information.The pro forma impact of all ~~2007~~2009 acquisitions on net income was not material.

In August 2009, the Company divested its debit and credit card issuing and acquiring processing business in Austria which was reported as part of the International segment. The Company recognized a loss on the sale of $37.2 million, comprised of a $21.9 million loss classified as “Other income (expense)” and a $15.3 million income tax expense in the Consolidated Statements of Operations.

In November 2009, the Company sold a merchant acquiring business in Canada which was reported as part of the International segment. The Company recognized a loss on the sale of $7.8 million, comprised of a $10.0 million gain classified as “Other income (expense)” and a $17.8 million income tax expense in the Consolidated Statements of Operations.

In January 2008, the Company entered into ~~a joint venture~~an alliance with ~~Allied Irish Banks p.l.c. ("AIB"),~~AIB, of which the Company owns ~~50.01%~~50.1%. The ~~joint venture will provide~~alliance provides card acquiring services in the Republic of Ireland, the United Kingdom and elsewhere in Europe. The purchase price allocation resulted in identifiable intangible assets of $79 million, which are being amortized over 10 years, a trade name of $15 million that is being amortized over 10 years and goodwill of $90 million. The alliance with AIB ~~will be~~is consolidated and reported in the International segment.

~~2006 Acquisitions~~In February 2008, the Company purchased the remaining interest in Unified Network Payment Solutions (“UNPS”) located in Canada. UNPS is consolidated and reported as part of the International segment.

In July 2008, FDC and its parent, Holdings, purchased the remaining 18.2% and 13.6% of the outstanding equity of Money Network, respectively, not already owned by the Company. The purchase price paid by Holdings consisted of shares of its common stock. FDC subsequently purchased Holdings’ interest in Money Network for an amount equivalent to the value of the shares issued by Holdings as purchase consideration. Money Network is reported as part of the Retail and Alliance Services segment.

In September 2008, the Company purchased 50% of EUFISERV’s inter-bank processing business (subsequently renamed Trionis). Trionis will provide services across Europe. The Company created a joint venture in January 2006 with Banca Nazionale del Lavoro ("BNL") to provide merchant acquiring services for Italian merchants. The Company has a 49% ownership interest in the alliance and accounts for itits investment under the equity method of accounting within the International segment.

~~In March 2006,~~On November 1, 2008, the Company ~~acquired substantially all~~and JPMorgan Chase terminated their merchant alliance, CPS, which was the Company’s largest merchant alliance. The Company received its proportionate 49% share of the assets of ~~ClearCheck,~~the alliance, including domestic merchant contracts, an equity investment in Merchant Link, a full-service ~~provider~~independent sales organization (“ISO”) and Agent Bank unit, and a portion of ~~return check management systems for major retailers~~the employees. The new domestic owned and ~~supermarkets across the United States. ClearCheck~~managed business is ~~reported~~being operated as part of FDC’s Retail and Alliance Services segment mostly within the ~~Financial Services segment.~~

~~In April 2006,~~BAMS alliance since June 2009 as discussed above. First Data will continue to provide transaction processing and related services for certain merchants of the alliance that were allocated to JPMorgan Chase but are resident on First Data’s processing platforms. First Data has historically accounted for its noncontrolling interest in the alliance under the equity method of accounting. Beginning November 1, 2008, the portion of the alliance’s business received by the Company ~~acquired~~in the ~~remaining interest of approximately 20% in its First Data Korea subsidiary and increased its ownership interest in its~~separation is reflected on a consolidated ~~subsidiary OMNIPAY from approximately 47% to approximately 69% through a buyout of management shareholders. Both entities are part~~basis throughout the financial statements. CPS accounted for the vast majority of the ~~International segment.~~

~~In June 2006,~~“Equity earnings in affiliates” and the processing and other fees noted in footnote (a) on the face of the Consolidated Statements of Operations. The receipt of the Company’s proportionate share of CPS was accounted for as a purchase business combination. The assets and liabilities received were recorded at their fair values. As a result of the alliance termination and subsequent business combination, the Company ~~acquired FDD, a German processor of cashless, card-based payment transactions. FDD is reported as part~~assessed its deferred tax liabilities established at the time of the ~~International segment.~~merger and reversed $508 million of those liabilities through purchase accounting for the Company’s proportionate share of CPS. The ~~aggregate~~ purchase price allocation resulted in ~~$53.2 million in~~ identifiable intangible assets of $1,047 million, which ~~were~~are being amortized over ~~seven~~three to 23approximately nine years, and goodwill of ~~$1.9~~$964 million. As part of the acquisition, the Company acquired easycash, a network solutions provider and a 100% owned subsidiary of FDD. As a condition for approval of the acquisition of FDD by FDC, the German Federal Cartel Office required that FDC sell the easycash subsidiary of FDD. easycash is involved in the business of point-of-sale terminal deployment and competes directly with FDC's subsidiary TeleCash GmbH and Co. KG. easycash was

~~Note 4: Business Combinations, Asset Acquisitions and Dispositions (Continued)~~

~~sold in~~The aggregate cash paid for acquisitions during the ~~fourth quarter 2006 for a~~year ended December 31, 2008 was approximately $267 million. The aggregate purchase price ~~equal to its allocated fair value resulting from the FDD acquisition.~~allocation associated with acquisitions during 2008 resulted in identifiable intangible assets and goodwill as follows:

Additional information.The pro forma impact of all 2008 acquisitions on net income was not material.

In ~~August 2006,~~July 2008, the Company ~~acquired~~sold its subsidiary Active Business Services Ltd. which was reported as part of the International segment.

In July 2008, the Company sold its interest in Early Warning Services which had been accounted for under the equity method and was reported in All Other and Corporate.

In October 2008, the Company sold its subsidiary Peace ~~a Customer Information System product company that develops advanced software for managing utility billing and customer care. Peace is~~which was reported as part of the Financial Services segment.

In December 2006, the Company acquired First Data Cono Sur, a provider of card issuing and merchant acquiring services in Argentina and Uruguay. The aggregate purchase price allocation resulted in identifiable intangible assets of $96.9 million, which were being amortized over seven to 11 years, and goodwill of $81.7 million. First Data Cono Sur is reported as part of the International segment.

~~The aggregate cash paid during the year ended~~On December 31, 2006 for the alliance and other acquisitions was approximately $287.5 million, net of cash received of $47.9 million. The aggregate purchase price allocation for these transactions resulted in $187.7 million in identifiable intangible assets, which were being amortized over five to 23 years, and goodwill of $159.2 million. The identifiable intangible assets of the acquisitions that occurred in 2006 are contemplated in the preliminary purchase price allocation associated with the merger discussed in Note 2.

~~The pro forma impact of all 2006 acquisitions on net income was not material.~~

~~In July 2006,~~2008, the Company sold 12.5% of the ~~majority~~membership interests in their merchant alliance, Wells Fargo Merchant Services, LLC (“WFMS”), to Wells Fargo & Company (“WFB”), for cash consideration totaling $222 million. This resulted in the Company owning 40% of the merchant alliance. FDC deconsolidated the WFMS balance sheet as of December 31, 2008 and is reflecting its remaining ownership interest ~~in its subsidiaries PPS and IDLogix to five national financial institutions to form Early Warning Services, LLC. Due to Early Warning Services, LLC being structured~~ as ~~a limited liability company, FDC's remaining interest in Early Warning Services, LLC is accounted for using the~~an equity method ~~of accounting and is reflected~~investment in the ~~"Investment in affiliates" line item of the Consolidated Balance Sheets. Refer to Note 19 for additional discussion.~~

~~In November 2006, the Company sold its subsidiary Taxware to ADP(R) Employer~~Retail and Alliance Services ~~a division of Automatic Data Processing, Inc. Refer to Note 19 for additional discussion.~~

~~In June 2005, the Company formed a merchant alliance with ICS, a card issuer and acquirer in the Netherlands, by purchasing 51% of their merchant acquiring business.~~segment. The Company ~~owns 51% of the alliance, has management control and consolidates the alliance as part of the International segment.~~

In July 2005, the Company acquired 100% of EPI, a provider of debit and credit card issuing and acquiring processing in nine Central and Eastern European countries. The purchase price allocation resulted in identifiable intangible assets of $39.4 million, which were being amortized over seven to 10 years, and goodwill of $75.5 million.

The Company entered into a merchant services alliance with BankWest in Australia in August 2005 by acquiring certain BankWest assets. The alliance provides the full range of acquiring services for BankWest merchants and their acceptance of debit cards, credit cards and other forms of electronic payments.

~~Note 4: Business Combinations, Asset Acquisitions and Dispositions (Continued)~~

The Company entered into a merchant services alliance with Citibank at the end of the third quarter 2005 by acquiring CitiCorp Payment Services, Inc., a provider of credit and debit card payment processing services to approximately 15,000 merchant locations.

In November 2005, the Company acquired an approximately 80% interest in First Data Korea. First Data Korea provides financial payment services, including value-added network services, and terminal interface services to local merchants with focus on small and medium size customers.

The Company acquired 100% of First Data Austria in November 2005. First Data Austria provides debit and credit card issuing and acquiring processing, as well as card network operations and terminals and ATM processing. The purchase price allocation resulted in identifiable intangible assets of $44.3 million, which were being amortized over seven to 15 years, and goodwill of $112.4 million.

The aggregate cash paid during the year ended December 31, 2005, net of cash acquired of $43.0 million, for the merchant alliances and other acquisitions was $443.9 million. The aggregate purchase price allocation for these acquisitions resulted in $212.3 million in identifiable intangible assets, which were being amortized over three to 15 years, except patents and trade names of $13.0 million that were being amortized over five to 25 years, and goodwill of $225.5 million. The identifiable intangible assets of the acquisitions that occurred in 2005 are contemplated in the preliminary purchase price allocation associated with the merger discussed in Note 2.

~~The pro forma impact of all 2005 acquisitions on net income was not material.~~

~~In November 2005, the Company sold its investment in Link2Gov, which was accounted for under the equity method of accounting. The sale resulted in proceeds of $12.4 million and~~recognized a pretax ~~gain~~loss of ~~$9.0 million.~~$3.8 million resulting from the transaction.

In August 2005, the Company sold its remaining interest in International Banking Technologies, which was substantially divested in 2001. The sale resulted in proceeds of $9.9 million and a pretax gain of $8.3 million.Other Information

~~The partial sale of PNC Merchant Services alliance in December 2005 resulted in cash proceeds of $39.8 million and a pretax gain of $36.3 million.~~

The following table outlines the net assets acquired and net cash paid for acquisitions (at date of acquisition) (in millions):

~~Note 4: Business Combinations, Asset Acquisitions and Dispositions (Continued)~~

The following table presents changes to goodwill for the ~~successor period from September 25, 2007 through December 31, 2007, the predecessor periods from January 1, 2007 through September 24, 2007 and year~~years ended December 31, ~~2006~~2009 and 2010 (in millions):

The terms of certain of the ~~Company's~~Company’s acquisition agreements provide for additional consideration to be paid if the acquired ~~entity's~~entity’s results of operations exceed certain targeted levels or if certain other conditions are met, as well as other payments or receipts of cash related to certain events that transpired subsequent to the acquisition of certain companies. Targeted levels are generally set substantially above the historical experience of the acquired entity at the time of acquisition. Such additional consideration is paid in cash and is recorded when payable as additional purchase price. Additional consideration was paid totaling ~~$0.5~~$1.4 million in ~~the successor period from September 25, 2007 through December 31, 2007, $50.0~~2010, $14.7 million in ~~the predecessor period from January 1, 2007 through September 24, 2007, $51.1~~2009 and $35.6 million in 2006, and $55.8 million in 2005. The maximum amount of remaining estimable contingent consideration consists of potential cash payments of $42.9 million, all of which was payable and accrued at December 31, 2007. Other contingent consideration that is expected to be paid but is not reliably estimable is not expected to exceed $10 million over the next year.

Operating results include the Company's proportionate share of income from affiliates, which consist of unconsolidated investments and joint ventures accounted for under the equity method of accounting. The most significant of these affiliates are related to the Company's merchant bank alliance program.

A merchant bank alliance, as it pertains to investments accounted for under the equity method, is a joint venture between FDC and a financial institution that combines the processing capabilities and management expertise of the Company with the visibility and distribution channel of the bank. The joint ventures acquire credit and debit card transactions from merchants. The Company provides processing and other services to the joint ventures and charges fees to the joint venture primarily based on contractual pricing. These fees have been separately identified on the face of the Consolidated Statements of Operations.

The Chase Paymentech alliance meets the Significant Subsidiary test provided in Regulation S-X Rule 1-02 (w) in that the Company's 2007 predecessor period and 2006 equity earnings of this alliance exceeded 20% of the Company's consolidated income from continuing operations before income taxes. In accordance with Regulation S-X Rule 3-09, the financial statements of Chase Paymentech are filed with this prospectus.

At December 31, 2007, there were nine affiliates accounted for under the equity method of accounting, comprised of five merchant alliances and four strategic investments in companies in related markets. The majority of equity earnings relate to the Chase Paymentech alliance. The Company's largest merchant alliance, Chase Paymentech, is 51% owned by J.P. Morgan Chase Bank, N.A., and 49% owned by FDC. The current term of the existing alliance agreement expires in 2010; however, JPMorgan had the right to terminate the alliance due to the change of control upon the closing of the merger. The Company has extended the time period to exercise this right to allow for further discussions regarding the alliance. If JPMorgan exercises its termination right, FDC has the right to receive 49% of the alliance's merchant contracts by value and be allocated 49% of the alliance's sales force.

In December 2005, FDC sold 20% of the PNC Merchant Services alliance (33% of the Company's interest) and began accounting for it under the equity method of accounting retroactively back to January 1, 2005.

~~A summary of unaudited financial information for the merchant alliances and other affiliates accounted for under the equity method of accounting is as follows (in millions):~~

Net operating revenues and operating expenses for 2005 have been adjusted to reflect the impact of conforming accounting policies resulting from the integration of the Chase Merchant Services and Paymentech alliances in the fourth quarter of 2005. Net operating revenues, operating expenses, operating income, and net income in the above table for 2005 have been adjusted to reflect eliminations among certain of the merchant alliances. The adjustments for eliminations had no effect on FDC's share of net income or equity earnings.

~~The primary components of assets and liabilities are settlement-related accounts as described in Note 6.~~

The formation of a merchant joint venture alliance accounted for under the equity method of accounting generally involves the Company and/or a financial institution contributing merchant contracts to the alliance and a cash payment from one owner to the other to achieve the desired ownership percentages. The asset amounts reflected above are owned by the alliances and other equity method investees and do not include any of such payments made by the Company.2008. As discussed in Note 2, a portion of the preliminary purchase price related to the merger was allocated to the Company's investments in unconsolidated joint ventures. The amount by which the total of the Company's investments in its joint ventures exceeded its proportionate share of the joint ventures' net assets totaled $3,190.8 million and $538.5 million at December 31, 2007 and 2006, respectively. The non-goodwill portion of this amount is considered an identifiable intangible asset that is amortized accordingly. The estimated future amortization expense for these intangible assets as of December 31, ~~2007 is $194.9 million in 2008, $161.2 million in 2009, $140.0 million in~~ 2010, ~~$105.9 million in 2011 and $89.7 million in 2012. These amounts assume that these alliances continue as they currently exist. Much of~~ the ~~difference between FDC's proportionate share of the investee's net income and FDC's equity earnings noted above relates to this amortization.~~Company did not have any contingent consideration payable.

Settlement assets and obligations result from ~~FDC's~~FDC’s processing services and associated settlement activities, including settlement of payment transactions. Settlement assets are generated principally from ~~payment instrument sales (primarily official checks and financial institution money orders) and~~ merchant services transactions. Certain merchant settlement assets that relate to settlement obligations accrued by the Company are held by partner banks to which the Company does not have legal ownership but has the right to use to satisfy the related settlement obligation. FDC records corresponding settlement obligations for amounts payable to merchants and for payment instruments not yet presented for settlement. ~~At December 31, 2006, the~~The difference in the aggregate amount of

of such assets and liabilities is primarily due to unrealized net investment gains and losses, which are reported as OCI in ~~stockholders'~~ equity. ~~As noted below and at December 31, 2007, the majority of settlement assets were invested in short-term investments so there was no such difference.~~ The principal components of ~~FDC's~~FDC’s settlement assets and obligations are as follows (in millions):

Cash equivalents consist of short-term time deposits, commercial paper ~~short-term variable rate demand notes~~ and other investments. See Note 75 for information concerning the ~~Company's~~Company’s investment securities.

FDC ~~generates~~generated revenues from its investment of certain settlement assets, ~~a substantial~~the majority of which ~~are~~pertained to cash equivalents and investment securities within the Company's Integrated Payment Systems ("IPS") segment. During 2007, the IPS investment portfolio was repositioned from long-term municipal obligations to principally short-term investments. Atsecurities. As of December 31, ~~2007,~~2010, the ~~IPS segment~~official check portfolio was invested in ~~short-term investment securities~~cash equivalents with ratings of ~~"A1 / P1"~~“A1/P1” or ~~better. IPS's~~better or in the “A” category or better and short-term and long-term investments ~~were~~ rated ~~"AA"~~in the “A” category or ~~better. IPS segment~~better with the exception of $4.7 million in lower rated securities, primarily auction rate securities described in Note 7. The following table presents the official check investment portfolio average balances ~~averaged $12.6 billion in 2007, $13.1 billion in 2006~~ and $13.4 billion in 2005. Investment revenues (before commissions to certain selling agents and hedging gains and losses) from the IPS segment portfolio totaled $116.6 million for the successor period September 25, 2007 through December 31, 2007, $341.5 million for the predecessor period January 1, 2007 through September 24, 2007, $469.5 million in 2006, and $448.3 million in 2005 ($172.5 million, $524.0 million, $720.5 million, and $691.7 million, respectively, on a pretax equivalent basis).

~~Investment~~The majority of the Company’s investment securities are a ~~principal~~ component of the ~~Company's~~Company’s settlement assets and represent the investment of funds received by FDC from the sale of payment instruments ~~(principally official~~(official checks and financial institution money orders) by authorized agents. The Company’s investment securities included in current settlement assets primarily consists of money market funds, discounted commercial paper, time deposits

and corporate bonds. The Company’s long-term settlement assets are comprised of student loan auction rate securities (“SLARS”) and corporate bonds. Realized gains and losses and other-than-temporary impairments (“OTTI”) on investments classified as settlement assets are recorded in the “Product sales and other” line item of the Consolidated Statements of Operations. The Company carried other investments including equity securities and shares of a money market fund which are carried at fair value and included in the “Other current assets” and “Other long-term assets” line items of the Consolidated Balance Sheets. Realized gains and losses on these investments are recorded in the “Other income (expense)” line item of the Consolidated Statements of Operations described in Note 9.

The principal components of the Company’s investment securities are as follows (in millions):

The following table presents the gross unrealized losses and fair value of the Company’s investments with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position (in millions):

Prior to the fourth quarter of 2010, the Company did not intend to sell the remainder of the SLARS and did not consider it more likely than not that it would be required to sell the SLARS before the recovery of the amortized cost basis and accordingly no significant OTTI losses had been recorded in earnings. This determination was based on management’s expectations as to when certain related settlement liabilities would need to be funded and the Company’s ability to use its revolving credit facility in the event the settlement liabilities need to be funded before the SLARS became liquid. However, during the fourth quarter of 2010, several events occurred which have impacted management’s expectations. Compliance with new state laws and regulations will restrict the Company’s ability to hold the SLARS for an extended period. Additionally, although the Company’s revolving credit facility remains available, management is no longer certain it will utilize it in order to avoid selling the SLARS at their current fair value. Due to the combination of the cumulative effect of the new and existing state laws and regulations noted above as well as the Company’s changing views of its use of capital, the Company can no longer assert that it will not more likely than not be required to sell the SLARS prior to the recovery of their fair value to their amortized cost. Accordingly, an other-than-temporary impairment of $27.9 million was recognized during the fourth quarter of 2010 in addition to an other-than-temporary impairment of $0.3 million recognized during the first quarter of 2010.

During ~~2007,~~the third quarter of 2010, the Company received proceeds of $85.3 million for its entire holdings in ~~conjunction~~the NextStudent SLARS as a result of the liquidation through public sale of the underlying collateral of the securities. The Company realized a loss of $2.8 million on the liquidation.

On January 28, 2011, the Company sold approximately $123 million of its holdings in SLARS resulting in a net realized loss of $2.6 million.

All of the above investments, with the ~~wind-down~~exception of ~~the official check and money order business, the Company repositioned a majority of the investment portfolio~~cost method investments, were classified within settlement assets from long-term state and municipal obligations to more liquid investments of shorter duration, though still generally tax exempt. Realized pretax gains and (losses) from the sale of these investment securities reclassified out of OCI into "Investment income" were $(3.9) million in the successor period from September 25, 2007 through December 31, 2007, $4.4 million in the predecessor period from January 1, 2007 through September 24, 2007, $0.3 million for 2006 and $0.4 million for 2005.as available-for-sale. The Company uses specific identification to determine the cost of a security sold and the amount of gains and losses reclassified out of OCI. The Company received proceeds from the sale of long-term investments of $0.7 billion in the successor period from September 25, 2007 through December 31, 2007, $10.9 billion in the predecessor period from January 1, 2007 through September 24, 2007, $18.5 million in 2006 and $46.2 million in 2005.

~~The Company also maintains various~~ other investments many of which are classified as available-for-sale and carried at fair market value of $43.6 million at December 31, 2007 and $92.7 million at December 31, 2006. Such investments are recorded in the "Other long-term assets" line item of the Consolidated Balance Sheets and include primarily equity securities. In addition, the Company has investments in non-marketable equity securities and other investments that are carried at cost of $27.5 million and $34.8 million at December 31, 2007 and 2006, respectively, and are also recorded in the "Other long-term assets" line item of the Consolidated Balance Sheets. Realized gains and losses associated with the investments described above are recognized in the "Othercomprehensive income ~~(expense)" line item of~~(“OCI”) into the Consolidated Statements of Operations. Unrealized gains and losses on investments carried at fair value are included as a separate component of OCI, net of any related tax effects.

The following table presents additional information regarding available-for-sale securities (in millions):

~~The principal components of investment securities are as follows (in millions):~~

The following table presents maturity information for the ~~Company's~~Company’s investments in debt securities ~~excluding consideration~~as of ~~auction mechanisms, at~~ December 31, ~~2007~~2010 (in millions):

The Company also maintained investments in non-marketable securities, held for strategic purposes (collectively referred to as “cost method investments”) which are carried at ~~December 31, 2007~~cost and included in “Other long-term assets” in the Company’s Consolidated Balance Sheets. These investments are ~~less than $50,000. The following table presents~~evaluated for impairment upon an indicator of impairment such as events or changes in circumstances that may have a significant adverse effect on the ~~gross unrealized losses and~~ fair value of the ~~Company's investments with unrealized losses that were not deemed to be other-than-temporarily impaired, aggregated by investment category and length~~investment. As of ~~time that individual securities have been in a continuous unrealized loss position, at~~ December 31, ~~2006 (in millions):~~

~~FDC maintains cash and cash equivalents, investment securities and certain hedging instruments (for specified purposes) with various financial institutions.~~ The Company ~~limits its concentration of these~~is exposed to various financial instruments with any one institution, and periodically reviews the credit standings of these institutions. FDC has a large and diverse customer base across various industries, thereby minimizing the credit risk of any one customer to FDC's accounts receivable amounts. In addition, each of the Company's business units perform ongoing credit evaluations on certain of their customers' financial condition.

~~FDC does not hold or issue financial instruments for trading purposes. FDC encounters credit~~ and market risks, including those related to ~~the Company's financial instruments, principally its investment securities. The Company attempts to mitigate credit risk by making high-quality investments. A majority of all its investments were~~changes in ~~short-term securities at December 31, 2007, with a large portion~~interest rates and foreign currency exchange rates, that exist as part of its ~~settlement assets in cash and cash equivalents.~~

Carrying amounts for certain of FDC's financial instruments (cash and cash equivalents, short-term investments and short-term borrowings) approximate fair value due to their short maturities. Accordingly, these instruments are not presented in the following table. The following table provides the estimated fair values of certain nonderivative financial instruments and derivative financial instruments (in millions):

The estimated fair value of long-term investment securities is based primarily on market quotations. As discussed in Note 10, a portion of the Company's long-term borrowings as of December 31, 2007 represents bridge financing ("bridge facilities") for which quoted market values do not exist. The fair market value of this bridge financing in the form of the senior unsecured cash-pay term loan facility was estimated using the quoted market value of the senior unsecured cash-pay notes as a basis as they have similar terms and the fair market value of the senior unsecured PIK term loan facility and the senior subordinated unsecured term loan facility were estimated using a PIK calculator and bond calculator, respectively, based upon certain assumptions made by the Company. Assumptions included the following: estimated yields based upon instruments with similar terms, durations and credit ratings; and coupon rates equal to the cap rates of the instruments per the agreements as described in Note 10. The fair market value of the remaining pre-merger long-term debt was based upon quoted market values. The estimated fair value of derivative financial instruments is modeled in Bloomberg software using the Bloomberg reported market data based on mid-market prices and the actual terms of the derivative contracts. While the Company believes its estimates result in a reasonable reflection of the fair value of these instruments, the estimated values may not be representative of actual values that could have been realized as of December 31, 2007 or that will be realized in the future.

ongoing business operations. The Company utilizes certain derivative financial instruments to enhance its ability to manage risks that exist as part of its ongoing business operations. The Company recognizes the fair value of all derivatives in the "Other long-term assets" and "Other long-term liabilities" captions in the Consolidated Balance Sheets at their fair value.these risks.

Two events occurred during 2007 that caused a significant change in the use of derivatives. As discussed in Note 1 and in February 2007, the Company announced its intent to gradually exit the official check and money order businesses. As of December 31, 2007, nearly all of the long-term instruments associated with these businesses were converted into more liquid instruments of shorter duration. In conjunction with the repositioning of the portfolio, the Company terminated all of the associated interest rate swaps that qualified as fair value hedges of the investments upon sale of the related investments.

As discussed in Note 2 and on September 24, 2007, the Company was acquired through a merger by an entity controlled by affiliates of KKR. As a result of the merger and also on September 24, 2007, the Company repurchased a majority of its outstanding debt through a tender offer. The interest rate swaps associated with this debt were terminated at the time the debt was repurchased. On September 24, 2007, the Company issued approximately $22 billion of variable rate debt (though interest rates on $9 billion of the debt was subject to certain caps) and subsequently swapped $7.5 billion of this variable rate debt to fixed rates.

~~As of December 31, 2007,~~2010, the Company uses derivative instruments to mitigate (i) cash flow risks with respect to changes in interest rates (forecasted interest payments on variable rate debt), ~~foreign currency rates (forecasted transactions denominated in foreign currency) and market price risk related to an equity security and~~ (ii) to protect the initial net investment in certain foreign subsidiaries and/or affiliates with respect to changes in foreign currency ~~rates. Not all of these derivatives qualify for hedge accounting as discussed in more detail below.~~

~~With respect~~exchange rates and (iii) to derivative instruments that are afforded hedge accounting pursuant to Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", on the date the derivative instrument is entered into,protect the Company designates the derivative as a cash flow hedge, a fair value hedge or a hedge of a net investment depending on the asset, liability, forecasted transaction or net investment being hedged. Changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge are generally recorded in OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is designated and qualifies as a fair value hedge are recorded immediately in earnings along with the corresponding change in the carrying value of the hedged item. Changes in the fair value of a net investment hedge are recorded as part of the cumulative translation adjustment in OCI.

~~assesses, both at inception of the hedge and on an ongoing basis, whether the hedge is highly effective in offsetting changes in cash flows, fair value or~~from foreign currency exposure of the underlying hedged items. The Company also performs an assessment of the probability of the forecasted transaction on a periodic basis. If it is determined that a derivative ceases to be highly effective during the term of the hedge or if the forecasted transaction is no longer probable, the Company will discontinue hedge accounting prospectively for such derivative.

In the predecessor periods, the Company used derivative instruments to mitigate cash flow risks with respect to forecasted transactions (commission payments) that in certain periods did not meet the documentation requirements of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133") to qualify for hedge accounting. Accordingly such derivative instruments were marked-to-market through the Consolidated Statements of Operations as part of the "Other income (expense)" line. By December 2006, the Company terminated all of these interest rate swaps and entered into new interest rate swaps that qualified for hedge accounting.

~~The Company is exposed to various financial and market risks, including those~~ related to ~~changes in interest rates and~~an outsourcing contract with a foreign ~~currency rates that exist as part of its ongoing business operations. The Company utilizes certain derivative financial instruments to enhance its ability to manage these risks.~~ vendor.

Derivative instruments are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company applies strict policies to manage each of these risks, including prohibition against derivatives trading, derivatives market-making or any other speculative activities. Although certain ~~transactions~~derivatives do not qualify for hedge accounting, they are ~~entered into~~maintained for economic hedge purposes and are not considered speculative.

The ~~Company's~~Company’s policy is to minimize its cash flow ~~fair value~~ and net investment exposures related to adverse changes in interest rates and foreign currency exchange rates. The ~~Company's~~Company’s objective is to engage in risk management strategies that provide adequate downside protection.

~~FDC does~~The Company recognizes all derivatives in the “Other long-term assets”, “Other current liabilities” and “Other long-term liabilities” captions in the Consolidated Balance Sheets at their fair values. The Company has designated certain of its interest rate swaps as cash flow hedges of forecasted interest rate payments related to its

variable rate debt and a cross currency swap as a foreign currency hedge of its net investment in a foreign subsidiary. Other interest rate swaps, cross currency swaps and forward contracts on various foreign currencies no longer qualify or have not ~~believe~~been designated as accounting hedges and do not receive hedge accounting treatment.

With respect to derivative instruments that are afforded hedge accounting, the effective portion of changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge is recorded in OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a net investment hedge that qualifies for hedge accounting are recorded as part of the cumulative translation adjustment in OCI. Any ineffectiveness associated with the aforementioned cash flow hedges is recorded immediately in the Consolidated Statements of Operations.

The Company formally documents all relationships between hedging instruments and the underlying hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges to forecasted transactions and net investment hedges to the underlying investment in a foreign subsidiary or affiliate. The Company formally assesses, both at inception of the hedge and on an ongoing basis, whether the hedge is highly effective in offsetting changes in cash flows or foreign currency exposure of the underlying hedged items. The Company also performs an assessment of the probability of the forecasted transactions on a periodic basis. If it is determined that a derivative ceases to be highly effective during the term of the hedge or if the forecasted transaction is no longer probable, the Company will discontinue hedge accounting prospectively for such derivative.

The Company monitors the financial stability of its derivative ~~financial instruments expose it to more than a nominal amount of credit risk as~~counterparties and all counterparties remain highly-rated (in the ~~counterparties are established, well-capitalized financial institutions with a long-term debt rating by Standard and Poor's and Moody's of "A"~~“A” category or ~~"A2", unless otherwise approved by the Company's Investment Committee.~~higher). The credit risk inherent in these agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. The Company performs a review at inception of the hedge, as circumstances warrant, and at least on a quarterly basis of the credit risk of these counterparties. The Company also monitors the concentration of its contracts with individual counterparties. ~~FDC anticipates that the counterparties will be able to fully satisfy their obligations under the agreements. FDC's~~The Company’s exposures are in liquid currencies (primarily in U.S. dollars, euros and Australian dollars) ~~and active equity markets,~~, so there is minimal risk that appropriate derivatives to maintain the hedging program would not be available in the future.

As of December 31, 2010, the Company had certain derivative instruments that functioned as economic hedges but no longer qualify or were not designated to qualify for hedge accounting. Such instruments included a cross-currency swap to hedge foreign currency exposure from an intercompany loan, a foreign exchange rate collar to hedge foreign currency exposure related to an outsourcing contract with a foreign vendor, and interest rate swaps to hedge the interest payments on variable rate debt from fluctuations in interest rates.

During the first quarter of 2009, one of the cash flow hedges of interest payments on the Company’s variable rate debt previously designated to qualify for hedge accounting ceased to be highly effective. As such, the Company did not apply hedge accounting to the discontinued hedge during the first quarter of 2009 and discontinued prospective hedge accounting for the affected derivatives with a notional balance of $1.5 billion. During the second quarter of 2009, the Company made an election with respect to the duration of the variable LIBOR interest rate payments it was hedging which was inconsistent with the original hedge strategy documented in the accounting designation. Accordingly, the Company had to de-designate the affected interest rate swaps, with $2.0 billion notional amount, from receiving hedge accounting. The Company was able to

re-designate prospectively an interest rate swap with a notional amount of ~~the merger all previous~~$500 million to continue to receive hedge accounting ~~designations were nullified because of~~treatment; however, the ~~merger. The Company redesignated certain of~~other interest rate swaps with $1.5 billion notional amount no longer met the ~~previous derivatives in the same hedging relationships to continue~~criteria to qualify for hedge ~~accounting.~~accounting primarily due to the significant “off-market” value of the swaps and will not be receiving hedge accounting treatment prospectively.

During the second quarter of 2010, two interest rate swaps with a total notional balance of $1.0 billion and one basis rate swap with a notional balance of $1.0 billion ceased to be highly effective. As such, the Company did not apply hedge accounting to the discontinued hedges during the second quarter of 2010 and discontinued prospective hedge accounting for the affected derivatives. The ~~remaining derivative instruments continue~~amount carried in OCI as of the date of de-designation has been reclassified into earnings in the same period during which the forecasted transaction affected earnings. The amount reclassified in the second quarter and third quarter of 2010 from OCI to ~~function as economic hedges but were not designated to qualify~~the “Other income (expense)” line of the Consolidated Statements of Operations was $4.6 million and $4.6 million, respectively, through the expiration date of the swaps in September 2010.

While the derivatives noted above no longer qualified for hedge ~~accounting. At December 31, 2007, those derivative instruments not designated as~~ accounting, ~~hedges include foreign currency forward contracts~~they continued to ~~hedge forecasted foreign currency sales,~~be effective economically in eliminating the variability in interest rate payments on the corresponding portion of the Company’s variable rate debt.

During the third quarter of 2010, five interest rate swaps with a ~~cross-currency swaps contract to hedge foreign currency exposure from an intercompany loan,~~total notional balance of $2.5 billion and one basis rate swap with a ~~cross-currency swap contract to hedge foreign currency exposure to a net investment in foreign operations and costless collars to hedge the anticipated cash flows from the future sale~~notional balance of ~~an equity security.~~ $1.0 billion expired.

As of December 31, ~~2007,~~2010, the notional amount of the ~~costless collars was 316,865 shares, the notional amount of the forward contracts~~foreign exchange rate collar was approximately ~~8.8~~83.8 million ~~Canadian dollars (approximately $8.9~~Philippine pesos ($1.9 million) ~~and the~~. The notional amount of the cross-currency swaps was ~~21.5~~91.1 million euro (approximately ~~$31.2~~$119.5 million). The notional amount of the interest rate swaps that no longer qualify for hedge accounting was $1.5 billion.

The periodic change in the mark-to-market of the derivative instruments not designated as accounting hedges is recorded immediately in the ~~statements of operations.~~

In the third quarter 2007, prior to the consummation of the merger, Sub entered into two forward starting, deal contingent interest rate swaps. Such swaps did not qualify for hedge accounting until consummation of the merger as discussed below in "Cash Flow Hedges". From the date the swaps were entered into until designated as hedges on September 24, 2007, the swaps were marked-to-market which resulted in a charge of approximately $19 million. This amount was recorded as a successor transaction in "Other income (expense)" in the Consolidated Statements of Operations.

The Company used to hedge the commission payment obligation (cash flows) associated with its official check business by entering into interest rate swap contracts but, due to insufficient hedge documentation, these swaps did not qualify for hedge accounting and were marked-to-market through the Consolidated Statements of Operations. ~~By December 2006,~~For information on the ~~Company terminated all~~location and amounts of ~~the above noted interest rate swaps and entered into new interest rate swaps that qualified for hedge accounting.~~

~~In 2006, in connection with a reduction~~derivative fair values in the outstanding balance of the Company's long-term borrowings, the Company de-designated an amount of the associated fair value hedges in proportion to the reduction in the debt balance. On the same date that the de-designations were effective, the Company entered into newConsolidated Balance Sheets and derivative ~~instruments ("mirror" swaps) with the terms exactly opposite to the de-designated proportions of the existing swaps. The de-designated proportions of the swaps~~gains and the new mirror swaps were not designated as accounting hedges and accordingly these derivatives were marked-to-market through the "Other income (expense)" line item of the Consolidated Statements of Operations. Since the terms of the de-designated swaps and the mirror swaps were exactly opposite, the changes in fair value of these instruments offset each other and resulted in no or immaterial impact on a net basis on the Consolidated Statements of Operations. These swaps were terminated at the time of the merger.

The Company had certain foreign currency derivative instruments that were effective as economic hedges prior to their termination in 2007, but were not designated as accounting hedges. Accordingly, the changes in fair value of such derivative instruments were recordedlosses in the Consolidated Statements of Operations, ~~and substantially offset~~see the ~~transaction gain or loss recognized on the underlying. The aggregate notional amount of these derivative instruments was 375.0 million yen at December 31, 2006.~~tabular information presented below.

Aforeign operation.As of December 31, 2010, the Company had a cross currency swap that was designated as a hedge of a net investment ~~hedge prior to~~in a foreign operation with an aggregate notional amount of 115.0 million Australian dollars (approximately $115.5 million).

For information on the ~~merger was redesignated at~~location and amounts of derivative fair values in the ~~merger date as a hedge of net investments in foreign operations. Since the existing~~Consolidated Balance Sheets and derivative ~~instrument was not at zero fair value at the time of redesignation, the redesignated hedging relationship will result in some ineffectiveness which will be recognized immediately~~gains and losses in the Consolidated Statements of ~~Operations. The effective portion of~~Operations, see the ~~change in fair value of the cross currency swap is recognized in the Consolidated Statements of Stockholders' Equity.~~ tabular information presented below.

Cash flow hedges.As of December 31, ~~2007, the aggregate notional amount of the Australian dollar cross currency swap was 115.0 million Australian dollars (approximately $100.5 million). As of December 31, 2007,~~2010, the Company ~~realized a $2.6 million gain in OCI in the successor period in the Consolidated Statements of Stockholders' Equity associated with the net investment hedge.~~

The aggregate notional amount of the Australian dollar cross currency swaps was 230.0 million Australian dollars at December 31, 2006. The aggregate notional amounts of the euro cross currency swaps were 492.5 million euros at December 31, 2006. All but one of the Australian dollar swaps were terminated at the time of the merger.

~~As noted above and in the third quarter 2007, prior to the consummation of the merger, Sub entered into two forward starting, deal contingent~~had interest rate ~~swaps. At the merger date such interest rate~~ swaps which were designated as cash flow hedges of the variability in the interest payments on ~~a specified $3.0~~$3.5 billion ~~portion~~ of the approximate ~~$12.8~~$12.0 billion variable rate senior secured term ~~loan due to changes in~~loan. The Company also had two basis rate swaps, which expired during the ~~LIBOR interest rate (the benchmark interest rate). Since these swaps were entered into prior to~~third quarter of 2010, that modified the ~~date~~variable rates on $3.0 billion of ~~their designation and they were not at zero fair value on that date,~~ the ~~hedging relationships will result in some ineffectiveness. In the fourth quarter 2007, the Company entered into additional~~$3.5 billion interest rate swaps ~~designated as cash flow hedges of~~and that lowered the ~~variability in the~~fixed interest ~~payments~~rates on ~~$4.5 billion of the variable rate senior secured term loan due to changes in the LIBOR~~those interest rate ~~(the benchmark~~swaps. The basis swaps paid interest ~~rate).~~ at rates equal to three-month-LIBOR and received interest at rates equal to one-month-LIBOR plus a fixed spread.

At December 31, ~~2007,~~2010, the maximum length of time over which the Company is hedging its exposure is approximately ~~five~~2 years. The effective portion of changes in fair value of the cash flow hedges is recorded temporarily in the Consolidated Statements of Stockholders' Equity as a component of OCI and then recognized in the Consolidated Statements of Operations in the same period or periods during which the payment of variable interest associated with the floating rate debt is recorded in earnings. Any ineffective portions of changes in fair value are recognized in the Consolidated Statements of Operations, in "Other income (expense)," during the period of change. The Company follows the hypothetical derivative method to measure hedge ~~ineffectiveness. Since~~ineffectiveness which resulted mostly from the ~~interest rate swaps entered into during~~hedges being off-market at the ~~fourth quarter 2007 match the hypothetical derivative, there has been no ineffectiveness to recognize~~time of designation. Ineffectiveness associated with these hedges is recognized immediately in the Consolidated Statements of Operations for these hedges. A $1.2 million loss associated with ineffectiveness was recognized in earnings during the successor period from September 25, 2007 to December 31, 2007 related to the cash flow hedges of the first $3.0 billion portion of the debt.Operations. The amount of losses in OCI ~~as of December 31, 2007~~ related to the hedged transactions as of December 31, 2010 that is expected to be reclassified into the Consolidated Statements of Operations ~~during~~within the next 12 months ~~ending December 31, 2008~~ is approximately ~~$31.9~~$75.9 million.

For information on the location and amounts of derivative fair values in the Consolidated Balance Sheets and derivative gains and losses in the Consolidated Balance Sheets or in the Consolidated Statements of Operations, see the tabular information presented below.

~~Note 8: Nonderivative and~~The Effect of Derivative ~~Financial~~ Instruments ~~(Continued)~~on the Consolidated Statements of Operations

In the predecessor periods, the Company entered into derivatives to hedge certain cash flows associated with foreign currency exposures and the forecasted sale of an investment security. At their initiation, these derivative instruments qualified, and were designated, as cash flow hedges. On an individual and aggregate basis such derivatives were immaterial to the financial statements for the predecessor periods presented. The amount of ineffectiveness related to these cash flow hedges was immaterial. These derivative instruments were either terminated at the time of the merger or are currently not designated as hedges.

As discussed above in Note 2 and in connection with the merger, the Company terminated the interest rate swaps associated with its debt in connection with the repurchase of the underlying debt. Additionally, the Company terminated the interest rate swaps associated with the long-term investment portfolio of the official check and money order businesses. These hedges qualified for the short-cut method of accounting as described in paragraph 68 of SFAS 133. Accordingly, there was no ineffectiveness related to these interest rate swaps. The aggregate notional amount of these interest rate swaps was $1.5 billion and $7.6 billion at December 31, 2006, respectively. Subsequent to the merger, the Company had no outstanding fair value hedges that qualified for hedge accounting.

The following table summarizes activity in other comprehensive income for the years ended December 31, ~~2007~~2010 and ~~2006~~2009 related to derivative instruments classified as cash flow hedges and net investment hedges held by the Company (in ~~millions)~~millions, after tax):

~~The Company's effective tax rates from continuing operations differ from statutory rates as follows:~~Fair value of financial instruments

~~Note 9: Income Taxes (Continued)~~Assets and Liabilities Measured at Fair Value on a Recurring Basis

~~FDC's income tax provisions (benefits) consist~~Fair value is defined by accounting guidance as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses the hierarchy prescribed in the accounting guidance for fair value measurements, based upon the available inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows:

Level 1 Inputs—Quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the ~~following components:~~measurement date.

