINGLY WAIVE ANY RIGHT TO A JURY TRIAL IN THE EVENT ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENT WITH THE COMPANY IS LITIGATED OR HEARD IN ANY COURT.

               10.2 Continuation of Employment. Unless the parties otherwise agree in writing, continuation of the Executive’s employment with the Company beyond the expiration of the Term shall be deemed an employment at will and shall not be deemed to extend any of the provisions of this Agreement, and Executive’s employment may thereafter be terminated “at will” by the Executive or the Company and Executive will be entitled to fringe benefits which the Executive is eligible to receive for so long as the Executive continues to be employed with the Company and the Executive shall be eligible for severance in accordance with the terms of the Company’s severance policy then in effect.

               10.3 Headings. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

               10.4 Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the Executive’s employment by the Company, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the Executive’s employment by the Company and its affiliates including, without limitation, effective as of the Effective Date, the Existing Employment Agreement and any severance, retention, change in control or similar types of benefits. No representation, promise or inducement has been made by either party that is not embodied in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.

               10.5 Assignment. This Agreement, and the Executive’s rights and obligations hereunder, may not be assigned by the Executive. The Company may assign its rights, together with its obligations, hereunder (i) to any affiliate or (ii) to third parties in connection with any sale, transfer or other disposition of all or substantially all of the business or assets of the Company; in any event the obligations of the Company hereunder shall be binding on its successors or assigns, whether by merger, consolidation or acquisition of all or substantially all of its business or assets.

               10.6 Waiver. This Agreement may be amended, modified, superseded, canceled, renewed or extended and the terms or covenants hereof may be waived, only by a written instrument executed by all of the parties hereto, or in the case of a waiver, by the party waiving compliance. The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by either party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

               10.7 Withholding Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state, local and other taxes as may be required to be withheld pursuant to any applicable law or regulation.

          11. Subsidiaries and Affiliates.

               11.1 As used herein, the term “subsidiary” shall mean any corporation or other business entity controlled directly or indirectly by the corporation or other business entity in question, and the term “affiliate” shall mean and include any corporation or other business entity directly or indirectly controlling, controlled by or under common control with the corporation or other business entity in question.

[Remainder of Page Intentionally Left Blank]

          IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

HARLAND CLARKE HOLDINGS CORP.
By:
	Name:	Charles Dawson
	Title:	President and Chief Executive Officer

Daniel Singleton 

EX-10.15

Exhibit 10.15

EMPLOYMENT AGREEMENT

          EMPLOYMENT AGREEMENT, dated as of May 5, 2008, among Harland Clarke Holdings Corp. (“Harland Clarke Holdings”), a Delaware corporation, Harland Financial Solutions Inc. (the “Company”), an Oregon corporation, and Raju Shivdasani (the “Executive”).

          WHEREAS, the Company wishes to employ the Executive, and the Executive wishes to accept such employment on the terms and conditions set forth in this Agreement;

          Accordingly, Harland Clarke Holdings, the Company and the Executive hereby agree as follows:

          1. Employment, Duties and Acceptance.

               1.1 Employment, Duties. The Company hereby employs the Executive for the Term (as defined in Section 2.1), to render exclusive and full-time services to the Company as President Enterprise Solutions Group or in such other executive position as may be mutually agreed upon by the Company and the Executive, and to perform such other duties consistent with such position as may be assigned to the Executive by the Chief Executive Officer of Harland Clarke Holdings (the “CEO”). During the Term, the Executive shall report solely to the CEO (or his designee).

               1.2 Acceptance. The Executive hereby accepts such employment and agrees to render the services described above. During the Term, the Executive agrees to serve the Company faithfully and to the best of the Executive’s ability, to devote the Executive’s entire business time, energy and skill to such employment, and to use the Executive’s best efforts, skill and ability to promote the Company’s interests. The Executive further agrees to accept election, and to serve during all or any part of the Term, as an officer or director of the Company and of any subsidiary or affiliate of the Company, without any compensation therefor other than that specified in this Agreement, if elected to any such position by the shareholders or by the Board of Directors of the Company (the “Board”) or of any subsidiary or affiliate, as the case may be.

               1.3 Location. The duties to be performed by the Executive hereunder shall be performed primarily at the offices of the Company in Lake Mary, Florida subject to reasonable travel requirements on behalf of the Company.

          2. Term of Employment; Certain Post-Term Benefits.

               2.1 The Term. This Agreement and the term of the Executive’s employment under this Agreement (the “Term”) shall become effective as of January 1, 2008 (the “Effective Date”) and will continue until December 31, 2010 (the “Termination Date”), subject to earlier termination pursuant to Section 4.

               2.2 End-of-Term Provisions. Prior to the end of the Term, the Company and the Executive shall meet to discuss whether the Term should be extended. The Company shall have the right at any time, however, to give written notice of non-renewal of the Term. In the event of non-renewal of the Term by the Company and the Executive’s employment is terminated after the end of the Term, other than for Cause (as defined below), or Disability (as defined below) following such notice of non-renewal, then such termination shall be treated as a termination without Cause and the Restricted Period (as defined below) shall be reduced to a period of one year post termination of employment (the “Reduced Restricted Period”). During such Restricted Period, the Executive shall receive 50% of the payments set forth in Sections 4.4(i) and 4.4(ii), subject to Executive’s signing and not revoking the release of claims as set forth in Section 4.6. For the avoidance of doubt, if the Company is willing to extend the Term and Executive does not agree to extend the Term, then upon such termination of employment at the end of the Term, the Executive shall be bound by the restrictive covenants set forth in Section 5 below, the Restricted Period shall not be reduced and Executive shall not be entitled to receive any severance benefits with respect to such termination. Notwithstanding the foregoing, the terms of this Section 2.2 will not impact any payments or other benefits to which the Executive would then be entitled under normal Company policies or the LTIP (as defined below) pursuant to the terms thereof.

          3. Compensation; Benefits.

               3.1 Salary. As compensation for all services to be rendered pursuant to this Agreement, the Company agrees to pay the Executive a base salary, payable in accordance with the Company’s normal payroll practices, at the annual rate of not less than $375,000 less such deductions or amounts to be withheld as required by applicable law and regulations (the “Base Salary”). In the event that the Company, in its sole discretion, from time to time determines to increase the Base Salary, such increased amount shall, from and after the effective date of the increase, constitute “Base Salary” for purposes of this Agreement.

               3.2 Incentive Compensation.

               3.2.1 Annual Bonus. Commencing with the 2008 fiscal year, the Executive will be eligible to receive a bonus with respect to 2008 and each later fiscal year ending during the Term computed in accordance with the provisions hereafter. If, with respect to any such fiscal year, the Company achieves “Consolidated EBITDA” (as defined below) of at least the percentage set forth in the table below of its business plan for such fiscal year, such bonus shall be the percentage set forth in the table below of Base Salary with respect to the fiscal year for which the bonus (any such bonus, an “Annual Bonus”) was earned:

Percentage of Consolidated EBITDA in Business Plan	Percentage of Base Salary
89.9% and below	Nil
90 — 94.9	52%
95 — 99.9	56%

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Percentage of Consolidated EBITDA in Business Plan	Percentage of Base Salary
100 – 105	60%
105.1 – 110	64%
110.1 – 115	68%
115.1 – 120	72%
120.1 – 125	76%
125.1 and over	80%

An Annual Bonus if earned in accordance with this Agreement shall be paid no later than the fifteenth day of the third month next following the year with respect to which such bonus was earned, provided that, except as otherwise specifically provided in this Agreement (including, without limitation, Section 4.4), as a condition precedent to any bonus entitlement the Executive must remain in employment with the Company at the time that the Annual Bonus is paid. Notwithstanding the foregoing, to the extent that Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), may be applicable, such Annual Bonus shall be subject to, and contingent upon, such shareholder approval as is necessary to cause the Annual Bonus to qualify as “performance-based compensation” under Section 162(m) of the Code and the regulations promulgated thereunder as well as approval of this Section 3.2.1 by the MFW Compensation Committee and any other required committees.

For the purposes of this Agreement, “Consolidated EBITDA” means for any fiscal year of the Company, consolidated operating income for such fiscal year of the Company plus, without duplication, the sum of (i) depreciation and amortization expense (excluding amounts of prepaid incentives under customer contracts), (ii) any extraordinary non-cash expenses or losses, (iii) any costs and expenses incurred in connection with the acquisition by M & F Worldwide Corp. of John H. Harland Company (the “Transaction”), (iv) allocation of fees charged by MFW or a subsidiary to the Company relating to the operation of the Company and (v) all restructuring costs (as defined under U.S. generally accepted accounting principles), in the case of clauses (i) through (v) above, solely with respect to Harland Financial Solutions, and minus (x) to the extent included in the statement of such consolidated net income for such period, the sum of any extraordinary or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such consolidated operating income for such period, gains on the sales of assets outside of the ordinary course of business), and (y) any cash payments made during such period in respect of items described in clause (ii) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of consolidated operating income, in the case of clauses (x) and (y) above, solely with respect to Harland Financial Solutions, all as determined on a consolidated basis, all of the foregoing to be determined by the Board or the MFW Compensation Committee, as applicable. For the purposes of determining compensation milestones for any fiscal year, Consolidated EBITDA will be adjusted by the Board or the MFW Compensation Committee, as applicable, as appropriate for material acquisitions or dispositions of any business or assets of or by the Company or its subsidiaries for such fiscal year and thereafter.

               3.2.2 Long Term Incentive Plan. During the Term, the Executive shall participate in the M&F Worldwide Corp. 2008 Long Term Incentive Plan (the “LTIP”). The specific terms of such award shall be set forth in an

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Award Agreement entered into with the Executive on or about the date hereof. If the term is extended, the Executive shall participate in a new Long Term Incentive Plan that shall commence after the LTIP ends. Notwithstanding the foregoing, to the extent that Section 162(m) of the Code may be applicable, the LTIP (and any subsequent Long Term Incentive Plan) shall be subject to, and contingent upon, such shareholder approval as is necessary to cause the LTIP to qualify as “performance-based compensation” under Section 162(m) of the Code and the regulations promulgated thereunder.