Successor
Predecessor

Period from
September 25
through
December 31,
2007

Period from
January 1
through
September 24,
2007 Year ended December 31,

2006 2005

(in millions)

Current

Federal
$ (29.7 ) $ 63.3 $ 193.1 $ 181.8

State and local
7.5 39.7 39.3 31.8

Foreign
13.7 48.5 32.1 15.0

(8.5 ) 151.5 264.5 228.6
Deferred

Federal
(153.2 ) (8.3 ) (44.9 ) (35.4 )

State and local
(13.3 ) (3.4 ) (5.1 ) (3.2 )

Foreign
(1.1 ) (14.0 ) (10.8 ) (1.7 )

(167.6 ) (25.7 ) (60.8 ) (40.3 )

$ (176.1 ) $ 125.8 $ 203.7 $ 188.3

~~Income tax refunds received, net~~

Level 2 Inputs—Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including but not limited to quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities and observable inputs other than quoted prices such as interest rates or yield curves.

Level 3 Inputs—Unobservable inputs reflecting the Company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk.

The Company maximizes the use of ~~tax payments,~~relevant observable inputs and minimizes the use of ~~$108 million~~unobservable inputs.

Financial instruments carried and measured at fair value on a recurring basis are classified in the ~~successor period from September 25, 2007 through December 31, 2007 are more than the current benefit primarily due~~table below according to the actual receipt of tax refunds related to the predecessor period from January 1, 2007 through September 24, 2007 and the year ended December 31, 2006. Income tax payments of $56 million in the predecessor period from January 1, 2007 through September 24, 2007 are less than current expense primarily due to increased tax benefits associated with the exercise of stock options recorded directly to equity resulting in a federal net operating loss carryback for a refund. Income tax payments of $86.0 million in 2006 are less than current expense primarily due to increased tax benefits associated with the exercise of stock options recorded directly to equity for 2006 and 2005 overpayment applied to 2006. Income tax payments of $262.0 million in 2005 are more than current expense primarily due to tax payments related to prior year tax liability and 2005 overpayment.fair value hierarchy described above (in millions):

Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the book and tax bases of the Company's assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Deferred tax assets are included in both "Other current assets" and "Other long-term assets" in FDC's Consolidated Balance Sheets. Deferred tax liabilities are included in


	Fair Value Measurement Using
As of December 31, 2010	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets:
Settlement assets:
Student loan auction rate securities	$	—	$	—	$	341.1	$	341.1
Other available-for-sale securities:
Corporate bonds		—		63.0		—		63.0
Preferred stock		0.2		—		—		0.2

Total other available-for-sale securities		0.2		63.0		341.1		404.3

Other long-term assets:
Available-for-sale securities		—		0.5		—		0.5
Foreign currency derivative contracts		—		7.7		—		7.7

Total other long-term assets		—		8.2		—		8.2

Total assets at fair value	$	0.2	$	71.2	$	341.1	$	412.5

Liabilities:
Other current liabilities:
Interest rate swap contracts	$	—	$	4.4	$	—	$	4.4
Other long-term liabilities:
Interest rate swap contracts		—		352.8		—		352.8
Foreign currency derivative contracts		—		22.2		—		22.2

Total liabilities at fair value	$	—	$	379.4	$	—	$	379.4

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Note 9: Income Taxes (Continued)~~

~~"Deferred long-term tax liabilities"~~Settlement assets - student loan auction rate securities. Due to the lack of observable market activity for the SLARS held by the Company, the Company, with the assistance of a third-party valuation firm upon which the Company in ~~FDC's Consolidated Balance Sheets.~~part relied, made certain assumptions, primarily relating to estimating both the weighted-average life for the securities held by the Company and the impact on the fair value of the current inability to redeem the securities at par value. All key assumptions and valuations were determined by and are the responsibility of management. The ~~following table outlines~~securities were valued using an income approach based on a probability-weighted discounted cash flow analysis. The Company considered each security’s key terms including date of issuance, date of maturity, auction intervals, scheduled auction dates, maximum auction rates, as well as underlying collateral, ratings, and guarantees or insurance. The impact of the ~~principal components of deferred tax items (in millions):~~

Successor
Predecessor

December 31,
2007
2006
Deferred tax assets related to:

Reserves and other accrued expenses
$ 51.4 $ 21.5

Pension obligations
41.6 58.8

Employee related liabilities
61.6 74.2

Unrealized securities and hedging (gain)/loss
64.9 —

Net operating losses and tax credit carryforwards
182.8 8.6

U.S. foreign tax credit on undistributed earnings
87.0 66.9

Total deferred tax assets
489.3 230.0
Valuation allowance
(92.4 ) (38.4 )

Realizable deferred tax assets
396.9 191.6

Deferred tax liabilities related to:

Property, equipment and intangibles
(2,507.8 ) (411.7 )

Investment in affiliates and other
(23.1 ) (115.4 )

Deferred revenues
(3.0 ) (2.0 )

Unrealized securities and hedging (gain)/loss
— (8.3 )

U.S. tax on foreign undistributed earnings
(113.9 ) (27.2 )

Foreign exchange (gain)/loss
(11.8 ) (55.9 )

Total deferred tax liabilities
(2,659.6 ) (620.5 )

Net deferred tax liabilities
$ (2,262.7 ) $ (428.9 )

~~The Company's deferred tax assets and liabilities are included~~Company’s judgment in the valuation was significant and, accordingly, the resulting fair value was classified as Level 3 within the fair value hierarchy. A 50 basis point change in liquidity risk premium, as well as slight changes in other factors, would impact the value of the SLARS by approximately $7 million. For additional information regarding the sale, settlements and impairments of the SLARS, refer to Note 5 of these Consolidated ~~Balance Sheets as follows:~~Financial Statements.

Successor
Predecessor

December 31,
2007
2006
Deferred current tax assets
$ 110.6 $ 96.4
Deferred long-term tax assets
8.3 10.7
Deferred long-term tax liabilities
(2,381.6 ) (536.0 )

Net deferred tax liabilities
$ (2,262.7 ) $ (428.9 )

~~Included~~


(in millions)	Fair Value Measurement Using Significant Unobservable Inputs (Level 3) Student loan auction rate securities
Beginning balance as of January 1, 2010	$	449.7
Total gains or losses (realized or unrealized):
Included in other comprehensive income		44.7
Included in product sales and other		(31.5	)
Sales		(23.5	)
Settlements		(98.3	)
Transfers in (out) of Level 3		—

Ending balance as of December 31, 2010	$	341.1

Settlement assets - other available-for-sale securities.Prices for the corporate bonds are not quoted on active exchanges but are priced through an independent third-party pricing service based on quotations from market-makers in the ~~changes~~specific instruments or, where appropriate, from other market inputs. Corporate bonds were valued under a market approach using observable inputs including reported trades, benchmark yields, broker/dealer quotes, issuer spreads and other standard inputs.

The Company’s experience with these types of investments and expectations of the current investments held is that they will be satisfied at the current carrying amount. These securities were classified as Level 2.

Derivative financial instruments.The Company uses derivative instruments to mitigate certain risks. The Company’s derivatives are not exchange listed and therefore the fair value is estimated under an income approach using Bloomberg analytics models that are based on readily observable market inputs. These models reflect the contractual terms of the derivatives, such as notional value and expiration date, as well as market-based observables including interest and foreign currency exchange rates, yield curves and the credit quality of the counterparties. The models also incorporate the Company’s creditworthiness in order to appropriately reflect non-performance risk. Inputs to the derivative pricing models are generally observable and do not contain a high level of subjectivity and, accordingly, the Company’s derivatives were classified within Level 2 of the fair value hierarchy. While the Company believes its estimates result in a reasonable reflection of the fair value of these instruments, the estimated values may not be representative of actual values that could have been realized or that will be realized in the ~~deferred tax balances above from December 31, 2006~~near future. Refer to ~~December 31, 2007 are deferred tax assets and liabilities~~Note 6 of these Consolidated Financial Statements for ~~various acquisitions and for differences between~~additional information regarding the ~~assigned fair market values and the tax bases of the assets and liabilities recognized in various purchase business combinations.~~Company’s derivative financial instruments.

As of December 31, 2007, the Company had recorded a valuation allowance of $92.4 million against U.S. foreign tax credits and foreign net operating losses. The increase to the valuation allowance in 2007 was primarily due to a reevaluation of the future benefits to be realized from foreign

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

During the year ended December 31, 2010, the Company recorded impairments totaling $11.5 million on assets with a total carrying value of $11.7 million, as a result of changes in management’s expectations with respect to projected cash flows, ongoing negative cash flows for certain assets or asset groups or due to the discontinued use of certain assets. The impairments related to property and equipment, customer relationships, software, other intangibles, and other long-term assets.

The fair values of the impaired assets were estimated primarily using an income approach, based on management’s current cash flow projections and using assumptions that management believes are consistent with market participant assumptions. The inputs to the valuations are largely unobservable, and the measurements are accordingly classified as Level 3. The majority of these assets were deemed fully impaired. All key assumptions and valuations were determined by and are the responsibility of management. The specific impairments are described in Note 2 of these Consolidated Financial Statements.

Note ~~9: Income Taxes (Continued)~~8: Borrowings

~~tax credits subsequent to~~Borrowings consisted of the merger on September 24, 2007. It is more likely than not that the tax benefit of those deferred tax assets will not be realized due to statutory limitations. Of the $92.4 million valuation allowance, $66.1 million, if subsequently reversed, would be recordedfollowing as ~~a reduction to goodwill.~~

As of December 31, ~~2007, the Company had aggregate federal net operating loss carryforwards of approximately $350 million. If not utilized, these carryforwards will expire in years 2008 through 2027.~~2010 and 2009 (in millions):

As of December 31, 2007, the Company had aggregate foreign net operating loss carryforwards of approximately $124 million. Foreign net operating loss carryforwards of $102 million, if not utilized, will expire in years 2008 through 2027. The remaining foreign net operating loss carryforwards of $22 million have an indefinite life.


As of December 31,	2010			2009
Short-term borrowings	$	180.3		$	109.2

Current portion of long-term borrowings(a):
4.50% Notes due 2010		—			12.8
5.625% Notes due 2011		31.4			—
Senior secured term loan facility due 2014		—			129.2
Capital lease obligations		58.8	��		53.7

Total current portion of long-term borrowings		90.2			195.7

Long-term borrowings(a):
5.625% Notes due 2011		—			30.0
4.70% Notes due 2013		13.3			12.7
4.85% Notes due 2014		3.2			3.0
Senior secured term loan facility due 2014		11,951.0			12,498.5
4.95% Notes due 2015		7.9			7.5
9.875% Senior notes due 2015		783.5			3,750.0
10.55% Senior PIK notes due 2015(b)		675.3			3,347.9
11.25% Senior subordinated notes due 2016		2,500.0			2,500.0
8.875% Senior notes due 2020		492.8			—
8.25% Senior second lien notes due 2021		1,981.8			—
12.625% Senior notes due 2021		2,973.1			—
8.75%/10.00% PIK toggle senior second lien notes due 2022 (b)		991.0			—
Capital lease obligations		65.9			155.3

Total long-term borrowings		22,438.8			22,304.9

Total borrowings	$	22,709.3		$	22,609.8

~~As of December 31, 2007, the Company had aggregate state net operating loss carryforwards of approximately $134 million. If not utilized, these carryforwards will expire in years 2008 through 2027.~~

(a)	Amounts are shown net of unamortized discount as applicable

(b)	Payment In-Kind (“PIK”)

~~As of December 31, 2007, the Company had foreign tax credit carryforwards of approximately $24 million. If not utilized, these carryforwards will expire in the year 2017.~~

The Company adopted the provisions of FASB Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes—An Interpretation of FASB Statement No. 109" ("FIN 48"), on January 1, 2007. This interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with FASB Statement No. 109, "Accounting for Income Taxes", and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

As a result of the implementation of FIN 48, the Company recorded a reduction to retained earnings of approximately $23 million and an increase to goodwill of approximately $25 million effective January 1, 2007. Also upon adoption of FIN 48, the Company reclassified approximately $140 million of deferred tax liabilities to income taxes payable to conform to the balance sheet presentation requirements of FIN 48. The Company expects the ongoing application of FIN 48 may result in more significant discrete items being recognized from period to period.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Note 9: Income Taxes (Continued)~~

A reconciliation of the unrecognized tax benefits for the predecessor period from January 1, 2007 through September 24, 2007 and the successor period from September 25, 2007 through December 31, 2007 is as follows (in millions):

Predecessor:

Balance as of January 1, 2007
$ 303.5

Increases for tax positions of prior years
28.6

Increases for tax positions related to the current period
7.8

Decreases due to the lapse of applicable statute of limitations
(30.9 )

Balance as of September 24, 2007
309.0

Successor:

Increases for tax positions of prior years
5.4

Increases for tax positions related to the current period
58.4

Decreases for settlements with taxing authorities
(0.6 )

Decreases due to the lapse of applicable statute of limitations
(4.1 )

Balance as of December 31, 2007
$ 368.1

The income taxes payable for unrecognized tax benefits is included in the "Other long-term liabilities" line of the Consolidated Balance Sheets, net of the federal benefit on state income taxes (approximately $31 million at December 31, 2007), and included at December 31, 2007 was approximately $3 million of tax positions that, if recognized, would affect the effective tax rate in the successor period. In September 2007, the Company's statute of limitations expired for certain state and federal positions without adjustment, resulting in the Company's unrecognized tax benefits decreasing by approximately $31 million, of which $1 million was recognized as a decrease to income tax expense of the predecessor period and the remaining $30 million as a decrease to goodwill. The $31 million decrease was comprised of $4 million of federal and $27 million of state tax positions. The Company increased unrecognized tax benefits in the third quarter for uncertainty regarding a federal tax receivable in the amount of approximately $8 million. Additional state statutes expired in October 2007 decreasing the Company's unrecognized tax benefits by approximately $4 million, all of which decreased goodwill.

As of December 31, 2007, the Company anticipates that its liability for unrecognized tax benefits will change within the next twelve months; however, the Company does not expect the change to significantly increase or decrease the total amounts of unrecognized tax benefits.

The Company recognizes interest related to unrecognized tax benefits and penalties in the "Income tax (benefit) expense" line item of the Consolidated Statements of Operations. Included in the "Income tax (benefit) expense" line for the period from January 1 through September 24, 2007 and the period from September 25, 2007 through December 31, 2007 were approximately $6 million and $4 million, respectively, of accrued interest expense (net of related tax benefits). The Company had approximately $47 million of interest and penalties accrued at December 31, 2007 which are not included in the period ending balance of $368.1 million of unrecognized tax benefits. Accrued interest and penalties are included in the "Other long-term liabilities" line of the Consolidated Balance Sheet.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 9: Income Taxes (Continued)~~

The Company or one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. As of December 31, 2007, the Company is no longer subject to income tax examination by the U.S. federal tax jurisdiction for years before 2002. State and local examinations are substantially complete through 1998.

Prior to the spin-off transaction, Western Union was part of the FDC consolidated, unitary and combined income tax returns ("combined tax returns") through September 29, 2006. As contemplated in certain agreements associated with the spin-off transaction, the Company is indemnified by Western Union for certain taxes attributable to operations of Western Union with respect to periods before the spin-off date of September 29, 2006. Although the Company is indemnified by Western Union, the Company remains the primary obligor to the tax authorities with respect to such combined tax return liabilities related to Western Union. Accordingly, as of December 31, 2007, FDC had approximately $133 million of uncertain income tax liabilities, including interest and penalties, recorded related to Western Union operations with a corresponding receivable from Western Union, included as a long-term account receivable in the "Other long-term assets" line of the Consolidated Balance Sheets, to reflect the indemnification for such liabilities. The liability for unrecognized tax benefits related to Western Union as of January 1, 2007 was approximately $115 million. Additionally, accruals for 2006 provision to return adjustments and interest expense increased the balance to approximately $133 million as of December 31, 2007. The Western Union contingent liability is in addition to the FDC liability for unrecognized tax benefits discussed above.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 10: Borrowings~~

~~Borrowings consisted of the following at December 31, 2007 and December 31, 2006:~~

Successor
Predecessor

December 31, 2007
December 31, 2006

(in millions)

Short-Term Borrowings:

Capital lease obligations
$ 49.6 $ 46.6

Other short-term debt
304.1 89.9

Senior secured revolving credit facility
60.0 —

Senior secured term loan facility due 2014
127.7 —

3.375% Notes due 2008
65.8 —

Medium-term notes
13.1 85.4
Long-Term Borrowings:

Medium-term note
— 40.4

3.375% Notes due 2008
— 499.5

3.90% Notes due 2009
13.8 102.7

4.50% Notes due 2010
18.5 158.7

5.625% Notes due 2011
34.9 156.6

4.70% Notes due 2013
14.2 478.8

4.85% Notes due 2014
4.7 375.1

4.95% Notes due 2015
7.5 399.7

Senior secured term loan facility due 2014
12,675.6 —

Senior unsecured cash-pay term loan facility due 2015
1,550.0 —

Senior unsecured PIK term loan facility due 2015(a)
2,817.5 —

9.875% Senior unsecured notes due 2015
2,200.0 —

Senior subordinated unsecured term loan facility due 2016
2,500.0 —

Capital lease obligations
114.5 128.4

Other long-term borrowings
2.3 6.3

Adjustments to carrying value for mark-to-market of interest rate swaps
— (51.9 )

$ 22,573.8 $ 2,516.2

~~(a)~~: ~~Payment In-Kind ("PIK")~~

The Company had a $1.5 billion commercial paper program in the predecessor period that was supported by a $1.5 billion revolving credit facility, both of which were terminated in conjunction with the merger.

The Company has lines of credit associated with First Data Deutschland which totaled approximately 160 million euro, or approximately $232 million, as of December 31, 2007. The Company had the full amount outstanding against these lines of credit as of December 31, 2007 and $89.6 million outstanding as of December 31, 2006.

The Company also has lines of credit associated with Cashcard Australia, Ltd. ("Cashcard") which are periodically used to fund ATM settlement activity. As of December 31, 2007, the lines of credit totaled approximately 162 million Australian dollars, or approximately $142 million. The Company had

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 10: Borrowings (Continued)~~

~~$54.6 million outstanding against these lines of credit as of December 31, 2007. There were no amounts outstanding against these lines of credit as of December 31, 2006.~~

The Company has two credit facilities associated with First Data Polska (formerly POLCARD) which are periodically used to fund settlement activity. As of December 31, 2007, the facilities totaled approximately 210 million Polish zloty, or approximately $84 million. The Company had an immaterial amount outstanding against these lines of credit as of December 31, 2007.

~~Debt Repurchases and repayments~~

In January 2007, the Company repurchased $32.4 million of its 4.7% senior notes due August 1, 2013, $30.2 million of its 4.85% senior notes due October 1, 2014, and $28.0 million of its 4.95% senior notes due June 15, 2015. In conjunction with the debt repurchases, the Company de-designated as a hedge a portion of the associated interest rate swaps so that the portion of the swaps remaining designated as fair value hedges corresponded to the remaining principal amount of the corresponding debt instruments. The Company recognized a $1.4 million pretax gain upon the debt repurchase.

~~On September 24, 2007, in conjunction with the merger, the Company repurchased debt as follows:~~

Principal
Amount
Repurchased

(in millions)

Medium-term note due 2007
$ 59.8
Medium-term note due 2008
26.9
3.375% Notes due 2008
431.9
3.90% Notes due 2009
87.5
4.50% Notes due 2010
137.3
5.625% Notes due 2011
115.7
4.70% Notes due 2013
428.6
4.85% Notes due 2014
338.3
4.95% Notes due 2015
360.9

$ 1,986.9

In combination with the September debt repurchases, the Company terminated the interest rate swaps associated with these debt instruments. The Company incurred a fee of $6.0 million in connection with this debt repurchase as well as an $11.2 million charge representing the premium paid for consent from holders to modify terms of the Company's debt they held. The gains and losses resulting from the debt repurchases were included in the "Other income (expense)" line of the Consolidated Statements of Operations.

~~In December 2007, the Company paid off its medium-term note due in 2007 for $25.6 million.~~

In September 2006, the Company paid off senior notes in the amount of $650 million. In November and December 2006, the Company re-purchased approximately $1.7 billion of its long-term debt with proceeds from the spin-off.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 10: Borrowings (Continued)~~

~~Debt Issuances~~

On September 24, 2007, the Company entered into $22.0 billion of new debt instruments in conjunction with the merger. The senior unsecured cash-pay term loan facility, senior unsecured PIK term loan facility and senior subordinated unsecured term loan facility are discussed more fully below and represent bridge financing (the "bridge facilities"). The Company anticipates it may issue note securities to replace these bridge facilities on or before one year from the transaction date. In October 2007, $2.2 billion of the senior unsecured cash-pay term loan facility was repaid upon issuance of 9.875% senior unsecured cash pay notes due 2015, as discussed more fully below.

Fees totaling $555.0 million associated with the merger have been capitalized as deferred financing costs and are reported in the "Other long-term assets" line of the Consolidated Balance Sheet. Approximately $112.5 million of fees were incurred and capitalized on the bridge facilities of which $27.5 million was subsequently recovered upon repayment of the $2.2 billion of senior unsecured cash-pay term loan facility. The terms of the bridge facilities provide for the repayment of all or a diminishing portion of the fees, depending upon timing, if the bridge facilities are refinanced in less than a year (currently, 50% of fees paid on bridge facilities are recoverable upon refinancing through May 21, 2008 and 25% are recoverable thereafter through September 24, 2008). The Company will incur additional underwriting fees when the bridge facilities are refinanced of which $44.0 million was incurred upon issuance of $2.2 billion of senior unsecured cash-pay notes and is included in the $555.0 million balance noted above. The deferred financing costs are being amortized using the interest method over the term of the respective debt, with a weighted-average period of six years.

Senior Secured Revolving Credit Facility ~~and Senior Secured Term Loan Facility~~

~~The Company entered into a $2.0 billion~~FDC’s senior secured revolving credit facility ~~with a term~~currently has commitments from nondefaulting financial institutions to provide $1,769.4 million of ~~six years. The Company drew $200.0~~credit. Up to $500 million ~~against~~of the senior secured revolving credit facility atis available for letters of credit (of which $51.9 million and $39.6 million of letters of credit were issued under the ~~time~~facility as of ~~the merger and $60.0 million was outstanding at~~ December 31, ~~2007. The Company also entered into a $13.0 billion senior secured term loan~~2010 and 2009, respectively). FDC had no amounts outstanding against this facility ~~with a term~~as of ~~seven years. At~~December 31, 2010 and 2009. As of December 31, 2010, $1,717.5 million remained available under the ~~merger date,~~revolving credit facility after considering the ~~Company drew $11,775 million in the form~~letters of U.S. dollar denominated loan and $1,000 million in the form of euro denominated loan (709.2 million euro). The remainder, $225 million, was available in the form of a delayed draw term loan facility in an amount approximately equal to existing notes remaining outstanding after the tender offers described above were completed. The delayed draw term loan facility may be drawn as the remaining notes are repaid (of which approximately $26 million was drawn in December 2007 when existing notes were repaid).credit issued under it.

Interest is payable at a rate equal to, at ~~the Company's~~FDC’s option, either (a) LIBOR for deposits in the applicable currency plus an applicable margin or (b) the higher of (1) the prime rate of Credit Suisse and (2) the federal funds effective rate plus 0.50%, plus an applicable margin. The ~~Company, however, made an irrevocable election to pay~~weighted-average interest rates were 4.5% and 4.8% for the years ended December 31, 2010 and 2009, respectively. The commitment fee rate for the unused portion of this facility is 0.50% per year. The revolving credit facility expires on September 24, 2013.

Other Short-Term Borrowings

FDC had approximately $428 million and $565 million available under short-term lines of credit and other arrangements with foreign banks and alliance partners primarily to fund settlement activity, as of December 31, 2010 and 2009, respectively. These arrangements are primarily associated with international operations and are in various functional currencies, the most significant of which are the euro, Australian dollar and Polish zloty. Certain of these arrangements are uncommitted (approximately $151 million and $186 million, respectively) but FDC had $150.6 million and $100.1 million of borrowings outstanding against them as of December 31, 2010 and 2009, respectively. The weighted average interest rates associated with these arrangements were 4.0% and 3.3% for the years ended December 31, 2010 and 2009, respectively. Commitment fees for the committed lines of credit range from 0.12% to 2.0%.

Modifications to the Senior Secured Credit Facilities

On August 10, 2010, FDC amended its senior secured credit facilities to, among other things:

(i) allow for FDC to incur additional secured indebtedness or additional unsecured indebtedness so long as (a) 100% of the net cash proceeds is used to repay FDC’s term loans or is offered on a pro rata basis to FDC’s term loan ~~facility solely under option (a). In combination with~~lenders of a particular class or classes in exchange for a like amount of term loans of such class or classes (and the ~~debt issuance, the Company designated as accounting hedges two five-year interest rate swaps related~~term loans so exchanged are cancelled) or (b) if such indebtedness is secured by a lien junior to the liens securing the obligations under FDC’s senior secured ~~term loan facility with notional amounts~~credit facilities, the aggregate principal amount shall not exceed $3.5 billion at any time and the net cash proceeds of ~~$2.0 billion and $1.0 billion~~such indebtedness shall be used to ~~receive interest at variable rates~~redeem or repay FDC’s senior or senior subordinated notes or (c) the amount available to be borrowed under the uncommitted incremental facilities is reduced by an amount equal to ~~LIBOR~~the aggregate principal amount of such indebtedness;

(ii) exclude from the calculation of consolidated senior secured debt (and hence from the maintenance covenant) certain indebtedness secured by a lien ranking junior to the liens securing FDC’s obligations under its senior secured credit facilities; and pay interest at fixed rates of 4.978% and 5.2475%, respectively. The Company entered into additional interest rate swaps in the successor period with an aggregate notional value of $4.5 billion to receive interest at variable rates equal to LIBOR and pay interest at fixed rates from 3.8665% to 4.924%.

~~The interest rate margin noted above may be reduced~~(iii) subject to the ~~Company attaining certain leverage ratios. In addition~~requirement to ~~paying interest~~make such offers on a pro rata basis to all lenders within a particular class of loans, allow FDC to agree with individual lenders to extend the ~~outstanding principal amounts, the Company is required~~maturity of their term loans or revolving commitments, and for FDC to pay ~~commitment fees for~~increased interest rates or otherwise modify the ~~unutilized commitments.~~ terms of their loans or revolving commitments in connection with such an extension.

The ~~initial commitment fee rates are~~amendment became effective, including the changes to the credit agreement described above, on August 20, 2010 following FDC’s issuance of $510.0 million in new notes and using the net cash proceeds

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Note 10: Borrowings (Continued)~~

~~0.50% per year for~~therefrom to prepay a like amount of FDC’s secured term loans. Refer to the ~~senior~~“8.875% Senior secured ~~revolving credit facility and 0.75% per year~~notes” section below. The Company recorded $26.8 million in fees in conjunction with the debt modification. The fees were recorded as a discount on ~~the delayed draw portion of~~ the senior secured term ~~loan facility.~~ loans and will be amortized to interest expense over the remaining life of the loans.

Senior Secured Term Loan Facility

The ~~commitment fee rate related to the~~terms of FDC’s senior secured ~~revolving credit~~term loan facility ~~may be reduced subject to the Company reducing its leverage to specified ratios.~~

~~The Company is required~~require FDC to pay equal quarterly installments in aggregate annual amounts equal to 1% of the original ~~funded~~ principal ~~amount~~amount. In accordance with this provision, FDC made the following principal payments (in millions):


For the years ended December 31,	2010		2009		2008
U.S. dollar denominated loan	$	89.2	$	119.0	$	117.7
Euro denominated loan		7.0		10.0		10.7

Total principal payments	$	96.2	$	129.0	$	128.4

In August 2010, in conjunction with the debt modification noted above, $489.7 million of FDC’s proceeds from the issuance of the senior notes described below were used to prepay a portion of the principal balances and satisfy the above described future quarterly principal payments of FDC’s senior secured term loans. As a result of the prepayment, FDC has satisfied the quarterly principal payments related to these loans until September 2014.

As of December 31, 2010, FDC had interest rate swaps which hedge the variability in the interest payments on $5.0 billion of the approximate $12.0 billion variable rate senior secured term loan. FDC also had two basis rate swaps, which expired during the third quarter of 2010, that modified the variable rates on $3.0 billion of the $3.5 billion interest rate swaps and that lowered the fixed interest rates on those interest rate swaps. The basis swaps paid interest at rates equal to three-month-LIBOR and received interest at rates equal to one-month-LIBOR plus a fixed spread. The net fixed rates on all of the interest rate swaps associated with the senior secured term loan facility ~~with the balance being payable~~range from 4.098% to 5.248%.

The senior secured term loan facility also requires mandatory prepayments based on ~~the final maturity date. Principal amounts outstanding~~a percentage of excess cash flow generated by FDC. All obligations under the senior secured ~~revolving credit~~loan facility are ~~due~~fully and ~~payable in full at maturity. In December 2007, the Company paid approximately $32 million for both the U.S. dollar and euro-denominated term loans related~~unconditionally guaranteed by substantially all domestic, wholly-owned subsidiaries of FDC, subject to ~~this provision.~~certain exceptions.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~The senior secured credit facilities contain certain mandatory prepayment requirements, such as excess cash flow,~~

Debt Exchange

On December 17, 2010, FDC completed its private exchange offers (“Debt Exchange”), in ~~certain circumstances,~~which FDC offered to exchange its 9.875% Senior notes due 2015 and ~~certain prepayment penalties related~~its 10.550% Senior PIK notes due 2015, subject to the maximum exchange amount of $6.0 billion, for the new securities, payable (i) 50% in new 8.25% Senior second lien notes due 2021 (“8.25% cash-pay notes”) or, in new 8.75%/10.00% PIK Toggle senior ~~secured term loan facility. Voluntary prepayments are allowed under certain circumstances.~~second lien notes due 2022 (“PIK toggle notes” and together with the 8.25% cash-pay notes, the “second lien notes”), and (ii) 50% in new 12.625% Senior Unsecured Notes due 2021. The ~~Company may prepay outstanding loans under the senior secured revolving credit facility at any time.~~

~~Senior Notes~~

~~On October 24, 2007, the Company issued $2.2 billion~~maximum aggregate principal amount of PIK toggle notes issuable in the exchange offers was $1.0 billion. The following table presents the results of the debt exchange.


Debt Exchange	Amounts (in millions)
Notes exchanged
9.875% Senior notes due 2015	$	2,966.5
10.55% Senior PIK notes due 2015		3,035.1

Total amount exchanged(a)	$	6,001.6

Notes issued
8.25% Senior second lien notes due 2021	$	1,999.7
8.75%/10.00% PIK toggle senior second lien notes due 2022		1,000.0
12.625% Senior notes due 2021		3,000.0

Total amount issued(a)	$	5,999.7

(a)	The difference between the total amount exchanged and the total amount issued relates primarily to a discount of the notes issued for exchanges subsequent to the early tender date.

FDC recorded $53.8 million in fees in conjunction with the debt exchange. The fees were recorded as a discount on the new notes and will be amortized to interest expense over the remaining term of the loans.

9.875% Senior Notes and 10.55% Senior PIK (Payment In-Kind) Notes

FDC’s 9.875% senior notes due September 24, 2015 are publicly tradable and require the ~~net proceeds~~payment of ~~which, together with cash~~interest semi-annually on ~~hand for~~March 31 and September 30.

FDC’s senior PIK notes due September 24, 2015 are publicly tradable and require the ~~underwriting fees~~payment of interest semi-annually on March 31 and September 30. The terms require that interest on these notes up to and including September 30, 2011 be paid ~~in connection with such sale, were used to repay $2.2 billion~~entirely by increasing the principal amount of the outstanding notes or by issuing senior ~~unsecured cash-pay term loan facility,~~PIK notes. Beginning October 1, 2011, interest will be payable in cash and the first such payment will be in March 2012. During 2010, prior to the exchange described ~~below.~~ above, and during 2009 and 2008, FDC increased the principal amount of these notes by $362.5 million, $333.0 million and $197.4 million, respectively, in accordance with this provision.

The 9.875% senior notes and 10.55% senior PIK notes are unsecured and (i) rank senior in right of payment ~~with~~to all of ~~the Company's~~FDC’s existing and future subordinated ~~indebtedness.~~ indebtedness, (ii) rank equally in right of payment to all of the existing and future senior indebtedness, (iii) are effectively subordinated in right of payment to all existing and future secured debt to the extent of the value of the assets securing such debt, and (iv) are structurally subordinated to all obligations of each subsidiary that is not a guarantor of the senior notes.

On December 17, 2010, FDC’s 9.875% senior notes and 10.55% senior PIK notes were partially exchanged for new securities as discussed in the “Debt exchange” section above.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.25% Senior Subordinated Notes

FDC’s publicly tradable 11.25% senior subordinated notes due March 31, 2016 require the payment of interest semi-annually on March 31 and September 30.

The senior subordinated notes are unsecured and (i) rank equally in right of payment with all of the existing and future senior ~~indebtedness, including under~~subordinated debt, (ii) rank senior in right of payment to all future debt and other obligations that are, by their terms, expressly subordinated in right of payment to the senior ~~unsecured interim credit facilities. The senior note guarantees~~subordinated notes, (iii) are ~~unsecured and rank senior~~effectively subordinated in right of payment to all existing and future ~~subordinated indebtedness~~secured debt to the extent of the ~~Company's~~value of the assets securing such debt, and (iv) are structurally subordinated to all obligations of each subsidiary that is not a guarantor ~~subsidiaries and its~~of the senior subordinated ~~unsecured interim credit facility. The~~notes.

8.875% Senior Secured Notes

On August 20, 2010, FDC issued $510.0 million of 8.875% senior note guarantees rank equally in right of payment with all existing and future senior indebtedness of the guarantor subsidiaries, including their guarantees under the senior unsecured interim credit facilities.

~~The~~secured notes ~~accrue interest at the rate of 9.875% per annum and mature on September 24, 2015.~~due August 15, 2020. Interest on the notes is payable on ~~March 31~~February 15 and ~~September 30~~August 15 of each year, commencing on ~~March 31, 2008.~~February 15, 2011. The proceeds from this issuance, net of discount and underwriting fees of $17.8 million, were $492.2 million, of which $489.7 million was used to prepay a portion of the senior secured term loans in accordance with the terms of FDC’s senior secured credit facilities as described above with the remainder used to pay costs associated with the issuance.

~~The Company~~FDC may redeem the notes, in whole or in part, at any time prior to ~~September 30, 2011~~August 15, 2015 at a price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest to the redemption date and ~~a "make-whole premium"~~an additional premium as defined. Thereafter, ~~the Company~~FDC may redeem the notes, in whole or in part, at established redemption ~~prices.~~prices, plus accrued and unpaid interest to the redemption date. In addition, on or prior to ~~September 30, 2010, the Company~~August 15, 2013, FDC may redeem up to 35% of the notes with the net cash proceeds from certain equity offerings at established redemption ~~prices.~~prices plus accrued and unpaid interest to the redemption date.

The ~~terms~~notes are equally and ratably secured on a first-priority basis with all existing and future obligations of FDC under any existing and future first lien obligations by all of the assets of FDC and its subsidiary guarantors that secure the senior secured credit facility, subject to permitted liens. The notes ~~require~~rank equal in right of payment with all existing and future senior indebtedness of FDC but are effectively senior to all of FDC and guarantor subsidiaries unsecured indebtedness to the ~~Company~~extent of the value of the collateral and are senior in right of payment to ~~file a registration statement with~~any subordinated indebtedness of FDC. The notes are effectively subordinated to any obligations secured by liens permitted under the ~~United States Securities and Exchange Commission (the "SEC") relating to an offer to exchange~~indenture for the notes and ~~guarantees for publicly tradable~~structurally subordinated to any existing and future indebtedness and liabilities of non-guarantor subsidiaries, including all foreign subsidiaries.

Second Lien Notes

Interest on the 8.25% cash-pay notes will be payable in cash, will accrue at the rate of 8.25% per annum and ~~guarantees having substantially identical terms within 360 days~~is payable semi-annually in arrears on January 15 and July 15, commencing on July 15, 2011. The 8.25% cash-pay notes mature on January 15, 2021.

Cash interest on the PIK toggle notes will accrue at a rate of the original issue date of the notes. Additionally, the Company is required to use its reasonable best efforts to keep effective the shelf registration statement until the earliest of (i) two years after the original issue date of the notes, (ii) such time as all of the notes have been sold or (iii) the date upon which all notes covered by such shelf registration statement become eligible for resale. If a registration statement is not filed8.75% per annum and ~~effective or is not maintained effective as noted above, then additional~~PIK interest will accrue at a rate of 10.00% per annum. The initial interest payment on the PIK toggle notes will be payable in cash. For any interest period thereafter through and including the interest period ending January 15, 2014, FDC may elect to pay interest on the PIK toggle notes (i) entirely in cash, (ii) entirely by increasing the aggregate principal amount of the outstanding PIK toggle notes ~~at a rate~~or by issuing PIK notes (“PIK Interest”), or (iii) on 50% of ~~0.25% per~~the outstanding aggregate principal amount of the PIK toggle notes in cash and on 50% of the outstanding aggregate principal amount of the outstanding PIK toggle notes by increasing the aggregate principal amount of the

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

outstanding PIK toggle notes or by issuing PIK notes (“Partial PIK Interest”). After January 15, 2014, all interest on the PIK toggle notes will be payable in cash. If FDC elects to pay PIK Interest or Partial PIK Interest, FDC will increase the principal amount of the PIK toggle notes or issue PIK toggle notes in an amount equal to the amount of PIK Interest or the portion of Partial PIK Interest payable in PIK toggle notes for the applicable interest payment period to holders of the PIK toggle notes on the relevant record date. The PIK toggle notes mature on January 15, 2022.

The second lien notes (i) rank senior in right of payment to any existing and future subordinated indebtedness, (ii) rank equally in right of payment with all of FDC’s existing and future senior indebtedness, (iii) are effectively senior in right of payment to indebtedness under FDC’s existing senior unsecured notes to the extent of the collateral securing the second lien notes, (iv) are effectively junior in right of payment with indebtedness under FDC’s senior secured credit facilities and other first lien obligations to the extent of the collateral securing such indebtedness and obligations, and (v) are effectively subordinated to all existing and future indebtedness and other liabilities of FDC’s non-guarantor subsidiaries (other than indebtedness and liabilities owed to FDC or one of FDC’s guarantor subsidiaries).

FDC may redeem the second lien notes, in whole or in part, at any time prior to January 15, 2016, at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest to the redemption date and a “make-whole premium.” Thereafter, FDC may redeem the second lien notes, in whole or in part, at established redemption prices. In addition, on or prior to January 15, 2014, FDC may redeem up to 35% of the aggregate principal amount of the notes with the net cash proceeds from certain equity offerings at established redemption prices.

~~Note 10: Borrowings (Continued)~~12.625% Senior Notes

~~annum increasing an additional 0.25%~~Interest on the 12.625% senior notes will be payable in cash, will accrue at the rate of 12.625% per annum, ~~after a 90-day period not~~and is payable semi-annually in arrears on January 15 and July 15, commencing on July 15, 2011. The 12.625% senior notes mature on January 15, 2021.

FDC has agreed to ~~exceed 0.5% per annum. Once~~use its reasonably best efforts to register notes substantially identical to the ~~registration is effective in accordance~~12.625% senior notes with the ~~above requirements such additional interest will cease~~SEC as part of an offer to ~~accrue. At this time no additional interest has accrued or is expected to be accrued.~~

~~Senior Unsecured Cash-pay Term Loan Facility and Senior Unsecured PIK Term Loan Facility~~

The Company entered into a $3.8 billion senior unsecured cash-pay term loan facility and a $2.8 billion senior unsecured PIK term loan facility with terms of eight years ("senior unsecured term loan facilities"). Interestexchange the registered notes for the ~~first six-month~~12.625% senior notes within 360 days after the issue date. If FDC fails to complete the exchange or, if required, to have one or more shelf registration statements declared effective within that time period ~~is payable at a~~(“registration default”), the annual interest rate ~~equal to LIBOR plus 3.5% for~~on the ~~cash-pay term loan facility and LIBOR plus 4.5% for~~12.625% senior notes will increase by 0.25%. The annual interest rate on the ~~PIK term loan facility. The margins, subject to certain caps noted below,~~12.625% senior notes will increase by an additional 0.25% for each subsequent 90-day period during which the registration default continues, up to a maximum additional interest rate of 0.50% atper year. FDC may subsequently cure the ~~beginning of each three-month period thereafter until September 24, 2008. At that time, margins, subject~~registration default and the applicable interest rate on the unsecured notes will revert to ~~certain caps noted below, will increase by 0.25% at~~ the ~~beginning of each three-month period thereafter for so long as the loans~~original rate.

The 12.625% senior notes are ~~outstanding. For so long as the Company is not~~similar in ~~default, the maximum interest rates the Company~~rank to FDC’s other senior notes described below. FDC may ~~pay related to these facilities are 9.875% for~~redeem the senior ~~unsecured cash-pay term loan facility and 10.55% for the senior unsecured PIK term loan facility. The increase~~notes, in ~~interest rates is related~~whole or in part, at any time prior to ~~these facilities being bridge facilities and, as discussed above, the Company expects~~January 15, 2016, at a price equal to ~~refinance the borrowings under the bridge facilities. As noted above and in October 2007, $2.2 billion~~100% of ~~the senior unsecured cash-pay term loan facility was repaid upon issuance of 9.875% senior unsecured cash pay notes due 2015.~~

~~Interest on the senior unsecured PIK term loan up to and including September 30, 2011 will be paid entirely by increasing~~ the principal amount of the ~~outstanding loan or by issuing senior unsecured PIK debt. Beginning October 1, 2011, such~~notes plus accrued and unpaid interest ~~will be payable in cash.~~

~~If any borrowings under~~to the redemption date and a “make-whole premium.” Thereafter, FDC may redeem the senior ~~unsecured term loan facilities remain outstanding~~notes, in whole or in part, at established redemption prices. In addition, on ~~the one-year anniversary~~or prior to January 15, 2014, FDC may redeem up to 35% of the ~~closing~~aggregate principal amount of the ~~senior unsecured term loan facilities, the lenders will have the option to exchange the initial loans for senior cash-pay notes or senior PIK~~ notes with ~~a term~~the net cash proceeds from certain equity offerings at established redemption prices.

Deferred Financing Costs

Deferred financing costs were capitalized in conjunction with certain of ~~seven years.~~FDC’s debt issuances and totaled $331.3 million and $411.2 million, as of December 31, 2010 and 2009, respectively. Deferred financing costs are

The senior unsecured term loan facilities contain certain mandatory redemption requirements, such as "excess cash flow" as defined, in certain circumstances. Voluntary repayments are allowed and are subject to certain costs.

~~Senior Subordinated Unsecured Term Loan Facility~~

The Company entered into a senior subordinated unsecured term loan facility providing senior subordinated unsecured financing of $2.5 billion consisting of a $2.5 billion senior subordinated unsecured term loan facility with a term of nine years. Interest for the first six-month period is payable at a rate equal to LIBOR plus 4.75%. The margin, subject to certain caps noted below, will increase by an additional 0.50% at the beginning of each three-month period thereafter until September 24, 2008. At that time, the margin, subject to certain caps noted below, will increase by 0.25% at the beginning of each three-month period thereafter for so long as the loan is outstanding. For so long as the Company is not in default, the maximum interest rate the Company may pay related to this facility is 11.250%. The increase in interest rates is related to this facility being a bridge facility and, as discussed above, the Company expects to refinance the borrowings under the bridge facility.

If any borrowings under the senior subordinated unsecured term loan facility remain outstanding on the one-year anniversary of the closing of the senior subordinated unsecured term loan facility, the lenders will have the option to exchange the initial subordinated loan for senior subordinated notes with a term of eight years that the Company will issue under a senior subordinated indenture.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Note 10: Borrowings (Continued)~~

~~The senior subordinated unsecured term loan facility contains certain mandatory redemption requirements. Voluntary repayments are allowed~~

reported in the “Other long-term assets” line of the Consolidated Balance Sheets and are ~~subject to certain costs.~~being amortized on a straight-line basis, which approximates the interest method, over the remaining term of the respective debt, with a weighted-average period of 5 years.

Guarantees and Covenants

All obligations under the senior secured revolving credit facility and senior secured term loan facility are unconditionally guaranteed by substantially all existing and future, direct and indirect, ~~wholly owned,~~wholly-owned, material domestic subsidiaries of ~~the Company~~FDC other than Integrated Payment Systems Inc. The senior secured facilities contain a number of covenants that, among other things, restrict ~~the Company's~~FDC’s ability to incur additional ~~indebtedness,~~indebtedness; create ~~liens,~~liens; enter into sale and leaseback ~~transactions,~~transactions; engage in mergers or ~~consolidations,~~consolidations; sell or transfer ~~assets,~~assets; pay dividends and distributions or repurchase ~~the Company's~~FDC’s or its parent company’s capital ~~stock,~~stock; make investments, loans or ~~advances,~~advances; prepay certain ~~indebtedness,~~indebtedness; make certain ~~acquisitions,~~acquisitions; engage in certain transactions with ~~affiliates,~~affiliates; amend material agreements governing certain indebtedness and change its lines of business. The senior secured facilities also require ~~the Company~~FDC to ~~maintain~~not exceed a maximum senior secured leverage ratio and contain certain customary affirmative covenants and events of default, including a change of ~~control beginning at the one year anniversary of debt issuance. The Company~~control. FDC is in compliance with all applicable ~~covenants as of December 31, 2007.~~covenants.

All obligations under the senior secured notes, senior ~~unsecured term loan facilities~~second lien notes, PIK toggle senior second lien notes, senior notes, senior PIK notes and senior subordinated ~~unsecured term loan facility~~notes are similarly guaranteed ~~on a subordinated basis~~ in accordance with their terms by each of ~~the Company's~~FDC’s domestic subsidiaries that guarantee obligations under ~~the Company's~~FDC’s senior secured term loan facility described above. These notes and facilities also contain a number of covenants similar to those described for the senior secured ~~term loan facility~~obligations noted above. ~~The Company~~FDC is in compliance with all applicable ~~covenants as of December 31, 2007.~~covenants.

~~Maturities~~Other

~~Aggregate annual maturities of long-term debt are $176.8 million~~In June 2010, FDC paid off its 4.50% notes due 2010 for $13.1 million.

In 2009, FDC paid off its 3.90% Note due in 2009 ~~$156.1~~for $10.7 million.

In December 2008, FDC repurchased debt as follows:


(in millions)	Principal Amount Repurchased
3.90% Notes due 2009	$	4.6
4.50% Notes due 2010		8.3
5.625% Notes due 2011		9.1
4.70% Notes due 2013		3.9
4.85% Notes due 2014		2.9
4.95% Notes due 2015		1.2

	$	30.0

In 2008, FDC recognized a $7.0 million gain in ~~2010, $166.7~~connection with the debt repurchase. Also during 2008, FDC paid off its medium-term note due in 2008 for $13.6 million and its 3.375% Note for $68.1 million also due in ~~2011, $132.0 million~~2008.

The gains and losses resulting from the debt repurchases were included in ~~2012 and $21,321.9 million in all periods thereafter.~~

~~Note 11: Supplemental Financial Information~~

~~Supplemental Statements of Operations Information~~

~~The "Other~~the “Other income (expense)"” line ~~item~~ of the Consolidated Statements of Operations includes investment gains and (losses), derivative financial instruments gains and (losses), divestitures, net, debt repayment gains and (losses) and non-operating foreign exchange gains and (losses). The following table details the components of other income (expense):Operations.

Successor
Predecessor

Period from
September 25
through
December 31,
2007

Period from
January 1
through
September 24,
2007 Year ended December 31,

2006 2005

(in millions)

Investment gains and (losses)
$ 0.9 $ (2.0 ) $ 11.6 $ 22.3
Derivative financial instruments gains and (losses)
(33.3 ) (0.6 ) 33.8 62.4
Divestitures, net
0.2 6.1 8.0 61.1
Debt repayment gains and (losses)
(17.2 ) 1.4 (30.8 ) —
Non-operating foreign currency gains and (losses)
(24.6 ) — — —

Other income (expense)
$ (74.0 ) $ 4.9 $ 22.6 $ 145.8

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Maturities

The following table presents the future aggregate annual maturities of long-term debt (in millions):


Year ended December 31,	Amount
2012	$	30.2
2013		28.1
2014		11,964.1
2015		1,476.3
Thereafter		8,940.1

Note ~~11:~~9: Supplemental Financial Information ~~(Continued)~~

Supplemental Statements of Operations Information

The following table details the components of “Other income (expense)” on the Consolidated Statements of Operations (in millions):

   Year ended December 31,
   2010 2009 2008
Investment gains
   $ 2.5    $ 3.0    $ 21.1
Derivative financial instruments losses
   (58.3 ) (67.4 ) (12.9 )
Divestitures, net
   18.7    (12.9 ) (8.5 )
Debt repayment gains
   —      —      7.0
Non-operating foreign currency gains and (losses)
   21.2    10.5    (21.1 )
Other
   —      5.5    —

Other income (expense)
   $ (15.9 ) $ (61.3 ) $ (14.4 )

Supplemental Balance Sheet Information

Successor
Predecessor

December 31,
2007
2006

(in millions)

Current Assets:

Accounts receivable:

Customers
$ 2,131.2 $ 1,673.4

Unconsolidated merchant alliances
52.5 58.8

Interest and other receivables
243.8 212.5

2,427.5 1,944.7

Less allowance for doubtful accounts
(14.7 ) (20.3 )

$ 2,412.8 $ 1,924.4

Other current assets:

Prepaid expenses
$ 166.7 $ 159.4

Inventory
107.5 114.4

Deferred and other income tax assets
186.4 98.3

Other
19.1 2.7

$ 479.7 $ 374.8

Property and equipment:

Land
$ 68.3 $ 70.6

Buildings
367.8 387.6

Leasehold improvements
35.3 150.0

Equipment and furniture
482.9 1,781.6

Equipment under capital lease
46.2 89.5

1,000.5 2,479.3

Less accumulated depreciation
(61.2 ) (1,711.3 )

$ 939.3 $ 768.0

Other long-term assets:

Accounts receivable, net of allowance for doubtful accounts of $7.0 (2007) and $8.7 (2006)
$ 370.8 $ 225.9

Investments
71.1 127.5

Regulatory and escrowed cash
6.8 27.4

Derivative financial instruments
1.0 92.6

Pension asset
1.9 —

Deferred financing costs (net of amortization)
489.5 6.8

Deferred income tax assets
8.3 10.7

Other
26.1 10.2

$ 975.5 $ 501.1

Other current liabilities:

Accrued expenses
$ 632.0 $ 704.8

Compensation and benefit liabilities
297.1 250.1

Income taxes payable
22.7 48.5

Minority interest
38.4 34.9

Accrued costs of businesses acquired (including deferred acquisition consideration)
43.9 55.2

Other
364.8 298.2

$ 1,398.9 $ 1,391.7

Other long-term liabilities:

Pension obligations
85.4 162.1

Accrued costs of businesses acquired (including deferred acquisition consideration)
34.0 14.8

Minority interest
14.5 77.0

Derivative financial instruments
221.0 166.8

Income taxes payable
478.1 92.6

Other
106.1 126.3

$ 939.1 $ 639.6


As of December 31,	2010			2009
(in millions)
Current assets:
Accounts receivable:
Customers	$	1,940.7		$	2,174.2
Due from unconsolidated merchant alliances		110.1			143.1
Leasing receivables		90.0			101.8
Interest and other receivables		49.1			51.3

		2,189.9			2,470.4
Less allowance for doubtful accounts-other receivables		(17.0	)		(12.9	)
Less allowance for doubtful accounts-leasing receivables		(3.3	)		(2.0	)

	$	2,169.6		$	2,455.5

Other current assets:
Prepaid expenses	$	134.4		$	122.1
Inventory		106.2			131.8
Deferred and other income tax assets		169.0			133.0
Other		3.8			11.9

	$	413.4		$	398.8

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


As of December 31,	2010			2009
(in millions)
Property and equipment:
Land	$	91.8		$	92.6
Buildings		340.7			403.5
Leasehold improvements		46.2			44.6
Equipment and furniture		947.9			812.8
Equipment under capital lease		217.0			161.6

		1,643.6			1,515.1
Less accumulated depreciation		(691.6	)		(463.7	)

	$	952.0		$	1,051.4

Other long-term assets:
Accounts receivable	$	150.1		$	144.3
Leasing receivables, net of allowance for doubtful accounts of $8.8 (2010) and $7.6 (2009)		221.7			208.3
Investments		25.0			25.6
Regulatory and escrowed cash		13.4			28.8
Derivative financial instruments		7.7			1.2
Deferred financing costs, net of amortization		331.3			411.2
Deferred income tax assets		11.6			3.3
Pension asset		0.2			—
Other		19.7			22.0

	$	780.7		$	844.7

Other current liabilities:
Accrued expenses	$	711.7		$	931.3
Compensation and benefit liabilities		253.9			182.3
Due to unconsolidated merchant alliances		115.5			97.4
Other		272.6			343.9

	$	1,353.7		$	1,554.9

Other long-term liabilities:
Pension obligations	$	69.8		$	143.1
Derivative financial instruments		375.0			465.0
Income taxes payable		556.5			586.7
Other		138.3			107.1

	$	1,139.6		$	1,301.9

~~Note 11: Supplemental Financial Information (Continued)~~

Supplemental Cash Flow Information

Supplemental cash flow information ~~for the successor period from September 25 through December 31, 2007 and the predecessor period from January 1 through September 24, 2007 and for the years ended December 31, 2006 and 2005~~ is summarized as ~~follows:~~follows (in millions):

Successor
Predecessor

Period from
September 25
through
December 31,
2007

Period from
January 1
through
September 24,
2007 Year ended December 31,

2006 2005

(in millions)

Income tax (refunds)/payments
$ (108.0 ) $ 56.0 $ 86.0 $ 262.0
Interest paid
547.5 90.5 263.5 183.5


	Year ended December 31,
	2010		2009		2008
Income tax payments, net of refunds received	$	100.5	$	79.0	$	69.0
Interest paid		1,494.9		1,412.2		1,424.7
Distributions received from equity method investments		194.1		136.7		122.7

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Significant non-cash ~~transactions~~transactions.In December 2010, the Company exchanged $3.0 billion of its 9.875% senior notes due 2015 and $3.0 billion of its 10.550% senior PIK notes due 2015 for $2.0 billion of 8.25% senior second lien notes due 2021, $1.0 billion of 8.75%/10.00% PIK toggle senior second lien notes due 2022 and $3.0 billion of 12.625% senior notes due 2021.

~~In addition~~Prior to the ~~transactions~~2010 exchange described ~~below, the Company also issued restricted stock awards~~above and ~~restricted stock units, the details of which are discussed in Note 15.~~

~~During the 2007 successor period, the Company increased~~during 2009 and 2008, the principal amount of the Company’s senior PIK notes due 2015 increased by $362.5 million, $333.0 million and $197.4 million, respectively, resulting from the “payment” of accrued interest expense. Beginning October 1, 2011, the interest on this PIK term loan facility will be required to be paid in cash and the first such payment will be due in March 2012.

During 2010, 2009 and 2008, the Company entered into capital leases totaling approximately $65 million, $105 million and $89 million, respectively.

The following summary details the Company’s exchange offerings during 2008 and 2009:

September 2008—Exchanged substantially all of the remaining balance of the Company’s 9.875% senior unsecured cash-pay term loan bridge loans due 2015, all of its 10.55% senior unsecured PIK term loan ~~facility by $67.5 million resulting from~~bridge loans due 2015 and 11.25% senior subordinated unsecured term loan bridge loans due 2016 for senior notes, senior PIK notes and senior subordinated notes, respectively, in each case having substantially identical terms and guarantees with the exception of interest ~~expense. As discussed in Note 10, interest~~payments being due semi-annually on ~~this facility is paid entirely by increasing~~March 31 and September 30 of each year instead of quarterly.

October 2008—Exchanged the $2.2 billion aggregate principal amount of its 9.875% senior notes due 2015 for publicly tradable notes having substantially identical terms and guarantees, except that the ~~outstanding loan.~~

~~On September 29, 2006, the holder of a warrant originally issued on November 16, 2000 exercised its right to a cashless exercise~~exchange notes are freely tradable. Substantially all of the ~~warrant.~~notes were exchanged effective October 21, 2008.

March 2009—Exchanged the remaining balance of the Company’s 9.875% senior unsecured cash-pay term loan bridge loans due 2015 that was not previously exchanged for senior notes identical to those described above.

September 2009—Exchanged aggregate principal amounts of $3.2 billion of its 10.55% senior PIK notes, $2.5 billion of its 11.25% senior subordinated notes and $1.6 billion of its 9.875% senior notes (which constituted all such notes outstanding at that date) for publicly tradable notes having substantially identical terms and guarantees, except that the exchange notes are freely tradable. Substantially all of the notes were exchanged effective September 9, 2009.

There were no expenditures, other than professional fees, or receipts of cash associated with the registration statements or exchange offers described above.

On June 26, 2009, the Company entered into an alliance with Bank of America N.A. and Rockmount. The Company’s and Bank of America N.A.’s direct contributions to the alliance consisted of non-cash assets and liabilities.

On November 1, 2008, the Company and JPMorgan Chase terminated their merchant alliance, CPS, which was the Company’s largest merchant alliance. The Company ~~issued 359,824 shares of~~received its ~~common stock to the warrant holder in connection with the cashless exercise. The warrant had provided for the purchase of 3.5 million shares~~proportionate 49% share of the ~~Company's common stock at $40.025 before giving effect~~assets of the alliance, including domestic merchant contracts, an equity investment in Merchant Link, a full-service ISO and Agent Bank unit, and a portion of the employees. The receipt of the Company’s proportionate share of CPS was accounted for as a business combination and was a non-cash transaction.

Refer to Note 13 for information concerning the ~~adjustment for the Company's spin-off of The Western Union Company.~~Company’s stock-based compensation plans.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

In connection with the spin-off, Western Union transferred $1 billion of Western Union notes to FDC. On September 29, 2006, the Company exchanged these Western Union notes for FDC debt (commercial paper) held by investment banks.

Note ~~12:~~10: Related Party Transactions

Merchant Alliances

A substantial portion of the ~~Company's~~Company’s business within the ~~Merchant~~Retail and Alliance Services and International segments ~~are~~is conducted through merchant alliances. Merchant alliances are alliances between the Company and financial institutions. If the Company has majority ownership and management control over an alliance, then the alliance’s financial statements are consolidated with those of the Company and the related processing fees are treated as an intercompany transaction and eliminated upon consolidation. If the Company does not have a controlling ownership interest in an alliance, it uses the equity method of accounting to account for its investment in the alliance. As a result, the Company’s consolidated revenues include processing fees charged to alliances accounted for under the equity method. No directors or officers of the Company have ownership interests in any of the alliances. ~~Certain merchant alliances, as it pertains to investments accounted for under the equity method, are joint ventures between the Company and financial institutions.~~ The formation of each of these alliances generally involves the Company and the bank contributing contractual merchant relationships to the alliance and a cash payment from one owner to the other to achieve the desired ownership percentage for each. The Company and the bank contract a long-term processing service agreement as part of the negotiation process. This agreement governs the ~~Company's~~Company’s provision of transaction processing services to the alliance. Therefore, the Company has two primary income streams from these alliances: its share of the alliance's net income (classified as "Equity earnings in affiliates") and the processing fees it charges to the alliance (classified as "Transaction and processing service fees"). The processing fees are based on transaction volumes and unit pricing as contained in the processing services agreement negotiated with the alliance partner.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 12: Related Party Transactions (Continued)~~

~~Additionally, the Company may have income streams such as from the sale of point-of-sale terminals and providing debit network services to alliances.~~

The Company negotiated all agreements with the alliance banks. Therefore, all transactions between the Company and its alliances were conducted at ~~arm's-length. The~~arm’s length; nevertheless, accounting guidance defines a transaction between the Company and an equity method investee as a related party transaction requiring separate disclosure in the financial statements of the Company. Accordingly, the revenue associated with these related party transactions are presented on the face of the Consolidated Statements of Operations.

If the Company has majority ownership and management control over an alliance, then the alliance's financial statements are consolidated with those of the Company and the related processing fees are treated as an intercompany transaction and eliminated upon consolidation.

Management Agreement

~~On September 24, 2007 and in connection with the merger,~~ First Data ~~entered into~~has a management agreement with affiliates of KKR (the ~~"Management Agreement"~~“Management Agreement”) pursuant to which KKR ~~will provide~~provides management, consulting, financial and other advisory services to the Company. Pursuant to the Management Agreement, KKR ~~is entitled to receive~~receives an aggregate annual management fee ~~of $20 million, which amount will increase 5% annually,~~ and reimbursement of out-of-pocket expenses incurred in connection with the provision of services. The Management Agreement has an initial term expiring on December 31, 2019, provided that the term will be extended annually thereafter unless the Company provides prior written notice of its desire not to automatically extend the term. The Management Agreement ~~shall terminate~~provides that KKR also is entitled to receive a fee equal to a percentage of the gross transaction value in connection with certain subsequent financing, acquisition, disposition and change of control transactions, as well as a termination fee based on the net present value of future payment obligations under the Management Agreement in the event of an initial public offering or under certain other circumstances. The Management Agreement terminates automatically upon the consummation of an initial public offering and may be terminated at any time by mutual consent of the Company and KKR. The Management Agreement also contains customary exculpation and indemnification provisions in favor of KKR and its affiliates. During ~~the successor period from September 25, 2007 through December 31, 2007,~~2010, 2009 and 2008, the Company incurred ~~$5.3~~$20.5 million, $21.3 million and $20.4 million, respectively, of management fees.

In addition, pursuant to the Management Agreement, the Company paid KKR transaction fees of $260 million in 2007 for certain services provided in connection with the merger and related transactions. The Management Agreement provides that KKR also will be entitled to receive a fee equal to a percentage of the gross transaction value in connection with certain subsequent financing, acquisition, disposition, merger combination and change of control transactions, as well as a termination fee based on the net present value of future payment obligations under the Management Agreement in the event of an initial public offering or under certain other circumstances.

~~Subsequent to the merger, certain~~Certain members of the ~~Company's~~Company’s Board of Directors are affiliated with KKR.

Transactions and Balances Involving ~~Directors and~~ Company ~~Executives~~Affiliates

~~The investments held by~~In August 2010, the Company paid KKR Capital Markets LLC (“KCM”), an affiliate of KKR, $5 million for services rendered in ~~investment funds managed by Mr. Robinson, a member of its Board of Directors, prior to~~arranging for the merger are no longer a related party transaction since subsequent to the merger this individual is not affiliated with FDC. Mr. Robinson and members of his family have equity interests in various companies associated with the investment funds. Prior to authorizing the transactions summarized below, Mr. Robinson's interests in the transactions were disclosed to and reviewed by the Board or the Oversight Committeeamendment of the ~~Board in place at that time. Between 1996 and 2001,~~Company’s credit agreement.

On November 17, 2010, the Company ~~committed~~entered into a dealer manager agreement and fee letter (collectively the “Dealer Manager Agreement”) with, among others, KCM, pursuant to ~~invest~~which KCM agreed to act as a total of $9 million to the investment funds noted above and as of December 31, 2007 less than 1% of such commitments remained unfunded. The Company is required to pay annual management fees to several of those entities ranging from 2% todealer

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Note 12: Related Party Transactions (Continued)~~

~~2.5%~~

manager for the exchange of certain of the ~~actively managed capital as well as its pro rata share~~Company’s existing notes for new securities (the “Exchange”). Under the terms of ~~certain expenses.~~ the Dealer Manager Agreement, upon completion of the Exchange in December 2010, the Company paid $26.1 million to KCM.

In connection with the Exchange, on December 17, 2010, the Company entered into a registration rights agreement with, among others, KCM, pursuant to which the Company agreed to use reasonable best efforts to register with the Securities and Exchange Commission notes having substantially identical terms to the 12.625% senior notes and to cause the Exchange to be completed or, if required, to have one or more shelf registration statements declared effective, within 360 days after the issue date of the unsecured notes. If the Company fails to satisfy this obligation, the annual interest rate on the unsecured notes will increase by 0.25%. The annual interest rate on the unsecured notes will increase by an additional 0.25% for each subsequent 90-day period during which the registration default continues, up to a maximum additional interest rate of 0.50% per year. If the Company cures the registration default, the applicable interest rate on the unsecured notes will revert to the original rate.

During ~~2007,~~2010, the Company incurred ~~management fees~~$7.3 million of ~~approximately $25,000.~~expenses from KKR Capstone, an affiliate of KKR, for consulting, financial and other advisory services to the Company.

Transactions and Balances Involving Company Executives

The Company has engaged in the following transactions with The Labry Companies and Plane Fish, LLC. Mr. Labry, an executive officer of ~~the Company,~~First Data, is the sole shareholder of The Labry Companies, Inc. and sole member of Plane Fish, LLC.

On January 31, 2006, First Data Merchant Services Corporation (“FDMS”), a wholly owned subsidiary of the Company, entered into a four year, eight month sublease agreement with The Labry Companies, Inc. for approximately 3,600 square feet of office space in Memphis, ~~Tennessee.~~Tennessee, including furniture, fixtures and equipment, on customary terms. During ~~2007 and 2006,~~2008, the Company paid approximately ~~$170,846 and $159,916, respectively,~~$71,000 to The Labry Companies, Inc. ~~Prior~~under the sublease. On June 1, 2008, FDMS terminated the sublease agreement and paid a fee to ~~authorizing~~The Labry Companies of approximately $220,000 pursuant to the sublease agreement. First Data Merchant Services Corporation entered into a direct lease agreement with the landlord for additional space and a longer term as of June 1, 2008. The Labry Companies, Inc. will retain the furniture, fixtures and equipment following the expiration or termination of the lease, or upon Mr. Labry’s separation from the Company.

The Company has engaged in a transaction ~~Mr. Labry's interest in the transaction was disclosed to and reviewed by the Board.~~associated with Plane Fish, LLC, ~~owns~~of which Mr. Labry, an executive officer of the Company, is the sole member. Plane Fish, LLC owned an aircraft which it ~~leases~~leased to a charter company. The charter company ~~makes~~made the aircraft available to its customers, including the Company, which ~~uses~~used the aircraft solely in connection with business-related travel by Mr. Labry and other company employees. On March 17, 2008, a third-party leasing company acquired the aircraft from Plane Fish, LLC for $8.5 million and the Company ~~employees.~~now leases the plane from the third-party leasing company through a capital lease. The Company negotiated the $8.5 million purchase price with Plane Fish, LLC and arranged for the third-party leasing company to purchase the aircraft with the Company’s commitment to lease the aircraft. The Company also reimbursed Plane Fish, LLC for $589,282 of additional expense incurred in operating the aircraft from September 24, 2007 until the date of purchase that previously had not been reimbursed. In ~~2007 and 2006,~~2008, the Company incurred ~~$1,029,999 and $807,374, respectively,~~$290,704 in expenses to the charter company for the charter of the aircraft.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note ~~13:~~11: Commitments and Contingencies

Operating Leases

The Company leases certain of its facilities and equipment under operating lease agreements, substantially all of which contain renewal options and escalation provisions. ~~Total~~The following table presents the amounts associated with total rent expense for operating leases was $24.8 million for the successor period from September 25, 2007 through December 31, 2007, and for the predecessor periods was $64.6 million from January 1, 2007 through September 24, 2007, $85.0 million in 2006, and $81.2 million in 2005.(in millions):


Year ended December 31,	Amount
2010	$	83.7
2009		80.5
2008		77.2

Future minimum aggregate rental commitments atas of December 31, ~~2007~~2010 under all noncancelable operating leases, net of sublease income, were ~~$216.5~~$267.1 million and are due in the following ~~years: $62.2 million for 2008, $50.6 million for 2009, $42.8 million for 2010, $29.3 million for 2011, $19.4 million for 2012 and $12.2 million thereafter.~~years (in millions):

~~The sublease~~


Year ended December 31,	Amount
2011	$	58.3
2012		44.9
2013		35.7
2014		21.4
2015		16.5
Thereafter		90.3

Sublease income is earned from leased space which FDC concurrently subleases to ~~its customers~~third parties with comparable time periods. ~~Certain future lease rental income exceeds lease payments and was excluded from the rental commitment amounts above. At~~As of December 31, ~~2007, these~~2010, sublease amounts totaled ~~$1.3~~$0.3 million in FDC obligations.

In addition, the Company has certain guarantees imbedded in leases and other agreements wherein the Company is required to relieve the counterparty in the event of changes in the tax code or rates. The Company believes the fair value of such guarantees is insignificant due to the likelihood and extent of the potential changes.

Letters of Credit

The Company has ~~$37.4~~$51.9 million in outstanding letters of credit atas of December 31, ~~2007, the majority~~2010, all of which were issued under the Company’s senior secured revolving credit facility and expire ~~in 2008~~prior to December 10, 2011 with a one-year renewal option. The letters of credit are held in connection with certain business combinations, lease arrangements, ~~and~~ bankcard association agreements and other security agreements. The Company expects to renew most of the letters of credit prior to expiration.

On or about April 3 and 4, 2003, two purported class action complaints were filed on behalf of the public holders of Concord's common stock (excluding shareholders related to or affiliated with the individual defendants). The defendants in those actions were certain current and former officers and directors of Concord. The complaints generally alleged breaches of the defendants' duty of loyalty and due care in connection with the defendants' alleged attempt to sell Concord without maximizing the value to shareholders in order to advance the defendants' alleged individual interests in obtaining indemnification agreements related to litigation against Concord and its directors alleging Concord's financial statements were materially misleading and other derivative litigation. The complaints sought

~~FIRST DATA CORPORATION~~Contingencies

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 13: Commitments and Contingencies (Continued)~~

class certification, injunctive relief directing the defendants' conduct in connection with an alleged sale or auction of Concord, reasonable attorneys' fees, experts' fees and other costs and relief the Court deems just and proper.

On ~~or about April~~July 2, ~~2003, an additional purported~~2004, a class action complaint was filed by Barton K. O'Brien. The defendants were Concord and certain of its current and former officers and directors. This complaint contained allegations regarding the individual defendants' alleged insider trading and alleged violations of securities and other laws and asserted that this alleged misconduct reduced the consideration offered to Concord shareholders in the merger between Concord and a subsidiary of the Company (the "Concord Merger"). The complaint sought class certification, attorneys' fees, experts' fees, costs and other relief the Court deems just and proper. Moreover, the complaint also sought an order enjoining consummation of the Concord Merger, rescinding the Concord Merger if it is consummated and setting it aside or awarding rescissory damages to members of the putative class, and directing the defendants to account to the putative class members for unspecified damages. These complaints were consolidated in a second amended consolidated complaint filed September 19, 2003 into one action (In Re: Concord EFS, Inc. Shareholders Litigation) in the Shelby County Circuit for the State of Tennessee.

On October 15, 2003, the plaintiffs In Re: Concord EFS, Inc. Shareholders Litigation moved for leave to file a third amended consolidated complaint similar to the previous complaints but also alleging that the proxy statement disclosures relating to the antitrust regulatory approval process were inadequate. A motion to dismiss was filed on June 22, 2004 alleging that the claims should be denied and are moot since the Concord Merger has occurred. On October 18, 2004, the Court heard arguments on the plaintiff's motion to amend complaint and defendant's motion to dismiss. On September 12, 2006, the Court granted the plaintiff's motion to file a third amended complaint. In early November 2006, Concord filed a motion to dismiss the third amended complaint. On June 28, 2007, a hearing was held on Concord's motion to dismiss the third amended complaint. No order has been issued on this motion yet. The Company intends to vigorously defend the action and an estimate of possible losses, if any, cannot be made at this time.

On July 2, 2004, Pamela Brennan, Terry Crayton, and Darla Martinez filed a class action complaint on behalf of themselves and all others similarly situated in the United States District Court for the Northern District of California against the Company, its subsidiary Concord EFS, Inc., and various financial ~~institutions ("Brennan").~~institutions. Plaintiffs claim that the defendants violated antitrust laws by conspiring to artificially inflate foreign ATM fees that were ultimately charged to ATM cardholders. Plaintiffs seek a declaratory judgment, injunctive relief, compensatory damages, ~~attorneys'~~attorneys’ fees, costs and such other relief as the nature of the case may require or as may seem just and proper to the court. Five similar suits were filed and served in July, August and October 2004 ~~two~~(referred to collectively as the “ATM Fee Antitrust Litigation”). The Court granted judgment in favor of the defendants, dismissing the case on September 17, 2010. On October 14, 2010, the plaintiffs appealed the summary judgment. The Company continues to believe the complaints are without merit and intends to vigorously defend them.

There are asserted claims against the Company where an unfavorable outcome is considered to be reasonably possible. These claims can generally be categorized in the Central District of California (Los Angeles), two in the Southern District of New York, and one in the Western District of Washington (Seattle). The plaintiffs sought to have all of the cases consolidated by the Multi District Litigation panel. That request was denied by the panel on December 16, 2004 and all cases were transferred to the Northern District Court of California and assigned to a single judge. All cases other than Brennan were stayed. Subsequently, a seventh lawsuit was filed in the District of Alaska, which thereafter was also transferred to the Northern District of California and assigned to the same judge.following three areas: (1) patent

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Note 13: Commitments and Contingencies (Continued)~~

~~2005, the plaintiffs filed an amended complaint~~infringement which ~~clarified the basis for alleging~~results from claims that the ~~holding companies, First Data Corporation, Bank One Corporation~~Company is using technology that has been patented by another party; (2) Merchant customer matters often associated with alleged processing errors or disclosure issues and ~~JPMorgan Chase, were liable. On July 21, 2005, Concord filed~~claims that one of the subsidiaries of the Company has violated a ~~motion~~federal or state requirement regarding credit reporting or collection in connection with its check verification guarantee, and collection activities; and (3) other matters which may include issues such as employment. The Company’s estimates of the possible ranges of losses in excess of any amounts accrued are $0 to $2 million for ~~summary judgment seeking~~patent infringement, $0 to ~~foreclose claims arising after February 1, 2001—the date that Concord acquired the STAR Network. On August 22, 2005, the Court also consolidated~~$20 million for merchant customer matters and $0 to $4 million for other matters, resulting in a total estimated range of possible losses of $0 to $26 million for all of the ATM interchange cases pending against the defendants in Brennan which will now be referred to collectively as the "ATM Fee Antitrust Litigation." On September 14, 2006, a hearing on Concord's Motion for Summary Judgment was held. On November 30, 2006, the Court issued an order that terminated the pending motion and requested further discovery on the limited issue of procompetitive justifications for the fixed ATM interchange by March 1, 2007. A hearing was held on the plaintiff's motion to compel on May 23, 2007, at which time the Court directed the defendants to file a motion for summary judgment. On June 25, 2007, the Court entered an order on the motion to compel. On August 3, 2007, the Company filed a motion for summary judgment seeking to dismiss plaintiffs' per se claims, arguing that there are procompetitive justifications for the ATM interchange. The hearing on this motion was held March 7, 2008 and the parties await the Court's ruling. The Company intends to vigorously defend the action and an estimate of possible losses, if any, cannot be made at this time.matters described above.

Six purported class action lawsuits have been filed against the Company and its directors challenging the process by which the Company agreed to enter into the Merger Agreement. These lawsuits have been consolidated into one action in Colorado state court and one action in Delaware state court, respectively. These purported class action complaints generally allege that the members of the Company's Board of Directors breached their fiduciary duties of care and loyalty by entering into the Merger Agreement without regard to the fairness of the transaction to its shareholders or the maximization of shareholder value. The complaints also allege that the Company and/or KKR aided and abetted the directors' breaches. The complaints generally seek class certification, an order enjoining consummation of the proposed merger, rescinding the proposed merger if it is consummated and setting it aside or awarding rescissory damages to members of the class, directing the defendants to exercise their fiduciary duties and account to the class members for unspecified damages, imposing a constructive trust in favor of the class for benefits improperly received by the defendants, and awarding costs and disbursements, including reasonable attorneys' fees, experts' fees and other costs and relief the Court deems just and proper.

The parties have entered into a settlement agreement which was executed and submitted to the Colorado state court for approval on December 12, 2007. On December 17, 2007 the District Court for Arapahoe County, Colorado granted preliminary approval of the settlement. A Notice of Pendancy and Settlement of Class Action and Hearing on Proposed Settlement was transmitted to the former shareholders of FDC in January. The notice provided for shareholders to submit any objections to the proposed settlement by February 26, 2008. Two objections were received. On March 7, 2008, the Court granted final approval of the settlement. The Company believes the complaints are without merit and intends to vigorously defend them in the event a settlement is not finalized.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 13: Commitments and Contingencies (Continued)~~

the 137 Patent generally relate to remote data acquisition, encryption, centralized processing and storage. DataTreasury voluntarily dismissed the action filed with the Court and refiled the complaint on November 7, 2002 in the United States District Court for the Northern District of Texas asserting that the First Data Defendants infringed the 988 Patent and the 137 Patent. The complaint seeks a declaration that the 988 Patent and the 137 Patent are valid and enforceable, injunctive relief, unidentified damages, prejudgment interest, treble damages, costs of suit and attorneys' fees. On November 15, 2002, the First Data Defendants filed a motion which was granted that the case be transferred to the Court. On March 1, 2005, the Court ruled on claim construction. DataTreasury filed amended infringement contentions in September 2005. On November 5, 2005, the First Data Defendants filed ex parte requests for reexamination of the 988 Patent and the 137 Patent with the United States Patent and Trademark Office (the "USPTO"). The First Data Defendants filed their final invalidity contentions in December 2005. The First Data Defendants filed a motion for summary judgment for patent invalidity on January 4, 2006. On September 12, 2005, DataTreasury filed a second complaint with the Court asserting that the Company's wholly owned subsidiaries Remitco, LLC ("Remitco") and Integrated Payment Systems Inc. infringed the 988 Patent and the 137 Patent. DataTreasury seeks a declaration that the 988 Patent and the 137 Patent are valid and enforceable, injunctive relief, unidentified damages, prejudgment interest, treble damages, costs of suit and attorneys' fees. On November 21, 2006, the Court consolidated the two cases. On July 24, 2007, counsel for the parties agreed among other procedural matters to abate the case until 60 days after the issuance of reexamination certificates by the USPTO for both the 988 Patent and the 137 Patent or 60 days after the Remitco document production is completed, at which time DataTreasury will serve amended infringement contentions. In accordance with the agreement of the counsel for the parties, the Court entered an order denying as moot the pending Joint Motion for Entry of a Docket Control Order and refrained from entering a new schedule. The USPTO issued a Certificate of Reexamination on the 998 Patent on October 3, 2007 and on the 137 Patent in December 2007. The Company intends to vigorously defend the action and an estimate of possible losses, if any, cannot be made at this time.

On February 24, 2006, DataTreasury filed a complaint with the United States District Court for the Eastern District of Texas, Marshall Division, naming more than 50 defendants, including the Company and its wholly owned subsidiaries Telecheck Services, Inc. and Remitco, for the infringement of Patent No. 5,930,778 (the "778 Patent"). The complaint seeks a declaration that the 778 Patent is valid and enforceable, injunctive relief, unidentified damages, prejudgment interest, treble damages, costs of suit and attorneys' fees. The 778 patent generally relates to the clearing of financial instruments. On September 25, 2007, all defendants entered into a stipulation, which, pursuant to the court's order, will result in a stay of the case pending the outcome of a pending re-examination of the 778 patent. The Company intends to vigorously defend the action and an estimate of possible losses, if any, cannot be made at this time.

In the normal course of business, the Company is subject to claims and litigation, including indemnification obligations to purchasers of former subsidiaries. Management of the Company believes that such matters will not have a material adverse effect on the ~~Company's~~Company’s results of operations, liquidity or financial condition.

~~In addition,~~Note 12: First Data Corporation Stockholders’ Equity and Redeemable Noncontrolling Interests

Dividends

The Company’s senior secured revolving credit facility, senior secured term loan facility, senior secured notes, senior second lien notes, PIK toggle senior second lien notes, senior notes, senior PIK notes, and senior subordinated notes contain restrictions on the Company’s ability to pay dividends. The restrictions are subject to numerous qualifications and exceptions, including an exception that allows the Company ~~has~~to pay a dividend to repurchase, under certain ~~guarantees imbedded~~circumstances, the equity of Parent held by employees, officers and directors that were obtained in ~~leases and other agreements wherein~~connection with the ~~Company is required to relieve the counterparty in the event of changes in the tax code or rates.~~stock compensation plan. The Company ~~believes the fair value of such guarantees is insignificant due~~paid cash dividends to ~~the likelihood~~its Parent totaling $14.9 million during 2010 and ~~extent of the potential changes.~~$1.8 million during 2008. No dividends were paid in 2009.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~Note 14: Stockholders' Equity~~

~~Dividends~~

In February 2005, the Company increased its quarterly dividend for common stockholders of record as of April 1, 2005 to $0.06 per common share from $0.02 per common share. Subsequent to the spin-off and in December 2006, the Company reduced its quarterly dividends from $0.06 per common share to $0.03 per common share for common stockholders of record as of January 2, 2007. Cash dividends of $45.3 million, $160.5 million and $184.9 million were declared for the predecessor periods from January 1, 2007 through September 24, 2007 and the years ended December 31, 2006 and 2005, respectively. As a result of the merger, the Company no longer pays cash dividends.

As a result of the spin-off, FDC recorded a net increase to retained earnings of $554.5 million which represented the distribution of the net liabilities and certain equity balances related to Western Union to shareholders. Such distribution occurred shortly after and is net of the transfer by Western Union of $1 billion of Western Union notes and $2.5 billion in cash to FDC as well as the net settlement of various intercompany balances and realignment of certain operating assets.

Other Comprehensive Income

The income tax effects allocated to and the cumulative balance of each component of OCI are as follows (in millions):

Beginning
Balance Pretax
Gain
(Loss)
Amount Tax
(Benefit)
Expense Net-of-Tax
Amount Western
Union
Dividend Ending
Balance
Successor

September 25, 2007 through December 31, 2007

Unrealized gains (losses) on hedging activities
$ — $ (174.0 ) $ (64.9 ) $ (109.1 ) $ — $ (109.1 )

Foreign currency translation adjustment
— 25.8 11.8 14.0 — 14.0

Minimum pension liability adjustment
— 2.5 0.9 1.6 — 1.6

$ — $ (145.7 ) $ (52.2 ) $ (93.5 ) $ — $ (93.5 )

Predecessor

January 1, 2007 through September 24, 2007

Unrealized gains (losses) on securities
$ 18.1 $ (29.0 ) $ (10.8 ) $ (18.2 ) $ — $ (0.1 )

Unrealized gains (losses) on hedging activities
(4.4 ) 0.9 0.5 0.4 — (4.0 )

Foreign currency translation adjustment
79.2 96.0 (27.1 ) 123.1 — 202.3

Minimum pension liability adjustment
(63.5 ) — — — — (63.5 )

Adjustment to initially apply SFAS No. 158
(46.3 ) — — — — (46.3 )

$ (16.9 ) $ 67.9 $ (37.4 ) $ 105.3 $ — $ 88.4


	Beginning Balance			Cumulative Effect Adjustment Net of Tax			Pretax Gain (Loss) Amount			Tax (Benefit) Expense			Net-of- Tax Amount			Ending Balance
As of December 31, 2010
Unrealized gains (losses) on securities	$	(27.4	)	$	—		$	44.0		$	16.5		$	27.5		$	0.1
Unrealized gains (losses) on hedging activities		(242.1	)		—			115.2			44.9			70.3			(171.8	)
Foreign currency translation adjustment		(318.8	)		—			(65.5	)		16.0			(81.5	)		(400.3	)
Pension liability adjustment		(93.4	)		—			44.9			16.4			28.5			(64.9	)

	$	(681.7	)	$	—		$	138.6		$	93.8		$	44.8		$	(636.9	)

As of December 31, 2009
Unrealized gains (losses) on securities	$	(11.2	)	$	(27.1	)	$	17.2		$	6.3		$	10.9		$	(27.4	)
Unrealized gains (losses) on hedging activities		(352.3	)		—			172.5			62.3			110.2			(242.1	)
Foreign currency translation adjustment		(542.5	)		—			209.2			(14.5	)		223.7			(318.8	)
Pension liability adjustment		(28.9	)		—			(101.1	)		(36.6	)		(64.5	)		(93.4	)

	$	(934.9	)	$	(27.1	)	$	297.8		$	17.5		$	280.3		$	(681.7	)

As of December 31, 2008
Unrealized gains (losses) on securities	$	—		$	—		$	(17.7	)	$	(6.5	)	$	(11.2	)	$	(11.2	)
Unrealized gains (losses) on hedging activities		(109.1	)		—			(387.3	)		(144.1	)		(243.2	)		(352.3	)
Foreign currency translation adjustment		14.0			—			(584.4	)		(27.9	)		(556.5	)		(542.5	)
Pension liability adjustment		1.6			—			(47.6	)		(17.1	)		(30.5	)		(28.9	)

	$	(93.5	)	$	—		$	(1,037.0	)	$	(195.6	)	$	(841.4	)	$	(934.9	)

In 2009, the Company recognized a cumulative effect adjustment of $43.3 million pretax ($27.1 million net of tax) in unrealized losses on securities and a corresponding increase in retained earnings. The cumulative effect adjustment was equal to the amount of an other-than-temporary-impairment previously recorded in the Consolidated Statement of Operations.