               3.3 Business Expenses. The Company shall pay or reimburse the Executive for all reasonable expenses actually incurred or paid by the Executive during the Term in the performance of the Executive’s services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as the Company customarily may require of its officers provided, however, that the maximum amount available for such expenses during any period may be fixed in advance by the Board.

               3.4 Vacation. During the Term, the Executive shall be entitled to a vacation period or periods of five (5) weeks during any fiscal year taken in accordance with the vacation policy of the Company during each year of the Term. Vacation time not used by the end of a year shall be forfeited.

               3.5 Fringe Benefits. During the Term, the Executive shall be entitled to all benefits for which the Executive shall be eligible under any qualified pension plan, 401(k) plan, group insurance or other so-called “fringe” benefit plan which the Company provides to its executive employees generally, which benefits may be subject to change to reflect the objectives and requirements of the Transaction.

          4. Termination.

               4.1 Death. If the Executive dies during the Term, the Term shall terminate forthwith upon the Executive’s death. The Company shall pay to the Executive’s estate: (i) any Base Salary earned but not paid; (ii) a pro rated Annual Bonus based on the number of days of the fiscal year worked by the Executive; (iii) amounts payable under the LTIP in accordance with the terms thereof; and (iv) Annual Bonus for the year prior to the year in which the Executive dies if at the time of death the Executive has earned an Annual Bonus payment for such prior year and has not yet been paid such Annual Bonus. The Executive shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement, except to the extent already earned and vested as of the day immediately prior to his death, or as earned, vested, or accrued by virtue of his death.

               4.2 Disability. If, during the Term the Executive is unable to perform his duties hereunder due to a physical or mental incapacity for a period of 6 months within any 12 month period (hereinafter a “Disability”), the Company shall have the right at any time thereafter to terminate the Term upon sending written notice of termination to the Executive. If the Company elects to terminate the Term by reason of

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Disability, the Company shall pay to the Executive promptly after the notice of termination: (i) any Base Salary earned but not paid, (ii) a pro rated Annual Bonus based on the number of days of the fiscal year worked by the Executive until the date of the notice of termination, (iii) amounts payable under the LTIP in accordance with the terms thereof, and (iv) Annual Bonus for the year prior to the year in which the Executive is terminated if at the time of termination the Executive has earned an Annual Bonus payment for such prior year and has not yet been paid such Annual Bonus, in each case less any other benefits payable to the Executive under any disability plan provided for hereunder or otherwise furnished to the Executive by the Company. The Executive shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement except to the extent already earned and vested as of the day immediately prior to his termination by reason of Disability, or as earned, vested, or accrued by virtue of his Disability.

               4.3 Cause. The Company may at any time by written notice to the Executive terminate the Term for “Cause” (as defined below) and, upon such termination, this Agreement shall terminate and the Executive shall be entitled to receive no further amounts or benefits hereunder, except for any Base Salary earned but not paid prior to such termination. For the purposes of this Agreement, “Cause” means: (i) continued neglect by the Executive of the Executive’s duties hereunder, (ii) continued incompetence or unsatisfactory attendance, (iii) conviction of any felony, (iv) violation of the rules, regulations, procedures or instructions relating to the conduct of employees, directors, officers and/or consultants of the Company, (v) willful misconduct by the Executive in connection with the performance of any material portion of the Executive’s duties hereunder, (vi) breach of fiduciary obligation owed to the Company or commission of any act of fraud, embezzlement, disloyalty or defalcation, or usurpation of a Company opportunity, (vii) breach of any provision of this Agreement, including any non-competition, non-solicitation and/or confidentiality provisions hereof, (viii) any act that has a material adverse effect upon the reputation of and/or the public confidence in the Company, (ix) failure to comply with a reasonable order, policy or rule that constitutes material insubordination, (x) engaging in any discriminatory or sexually harassing behavior or (xi) using, possessing or being impaired by or under the influence of illegal drugs or the abuse of controlled substances or alcohol on the premises of the Company or any of its subsidiaries or affiliates or while working or representing the Company or any of its subsidiaries or affiliates. A termination for Cause by the Company of any of the events described in clauses (i), (ii), (iv), (ix), (x) and (xi) shall only be effective on 15 days advance written notification, providing Executive the opportunity to cure, if reasonably capable of cure within said 15-day period; provided, however, that no such notification is required if the Cause event is not reasonably capable of cure or the Board determines that its fiduciary obligation requires it to effect a termination of Executive for Cause immediately.

               4.4 Termination by Company without Cause or by the Executive for Good Reason. If the Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability) or by the Executive for Good Reason (as defined below), the Executive shall receive: (i) as severance pay, an amount equal to one and one-half times the Base Salary payable in installments in

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accordance with the Company’s normal payroll practices, (ii) continuation for a 12-month period following the date of termination of group health plan benefits to the extent authorized by and consistent with 29 U.S.C. § 1161 et seq. (commonly known as “COBRA”), with the cost of the regular premium for such benefits shared in the same relative proportion by the Company and the Employee as in effect on the date of termination, (iii) pro-rated Annual Bonus for the year in which termination occurred if the Executive would have been eligible to receive such bonus hereunder (including due to satisfaction by the Company of performance milestones) had the Executive been employed at the time such Annual Bonus is normally paid, which pro-rated Annual Bonus will be paid at the time and in the manner such Annual Bonus is paid to other executives receiving such bonus payment, (iv) Annual Bonus for the year prior to the year in which the Executive is so terminated if at the time of termination the Executive has earned an Annual Bonus payment for such prior year and has not yet been paid such due to such termination, which prior year Annual Bonus will be paid at the time and in the manner such prior year Annual Bonus is paid to other executives receiving such prior year Annual Bonus and (v) amounts payable, if any, under the LTIP in accordance with the terms thereof. The Executive shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement. For purposes of this Agreement, “Good Reason” means, without the advance written consent of the Executive: (i) a reduction in Base Salary, unless such reduction is made generally to other senior executives of the Company, or (ii) a material and continuing reduction in the Executive’s responsibilities, provided, that a change in reporting responsibilities shall not constitute Good Reason and further provided that a termination by the Executive for Good Reason shall be effective only if the Executive provides the Company with written notice specifying the event which constitutes Good Reason within thirty (30) days following the occurrence of such event or date Executive became aware or should have become aware of such event and the Company fails to cure the circumstances giving rise to Good Reason within 30 days after such notice.

               4.5 Termination by Executive other than for Good Reason. The Executive is required to provide the Company with 30 days prior written notice of termination to the Company. Subject to Section 4.4, upon termination of employment by the Executive, the Executive shall receive any Base Salary earned but not paid prior to such termination and shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement, except to the extent already earned and vested as of the day immediately prior to such termination.

               4.6 Release. Notwithstanding any other provision of this Agreement to the contrary, the Executive acknowledges and agrees that any and all payments, other than payment of any accrued and unpaid Base Salary to which the Executive is entitled under this Section 4 are conditioned upon and subject to the Executive’s execution of a general waiver and release (for the avoidance of doubt, the restrictive covenants contained in Section 5 of this Agreement shall survive the termination of this Agreement) in such form as may be prepared by the Company, of all claims, except for such matters covered by provisions of this Agreement which expressly survive the termination of this Agreement.

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               4.7 Section 409A. Notwithstanding the foregoing provisions of this Section 4, if any payments or benefits due to the Executive hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code such payments or benefits shall be restructured in a manner which does not cause such an accelerated or additional tax. Without limiting the application of the preceding sentence, any payment of money due hereunder which is delayed in order to avoid the application of Section 409A of the Code (e.g., a six-month delay in the commencement of severance pay, if necessary, if at the time of the Executive’s termination of employment he is a “specified employee,” as defined in Section 409A of the Code) shall be paid as soon as possible without causing the application of Section 409A of the Code.

          5. Protection of Confidential Information; Restrictive Covenants.

               5.1 From the Effective Date, the Company will share with Executive confidential and trade secret information regarding not only the Company but also its subsidiaries and affiliates. In view of the fact that the Executive’s work for the Company will bring the Executive into close contact with many confidential affairs of the Company not readily available to the public, trade secret information and plans for future developments, the Executive agrees:

               5.1.1 To keep and retain in the strictest confidence all confidential matters of the Company, including, without limitation, “know how”, trade secrets, customer lists, pricing policies, operational methods, technical processes, formulae, inventions and research projects, other business affairs of the Company, and any material confidential information whatsoever concerning any director, officer, employee, shareholder, partner, customer or agent of the Company or their respective family members learned by the Executive heretofore or hereafter, and not to disclose them to anyone outside of the Company, either during or after the Executive’s employment with the Company, except in the course of performing the Executive’s duties hereunder or with the Company’s express written consent. The foregoing prohibitions shall include, without limitation, directly or indirectly publishing (or causing, participating in, assisting or providing any statement, opinion or information in connection with the publication of) any diary, memoir, letter, story, photograph, interview, article, essay, account or description (whether fictionalized or not) concerning any of the foregoing, publication being deemed to include any presentation or reproduction of any written, verbal or visual material in any communication medium, including any book, magazine, newspaper, theatrical production or movie, or television or radio programming or commercial; and

               5.1.2 To deliver promptly to the Company on termination of the Executive’s employment by the Company, or at any time the Company may so request, all memoranda, notes, records, reports, manuals, drawings, blueprints and other documents (and all copies thereof), including data stored in computer memories or on other media used for electronic storage or retrieval, relating to the Company’s business and all property associated therewith, which the Executive may then possess or have under the Executive’s control, and not retain any copies, notes or summaries; provided Executive shall be entitled to keep a copy of this

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Agreement and compensation and benefit plans to which Executive is entitled to receive benefits thereunder.