Other First Data Corporation Stockholders’ Equity Transactions

The following table presents the effects of changes in FDC’s ownership interest in its BAMS alliance on FDC’s equity (in millions):


	Year ended December 31,
	2010			2009
Net loss attributable to FDC	$	(1,021.8	)	$	(1,086.4	)
Increase in FDC’s paid-in capital for gain recognized on formation on BAMS, net of tax		—			20.8
Decrease in FDC’s paid-in capital for loss recognized from purchase of noncontrolling interest, including tax effect		(7.5	)		—

Change in net loss attributable to FDC and transfers from noncontrolling interest	$	(1,029.3	)	$	(1,065.6	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Redeemable Noncontrolling Interests

As discussed in Note ~~14: Stockholders' Equity (Continued)~~

December 31, 2006

Unrealized gains (losses) on securities
$ (49.2 ) $ 107.1 $ 38.2 $ 68.9 $ (1.6 ) $ 18.1

Unrealized gains (losses) on hedging activities
(6.7 ) 3.3 1.0 2.3 — (4.4 )

Foreign currency translation adjustment
31.2 102.4 44.0 58.4 (10.4 ) 79.2

Minimum pension liability adjustment
(141.6 ) 2.4 (1.6 ) 4.0 74.1 (63.5 )

Adjustment to initially apply SFAS No. 158
— (74.0 ) (27.7 ) (46.3 ) — (46.3 )

$ (166.3 ) $ 141.2 $ 53.9 $ 87.3 $ 62.1 $ (16.9 )

December 31, 2005

Unrealized gains (losses) on securities
$ 71.4 $ (185.5 ) $ (64.9 ) $ (120.6 ) $ — $ (49.2 )

Unrealized gains (losses) on hedging activities
(18.3 ) 18.1 6.5 11.6 — (6.7 )

Foreign currency translation adjustment
108.7 (117.3 ) (39.8 ) (77.5 ) — 31.2

Minimum pension liability adjustment
(163.6 ) 33.9 11.9 22.0 — (141.6 )

$ (1.8 ) $ (250.8 ) $ (86.3 ) $ (164.5 ) $ — $ (166.3 )

3, the third party owning a controlling interest in Rockmount exercised a put right on Rockmount’s beneficial interest in BAMS requiring net cash payments from FDC of $213 million. The ~~successor period beginning~~redemption amount was based on Rockmount’s capital account balance ~~of OCI was zero due~~in BAMS immediately prior to the ~~previous balance being eliminated in purchase accounting~~redemption with an additional adjustment paid by the Company and Bank of America N.A. based on the level of BAMS revenues for the ~~merger.~~

~~Other Stockholders' Equity Transactions~~

In 2007, the Company accelerated vesting of all outstanding stock options, restricted stock awards and restricted stock units as a result of the merger transaction. For information regarding stock compensation plans refer to Note 15 and for information regarding the merger refer to Note 2.trailing 12 month period ended March 31, 2010.

The following table presents ~~stock repurchase programs authorized by~~a summary of the Board of Directors that were utilized for the predecessor period during the year ended December 31, 2005 through the predecessor period from January 1, 2007 through September 24, 2007, disclosing total shares purchased under each program during the respective yearsredeemable noncontrolling interests activity in 2010 and ~~the associated cost~~2009 (in millions):

Predecessor

Year ended December 31,

Period from
January 1 through
September 24, 2007

2006 2005

Treasury
Shares Cost Treasury
Shares Cost Treasury
Shares Cost
Share repurchase programs:

$1.5 billion, authorized October 2004
— — — — 22.2 $ 905.8
$2.0 billion, authorized February 2005
— — 13.1 $ 325.8 20.2 807.8

— — 13.1 $ 325.8 42.4 $ 1,713.6
Treasury stock purchases related to employee benefit plans

11.2
$
335.3
22.4
961.1
11.3
461.4

Total stock repurchases
11.2 $ 335.3 35.5 $ 1,286.9 53.7 $ 2,175.0

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~


Balance as of January 1, 2009	$	—
Contributions		193.0
Share of income		3.7

Adjustment to redemption value of redeemable noncontrolling interests		30.2

Balance as of December 31, 2009		226.9
Distributions		(27.6	)
Share of income		35.0
Purchase of noncontrolling interests		(213.3	)
Adjustment to redemption value of redeemable noncontrolling interests		7.0
Other		0.1

Balance as of December 31, 2010	$	28.1

Note ~~14: Stockholders' Equity (Continued)~~

The difference between the cost of shares repurchased noted in the table above and the amount reflected in the Consolidated Statements of Cash Flows is due to timing of trade settlements. Following the September 24, 2007 merger transaction, the Company terminated the registration of all equity securities and will no longer make repurchases under existing plans and programs.

~~Common Stock Warrants~~

Upon the formation of FDGS in 2000, the Company issued a warrant to iFormation Group to purchase 3.5 million shares of FDC common stock at a price of $40.025 per share before giving effect to the adjustment for the Company's spin-off of The Western Union Company. On September 29, 2006, the holder of the warrant originally issued on November 16, 2000 exercised its right to a cashless exercise of the warrant. The Company issued 359,824 shares of its common stock to the warrant holder in connection with the cashless exercise.

In connection with a service agreement executed in 2003, the Company issued a warrant to purchase shares of FDC common stock. After adjustment for the Company's spin-off of The Western Union Company, the warrant provided for the purchase of 353,396 shares at a price of $28.30 per share. In conjunction with the merger, the warrant was exercised.

~~Note 15:~~13: Stock Compensation Plans

~~Successor Equity Plans~~

~~On October 26, 2007, the Company established~~The Company’s parent, Holdings, has a stock incentive plan for certain management employees of FDC and its affiliates ("(“stock ~~plan"~~plan”). ~~This stock plan is at the Holdings level which owns 100% of FDC's equity interests.~~ The stock plan provides the opportunity for certain management employees to purchase shares in Holdings and then receive a number of options or restricted stock based on a multiple of their investment in such shares. The ~~employees that choose~~plan also allows for the Company to ~~invest will~~award shares and options to management employees. The participants of the stock plan enter into a management ~~stockholders'~~stockholders’ agreement. Principal terms of the management ~~stockholders'~~stockholders’ agreement include ~~restrictions on transfers, lock ups, right of first refusal, registration rights, and a confidentiality, non-solicitation and non-compete covenant.~~

The expense associated with this plan will be recorded by FDC. FDC will use the Black-Scholes option pricing model to measure the fair value of equity-based awards granted to management. Option-pricing models require estimates of a number of key valuation inputs including expected volatility, expected dividend yield, expected term and risk-free interest rate.

In January 2008, 29.1 million time options and 27.4 million performance options were granted under the new stock plan. Generally, time options and performance options are granted equally, based on a multiple of the employee's investment in shares of Holdings. Time options will vest equally over a five-year period and performance options will vest based upon Company EBITDA targets. These EBITDA targets have both annual and cumulative components.

~~In January 2008, 1.8 million restricted stock units were granted under the new stock plan. Grants were made as incentive awards. All restricted stock units will vest on September 24, 2012.~~

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 15: Stock Compensation Plans (Continued)~~

~~Predecessor Equity Plans~~

As discussed in Note 1 and effective January 1, 2006, the Company adopted SFAS 123R using the modified prospective method. The following table sets forth total stock-based compensation expense recognized in the noted line items of the Consolidated Statements of Operations resulting from stock options, non-vested restricted stock awards, non-vested restricted stock units as well as the employee stock purchase plan ("ESPP") (in millions):

Predecessor

Period from
January 1 through
September 24, 2007 Year ended
December 31, 2006
Income before income taxes, minority interest, equity earnings in affiliates and discontinued operations
$ (247.4 ) $ (66.5 )
Income tax benefit
92.3 24.9

Income from continuing operations
$ (155.1 ) $ (41.6 )

The above table includes expense of $73.9 million in the predecessor period from January 1, 2007 through September 24, 2007 and $8.4 million for the year ended December 31, 2006, net of tax, resulting from restricted stock awards and restricted stock units. Expense related to restricted stock awards and restricted stock units was also recorded under the provisions of Accounting Principles Board Opinion No. 25 ("APB 25") in prior periods before the adoption of SFAS 123R. Included in the predecessor period in 2007 is $175.9 million of stock-based compensation expense due to the accelerated vesting of stock options, restricted stock awards and restricted stock units as the result of change in control provisions upon closing of the merger. There was no stock-based compensation capitalized during the predecessor period from January 1, 2007 through September 24, 2007 and the year ended December 31, 2006. Stock-based compensation expense is recognized in the "Cost of services" and "Selling, general and administrative" line items of the Consolidated Statements of Operations.

As discussed in Note 2, vesting of FDC stock options, restricted stock awards and restricted stock units was accelerated upon closing of the merger. As a result, holders of stock options received cash equal to the intrinsic value of the awards based on a market price of $34.00 per share while holders of restricted stock awards and restricted stock units received $34.00 per share in cash, without interest, and the associated options and restricted stock were cancelled. Vesting of Western Union options, restricted stock awards and restricted stock units held by FDC employees was also accelerated upon closing of the merger. The acceleration of the vesting period resulted in a corresponding acceleration of expense recognition associated with the above noted awards.

As permitted by SFAS 123 "Accounting for Stock-Based Compensation" ("SFAS 123"), during 2005 the Company followed APB 25 under which share-based payments to employees are accounted for using the intrinsic value method and, as such, generally recognized no compensation cost for employee stock options or the ESPP. The Company's pro forma information for 2005 under SFAS 123, which

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 15: Stock Compensation Plans (Continued)~~

~~reflects compensation expense equal to the fair value of the options, restricted stock awards and ESPP rights recognized over their vesting period, is as follows (in millions):~~

Year ended December 31,
2005
Reported income from continuing operations
$ 807.5
Restricted stock expense and effect of accelerated vesting included in reported net income, net of tax
11.3
SFAS 123 expense, net of tax
(217.8 )

Pro forma income from continuing operations
$ 601.0

Certain of the Company's employee share-based compensation awards had terms that provided for vesting to continue after retirement. Prior to the adoption of SFAS 123R, the Company accounted for this type of arrangement by recognizing pro forma compensation cost over the stated vesting period for the SFAS 123 pro forma disclosures. Upon adoption of SFAS 123R, compensation cost was recognized over a shorter period that ended with retirement eligibility. The impact of applying the SFAS 123R requirements for accelerated expense recognition would have decreased the December 31, 2005 pro forma SFAS 123 compensation expense by $12.9 million, net of tax.

~~Stock Options and Employee Stock Purchase Plan Rights~~

FDC had two plans in the predecessor period that provided for the granting of stock options to employees and other key individuals who performed services for the Company. The options had been issued at prices equivalent to or in excess of the common stock's fair market value at the date of grant and generally had 10-year terms. The requisite service period for stock options was the same as the vesting period, with the exception of retirement eligible employees who had shorter requisite service periods which ended when the employees became retirement eligible. Compensation expense related to stock options was recognized over the requisite service period. The vesting of options was accelerated upon closing of the merger as noted above.

In December 2005, the Company accelerated vesting of all outstanding unvested stock options granted by the Company to its officers and employees under the Company's 2002 Long-Term Incentive Plan. The decision to accelerate the vesting of these stock options was made primarily to reduce share-based compensation expense that otherwise likely would be recorded in future periods following the Company's adoption of SFAS 123R. The Company recognized compensation expense of $9.6 million from continuing operations during the fourth quarter of 2005 related to accelerated vesting. During the year ended December 31, 2006, the Company granted stock option awards under its plans for which the Company recognized compensation expense in accordance with the provisions of SFAS 123R.

Amounts accumulated for the ESPP through payroll deductions elected by eligible employees were used to make quarterly purchases of FDC common stock at a 15% discount from the lower of the market price at the beginning or end of the quarter. The fair value of these awards was recognized as compensation expense in the Consolidated Statement of Operations for the year ended December 31, 2006 and in 2007 until the discontinuation of the ESPP plan as of June 30, 2007 in accordance with the provisions of SFAS 123R.

~~The fair value for FDC stock options granted and ESPP rights for the predecessor periods from January 1, 2007 through September 24, 2007 and the years ended December 31, 2006 and 2005 were~~

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 15: Stock Compensation Plans (Continued)~~

~~estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:~~

Predecessor

Stock Options

Period from
January 1 through
September 24, 2007 2006 2005(a)
Risk-free interest rate
4.65 % 4.62 % 4.16 %
Dividend yield
0.49 % 0.58 % 0.58 %
Volatility
23.4 % 23.5 % 32.6 %
Expected term (in years)
5 years 5 years 6 years
Fair value
$ 7 $ 7 $ 8

Predecessor

ESPP(b)

Period from
January 1 through
September 24, 2007 2006 2005(a)
Risk-free interest rate
4.75 % 4.74 % 3.11 %
Dividend yield
0.47 % 0.54 % 0.58 %
Volatility
23.9 % 22.9 % 19.1 %
Expected term (in years)
0.25 0.25 0.25
Fair value
$ 6 $ 8 $ 8

~~(a)~~: ~~Assumptions used to calculate pro forma compensation expense under SFAS 123 discussed above.~~
~~(b)~~: ~~The ESPP was terminated as of June 30, 2007.~~

~~Expected volatility~~—Prior to 2006, the Company used historical volatility to estimate the grant-date fair value of stock options and ESPP rights. The Company changed its method of estimating expected volatility for all stock options granted and ESPP rights after January 1, 2006 to implied volatility. The change in assumption, made in conjunction with the adoption of SFAS 123R, was expected to result in a more accurate estimate of the grant-date fair value of employee stock options. The Company calculated implied volatility on a daily basis using the Black-Scholes option pricing model. This calculation incorporated the market prices of a variety of traded options, the market price of the Company's stock, the exercise price and remaining term of the traded options, the expected dividends, and the risk-free rate. The traded options used were similar in exercise price to awards granted to employees, were near-the-money, and typically had a remaining maturity of greater than one year. For each grant, the Company used the average of the daily implied volatilities for the six months preceding the grant date. For grants made after the Western Union spin-off, the Company used the average of the daily implied volatility for the period between the spin-off and the grant date. Using implied volatility versus historical volatility to value the stock options granted in 2006 resulted in a decrease in the total grant-date fair value of approximately $20 million.

~~Expected dividend yield~~~~—The dividend yield was the calculation of a rolling 12 month average stock price divided by the annualized dividend amount.~~

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 15: Stock Compensation Plans (Continued)~~

~~Expected term~~—The Company aggregated stock option awards into classes. For each class, the expected term was primarily based on the results of a study performed on the historical exercise and post-vesting employment termination behavior for similar grants. The expected terms were as follows: 4.5 year life for employees (Non-Board of Directors, Non-Executives), 7 year life for the Board of Directors and 7.5 year life for the Executive Committee. The expected term of ESPP rights was 0.25 years as purchase rights were achieved over the course of the quarter in which the employee participated in the employee stock purchase plan. Once the shares were purchased, the employee could sell their respective shares.

~~Risk-free interest rate~~—The risk-free rate for stock options granted during the period was determined by using a zero-coupon U.S. Treasury rate for the period that coincided with the expected terms listed above. The risk-free rate for ESPP rights was determined by using a 3-month maturity U.S. Treasury bond.

~~A summary of FDC stock option activity for the predecessor period from January 1, 2007 through September 24, 2007 is as follows (options in millions):~~

Options Weighted-Average
Exercise Price
Outstanding at January 1, 2007
47.1 $ 21
Granted
7.0 $ 25
Exercised
(7.7 ) $ 19
Cancelled / Forfeited*
(46.4 ) $ 22

Outstanding at September 24, 2007
—

*: ~~As noted above, vesting of stock options was accelerated upon the closing of the merger and then cancelled with a right to receive cash.~~

The total intrinsic value of stock options exercised during the predecessor periods from January 1, 2007 through September 24, 2007 and for the twelve months ended December 31, 2006 and 2005 was $86.2 million, $310.4 million and $168.1 million, respectively.

The Company received $187.4 million, $729.8 million and $319.5 million in cash proceeds related to the exercise of stock options and ESPP purchases during the predecessor periods from January 1, 2007 through September 24, 2007 and the twelve months ended December 31, 2006 and 2005, respectively. In addition, the Company realized total tax benefits from stock option exercises (and in 2007 the right to receive cash upon the accelerated vesting at the time of the merger) of $224.8 million, $122.9 million and $51.4 million during the predecessor periods from January 1, 2007 through September 24, 2007 and for the twelve months ended December 31, 2006 and 2005, respectively, which were recorded as increases to the "Additional paid-in capital" line item of the Consolidated Balance Sheets.

The adoption of SFAS 123R resulted in reflecting the excess tax benefit from the exercise of stock-based compensation awards in cash flows from financing activities. For the predecessor periods from January 1, 2007 through September 24, 2007 and the twelve months ended December 31, 2006, the excess tax benefit from stock-based compensation awards of $219.8 million and $124.2 million,

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 15: Stock Compensation Plans (Continued)~~

respectively, was reflected as a use of cash in cash flows provided by operating activities and a source of cash in cash flows used in financing activities in the Consolidated Statements of Cash Flows.

In accordance with SFAS 123R, the Company calculated its pool of excess tax benefits available to absorb write-offs of deferred tax assets in subsequent periods. At December 31, 2006, the balance of this pool was approximately $193 million. The pool of excess tax benefits was eliminated due to the merger.

Upon the exercise of stock options (or the issuance of restricted stock awards as described below), shares of common stock were issued from treasury stock. The Company maintained a systematic buyback program with its purchasing agent. The Company had set up a graduated scale of shares to be purchased based on the number of shares currently held in treasury stock.

~~Restricted Stock Awards and Restricted Stock Units~~

~~The Company granted 3.7 million restricted stock awards and restricted stock units in 2007.~~

During 2006, the Company implemented a new incentive compensation plan for certain employees which provided for the issuance of 1.1 million restricted stock awards or restricted stock units upon the achievement of certain performance criterion that were met in the third quarter 2006. The fair value of the awards granted in February 2006 was measured based on the market value of the shares on the date of grant. The vesting of the awards was accelerated upon closing of the merger as noted above.

In 2005, the Company awarded 550,000 shares of restricted stock to executive officers (460,000 shares were issued in the first quarter 2005 and 90,000 shares were issued in the fourth quarter 2005). The vesting of the stock awards was accelerated upon closing of the merger as noted above. The fair value of the 2005 grant of $21.2 million was measured based on the market value of the shares on the date of grant. Upon retiring from the Company in 2005, Mr. Fote's, the former Chief Executive Officer, 2005 stock award was accelerated and all associated unamortized expense was recognized.

~~A summary of FDC restricted stock award and restricted stock unit activity for the predecessor period from January 1, 2007 through September 24, 2007 is as follows (awards/units in millions):~~

Awards/Units Weighted-Average
Grant-Date
Fair Value
Non-vested at January 1, 2007
1.1 $ 24
Granted
3.7 $ 25
Vested
(0.4 ) $ 27
Cancelled / Forfeited*
(4.4 ) $ 25

Non-vested at September 24, 2007(a)
—

*: ~~As noted above, vesting of restricted stock awards and restricted stock units was accelerated upon the closing of the merger and then cancelled with a right to receive cash.~~

The total fair value of shares vested (measured as of the date of vesting excluding the impact of accelerated vesting) was $9.8 million, $3.9 million and $8.5 million during the predecessor periods from

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 15: Stock Compensation Plans (Continued)~~

~~January 1, 2007 through September 24, 2007 and the twelve months ended December 31, 2006 and 2005, respectively.~~

~~Note 16: Employee Benefit Plans~~

~~Defined Contribution Plans~~

FDC maintains a defined contribution savings plan covering virtually all of the Company's U.S. employees and a Defined Contribution Pension Plan for employees in the United Kingdom. The plans provide tax-deferred amounts for each participant, consisting of employee elective contributions, Company matching and discretionary Company contributions.

Prior to the merger, the Company provided non-qualified deferred compensation plans for certain highly compensated employees. The plans provided tax-deferred contributions and matching of Company contributions under the defined contribution plans otherwise limited by the IRS or plan limits. These plans were terminated in October 2007.

The aggregate amounts charged to expense in connection with these plans were approximately $14.7 million for the successor period from September 25, 2007 through December 31, 2007 and for the predecessor were $39.8 million for the period from January 1, 2007 through September 24, 2007, $50.4 million in 2006, and $53.6 million in 2005.

~~Defined Benefit Plans~~

The Company has a defined benefit pension plan which is frozen and covers certain full-time employees in the U.S. Prior to the Western Union spin-off, the Company-sponsored U.S. plan participated in a master trust along with other defined benefit pension plans the majority of which related to Western Union. Upon spin-off, Western Union continued to sponsor its pension plans, and the master trust investments associated with these plans were transferred to a separate Western Union trust. The Company also has separate plans covering certain employees located in the United Kingdom, Greece and Germany. The United Kingdom Defined Benefit Plan is no longer offered to new employees; however, the Company is required to continue offering benefits to employees that were participating in the plan as of August 1, 2004. The cost of retirement benefits for eligible employees, measured by length of service, compensation and other factors, is being funded in accordance with laws and regulations of the respective countries.

In December 2006, the Company adopted the recognition provision of SFAS 158. This statement requires a company to recognize the funded status of a benefit plan as an asset or a liability in its statement of financial position ("the recognition provision"). In addition, a company is required to measure plan assets and benefit obligations as of the date of its fiscal year-end statement of financial position ("the measurement date provision"). The measurement date provision is effective for fiscal years ending after December 15, 2008. As a result of the merger, the Company measured the benefit plan assets and obligations as of the merger date and allocated purchase price to each plan equal to its funded status. Unrecognized gains and losses recorded to other comprehensive income in predecessor periods will no longer amortize into the Consolidated Statements of Operations as a component of net periodic pension cost for the successor period. Additionally, for its new basis of accounting, the successor Company elected December 31 as the measurement date for its plans. As such, the adoption of the measurement date provisions of SFAS No. 158 has no impact on the Company's financial

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 16: Employee Benefit Plans (Continued)~~

position or results of operations. In predecessor periods, the Company used a September 30 measurement date for its plans. As a result of the aforementioned change in measurement date, the Company recorded a purchase accounting adjustment to goodwill to true up net periodic benefit expense for the predecessor period.

The following table provides a reconciliation of the changes in the plans' projected benefit obligation and fair value of assets over the successor period from September 25, 2007 through December 31, 2007, the predecessor periods from September 30, 2006 through September 24, 2007 and the year ended September 30, 2006, and a statement of the funded status as of the respective period ends.

Successor
Predecessor

Period from
September 25
through
December 31, 2007
Period from
September 30,
2006 through
September 24, 2007 September 30, 2006

(in millions)

Change in benefit obligation

Benefit obligation at beginning of period
$ 738.8 $ 708.2 $ 610.1

Service costs
2.7 10.6 11.5

Interest costs
10.8 36.6 32.4

Actuarial (gain)/loss
(3.8 ) (21.9 ) 10.8

Acquired benefit obligations
— 4.3 —

Termination benefits(a)
— 1.4 3.6

Benefits paid
(7.0 ) (22.0 ) (24.0 )

Plan participant contributions
0.6 2.6 2.8

Foreign currency translation
(9.8 ) 19.0 61.0

Benefit obligation at end of period
732.3 738.8 708.2
Change in plan assets

Fair value of plan assets at the beginning of period
626.7 546.1 451.1

Actual return on plan assets
9.1 52.7 42.9

Company contributions
27.5 31.9 27.4

Plan participant contributions
0.6 2.6 2.8

Benefits paid
(6.6 ) (21.5 ) (23.5 )

Foreign currency translation
(8.5 ) 14.9 45.4

Fair value of plan assets at end of period
648.8 626.7 546.1

Funded status of the plans
$ (83.5 ) $ (112.1 ) $ (162.1 )

~~(a)~~: ~~Restructuring activities in Europe resulted in an increase in the projected benefit obligation.~~

The net pension liability of $83.5 million at December 31, 2007 is made up of $1.9 million of non-current assets and $85.4 million of non-current liabilities. The projected benefit asset is included in "Other long-term assets" and the liabilities are included in "Other long-term liabilities" on the Consolidated Balance Sheets.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 16: Employee Benefit Plans (Continued)~~

As of December 31, 2007, the projected benefit obligation was in excess of the fair value of plan assets for all pension plans with the exception of the U.S. plan. The Company made an additional $20.0 million contribution to the U.S. plan in November 2007 resulting in the fair value of assets exceeding the projected benefit obligation in the amount of $1.9 million. As of September 30, 2006, the projected benefit obligation was in excess of the fair value of plan assets for all pension plans.

~~The accumulated benefit obligation for all defined benefit pension plans was $649.2 million at December 31, 2007, $656.7 million at September 24, 2007 and $613.5 million at September 30, 2006.~~

The following table summarizes the activity in other comprehensive income for the successor period from September 25, 2007 through December 31, 2007 and the predecessor periods from January 1, 2007 through September 24, 2007 and the years ended December 31, 2006 and 2005, net of tax, excluding discontinued operations:

Successor
Predecessor

Period from
September 25
through
December 31,
2007

Period from
January 1
through
September 24,
2007

Year Ended December 31,
(in millions)

2006 2005
Total unrecognized gain/(loss) included in other comprehensive income at the beginning of period
— $ (109.8 ) $ (67.5 ) $ (84.5 )
Adjustment for adoption of SFAS 158
— — (46.3 ) —
Unrecognized gain/(loss) arising during the period
$ 1.1 — (0.8 ) 8.1
Reclassification into earnings from other comprehensive income
— — 5.7 7.1
Foreign currency translation
0.5 — (0.9 ) 1.8

Total unrecognized gain/(loss) included in other comprehensive income at end of period
$ 1.6 $ (109.8 ) $ (109.8 ) $ (67.5 )

~~Amounts recorded in other comprehensive income represent unrecognized net gains and losses. The Company does not have prior year service costs or credits or net transition assets or obligations.~~

~~The following table provides the components of net periodic benefit cost for the plans:~~

Successor
Predecessor

Period from
September 25
through
December 31,
2007

Period from
January 1
through
September 24,
2007

Year Ended December 31,
(in millions)

2006 2005
Service costs
$ 2.7 $ 8.0 $ 11.5 $ 10.4
Interest costs
10.8 27.4 32.4 32.3
Expected return on plan assets
(11.1 ) (35.7 ) (33.4 ) (29.8 )
Amortization
— 7.7 9.1 10.9

Net periodic benefit expense
$ 2.4 $ 7.4 $ 19.6 $ 23.8

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 16: Employee Benefit Plans (Continued)~~

~~Assumptions~~

~~The weighted-average rate assumptions used in the measurement of the Company's benefit obligation are as follows:~~

Successor
Predecessor

Period from
September 25
through
December 31,
2007
Period from
January 1
through
September 24,
2007 September 30,
2006
Discount rate
5.98 % 5.95 % 5.18 %
Rate of compensation increase*
4.09 % 4.09 % 3.89 %

~~The weighted-average rate assumptions used in the measurement of the Company's net cost are as follows:~~

Successor
Predecessor

Period from
September 25
through
December 31,
2007

Period from
January 1
through
September 24,
2007

Year ended December 31,

2006 2005
Discount rate
5.83 % 5.36 % 5.09 % 5.60 %
Expected long-term return on plan assets
7.07 % 6.75 % 6.96 % 7.57 %
Rate of compensation increase*
3.95 % 3.82 % 3.62 % 3.77 %

*: ~~Applies only to plans in the UK, Germany and Greece.~~

SFAS No. 87, "Employers' Accounting for Pensions" ("SFAS 87"), requires the sponsor of a defined benefit pension plan to measure the plan's obligations and annual expense using assumptions that reflect best estimates and are consistent to the extent that each assumption reflects expectations of future economic conditions. As the bulk of pension benefits will not be paid for many years, the computation of pension expenses and benefits is based on assumptions about future interest rates, estimates of annual increases in compensation levels, and expected rates of return on plan assets. In general, pension obligations are most sensitive to the discount rate assumption, and it is set based on the rate at which the pension benefits could be settled effectively. Assumptions for the U.S. plans and the foreign plans are comparable in all of the above periods.

The Company employs a building block approach in determining the long-term rate of return for plan assets. Historical markets are studied and long-term historical relationships between equities and fixed-income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. The long-term portfolio return is established using a building block approach with proper consideration of diversification and re-balancing. Peer data and historical returns are reviewed to check for reasonableness and appropriateness.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 16: Employee Benefit Plans (Continued)~~

~~Plan Assets~~

~~The Company's pension plan asset allocation at December 31, 2007 and September 30, 2006, and target allocation based on the investment policy are as follows:~~

Percentage of
Plan Assets at
Measurement Date
Asset Category
2007 2006
Equity securities
61 % 62 %
Debt securities
38 % 37 %
Other
1 % 1 %

Total
100 % 100 %

Asset Category
Target allocation
U.S. plans Target allocation
Foreign plans
Equity securities
30 % 70 %
Debt securities
68 % 30 %
Other
0–10 % 0 %

~~The following table details plan assets invested in related party securities:~~

2006
Plan Asset Holdings(b)
Shares
(in thousands) Fair
Market Value
(in millions) % of Total
Plan Assets
FDC common stock(a)
4.7 $ 0.2 0.04 %
Bank of New York common stock
7.4 $ 0.3 0.05 %

~~(a)~~: ~~The fair market value reflects the pre-spin-off value of FDC common stock.~~
~~(b)~~: ~~All related party plan asset investments were terminated in 2007.~~

~~The maturities of debt securities at December 31, 2007 range from current to 80 years with a weighted-average maturity of 15 years.~~

The Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities and plan funded status. The investment portfolio contains a diversified blend of equity and fixed-income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, as well as growth, value, and small and large capitalizations. Other assets, primarily private equity, are used judiciously to enhance long-term returns while improving portfolio diversification. Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and periodic asset and liability studies.

~~Contributions~~

~~Contributions to plan assets in 2008 are expected to be approximately $40 million.~~

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 16: Employee Benefit Plans (Continued)~~

The estimated future benefit payments, which reflect expected future service, are expected to be $19.5 million in 2008, $19.8 million in 2009, $20.8 million in 2010, $22.1 million in 2011, $23.5 million in 2012 and $147.0 million in 2013 through 2017.

~~The Company does not offer post-retirement health care or other insurance benefits for retired employees.~~

~~Note 17: Segment Information~~

Operating segments are defined by SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information" ("SFAS 131") as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM"), or decision-making group, in deciding how to allocate resources and in assessing performance. FDC's CODM is its Chief Executive Officer. FDC classifies its businesses into five segments: Merchant Services, Financial Services, International, Prepaid Services and Integrated Payment Systems.

~~Management and 2008 Segment Reorganization~~

As discussed in Note 1 on September 24, 2007, the Company was acquired through a merger transaction by affiliates of KKR and a new Chief Executive Officer ("CEO") was appointed. In connection with this change in leadership, changes were made to the Company's senior management and organization of the business. Effective January 1, 2008, the CODM began making strategic and operating decisions with regards to assessing performance and allocating resources based on a new segment structure. Segment results for 2007, 2006 and 2005 have been adjusted to reflect the new structure. A summary of how the new segments are structured follows:

~~Segment~~		~~Description~~

~~Merchant Services~~		Comprised of businesses that provide services which facilitate the merchants' ability to accept credit, debit, stored-value and loyalty cards. The segment's processing services include authorization, transaction capture, settlement, chargeback handling, and internet-based transaction processing. Merchant services also provide POS devices and other equipment necessary to capture merchant transactions. A majority of these services are offered to the merchants through joint ventures or other alliance arrangements primarily with financial institutions and pertain to transactions in which consumer payments to merchants are made through a card association (such as Visa or MasterCard), a debit network, or another payment network (such as Discover).
~~Financial Services~~		Provides issuer card and network solutions and payment management solutions for point of sale and recurring bill payments. Issuer card and network solutions include credit and retail card processing, debit card processing and network

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 17: Segment Information (Continued)~~

~~Segment~~		~~Description~~

		services (including the STAR Network), and output services for financial institutions and other organizations offering credit cards, debit cards and retail private label cards to consumers and businesses to manage customer accounts. Payment solutions include check verification, settlement and guarantee services (including TeleCheck) and other payment options that support merchants and online retailers, businesses, and government agencies. The segment's largest components of revenue consist of fees for account management, transaction authorization and posting, network switching, check acceptance and warranty, as well as reimbursable postage. In addition to issuer card and core payment solutions, Financial Services offers services to improve customer communications, billing, online banking and consumer bill payment, and analytics.
~~Prepaid Services~~		Consists of businesses that provide a wide range of open and closed loop stored-value products and processing services. The closed loop operations comprise the largest component of the segments revenue, providing gift card processing services to large national merchants as well as fleet services to trucking companies. The open loop products are the fastest growing component of the segment driven primarily by employers' adoption of the Money Network payroll product.
~~International~~		Comprised of businesses that provide the following services outside of the United States: credit, retail, debit and prepaid card processing; merchant acquiring and processing; ATM and point-of-sale ("POS") processing, driving, acquiring and switching services; and card processing software. The largest components of the segment's revenue are fees for facilitating the merchants' ability to accept credit, retail and debit cards by authorizing, capturing, and settling merchants' credit, retail, debit, stored-value and loyalty card transactions as well as for transaction authorization and posting, network switching and account management.
~~Integrated Payment Systems~~		Involves the issuance of official checks and money orders by agents which are typically banks or other financial institutions. Official checks serve as an alternative to a bank's own disbursement items such as cashiers or bank checks. Revenue is principally earned on invested funds which are pending settlement.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 17: Segment Information (Continued)~~

~~The business segment measurements provided to, and evaluated by, the Company's CODM are computed in accordance with the following principles:~~

•: ~~The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.~~
•: ~~Segment revenue includes equity earnings in affiliates (excluding amortization expense) and inter-segment revenue.~~
•: ~~Segment operating profit includes minority interest and equity earnings in affiliates, net of related amortization expense.~~
•: Segment operating profit excludes restructuring charges, asset impairment charges, significant litigation and regulatory settlement charges, other charges, interest expense, other income (expense), and income taxes since they are not allocated to the segments for internal evaluation purposes. While these items are identifiable to the business segments, they are not included in the measurement of segment operating profit provided to the CODM for purposes of assessing segment performance and decision making with respect to resource allocation.
•: ~~Revenues and operating profit of the IPS segment are stated on a pretax equivalent basis (i.e., as if investment earnings on nontaxable investments were fully taxable at FDC's marginal tax rate).~~
•: Corporate operations include administrative and shares service functions such as the executive group, legal, tax, treasury, internal audit, accounting, human resources, information technology and procurement. Costs incurred by Corporate that are directly related to a segment are allocated to the respective segment. Administrative and shared service costs are retained by Corporate.

The following tables present the Company's operating segment results for the successor period from September 25, 2007 through December 31, 2007 and the predecessor periods from January 1, 2007 through September 24, 2007 and the years ended December 31, 2006 and 2005:

Successor period from September 25, 2007
through December 31, 2007
Merchant
Services Financial
Services International Prepaid
Services Integrated
Payment
Systems All Other
and
Corporate Totals

(in millions)

Revenues:

Transaction and processing service fees
$ 533.6 $ 551.4 $ 382.0 $ 76.8 $ 4.7 $ 27.0 $ 1,575.5

Investment income, net
12.1 0.9 4.9 — 29.6 — 47.5

Product sales and other
87.6 29.1 92.2 — — 16.4 225.3

Reimbursable debit network fees, postage and other
308.4 198.7 8.6 — — — 515.7

Equity earnings in affiliates(a)
95.6 — 9.1 — — 1.0 105.7

Total segment reporting revenues
$ 1,037.3 $ 780.1 $ 496.8 $ 76.8 $ 34.3 $ 44.4 $ 2,469.7

Internal revenue and pretax equivalency
$ 12.5 $ 10.4 $ 1.3 $ — $ 55.8 $ 5.5 $ 85.5
External revenue
1,024.8 769.7 495.5 76.8 (21.5 ) 38.9 2,384.2
Depreciation and amortization
225.1 116.3 67.0 6.3 0.3 12.2 427.2
Operating profit (loss)
100.9 101.4 49.1 13.2 21.3 (67.6 ) 218.3
Restructuring, investment gains and (losses), derivative financial instruments gains and (losses), debt repayment costs, and non-operating foreign exchange gain/(loss)
(6.8 ) 0.1 (4.2 ) — (1.0 ) (62.1 ) (74.0 )
Expenditures for long-lived assets
13.5 46.6 41.8 2.8 0.2 7.8 112.7
Equity earnings in affiliates
38.7 — 7.7 — — 0.4 46.8
Investment in unconsolidated affiliates
3,290.4 — 215.9 — — 20.0 3,526.3

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 17: Segment Information (Continued)~~

Predecessor period from January 1, 2007
through September 24, 2007
Merchant
Services Financial
Services International Prepaid
Services Integrated
Payment
Systems All Other
and
Corporate Totals

(in millions)

Revenues:

Transaction and processing service fees
$ 1,448.4 $ 1,477.1 $ 876.7 $ 138.0 $ 14.0 $ 70.2 $ 4,024.4

Investment income, net
36.8 3.8 12.2 — 56.9 — 109.7

Product sales and other
263.8 106.8 203.4 — 0.5 49.3 623.8

Reimbursable debit network fees, postage and other
735.4 512.5 25.6 — 0.1 — 1,273.6

Equity earnings in affiliates(a)
220.8 — 24.8 — — 3.0 248.6

Total segment reporting revenues
$ 2,705.2 $ 2,100.2 $ 1,142.7 $ 138.0 $ 71.5 $ 122.5 $ 6,280.1

Internal revenue and pretax equivalency
$ 34.9 $ 27.8 $ 3.5 $ — $ 175.7 $ 16.7 $ 258.6
External revenue
2,670.3 2,072.4 1,139.2 138.0 (104.2 ) 105.8 6,021.5
Depreciation and amortization
159.8 188.9 156.3 6.2 2.5 26.5 540.2
Operating profit (loss)
713.3 436.7 98.3 24.2 30.1 (445.6 ) 857.0
Restructuring, impairments, litigation and regulatory settlements, other, investment gains and (losses), derivative financial instruments gains and (losses) and debt repayment costs
(0.8 ) (4.1 ) (7.0 ) (5.0 ) (15.2 ) 7.6 (24.5 )
Expenditures for long-lived assets
28.6 125.8 112.9 3.0 0.8 128.1 399.2
Equity earnings in affiliates
212.3 — 8.9 — — 1.8 223.0

Predecessor Twelve months ended
December 31, 2006
Merchant
Services Financial
Services International Prepaid
Services Integrated
Payment
Systems All Other
and
Corporate Totals

(in millions)

Revenues:

Transaction and processing service fees
$ 1,911.1 $ 1,924.3 $ 985.0 $ 191.4 $ 16.4 $ 94.2 $ 5,122.4

Investment income, net
46.8 6.2 10.1 — 54.1 — 117.2

Product sales and other
370.4 110.3 206.3 — 0.4 30.4 717.8

Reimbursable debit network fees, postage and other
831.4 630.0 27.6 — 0.1 — 1,489.1

Equity earnings in affiliates(a)
283.3 — 29.3 — — 1.0 313.6

Total segment reporting revenues
$ 3,443.0 $ 2,670.8 $ 1,258.3 $ 191.4 $ 71.0 $ 125.6 $ 7,760.1

Internal revenue and pretax equivalency
$ 53.0 $ 47.4 $ 3.3 $ — $ 248.5 $ 17.9 $ 370.1
External revenue
3,390.0 2,623.4 1,255.0 191.4 (177.5 ) 107.7 7,390.0
Depreciation and amortization
215.7 256.6 178.7 7.1 9.0 33.7 700.8
Operating profit (loss)
978.2 567.2 153.5 37.3 12.1 (272.6 ) 1,475.7
Restructuring, impairments, litigation and regulatory settlements, other, investment gains and (losses), derivative financial instruments gains and (losses) and debt repayment costs
7.4 (34.0 ) (6.9 ) 0.1 33.6 9.4 9.6
Expenditures for long-lived assets
39.3 125.0 104.8 2.2 5.2 23.6 300.1
Equity earnings in affiliates
274.0 — 9.7 — — (0.6 ) 283.1
Investment in unconsolidated affiliates
667.7 — 70.7 — — 18.1 756.5

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 17: Segment Information (Continued)~~

Predecessor Twelve months ended
December 31, 2005
Merchant
Services Financial
Services International Prepaid
Services Integrated
Payment
Systems All Other
and
Corporate Totals

(in millions)

Revenues:

Transaction and processing service fees
$ 1,806.8 $ 1,926.7 $ 714.0 $ 181.2 $ 16.9 $ 107.8 $ 4,753.4

Investment income, net
31.1 2.2 10.4 — 162.3 — 206.0

Product sales and other
315.2 155.2 145.2 0.7 0.1 23.1 639.5

Reimbursable debit network fees, postage and other
686.3 602.9 15.8 — 0.6 — 1,305.6

Equity earnings in affiliates(a)
237.0 — 27.5 — — — 264.5

Total segment reporting revenues
$ 3,076.4 $ 2,687.0 $ 912.9 $ 181.9 $ 179.9 $ 130.9 $ 7,169.0

Internal revenue and pretax equivalency
$ 53.2 $ 27.0 $ 9.4 $ — $ 256.0 $ 32.8 $ 378.4
External revenue
3,023.2 2,660.0 903.5 181.9 (76.1 ) 98.1 6,790.6
Depreciation and amortization
219.8 258.4 147.9 11.3 13.4 38.2 689.0
Operating profit (loss)
804.6 599.4 118.7 28.1 113.3 (253.2 ) 1,410.9
Restructuring, impairments, other, investment gains and (losses) and derivative financial instruments gains and (losses)
(22.8 ) (41.5 ) (29.0 ) (0.9 ) 57.0 (20.7 ) (57.9 )
Expenditures for long-lived assets
63.6 144.7 50.0 1.5 17.0 50.6 327.4
Equity earnings in affiliates
224.7 — 9.2 — — (1.0 ) 232.9
Investment in unconsolidated affiliates
594.9 — 68.0 — — 3.0 665.9

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 17: Segment Information (Continued)~~

~~A reconciliation of reportable segment amounts to the Company's consolidated balances is as follows:~~

Successor
Predecessor

Period from
September 25
through
December 31,
2007

Period from
January 1
through
September 24,
2007 Year ended
December 31,

2006 2005

(in millions)

Revenues:

Total reported segments
$ 2,425.3 $ 6,157.6 $ 7,634.5 $ 7,038.1

All other and corporate
44.4 122.5 125.6 130.9

Subtotal
2,469.7 6,280.1 7,760.1 7,169.0

Equity earnings in affiliates(a)
(105.7 ) (248.6 ) (313.6 ) (264.5 )

Eliminations(b)
(85.5 ) (258.6 ) (370.1 ) (378.4 )

Consolidated
$ 2,278.5 $ 5,772.9 $ 7,076.4 $ 6,526.1

Income (loss) before income taxes, minority interest, equity earnings in affiliates and discontinued operations:

Total reported segments
$ 285.9 $ 1,302.6 $ 1,748.3 $ 1,664.1

All other and corporate
(67.6 ) (445.6 ) (272.6 ) (253.2 )

Subtotal
218.3 857.0 1,475.7 1,410.9

Interest expense
(584.7 ) (103.6 ) (248.0 ) (190.9 )

Interest income
17.9 30.8 55.5 12.4

Minority interest from segment operations(c)
39.0 106.3 138.8 126.9

Equity earnings in affiliates
(46.8 ) (223.0 ) (283.1 ) (232.9 )

Restructuring, net
0.2 (7.9 ) (24.0 ) (76.2 )

Impairments
— (20.6 ) (16.1 ) (40.8 )

Litigation and regulatory settlements
— (2.5 ) 34.8 —

Other
— 7.7 0.3 (25.6 )

Other income (expense)(d)
(74.0 ) 4.9 22.6 145.8

Eliminations(b)
(55.7 ) (176.6 ) (245.9 ) (239.8 )

Consolidated
$ (485.8 ) $ 472.5 $ 910.6 $ 889.8

~~(a)~~: ~~Excludes equity losses that were recorded in expense and the amortization related to the excess of the investment balance over the Company's proportionate share of the investee's net book value.~~
~~(b)~~: ~~Represents elimination of an adjustment to record IPS segment investment income and its related operating profit on a pretax equivalent basis and elimination of intersegment revenue.~~
~~(c)~~: ~~Excludes minority interest attributable to items excluded from segment operations.~~
~~(d)~~: Other income (expense) includes investment gains and (losses), derivative financial instruments gains and (losses), divestitures, net, debt repayment gain/(loss) and non-operating foreign exchange gain/(loss) as discussed in Note 1.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 17: Segment Information (Continued)~~

~~Segment assets are as follows (in millions):~~

Successor
Predecessor

December 31,
2007
December 31,
2006
Assets:

Merchant Services
$ 21,370.3 $ 11,137.5
Financial Services
8,297.3 5,003.2
International
6,841.1 3,559.5
Prepaid Services
1,518.5 252.3
Integrated Payment Systems
13,138.2 14,396.4
All Other and Corporate
1,343.9 216.9

Consolidated
$ 52,509.3 $ 34,565.8

~~Information concerning principal geographic areas was as follows (in millions):~~

United
States International Total
Revenues

2007 Successor period from September 25 through December 31
$ 1,783.9 $ 494.6 $ 2,278.5

2007 Predecessor period from January 1 through September 24
4,647.4 1,125.5 5,772.9

2006 Predecessor
5,883.8 1,192.6 7,076.4

2005 Predecessor
5,682.7 843.4 6,526.1
Long-Lived Assets

2007 Successor
$ 21,469.9 $ 4,810.2 $ 26,280.1

2006 Predecessor
8,645.9 2,059.1 10,705.0

2005 Predecessor
9,063.0 1,400.9 10,463.9

~~"International" represents businesses of significance, which have local currency as their functional currency regardless of the segments to which the associated revenues and long-lived assets applied.~~

~~Note 18: Quarterly Financial Results (Unaudited)~~

~~As discussed in Notes 1 and 19, NYCE, PPS, IDLogix, Taxware and Western Union are presented as discontinued operations. The 2006 quarterly amounts have been adjusted to reflect this presentation.~~

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 18: Quarterly Financial Results (Unaudited) (Continued)~~

~~Summarized quarterly results for the two years ended December 31, 2007 and 2006, respectively, are as follows (in millions):~~

Predecessor
Successor

Third
Third

2007 by Quarter:
First Second Period from
July 1
through
September 24,
Period from
September 25
through
September 30, Fourth
Revenues
$ 1,836.3 $ 2,000.7 $ 1,935.9 $ 135.3 $ 2,143.2
Expenses
1,640.9 1,720.4 1,871.2 127.3 1,996.2
Interest income
8.0 12.9 9.9 3.6 14.3
Interest expense
(34.5 ) (35.9 ) (33.2 ) (34.6 ) (550.1 )
Other income (expense)
1.0 2.4 1.5 (27.7 ) (46.3 )

Income (loss) before income taxes, minority interest, equity earnings in affiliates and discontinued operations
169.9 259.7 42.9 (50.7 ) (435.1 )
Income tax expense (benefit)
37.4 70.2 18.2 (21.2 ) (154.9 )
Minority interest
(29.1 ) (40.0 ) (36.2 ) (2.5 ) (36.5 )
Equity earnings in affiliates
68.3 79.4 75.3 3.3 43.5

(Loss) income from continuing operations
171.7 228.9 63.8 (28.7 ) (273.2 )
Discontinued operations, net of tax of $(4.1), $0, $7.1, $0 and $0, respectively
3.5 — (7.1 ) — —

Net (loss) income
$ 175.2 $ 228.9 $ 56.7 $ (28.7 ) $ (273.2 )

Predecessor
2006 by Quarter:
First Second Third Fourth
Revenues
$ 1,635.7 $ 1,731.1 $ 1,787.2 $ 1,922.4
Expenses
1,422.6 1,457.5 1,492.1 1,623.7
Interest income
2.9 7.1 13.8 31.7
Interest expense
(57.6 ) (60.9 ) (72.3 ) (57.2 )
Other income (expense)
108.9 87.7 (142.8 ) (31.2 )

Income before income taxes, minority interest, equity earnings in affiliates and discontinued operations
267.3 307.5 93.8 242.0
Income tax expense
77.2 82.9 4.7 38.9
Minority interest
(28.9 ) (40.3 ) (34.8 ) (38.3 )
Equity earnings in affiliates
58.5 72.4 77.0 75.2

Income from continuing operations
219.7 256.7 131.3 240.0
Discontinued operations, net of tax of $101.3, $107.1, $125.9 and $25.8, respectively
210.4 205.9 210.9 38.5

Net income
$ 430.1 $ 462.6 $ 342.2 $ 278.5

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 18: Quarterly Financial Results (Unaudited) (Continued)~~

~~Note 19: Discontinued Operations~~

The Company's financial statements reflect NYCE, PPS, IDLogix, Western Union and Taxware as discontinued operations. The results of operations of these entities are treated as income from discontinued operations, net of tax, and separately stated on the Consolidated Statements of Operations, below (loss) income from continuing operations.

As a result of the merger with Concord, the Company divested its 64% ownership of NYCE, an electronic funds transfer network, on July 30, 2004. The sale agreement of NYCE contemplated potential adjustments to the sales price that became estimable in the fourth quarter 2005. The estimated adjustment to the sales price of $28.2 million was recorded in the fourth quarter 2005 and was presented net of the related disposition reserve and taxes in discontinued operations on the Consolidated Statements of Operations. During the first quarter of 2006, the adjustment to the sales price was finalized resulting in an additional charge of $1.6 million, which was also presented in discontinued operations, and was $1.0 million net of taxes.

In July 2006, the Company sold the majority of its ownership interest in its subsidiaries PPS and IDLogix to five national financial institutions to form Early Warning Services, LLC for the purchase price of $84.7 million, net of related expenses, and an 18% interest in Early Warning Services. The purchase price is also net of $11.2 million in cash paid to buyout the PPS minority holder prior to the sale. FDC's interest in Early Warning Services is reflected in the "Investment in affiliates" line item of the Consolidated Balance Sheets. The Company recognized a gain on the sale of $0.7 million, net of tax, which is included in the results of discontinued operations in 2006. PPS and IDLogix were previously reported as part of All Other and Corporate.

As discussed in Note 1 and on September 29, 2006, the Company separated its Western Union money transfer business into an independent, publicly traded company. The spin-off included all entities previously reported as the Western Union segment as well as two small entities previously reported in All Other and Corporate. In connection with the spin-off, Western Union transferred $1 billion of notes and $2.5 billion in cash to FDC. To facilitate Western Union's separation from FDC, FDC provided certain services to Western Union during a one-year transition period. Additionally, the Company and Western Union entered into various commercial service agreements which are long-term arrangements to provide ongoing services.

In November 2006, the Company sold its subsidiary Taxware to ADP(R) Employer Services, a division of Automatic Data Processing, Inc. for approximately $125 million in cash. The Company recognized a gain on the sale of $42.6 million, net of tax and minority interest, which is also included in the results of discontinued operations in 2006. Taxware was previously reported as part of All Other and Corporate.

Discontinued operations for the year ended December 31, 2006 also includes non-recurring separation costs of $48.4 million which consist principally of investment banker fees, external legal and accounting fees to affect the spin-off, costs to separate information systems and consulting costs incurred to assist in managing the spin-off.

Included in the results from discontinued operations is interest expense allocated based upon a percentage of net assets in accordance with EITF No. 87-24 "Allocation of Interest to Discontinued Operations" of $32.7 million and $35.6 million for the years ended December 31, 2006 and 2005, respectively. In addition, certain corporate expenses were allocated to discontinued operations in accordance with EITF 87-24 and were limited to specifically identified costs and other costs, such as corporate shared services, which support segment operations. These costs represent those that have historically been allocated to and recorded by the Company's operating segments as an expense with

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 19: Discontinued Operations (Continued)~~

~~the exception of the addition of certain share-based compensation expenses and pension benefit not previously allocated.~~

~~Losses from discontinued operations for the predecessor period from January 1, 2007 through September 24, 2007 relate to certain tax account true-ups and discrete tax items related to Western Union.~~

~~The following table presents the summarized results of discontinued operations for the years ended December 31, 2006 and 2005 (in millions):~~

Year Ended
December 31,

2006 2005
Revenue
$ 3,351.1 $ 4,072.0
Expenses
2,385.5 2,779.7

Operating profit
965.6 1,292.3
Other income (expense)
75.0 17.4

Income before income taxes
1,040.6 1,309.7
Income tax expense(a)
360.0 402.1
Minority interest, net of tax
(24.3 ) (1.7 )
Equity earnings in affiliates
9.4 4.0

Income from discontinued operations
$ 665.7 $ 909.9

~~(a)~~: ~~The amount of the gain on the sale of NYCE in excess of the income taxes was deferred (reserved) to 2005. During 2005, the reserve of $9.8 million was reversed against the sales price adjustment.~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements~~

On October 24, 2007, the Company issued in a private offering $2.2 billion aggregate principal amount of senior notes due 2015 as described in Note 10. The senior notes are unconditionally guaranteed by substantially all existing and future, direct and indirect, wholly owned, material domestic subsidiaries of the Company other than Integrated Payment Systems, Inc. ("Guarantors"). None of the other subsidiaries of the Company, either direct or indirect, guarantee the senior notes ("Non-Guarantors"). The Guarantors also unconditionally guarantee the senior secured revolving credit facility and senior secured term loan facility, senior unsecured term loan facilities and senior subordinated unsecured term loan facility described in Note 10. The senior note guarantees are unsecured and rank senior in right of payment to all existing and future subordinated indebtedness of the Company's guarantor subsidiaries and its senior subordinated unsecured interim credit facility. The senior note guarantees rank equally in right of payment with all existing and future senior indebtedness of the guarantor subsidiaries, including their guarantees under the senior unsecured interim credit facilities.

The following tables present the results of operations, financial position and cash flows of the Company ("Parent"), the Guarantor subsidiaries, the Non-Guarantor subsidiaries and Eliminations for the successor period from September 25, 2007 to December 31, 2007 and the predecessor periods comprised of the period from January 1, 2007 to September 24, 2007, the years ended December 31, 2006 and 2005 and as of December 31, 2007 and 2006 to arrive at the information for First Data Corporation on a consolidated basis.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS~~

~~(Successor)~~

~~(in millions)~~

Period from September 25 through December 31, 2007

Parent
Company Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Revenues:

Transaction and processing service fees
$ 0.8 $ 1,109.4 $ 444.6 $ (1.5 ) $ 1,553.3

Investment income, net
— 11.9 (20.1 ) — (8.2 )

Product sales and other
— 133.3 96.6 (6.9 ) 223.0

Reimbursable debit network fees, postage and other
— 486.6 23.8 — 510.4

0.8 1,741.2 544.9 (8.4 ) 2,278.5

Expenses:

Cost of services (exclusive of items shown below)
— 591.7 200.1 (1.5 ) 790.3

Cost of products sold
— 59.6 34.6 (6.9 ) 87.3

Selling, general and administrative
14.5 229.2 124.2 — 367.9

Reimbursable debit network fees, postage and other
— 486.6 23.8 — 510.4

Depreciation and amortization
1.1 269.4 97.3 — 367.8

Other operating expenses:

Restructuring, net
— (0.2 ) — — (0.2 )

15.6 1,636.3 480.0 (8.4 ) 2,123.5

Operating (loss) profit
(14.8 ) 104.9 64.9 — 155.0

Interest income
9.6 1.9 6.4 — 17.9
Interest expense
(578.4 ) (1.1 ) (5.2 ) — (584.7 )
Interest (expense) income from intercompany notes
(28.1 ) 22.7 5.4 — —
Other income (expense)
(72.6 ) (0.1 ) (1.3 ) — (74.0 )
Equity earnings from consolidated subsidiaries
149.4 (0.9 ) — (148.5 ) —

(520.1 ) 22.5 5.3 (148.5 ) (640.8 )

(Loss) income before income taxes, minority interest and equity earnings in affiliates
(534.9 ) 127.4 70.2 (148.5 ) (485.8 )
Income tax (benefit) expense(1)
(221.2 ) 68.0 (22.9 ) — (176.1 )
Minority interest
— (0.1 ) (38.9 ) — (39.0 )
Equity earnings in affiliates
11.8 32.4 2.6 — 46.8

Net (loss) income
$ (301.9 ) $ 91.7 $ 56.8 $ (148.5 ) $ (301.9 )

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS~~

~~(Predecessor)~~

~~(in millions)~~

Period from January 1 through September 24, 2007

Parent
Company Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Revenues:

Transaction and processing service fees
$ 2.3 $ 2,863.8 $ 1,103.8 $ (4.0 ) $ 3,965.9

Investment income, net
— 33.2 (100.1 ) — (66.9 )

Product sales and other
— 411.3 224.5 (19.4 ) 616.4

Reimbursable debit network fees, postage and other
— 1,206.7 50.8 — 1,257.5

2.3 4,515.0 1,279.0 (23.4 ) 5,772.9

Expenses:

Cost of services (exclusive of items shown below)
125.3 1,510.1 575.9 (4.0 ) 2,207.3

Cost of products sold
— 150.6 78.0 (19.4 ) 209.2

Selling, general and administrative
332.9 503.7 222.2 — 1,058.8

Reimbursable debit network fees, postage and other
— 1,206.7 50.8 — 1,257.5

Depreciation and amortization
5.7 349.9 120.8 — 476.4

Other operating expenses:

Restructuring, net
(0.6 ) 6.2 2.3 — 7.9

Impairments
— 4.2 16.4 — 20.6

Litigation and regulatory settlements
(2.5 ) 5.0 — — 2.5

Other
(3.8 ) (1.7 ) (2.2 ) — (7.7 )

457.0 3,734.7 1,064.2 (23.4 ) 5,232.5

Operating (loss) profit
(454.7 ) 780.3 214.8 — 540.4

Interest income
10.6 3.6 16.6 — 30.8
Interest expense
(90.3 ) (2.7 ) (10.6 ) — (103.6 )
Interest (expense) income from intercompany notes
(38.6 ) 41.0 (2.4 ) — —
Other income (expense)
2.4 3.5 (1.0 ) — 4.9
Equity earnings from consolidated subsidiaries
839.1 137.4 — (976.5 ) —

723.2 182.8 2.6 (976.5 ) (67.9 )

Income before income taxes, minority interest, equity earnings in affiliates and discontinued operations
268.5 963.1 217.4 (976.5 ) 472.5
Income tax (benefit) expense(1)
(161.5 ) 433.6 (146.3 ) — 125.8
Minority interest
— (2.4 ) (102.9 ) — (105.3 )
Equity earnings in affiliates
30.8 183.6 8.6 — 223.0

Income from continuing operations
460.8 710.7 269.4 (976.5 ) 464.4
Loss from discontinued operations, net of taxes
— — (3.6 ) — (3.6 )

Net income
$ 460.8 $ 710.7 $ 265.8 $ (976.5 ) $ 460.8

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS~~

~~(Predecessor)~~

~~(in millions)~~

Year Ended December 31, 2006

Parent
Company Guarantor
Subsidiaries Non-
Guarantor
Subsidiaries Eliminations Consolidated
Revenues:

Transaction and processing service fees
$ 3.2 $ 3,751.4 $ 1,284.9 $ (1.9 ) $ 5,037.6

Investment income, net
— 37.5 (166.1 ) — (128.6 )

Product sales and other
— 476.2 252.4 (28.8 ) 699.8

Reimbursable debit network fees, postage and other
— 1,419.1 48.5 — 1,467.6

3.2 5,684.2 1,419.7 (30.7 ) 7,076.4

Expenses:

Cost of services (exclusive of items shown below)
39.2 1,826.2 631.1 (3.2 ) 2,493.3

Cost of products sold
— 209.2 99.3 (27.5 ) 281.0

Selling, general and administrative
213.8 638.4 277.1 — 1,129.3

Reimbursable debit network fees, postage and other
— 1,419.1 48.5 — 1,467.6

Depreciation and amortization
7.9 474.1 137.7 — 619.7

Other operating expenses:

Restructuring, net
3.1 11.4 9.5 — 24.0

Impairments
(0.5 ) 16.6 — — 16.1

Litigation and regulatory settlements
(42.4 ) 15.0 (7.4 ) — (34.8 )

Other
— (0.3 ) — — (0.3 )

221.1 4,609.7 1,195.8 (30.7 ) 5,995.9

Operating (loss) profit
(217.9 ) 1,074.5 223.9 — 1,080.5

Interest income
39.5 7.2 8.8 — 55.5
Interest expense
(237.9 ) (2.2 ) (7.9 ) — (248.0 )
Interest (expense) income from intercompany notes
(18.7 ) 44.2 (25.5 ) — —
Other income (expense)
(27.7 ) 5.2 45.1 — 22.6
Equity earnings from consolidated subsidiaries
1,765.1 269.5 — (2,034.6 ) —

1,520.3 323.9 20.5 (2,034.6 ) (169.9 )

Income before income taxes, minority interest, equity earnings in affiliates and discontinued operations
1,302.4 1,398.4 244.4 (2,034.6 ) 910.6
Income tax (benefit) expense(1)
(175.0 ) 567.7 (189.0 ) — 203.7
Minority interest
— (5.5 ) (136.8 ) — (142.3 )
Equity earnings in affiliates
36.0 240.4 6.7 — 283.1

Income from continuing operations
1,513.4 1,065.6 303.3 (2,034.6 ) 847.7
Income from discontinued operations, net of taxes
— — 665.7 — 665.7

Net income
$ 1,513.4 $ 1,065.6 $ 969.0 $ (2,034.6 ) $ 1,513.4

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS~~

~~(Predecessor)~~

~~(in millions)~~

Year Ended December 31, 2005

Parent
Company Guarantor
Subsidiaries Non-
Guarantor
Subsidiaries Eliminations Consolidated
Revenues:

Transaction and processing service fees
$ 3.1 $ 3,613.9 $ 1,063.5 $ (21.6 ) $ 4,658.9

Investment income, net
— 24.8 (58.4 ) — (33.6 )

Product sales and other
— 495.9 146.1 (24.6 ) 617.4

Reimbursable debit network fees, postage and other
— 1,252.7 30.7 — 1,283.4

3.1 5,387.3 1,181.9 (46.2 ) 6,526.1

Expenses:

Cost of services (exclusive of items shown below)
7.1 1,822.3 499.4 (21.6 ) 2,307.2

Cost of products sold
— 194.3 79.9 (24.6 ) 249.6

Selling, general and administrative
207.1 584.8 218.9 — 1,010.8

Reimbursable debit network fees, postage and other
— 1,252.7 30.7 — 1,283.4

Depreciation and amortization
8.0 493.6 108.4 — 610.0

Other operating expenses:

Restructuring, net
7.4 59.5 9.3 — 76.2

Impairments
(0.2 ) 12.5 28.5 — 40.8

Other
2.9 16.8 5.9 — 25.6

232.3 4,436.5 981.0 (46.2 ) 5,603.6

Operating (loss) profit
(229.2 ) 950.8 200.9 — 922.5

Interest income
5.3 5.3 1.8 — 12.4
Interest expense
(185.3 ) (1.9 ) (3.7 ) — (190.9 )
Interest (expense) income from intercompany notes
(19.1 ) 24.9 (5.8 ) — —
Other income (expense)
0.2 68.0 77.6 — 145.8
Equity earnings from consolidated subsidiaries
1,936.0 160.2 — (2,096.2 ) —

1,737.1 256.5 69.9 (2,096.2 ) (32.7 )

Income before income taxes, minority interest, equity earnings in affiliates and discontinued operations
1,507.9 1,207.3 270.8 (2,096.2 ) 889.8
Income tax (benefit) expense(1)
(169.5 ) 507.5 (149.7 ) — 188.3
Minority interest
— (3.1 ) (123.8 ) — (126.9 )
Equity earnings in affiliates
40.0 196.9 (4.0 ) — 232.9

Income from continuing operations
1,717.4 893.6 292.7 (2,096.2 ) 807.5
Income from discontinued operations, net of taxes
— — 909.9 — 909.9

Net income
$ 1,717.4 $ 893.6 $ 1,202.6 $ (2,096.2 ) $ 1,717.4

~~(1)~~: The Non-Guarantor tax benefits are predominately attributable to tax losses of Integrated Payments Systems, Inc. ("IPS"), a wholly owned subsidiary of the Parent. Under tax sharing agreements, IPS receives the tax benefit for tax losses utilized in the Parent's consolidated tax return. The losses are in large part due to IPS historically investing its investment portfolio in non-taxable municipal bonds at the instruction of Parent. The IPS tax benefit included for the successor period September 25, 2007 to December 31, 2007, the predecessor period January 1, 2007 to September 24, 2007 and years ended December 31, 2006 and 2005 was $46.7 million, $171.3 million, $228.6 million, $181.9 million, respectively. As of January 1, 2008, with the wind-down of the official check and money order business and the shift from tax exempt investments to a taxable portfolio, IPS is no longer in a taxable loss position.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING BALANCE SHEET~~

~~(in millions)~~

~~(Successor)~~

December 31, 2007

Parent
Company Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
ASSETS

Current assets:

Cash and cash equivalents
$ 60.6 $ 60.7 $ 485.2 — $ 606.5

Accounts receivable, net of allowance for doubtful accounts
21.9 1,339.1 1,051.8 — 2,412.8

Settlement assets(2)
— 3,989.9 13,152.7 — 17,142.6

Other current assets
94.3 272.3 113.1 — 479.7

Total current assets
176.8 5,662.0 14,802.8 — 20,641.6

Property and equipment, net of accumulated depreciation
21.7 608.6 309.0 — 939.3
Goodwill
— 11,963.3 4,853.9 — 16,817.2
Customer relationships, net of accumulated amortization
— 5,106.5 1,679.0 — 6,785.5
Other intangibles, net of accumulated amortization
2.6 1,087.7 647.8 — 1,738.1
Investment in affiliates
532.8 2,738.0 255.5 — 3,526.3
Long-term settlement assets(2)
— — 1,085.8 — 1,085.8
Other long-term assets
654.2 246.4 74.9 — 975.5
Investment in consolidated subsidiaries
30,208.8 2,246.8 — $ (32,455.6 ) —

Total assets
$ 31,596.9 $ 29,659.3 $ 23,708.7 $ (32,455.6 ) $ 52,509.3

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:

Accounts payable
$ 2.2 $ 84.6 $ 71.7 — $ 158.5

Short-term and current portion of long-term borrowings
266.6 21.5 332.2 — 620.3

Settlement obligations(2)
— 3,989.9 14,238.5 — 18,228.4

Other current liabilities
163.4 772.3 463.2 — 1,398.9

Total current liabilities
432.2 4,868.3 15,105.6 — 20,406.1

Long-term borrowings
21,836.6 12.4 104.5 — 21,953.5
Deferred long-term tax (assets) liabilities
(305.6 ) 2,341.6 345.6 — 2,381.6
Intercompany payable (receivable)
548.6 (88.7 ) (459.9 ) — —
Intercompany notes
1,575.7 (1,254.9 ) (320.8 ) — —
Other long-term liabilities
680.4 144.1 114.6 — 939.1

Total liabilities
24,767.9 6,022.8 14,889.6 — 45,680.3

Stockholder's equity
6,829.0 23,636.5 8,819.1 $ (32,455.6 ) 6,829.0

Total liabilities and stockholder's equity
$ 31,596.9 $ 29,659.3 $ 23,708.7 $ (32,455.6 ) $ 52,509.3

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~
~~CONDENSED CONSOLIDATING BALANCE SHEET~~
~~(in millions)~~
~~(Predecessor)~~

December 31, 2006

Parent
Company Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
ASSETS

Current assets:

Cash and cash equivalents
$ 82.9 $ 190.6 $ 880.7 — $ 1,154.2

Accounts receivable, net of allowance for doubtful accounts
29.4 1,159.5 735.5 — 1,924.4

Settlement assets(2)
— 3,994.8 3,781.1 — 7,775.9

Other current assets
34.0 256.2 84.6 — 374.8

Total current assets
146.3 5,601.1 5,481.9 — 11,229.3

Property and equipment, net of accumulated depreciation
9.0 531.9 227.1 — 768.0
Goodwill
3.8 6,481.5 874.2 — 7,359.5
Customer relationships, net of accumulated amortization
— 1,153.5 445.2 — 1,598.7
Other intangibles, net of accumulated amortization
3.7 756.5 218.6 — 978.8
Investment in affiliates
426.5 206.6 123.4 — 756.5
Long-term settlement assets(2)
— — 11,373.9 — 11,373.9
Other long-term assets
174.6 197.7 128.8 — 501.1
Investment in consolidated subsidiaries
13,555.4 1,041.5 — $ (14,596.9 ) —

Total assets
$ 14,319.3 $ 15,970.3 $ 18,873.1 $ (14,596.9 ) $ 34,565.8

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable
$ 36.3 $ 75.9 $ 62.4 — $ 174.6

Short-term and current portion of long-term borrowings
85.3 20.0 116.6 — 221.9

Settlement obligations(2)
— 3,994.8 15,171.7 — 19,166.5

Other current liabilities
286.8 673.3 431.6 — 1,391.7

Total current liabilities
408.4 4,764.0 15,782.3 — 20,954.7

Long-term borrowings
2,159.6 27.2 107.5 — 2,294.3
Deferred long-term (assets) tax liabilities
(99.2 ) 495.9 139.3 — 536.0
Intercompany payable (receivable)
961.0 (2,194.0 ) 1,233.0 — —
Intercompany notes
535.3 (767.7 ) 232.4 — —
Other long-term liabilities
213.0 332.7 93.9 — 639.6

Total liabilities
4,178.1 2,658.1 17,588.4 — 24,424.6

Stockholders' equity
10,141.2 13,312.2 1,284.7 $ (14,596.9 ) 10,141.2

Total liabilities and stockholders' equity
$ 14,319.3 $ 15,970.3 $ 18,873.1 $ (14,596.9 ) $ 34,565.8

~~(2)~~: The majority of the guarantor settlement assets relates to our merchant acquiring business. We believe the settlement assets are not available to satisfy any claims other than those related to the settlement liabilities.

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~(Successor)~~

~~(in millions)~~

Period from September 25 through December 31, 2007

Parent
Company Guarantor
Subsidiaries Non-
Guarantor
Subsidiaries Eliminations Consolidated
Cash and cash equivalents at beginning of period
— — — — —

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income from continuing operations
$ (301.9 ) $ 91.7 $ 56.8 $ (148.5 ) $ (301.9 )

Adjustments to reconcile to net cash provided by operating activities:

Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)
5.1 327.1 95.0 — 427.2

Charges (gains) related to restructuring, impairments, litigation and regulatory settlements, other and other income (expense)
72.6 (0.1 ) 1.3 — 73.8

Other non-cash and non-operating items, net
(93.9 ) (85.9 ) (4.3 ) 148.5 (35.6 )

(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions
(181.4 ) 168.5 (341.4 ) — (354.3 )

Net cash (used in) provided by operating activities
(499.5 ) 501.3 (192.6 ) — (190.8 )

CASH FLOWS FROM INVESTING ACTIVITIES

Merger with Kohlberg Kravis Roberts & Co, net of cash acquired
(26,016.8 ) 58.2 202.4 — (25,756.2 )

Current period acquisitions, net of cash acquired
(85.2 ) — (51.4 ) — (136.6 )

Payments related to other businesses previously acquired
— (0.5 ) — — (0.5 )

Additions to property and equipment, net
0.1 (31.0 ) (24.3 ) — (55.2 )

Payments to secure customer service contracts, including outlays for conversion and capitalized systems development costs
(0.6 ) (49.7 ) (7.2 ) — (57.5 )

Proceeds from the sale of marketable securities
— — 14.1 — 14.1

Other investing activities
24.2 0.3 84.2 — 108.7

Net cash (used in) provided by investing activities
(26,078.3 ) (22.7 ) 217.8 — (25,883.2 )

CASH FLOWS FROM FINANCING ACTIVITIES

Short-term borrowings, net
60.0 — 178.5 — 238.5

Proceeds from issuance of long-term debt
21,245.7 — — — 21,245.7

Principal payments on long-term debt
(2,019.0 ) (5.5 ) (8.8 ) — (2,033.3 )

Proceeds from issuance of common stock
7,224.4 — — — 7,224.4

Intercompany
127.3 (384.0 ) 256.7 — —

Net cash provided by (used in) financing activities
26,638.4 (389.5 ) 426.4 — 26,675.3

Effect of exchange rate changes on cash and cash equivalents
— (28.4 ) 33.6 — 5.2

Change in cash and cash equivalents
60.6 60.7 485.2 — 606.5

Cash and cash equivalents at end of period
$ 60.6 $ 60.7 $ 485.2 $ — $ 606.5

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~
~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~
~~(Predecessor)~~
~~(in millions)~~

Period from January 1 through September 24, 2007

Parent
Company Guarantor
Subsidiaries Non-
Guarantor
Subsidiaries Eliminations Consolidated
Cash and cash equivalents at beginning of period
$ 82.9 $ 190.6 $ 880.7 — $ 1,154.2

CASH FLOWS FROM OPERATING ACTIVITIES

Net income from continuing operations
460.8 710.7 269.4 $ (976.5 ) 464.4

Net loss from discontinued operations
— — (3.6 ) — (3.6 )

Adjustments to reconcile to net cash provided by operating activities:

Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)
12.3 401.4 126.5 — 540.2

(Gains) charges related to restructuring, impairments, litigation and regulatory settlements, other and other income (expense)
(6.8 ) 10.2 17.5 — 20.9

Other non-cash and non-operating items, net
(653.8 ) (243.0 ) (11.9 ) 976.5 67.8

(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions
(300.0 ) 339.0 (368.1 ) — (329.1 )

Net cash (used in) provided by operating activities from continuing operations
(487.5 ) 1,218.3 33.4 — 764.2

Net cash used in operating activities from discontinued operations
— — (9.7 ) — (9.7 )

Net cash provided by operating activities
(487.5 ) 1,218.3 23.7 — 754.5

CASH FLOWS FROM INVESTING ACTIVITIES

Current period acquisitions, net of cash acquired
(358.1 ) (12.4 ) (319.8 ) — (690.3 )

Payments related to other businesses previously acquired
(12.0 ) (33.9 ) (4.1 ) — (50.0 )

Additions to property and equipment, net
(15.9 ) (195.4 ) (64.2 ) — (275.5 )

Payments to secure customer service contracts, including outlays for conversion and capitalized systems development costs
(5.0 ) (106.9 ) (11.8 ) — (123.7 )

Proceeds from the sale of marketable securities
— 11.8 — — 11.8

Other investing activities
(17.4 ) (10.3 ) 18.2 — (9.5 )

Net cash used in investing activities
(408.4 ) (347.1 ) (381.7 ) — (1,137.2 )

CASH FLOWS FROM FINANCING ACTIVITIES

Short-term borrowings, net
— — 26.3 — 26.3

Principal payments on long-term debt
(88.3 ) (19.1 ) (19.2 ) — (126.6 )

Proceeds from issuance of common stock
187.4 — — — 187.4

Excess tax benefit from share-based payment
arrangement
219.8 — — — 219.8

Purchase of treasury shares
(371.8 ) — — — (371.8 )

Cash dividends
(67.7 ) — — — (67.7 )

Intercompany
1,346.4 (994.7 ) (351.7 ) — —

Net cash provided by (used in) financing activities
1,225.8 (1,013.8 ) (344.6 ) — (132.6 )

Effect of exchange rate changes on cash and cash
equivalents
— 10.2 24.3 — 34.5

Change in cash and cash equivalents
329.9 (132.4 ) (678.3 ) — (480.8 )

Cash and cash equivalents at end of period
$ 412.8 $ 58.2 $ 202.4 $ — $ 673.4

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~(Predecessor)~~

~~(in millions)~~

Year ended December 31, 2006

Parent
Company Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Cash and cash equivalents at beginning of period, including cash of discontinued operations
$ 18.5 $ 153.2 $ 1,009.2 — $ 1,180.9

CASH FLOWS FROM OPERATING ACTIVITIES

Net income from continuing operations
1,513.4 1,065.6 303.3 $ (2,034.6 ) 847.7

Net income from discontinued operations
— — 665.7 — 665.7

Adjustments to reconcile to net cash provided by operating activities:

Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)
15.2 543.0 142.6 — 700.8

(Gains) charges related to restructuring, impairments, litigation and regulatory settlements, other and other income (expense)
(12.1 ) 37.5 (43.0 ) — (17.6 )

Other non-cash and non-operating items, net
(1,709.7 ) (353.5 ) (9.9 ) 2,034.6 (38.5 )

(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions
(431.9 ) 484.6 (256.1 ) — (203.4 )

Net cash (used in) provided by operating activities from continuing operations
(625.1 ) 1,777.2 136.9 — 1,289.0

Net cash provided by operating activities from discontinued operations
— — 796.0 — 796.0

Net cash (used in) provided by operating activities
(625.1 ) 1,777.2 932.9 — 2,085.0

CASH FLOWS FROM INVESTING ACTIVITIES

Current period acquisitions, net of cash acquired
(277.1 ) (0.7 ) (9.7 ) — (287.5 )

Payments related to other businesses previously acquired
(0.1 ) (44.1 ) (6.9 ) — (51.1 )

Proceeds from dispositions, net of expenses paid
74.6 124.1 — — 198.7

Additions to property and equipment, net
(3.2 ) (113.5 ) (53.7 ) — (170.4 )

Payments to secure customer service contracts, including outlays for conversion and capitalized systems development costs
(1.6 ) (111.8 ) (16.3 ) — (129.7 )

Proceeds from the sale of marketable securities
— 34.3 10.7 — 45.0

Dividend received from discontinued operations
2,500.0 — — — 2,500.0

Cash retained by Western Union
— — (1,327.8 ) — (1,327.8 )

Other investing activities
54.3 (42.5 ) 190.8 — 202.6

Net cash provided by (used in) investing activities from continuing operations
2,346.9 (154.2 ) (1,212.9 ) — 979.8

Net cash used in investing activities from discontinued operations
— — (280.3 ) — (280.3 )

Net cash provided by (used in) investing activities
2,346.9 (154.2 ) (1,493.2 ) — 699.5

CASH FLOWS FROM FINANCING ACTIVITIES

Short-term borrowings, net
290.9 — (114.9 ) — 176.0

Principal payments on long-term debt
(2,372.3 ) (19.3 ) (21.2 ) — (2,412.8 )

Proceeds from issuance of common stock
729.8 — — — 729.8

Excess tax benefit from share-based payment arrangement
124.2 — — — 124.2

Purchase of treasury shares
(1,252.5 ) — — — (1,252.5 )

Cash dividends
(183.6 ) — — — (183.6 )

Intercompany
1,006.1 (1,575.3 ) 569.2 — —

Net cash (used in) provided by financing activities from continuing operations
(1,657.4 ) (1,594.6 ) 433.1 — (2,818.9 )

Net cash (used in) financing activities from discontinued operations
— — (26.5 ) — (26.5 )

Net cash provided by (used in) financing activities
(1,657.4 ) (1,594.6 ) 406.6 — (2,845.4 )

Effect of exchange rate changes on cash and cash equivalents
— 9.0 25.2 — 34.2

Change in cash and cash equivalents
64.4 37.4 (128.5 ) — (26.7 )

Cash and cash equivalents at end of period
$ 82.9 $ 190.6 $ 880.7 $ — $ 1,154.2

~~FIRST DATA CORPORATION~~

~~NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~Note 20: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~(Predecessor)~~

~~(in millions)~~

Year ended December 31, 2005

Parent
Company Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Cash and cash equivalents at beginning of period, including cash of discontinued operations
$ 29.0 $ 240.2 $ 626.2 — $ 895.4

CASH FLOWS FROM OPERATING ACTIVITIES

Net income from continuing operations
1,717.4 893.6 292.7 $ (2,096.2 ) 807.5

Net income from discontinued operations
— — 909.9 — 909.9

Adjustments to reconcile to net cash provided by operating activities:

Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)
14.3 561.4 113.3 — 689.0

Charges (gains) related to restructuring, impairments, other and other income (expense)
9.9 20.8 (33.9 ) — (3.2 )

Other non-cash and non-operating items, net
(1,941.7 ) (169.2 ) 5.5 2,096.2 (9.2 )

(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions
(452.8 ) 424.4 (200.5 ) — (228.9 )

Net cash (used in) provided by operating activities from continuing operations
(652.9 ) 1,731.0 177.1 — 1,255.2

Net cash provided by operating activities from discontinued operations
— — 1,091.0 — 1,091.0

Net cash (used in) provided by operating activities
(652.9 ) 1,731.0 1,268.1 — 2,346.2

CASH FLOWS FROM INVESTING ACTIVITIES

Current period acquisitions, net of cash acquired
(50.6 ) (81.4 ) (311.9 ) — (443.9 )

Payments related to other businesses previously acquired
— (55.3 ) (0.5 ) — (55.8 )

Proceeds from dispositions, net of expenses paid
— 46.4 9.8 — 56.2

Additions to property and equipment, net
(19.5 ) (140.4 ) (29.6 ) — (189.5 )

Payments to secure customer service contracts, including outlays for conversion and capitalized systems development costs
(1.7 ) (121.8 ) (14.4 ) — (137.9 )

Proceeds from the sale of marketable securities
— 187.3 37.2 — 224.5

Other investing activities
1.9 6.3 (96.7 ) — (88.5 )

Net cash used in investing activities from continuing operations
(69.9 ) (158.9 ) (406.1 ) — (634.9 )

Net cash used in investing activities from discontinued operations
— — (125.1 ) — (125.1 )

Net cash used in investing activities
(69.9 ) (158.9 ) (531.2 ) — (760.0 )

CASH FLOWS FROM FINANCING ACTIVITIES

Short-term borrowings, net
39.6 — — — 39.6

Proceeds from issuance of long-term debt
995.6 — — — 995.6

Principal payments on long-term debt
(200.0 ) (26.8 ) (15.4 ) — (242.2 )

Proceeds from issuance of common stock
319.5 — — — 319.5

Purchase of treasury shares
(2,222.7 ) — — — (2,222.7 )

Cash dividends
(155.0 ) — — — (155.0 )

Intercompany
1,935.3 (1,623.2 ) (312.1 ) — —

Net cash provided by (used in) financing activities from continuing operations
712.3 (1,650.0 ) (327.5 ) — (1,265.2 )

Net cash used in financing activities from discontinued operations
— — (0.7 ) — (0.7 )

Net cash provided by (used in) financing activities
712.3 (1,650.0 ) (328.2 ) — (1,265.9 )
Effect of exchange rate changes on cash and cash equivalents
— (9.1 ) (25.7 ) — (34.8 )

Change in cash and cash equivalents
(10.5 ) (87.0 ) 383.0 — 285.5

Cash and cash equivalents at end of period, including cash of discontinued operations
$ 18.5 $ 153.2 $ 1,009.2 $ — $ 1,180.9

~~FIRST DATA CORPORATION~~

~~CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(Unaudited)~~

~~(in millions)~~

Successor
Predecessor

Three months
ended March 31,
2008
Three months
ended March 31,
2007
Revenues:

Transaction and processing service fees:

Merchant related services(a)
$ 634.9 $ 568.8

Check services
100.6 96.1

Card services(a)
506.5 461.1

Other services
137.7 141.7

Investment income, net
56.0 (30.3 )

Product sales and other
212.0 188.0

Reimbursable debit network fees, postage and other
478.8 410.9

2,126.5 1,836.3

Expenses:

Cost of services (exclusive of items shown below)
756.8 691.4

Cost of products sold
70.9 66.7

Selling, general and administrative
304.3 294.8

Reimbursable debit network fees, postage and other
478.8 410.9

Depreciation and amortization
319.1 158.8

Other operating expenses:

Restructuring, net
— 2.0

Impairments
— 16.3

1,929.9 1,640.9

Operating profit
196.6 195.4

Interest income
9.0 8.0
Interest expense
(517.7 ) (34.5 )
Other income (expense)
(43.2 ) 1.0

(551.9 ) (25.5 )

(Loss) income before income taxes, minority interest, equity earnings in affiliates and discontinued operations
(355.3 ) 169.9
Income tax (benefit) expense
(130.5 ) 37.4
Minority interest
(29.0 ) (29.1 )
Equity earnings in affiliates
32.1 68.3

(Loss) income from continuing operations
(221.7 ) 171.7
Income from discontinued operations, net of taxes of $(4.1)
— 3.5

Net (loss) income
$ (221.7 ) $ 175.2

~~(a)~~: Includes processing fees, administrative service fees and other fees charged to merchant alliances accounted for under the equity method of $53.3 million for the three months ended March 31, 2008 and $53.4 million for the comparable period in 2007.
~~See Notes to Consolidated Financial Statements.~~

~~FIRST DATA CORPORATION~~

~~CONSOLIDATED BALANCE SHEETS~~

~~(in millions, except common stock share amounts)~~

Successor

March 31,
2008 December 31,
2007

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents
$ 701.9 $ 606.5

Receivables, net of allowance for doubtful accounts of $16.8 (2008) and $14.7 (2007)
2,216.2 2,412.8

Settlement assets
15,432.3 17,142.6

Other current assets
462.8 479.7

Total current assets
18,813.2 20,641.6

Property and equipment, net of accumulated depreciation of $121.2 (2008) and $61.2 (2007)
975.1 939.3
Goodwill
17,074.8 16,817.2
Customer relationships, net of accumulated amortization of $425.9 (2008) and $230.5 (2007)
6,697.5 6,785.5
Other intangibles, net of accumulated amortization of $138.4 (2008) and $76.9 (2007)
1,766.7 1,738.1
Investment in affiliates
3,490.6 3,526.3
Long-term settlement assets
567.8 1,085.8
Other long-term assets
885.4 975.5

Total assets
$ 50,271.1 $ 52,509.3

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:

Accounts payable
$ 156.8 $ 158.5

Short-term and current portion of long-term borrowings
614.0 620.3

Settlement obligations
16,001.1 18,228.4

Other current liabilities
1,304.0 1,398.9

Total current liabilities
18,075.9 20,406.1

Long-term borrowings
22,098.6 21,953.5

Deferred long-term tax liabilities
2,107.3 2,381.6

Other long-term liabilities
1,210.5 939.1

Total liabilities
43,492.3 45,680.3

Commitments and contingencies (see Note 9)

Stockholder's equity:

Common stock, $.01 par value; authorized and issued 1,000 shares (2008 and 2007)
— —

Additional paid-in capital
7,333.8 7,224.4

Paid-in capital
7,333.8 7,224.4

Retained loss
(523.6 ) (301.9 )

Accumulated other comprehensive loss
(31.4 ) (93.5 )

Total stockholder's equity
6,778.8 6,829.0

Total liabilities and stockholder's equity
$ 50,271.1 $ 52,509.3

~~See Notes to Consolidated Financial Statements.~~

~~FIRST DATA CORPORATION~~

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(in millions)~~

~~(Unaudited)~~

Successor
Predecessor

Three months
ended March 31,
2008
Three months
ended March 31,
2007
Cash and cash equivalents at beginning of period
$ 606.5 $ 1,154.2

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income from continuing operations
(221.7 ) 171.7

Net income from discontinued operations
— 3.5

Adjustments to reconcile to net cash provided by operating activities:

Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)
368.4 180.8

Charges (gains) related to restructuring, impairments and other income (expense)
43.2 17.3

Other non-cash and non-operating items, net
(4.9 ) (56.8 )

Increase (decrease) in cash, excluding the effects of acquisitions and dispositions, resulting from changes in:

Accounts receivable, current and non-current
240.0 127.9

Other assets, current and non-current
142.1 79.8

Accounts payable and other liabilities, current and non-current
(133.3 ) (83.3 )

Income tax accounts
(149.8 ) 7.1

Excess tax benefit from share-based payment arrangement
— (12.4 )

Net cash provided by operating activities from continuing operations
284.0 432.1

Net cash used in operating activities from discontinued operations
— (9.7 )

Net cash provided by operating activities
284.0 422.4

CASH FLOWS FROM INVESTING ACTIVITIES

Current period acquisitions, net of cash acquired
(193.3 ) (239.9 )

Payments related to other businesses previously acquired
(18.3 ) (50.8 )

Additions to property and equipment, net
(53.4 ) (56.7 )

Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs
(40.8 ) (41.0 )

Proceeds from the sale of marketable securities
52.3 11.2

Other investing activities
(1.5 ) 13.5

Net cash used in investing activities
(255.0 ) (363.7 )

CASH FLOWS FROM FINANCING ACTIVITIES

Short-term borrowings, net
(15.0 ) (49.3 )

Principal payments on long-term debt
(44.9 ) (101.8 )

Proceeds from issuance of common stock
— 61.8

Capital contributed by Parent
105.1 —

Excess tax benefit from share-based payment arrangement
— 12.4

Purchase of treasury shares
— (117.1 )

Cash dividends
— (22.6 )

Net cash provided by (used in) financing activities
45.2 (216.6 )

Effect of exchange rate changes on cash and cash equivalents
21.2 8.0

Change in cash and cash equivalents
95.4 (149.9 )

Cash and cash equivalents at end of period
$ 701.9 $ 1,004.3

~~See Notes to Consolidated Financial Statements.~~

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~(Unaudited)~~

~~Note 1: Basis of Presentation~~

The accompanying Consolidated Financial Statements of First Data Corporation ("FDC" or the "Company") should be read in conjunction with the Company's Consolidated Financial Statements for the year ended December 31, 2007. Significant accounting policies disclosed therein have not changed.