               5.2 In support of Executive’s commitments to maintain the confidentiality of the Company’s confidential and trade secret information, during (i) the Term, and (ii) for a period of two years following termination of the Executive’s employment for any reason (the “Restricted Period”), the Executive shall not in the United States and in any non-US jurisdiction where the Company may then do business: (a) directly or indirectly, enter the employ of, or render any services to, any person, firm or corporation engaged in any business competitive with the business of the Company or of any of its subsidiaries or affiliates; (b) engage in such business on the Executive’s own account; and the Executive shall not become interested in any such business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity; (c) solicit or encourage (or cause to be solicited or encouraged) or cause any client, customer or supplier of the Company to cease doing business with the Company, or to reduce the amount of business such client, customer or supplier does with the Company or (d) solicit or encourage (or cause to be solicited or encouraged) to cease to work with the Company, or hire (or cause to be hired), any person who is an employee of or consultant then under contract with the Company or who was an employee of or consultant then under contract with the Company within the six month period preceding such activity without the Company’s written consent. Provided, however, that this clause (d) shall not apply during the Restricted Period to a consulting or advisory firm which is also then currently engaged or under a retainer relationship (in each case, without any action by the Executive, whether directly or indirectly) by a subsequent employer of the Executive.

               5.3 If the Executive commits a breach, or poses a serious and objective threat to commit a breach, of any of the provisions of Sections 5.1 or 5.2 hereof, the Company shall have the following rights and remedies:

               5.3.1 The right and remedy to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company;

               5.3.2 The right and remedy to require the Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by the Executive as the result of any transactions constituting a breach of any of the provisions of the preceding paragraph, and the Executive hereby agrees to account for and pay over such benefits to the Company. Each of the rights and remedies enumerated above shall be independent of the other, and shall be severally enforceable, and all of such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity; and

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               5.3.3 In addition to any other remedy which may be available (i) at law or in equity, or (ii) pursuant to any other provision of this Agreement, the payments by the Company of Base Salary and the regular premium for group health benefits pursuant to Section 4.4 will cease as of the date on which such violation first occurs. In addition, if the Executive breaches any of the covenants contained in Sections 5.1 and 5.2 and the Company obtains injunctive relief with respect thereto (that is not later reversed or otherwise terminated or vacated by judicial order), the period during which the Executive is required to comply with that particular covenant shall be extended by the same period that the Executive was in breach of such covenant prior to the effective date of such injunctive relief.

               5.4 If any of the covenants contained in Sections 5.1 or 5.2, or any part thereof, hereafter are held by a court to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to those portions found invalid.

               5.5 If any of the covenants contained in Sections 5.1 or 5.2, or any part thereof, are held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, said provision shall then be enforceable.

               5.6 The Executive agrees (whether during or after the Executive’s employment with the Company) not to issue, circulate, publish or utter any false or disparaging statements, remarks or rumors about the Company or its affiliates or the officers, directors, managers, customers, partners, or shareholders of the Company or its affiliates unless giving truthful testimony under subpoena.

               5.7 For purposes of this Section 5 only, the term “Company” includes the Company and its subsidiaries and affiliates which are related to the businesses of Harland Clarke Holdings.

          6. Inventions and Patents.

               6.1 The Executive agrees that all processes, technologies and inventions (collectively, “Inventions”), including new contributions, improvements, ideas and discoveries, whether patentable or not, conceived, developed, invented or made by him during the Term shall belong to the Company, provided that such Inventions grew out of the Executive’s work with the Company or any of its subsidiaries or affiliates, are related in any manner to the business (commercial or experimental) of the Company or any of its subsidiaries or affiliates or are conceived or made on the Company’s time or with the use of the Company’s facilities or materials. The Executive shall further: (a) promptly disclose such Inventions to the Company; (b) assign to the Company, without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries; (c) sign all papers necessary to carry out the foregoing; and (d) give testimony in support of the Executive’s inventorship.

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               6.2 If any Invention is described in a patent application or is disclosed to third parties, directly or indirectly, by the Executive within two years after the termination of the Executive’s employment by the Company, it is to be presumed that the Invention was conceived or made during the Term.

               6.3 The Executive agrees that the Executive will not assert any rights to any Invention as having been made or acquired by the Executive prior to the date of this Agreement, except for Inventions, if any, disclosed to the Company in writing prior to the date hereof.

          7. Intellectual Property.

          The Company shall be the sole owner of all the products and proceeds of the Executive’s services hereunder, including, but not limited to, all materials, ideas, concepts, formats, suggestions, developments, arrangements, packages, programs and other intellectual properties that the Executive may acquire, obtain, develop or create in connection with and during the Term, free and clear of any claims by the Executive (or anyone claiming under the Executive) of any kind or character whatsoever (other than the Executive’s right to receive payments hereunder). The Executive shall, at the request of the Company, execute such assignments, certificates or other instruments as the Company may from time to time deem necessary or desirable to evidence, establish, maintain, perfect, protect, enforce or defend its right, title or interest in or to any such properties.

          8. Notices.

          All notices, requests, consents and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, sent by overnight courier or mailed first class, postage prepaid, by registered or certified mail (notices mailed shall be deemed to have been given on the date mailed), as follows (or to such other address as either party shall designate by notice in writing to the other in accordance herewith):

If to the Company, to:

Harland Clarke Holdings Corp.
10931 Laureate Drive
San Antonio, TX 78249
Attn: Senior Vice President Human Resources

If to the Executive, to:

Such address as shall most currently appear on the records of the Company.

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          9. Governing Law; Dispute Resolution.

               9.1 It is the intent of the parties hereto that all questions with respect to the construction of this Agreement and the rights and liabilities of the parties hereunder shall be determined in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof that would call for the application of the substantive law of any jurisdiction other than the State of Delaware.

               9.2 Each party irrevocably agrees for the exclusive benefit of the other that any and all suits, actions or proceedings relating to Section 5 of this Agreement (a “Proceeding”) shall be maintained in either the courts of the State of Delaware or the federal District Courts sitting in Bexar County, Texas or Wilmington, Delaware (collectively, the “Chosen Courts”) and that the Chosen Courts shall have exclusive jurisdiction to hear and determine or settle any such Proceeding and that any such Proceedings shall only be brought in the Chosen Courts. Each party irrevocably waives any objection that it may have now or hereafter to the laying of the venue of any Proceedings in the Chosen Courts and any claim that any Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any Proceeding brought in the Chosen Courts shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction.

               9.3 Each of the parties hereto agrees that this Agreement involves at least $100,000 and that this Agreement has been entered into in express reliance on Section 2708 of Title 6 of the Delaware Code. Each of the parties hereto irrevocably and unconditionally agrees (i) that, to the extent such party is not otherwise subject to service of process in the State of Delaware, it will appoint (and maintain an agreement with respect to) an agent in the State of Delaware as such party’s agent for acceptance of legal process and notify the other parties hereto of the name and address of said agent, (ii) that service of process may also be made on such party by pre-paid certified mail with a validated proof of mailing receipt constituting evidence of valid service sent to such party at the address set forth in Section 8 of this Agreement, as such address may be changed from time to time pursuant hereto, and (iii) that service made pursuant to clause (i) or (ii) above shall, to the fullest extent permitted by applicable law, have the same legal force and effect as if served upon such party personally within the State of Delaware.

               9.4 Any controversy or claim arising out of or related to any other provision of this Agreement shall be settled by final, binding and non-appealable arbitration in Bexar County, Texas or Wilmington, Delaware by a single arbitrator. Subject to the following provisions, the arbitration shall be conducted in accordance with the applicable rules of JAMS then in effect. Any award entered by the arbitrator shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrator shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. Each party shall be responsible for its own expenses relating to the conduct

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of the arbitration or litigation (including reasonable attorneys’ fees and expenses) and shall share the fees of JAMS and the arbitrator, if applicable, equally.

          10. General.

               10.1 JURY TRIAL WAIVER. THE PARTIES EXPRESSLY AND KNOWINGLY WAIVE ANY RIGHT TO A JURY TRIAL IN THE EVENT ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENT WITH THE COMPANY IS LITIGATED OR HEARD IN ANY COURT.

               10.2 Continuation of Employment. Unless the parties otherwise agree in writing, continuation of the Executive’s employment with the Company beyond the expiration of the Term shall be deemed an employment at will and shall not be deemed to extend any of the provisions of this Agreement, and Executive’s employment may thereafter be terminated “at will” by the Executive or the Company and Executive will be entitled to fringe benefits which the Executive is eligible to receive for so long as the Executive continues to be employed with the Company and the Executive shall be eligible for severance in accordance with the terms of the Company’s severance policy then in effect.

               10.3 Headings. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

               10.4 Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the Executive’s employment by the Company, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the Executive’s employment by the Company and its affiliates including without limitation any severance, retention, change in control or similar types of benefits; provided, however, that the Executive’s award under the Harland 2007 Long Term Incentive Plan in the maximum aggregate amount of $120,300 shall not be prejudiced by the terms of this Agreement and shall be administered in accordance with the terms of such award in effect immediately prior to the date hereof (which for the avoidance of doubt is not accelerated as a result of the Transaction). Furthermore, except as stated above, the Executive acknowledges and agrees that any prior employment agreement is terminated in its entirety and the Executive has no further right to any payments or benefits thereunder. No representation, promise or inducement has been made by either party that is not embodied in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.

               10.5 Assignment. This Agreement, and the Executive’s rights and obligations hereunder, may not be assigned by the Executive. The Company may assign its rights, together with its obligations, hereunder (i) to any affiliate or (ii) to third parties in connection with any sale, transfer or other disposition of all or substantially all of the business or assets of the Company; in any event the obligations of the Company

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hereunder shall be binding on its successors or assigns, whether by merger, consolidation or acquisition of all or substantially all of its business or assets.

               10.6 Waiver. This Agreement may be amended, modified, superseded, canceled, renewed or extended and the terms or covenants hereof may be waived, only by a written instrument executed by all of the parties hereto, or in the case of a waiver, by the party waiving compliance. The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by either party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

               10.7 Withholding Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state, local and other taxes as may be required to be withheld pursuant to any applicable law or regulation.

          11. Subsidiaries and Affiliates.

               11.1 As used herein, the term “subsidiary” shall mean any corporation or other business entity controlled directly or indirectly by the corporation or other business entity in question, and the term “affiliate” shall mean and include any corporation or other business entity directly or indirectly controlling, controlled by or under common control with the corporation or other business entity in question.

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

HARLAND FINANCIAL SOLUTIONS INC.
By:
	Name:	Edward P. Taibi
	Title:	Vice President
HARLAND CLARKE HOLDINGS CORP.
By:
	Name:	Charles Dawson
	Title:	President and Chief Executive Officer

Raju M. Shivdasani

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EX-10.16

Exhibit 10.16

EMPLOYMENT AGREEMENT

          EMPLOYMENT AGREEMENT, dated as of May 5, 2008, among Harland Clarke Holdings Corp. (“Harland Clarke Holdings”), a Delaware corporation, Harland Financial Solutions Inc. (the “Company”), an Oregon corporation, and A.O. Clemons (the “Executive”).

          WHEREAS, the Company wishes to employ the Executive, and the Executive wishes to accept such employment on the terms and conditions set forth in this Agreement;

          Accordingly, Harland Clarke Holdings, the Company and the Executive hereby agree as follows:

          1. Employment, Duties and Acceptance.

               1.1 Employment, Duties. The Company hereby employs the Executive for the Term (as defined in Section 2.1), to render exclusive and full-time services to the Company as President Risk Management and Compliance Solutions or in such other executive position as may be mutually agreed upon by the Company and the Executive, and to perform such other duties consistent with such position as may be assigned to the Executive by the Chief Executive Officer of Harland Clarke Holdings (the “CEO”). During the Term, the Executive shall report solely to the CEO (or his designee).

               1.2 Acceptance. The Executive hereby accepts such employment and agrees to render the services described above. During the Term, the Executive agrees to serve the Company faithfully and to the best of the Executive’s ability, to devote the Executive’s entire business time, energy and skill to such employment, and to use the Executive’s best efforts, skill and ability to promote the Company’s interests. The Executive further agrees to accept election, and to serve during all or any part of the Term, as an officer or director of the Company and of any subsidiary or affiliate of the Company, without any compensation therefor other than that specified in this Agreement, if elected to any such position by the shareholders or by the Board of Directors of the Company (the “Board”) or of any subsidiary or affiliate, as the case may be.

               1.3 Location. The duties to be performed by the Executive hereunder shall be performed primarily at the offices of the Company in Portland, Oregon subject to reasonable travel requirements on behalf of the Company.

          2. Term of Employment; Certain Post-Term Benefits.

               2.1 The Term. This Agreement and the term of the Executive’s employment under this Agreement (the “Term”) shall become effective as of January 1, 2008 (the “Effective Date”) and will continue until December 31, 2010 (the “Termination Date”), subject to earlier termination pursuant to Section 4.

               2.2 End-of-Term Provisions. Prior to the end of the Term, the Company and the Executive shall meet to discuss whether the Term should be extended. The Company shall have the right at any time, however, to give written notice of non-renewal of the Term. In the event of non-renewal of the Term by the Company and the Executive’s employment is terminated after the end of the Term, other than for Cause (as defined below), or Disability (as defined below) following such notice of non-renewal, then such termination shall be treated as a termination without Cause and the Restricted Period (as defined below) shall be reduced to a period of one year post termination of employment (the “Reduced Restricted Period”). During such Restricted Period, the Executive shall receive 50% of the payments set forth in Sections 4.4(i) and 4.4(ii), subject to Executive’s signing and not revoking the release of claims as set forth in Section 4.6. For the avoidance of doubt, if the Company is willing to extend the Term and Executive does not agree to extend the Term, then upon such termination of employment at the end of the Term, the Executive shall be bound by the restrictive covenants set forth in Section 5 below, the Restricted Period shall not be reduced and Executive shall not be entitled to receive any severance benefits with respect to such termination. Notwithstanding the foregoing, the terms of this Section 2.2 will not impact any payments or other benefits to which the Executive would then be entitled under normal Company policies or the LTIP (as defined below) pursuant to the terms thereof.

          3. Compensation; Benefits.

               3.1 Salary. As compensation for all services to be rendered pursuant to this Agreement, the Company agrees to pay the Executive a base salary, payable in accordance with the Company’s normal payroll practices, at the annual rate of not less than $360,000 less such deductions or amounts to be withheld as required by applicable law and regulations (the “Base Salary”). In the event that the Company, in its sole discretion, from time to time determines to increase the Base Salary, such increased amount shall, from and after the effective date of the increase, constitute “Base Salary” for purposes of this Agreement.

               3.2 Incentive Compensation.

               3.2.1 Annual Bonus. Commencing with the 2008 fiscal year, the Executive will be eligible to receive a bonus with respect to 2008 and each later fiscal year ending during the Term computed in accordance with the provisions hereafter. If, with respect to any such fiscal year, the Company achieves “Consolidated EBITDA” (as defined below) of at least the percentage set forth in the table below of its business plan for such fiscal year, such bonus shall be the percentage set forth in the table below of Base Salary with respect to the fiscal year for which the bonus (any such bonus, an “Annual Bonus”) was earned:

Percentage of Consolidated	Percentage of Base
EBITDA in Business Plan	Salary
89.9% and below	Nil
90 — 94.9	52%
95 — 99.9	56%

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Percentage of Consolidated	Percentage of Base
EBITDA in Business Plan	Salary
100 – 105	60%
105.1 – 110	64%
110.1 – 115	68%
115.1 – 120	72%
120.1 – 125	76%
125.1 and over	80%

An Annual Bonus if earned in accordance with this Agreement shall be paid no later than the fifteenth day of the third month next following the year with respect to which such bonus was earned, provided that, except as otherwise specifically provided in this Agreement (including, without limitation, Section 4.4), as a condition precedent to any bonus entitlement the Executive must remain in employment with the Company at the time that the Annual Bonus is paid. Notwithstanding the foregoing, to the extent that Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), may be applicable, such Annual Bonus shall be subject to, and contingent upon, such shareholder approval as is necessary to cause the Annual Bonus to qualify as “performance-based compensation” under Section 162(m) of the Code and the regulations promulgated thereunder as well as approval of this Section 3.2.1 by the MFW Compensation Committee and any other required committees.

For the purposes of this Agreement, “Consolidated EBITDA” means for any fiscal year of the Company, consolidated operating income for such fiscal year of the Company plus, without duplication, the sum of (i) depreciation and amortization expense (excluding amounts of prepaid incentives under customer contracts), (ii) any extraordinary non-cash expenses or losses, (iii) any costs and expenses incurred in connection with the Transaction, (iv) allocation of fees charged by MFW or a subsidiary to the Company relating to the operation of the Company and (v) all restructuring costs (as defined under U.S. generally accepted accounting principles), in the case of clauses (i) through (v) above, solely with respect to Harland Financial Solutions, and minus (x) to the extent included in the statement of such consolidated net income for such period, the sum of any extraordinary or non-recurring income or gains (including, whether or not otherwise includable as a separate item in the statement of such consolidated operating income for such period, gains on the sales of assets outside of the ordinary course of business), and (y) any cash payments made during such period in respect of items described in clause (ii) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of consolidated operating income, in the case of clauses (x) and (y) above, solely with respect to Harland Financial Solutions, all as determined on a consolidated basis, all of the foregoing to be determined by the Board or the MFW Compensation Committee, as applicable. For the purposes of determining compensation milestones for any fiscal year, Consolidated EBITDA will be adjusted by the Board or the MFW Compensation Committee, as applicable, as appropriate for material acquisitions or dispositions of any business or assets of or by the Company or its subsidiaries for such fiscal year and thereafter.

               3.2.2 Long Term Incentive Plan. During the Term, the Executive shall participate in the M&F Worldwide Corp. 2008 Long Term Incentive Plan (the “LTIP”). The specific terms of such award shall be set forth in an Award Agreement entered into with the Executive on or about the date hereof. If the

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Term is extended, the Executive shall participate in a new Long Term Incentive Plan that shall commence after the LTIP ends. Notwithstanding the foregoing, to the extent that Section 162(m) of the Code may be applicable, the LTIP (and any subsequent Long Term Incentive Plan) shall be subject to, and contingent upon, such shareholder approval as is necessary to cause the LTIP to qualify as “performance-based compensation” under Section 162(m) of the Code and the regulations promulgated thereunder.

               3.3 Business Expenses. The Company shall pay or reimburse the Executive for all reasonable expenses actually incurred or paid by the Executive during the Term in the performance of the Executive’s services under this Agreement, upon presentation of expense statements or vouchers or such other supporting information as the Company customarily may require of its officers provided, however, that the maximum amount available for such expenses during any period may be fixed in advance by the Board.

               3.4 Vacation. During the Term, the Executive shall be entitled to a vacation period or periods of five (5) weeks during any fiscal year taken in accordance with the vacation policy of the Company during each year of the Term. Vacation time not used by the end of a year shall be forfeited.

               3.5 Fringe Benefits. During the Term, the Executive shall be entitled to all benefits for which the Executive shall be eligible under any qualified pension plan, 401(k) plan, group insurance or other so-called “fringe” benefit plan which the Company provides to its executive employees generally, which benefits may be subject to change to reflect the objectives and requirements of the Transaction.

          4. Termination.

               4.1 Death. If the Executive dies during the Term, the Term shall terminate forthwith upon the Executive’s death. The Company shall pay to the Executive’s estate: (i) any Base Salary earned but not paid; (ii) a pro rated Annual Bonus based on the number of days of the fiscal year worked by the Executive; (iii) amounts payable under the LTIP in accordance with the terms thereof; and (iv) Annual Bonus for the year prior to the year in which the Executive dies if at the time of death the Executive has earned an Annual Bonus payment for such prior year and has not yet been paid such Annual Bonus. The Executive shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement, except as described in Section 3.5 and except to the extent already earned and vested as of the day immediately prior to his death, or as earned, vested, or accrued by virtue of his death.