On September 24, 2007, the Company was acquired through a merger transaction with an entity controlled by affiliates of Kohlberg Kravis Roberts & Co. ("KKR" or the "sponsor"). The merger resulted in the equity of FDC becoming privately held. Details of the merger are more fully discussed in Note 2. The accompanying consolidated statements of operations and cash flows are presented for two periods: predecessor (the three month period ended March 31, 2007) and successor (the three month period ended March 31, 2008), which relate to the period preceding the merger and the period succeeding the merger, respectively. The Company applied purchase accounting to the opening balance sheet and results of operations on September 25, 2007 as the merger occurred at the close of business on September 24, 2007. The merger resulted in a new basis of accounting beginning on September 25, 2007.

The accompanying Consolidated Financial Statements are unaudited; however, in the opinion of management, they include all normal recurring adjustments necessary for a fair presentation of the consolidated financial position of the Company at March 31, 2008, and the consolidated results of its operations and cash flows for the successor and predecessor periods for the three months ended March 31, 2008 and 2007, respectively. Results of operations reported for interim periods are not necessarily indicative of results for the entire year due in part to the seasonality of certain business units.

~~Use of Estimates~~

The preparation of 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 Consolidated Financial Statements and accompanying notes. Actual results could differ from these estimates.

~~Presentation~~

The Company's Consolidated Balance Sheet presentation has historically been unclassified due to the short-term nature of its settlement obligations contrasted with the Company's ability to invest cash awaiting settlement in long-term investment securities. The Company repositioned the majority of its investment portfolio associated with cash awaiting settlement from long-term investments to short-term investments. As a result of the repositioning of the portfolio such that a majority of the settlement assets and all settlement liabilities are short-term, the Company has changed to a classified balance sheet. The Consolidated Balance Sheet as of December 31, 2007 has been adjusted to conform to this presentation.

A new Chief Executive Officer, the Company's chief operating decision maker, was appointed as a result of the September 24, 2007 merger with an affiliate of KKR. In connection with this change in leadership, changes were made to the Company's senior management and organization of the business. Effective January 1, 2008, the Company's new Chief Executive Officer began making strategic and operating decisions with regards to assessing performance and allocating resources based on a new segment structure. Segment results for 2007 have been adjusted to reflect the new structure. In

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 1: Basis of Presentation (Continued)~~

connection with this segment realignment the Company also reclassified certain transaction and processing service fee revenue components in the Consolidated Statements of Operations, primarily the prepaid business from "Merchant related services" to "Other services" and the debit network business from "Merchant related services" to "Card services". Additionally, consolidated expenses for 2007 have been adjusted to present certain depreciation and amortization amounts as a separate component of expenses.

~~Official Check and Money Order Wind-down~~

In conjunction with the wind-down of the official check and money order business (included within the Integrated Payment Systems ("IPS") segment) and in the first quarter 2008, the Company repositioned its investment portfolio to principally taxable investments. As a result, the revenues and operating profit of the IPS segment are no longer stated on a pretax equivalent basis effective as of January 1, 2008. The investment portfolio decreased from $12.6 billion at December 31, 2007 to $9.6 billion at March 31, 2008 due to the wind-down. The investment portfolio included approximately $558 million of auction rate securities as of March 31, 2008 compared to approximately $1,077 million as of December 31, 2007. The auction mechanism on certain of these investments has failed so these investments are not currently liquid; however, all of the securities were "AAA" rated, except for one "AA" rated, and the Company has the ability and intent to hold them until the auction mechanism or alternative liquidity vehicle is established. The Company does not believe these securities were impaired at March 31, 2008. At March 31, 2008, the market values of the auction rate securities approximated their par values. Subsequent to March 31, 2008, the market became even less liquid which may factor into the Company's consideration of the investments' value in future periods if such market conditions continue.

~~Revenue Recognition~~

The Company recognizes revenues from its processing services as such services are performed. Revenue is recorded net of certain costs such as credit and offline debit interchange fees and assessments charged by credit card associations which totaled $1,902.7 million and $1,651.8 million for the three months ended March 31, 2008 and 2007, respectively. Debit network fees related to acquired PIN-based debit transactions are recognized in the "Reimbursable debit network fees, postage and other" revenues and expenses lines of the Consolidated Statements of Operations. The debit network fees related to acquired PIN-debit transactions charged by debit networks totaled $285.9 million and $224.9 million for the three months ended March 31, 2008 and 2007, respectively.

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 1: Basis of Presentation (Continued)~~

~~Supplemental Financial Information~~

~~The following table details the components of "Other income (expense)" on the Consolidated Statements of Operations:~~

Successor
Predecessor
(in millions)
Three months
ended
March 31,
2008
Three months
ended
March 31,
2007
Investment gains and (losses)
$ 22.1 $ (1.4 )
Derivative financial instruments gains and (losses)
(12.8 ) —
Divestitures, net
— 1.0
Debt repayment gains and (losses)
— 1.4
Non-operating foreign currency gains and (losses)
(52.5 ) —

Other income (expense)
$ (43.2 ) $ 1.0

The investment gains for the three months ended March 31, 2008 resulted from the sale of MasterCard stock. The net losses related to derivative financial instruments were due most significantly to the mark-to-market adjustments for cross currency swaps and interest rate swaps that are not designated as accounting hedges.

For the three months ended March 31, 2008, the net non-operating foreign currency exchange loss related to the mark-to-market of the Company's intercompany loans and the euro-denominated debt issued in connection with the merger. Historically, intercompany loans were deemed to be of a long-term nature for which settlement was not planned or anticipated in the foreseeable future. Accordingly, the translation adjustments were reported in "Other comprehensive income". Effective in September 2007, the Company now plans to settle the intercompany loans which results in a benefit or charge to earnings due to movement in foreign currency exchange rates.

~~Supplemental Cash Flow Information~~

Significant non-cash transactions during the three months ended March 31, 2008 included the Company increasing the principal amount of its senior unsecured PIK term loan facility by $67.6 million resulting from the "payment" of interest expense.

~~See Note 11 for information concerning the Company's stock-based compensation plans.~~

~~New Accounting Pronouncements~~

In December 2007, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 141(R), "Business Combinations." The new standard will significantly change the financial accounting and reporting of business combination transactions in the consolidated financial statements. It will require an acquirer to recognize, at the acquisition date, the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at their full fair values as of that date. In a business combination achieved in stages (step acquisitions), the acquirer will be required to remeasure its previously held equity interest in the acquiree at its acquisition-date fair

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 1: Basis of Presentation (Continued)~~

value and recognize the resulting gain or loss in earnings. The acquisition-related transaction and restructuring costs will no longer be included as part of the capitalized cost of the acquired entity but will be required to be accounted for separately in accordance with applicable generally accepted accounting principles in the U.S. SFAS No. 141(R) 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.

In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements." The statement clarifies the definition of a non-controlling (or minority) interest and requires that non-controlling interests in subsidiaries be reported as a component of equity in the consolidated statement of financial position and requires that earnings attributed to the non-controlling interests be reported as part of consolidated earnings and not as a separate component of income or expense. However, it will also require expanded disclosures of the attribution of consolidated earnings to the controlling and non-controlling interests on the face of the consolidated income statement. SFAS No. 160 will require that changes in a parent's controlling ownership interest, that do not result in a loss of control of the subsidiary, are accounted for as equity transactions among shareholders in the consolidated entity therefore resulting in no gain or loss recognition in the income statement. Only when a subsidiary is deconsolidated will a parent recognize a gain or loss in net income. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008, and will be applied prospectively except for the presentation and disclosure requirements that will be applied retrospectively for all periods presented.

~~Note 2: Merger~~

On September 24, 2007, FDC merged with Omaha Acquisition Corporation, a wholly owned subsidiary of First Data Holdings, Inc. which, in turn, was controlled by affiliates of KKR. For additional details, refer to Note 2 to the Consolidated Financial Statements in the Company's Consolidated Financial Statements for the year ended December 31, 2007.

~~Preliminary Purchase Price Allocation~~

The total purchase price of approximately $26.6 billion was allocated to the Company's net tangible and identifiable intangible assets based on their estimated fair values as set forth below. Property and equipment were carried forward at historical net balances as a current best estimate of fair value. The Company is in the process of valuing fixed assets and expects to be completed in the second quarter of 2008. A portion of the preliminary valuation was allocated to the Company's investments in unconsolidated joint ventures (reflected in the "Investment in affiliates" line of the Consolidated Balance Sheets). The excess of the purchase price over the net tangible and identifiable intangible assets was recorded as goodwill. The preliminary allocation of the purchase price to identifiable intangible assets was based upon preliminary valuation data and the estimates and assumptions are subject to change. The Company is also in the process of working through other

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 2: Merger (Continued)~~

~~potential purchase accounting adjustments that mostly relate to pre-acquisition contingencies and implementation of management's restructuring plans.~~

(in millions)

Property and equipment
$ 931.1
Customer Relationships
6,987.5
Software
990.0
Tradenames
621.1
Other Intangibles
96.0
Goodwill
16,766.2
Investment in affiliates
3,565.1
Deferred taxes
(2,255.8 )
Other net liabilities acquired
(1,145.2 )

Total purchase price
$ 26,556.0

The preliminary estimated weighted-average useful lives (excluding the impact of accelerated amortization and the First Data tradename which was determined to have an indefinite life) associated with the intangible assets are approximately:


~~Customer Relationships~~		~~14 years~~
~~Software~~		~~5 years~~
~~Tradenames~~		~~15 years~~
~~Other Intangibles~~		~~24 years~~
~~Investment in affiliates~~		~~11 years~~
~~Total weighted—average useful lives~~		~~13 years~~

The Company generally uses straight-line amortization for intangible assets other than for customer relationships for which the pattern of economic benefits are known and for which an accelerated method of amortization is used to more appropriately allocate the cost of the relationships to the periods that will benefit from them. Deferred tax liabilities were recorded related to the allocation of the purchase price to intangible assets. Less than 5% of goodwill resulting from the merger is deductible for tax purposes at a local jurisdiction level. The preliminary allocation of goodwill by segment is as follows (in millions):

Merchant Services
$ 9,066.7
Financial Services
3,801.2
International
2,845.1
Prepaid Services
1,039.9
Integrated Payment Systems
—
All Other and Corporate
13.3

$ 16,766.2

~~Goodwill will be reviewed at least annually for impairment.~~

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 2: Merger (Continued)~~

~~Merger Related Restructuring Charges~~

During the fourth quarter 2007, the Company implemented a plan that provided strategic direction for the Company under its new leadership. The plan anticipated capturing efficiencies related to the simplification of domestic and international operations and other near term cost saving initiatives as well as certain reductions in personnel. In accordance with this plan and in November 2007, the Company terminated approximately 1,600 employees across the organization representing all levels of employees and approximately 6% of its worldwide work force. A majority of them ceased working before December 31, 2007. The Company expects that the remaining employees will cease working at various times through the first six months of 2008. Additional actions occurred during first quarter 2008 resulting in the termination of over 100 employees across the organization most of whom ceased working before March 31, 2008. A majority of the successor severance costs were recorded in purchase accounting with the remainder recorded through current operations. The Company anticipates taking additional similar types of actions during the remainder of 2008 as part of its overall plan, with the majority of severance costs to be recorded in purchase accounting as assumed liabilities.

~~The following table summarizes the Company's utilization of restructuring accruals related to the merger recorded in purchase accounting for the three months ended March 31, 2008:~~

Employee
Severance

(in millions)

Remaining accrual at January 1, 2008
$ 92.4

Charges recorded in purchase accounting
15.8

Cash payments
(43.5 )

Other adjustments
(0.9 )

Remaining accrual at March 31, 2008
$ 63.8

~~Merger and Other Related Costs~~

~~During the three months ended March 31, 2007, the Company expensed merger related costs consisting primarily of investment banking, accounting and legal fees totaling $5.0 million.~~

~~Unaudited Pro Forma Condensed Consolidated Statements of Operations~~

The following Unaudited Pro Forma Condensed Consolidated Statements of Operations reflect the consolidated results of operations of the Company as if the merger had occurred on January 1, 2007. The historical financial information has been adjusted to give effect to events that are (1) directly attributed to the merger, (2) factually supportable, and (3) with respect to the statement of operations, expected to have a continuing impact on the combined results. Such items include interest expense related to debt issued in conjunction with the merger as well as additional amortization expense associated with the preliminary valuation of intangible assets. This unaudited pro forma information should not be relied upon as necessarily being indicative of the historical results that would have been obtained if the merger had actually occurred on that date, nor of the results that may be obtained in the future.

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 2: Merger (Continued)~~

~~Unaudited Pro Forma Condensed Consolidated Statements of Operations~~

Three months
ended March 31,
2007

(in millions)

Revenues:

Transaction and processing service fees
$ 1,267.7

Investment income, net
(30.3 )

Product sales and other
188.0

Reimbursable debit network fees, postage and other
410.9

1,836.3

Expenses:

Cost of services (exclusive of items shown below)
688.8

Cost of products sold
66.7

Selling, general and administrative
293.9

Reimbursable debit network fees, postage and other
410.9

Depreciation and amortization
317.6

Other operating expenses:

Restructuring, net
2.0

Impairments
16.3

1,796.2

Operating profit
40.1

Interest income
8.0
Interest expense
(511.7 )
Other income (expense)
(0.4 )

(504.1 )

Loss before income taxes, minority interest, equity earnings in affiliates and discontinued operations
(464.0 )
Income taxes
(217.5 )
Minority interest
(29.1 )
Equity earnings in affiliates
18.8

Loss from continuing operations
$ (256.8 )

~~Note 3: Restructuring and Impairments~~

~~Restructuring charges and reversal of restructuring accruals~~

During the first quarter 2007, the Company recorded restructuring charges comprised of severance totaling $2.0 million, net of accrual reversals. The charges resulted from efforts to improve the overall efficiency and effectiveness of the sales and sales support teams within the Merchant Services segment. Severance charges resulted from the termination of approximately 230 sales related employees

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 3: Restructuring and Impairments (Continued)~~

~~comprising approximately 10% of the segment's regional sales, cross-sale and sales support organizations. This restructuring plan was completed in the first quarter of 2007.~~

The following table summarizes the Company's utilization of restructuring accruals from continuing operations, excluding merger related restructuring charges described in Note 2, for the period from January 1, 2008 through March 31, 2008 (in millions):

Employee
Severance Facility
Closure
Remaining accrual at January 1, 2008
$ 6.5 $ 0.1

Expense provision
— —

Cash payments and other
(1.7 ) (0.1 )

Changes in estimates(a)
(0.8 ) —

Remaining accrual at March 31, 2008
$ 4.0 $ —

~~(a)~~: ~~Recorded through purchase accounting for the merger.~~

~~Impairments~~

During the first quarter 2007, the Company recorded a charge of $16.3 million related to the impairment of goodwill and intangible assets associated with the wind-down of the Company's official check and money order business.

~~Note 4: Acquisitions~~

In January 2008, the Company entered into a joint venture with Allied Irish Banks p.l.c. ("AIB"), of which the Company owns 50.1%. The joint venture provides card acquiring services in the Republic of Ireland, the United Kingdom and elsewhere in Europe. The cash paid to acquire AIB was approximately $176 million. The preliminary purchase price allocation resulted in identifiable intangible assets of $70 million, which are being amortized over 10 years, a tradename of $40 million that is being amortized over 15 years and goodwill of $71 million. The joint venture with AIB is consolidated and reported as part of the International segment.

~~In February 2008, the Company acquired the remaining interest in Unified Network Payment Solutions ("UNPS") located in Canada. UNPS is consolidated and reported as part of the International segment.~~

The aggregate cash paid during the three months ended March 31, 2008 for the acquisitions was approximately $193 million. The aggregate preliminary purchase price allocation for these acquisitions resulted in $70 million in identifiable intangible assets, which are being amortized over 10 years, tradenames of $41 million that are being amortized over 10 to 15 years and goodwill of $71 million.

~~The pro forma impact of all 2008 acquisitions on net income was not material.~~

On April 28, 2008, the Company announced that it had reached an agreement to acquire InComm Holdings Inc. ("InComm"). The transaction is subject to customary closing conditions and regulatory approvals. InComm is a distributor of gift cards, prepaid wireless products, reloadable debit cards,

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 4: Acquisitions (Continued)~~

digital music downloads, content, games, software and bill payment solutions. InComm also provides stored valued product marketing and technology solutions to international markets in Europe and Canada. The Company will acquire InComm for approximately $980 million, plus contingent future payments of up to $250 million over a three-year performance period. The acquisition is expected to close in the second half of 2008. InComm will be reported as part of the Prepaid Services segment.

~~Note 5: Investments in Affiliates~~

At March 31, 2008, there were eight affiliates accounted for under the equity method of accounting, comprised of five merchant alliances and three strategic investments in companies in related markets. The majority of equity earnings relate to the Chase Paymentech alliance, the Company's largest merchant alliance. Chase Paymentech, is 51% owned by J.P. Morgan Chase Bank, N.A., and 49% owned by FDC. The current term of the existing alliance agreement expires in 2010; however, JPMorgan had the right to terminate the alliance due to the change of control upon the closing of the merger. The Company has extended the time period to exercise this right to allow for further discussions regarding the alliance; however, the Company expects the alliance to end prior to its existing expiration date in 2010. The Company believes the new expiration date will most likely be sometime in 2009. Under the alliance agreement, FDC has the right to receive 49% of the alliance's merchant contracts by value and be allocated 49% of the alliance's sales force. The Company has historically accounted for its minority interest in Chase Paymentech under the equity method of accounting. Upon expiration, the portion of the alliance's business retained by the Company would instead be reflected on a consolidated basis throughout the financial statements. Additionally, expiration in 2009 will cause the Company to incur an obligation associated with taxes. Based on preliminary estimates and assumptions this obligation could be in excess of $200 million. A significant portion of this obligation may be recovered through amortization of increased tax basis generated by this event.

~~A summary of unaudited financial information for the merchant alliances and other affiliates accounted for under the equity method of accounting is as follows:~~

Successor

March 31,
2008 December 31,
2007

(in millions)

Total assets
$ 8,093.7 $ 7,443.7
Total liabilities
$ 6,849.2 $ 6,186.8

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 5: Investments in Affiliates (Continued)~~

Successor
Predecessor

Three months ended March 31, 2008
Three months ended March 31, 2007

(in millions)

Net operating revenues
$ 413.0 $ 375.4
Operating expenses
241.3 214.5

Operating income
$ 171.7 $ 160.9

Net income
$ 164.4 $ 152.7
FDC equity earnings
$ 32.1 $ 68.3

The primary components of assets and liabilities are settlement-related accounts as described in Note 6 to the Consolidated Financial Statements included in the Company's Consolidated Financial Statements for the year ended December 31, 2007.

~~Note 6: Borrowings~~

The Company has a $2.0 billion senior secured revolving credit facility. The amounts outstanding against this facility were $90.0 million and $60.0 million as of March 31, 2008 and December 31, 2007, respectively.

The terms of the Company's senior secured term loan facility require the Company to pay equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount. During the three months ended March 31, 2008, the Company paid $31.9 million of principal payments on the senior secured term loan facility in accordance with this provision ($29.4 million related to the U.S. dollar denominated loan and $2.5 million related to the euro denominated loan).

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 6: Borrowings (Continued)~~

The terms of the Company's senior unsecured PIK (Payment In-Kind) term loan require that interest on this loan up to and including September 30, 2011 be paid entirely by increasing the principal amount of the outstanding loan or by issuing senior unsecured PIK debt. During the three months ended March 31, 2008, the Company increased the principal amount of this loan by $67.6 million in accordance with this provision.

The Company has lines of credit associated with First Data Deutschland which totaled approximately 160 million euro, or approximately $254 million, as of March 31, 2008. The Company had $122.2 million outstanding against these lines of credit as of March 31, 2008 and the full amount outstanding against these lines of credit as of December 31, 2007.

The Company has lines of credit associated with Cashcard Australia, Ltd. which are periodically used to fund ATM settlement activity. As of March 31, 2008, the lines of credit totaled approximately 162 million Australian dollars, or approximately $149 million. The Company had $62.0 million and $54.6 million outstanding against these lines of credit as of March 31, 2008 and December 31, 2007, respectively.

The Company also has committed lines of credit associated with the AIB joint venture which totaled 145 million euro, or approximately $230 million, as of March 31, 2008. The credit lines are used primarily to fund settlement activity. The Company had $75.0 million outstanding against these lines of credit as of March 31, 2008.

The Company has two credit facilities associated with First Data Polska which are periodically used to fund settlement activity. The maximum amount available under these facilities, which varies for peak needs during the year, totals 245 million Polish zloty, or approximately $110 million. The Company had an immaterial amount outstanding against these lines of credit as of March 31, 2008 and December 31, 2007.

~~The Company is in compliance with all applicable covenants as of March 31, 2008.~~

~~Note 7: Comprehensive Income~~

~~The components of comprehensive income (loss) are as follows (in millions):~~

Successor
Predecessor

Three months ended
March 31, 2008
Three months ended
March 31, 2007
Net (loss) income
$ (221.7 ) $ 175.2
Foreign currency translation adjustment
231.8 28.0
Unrealized (loss) gain on hedging activities
(169.0 ) 0.9
Unrealized loss on securities
(0.7 ) (13.9 )

Total comprehensive (loss) income
$ (159.6 ) $ 190.2

~~Net gains and losses on securities realized during the three months ended March 31, 2008 and 2007 were immaterial.~~

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 8: Segment Information~~

For a detailed discussion of the Company's principles regarding its operating segments refer to Note 17 to the Consolidated Financial Statements included in the Company's Consolidated Financial Statements for the year ended December 31, 2007.

As discussed in Note 1, the Company started operating under a new segment structure effective January 1, 2008. In connection with this segment realignment, the Company additionally excluded interest income and indirect corporate overhead from segment results. Segment results for the three months ended March 31, 2007 have been adjusted to reflect the new structure. A summary of the new segments follows:

•: The Merchant Services segment is comprised of businesses that provide services which facilitate the merchants' ability to accept credit, debit, stored-value and loyalty cards. The segment's processing services include authorization, transaction capture, settlement, chargeback handling, and internet-based transaction processing. Merchant Services also provide POS devices and other equipment necessary to capture merchant transactions. A majority of these services are offered to the merchants through joint ventures or other alliance arrangements primarily with financial institutions and pertain to transactions in which consumer payments to merchants are made through a card association (such as Visa or MasterCard), a debit network, or another payment network (such as Discover).
•: The Financial Services segment provides issuer card and network solutions and payment management solutions for point of sale and recurring bill payments. Issuer card and network solutions include credit and retail card processing, debit card processing and network services (including the STAR Network), and output services for financial institutions and other organizations offering credit cards, debit cards and retail private label cards to consumers and businesses to manage customer accounts. Payment management solutions include check verification, settlement and guarantee services (provided by TeleCheck) and other payment options that support merchants and online retailers, businesses, and government agencies. The segment's largest components of revenue consist of fees for account management, transaction authorization and posting, network switching, check acceptance and warranty, as well as reimbursable postage.
•: The International segment is comprised of businesses that provide the following services outside of the United States: credit, retail, debit and prepaid card processing; merchant acquiring and processing; ATM and point-of-sale ("POS") processing, driving, acquiring and switching services; and card processing software. The largest components of the segment's revenue are fees for facilitating the merchants' ability to accept credit, retail and debit cards by authorizing, capturing, and settling merchants' credit, retail, debit, stored-value and loyalty card transactions as well as for transaction authorization and posting, network switching and account management.
•: The Prepaid Services segment consists of businesses that provide a wide range of open and closed loop stored-value products and processing services. The closed loop operations comprise the largest component of the segment's revenue, providing gift card processing services to large national merchants as well as fleet services to trucking companies. The open loop products are

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 8: Segment Information (Continued)~~

~~the fastest growing component of the segment driven primarily by employers' adoption of the Money Network payroll product.~~

•: The IPS segment's operations involve the issuance of official checks and money orders by agents which are typically banks or other financial institutions. Official checks serve as an alternative to a bank's own disbursement items such as cashiers or bank checks. Revenue is principally earned on invested funds which are pending settlement. Although the segments have changed, a detailed discussion regarding the businesses that comprise the Company's segments, the strategies of the Company and the businesses within the segment, business trends affecting the Company and certain risks inherent in the Company's business is included in "Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Consolidated Financial Statements for the year ended December 31, 2007.

~~The following table presents the Company's operating segment results for three months ended March 31, 2008 and 2007, respectively:~~

Successor
Merchant
Services Financial
Services
Prepaid
Services Integrated
Payment
Systems All
Other and
Corporate

Three months ended March 31, 2008
International Totals

(in millions)

Revenues:

Transaction and processing service fees
$ 476.9 $ 496.7 $ 350.0 $ 46.0 $ 3.6 $ 19.5 $ 1,392.7

Investment income, net
7.9 0.7 6.1 — 41.3 — 56.0

Product sales and other
78.2 25.1 71.8 — 0.1 39.1 214.3

Reimbursable debit network fees, postage and other
290.9 183.0 9.3 — — 483.2

Equity earnings in affiliates(a)
71.9 — 7.4 — — 1.0 80.3

Total segment reporting revenues
$ 925.8 $ 705.5 $ 444.6 $ 46.0 $ 45.0 $ 59.6 $ 2,226.5

Internal revenue
$ 10.9 $ 6.9 $ 1.9 $ — $ — $ — $ 19.7
External revenue
914.9 698.6 442.7 46.0 45.0 59.6 2,206.8
Depreciation and amortization
194.5 99.1 61.6 7.9 0.1 5.2 368.4
Operating profit (loss)
72.9 102.5 21.3 2.7 34.0 (33.7 ) 199.7
Investment gains, derivative financial instruments gains and (losses) and non-operating foreign currency gains and (losses)
12.5 — 9.0 — — (64.7 ) (43.2 )

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 8: Segment Information (Continued)~~

Predeccessor
Merchant
Services Financial
Services
Prepaid
Services Integrated
Payment
Systems All
Other and
Corporate

Three months ended March 31, 2007 (in millions)
International Totals
Revenues:

Transaction and processing service fees
$ 447.6 $ 482.9 $ 281.9 $ 46.1 $ 4.7 $ 23.7 $ 1,286.9

Investment income, net
12.1 1.7 2.8 — 13.9 — 30.5

Product sales and other
87.1 33.4 59.3 — 0.2 10.8 190.8

Reimbursable debit network fees, postage and other
230.1 177.4 8.8 — — — 416.3

Equity earnings in affiliates(a)
68.1 — 7.9 — — 1.0 77.0

Total segment reporting revenues
$ 845.0 $ 695.4 $ 360.7 $ 46.1 $ 18.8 $ 35.5 $ 2,001.5

Internal revenue and pretax equivalency
$ 11.4 $ 9.8 $ 1.0 $ — $ 60.4 $ 5.6 $ 88.2
External revenue
833.6 685.6 359.7 46.1 (41.6 ) 29.9 1,913.3
Depreciation and amortization
55.2 64.2 50.0 1.9 1.5 8.0 180.8
Operating profit (loss)
195.1 144.9 34.2 9.1 3.0 (72.6 ) 313.7
Restructuring, impairments, investment gains and (losses) and debt repayment costs
(2.6 ) 0.1 0.4 — (17.4 ) 1.2 (18.3 )

~~A reconciliation of reportable segment amounts to the Company's consolidated balances is as follows (in millions):~~

Successor
Predecessor

Three months ended
March 31, 2008
Three months ended
March 31, 2007

(in millions)

Revenues:

Total reported segments
$ 2,166.9 $ 1,966.0

All other and corporate
59.6 35.5

Subtotal
2,226.5 2,001.5

Equity earning in affiliates(a)
(80.3 ) (77.0 )

Eliminations(b)
(19.7 ) (88.2 )

Consolidated
$ 2,126.5 $ 1,836.3

(Loss) income before income taxes, minority interest, equity earnings in affiliates and discontinued operations:

Total reported segments
$ 233.4 $ 386.3

All other and corporate
(33.7 ) (72.6 )

Subtotal
199.7 313.7

Interest income
9.0 8.0

Interest expense
(517.7 ) (34.5 )

Minority interest from segment operations(c)
29.0 29.0

Equity earnings in affiliates
(32.1 ) (68.3 )

Restructuring, net
— (2.0 )

Impairments
— (16.3 )

Other income (expense)
(43.2 ) 1.0

Eliminations(b)
— (60.7 )

Consolidated
$ (355.3 ) $ 169.9

~~(a)~~: ~~Excludes equity losses that were recorded in expense and the amortization related to the excess of the investment balance over the Company's proportionate share of the investee's net book value.~~

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 8: Segment Information (Continued)~~

~~(b)~~: Represents elimination of an adjustment to record Integrated Payment Systems segment investment income and its related operating profit on a pretax equivalent basis in 2007 (no adjustment necessary in 2008 as the associated investment portfolio was repositioned to taxable investments) and elimination of intersegment revenue.
~~(c)~~: ~~Excludes minority interest attributable to items excluded from segment operations.~~

~~Segment assets are as follows (in millions):~~

Successor

March 31,
2008 December 31,
2007
Assets:

Merchant Services
$ 21,600.7 $ 21,370.3

Financial Services
8,163.2 8,297.3

International
7,531.5 6,841.1

Prepaid Services
1,519.7 1,518.5

Integrated Payment Systems
10,117.3 13,138.2

All Other and Corporate
1,338.7 1,343.9

Consolidated
$ 50,271.1 $ 52,509.3

~~Note 9: Commitments and Contingencies~~

On or about April 2, 2003, an additional purported class action complaint was filed by Barton K. O'Brien. The defendants were Concord and certain of its current and former officers and directors. This complaint contained allegations regarding the individual defendants' alleged insider trading and alleged violations of securities and other laws and asserted that this alleged misconduct reduced the consideration offered to Concord shareholders in the merger between Concord and a subsidiary of the Company (the "Concord Merger"). The complaint sought class certification, attorneys' fees, experts' fees, costs and other relief the Court deems just and proper. Moreover, the complaint also sought an order enjoining consummation of the Concord Merger, rescinding the Concord Merger if it is consummated and setting it aside or awarding rescissory damages to members of the putative class, and directing the defendants to account to the putative class members for unspecified damages. These complaints were consolidated in a second amended consolidated complaint filed September 19, 2003 into one action (In Re: Concord EFS, Inc. Shareholders Litigation) in the Shelby County Circuit for the State of Tennessee.

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 9: Commitments and Contingencies (Continued)~~

On October 15, 2003, the plaintiffs In Re: Concord EFS, Inc. Shareholders Litigation moved for leave to file a third amended consolidated complaint similar to the previous complaints but also alleging that the proxy statement disclosures relating to the antitrust regulatory approval process were inadequate. A motion to dismiss was filed on June 22, 2004 alleging that the claims should be denied and are moot since the Concord Merger has occurred. On October 18, 2004, the Court heard arguments on the plaintiff's motion to amend complaint and defendant's motion to dismiss. On September 12, 2006, the Court granted the plaintiff's motion to file a third amended complaint. In early November 2006, Concord filed a motion to dismiss the third amended complaint. On June 28, 2007, a hearing was held on Concord's motion to dismiss the third amended complaint. On May 2, 2008, the Court issued an order granting Concord's motion. The Company intends to vigorously defend the action and an estimate of possible losses, if any, cannot be made at this time.

On July 2, 2004, Pamela Brennan, Terry Crayton, and Darla Martinez filed a class action complaint on behalf of themselves and all others similarly situated in the United States District Court for the Northern District of California against the Company, its subsidiary Concord EFS, Inc., and various financial institutions ("Brennan"). Plaintiffs claim that the defendants violated antitrust laws by conspiring to artificially inflate foreign ATM fees that were ultimately charged to ATM cardholders. Plaintiffs seek a declaratory judgment, injunctive relief, compensatory damages, attorneys' fees, costs and such other relief as the nature of the case may require or as may seem just and proper to the court. Five similar suits were filed and served in July, August and October 2004, two in the Central District of California (Los Angeles), two in the Southern District of New York, and one in the Western District of Washington (Seattle). The plaintiffs sought to have all of the cases consolidated by the Multi District Litigation panel. That request was denied by the panel on December 16, 2004 and all cases were transferred to the Northern District Court of California and assigned to a single judge. All cases other than Brennan were stayed. Subsequently, a seventh lawsuit was filed in the District of Alaska, which thereafter was also transferred to the Northern District of California and assigned to the same judge.

In Brennan, on May 4, 2005, the Court ruled on Defendants' Motion to Dismiss and Motion for Judgment on the Pleadings. The Court did not dismiss the complaint, except for a technical dismissal of the claims against First Data Corporation, Bank One Corporation and JPMorgan Chase. On May 25, 2005, the plaintiffs filed an amended complaint which clarified the basis for alleging that the holding companies, First Data Corporation, Bank One Corporation and JPMorgan Chase, were liable. On July 21, 2005, Concord filed a motion for summary judgment seeking to foreclose claims arising after February 1, 2001—the date that Concord acquired the STAR Network. On August 22, 2005, the Court also consolidated all of the ATM interchange cases pending against the defendants in Brennan which will now be referred to collectively as the "ATM Fee Antitrust Litigation." On September 14, 2006, a hearing on Concord's Motion for Summary Judgment was held. On November 30, 2006, the Court issued an order that terminated the pending motion and requested further discovery on the limited issue of procompetitive justifications for the fixed ATM interchange by March 1, 2007. A hearing was held on the plaintiff's motion to compel on May 23, 2007, at which time the Court directed the defendants to file a motion for summary judgment. On June 25, 2007, the Court entered an order on the motion to compel. On August 3, 2007, the Company filed a motion for summary judgment seeking to dismiss plaintiffs' per se claims, arguing that there are procompetitive justifications for the ATM interchange. On March 24, 2008, the Court entered an order granting the defendants' motions for

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 9: Commitments and Contingencies (Continued)~~

partial summary judgment, finding that the claims raised in this case would need to be addressed under a "Rule of Reason" analysis. On April 18, 2008, the Court entered an order certifying for appeal the March 24, 2008 order. Plaintiffs filed their petition for permission of the Ninth Circuit on May 2, 2008. The Company intends to vigorously defend the action and an estimate of possible losses, if any, cannot be made at this time.

In May 2002, DataTreasury Corporation ("DataTreasury") commenced action in the United States District Court for the Eastern District of Texas (the "Court") against the Company and its wholly owned subsidiaries First Data Merchant Services Corporation, TeleCheck Services, Inc. d/b/a Telecheck International, Inc., and Microbilt Corporation (subsequently merged into TASQ Technology, Inc.), (collectively, the "First Data Defendants"), alleging infringement of United States Patent No. 5,910,988 (the "988 Patent") and Patent No. 6,032,137 (the "137 Patent"). The complaint sought a declaration that the 988 Patent and the 137 Patent were valid and enforceable, injunctive relief, unidentified damages, pre-judgment interest, treble damages, costs of suit and attorneys' fees. The 988 Patent and the 137 Patent generally relate to remote data acquisition, encryption, centralized processing and storage. DataTreasury voluntarily dismissed the action filed with the Court and refiled the complaint on November 7, 2002 in the United States District Court for the Northern District of Texas asserting that the First Data Defendants infringed the 988 Patent and the 137 Patent. The complaint seeks a declaration that the 988 Patent and the 137 Patent are valid and enforceable, injunctive relief, unidentified damages, prejudgment interest, treble damages, costs of suit and attorneys' fees. On November 15, 2002, the First Data Defendants filed a motion which was granted that the case be transferred to the Court. On March 1, 2005, the Court ruled on claim construction. DataTreasury filed amended infringement contentions in September 2005. On November 5, 2005, the First Data Defendants filed ex parte requests for reexamination of the 988 Patent and the 137 Patent with the United States Patent and Trademark Office (the "USPTO"). The First Data Defendants filed their final invalidity contentions in December 2005. The First Data Defendants filed a motion for summary judgment for patent invalidity on January 4, 2006. On September 12, 2005, DataTreasury filed a second complaint with the Court asserting that the Company's wholly owned subsidiaries Remitco, LLC ("Remitco") and Integrated Payment Systems Inc. infringed the 988 Patent and the 137 Patent. DataTreasury seeks a declaration that the 988 Patent and the 137 Patent are valid and enforceable, injunctive relief, unidentified damages, prejudgment interest, treble damages, costs of suit and attorneys' fees. On November 21, 2006, the Court consolidated the two cases. On July 24, 2007, counsel for the parties agreed among other procedural matters to abate the case until 60 days after the issuance of reexamination certificates by the USPTO for both the 988 Patent and the 137 Patent or 60 days after the Remitco document production is completed, at which time DataTreasury will serve amended infringement contentions. In accordance with the agreement of the counsel for the parties, the Court entered an order denying as moot the pending Joint Motion for Entry of a Docket Control Order and refrained from entering a new schedule. The USPTO issued a Certificate of Reexamination on the 998 Patent on October 3, 2007 and on the 137 Patent in December 2007. The Company intends to vigorously defend the action and an estimate of possible losses, if any, cannot be made at this time.

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 9: Commitments and Contingencies (Continued)~~

enforceable, injunctive relief, unidentified damages, prejudgment interest, treble damages, costs of suit and attorneys' fees. The 778 patent generally relates to the clearing of financial instruments. On September 25, 2007, all defendants entered into a stipulation, which, pursuant to the court's order, will result in a stay of the case pending the outcome of a pending re-examination of the 778 patent. The Company intends to vigorously defend the action and an estimate of possible losses, if any, cannot be made at this time.

In the normal course of business, the Company is subject to claims and litigation, including indemnification obligations to purchasers of former subsidiaries. Management of the Company believes that such matters will not have a material adverse effect on the Company's results of operations, liquidity or financial condition.

~~Note 10: Employee Benefit Plans~~

~~The following table provides the components of net periodic benefit expense from continuing operations for the Company's defined benefit pension plans:~~

Successor
Predecessor

Three months ended
March 31, 2008
Three months ended
March 31, 2007

(in millions)

Service costs
$ 2.8 $ 2.7
Interest costs
10.8 9.0
Expected return on plan assets
(11.2 ) (9.3 )
Amortization
— 2.1

Net periodic benefit expense from continuing operations
$ 2.4 $ 4.5

The Company estimates pension plan contributions for 2008 to be approximately $40 million. During the three months ended March 31, 2008, $7.1 million was contributed to the United Kingdom plan. No contributions are expected to the U.S. plan during 2008.

~~Note 11: Stock-Based Compensation~~

~~Successor Equity Plans~~

On October 26, 2007, First Data Holdings, Inc. ("Holdings") established a stock incentive plan for certain management employees of FDC and its affiliates ("stock plan"). This stock plan is at the Holdings level which owns 100% of FDC's equity interests. The stock plan provided the opportunity for certain management employees to purchase shares in Holdings and then receive a number of options or restricted stock based on a multiple of their investment in such shares. The employees that chose to invest entered into a management stockholders' agreement. Principal terms of the management stockholders' agreement included restrictions on transfers, lock ups, right of first refusal, registration rights, and a confidentiality, non-solicitation and non-compete covenant. The expense associated with this plan is recorded by FDC. The number of shares authorized under the stock plan is 119.5 million, 83 million of which are authorized for options.

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 11: Stock-Based Compensation (Continued)~~

~~Each employee who invested has~~The participants of the stock plan have the right to require Holdings to repurchase the shares and options upon the ~~employee's~~employee’s termination due to death or disability. The put rights expire one year after the termination event or upon a change in control. The repurchase price for the shares is their fair market value at the time of repurchase. The repurchase price for the options is their intrinsic value at the time of repurchase.

Additionally, Holdings has the right to repurchase stock and options upon termination of employment for any reason. These call rights expire on the earliest of 180 days after the termination event, a change in control, or September 24, 2012. Depending on the cause of termination, Holdings will have the right to repurchase shares at either the fair market value at the time of repurchase or the lesser of fair market value or the original price paid by the employee to purchase the shares. Holdings may repurchase vested options at their intrinsic value at the time of repurchase.

Total stock-based compensation expense recognized in the “Selling, general and administrative” line item of the Consolidated Statements of Operations resulting from stock options, non-vested restricted stock awards and non-vested restricted stock units was ~~$4.4~~as follows:


Year ended December 31,	Amount
2010	$	17.1
2009		19.2
2008		16.6

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

On July 1, 2008, FDC and Holdings purchased the remaining 18.2% and 13.6% of the outstanding equity of Money Network, respectively, not already owned by the Company. The consideration paid by Holdings consisted of 6 million ~~pretax for~~shares of its common stock paid to employees continuing with the ~~three months~~Company. During the years ended ~~March~~December 31, ~~2008. Stock-based~~2010, 2009 and 2008, FDC recognized $3.2 million, $1.9 million and $2.4 million, respectively, of stock compensation expense ~~is recognized~~(included in total stock-based compensation expense noted above) due to certain repurchase features associated with the ~~"Selling, general and administrative" line item~~Holdings shares so issued. FDC subsequently purchased Holdings’ interest in Money Network for an amount equivalent to the value of the ~~Consolidated Statements~~shares issued by Holdings as purchase consideration (excess of ~~Operations.~~value of shares issued by Holdings over the stock compensation expense to be recognized).