               4.2 Disability. If, during the Term the Executive is unable to perform his duties hereunder due to a physical or mental incapacity for a period of 6 months within any 12 month period (hereinafter a “Disability”), the Company shall have the right at any time thereafter to terminate the Term upon sending written notice of termination to the Executive. If the Company elects to terminate the Term by reason of

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Disability, the Company shall pay to the Executive promptly after the notice of termination: (i) any Base Salary earned but not paid, (ii) a pro rated Annual Bonus based on the number of days of the fiscal year worked by the Executive until the date of the notice of termination, (iii) amounts payable under the LTIP in accordance with the terms thereof, and (iv) Annual Bonus for the year prior to the year in which the Executive is terminated if at the time of termination the Executive has earned an Annual Bonus payment for such prior year and has not yet been paid such Annual Bonus, in each case less any other benefits payable to the Executive under any disability plan provided for hereunder or otherwise furnished to the Executive by the Company. The Executive shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement except to the extent already earned and vested as of the day immediately prior to his termination by reason of Disability, or as earned, vested, or accrued by virtue of his Disability.

               4.3 Cause. The Company may at any time by written notice to the Executive terminate the Term for “Cause” (as defined below) and, upon such termination, this Agreement shall terminate and the Executive shall be entitled to receive no further amounts or benefits hereunder, except for any Base Salary earned but not paid prior to such termination. For the purposes of this Agreement, “Cause” means: (i) continued neglect by the Executive of the Executive’s duties hereunder, (ii) continued incompetence or unsatisfactory attendance, (iii) conviction of any felony, (iv) violation of the rules, regulations, procedures or instructions relating to the conduct of employees, directors, officers and/or consultants of the Company, (v) willful misconduct by the Executive in connection with the performance of any material portion of the Executive’s duties hereunder, (vi) breach of fiduciary obligation owed to the Company or commission of any act of fraud, embezzlement, disloyalty or defalcation, or usurpation of a Company opportunity, (vii) breach of any provision of this Agreement, including any non-competition, non-solicitation and/or confidentiality provisions hereof, (viii) any act that has a material adverse effect upon the reputation of and/or the public confidence in the Company, (ix) failure to comply with a reasonable order, policy or rule that constitutes material insubordination, (x) engaging in any discriminatory or sexually harassing behavior or (xi) using, possessing or being impaired by or under the influence of illegal drugs or the abuse of controlled substances or alcohol on the premises of the Company or any of its subsidiaries or affiliates or while working or representing the Company or any of its subsidiaries or affiliates. A termination for Cause by the Company of any of the events described in clauses (i), (ii), (iv), (ix), (x) and (xi) shall only be effective on 15 days advance written notification, providing Executive the opportunity to cure, if reasonably capable of cure within said 15-day period; provided, however, that no such notification is required if the Cause event is not reasonably capable of cure or the Board determines that its fiduciary obligation requires it to effect a termination of Executive for Cause immediately.

               4.4 Termination by Company without Cause or by the Executive for Good Reason. If the Executive’s employment is terminated by the Company without Cause (other than by reason of death or Disability) or by the Executive for Good Reason (as defined below), the Executive shall receive: (i) as severance pay, an amount equal to one and one-half times the Base Salary payable in installments in

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accordance with the Company’s normal payroll practices, (ii) continuation for a 12-month period following the date of termination of group health plan benefits to the extent authorized by and consistent with 29 U.S.C. § 1161 et seq. (commonly known as “COBRA”), with the cost of the regular premium for such benefits shared in the same relative proportion by the Company and the Employee as in effect on the date of termination, (iii) pro-rated Annual Bonus for the year in which termination occurred if the Executive would have been eligible to receive such bonus hereunder (including due to satisfaction by the Company of performance milestones) had the Executive been employed at the time such Annual Bonus is normally paid, which pro-rated Annual Bonus will be paid at the time and in the manner such Annual Bonus is paid to other executives receiving such bonus payment, (iv) Annual Bonus for the year prior to the year in which the Executive is so terminated if at the time of termination the Executive has earned an Annual Bonus payment for such prior year and has not yet been paid such due to such termination, which prior year Annual Bonus will be paid at the time and in the manner such prior year Annual Bonus is paid to other executives receiving such prior year Annual Bonus and (v) amounts payable, if any, under the LTIP in accordance with the terms thereof. The Executive shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement. For purposes of this Agreement, “Good Reason” means, without the advance written consent of the Executive: (i) a reduction in Base Salary, unless such reduction is made generally to other senior executives of the Company, or (ii) a material and continuing reduction in the Executive’s responsibilities, provided, that a change in reporting responsibilities shall not constitute Good Reason and further provided that a termination by the Executive for Good Reason shall be effective only if the Executive provides the Company with written notice specifying the event which constitutes Good Reason within thirty (30) days following the occurrence of such event or date Executive became aware or should have become aware of such event and the Company fails to cure the circumstances giving rise to Good Reason within 30 days after such notice.

               4.5 Termination by Executive other than for Good Reason. The Executive is required to provide the Company with 30 days prior written notice of termination to the Company. Subject to Section 4.4, upon termination of employment by the Executive, the Executive shall receive any Base Salary earned but not paid prior to such termination and shall have no further rights to any compensation (including any Base Salary or Annual Bonus) or any other benefits under this Agreement, except to the extent already earned and vested as of the day immediately prior to such termination.

               4.6 Release. Notwithstanding any other provision of this Agreement to the contrary, the Executive acknowledges and agrees that any and all payments, other than payment of any accrued and unpaid Base Salary to which the Executive is entitled under this Section 4 are conditioned upon and subject to the Executive’s execution of a general waiver and release (for the avoidance of doubt, the restrictive covenants contained in Section 5 of this Agreement shall survive the termination of this Agreement) in such form as may be prepared by the Company, of all claims, except for such matters covered by provisions of this Agreement which expressly survive the termination of this Agreement.

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               4.7 Section 409A. Notwithstanding the foregoing provisions of this Section 4, if any payments or benefits due to the Executive hereunder would cause the application of an accelerated or additional tax under Section 409A of the Code such payments or benefits shall be restructured in a manner which does not cause such an accelerated or additional tax. Without limiting the application of the preceding sentence, any payment of money due hereunder which is delayed in order to avoid the application of Section 409A of the Code (e.g., a six-month delay in the commencement of severance pay, if necessary, if at the time of the Executive’s termination of employment he is a “specified employee,” as defined in Section 409A of the Code) shall be paid as soon as possible without causing the application of Section 409A of the Code.

          5. Protection of Confidential Information; Restrictive Covenants.

               5.1 From the Effective Date, the Company will share with Executive confidential and trade secret information regarding not only the Company but also its subsidiaries and affiliates. In view of the fact that the Executive’s work for the Company will bring the Executive into close contact with many confidential affairs of the Company not readily available to the public, trade secret information and plans for future developments, the Executive agrees:

               5.1.1 To keep and retain in the strictest confidence all confidential matters of the Company, including, without limitation, “know how”, trade secrets, customer lists, pricing policies, operational methods, technical processes, formulae, inventions and research projects, other business affairs of the Company, and any material confidential information whatsoever concerning any director, officer, employee, shareholder, partner, customer or agent of the Company or their respective family members learned by the Executive heretofore or hereafter, and not to disclose them to anyone outside of the Company, either during or after the Executive’s employment with the Company, except in the course of performing the Executive’s duties hereunder or with the Company’s express written consent. The foregoing prohibitions shall include, without limitation, directly or indirectly publishing (or causing, participating in, assisting or providing any statement, opinion or information in connection with the publication of) any diary, memoir, letter, story, photograph, interview, article, essay, account or description (whether fictionalized or not) concerning any of the foregoing, publication being deemed to include any presentation or reproduction of any written, verbal or visual material in any communication medium, including any book, magazine, newspaper, theatrical production or movie, or television or radio programming or commercial; and

               5.1.2 To deliver promptly to the Company on termination of the Executive’s employment by the Company, or at any time the Company may so request, all memoranda, notes, records, reports, manuals, drawings, blueprints and other documents (and all copies thereof), including data stored in computer memories or on other media used for electronic storage or retrieval, relating to the Company’s business and all property associated therewith, which the Executive may then possess or have under the Executive’s control, and not retain any copies, notes or summaries; provided Executive shall be entitled to keep a copy of this

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Agreement and compensation and benefit plans to which Executive is entitled to receive benefits thereunder.

               5.2 In support of Executive’s commitments to maintain the confidentiality of the Company’s confidential and trade secret information, during (i) the Term, and (ii) for a period of two years following termination of the Executive’s employment for any reason (the “Restricted Period”), the Executive shall not in the United States and in any non-US jurisdiction where the Company may then do business: (a) directly or indirectly, enter the employ of, or render any services to, any person, firm or corporation engaged in any business competitive with the business of the Company or of any of its subsidiaries or affiliates; (b) engage in such business on the Executive’s own account; and the Executive shall not become interested in any such business, directly or indirectly, as an individual, partner, shareholder, director, officer, principal, agent, employee, trustee, consultant, or in any other relationship or capacity; (c) solicit or encourage (or cause to be solicited or encouraged) or cause any client, customer or supplier of the Company to cease doing business with the Company, or to reduce the amount of business such client, customer or supplier does with the Company or (d) solicit or encourage (or cause to be solicited or encouraged) to cease to work with the Company, or hire (or cause to be hired), any person who is an employee of or consultant then under contract with the Company or who was an employee of or consultant then under contract with the Company within the six month period preceding such activity without the Company’s written consent; provided, however, that this clause (d) shall not apply during the Restricted Period to a consulting or advisory firm which is also then currently engaged or under a retainer relationship (in each case, without any action by the Executive, whether directly or indirectly) by a subsequent employer of the Executive.