In 2008, the Board of Directors approved a deferred compensation plan for non-employee directors that allows each of these directors to defer their annual compensation. The plan is unfunded. For purposes of determining the investment return on the deferred compensation, each director’s account will be treated as if credited with a number of shares of Holdings stock determined by dividing the deferred amount by the first fair value of the stock approved during the year. The account balance will be paid in cash upon termination of Board service, certain liquidity events or other certain events at the fair value of the stock at the time of settlement. Due to the cash settlement provisions, the account balances were recorded as a liability and are adjusted to fair value quarterly. As of December 31, 2010, the balance of this liability was $0.4 million.

Stock Options

~~In January~~During the years ended December 31, 2010, 2009 and 2008, time options and performance options were granted under the ~~new~~ stock plan. ~~Generally,~~The time options and performance options ~~were granted equally based on a multiple of the employee's investment in shares of Holdings and~~ have a contractual term of 10 years. Time options ~~will~~ vest equally over a ~~five-year~~three to five year period from the date of issuance and performance options ~~will~~ vest based upon the Company achieving certain EBITDA ~~targets for the years 2008 through 2012. These EBITDA targets have both annual and cumulative components.~~targets. The options also have certain accelerated vesting provisions upon a change in control, ~~an initial~~a qualified public offering, ~~and~~or certain termination events.

In May 2010, the Company modified the terms of time based options and performance based options outstanding under the stock plan. The modifications only affected active employees as of the modification date. The exercise price on previously granted time based options was reduced from $5 to $3. The Company is continuing to recognize expense on these options based on the original grant date fair value amortized over the remaining original vesting schedule. Due to the nature of the call rights associated with the time based options, subsequent to the modification, which expire 180 days after certain employment termination events or the latter of September 24, 2012 or a qualified public offering, the incremental stock option fair value from the change in exercise price will only be recognized upon such events. Prior to the modifications, the call rights expired 180 days after certain employment termination events or the earlier of September 24, 2012 or a change in control. In addition, outstanding performance based options were cancelled and reissued. The reissued performance based options have an exercise price of $3 and a tiered vesting schedule that provides for vesting of 25%, 75% or 100% of the options if the Company achieves certain EBITDA targets in any fiscal year between January 1, 2010 and December 31, 2013. The performance based options have call rights similar to the time based options described above. Due to the call rights, the Company will only recognize expense on the performance based options upon a qualified public offering or certain employment termination events. In conjunction with the above noted modifications, stock plan participants also received a cash bonus payment in the second quarter of 2010 totaling $7.8 million.

As of December 31, 2010 there was approximately $110 million of total unrecognized compensation expense, net of estimated forfeitures, related to non-vested stock options. Approximately $31 million will be recognized over a weighted-average period of approximately 2.9 years while approximately $79 million will only be recognized upon a qualified public offering or certain termination events.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

During 2010, 2009, and 2008, Holdings paid $21.9 million, $4.5 million, and $3.8 million, respectively, to repurchase shares from employees that terminated employment with the Company.

The fair value of ~~FDC~~Holdings stock options granted for the ~~three months~~years ended ~~March~~December 31, 2010, 2009 and 2008 were estimated at the date of grant using a Black-Scholes option pricing model with the following ~~assumptions:~~weighted-average assumptions (excluding the effect of stock plan modifications):

Three
months ended
March 31,
2008
Risk-free interest rate (weighted-average)
3.35 %
Dividend yield
—
Volatility (weighted-average)
51.96 %
Expected term (in years)
7
Fair value of stock
$ 5


	Year ended December 31,
	2010			2009			2008
Risk-free interest rate		3.03	%		3.21	%		3.39	%
Dividend yield		—			—			—
Volatility		51.40	%		53.58	%		55.53	%
Expected term (in years)		7			7			7
Fair value of stock	$	3		$	3		$	5
Fair value of options	$	2		$	2		$	3

Risk-free interest ~~rate~~rate——The risk-free rate for stock options granted during the period was determined by using a zero-coupon U.S. Treasury rate for the ~~period~~periods that coincided with the expected terms listed above.

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 11: Stock-Based Compensation (Continued)~~

Expected dividend ~~yield~~yield——No routine dividends are currently being paid by Holdings, or are expected to be paid in future periods.

Expected volatility—As ~~the Company~~Holdings is a non-publicly traded company, the expected volatility is based on the historical volatilities of a group of guideline companies.

Expected ~~term~~term——The Company estimated the expected term by considering the historical exercise and termination behavior of employees that participated in the ~~predecessor~~Company’s previous equity plans, the vesting conditions of options granted under the stock plan, as well as the impact of limited liquidity for common stock of a non-publicly traded company.

Fair value of stock—The Company relied in part upon a third-party valuation firm in determining the fair value of Holdings stock. All key assumptions and valuations were determined by and are the responsibility of management.

A summary of ~~FDC~~Holdings stock option activity for the ~~three months~~year ended ~~March~~December 31, ~~2008~~2010 is as follows (options in millions):


	2010
	Options			Weighted- Average Exercise Price		Remaining Contractual Term
Outstanding as of January 1		67.1		$	5
Granted(a)		47.0		$	3
Cancelled / Forfeited(a)		(44.1	)	$	5

Outstanding as of December 31		70.0		$	3		7 years

Options exercisable as of December 31		11.7		$	3		7 years


(a)
~~Outstanding at January 1~~	—
~~Granted~~	~~57.2~~
~~Cancelled / Forfeited~~	~~(0.8~~	)

~~Outstanding at March 31~~	~~56.4~~
		The number of options granted and cancelled/forfeited includes performance based options cancelled and reissued in connection with the stock plan modifications discussed above.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Restricted Stock Awards and Restricted Stock Units

~~In January 2008, restricted~~Restricted stock awards ~~and units~~ were granted under the ~~new~~ stock ~~plan.~~plan during 2010, 2009 and 2008. Grants were made as incentive awards. ~~All restricted stock units~~The restrictions on the awards granted subsequent to the modifications described above will ~~vest on September 24, 2012. The restricted stock awards and units also have certain accelerated vesting provisions~~lapse upon a qualified public offering, a change in control ~~an initial public offering, and~~or certain employment termination or liquidity events. As such, the Company is not recognizing expense on awards granted subsequent to the modifications described above. The Company is continuing to recognize expense on the restricted stock awards granted prior to the modifications described above based on the original grant date fair value amortized over the remaining original vesting schedule. As of December 31, 2010 there was approximately $25 million of total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock. Approximately $2 million will be recognized over a weighted-average period of approximately 2.4 years while approximately $23 million will only be recognized upon certain liquidity events or certain termination events. During 2010, 2009, and 2008, the Company paid $2.5 million, $0.2 million, and $0.1 million, respectively, to repurchase stock awards from employees that terminated employment with the Company.

A summary of ~~FDC~~Holdings restricted stock award and restricted stock unit activity for the ~~three months~~year ended ~~March~~December 31, ~~2008~~2010 is as follows (awards/units in millions):



~~Non-vested at January 1~~	—
~~Granted~~	~~2.0~~
~~Cancelled / Forfeited~~	~~(0.1~~	)

~~Non-vested at March 31~~	~~1.9~~


	2010 Awards/Units			Weighted- Average Grant-Date Fair Value
Non-vested as of January 1		1.5		$	5
Granted		8.1		$	3
Cancelled / Forfeited		(1.2	)	$	4

Non-vested as of December 31		8.4		$	3

~~Predecessor Equity~~Note 14: Employee Benefit Plans

~~For a detailed description~~Defined Contribution Plans

FDC maintains defined contribution savings plans covering virtually all of the ~~Company's stock compensation~~Company’s U.S. employees and defined contribution pension plans ~~prior to the merger with an affiliate of KKR, refer to Note 15 to the Consolidated Financial Statements included~~for international employees primarily in the ~~Company's Consolidated Financial Statements~~United Kingdom. The plans provide tax-deferred amounts for each participant, consisting of employee elective contributions, Company matching and discretionary Company contributions.

The following table presents the aggregate amounts charged to expense in connection with these plans (in millions):


Year ended December 31,
2010	2009	2008
$35.7	$38.3	$35.4

Defined Benefit Plans

The Company has a defined benefit pension plan which is frozen and covers certain full-time employees in the U.S. The Company also has separate plans covering certain employees located in the United Kingdom, Greece, Austria and Germany. As of June 30, 2009, the Company eliminated future benefits relating to length of service, compensation and other factors related to its defined benefit pension plan that covers certain employees in the United Kingdom. The Company has accounted for the ~~year ended December 31, 2007. Vesting~~elimination of ~~pre-merger FDC stock options, restricted stock awards and restricted stock units was accelerated upon closing~~benefits as a curtailment which resulted in a re-measurement of the ~~merger~~plan assets and ~~holders of the awards received cash payments discussed more fully in the Company's Consolidated Financial Statements for the year ended December 31, 2007.~~

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 11: Stock-Based Compensation (Continued)~~

Total stock-based compensation expense recognized in the Consolidated Statements of Operations resulting from stock options, non-vested restricted stock awards, non-vested restricted stock units as well as the employee stock purchase plan ("ESPP") was $27.8 million for the three months ended March 31, 2007. Stock-based compensation expense in 2007 was recognized in the "Cost of services" and "Selling, general and administrative" line items of the Consolidated Statements of Operations.

~~Stock Options and Employee Stock Purchase Plan Rights~~

The fair value of FDC stock options granted and ESPP rights for the three months ended March 31, 2007 was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:

Three Months Ended
March 31, 2007

Stock Options ESPP
Risk-free interest rate
4.65 % 4.63 %
Dividend yield
0.49 % 0.49 %
Volatility
23.42 % 23.91 %
Expected term (in years)
5 0.25
Fair value
$ 7 $ 5

~~Note 12: Fair Value Measurement~~

benefit obligation. In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". Although this statement does not require any new fair value measurements, in certain cases its application has changed previous practice in determining fair value. SFAS 157 became effective foraddition, the Company beginning January 1, 2008 as it relates to fair value measurements of financial assets and liabilities and non-financial assets and liabilities that are recognized at fair value in its financial statements on a recurring basis (at least annually). It will be effective beginning January 1, 2009 forchanged certain ~~other non-financial assets and non-financial liabilities.~~

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. It establishes a hierarchy for fair value measurements based upon the inputs to the valuation and the degree to which they are observable or not observable in the market. The three levels in the hierarchy are as follows:

•: ~~Level 1—Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date.~~
•: Level 2—Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data.
•: ~~Level 3—Inputs to the valuation that are unobservable inputs for the asset or liability.~~

~~SFAS 157 assigns the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.~~

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~(Unaudited)~~

~~Note 12: Fair Value Measurement (Continued)~~

~~In connection with~~

assumptions used in the ~~adoption~~measurement of ~~SFAS 157,~~its benefit obligation. The re-measurement resulted in a net increase to the net pension liability and a loss, net of income taxes, recorded to other comprehensive income of approximately $53 million due most significantly to a change in the discount rate assumption. This loss is partially offset by a benefit recorded, net of income taxes, to other comprehensive income of approximately $8 million related to the curtailment of the plan. The curtailment will also decrease service cost expense in future periods.

The Company ~~adjusted, prospectively,~~uses December 31 as the measurement date for its ~~method~~plans.

The following table provides a reconciliation of ~~measuring~~ the changes in the plans’ projected benefit obligation and fair value of ~~certain financial instruments~~assets for the years ended December 31, 2010 and 2009, as well as a ~~result, recorded a reduction~~statement of the funded status as of the respective period ends (in millions);


As of December 31,	2010			2009
Change in benefit obligation
Benefit obligation at beginning of period	$	741.5		$	544.1
Service costs		3.1			6.6
Interest costs		40.0			37.6
Curtailment		—			(11.6	)
Actuarial (gain)/loss		(12.0	)		154.5
Divested benefit obligations		—			(1.9	)
Termination benefits(a)		1.1			0.1
Benefits paid		(27.3	)		(29.6	)
Plan participant contributions		—			0.9
Foreign currency translation		(20.5	)		40.8

Benefit obligation at end of period		725.9			741.5
Change in plan assets
Fair value of plan assets at the beginning of period		598.4			472.6
Actual return on plan assets		70.0			79.6
Company contributions		31.4			36.8
Plan participant contributions		—			0.9
Benefits paid		(26.8	)		(28.3	)
Foreign currency translation		(16.7	)		36.8

Fair value of plan assets at end of period		656.3			598.4

Funded status of the plans	$	(69.6	)	$	(143.1	)

(a)	Related to restructuring activities in Europe.

The net pension liability of $69.6 million at December 31, 2010 was made up of $0.2 million of non-current assets and $69.8 million of non-current liabilities. The projected benefit asset was included in ~~its derivative~~“Other long-term assets” and the liabilities were included in “Other long-term liabilities” on the Consolidated Balance Sheets. The net pension liability of ~~$13.2 million and an increase in investment securities of $1.0~~$143.1 million as of December 31, 2009 is made up of non-current liabilities included in “Other long-term liabilities” on the ~~date~~Consolidated Balance Sheets.

The accumulated benefit obligation for all defined benefit pension plans was $724.5 million and $739.8 million as of ~~adoption.~~ December 31, 2010 and 2009, respectively.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The ~~derivatives were adjusted to reflect~~following table summarizes the ~~Company's own non-performance risk. Substantially~~activity in other comprehensive income, net of tax (in millions):


	Year ended December 31,
	2010			2009			2008
Total unrecognized gain/(loss) included in other comprehensive income at the beginning of period	$	(93.4	)	$	(28.9	)	$	1.6
Unrecognized gain/(loss) arising during the period		27.1			(73.1	)		(30.0	)
Curtailment		—			7.7			—
Amortization of deferred gains/(losses) to net periodic benefit expense(a)		1.4			0.9			—
Foreign currency translation		—			—			(0.5	)

Total unrecognized gain/(loss) included in other comprehensive income at end of period	$	(64.9	)	$	(93.4	)	$	(28.9	)

(a)	Expected amortization of deferred losses to net periodic benefit expense in 2011 is $1.2 million pretax.

Amounts recorded in other comprehensive income represent unrecognized net actuarial gains and losses. The Company does not have prior year service costs or credits or net transition assets or obligations.

The following table provides the components of net periodic benefit cost for the plans (in millions):


	Year ended December 31,
	2010			2009			2008
Service costs	$	3.1		$	6.6		$	10.8
Interest costs		40.0			37.6			41.1
Expected return on plan assets		(40.4	)		(35.3	)		(42.4	)
Amortization		2.2			1.3			—

Net periodic benefit expense	$	4.9		$	10.2		$	9.5

Assumptions.The weighted-average rate assumptions used in the measurement of the Company’s benefit obligation are as follows:


As of December 31,	2010			2009			2008
Discount rate		5.40	%		5.62	%		6.52	%
Rate of compensation increase*		4.00	%		4.00	%		3.76	%

*	2010 and 2009 applies to a plan in Greece. 2008 applies to plans in the United Kingdom, Germany, Greece and Austria.

The weighted-average rate assumptions used in the measurement of the Company’s net cost are as follows:


As of December 31,	2010			2009			2008
Discount rate		5.55	%		6.19	%		5.94	%
Expected long-term return on plan assets		6.86	%		6.95	%		6.84	%
Rate of compensation increase*		4.00	%		3.85	%		3.82	%

*	2010 applies to Greece. 2009 applies to plans in the United Kingdom (through June 2009) and Greece. 2008 applies to plans in the United Kingdom, Germany, Greece and Austria.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Assumptions for the U.S. plans and the foreign plans are comparable in all of the ~~$13.2 million related~~above periods. The Company employs a building block approach in determining the long-term rate of return for plan assets with proper consideration of diversification and re-balancing. Historical markets are studied and long-term historical relationships between equities and fixed-income securities are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. Current market factors such as inflation and interest rates are evaluated before long-term capital market assumptions are determined. Peer data and historical returns are reviewed to ~~derivatives that have been designated~~check for reasonableness and appropriateness. All assumptions are the responsibility of management.

Plan assets.The Company’s pension plan target asset allocation, based on the investment policy as ~~cash flow hedges~~of December 31, 2010, is as follows:


Asset Category	Target allocation U.S. plans			Target allocation Foreign plans
Equity securities		40	%		60	%
Debt securities		60	%		40	%

The Company employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for ~~accounting purposes~~a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities and ~~was recorded~~plan funded status. The investment portfolio contains a diversified blend of equity and fixed-income investments. Furthermore, equity investments are diversified across U.S. and non-U.S. stocks, as well as growth, value, and small, mid and large capitalizations. In addition, private equity securities comprise a ~~reduction~~very small part of the ~~unrealized losses~~equity allocation. The fixed income allocation is a combination of fixed income investment strategies designed to contribute to the total rate of return of all plan assets while minimizing risk and supporting the duration of plan liabilities.

Investment risk is measured and monitored on an ongoing basis through quarterly investment portfolio reviews, annual liability measurements, and periodic asset and liability studies. The general philosophy of the Investment Council in ~~"Other comprehensive income" ("OCI").~~ setting the allocation percentages for the domestic plan shown above is to adhere to the appropriate allocation mix necessary to support the underlying plan liabilities as influenced significantly by the demographics of the participants and the frozen nature of the plan.

The ~~increase~~goal of the Board of Trustees of the United Kingdom plan is the acquisition of secure assets of appropriate liquidity which are expected to generate income and capital growth to meet, together with new contributions from the Company, the cost of current and future benefits, as set out in ~~investment~~the Trust Deed and Rules. The Trustees, together with the plan’s consultants and actuaries, further design the asset allocation shown above to limit the risk of the assets failing to meet the liabilities over the long term. Currently the equity allocation is diversified amongst both United Kingdom and non-United Kingdom equities from North America, Europe, Japan and Asia Pacific. A small portion is allocated to other global emerging market equity securities. Fixed income is allocated primarily to United Kingdom government bond securities ~~was also recorded~~with the remaining portion in ~~OCI.~~investment-grade corporate bonds.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Fair value measurements.Financial instruments included in plan assets carried ~~at fair value as of March 31, 2008~~ and measured at fair value on a recurring basis are classified in the table below according to the hierarchy described ~~above:~~

Fair Value Measurement Using

Quoted prices in
active markets
for identical
assets
(Level 1) Significant other
inputs
(Level 2) Total

(in millions)

March 31, 2008

Settlement Assets:

Auction rate securities
$ — $ 558.0 $ 558.0

Other available-for-sale securities
7.0 7,717.8 7,724.8

Total assets at fair value
$ 7.0 $ 8,275.8 $ 8,282.8

Other Liabilities:

Interest rate swaps
$ — $ 465.8 $ 465.8

Foreign currency derivatives
— 26.6 26.6

Total liabilities at fair value
$ — $ 492.4 $ 492.4

~~None of the Company's fair value measurements as of March 31, 2008 were based, to a significant degree, on Level 3 inputs.~~

~~Settlement Assets~~in Note 7 (in millions):

As of March 31, 2008, $8.3 billion of the Company's $16.0 billion of Settlement assets were comprised of financial instruments that were carried at fair value. These investments included auction rate securities ("ARS") and other available-for-sale securities discussed in more detail below.

~~Auction rate securities~~


	Fair Value Measurement Using
As of December 31, 2010	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Investments:
Cash and cash equivalents(a)	$	5.5		—		—	$	5.5
Registered investment companies(b)		21.1		—		—		21.1
Private investment funds—redeemable(c)		—	$	625.0		—		625.0
Private investment funds—non-redeemable(d)		—		—	$	0.3		0.3
Insurance annuity contracts(e)		—		—		4.4		4.4

Total investments at fair value	$	26.6	$	625.0	$	4.7	$	656.3

The Company held $558 million of ARS which are long-term debt instruments with variable interest rates that periodically reset through a Dutch auction process but do not include a put-back option. Beginning in mid-February 2008, due largely to uncertainty in the global credit and capital markets, investment banks and broker dealers became less willing to support ARS auctions. As a result, multiple auctions failed, including the auctions for the ARS held by the Company, although certain ARS were successfully auctioned by the Company during that time. A failed auction does not represent a default by the issuer of the underlying security. As of March 31, 2008, the auction rate securities held by the Company were all AAA rated, except for one AA rated, were all collateralized by securitized

(a)	Includes 76% of cash held in demand deposits and 24% of short-term money market accounts.

(b)	Comprised of small and mid-cap equity funds.

(c)	Includes 50% of equity index funds, 49% of fixed income investments, and 1% other investments.

(d)	Comprised of limited liability corporations and limited partnership interests.

(e)	Comprised of assets held under insurance annuity contracts.


As of December 31, 2009	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Investments:
Cash and cash equivalents(a)	$	8.5		—		—	$	8.5
Registered investment companies(b)		7.0		—		—		7.0
Private investment funds—redeemable(c)		—	$	577.2		—		577.2
Private investment funds—non-redeemable(d)		—		—	$	0.4		0.4
Insurance annuity contracts(e)		—		—		5.3		5.3

Total investments at fair value	$	15.5	$	577.2	$	5.7	$	598.4

(a)	Includes 94% of cash held in demand deposits and 6% of short-term money market accounts.

(b)	Comprised of small and mid-cap equity funds.

(c)	Includes 52% of equity index funds and 48% of fixed income investments.

(d)	Comprised of limited liability corporations and limited partnership interests.

(e)	Comprised of assets held under insurance annuity contracts.


	Fair Value Measurement Using Significant Unobservable Inputs (Level 3)
(in millions)	Insurance annuity contracts			Private investment funds non-redeemable
Beginning balance as of December 31, 2009	$	5.3		$	0.4
Actual return on plan assets		(0.9	)		—
Distributions		—			(0.1	)

Ending balance as of December 31, 2010	$	4.4		$	0.3

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Cash and cash equivalents.The Company’s domestic Plan held cash and cash equivalents of $1.3 million and $0.5 million at December 31, 2010 and 2009, respectively, which consists of an investment in shares of a registered money market fund. The fair value is determined by year end Net Asset Values (“NAV’s”) publicly reported on national exchanges as of December 31, 2010. The Company’s United Kingdom Plan held cash of $4.2 million and $8.0 million at December 31, 2010 and 2009, respectively, which consists of demand deposits.

Registered investment companies.The Company’s domestic Plan was invested in shares of mutual funds as of December 31, 2010 and 2009, which are registered with the Securities and Exchange Commission. Prices of these funds are based on NAV’s calculated by the funds and are publicly reported on national exchanges. The domestic Plan measures fair value of these investments using the NAV’s provided by the fund managers.

Private investment funds—redeemable.The Company’s domestic and United Kingdom Plans are invested in shares or units of several private investment funds, not the underlying assets. Redeemable private investment funds include collective trusts, comingled funds, pooled funds, limited partnerships, limited liability corporations, and group trusts. The funds calculate NAV’s on a periodic basis and are available only from the fund managers. Private investment funds are redeemable at the NAV’s.

Private investment funds—non-redeemable.The Company’s domestic Plan has investments in several partnerships (limited partnership and limited liability corporations) for which the domestic Plan has no ability to redeem or transfer its interests; therefore, there is no market in which the domestic Plan can exit these investments. As a result, the domestic Plan measures fair value of these investments using estimates of fair value which come from partner capital statements provided by the partnerships.

Insurance annuity contracts.The Company’s United Kingdom Plan is invested in several insurance annuity contracts. The value of these contracts is calculated by estimating future payments and discounting them to present value. As a result, there is no market for the Plan to exit these investments.

Contributions.Contributions to the plans in 2011 are expected to be approximately $29 million.

The estimated future benefit payments, which reflect expected future service, are expected to be as follows (in millions):


Year ended December 31,	Amount
2011	$	21.6
2012		22.6
2013		23.9
2014		25.5
2015		28.0
2016-2020		171.9

The Company does not offer post-retirement health care or other insurance benefits for retired employees.

Note 15: Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s chief operating decision maker (“CODM”), or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer. The Company is organized in three segments: Retail and Alliance Services, Financial Services and International.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Effective January 1, 2010, IPS is being reported within All Other and Corporate. Results for 2009 and 2008 have been adjusted to reflect the change. Other amounts in 2009 and 2008 have been adjusted to conform to current year presentation.

The business segment measurements provided to and evaluated by the CODM are computed in accordance with the following principles:

The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies.

Segment results exclude divested businesses.

Retail and Alliance Services segment revenue does not include equity earnings because it is reported using proportionate consolidation as described below. Other segment revenue includes equity earnings in affiliates (excluding amortization expense) and intersegment revenue.

Segment revenue excludes reimbursable debit network fees, postage and other revenue.

Segment earnings before net interest expense, income taxes, depreciation and amortization (“EBITDA”) includes equity earnings in affiliates and excludes depreciation and amortization expense, net income attributable to noncontrolling interests, other operating expenses and other income (expense). Retail and Alliance Services segment EBITDA does not include equity earnings because it is reported using proportionate consolidation as described below. Additionally, segment EBITDA is adjusted for items similar to certain of those used in calculating the Company’s compliance with debt covenants. The additional items that are adjusted to determine segment EBITDA are:

stock based compensation expense is excluded;

official check and money order businesses’ EBITDA are excluded;

cost of data center technology and savings initiatives are excluded and represent implementation costs associated with initiatives to reduce operating expenses including items such as platform and data center consolidation initiatives in the International segment, expenses related to the reorganization of global application development resources, expenses associated with domestic data center consolidation initiatives and planned workforce reduction expenses, expenses related to the conversion of certain BAMS merchant clients onto First Data platforms, as well as certain platform development and other costs directly associated with the termination of the CPS alliance, all of which are considered nonrecurring projects (excludes costs accrued in purchase accounting);

debt issuance costs are excluded and represent costs associated with issuing debt and modifying the Company’s debt structure as well as costs associated with the issuance of debt related to the merger with an affiliate of KKR in 2007;

KKR related items are excluded and represent items related to the merger with an affiliate of KKR primarily resulting from annual sponsor fees for management, consulting, financial and other advisory services and the effect of purchase accounting associated with the merger on EBITDA which is primarily the result of revenue recognition adjustments.

Retail and Alliance Services segment revenue and EBITDA are reflected based on the Company’s proportionate share of the results of its investments in businesses accounted for under the equity method and consolidated subsidiaries with noncontrolling ownership interests. In addition, Retail and Alliance services segment measures reflect commission payments to certain ISO’s, which are treated as an expense in the Consolidated Statements of Operations, as contra revenue to be consistent with revenue share arrangements with other ISO’s that are recorded as contra revenue.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Corporate operations include administrative and shared service functions such as the executive group, legal, tax, treasury, internal audit, accounting, human resources, information technology and procurement. Costs incurred by Corporate that are directly attributable to a segment are allocated to the respective segment. Administrative and shared service costs are retained by Corporate.

The following tables present the Company’s operating segment results for the years ended December 31, 2010, 2009 and 2008 (in millions):


Year ended December 31, 2010	Retail and Alliance Services			Financial Services			International			All Other and Corporate			Totals
Revenues:
Transaction and processing service fees	$	2,923.9		$	1,362.2		$	1,237.5		$	126.8		$	5,650.4
Product sales and other		390.9			46.8			353.9			23.9			815.5
Equity earnings in affiliates(a)		—			—			29.4			—			29.4

Total segment reporting revenues	$	3,314.8		$	1,409.0		$	1,620.8		$	150.7		$	6,495.3

Internal revenue	$	18.0		$	36.0		$	8.4		$	—		$	62.4
External revenue		3,296.8			1,373.0			1,612.4			150.7			6,432.9
Depreciation and amortization		676.2			362.9			289.9			51.2			1,380.2
Segment EBITDA		1,322.3			553.0			329.8			(178.1	)		2,027.0
Other operating expenses and other income (expense) excluding divestitures		(60.2	)		(8.5	)		(26.4	)		(21.0	)		(116.1	)
Expenditures for long-lived assets		26.4			69.9			167.2			100.7			364.2
Equity earnings in affiliates		104.8			—			12.5			—			117.3
Investment in unconsolidated affiliates		1,013.5			—			194.7			—			1,208.2


Year ended December 31, 2009	Retail and Alliance Services			Financial Services			International			All Other and Corporate			Totals
Revenues:
Transaction and processing service fees	$	2,720.1		$	1,379.8		$	1,197.1		$	209.7		$	5,506.7
Product sales and other		342.7			63.0			344.9			40.7			791.3
Equity earnings in affiliates(a)		—			—			30.1			—			30.1

Total segment reporting revenues	$	3,062.8		$	1,442.8		$	1,572.1		$	250.4		$	6,328.1

Internal revenue	$	16.5		$	34.0		$	6.5		$	1.1		$	58.1
External revenue		3,046.3			1,408.8			1,565.6			249.3			6,270.0
Depreciation and amortization		752.2			353.3			285.6			73.7			1,464.8
Segment EBITDA		1,193.5			645.3			398.7			(122.7	)		2,114.8
Other operating expenses and other income (expense) excluding divestitures		(5.3	)		(25.6	)		(173.9	)		(133.1	)		(337.9	)
Expenditures for long-lived assets		42.5			84.2			170.3			81.8			378.8
Equity earnings in affiliates		86.6			—			11.2			—			97.8
Investment in unconsolidated affiliates		1,075.8			—			215.5			—			1,291.3

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


Year ended December 31, 2008	Retail and Alliance Services			Financial Services			International			All Other and Corporate			Totals
Revenues:
Transaction and processing service fees	$	2,894.2		$	1,480.4		$	1,324.3		$	220.1		$	5,919.0
Product sales and other		383.0			37.1			338.5			156.8			915.4
Equity earnings in affiliates(a)		—			—			33.2			2.5			35.7

Total segment reporting revenues	$	3,277.2		$	1,517.5		$	1,696.0		$	379.4		$	6,870.1

Internal revenue	$	19.7		$	35.9		$	6.3		$	0.7		$	62.6
External revenue		3,257.5			1,481.6			1,689.7			378.7			6,807.5
Depreciation and amortization		901.9			321.5			254.6			81.6			1,559.6
Segment EBITDA		1,407.8			753.1			433.3			(39.2	)		2,555.0
Other operating expenses and other income (expense) excluding divestitures		(1,104.6	)		(1,399.6	)		(366.3	)		(186.8	)		(3,057.3	)
Expenditures for long-lived assets		30.4			180.1			202.3			34.0			446.8
Equity earnings in affiliates		109.1			—			11.8			2.1			123.0
Investment in unconsolidated affiliates		1,042.0			—			217.6			—			1,259.6

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

A reconciliation of reportable segment amounts to the Company’s consolidated balances is as follows (in millions):


	Year ended December 31,
	2010			2009			2008
Revenues:
Total reported segments	$	6,344.6		$	6,077.7		$	6,490.7
All Other and Corporate		150.7			250.4			379.4
Adjustments to reconcile to Adjusted revenue:
Official check and money order revenues(b)		8.0			(0.8	)		(43.1	)
Eliminations of intersegment revenues		(62.4	)		(58.1	)		(62.6	)

Adjusted revenue		6,440.9			6,269.2			6,764.4

Adjustments to reconcile to Consolidated revenues:
Divested businesses		—			75.2			178.0
Adjustments for non-wholly owned entities(c)		224.1			(12.3	)		(375.8	)
Official check and money order revenues		(8.0	)		0.8			43.1
ISO commission expense		333.8			252.7			100.9
Reimbursable debit network fees, postage and other		3,389.6			2,728.2			2,100.7

Consolidated revenues	$	10,380.4		$	9,313.8		$	8,811.3

Segment EBITDA:
Total reported segments	$	2,205.1		$	2,237.5		$	2,594.2
All Other and Corporate		(178.1	)		(122.7	)		(39.2	)

Adjusted EBITDA		2,027.0			2,114.8			2,555.0

Adjustments to reconcile to “Net loss attributable to First Data Corporation”:
Divested businesses		1.1			43.7			88.3
Adjustments for non-wholly owned entities(c)		34.3			(21.3	)		(237.8	)
Depreciation and amortization		(1,414.4	)		(1,452.3	)		(1,369.7	)
Interest expense		(1,796.6	)		(1,796.4	)		(1,964.9	)
Interest income		7.8			11.7			26.0
Other items(d)		(97.4	)		(351.0	)		(3,270.0	)
Income tax benefit		323.8			578.8			699.2
Stock based compensation		(16.1	)		(19.2	)		(16.6	)
Official check and money order EBITDA		(21.2	)		(19.9	)		5.7
Cost of data center, technology and savings initiatives		(33.5	)		(147.9	)		(229.2	)
KKR merger related items		(28.5	)		(26.5	)		(46.3	)
Debt issuance costs		(8.1	)		(0.7	)		(4.0	)
Eliminations		—			(0.2	)		—

Net loss attributable to First Data Corporation	$	(1,021.8	)	$	(1,086.4	)	$	(3,764.3	)

(a)	Excludes equity losses that were recorded in expense and the amortization related to the excess of the investment balance over the Company’s proportionate share of the investee’s net book value for the International segment and All Other and Corporate.

(b)	Represents an adjustment to exclude the official check and money order businesses from Adjusted revenue.

(c)	Represent the net adjustment to reflect First Data’s proportionate share of alliance revenue and EBITDA within the Retail and Alliance Services segment and amortization related to equity method investments not included in segment EBITDA.

(d)	Includes “Other operating expenses” and “Other income (expense)” as presented on the Consolidated Statements of Operations.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Segment assets are as follows (in millions):


As of December 31,	2010		2009
Assets:
Retail and Alliance Services	$	24,673.8	$	25,377.3
Financial Services		4,982.2		5,238.8
International		5,186.7		5,841.5
All Other and Corporate		2,701.4		3,277.8

Consolidated	$	37,544.1	$	39,735.4

A reconciliation of reportable segment depreciation and amortization amounts to the Company’s consolidated balances in the Consolidated Statements of Cash Flows is as follows (in millions):


	Year ended December 31,
	2010		2009		2008
Depreciation and Amortization:
Total reported segments	$	1,329.0	$	1,391.1	$	1,478.0
All Other and Corporate		51.2		73.7		81.6

		1,380.2		1,464.8		1,559.6

Adjustments to reconcile to consolidated depreciation and amortization:
Divested businesses		—		8.9		15.8
Adjustments for non-wholly owned entities		107.2		52.4		(26.7	)
Amortization of initial payments for new contracts		38.6		27.7		10.9

Total consolidated depreciation and amortization	$	1,526.0	$	1,553.8	$	1,559.6

Information concerning principal geographic areas was as follows (in millions):


	United States		International		Total
Revenues
2010	$	8,806.8	$	1,573.6	$	10,380.4
2009		7,789.3		1,524.5		9,313.8
2008		7,033.2		1,778.1		8,811.3
Long-Lived Assets
2010	$	21,979.0	$	3,424.6	$	25,403.6
2009		22,962.4		3,694.7		26,657.1
2008		20,026.0		3,826.2		23,852.2

“International” represents businesses of significance, which have local currency as their functional currency regardless of the segments to which the associated revenues and long-lived assets applied.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Note 16: Quarterly Financial Results (Unaudited)

Summarized quarterly results for the two years ended December 31, 2010 and 2009, respectively, are as follows (in millions):


2010 by Quarter:	First			Second			Third			Fourth
Revenues	$	2,402.1		$	2,614.7		$	2,633.1		$	2,730.5
Expenses		2,332.1			2,467.9			2,492.4			2,571.3
Interest income		2.0			1.4			2.1			2.3
Interest expense		(448.9	)		(450.9	)		(455.8	)		(441.0	)
Other income (expense)		8.2			24.8			(52.3	)		3.4

Loss before income taxes and equity earnings in affiliates		(368.7	)		(277.9	)		(365.3	)		(276.1	)
Income tax (benefit) expense		(138.1	)		(122.4	)		52.3			(115.6	)
Equity earnings in affiliates		22.2			33.3			31.2			30.6

Net loss		(208.4	)		(122.2	)		(386.4	)		(129.9	)
Less: Net income attributable to noncontrolling interests		31.7			49.0			44.9			49.3

Net loss attributable to First Data Corporation	$	(240.1	)	$	(171.2	)	$	(431.3	)	$	(179.2	)


2009 by Quarter:	First			Second			Third			Fourth
Revenues	$	2,076.2		$	2,208.6		$	2,443.2		$	2,585.8
Expenses		2,045.8			2,090.4			2,328.4			2,694.4
Interest income		3.3			3.1			3.2			2.1
Interest expense		(448.2	)		(449.6	)		(447.5	)		(451.1	)
Other income (expense)		23.3			(3.6	)		(84.5	)		3.5

Loss before income taxes and equity earnings in affiliates		(391.2	)		(331.9	)		(414.0	)		(554.1	)
Income tax benefit		(144.8	)		(112.8	)		(132.5	)		(188.7	)
Equity earnings in affiliates		18.5			25.5			26.8			27.0

Net loss		(227.9	)		(193.6	)		(254.7	)		(338.4	)
Less: Net income attributable to noncontrolling interests		3.4			2.3			35.9			30.2

Net loss attributable to First Data Corporation	$	(231.3	)	$	(195.9	)	$	(290.6	)	$	(368.6	)

Note 17: Income Taxes


	Year ended December 31,
(in millions)	2010			2009			2008
Components of pretax (loss) income:
Domestic	$	(1,289.1	)	$	(1,799.2	)	$	(3,983.1	)
Foreign		118.4			205.8			(324.1	)

	$	(1,170.7	)	$	(1,593.4	)	$	(4,307.2	)

(Benefit) provision for income taxes:
Federal	$	(313.9	)	$	(579.6	)	$	(667.8	)
State and local		(39.3	)		(38.8	)		(46.6	)
Foreign		29.4			39.6			15.2

	$	(323.8	)	$	(578.8	)	$	(699.2	)


Effective Income Tax Rate		27.7	%		36.3	%		16.2	%

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The Company’s effective tax rates differ from statutory rates as follows:


	Year ended December 31,
	2010	2009	2008
Federal statutory rate	35.0%	35.0%	35.0%
State income taxes, net of federal income tax benefit	2.0	2.1	1.1
Nontaxable income from noncontrolling interests	5.2	1.6	1.3
Impact of foreign operations(a)	1.5	2.5	1.2
Valuation allowances	(15.1)	(1.7)	(0.1)
Liability for unrecognized tax benefits	2.1	(2.5)	(0.7)
Goodwill impairment	0.0	(0.3)	(24.4)
Other	(3.0)	(0.4)	2.8

Effective tax rate	27.7%	36.3%	16.2%

(a)	The impact of foreign operations includes the effects of tax earnings and profits adjustments, foreign losses and differences between foreign tax expense and foreign taxes eligible for the U.S. foreign tax credit.

The Company’s income tax (benefits) provisions consisted of the following components:


	Year ended December 31,
(in millions)	2010			2009			2008
Current
Federal	$	(27.7	)	$	39.8		$	31.4
State and local		18.3			13.1			29.2
Foreign		57.7			67.7			103.5

		48.3			120.6			164.1
Deferred
Federal		(286.2	)		(619.4	)		(699.1	)
State and local		(57.6	)		(51.9	)		(75.8	)
Foreign		(28.3	)		(28.1	)		(88.4	)

		(372.1	)		(699.4	)		(863.3	)

	$	(323.8	)	$	(578.8	)	$	(699.2	)

Income tax payments, net of refunds received, of $100.5 million in 2010 were greater than current expense primarily as a result of the decreased liability for unrecognized tax benefits reducing current expense. Income tax payments, net of refunds received, of $79 million in 2009 were less than current expense primarily as a result of the increased liability for unrecognized tax benefits increasing current expense. Income tax payments, net of refunds received, of $69 million in 2008 were less than current expense primarily due to the actual receipt of tax refunds related to the period from September 25, 2007 through December 31, 2007.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the book and tax bases of the Company’s assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. Deferred tax assets are included in both “Other current assets” and “Other long-term assets” in the Company’s Consolidated Balance Sheets. Deferred tax liabilities are included in “Deferred long-term tax liabilities” in the Company’s Consolidated Balance Sheets. The following table outlines the principal components of deferred tax items (in millions):


As of December 31,	2010			2009
Deferred tax assets related to:
Reserves and other accrued expenses	$	360.1		$	337.3
Pension obligations		43.4			72.7
Employee related liabilities		59.8			57.1
Deferred revenues		15.3			9.1
Unrealized securities and hedging (gain)/loss		101.7			163.1
Net operating losses and tax credit carryforwards		772.8			547.5
U.S. foreign tax credits on undistributed earnings		171.4			186.8
Foreign exchange (gain)/loss		23.1			34.8

Total deferred tax assets		1,547.6			1,408.4
Valuation allowance		(287.2	)		(110.6	)

Realizable deferred tax assets		1,260.4			1,297.8

Deferred tax liabilities related to:
Property, equipment and intangibles		(1,549.8	)		(2,052.2	)
Investment in affiliates and other		(472.6	)		(328.6	)
U.S. tax on foreign undistributed earnings		(113.7	)		(138.9	)

Total deferred tax liabilities		(2,136.1	)		(2,519.7	)

Net deferred tax liabilities	$	(875.7	)	$	(1,221.9	)

The Company’s deferred tax assets and liabilities were included in the Consolidated Balance Sheets as follows (in millions):


As of December 31,	2010			2009
Current deferred tax assets	$	126.4		$	121.2
Long-term deferred tax assets		11.6			3.3
Long-term deferred tax liabilities		(1,013.7	)		(1,346.4	)

Net deferred tax liabilities	$	(875.7	)	$	(1,221.9	)

As of December 31, 2010 and December 31, 2009 the Company had recorded valuation allowances of $287.2 million and $110.6 million, respectively, against federal, state and foreign net operating losses and foreign tax credits. The increase to the valuation allowance of $176.6 million in 2010 was primarily due to a change in federal tax law, which adversely affects the Company’s ability to utilize foreign tax credits.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following table presents the approximate amounts of federal, state and foreign net operating loss carryforwards and foreign tax credit, general business credit and minimum tax credit carryforwards (in millions):


As of December 31,	2010
Federal net operating loss carryforwards(a)	$	1,566
State net operating loss carryforwards(b)		2,402
Foreign net operating loss carryforwards(c)		240
Foreign tax credit carryforwards(d)		109
General business credit carryforwards(e)		26
Minimum tax credit carryforwards(f)		14

(a)	If not utilized, these carryforwards will expire in years 2015 through 2030.

(b)	If not utilized, these carryforwards will expire in years 2011 through 2030.

(c)	Foreign net operating loss carryforwards of $117 million, if not utilized, will expire in years 2011 through 2020. The remaining foreign net operating loss carryforwards of $123 million have an indefinite life.

(d)	If not utilized, these carryforwards will expire in years 2017 through 2020.

(e)	If not utilized, these carryforwards will expire in years 2025 through 2029.

(f)	These carryforwards have an indefinite life.