               5.3 If the Executive commits a breach, or poses a serious and objective threat to commit a breach, of any of the provisions of Sections 5.1 or 5.2 hereof, the Company shall have the following rights and remedies:

               5.3.1 The right and remedy to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that money damages will not provide an adequate remedy to the Company;

               5.3.2 The right and remedy to require the Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by the Executive as the result of any transactions constituting a breach of any of the provisions of the preceding paragraph, and the Executive hereby agrees to account for and pay over such benefits to the Company. Each of the rights and remedies enumerated above shall be independent of the other, and shall be severally enforceable, and all of such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity; and

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               5.3.3 In addition to any other remedy which may be available (i) at law or in equity, or (ii) pursuant to any other provision of this Agreement, the payments by the Company of Base Salary and the regular premium for group health benefits pursuant to Section 4.4 will cease as of the date on which such violation first occurs. In addition, if the Executive breaches any of the covenants contained in Sections 5.1 and 5.2 and the Company obtains injunctive relief with respect thereto (that is not later reversed or otherwise terminated or vacated by judicial order), the period during which the Executive is required to comply with that particular covenant shall be extended by the same period that the Executive was in breach of such covenant prior to the effective date of such injunctive relief.

               5.4 If any of the covenants contained in Sections 5.1 or 5.2, or any part thereof, hereafter are held by a court to be invalid or unenforceable, the same shall not affect the remainder of the covenant or covenants, which shall be given full effect, without regard to those portions found invalid.

               5.5 If any of the covenants contained in Sections 5.1 or 5.2, or any part thereof, are held to be unenforceable because of the duration of such provision or the area covered thereby, the parties agree that the court making such determination shall have the power to reduce the duration and/or area of such provision and, in its reduced form, said provision shall then be enforceable.

               5.6 The Executive agrees (whether during or after the Executive’s employment with the Company) not to issue, circulate, publish or utter any false or disparaging statements, remarks or rumors about the Company or its affiliates or the officers, directors, managers, customers, partners, or shareholders of the Company or its affiliates unless giving truthful testimony under subpoena.

               5.7 For purposes of this Section 5 only, the term “Company” includes the Company and its subsidiaries and affiliates which are related to the businesses of Harland Clarke Holdings.

          6. Inventions and Patents.

               6.1 The Executive agrees that all processes, technologies and inventions (collectively, “Inventions”), including new contributions, improvements, ideas and discoveries, whether patentable or not, conceived, developed, invented or made by him during the Term shall belong to the Company, provided that such Inventions grew out of the Executive’s work with the Company or any of its subsidiaries or affiliates, are related in any manner to the business (commercial or experimental) of the Company or any of its subsidiaries or affiliates or are conceived or made on the Company’s time or with the use of the Company’s facilities or materials. The Executive shall further: (a) promptly disclose such Inventions to the Company; (b) assign to the Company, without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries; (c) sign all papers necessary to carry out the foregoing; and (d) give testimony in support of the Executive’s inventorship.

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               6.2 If any Invention is described in a patent application or is disclosed to third parties, directly or indirectly, by the Executive within two years after the termination of the Executive’s employment by the Company, it is to be presumed that the Invention was conceived or made during the Term.

               6.3 The Executive agrees that the Executive will not assert any rights to any Invention as having been made or acquired by the Executive prior to the date of this Agreement, except for Inventions, if any, disclosed to the Company in writing prior to the date hereof.

          7. Intellectual Property.

          The Company shall be the sole owner of all the products and proceeds of the Executive’s services hereunder, including, but not limited to, all materials, ideas, concepts, formats, suggestions, developments, arrangements, packages, programs and other intellectual properties that the Executive may acquire, obtain, develop or create in connection with and during the Term, free and clear of any claims by the Executive (or anyone claiming under the Executive) of any kind or character whatsoever (other than the Executive’s right to receive payments hereunder). The Executive shall, at the request of the Company, execute such assignments, certificates or other instruments as the Company may from time to time deem necessary or desirable to evidence, establish, maintain, perfect, protect, enforce or defend its right, title or interest in or to any such properties.

          8. Notices.

          All notices, requests, consents and other communications required or permitted to be given hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, sent by overnight courier or mailed first class, postage prepaid, by registered or certified mail (notices mailed shall be deemed to have been given on the date mailed), as follows (or to such other address as either party shall designate by notice in writing to the other in accordance herewith):

If to the Company, to:

Harland Clarke Holdings Corp.

10931 Laureate Drive
San Antonio, TX 78249
Attn: Senior Vice President Human Resources

If to the Executive, to:

Such address as shall most currently appear on the records of the Company.

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          9. Governing Law; Dispute Resolution.

               9.1 It is the intent of the parties hereto that all questions with respect to the construction of this Agreement and the rights and liabilities of the parties hereunder shall be determined in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof that would call for the application of the substantive law of any jurisdiction other than the State of Delaware.

               9.2 Each party irrevocably agrees for the exclusive benefit of the other that any and all suits, actions or proceedings relating to Section 5 of this Agreement (a “Proceeding”) shall be maintained in either the courts of the State of Delaware or the federal District Courts sitting in Bexar County, Texas or Wilmington, Delaware (collectively, the “Chosen Courts”) and that the Chosen Courts shall have exclusive jurisdiction to hear and determine or settle any such Proceeding and that any such Proceedings shall only be brought in the Chosen Courts. Each party irrevocably waives any objection that it may have now or hereafter to the laying of the venue of any Proceedings in the Chosen Courts and any claim that any Proceedings have been brought in an inconvenient forum and further irrevocably agrees that a judgment in any Proceeding brought in the Chosen Courts shall be conclusive and binding upon it and may be enforced in the courts of any other jurisdiction.

               9.3 Each of the parties hereto agrees that this Agreement involves at least $100,000 and that this Agreement has been entered into in express reliance on Section 2708 of Title 6 of the Delaware Code. Each of the parties hereto irrevocably and unconditionally agrees (i) that, to the extent such party is not otherwise subject to service of process in the State of Delaware, it will appoint (and maintain an agreement with respect to) an agent in the State of Delaware as such party’s agent for acceptance of legal process and notify the other parties hereto of the name and address of said agent, (ii) that service of process may also be made on such party by pre-paid certified mail with a validated proof of mailing receipt constituting evidence of valid service sent to such party at the address set forth in Section 8 of this Agreement, as such address may be changed from time to time pursuant hereto, and (iii) that service made pursuant to clause (i) or (ii) above shall, to the fullest extent permitted by applicable law, have the same legal force and effect as if served upon such party personally within the State of Delaware.

               9.4 Any controversy or claim arising out of or related to any other provision of this Agreement shall be settled by final, binding and non-appealable arbitration in Bexar County, Texas or Wilmington, Delaware by a single arbitrator. Subject to the following provisions, the arbitration shall be conducted in accordance with the applicable rules of JAMS then in effect. Any award entered by the arbitrator shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This arbitration provision shall be specifically enforceable. The arbitrator shall have no authority to modify any provision of this Agreement or to award a remedy for a dispute involving this Agreement other than a benefit specifically provided under or by virtue of the Agreement. Each party shall be responsible for its own expenses relating to the conduct

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of the arbitration or litigation (including reasonable attorneys’ fees and expenses) and shall share the fees of JAMS and the arbitrator, if applicable, equally.

          10. General.

               10.1 JURY TRIAL WAIVER. THE PARTIES EXPRESSLY AND KNOWINGLY WAIVE ANY RIGHT TO A JURY TRIAL IN THE EVENT ANY ACTION ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE EXECUTIVE’S EMPLOYMENT WITH THE COMPANY IS LITIGATED OR HEARD IN ANY COURT.

               10.2 Continuation of Employment. Unless the parties otherwise agree in writing, continuation of the Executive’s employment with the Company beyond the expiration of the Term shall be deemed an employment at will and shall not be deemed to extend any of the provisions of this Agreement, and Executive’s employment may thereafter be terminated “at will” by the Executive or the Company and Executive will be entitled to fringe benefits which the Executive is eligible to receive for so long as the Executive continues to be employed with the Company and the Executive shall be eligible for severance in accordance with the terms of the Company’s severance policy then in effect.

               10.3 Headings. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

               10.4 Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties relating to the Executive’s employment by the Company, and supersedes all prior agreements, arrangements and understandings, written or oral, relating to the Executive’s employment by the Company and its affiliates including without limitation any severance, retention, change in control or similar types of benefits; provided, however, that the Executive’s award under the Harland 2007 Long Term Incentive Plan in the maximum aggregate amount of $96,240 shall not be prejudiced by the terms of this Agreement and shall be administered in accordance with the terms of such award in effect immediately prior to the date hereof (which for the avoidance of doubt is not accelerated as a result of the Transaction). Furthermore, except as stated above, the Executive acknowledges and agrees that any prior employment agreement is terminated in its entirety and the Executive has no further right to any payments or benefits thereunder. No representation, promise or inducement has been made by either party that is not embodied in this Agreement, and neither party shall be bound by or liable for any alleged representation, promise or inducement not so set forth.

               10.5 Assignment. This Agreement, and the Executive’s rights and obligations hereunder, may not be assigned by the Executive. The Company may assign its rights, together with its obligations, hereunder (i) to any affiliate or (ii) to third parties in connection with any sale, transfer or other disposition of all or substantially all of the business or assets of the Company; in any event the obligations of the Company

12

hereunder shall be binding on its successors or assigns, whether by merger, consolidation or acquisition of all or substantially all of its business or assets.

               10.6 Waiver. This Agreement may be amended, modified, superseded, canceled, renewed or extended and the terms or covenants hereof may be waived, only by a written instrument executed by all of the parties hereto, or in the case of a waiver, by the party waiving compliance. The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect the right at a later time to enforce the same. No waiver by either party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

               10.7 Withholding Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state, local and other taxes as may be required to be withheld pursuant to any applicable law or regulation.

          11. Subsidiaries and Affiliates.

               11.1 As used herein, the term “subsidiary” shall mean any corporation or other business entity controlled directly or indirectly by the corporation or other business entity in question, and the term “affiliate” shall mean and include any corporation or other business entity directly or indirectly controlling, controlled by or under common control with the corporation or other business entity in question. WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.

HARLAND FINANCIAL SOLUTIONS INC.
By:
	Name:	Edward P. Taibi
	Title:	Vice President
HARLAND CLARKE HOLDINGS CORP.
By:
	Name:	Charles Dawson
	Title:	President and Chief Executive Officer

A.O. Clemons

13

EX-10.18

Exhibit 10.18

First Amendment to the Employment Agreement

          FIRST AMENDMENT, dated as of, and effective, December 31 , 2008 (this “Amendment”), to the Employment Agreement dated as of February 7, 2008 (the “Agreement”) by and between Harland Clarke Holdings Corp., a Delaware corporation (the “Company”) and Daniel Singleton (the “Executive”).

          WHEREAS, the parties desire to amend the Agreement in certain respects; and agree that all other terms and conditions of the Agreement shall otherwise remain in place, except as expressly amended herein.

          NOW, THEREFORE, for valuable consideration, receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties do hereby agree as follows, effective as of the date set forth below:

          1. The following phrase shall be added to Section 4.1(ii) of the Agreement after the word “Executive” and to Section 4.2(ii) of the Agreement after the word “termination”:

     “, which pro-rated Annual Bonus will be paid at the time and in the manner such Annual Bonus is paid to other executives receiving such bonus payment”

          2. The following phrase shall be added to each of Sections 4.1(iv) and 4.2(iv) of the Agreement, in each case after the phrase “paid such Annual Bonus”:

     “, which prior year Annual Bonus will be paid at the time and in the manner such prior year Annual Bonus is paid to other executives receiving such prior year Annual Bonus”

          3. The following sentence shall be added to the end of Section 4.6:

     “Notwithstanding anything to the contrary, the severance payments and benefits are conditioned on the Executive’s execution, delivery and nonrevocation of the general waiver and release of claims within fifty-five days following the Executive’s termination of employment (the “Release Condition”). Payments and benefits will commence five business days after the Release Condition is satisfied.”

          4. Section 4.7 is amended and restated in its entirety as follows:

          “4.7 Section 409A.

          4.7.1 This Agreement is intended to satisfy the requirements of Section 409A of the Code (“Section 409A”) with respect to amounts, if any, subject thereto and shall be interpreted and construed and shall be performed by the parties consistent with such intent. If either party notifies the other in writing that one or more or the provisions of this Agreement contravenes any Treasury Regulations or guidance promulgated under Section 409A or causes any amounts to be subject to interest, additional tax or penalties under Section 409A, the parties shall agree to negotiate in

good faith to make amendments to this Agreement as the parties mutually agree, reasonably and in good faith are necessary or desirable, to (i) maintain to the maximum extent reasonably practicable the original intent of the applicable provisions without violating the provisions of Section 409A or increasing the costs to the Company of providing the applicable benefit or payment and (ii) to the extent possible, to avoid the imposition of any interest, additional tax or other penalties under Section 409A upon the parties.

          4.7.2 To the extent the Executive would otherwise be entitled to any payment or benefit under this Agreement, or any plan or arrangement of the Company or its affiliates, that constitutes a “deferral of compensation” subject to Section 409A and that if paid during the six (6) months beginning on the date of termination of the Executive’s employment would be subject to the Section 409A additional tax because the Executive is a “specified employee” (within the meaning of Section 409A and as determined by the Company), the payment or benefit will be paid or provided to the Executive on the earlier of the first day following the six (6) month anniversary of the Executive’s termination of employment or death.

          4.7.3 Any payment or benefit due upon a termination of the Executive’s employment that represents a “deferral of compensation” within the meaning of Section 409A shall be paid or provided to the Executive only upon a “separation from service” as defined in Treas. Reg. § 1.409A-1(h). Each payment made under this Agreement shall be deemed to be a separate payment for purposes of Section 409A. Amounts payable under this Agreement shall be deemed not to be a “deferral of compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation §§ 1.409A-1(b)(4) (“short-term deferrals”) and (b)(9) (“separation pay plans,” including the exception under subparagraph (iii)) and other applicable provisions of Treasury Regulation § 1.409A-1 through A-6.

          4.7.4 Notwithstanding anything to the contrary in Agreement, any payment or benefit under this Agreement or otherwise that is exempt from Section 409A pursuant to Treasury Regulation § 1.409A-1(b)(9)(v)(A) or (C) (relating to certain reimbursements and in-kind benefits) shall be paid or provided to the Executive only to the extent that the expenses are not incurred, or the benefits are not provided, beyond the last day of the second calendar year following the calendar year in which the Executive’s “separation from service” occurs; and provided further that such expenses are reimbursed no later than the last day of the third calendar year following the calendar year in which the Executive’s “separation from service” occurs. To the extent any expense reimbursement or the provision of any in-kind benefit is determined to be subject to Section 409A (and not exempt pursuant to the prior sentence or otherwise), the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect provision of in-kind benefits or expenses eligible for reimbursement in any other calendar year (except for any life-time or other aggregate limitation applicable to medical expenses), and in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which the Executive incurred such expenses, and in no event shall any right to reimbursement or the

2

provision of any in-kind benefit be subject to liquidation or exchange for another benefit.”

          5. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof that would call for the application of the substantive law of any jurisdiction other than the State of Delaware.

          6. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be a duplicate original, but all of which, taken together, shall constitute a single instrument.

          IN WITNESS WHEREOF, the parties have caused this First Amendment to the Agreement to be executed and delivered as of the date written first above.

HARLAND CLARKE HOLDINGS CORP.
By:
	By:
	Title:

EXECUTIVE
By:
	Daniel Singleton

3

EX-10.19

Exhibit 10.19

First Amendment to the Employment Agreement

          FIRST AMENDMENT, dated as of, and effective, December 31, 2008 (this “Amendment”), to the Employment Agreement dated as of May 5, 2008 (the “Agreement”) by and among Harland Clarke Holdings Corp., (Harland Clarke Holdings), a Delaware corporation, Harland Financial Solutions Inc. (the “Company”), an Oregon corporation, and Raju Shivdasani (the “Executive”).

          WHEREAS, the parties desire to amend the Agreement in certain respects; and agree that all other terms and conditions of the Agreement shall otherwise remain in place, except as expressly amended herein.

          NOW, THEREFORE, for valuable consideration, receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties do hereby agree as follows, effective as of the date set forth below:

          1. The following phrase shall be added to Section 4.1(ii) of the Agreement after the word “Executive” and to Section 4.2(ii) of the Agreement after the word “termination”:

     “, which pro-rated Annual Bonus will be paid at the time and in the manner such Annual Bonus is paid to other executives receiving such bonus payment”

          2. The following phrase shall be added to each of Sections 4.1(iv) and 4.2(iv) of the Agreement, in each case after the phrase “paid such Annual Bonus”:

     “, which prior year Annual Bonus will be paid at the time and in the manner such prior year Annual Bonus is paid to other executives receiving such prior year Annual Bonus”

          3. The following sentence shall be added to the end of Section 4.6:

     “Notwithstanding anything to the contrary, the severance payments and benefits are conditioned on the Executive’s execution, delivery and nonrevocation of the general waiver and release of claims within fifty-five days following the Executive’s termination of employment (the “Release Condition”). Payments and benefits will commence five business days after the Release Condition is satisfied.”

          4. Section 4.7 is amended and restated in its entirety as follows:

          “4.7 Section 409A.

          4.7.1 This Agreement is intended to satisfy the requirements of Section 409A of the Code (“Section 409A”) with respect to amounts, if any, subject thereto and shall be interpreted and construed and shall be performed by the parties consistent with such intent. If either party notifies the other in writing that one or more or the provisions of this Agreement contravenes any Treasury Regulations or guidance promulgated under Section 409A or causes any amounts to be subject to interest,

additional tax or penalties under Section 409A, the parties shall agree to negotiate in good faith to make amendments to this Agreement as the parties mutually agree, reasonably and in good faith are necessary or desirable, to (i) maintain to the maximum extent reasonably practicable the original intent of the applicable provisions without violating the provisions of Section 409A or increasing the costs to the Company of providing the applicable benefit or payment and (ii) to the extent possible, to avoid the imposition of any interest, additional tax or other penalties under Section 409A upon the parties.

          4.7.2 To the extent the Executive would otherwise be entitled to any payment or benefit under this Agreement, or any plan or arrangement of the Company or its affiliates, that constitutes a “deferral of compensation” subject to Section 409A and that if paid during the six (6) months beginning on the date of termination of the Executive’s employment would be subject to the Section 409A additional tax because the Executive is a “specified employee” (within the meaning of Section 409A and as determined by the Company), the payment or benefit will be paid or provided to the Executive on the earlier of the first day following the six (6) month anniversary of the Executive’s termination of employment or death.

          4.7.3 Any payment or benefit due upon a termination of the Executive’s employment that represents a “deferral of compensation” within the meaning of Section 409A shall be paid or provided to the Executive only upon a “separation from service” as defined in Treas. Reg. § 1.409A-1(h). Each payment made under this Agreement shall be deemed to be a separate payment for purposes of Section 409A. Amounts payable under this Agreement shall be deemed not to be a “deferral of compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation §§ 1.409A-1(b)(4) (“short-term deferrals”) and (b)(9) (“separation pay plans,” including the exception under subparagraph (iii)) and other applicable provisions of Treasury Regulation § 1.409A-1 through A-6.

          4.7.4 Notwithstanding anything to the contrary in Agreement, any payment or benefit under this Agreement or otherwise that is exempt from Section 409A pursuant to Treasury Regulation § 1.409A-1(b)(9)(v)(A) or (C) (relating to certain reimbursements and in-kind benefits) shall be paid or provided to the Executive only to the extent that the expenses are not incurred, or the benefits are not provided, beyond the last day of the second calendar year following the calendar year in which the Executive’s “separation from service” occurs; and provided further that such expenses are reimbursed no later than the last day of the third calendar year following the calendar year in which the Executive’s “separation from service” occurs.  To the extent any expense reimbursement or the provision of any in-kind benefit is determined to be subject to Section 409A (and not exempt pursuant to the prior sentence or otherwise), the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect provision of in-kind benefits or expenses eligible for reimbursement in any other calendar year (except for any life-time or other aggregate limitation applicable to medical expenses), and in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which the

2

Executive incurred such expenses, and in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit.”

          5. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof that would call for the application of the substantive law of any jurisdiction other than the State of Delaware.

          6. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be a duplicate original, but all of which, taken together, shall constitute a single instrument.

          IN WITNESS WHEREOF, the parties have caused this First Amendment to the Agreement to be executed and delivered as of the date written first above.

HARLAND CLARKE HOLDINGS CORP.
By:
	Name:
	Title:
HARLAND FINANCIAL SOLUTIONS INC.
By:
	Name:
	Title:
EXECUTIVE
By:
	Raju M. Shivdasani

3

EX-10.20

Exhibit 10.20

First Amendment to the Employment Agreement

          FIRST AMENDMENT, dated as of, and effective, December 31, 2008 (this “Amendment”), to the Employment Agreement dated as of May 5, 2008 (the “Agreement”) by and among Harland Clarke Holdings Corp., (“Harland Clarke Holdings”), a Delaware corporation, Harland Financial Solutions Inc. (the “Company”), an Oregon corporation, and A. O. Clemons (the “Executive”).

          WHEREAS, the parties desire to amend the Agreement in certain respects; and agree that all other terms and conditions of the Agreement shall otherwise remain in place, except as expressly amended herein.

          NOW, THEREFORE, for valuable consideration, receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties do hereby agree as follows, effective as of the date set forth below:

          1. The following phrase shall be added to Section 4.1(ii) of the Agreement after the word “Executive” and to Section 4.2(ii) of the Agreement after the word “termination”:

     “, which pro-rated Annual Bonus will be paid at the time and in the manner such Annual Bonus is paid to other executives receiving such bonus payment”

          2. The following phrase shall be added to each of Sections 4.1(iv) and 4.2(iv) of the Agreement, in each case after the phrase “paid such Annual Bonus”:

     “, which prior year Annual Bonus will be paid at the time and in the manner such prior year Annual Bonus is paid to other executives receiving such prior year Annual Bonus”

          3. The following sentence shall be added to the end of Section 4.6:

     “Notwithstanding anything to the contrary, the severance payments and benefits are conditioned on the Executive’s execution, delivery and nonrevocation of the general waiver and release of claims within fifty-five days following the Executive’s termination of employment (the “Release Condition”). Payments and benefits will commence five business days after the Release Condition is satisfied.”

          4. Section 4.7 is amended and restated in its entirety as follows:

     “4.7 Section 409A.

          4.7.1 This Agreement is intended to satisfy the requirements of Section 409A of the Code (“Section 409A”) with respect to amounts, if any, subject thereto and shall be interpreted and construed and shall be performed by the parties consistent with such intent. If either party notifies the other in writing that one or more or the provisions of this Agreement contravenes any Treasury Regulations or guidance promulgated under Section 409A or causes any amounts to be subject to interest,

additional tax or penalties under Section 409A, the parties shall agree to negotiate in good faith to make amendments to this Agreement as the parties mutually agree, reasonably and in good faith are necessary or desirable, to (i) maintain to the maximum extent reasonably practicable the original intent of the applicable provisions without violating the provisions of Section 409A or increasing the costs to the Company of providing the applicable benefit or payment and (ii) to the extent possible, to avoid the imposition of any interest, additional tax or other penalties under Section 409A upon the parties.

          4.7.2 To the extent the Executive would otherwise be entitled to any payment or benefit under this Agreement, or any plan or arrangement of the Company or its affiliates, that constitutes a “deferral of compensation” subject to Section 409A and that if paid during the six (6) months beginning on the date of termination of the Executive’s employment would be subject to the Section 409A additional tax because the Executive is a “specified employee” (within the meaning of Section 409A and as determined by the Company), the payment or benefit will be paid or provided to the Executive on the earlier of the first day following the six (6) month anniversary of the Executive’s termination of employment or death.

          4.7.3 Any payment or benefit due upon a termination of the Executive’s employment that represents a “deferral of compensation” within the meaning of Section 409A shall be paid or provided to the Executive only upon a “separation from service” as defined in Treas. Reg. § 1.409A-1(h). Each payment made under this Agreement shall be deemed to be a separate payment for purposes of Section 409A. Amounts payable under this Agreement shall be deemed not to be a “deferral of compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation §§ 1.409A-1(b)(4) (“short-term deferrals”) and (b)(9) (“separation pay plans,” including the exception under subparagraph (iii)) and other applicable provisions of Treasury Regulation § 1.409A-1 through A-6.

          4.7.4 Notwithstanding anything to the contrary in Agreement, any payment or benefit under this Agreement or otherwise that is exempt from Section 409A pursuant to Treasury Regulation § 1.409A-1(b)(9)(v)(A) or (C) (relating to certain reimbursements and in-kind benefits) shall be paid or provided to the Executive only to the extent that the expenses are not incurred, or the benefits are not provided, beyond the last day of the second calendar year following the calendar year in which the Executive’s “separation from service” occurs; and provided further that such expenses are reimbursed no later than the last day of the third calendar year following the calendar year in which the Executive’s “separation from service” occurs.  To the extent any expense reimbursement or the provision of any in-kind benefit is determined to be subject to Section 409A (and not exempt pursuant to the prior sentence or otherwise), the amount of any such expenses eligible for reimbursement, or the provision of any in-kind benefit, in one calendar year shall not affect provision of in-kind benefits or expenses eligible for reimbursement in any other calendar year (except for any life-time or other aggregate limitation applicable to medical expenses), and in no event shall any expenses be reimbursed after the last day of the calendar year following the calendar year in which the

2

Executive incurred such expenses, and in no event shall any right to reimbursement or the provision of any in-kind benefit be subject to liquidation or exchange for another benefit.”

          5. This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws thereof that would call for the application of the substantive law of any jurisdiction other than the State of Delaware.

          6. This Amendment may be executed in one or more counterparts, each of which shall be deemed to be a duplicate original, but all of which, taken together, shall constitute a single instrument.

          IN WITNESS WHEREOF, the parties have caused this First Amendment to the Agreement to be executed and delivered as of the date written first above.

HARLAND CLARKE HOLDINGS CORP.
By:
	Name:
	Title:
HARLAND FINANCIAL SOLUTIONS INC.
By:
	Name:
	Title:
EXECUTIVE
By:
	A.O. Clemons

3

EX-21.1

Exhibit 21.1

SUBSIDIARIES

DOMESTIC SUBSIDIARIES OF THE COMPANY:

NAME OF SUBSIDIARY	STATE OF INCORPORATION
Harland Clarke Corp.	Delaware
Checks In the Mail, Inc.	Delaware
HFS Scantron Holdings Corp.	New York
Scantron Corporation	Delaware
Harland Financial Solutions, Inc.	Oregon
John H. Harland Company of Puerto Rico	Georgia
Centralia Holdings Corporation	Georgia
Transaction Holdings Inc.	Tennessee
Transaction Graphics Inc.	Tennessee
Checkboxes Direct, Inc.	Tennessee
HFS Research & Development, Inc.	Delaware

FOREIGN SUBSIDIARIES OF THE COMPANY:

NAME OF SUBSIDIARY	JURISDICTION
Harland Financial Solutions Worldwide Limited	Ireland
Harland Israel Ltd.	Israel
Scantron Canada, Ltd.	Canada

EX-24.1

POWER OF ATTORNEY

     KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Charles T. Dawson, Peter A. Fera, Jr. and Paul G. Savas or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with the HARLAND CLARKE HOLDINGS CORP. (the “Corporation”) Annual Report on Form 10-K for the year ended December 31, 2008 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has signed these presents this 26^th day of February 2009.

/s/ Barry F. Schwartz               
BARRY F. SCHWARTZ

POWER OF ATTORNEY

     KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Charles T. Dawson, Peter A. Fera, Jr. and Paul G. Savas or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with the HARLAND CLARKE HOLDINGS CORP. (the “Corporation”) Annual Report on Form 10-K for the year ended December 31, 2008 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has signed these presents this 26^th day of February 2009.

/s/ Paul G. Savas               
PAUL G. SAVAS

Exhibit 24.1

POWER OF ATTORNEY

     KNOWN ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints each of Charles T. Dawson, Peter A. Fera, Jr. and Paul G. Savas or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution, for him and in his name, place and stead, in any and all capacities, in connection with the HARLAND CLARKE HOLDINGS CORP. (the “Corporation”) Annual Report on Form 10-K for the year ended December 31, 2008 under the Securities Exchange Act of 1934, as amended, including, without limiting the generality of the foregoing, to sign the Form 10-K in the name and on behalf of the Corporation or on behalf of the undersigned as a director or officer of the Corporation, and any amendments to the Form 10-K and any instrument, contract, document or other writing, of or in connection with the Form 10-K or amendments thereto, and to file the same, with all exhibits thereto, and other documents in connection therewith, including this power of attorney, with the Securities and Exchange Commission and any applicable securities exchange or securities self-regulatory body, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, each acting alone, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

     IN WITNESS WHEREOF, the undersigned has signed these presents this 26^th day of February 2009.

/s/ Charles T. Dawson               
CHARLES T. DAWSON

EX-31.1

Exhibit 31.1

Harland Clarke Holdings Corp. and Subsidiaries
Certification of Principal Executive Officer
Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)

I, Charles T. Dawson, certify that:

1. I have reviewed this Annual Report on Form 10-K of Harland Clarke Holdings Corp.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 27, 2009

/s/  Charles T. Dawson

Name: Charles T. Dawson

Title:   Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Harland Clarke Holdings Corp. and Subsidiaries
Certification of Principal Financial Officer
Pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a)

I, Peter A. Fera, Jr., certify that:

1.	I have reviewed this Annual Report on Form 10-K of Harland Clarke Holdings Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: February 27, 2009

/s/  Peter A. Fera, Jr.

Name: Peter A. Fera, Jr.

Title:   Chief Financial Officer

(Principal Financial Officer)