A reconciliation of the unrecognized tax benefits for the year ended December 31, 2008, 2009 and 2010 is as follows (in millions):


Balance as of January 1, 2008	$	368.1
Increases for tax positions of prior years		23.1
Decreases for tax positions of prior years		(11.6	)
Increases for tax positions related to the current period		4.9
Decreases for cash settlements with taxing authorities		(3.3	)
Decreases due to the lapse of the applicable statute of limitations		(9.7	)

Balance as of December 31, 2008	$	371.5
Increases for tax positions of prior years		21.6
Decreases for tax positions of prior years		(5.2	)
Increases for tax positions related to the current period		35.4
Decreases for cash settlements with taxing authorities		(2.9	)
Decreases due to the lapse of the applicable statute of limitations		(5.4	)

Balance as of December 31, 2009	$	415.0
Increases for tax positions of prior years		0.5
Decreases for tax positions of prior years		(45.4	)
Increases for tax positions related to the current period		1.9
Decreases for cash settlements with taxing authorities		(1.4	)
Decreases due to the lapse of the applicable statute of limitations		(2.0	)

Balance as of December 31, 2010	$	368.6

Most of the unrecognized tax benefits are included in the “Other long-term liabilities” line of the Consolidated Balance Sheets, net of the federal benefit on state income taxes (approximately $24 million at December 31, 2010). However, those unrecognized tax benefits that affect the federal consolidated tax years ending December 31, 2008, 2009 and 2010 are included in the “Long-term deferred tax liabilities” line of the Consolidated Balance Sheets, as these items reduce the Company’s net operating loss and credit carryforwards

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

from those periods. The unrecognized tax benefits at December 31, 2010 and 2009 included approximately $195 million and $217 million, respectively, of tax positions that, if recognized, would affect the effective tax rate.

During the year ended December 31, 2010, the Company’s liability for unrecognized tax benefits was reduced by $39 million upon the closure of the 2002 federal tax year and after negotiating settlements with the Internal Revenue Service (“IRS”) regarding specific contested issues in the 2003 and 2004 federal tax years. The reduction in the liability was recorded through a decrease to tax expense and an increase to deferred tax liabilities.

During the years ended December 31, 2009 and 2008, the Company’s liability for unrecognized tax benefits was reduced by $5 million and $11 million, respectively, after negotiating settlements with certain state jurisdictions. The reductions in the liability were recorded through cash payments and a decrease to tax expense in 2009 and a decrease to goodwill in 2008.

The Company recognizes interest and penalties related to unrecognized tax benefits in the “Income tax benefit” line item of the Consolidated Statements of Operations. Cumulative accrued interest and penalties (net of related tax benefits) are not included in the ending balances of unrecognized tax benefits. Cumulative accrued interest and penalties are included in the “Other long-term liabilities” line of the Consolidated Balance Sheets. The related tax benefits of the accrued interest are included in the “Long-term deferred tax liabilities” line of the Consolidated Balance Sheets. The following table presents the approximate amounts associated with accrued interest expense and the cumulative accrued interest and penalties (in millions):


	Year ended December 31,
	2010		2009		2008
Current year accrued interest expense, net of related tax benefits	$	14	$	18	$	15
Cumulative accrued interest and penalties, net of related tax benefits		67		70		56

As of December 31, 2010, the Company anticipates it is reasonably possible that its liability for unrecognized tax benefits may decrease by approximately $57 million within the next twelve months as the result of the possible closure of its 2003 and 2004 federal tax years, potential settlements with certain states and the lapse of the statute of limitations in various state jurisdictions. The potential decrease relates to various federal and state tax benefits including research and experimentation credits and certain amortization, loss and stock warrant deductions.

The Company or one or more of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2010, the Company is no longer subject to income tax examination by the U.S. federal jurisdiction for years before 2003. State and local examinations are substantially complete through 1999. Foreign jurisdictions generally remain subject to examination by their respective authorities from 2003 forward, none of which are considered major jurisdictions.

The IRS completed its examination of the U.S. federal consolidated income tax returns of the Company for 2003 and 2004 and issued a Notice of Deficiency (the “Notice”) in December 2008. The Notice claims that the Company and its subsidiaries, which included The Western Union Company (“Western Union”) during the years at issue, owe significant additional taxes, interest and penalties with respect to a variety of adjustments. The Company and Western Union agree with several of the adjustments in the Notice. Additionally, during 2010, the IRS conceded certain of the adjustments. As to the adjustments that remain in dispute, for 2003 such issues represent total taxes and penalties allegedly due of approximately $31 million, of which $8 million relates to the

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Company and $23 million relates to Western Union, and for 2004 such issues represent total taxes and penalties allegedly due of approximately $91 million, all of which relates to Western Union. The Company estimates that the total interest due (pretax) on such amounts for both years is approximately $53 million through December 31, 2010, of which $4 million relates to the Company and $49 million relates to Western Union. As to the disputed issues, the Company and Western Union are contesting the asserted deficiencies in U.S. Tax Court; however, in the fourth quarter of 2010 all disputed issues were assigned to IRS Appeals and currently are being reviewed in that forum for possible resolution. The Company believes that it has adequately reserved for its disputed issues and final resolution of those issues will not have a material adverse effect on its financial position or results of operations.

Prior to the spin-off transaction, Western Union was part of the FDC consolidated, unitary and combined income tax returns through the spin-off date of September 29, 2006. Under the Tax Allocation Agreement executed at the time of the spin-off of Western Union, Western Union is responsible for and must indemnify the Company against all taxes, interest and penalties that relate to Western Union for periods prior to the spin-off date, including the amounts asserted in the Notice as described above. If Western Union were to agree to or be finally determined to owe any amounts for such periods but were to default in its indemnification obligation under the Tax Allocation Agreement, the Company as parent of the tax group during such periods generally would be required to pay the amounts to the relevant tax authority, resulting in a potentially material adverse effect on the Company’s financial position and results of operations. Accordingly, as of December 31, 2010, the Company had approximately $130 million of uncertain income tax liabilities recorded related to Western Union for periods prior to the spin-off date. The Company has recorded a corresponding account receivable of equal amount from Western Union, which is included as a long-term account receivable in the “Other long-term assets” line of the Company’s Consolidated Balance Sheets, to reflect the indemnification for such liabilities. The uncertain income tax liabilities and corresponding receivable are based on information provided by Western Union regarding its tax contingency reserves for periods prior to the spin-off date. There is no assurance that a Western Union-related issue raised by the IRS or other tax authority will be finally resolved at a cost not in excess of the amount reserved and reflected in the Company’s uncertain income tax liabilities and corresponding receivable from Western Union. The Western Union contingent liability is in addition to the FDC liability for unrecognized tax benefits discussed above.

Note 18: Supplemental Guarantor Condensed Consolidating Financial Statements

As described in Note 8 to these Consolidated Financial Statements, the Company’s 9.875% senior notes, 12.625% senior notes, 10.55% senior PIK notes and 11.25% senior subordinated notes are unconditionally guaranteed by substantially all existing and future, direct and indirect, wholly-owned, domestic subsidiaries of FDC other than Integrated Payment Systems Inc. (“Guarantors”). None of the other subsidiaries of FDC, either direct or indirect, guarantee the notes (“Non-Guarantors”). The Guarantors also unconditionally guarantee the senior secured revolving credit facility, senior secured term loan facility and the 8.875% senior secured notes which rank senior in right of payment to all existing and future unsecured and second lien indebtedness of FDC’s guarantor subsidiaries. The Guarantors further unconditionally guarantee the 8.25% senior second lien notes and 8.75%/10.00% PIK toggle senior second lien notes which rank senior in right of payment to all existing and future unsecured indebtedness of FDC’s guarantor subsidiaries. The 9.875% senior note, 12.625% senior note, 10.55% senior PIK note and 11.25% senior subordinated note guarantees are unsecured and rank equally in right of payment with all existing and future senior indebtedness of the guarantor subsidiaries but senior in right of payment to all existing and future subordinated indebtedness of FDC’s guarantor subsidiaries. The 11.25% senior subordinated note guarantees are unsecured and rank equally in right of payment with all existing and future senior subordinated indebtedness of the guarantor subsidiaries.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

The following tables present the results of operations, financial position and cash flows of FDC (“FDC Parent Company”), the Guarantor subsidiaries, the Non-Guarantor subsidiaries and consolidation adjustments for the years ended December 31, 2010, 2009 and 2008 and as of December 31, 2010 and 2009 to arrive at the information for FDC on a consolidated basis.


	Year ended December 31, 2010
	FDC Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	—		$	4,001.7		$	2,328.3		$	(148.5	)	$	6,181.5
Product sales and other		—			542.6			319.3			(52.6	)		809.3
Reimbursable debit network fees, postage and other		—			2,299.8			1,160.3			(70.5	)		3,389.6

		—			6,844.1			3,807.9			(271.6	)		10,380.4


Expenses:
Cost of services (exclusive of items shown below)		—			1,944.3			1,227.5			(148.5	)		3,023.3
Cost of products sold		—			257.8			170.0			(52.6	)		375.2
Selling, general and administrative		264.7			877.2			437.8			—			1,579.7
Reimbursable debit network fees, postage and other		—			2,299.8			1,160.3			(70.5	)		3,389.6
Depreciation and amortization		7.6			937.9			468.9			—			1,414.4
Other operating expenses:
Restructuring, net		12.7			46.0			13.3			—			72.0
Impairments		—			7.8			3.7			—			11.5
Litigation and regulatory settlements		—			(2.0	)		—			—			(2.0	)

		285.0			6,368.8			3,481.5			(271.6	)		9,863.7

Operating (loss) profit		(285.0	)		475.3			326.4			—			516.7

Interest income		1.0			1.1			5.7			—			7.8
Interest expense		(1,775.2	)		(6.4	)		(15.0	)		—			(1,796.6	)
Interest income (expense) from intercompany notes		112.3			(146.4	)		34.1			—			—
Other income (expense)		2.8			31.8			(24.5	)		(26.0	)		(15.9	)
Equity earnings from consolidated subsidiaries		323.8			150.2			—			(474.0	)		—

		(1,335.3	)		30.3			0.3			(500.0	)		(1,804.7	)

(Loss) income before income taxes and equity earnings in affiliates		(1,620.3	)		505.6			326.7			(500.0	)		(1,288.0	)
Income tax (benefit) expense		(598.5	)		164.7			110.0			—			(323.8	)
Equity earnings in affiliates		—			117.7			1.5			(1.9	)		117.3

Net (loss) income		(1,021.8	)		458.6			218.2			(501.9	)		(846.9	)
Less: Net (loss) income attributable to noncontrolling interests		—			(0.2	)		49.3			125.8			174.9

Net (loss) income attributable to First Data Corporation	$	(1,021.8	)	$	458.8		$	168.9		$	(627.7	)	$	(1,021.8	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Year ended December 31, 2009
	FDC Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	—		$	4,111.5		$	1,741.2		$	(63.8	)	$	5,788.9
Product sales and other		—			521.0			304.1			(28.4	)		796.7
Reimbursable debit network fees, postage and other		—			2,233.5			527.7			(33.0	)		2,728.2

		—			6,866.0			2,573.0			(125.2	)		9,313.8

Expenses:
Cost of services (exclusive of items shown below)		—			2,138.3			870.6			(63.8	)		2,945.1
Cost of products sold		—			229.9			104.0			(28.4	)		305.5
Selling, general and administrative		218.9			827.0			392.3			—			1,438.2
Reimbursable debit network fees, postage and other		—			2,233.5			527.7			(33.0	)		2,728.2
Depreciation and amortization		6.0			1,063.5			382.8			—			1,452.3
Other operating expenses:
Restructuring, net		3.0			59.0			30.8			—			92.8
Impairments		—			100.2			84.9			—			185.1
Litigation and regulatory settlements		(2.7	)		14.5			—			—			11.8

		225.2			6,665.9			2,393.1			(125.2	)		9,159.0

Operating (loss) profit		(225.2	)		200.1			179.9			—			154.8

Interest income		3.5			0.7			7.5			—			11.7
Interest expense		(1,770.7	)		(7.5	)		(18.2	)		—			(1,796.4	)
Interest (expense) income from intercompany notes		(97.3	)		58.7			38.6			—			—
Other (expense) income		(88.6	)		(0.2	)		27.5			—			(61.3	)
Equity earnings from consolidated subsidiaries		322.5			28.4			—			(350.9	)		—

		(1,630.6	)		80.1			55.4			(350.9	)		(1,846.0	)

(Loss) income before income taxes and equity earnings in affiliates		(1,855.8	)		280.2			235.3			(350.9	)		(1,691.2	)
Income tax (benefit) expense		(769.4	)		217.5			(26.9	)		—			(578.8	)
Equity earnings in affiliates		—			101.5			(1.2	)		(2.5	)		97.8

Net (loss) income		(1,086.4	)		164.2			261.0			(353.4	)		(1,014.6	)
Less: Net (loss) income attributable to noncontrolling interests		—			(0.1	)		10.9			61.0			71.8

Net (loss) income attributable to First Data Corporation	$	(1,086.4	)	$	164.3		$	250.1		$	(414.4	)	$	(1,086.4	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Year ended December 31, 2008
	FDC Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	2.6		$	4,061.9		$	1,727.1		$	(6.3	)	$	5,785.3
Product sales and other		—			555.9			394.6			(25.2	)		925.3
Reimbursable debit network fees, postage and other		—			1,995.8			104.9			—			2,100.7

		2.6			6,613.6			2,226.6			(31.5	)		8,811.3

Expenses:
Cost of services (exclusive of items shown below)		—			1,984.1			892.8			(6.3	)		2,870.6
Cost of products sold		—			210.6			131.4			(25.2	)		316.8
Selling, general and administrative		223.4			774.3			377.1			—			1,374.8
Reimbursable debit network fees, postage and other		—			1,995.8			104.9			—			2,100.7
Depreciation and amortization		5.9			1,010.8			353.0			—			1,369.7
Other operating expenses:
Restructuring, net		—			12.0			—			—			12.0
Impairments		—			2,680.4			563.2			—			3,243.6

		229.3			8,668.0			2,422.4			(31.5	)		11,288.2

Operating loss		(226.7	)		(2,054.4	)		(195.8	)		—			(2,476.9	)

Interest income		8.9			3.0			14.1			—			26.0
Interest expense		(1,933.9	)		(7.2	)		(23.8	)		—			(1,964.9	)
Interest (expense) income from intercompany notes		(113.6	)		87.2			26.4			—			—
Other (expense) income		(24.1	)		0.1			9.6			—			(14.4	)
Equity (loss) earnings from consolidated subsidiaries		(2,350.6	)		32.0			—			2,318.6			—

		(4,413.3	)		115.1			26.3			2,318.6			(1,953.3	)

Loss before income taxes and equity earnings in affiliates		(4,640.0	)		(1,939.3	)		(169.5	)		2,318.6			(4,430.2	)
Income tax (benefit) expense		(858.8	)		216.8			(57.2	)		—			(699.2	)
Equity earnings in affiliates		16.9			98.1			8.0			—			123.0

Net loss		(3,764.3	)		(2,058.0	)		(104.3	)		2,318.6			(3,608.0	)
Less: Net income attributable to noncontrolling interests		—			1.8			154.5			—			156.3

Net loss attributable to First Data Corporation	$	(3,764.3	)	$	(2,059.8	)	$	(258.8	)	$	2,318.6		$	(3,764.3	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2010
	FDC Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	164.1		$	21.1		$	324.3			—		$	509.5
Accounts receivable, net of allowance for doubtful accounts		2.6			1,121.1			1,045.9			—			2,169.6
Settlement assets(1)		—			3,476.2			3,217.8			—			6,694.0
Other current assets		86.0			262.4			65.0			—			413.4

Total current assets		252.7			4,880.8			4,653.0			—			9,786.5

Property and equipment, net of accumulated depreciation		30.3			637.2			284.5			—			952.0
Goodwill		—			9,468.3			7,828.6			—			17,296.9
Customer relationships, net of accumulated amortization		—			2,923.8			2,299.9			—			5,223.7
Other intangibles, net of accumulated amortization		606.9			665.4			658.7			—			1,931.0
Investment in affiliates		—			1,169.9			38.3			—			1,208.2
Long-term settlement assets(1)		—			—			365.1			—			365.1
Other long-term assets		482.4			265.5			32.8			—			780.7
Investment in consolidated subsidiaries		25,074.4			5,361.4			—		$	(30,435.8	)		—

Total assets	$	26,446.7		$	25,372.3		$	16,160.9		$	(30,435.8	)	$	37,544.1

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	0.4		$	95.2		$	85.3			—		$	180.9
Short-term and current portion of long-term borrowings		31.7			44.9			193.9			—			270.5
Settlement obligations(1)		—			3,476.2			3,582.7			—			7,058.9
Other current liabilities		301.1			651.3			401.3			—			1,353.7

Total current liabilities		333.2			4,267.6			4,263.2			—			8,864.0

Long-term borrowings		22,376.0			21.8			41.0			—			22,438.8
Long-term deferred tax (assets) liabilities		(928.5	)		1,838.6			103.6			—			1,013.7
Intercompany payable (receivable)		4,298.1			(3,496.7	)		(801.4	)		—			—
Intercompany notes		(1,253.2	)		1,621.1			(367.9	)		—			—
Other long-term liabilities		1,026.8			89.7			23.1			—			1,139.6

Total liabilities		25,852.4			4,342.1			3,261.6			—			33,456.1

Redeemable equity interests		—			—			28.1		$	(28.1	)		—
Redeemable noncontrolling interests		—			—			—			28.1			28.1
First Data Corporation stockholder’s equity		594.3			21,030.4			5,864.5			(26,894.9	)		594.3
Noncontrolling interests		—			(0.2	)		52.5			3,413.3			3,465.6
Equity of consolidated alliance		—			—			6,954.2			(6,954.2	)		—

Total equity		594.3			21,030.2			12,871.2			(30,435.8	)		4,059.9

Total liabilities and equity	$	26,446.7		$	25,372.3		$	16,160.9		$	(30,435.8	)	$	37,544.1

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	December 31, 2009
	FDC Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	104.6		$	25.4		$	607.0			—		$	737.0
Accounts receivable, net of allowance for doubtful accounts		17.1			1,106.3			1,332.1			—			2,455.5
Settlement assets(1)		—			3,523.3			3,347.0			—			6,870.3
Other current assets		69.3			243.3			86.2			—			398.8

Total current assets		191.0			4,898.3			5,372.3			—			10,461.6

Property and equipment, net of accumulated depreciation		29.9			677.9			343.6			—			1,051.4
Goodwill		—			9,570.0			7,905.8			—			17,475.8
Customer relationships, net of accumulated amortization		—			3,398.4			2,610.4			—			6,008.8
Other intangibles, net of accumulated amortization		607.0			820.9			693.2			—			2,121.1
Investment in affiliates		—			1,391.7			35.0		$	(135.4	)		1,291.3
Long-term settlement assets(1)		—			—			480.7			—			480.7
Other long-term assets		563.9			226.5			54.3			—			844.7
Investment in consolidated subsidiaries		26,401.5			5,370.0			—			(31,771.5	)		—

Total assets	$	27,793.3		$	26,353.7		$	17,495.3		$	(31,906.9	)	$	39,735.4

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	0.2		$	95.4		$	105.1			—		$	200.7
Short-term and current portion of long-term borrowings		142.2			36.9			125.8			—			304.9
Settlement obligations(1)		—			3,523.3			3,871.4			—			7,394.7
Other current liabilities		384.8			691.0			479.1			—			1,554.9

Total current liabilities		527.2			4,346.6			4,581.4			—			9,455.2

Long-term borrowings		22,152.8			47.3			104.8			—			22,304.9
Long-term deferred tax (assets) liabilities		(764.3	)		2,101.7			9.0			—			1,346.4
Intercompany payable (receivable)		4,203.4			(3,550.8	)		(652.6	)		—			—
Intercompany notes		(1,044.2	)		1,405.0			(360.8	)		—			—
Other long-term liabilities		1,133.1			146.3			22.5			—			1,301.9

Total liabilities		26,208.0			4,496.1			3,704.3			—			34,408.4

Redeemable equity interests		—			—			362.3		$	(362.3	)		—
Redeemable noncontrolling interests		—			—			—			226.9			226.9
First Data Corporation stockholder’s equity		1,585.3			21,857.6			6,315.3			(28,172.9	)		1,585.3
Noncontrolling interests		—			—			46.4			3,468.4			3,514.8
Equity of consolidated alliance		—			—			7,067.0			(7,067.0	)		—

Total equity		1,585.3			21,857.6			13,428.7			(31,771.5	)		5,100.1

Total liabilities and equity	$	27,793.3		$	26,353.7		$	17,495.3		$	(31,906.9	)	$	39,735.4

(1)	The majority of the Guarantor settlement assets relate to FDC’s merchant acquiring business. FDC believes the settlement assets are not available to satisfy any claims other than those related to the settlement liabilities.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Year ended December 31, 2010
	FDC Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(1,021.8	)	$	458.6		$	218.2		$	(501.9	)	$	(846.9	)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)		7.6			1,036.9			481.5			—			1,526.0
Charges related to other operating expenses and other income (expense)		9.9			20.0			41.5			26.0			97.4
Other non-cash and non-operating items, net		(11.6	)		(207.4	)		8.8			475.8			265.6
(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions		(608.4	)		107.0			216.9			(2.9	)		(287.4	)

Net cash (used in) provided by operating activities		(1,624.3	)		1,415.1			966.9			(3.0	)		754.7

CASH FLOWS FROM INVESTING ACTIVITIES
Current period acquisitions, net of cash acquired		—			(3.1	)		(0.1	)		—			(3.2	)
Payments related to other businesses previously acquired		—			—			(1.4	)		—			(1.4	)
Proceeds from dispositions, net of expenses paid and cash disposed		—			—			21.2			—			21.2
Proceeds from sale of property and equipment		—			1.4			4.1			—			5.5
Additions to property and equipment		(4.2	)		(113.0	)		(92.9	)		—			(210.1	)
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs		(1.7	)		(116.9	)		(41.0	)		—			(159.6	)
Proceeds from the sale of marketable securities		—			—			0.3			—			0.3
Distributions and dividends from subsidiaries		225.8			187.9			—			(413.7	)		—
Other investing activities		3.8			135.1			13.7			(134.5	)		18.1

Net cash provided by (used in) investing activities		223.7			91.4			(96.1	)		(548.2	)		(329.2	)

CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net		—			—			75.1			—			75.1
Debt modification and related financing costs		(61.2	)		—			—			—			(61.2	)
Principal payments on long-term debt		(143.8	)		(57.0	)		(19.6	)		—			(220.4	)
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interests		—			—			(31.0	)		(185.1	)		(216.1	)
Distributions paid to redeemable equity holders		—			—			(7.5	)		7.5			—
Distributions paid to equity holders		—			—			(368.5	)		368.5			—
Redemption of Parent’s redeemable common stock		(2.5	)		—			—			—			(2.5	)
Redemption of redeemable equity of consolidated alliance		—			—			(347.8	)		347.8			—
Purchase of noncontrolling interest		—			—			—			(213.3	)		(213.3	)
Cash dividends		(14.9	)		—			(225.8	)		225.8			(14.9	)
Intercompany		1,682.5			(1,454.7	)		(227.8	)		—			—

Net cash provided by (used in) financing activities		1,460.1			(1,511.7	)		(1,152.9	)		551.2			(653.3	)
Effect of exchange rate changes on cash and cash equivalents		—			0.9			(0.6	)		—			0.3

Change in cash and cash equivalents		59.5			(4.3	)		(282.7	)		—			(227.5	)

Cash and cash equivalents at beginning of period		104.6			25.4			607.0			—			737.0

Cash and cash equivalents at end of period	$	164.1		$	21.1		$	324.3		$	—		$	509.5

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Year ended December 31, 2009
	FDC Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(1,086.4	)	$	164.2		$	261.0		$	(353.4	)	$	(1,014.6	)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)		6.0			1,153.7			394.1			—			1,553.8
Charges (gains) related to other operating expenses and other income (expense)		88.4			173.9			88.2			—			350.5
Other non-cash and non-operating items, net		38.8			(86.9	)		0.9			353.4			306.2
(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions		(795.7	)		903.6			(304.2	)		—			(196.3	)

Net cash (used in) provided by operating activities		(1,748.9	)		2,308.5			440.0			—			999.6

CASH FLOWS FROM INVESTING ACTIVITIES
Current period acquisitions, net of cash acquired		—			(141.2	)		(74.0	)		128.7			(86.5	)
Payments related to other businesses previously acquired		—			(14.6	)		(0.1	)		—			(14.7	)
Proceeds from dispositions, net of expenses paid and cash disposed		—			—			88.1			—			88.1
Proceeds from sale of property and equipment		—			7.1			22.3			—			29.4
Additions to property and equipment		(8.0	)		(92.2	)		(98.9	)		—			(199.1	)
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs		(2.6	)		(135.5	)		(41.9	)		—			(180.0	)
Proceeds from the sale of marketable securities		1.5			2.4			—			—			3.9
Other investing activities		104.4			(27.3	)		(16.8	)		(109.0	)		(48.7	)

Net cash provided by (used in) investing activities		95.3			(401.3	)		(121.3	)		19.7			(407.6	)

CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net		(18.0	)		—			(188.1	)		—			(206.1	)
Principal payments on long-term debt		(175.1	)		(39.8	)		(28.2	)		—			(243.1	)
Proceeds from issuance of common stock		—			—			321.7			(321.7	)		—
Distributions and dividends paid to noncontrolling interests		—			—			(10.0	)		—			(10.0	)
Contribution from noncontrolling interests		—			—			—			193.0			193.0
Cash dividends		—			—			(109.0	)		109.0			—
Intercompany		1,940.8			(1,879.5	)		(61.3	)		—			—

Net cash provided by (used in) financing activities		1,747.7			(1,919.3	)		(74.9	)		(19.7	)		(266.2	)
Effect of exchange rate changes on cash and cash equivalents		—			(1.4	)		6.3			—			4.9

Change in cash and cash equivalents		94.1			(13.5	)		250.1			—			330.7

Cash and cash equivalents at beginning of period		10.5			38.9			356.9			—			406.3

Cash and cash equivalents at end of period	$	104.6		$	25.4		$	607.0		$	—		$	737.0

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)


	Year ended December 31, 2008
	FDC Parent Company			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(3,764.3	)	$	(2,058.0	)	$	(104.3	)	$	2,318.6		$	(3,608.0	)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)		33.6			1,171.6			354.4			—			1,559.6
Charges (gains) related to other operating expenses and other income (expense)		21.1			2,692.3			553.6			—			3,267.0
Other non-cash and non-operating items, net		2,605.8			(239.7	)		(9.6	)		(2,318.6	)		37.9
(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions		(679.9	)		224.8			(214.9	)		—			(670.0	)

Net cash (used in) provided by operating activities		(1,783.7	)		1,791.0			579.2			—			586.5

CASH FLOWS FROM INVESTING ACTIVITIES
Current period acquisitions, net of cash acquired		—			(3.2	)		(185.5	)		—			(188.7	)
Payments related to other businesses previously acquired		(17.2	)		(18.1	)		(0.3	)		—			(35.6	)
Proceeds from dispositions, net of expenses paid and cash disposed		5.1			191.7			18.3			—			215.1
Additions to property and equipment, net		(4.4	)		(162.5	)		(117.0	)		—			(283.9	)
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs		(1.4	)		(111.1	)		(51.4	)		—			(163.9	)
Proceeds from the sale of marketable securities		—			22.8			52.1			—			74.9
Other investing activities		138.6			12.5			0.9			(153.3	)		(1.3	)

Net cash provided by (used in) investing activities		120.7			(67.9	)		(282.9	)		(153.3	)		(383.4	)

CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net		(42.0	)		—			0.1			—			(41.9	)
Proceeds from issuance of long-term debt		100.4			—			—			—			100.4
Principal payments on long-term debt		(265.7	)		(30.9	)		(30.2	)		—			(326.8	)
Distributions and dividends paid to noncontrolling interests and redeemable controlling interests		—			—			(150.9	)		—			(150.9	)
Purchases of noncontrolling interests		(17.6	)		(60.8	)		—			—			(78.4	)
Capital contributed by Parent		126.8			—			—			—			126.8
Excess tax benefit from share-based payment arrangement		13.1			—			—			—			13.1
Cash dividends		(1.8	)		—			(153.3	)		153.3			(1.8	)
Intercompany		1,699.7			(1,674.7	)		(25.0	)		—			—

Net cash provided by (used in) financing activities		1,612.9			(1,766.4	)		(359.3	)		153.3			(359.5	)
Effect of exchange rate changes on cash and cash equivalents		—			21.5			(65.3	)		—			(43.8	)

Change in cash and cash equivalents		(50.1	)		(21.8	)		(128.3	)		—			(200.2	)

Cash and cash equivalents at beginning of period		60.6			60.7			485.2			—			606.5

Cash and cash equivalents at end of period	$	10.5		$	38.9		$	356.9		$	—		$	406.3

FIRST DATA CORPORATION

SCHEDULE II—Valuation and Qualifying Accounts

(dollars, in millions)


Description	Balance at Beginning of Period		Additions				Deductions		Balance at End of Period
Description	Balance at Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts		Deductions		Balance at End of Period
Year ended December 31, 2010 deducted from receivables	$	22.5	$	68.7	$	0.0	$	62.1(a)	$	29.1
Year ended December 31, 2009 deducted from receivables	$	23.8	$	59.3	$	0.0	$	60.6(a)	$	22.5
Year ended December 31, 2008 deducted from receivables	$	21.7	$	44.3	$	0.0	$	42.2(a)	$	23.8

(a)	Amounts related to business divestitures and write-offs against assets.

FIRST DATA CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three months ended June 30,						Six months ended June 30,
(in millions)	2011			2010			2011			2010
Revenues:
Transaction and processing service fees:
Merchant related services(a)	$	939.5		$	883.8		$	1,772.5		$	1,676.2
Check services		84.5			97.8			168.5			188.3
Card services(a)		439.2			431.1			868.8			864.3
Other services		130.2			144.6			266.6			276.7
Product sales and other(a)		217.4			207.5			414.3			402.3
Reimbursable debit network fees, postage and other		939.0			849.9			1,803.3			1,609.0

		2,749.8			2,614.7			5,294.0			5,016.8

Expenses:
Cost of services (exclusive of items shown below)		719.5			752.8			1,436.0			1,508.3
Cost of products sold		92.5			99.7			183.3			175.0
Selling, general and administrative		438.6			395.9			850.3			774.6
Reimbursable debit network fees, postage and other		939.0			849.9			1,803.3			1,609.0
Depreciation and amortization		329.8			347.4			671.6			698.7
Other operating expenses:
Restructuring, net		18.4			23.9			31.0			36.4
Litigation and regulatory settlements		—			(1.7	)		—			(2.0	)

		2,537.8			2,467.9			4,975.5			4,800.0

Operating profit		212.0			146.8			318.5			216.8

Interest income		1.9			1.4			3.8			3.4
Interest expense		(462.3	)		(450.9	)		(904.6	)		(899.8	)
Other income (expense)		(1.4	)		24.8			(27.7	)		33.0

		(461.8	)		(424.7	)		(928.5	)		(863.4	)

Loss before income taxes and equity earnings in affiliates		(249.8	)		(277.9	)		(610.0	)		(646.6	)
Income tax benefit		(88.1	)		(122.4	)		(236.1	)		(260.5	)
Equity earnings in affiliates		33.5			33.3			61.2			55.5

Net loss		(128.2	)		(122.2	)		(312.7	)		(330.6	)
Less: Net income attributable to noncontrolling interests		47.6			49.0			80.2			80.7

Net loss attributable to First Data Corporation	$	(175.8	)	$	(171.2	)	$	(392.9	)	$	(411.3	)

(a)

Includes processing fees, administrative service fees and other fees charged to merchant alliances accounted for under the equity method of $36.5 million and $72.2 million for the three and six months ended June 30, 2011, respectively, and $34.6 million and $64.7 million for the comparable periods in 2010.

See Notes to Consolidated Financial Statements.

FIRST DATA CORPORATION

CONSOLIDATED BALANCE SHEETS


(in millions, except common stock share amounts)	As of June 30, 2011 (Unaudited)			As of December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	611.5		$	509.5
Accounts receivable, net of allowance for doubtful accounts of $23.2 (2011) and $20.3 (2010)		1,876.4			2,169.6
Settlement assets		6,883.6			6,694.0
Other current assets		439.1			413.4

Total current assets		9,810.6			9,786.5

Property and equipment, net of accumulated depreciation of $791.9 (2011) and $691.6 (2010)		962.9			952.0
Goodwill		17,444.5			17,296.9
Customer relationships, net of accumulated amortization of $2,872.0 (2011) and $2,490.5 (2010)		4,894.6			5,223.7
Other intangibles, net of accumulated amortization of $1,148.2 (2011) and $975.8 (2010)		1,930.1			1,931.0
Investment in affiliates		1,201.7			1,208.2
Long-term settlement assets		242.7			365.1
Other long-term assets		803.2			780.7

Total assets	$	37,290.3		$	37,544.1

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	197.0		$	180.9
Short-term and current portion of long-term borrowings		169.7			270.5
Settlement obligations		7,125.2			7,058.9
Other current liabilities		1,500.1			1,353.7

Total current liabilities		8,992.0			8,864.0

Long-term borrowings		22,584.3			22,438.8
Long-term deferred tax liabilities		826.4			1,013.7
Other long-term liabilities		1,023.7			1,139.6

Total liabilities		33,426.4			33,456.1

Commitments and contingencies (See Note 7)
Redeemable noncontrolling interest		45.4			28.1
First Data Corporation stockholder’s equity:
Common stock, $.01 par value; authorized and issued 1,000 shares (2011 and 2010)		—			—
Additional paid-in capital		7,385.6			7,395.1

Paid-in capital		7,385.6			7,395.1
Accumulated loss		(6,556.8	)		(6,163.9	)
Accumulated other comprehensive loss		(436.1	)		(636.9	)

Total First Data Corporation stockholder’s equity		392.7			594.3

Noncontrolling interests		3,425.8			3,465.6

Total equity		3,818.5			4,059.9

Total liabilities and equity	$	37,290.3		$	37,544.1

See Notes to Consolidated Financial Statements.

FIRST DATA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six months ended June 30,
(in millions)	2011			2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(312.7	)	$	(330.6	)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)		725.0			753.8
Charges related to other operating expenses and other income (expense)		58.7			1.4
Other non-cash and non-operating items, net		(1.2	)		138.3
Increase (decrease) in cash, excluding the effects of acquisitions and dispositions, resulting from changes in:
Accounts receivable, current and long-term		291.6			264.8
Other assets, current and long-term		80.0			149.6
Accounts payable and other liabilities, current and long-term		64.6			(225.8	)
Income tax accounts		(271.2	)		(327.9	)

Net cash provided by operating activities		634.8			423.6

CASH FLOWS FROM INVESTING ACTIVITIES
Current period acquisitions		(13.3	)		(0.9	)
Payments related to other businesses previously acquired		—			(1.3	)
Proceeds from dispositions, net of expenses paid and cash disposed		1.7			21.2
Additions to property and equipment		(111.8	)		(95.4	)
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs		(103.7	)		(82.0	)
Other investing activities		0.7			18.0

Net cash used in investing activities		(226.4	)		(140.4	)

CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net		(110.1	)		8.3
Debt modification and related financing costs		(39.7	)		—
Principal payments on long-term debt		(35.0	)		(119.5	)
Proceeds from sale-leaseback transactions		7.3			—
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interests		(131.2	)		(86.7	)
Purchase of noncontrolling interest		—			(213.3	)
Redemption of Parent’s redeemable common stock		(0.3	)		(0.8	)
Cash dividends		—			(14.9	)

Net cash used in financing activities		(309.0	)		(426.9	)

Effect of exchange rate changes on cash and cash equivalents		2.6			(9.6	)

Change in cash and cash equivalents		102.0			(153.3	)

Cash and cash equivalents at beginning of period		509.5			737.0

Cash and cash equivalents at end of period	$	611.5		$	583.7

See Notes to Consolidated Financial Statements.

FIRST DATA CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


							First Data Corporation Shareholder
Six months ended June 30, 2011 (in millions)	Total			Comprehensive Income (Loss)			Accumulated Loss			Accumulated Other Comprehensive Income (Loss)			Common Shares		Paid-In Capital			Noncontrolling Interests
Balance, December 31, 2010	$	4,059.9					$	(6,163.9	)	$	(636.9	)		0.0	$	7,395.1		$	3,465.6
Dividends and distributions paid to noncontrolling interests		(114.3	)																(114.3	)
Comprehensive loss:
Net (loss) income(a)		(328.0	)	$	(328.0	)		(392.9	)										64.9
Other comprehensive income, net of taxes:
Unrealized gains on securities		0.6			0.6						0.6
Unrealized gains on hedging activities		46.8			46.8						46.8
Foreign currency translation adjustment		163.0			163.0						153.4								9.6

Other comprehensive income					210.4

Comprehensive loss				$	(117.6	)

Adjustment to redemption value of redeemable noncontrolling interest		(18.9	)													(18.9	)
Stock compensation expense and other		9.4														9.4

Balance, June 30, 2011	$	3,818.5					$	(6,556.8	)	$	(436.1	)		0.0	$	7,385.6		$	3,425.8


Six months ended June 30, 2010 (in millions)
Balance, December 31, 2009	$	5,100.1					$	(5,127.3	)	$	(681.7	)		0.0	$	7,394.3		$	3,514.8
Dividends and distributions paid to noncontrolling interests		(74.8	)																(74.8	)
Purchase of noncontrolling interest		—														(2.5	)		2.5
Comprehensive loss:
Net (loss) income(a)		(348.9	)	$	(348.9	)		(411.3	)										62.4
Other comprehensive loss, net of taxes:
Unrealized gains on securities		6.0			6.0						6.0
Unrealized gains on hedging activities		29.6			29.6						29.6
Foreign currency translation adjustment		(273.4	)		(273.4	)					(264.8	)							(8.6	)
Pension liability adjustment		2.2			2.2						2.2

Other comprehensive loss					(235.6	)

Comprehensive loss				$	(584.5	)

Adjustment to redemption value of redeemable noncontrolling interests		(7.0	)													(7.0	)
Stock compensation expense and other		5.8														5.8
Cash dividends paid by First Data Corporation to Parent		(14.9	)					(14.9	)

Balance, June 30, 2010	$	4,424.7					$	(5,553.5	)	$	(908.7	)		0.0	$	7,390.6		$	3,496.3

(a)

The total net loss presented in the Consolidated Statements of Equity for the six months ended June 30, 2011 and 2010 is $15.3 million and $18.3 million, respectively, greater than the amount presented on the Consolidated Statements of Operations due to the net income attributable to the redeemable noncontrolling interests not included in equity.

See Notes to Consolidated Financial Statements.

FIRST DATA CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	Three months ended June 30,						Six months ended June 30,
(in millions)	2011			2010			2011			2010
Net loss^(a)	$	(136.0	)	$	(132.0	)	$	(328.0	)	$	(348.9	)
Other comprehensive income (loss), net of tax:
Unrealized gains on securities		1.2			6.1			0.6			6.0
Unrealized gains on hedging activities		20.0			19.9			46.8			29.6
Foreign currency translation adjustment		32.4			(153.3	)		163.0			(273.4	)
Pension liability adjustment		0.2			0.1			(0.0	)		2.2

Total other comprehensive income (loss), net of tax		53.8			(127.2	)		210.4			(235.6	)

Comprehensive loss		(82.2	)		(259.2	)		(117.6	)		(584.5	)
Less: Comprehensive income attributable to noncontrolling interests		49.2			36.7			74.5			53.8

Comprehensive loss attributable to First Data Corporation	$	(131.4	)	$	(295.9	)	$	(192.1	)	$	(638.3	)

(a)

The net loss presented in the Consolidated Statements of Comprehensive Income (Loss) is greater than the amounts presented on the Consolidated Statements of Operations due to the net income attributable to the redeemable noncontrolling interests not included in equity which totaled $7.8 million and $15.3 million for the three and six months ended June 30, 2011, respectively and $9.8 million and $18.3 million for the three and six months ended June 30, 2010, respectively.

See Notes to Consolidated Financial Statements.

FIRST DATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: Basis of Presentation

The accompanying Consolidated Financial Statements of First Data Corporation (“FDC” or the “Company”) should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Significant accounting policies disclosed therein have not changed.

The accompanying Consolidated Financial Statements are unaudited; however, in the opinion of management, they include all normal recurring adjustments necessary for a fair presentation of the consolidated financial position of the Company as of June 30, 2011, the consolidated results of its operations and comprehensive income (loss) for the three and six months ended June 30, 2011 and 2010 and the consolidated cash flows and changes in equity for the six months ended June 30, 2011 and 2010. Results of operations reported for interim periods are not necessarily indicative of results for the entire year due in part to the seasonality of certain business units.

Use of Estimates

Presentation

Depreciation and amortization presented as a separate line item on the Company’s Consolidated Statements of Operations does not include amortization of initial payments for new contracts which is recorded as a contra-revenue within “Transaction and processing service fees.” Also not included is amortization related to equity method investments which is netted within the “Equity earnings in affiliates” line. The following table presents the amounts associated with such amortization:


	Three months ended June 30,				Six months ended June 30,
(in millions)	2011		2010		2011		2010
Amortization of initial payments for new contracts	$	10.1	$	9.1	$	19.7	$	18.7
Amortization related to equity method investments	$	18.0	$	18.1	$	33.7	$	36.4

Revenue Recognition

The Company recognizes revenues from its processing services as such services are performed. Revenue is recorded net of certain costs such as credit and offline debit interchange fees and assessments charged by credit card associations. Debit network fees related to acquired personal identification number based debit (“PIN-debit”) transactions are recognized in the “Reimbursable debit network fees, postage and other” revenue and expense lines of the Consolidated Statements of Operations. The following table presents the amounts associated with processing services revenue:


	Three months ended June 30,				Six months ended June 30,
(in millions)	2011		2010		2011		2010
Interchange fees and assessments	$	4,907.7	$	4,465.8	$	9,382.0	$	8,535.4
Debit network fees	$	797.5	$	708.8	$	1,523.2	$	1,313.5

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

New Accounting Guidance

In May 2011, the Financial Accounting Standards Board revised its guidance on fair value measurements. The amendment clarifies certain aspects of the Board’s intent for the application of existing fair value measurement requirements and additionally changes certain requirements for measuring fair value or for disclosing information about fair value measurements. The amendments will be effective for the Company during the first quarter of 2012. Management is currently assessing the impact of the revised guidance on its fair value measurements.

Note 2: Supplemental Financial Information

Supplemental Statement of Operations Information

The following table details the components of “Other income (expense)” on the Consolidated Statements of Operations:


	Three months ended June 30,						Six months ended June 30,
(in millions)	2011			2010			2011			2010
Investment gains	$	—		$	—		$	—		$	1.8
Derivative financial instruments gains (losses)		6.2			(2.1	)		(5.1	)		(26.8	)
Divestitures, net		(0.9	)		—			(0.9	)		20.0
Non-operating foreign currency (losses) and gains		(6.7	)		26.9			(21.7	)		38.0

Other income (expense)	$	(1.4	)	$	24.8		$	(27.7	)	$	33.0

Supplemental Cash Flow Information

During the six months ended June 30, 2011 and 2010, the principal amount of FDC’s senior Payment In-Kind (“PIK”) notes due 2015 increased by $35.6 million and $176.6 million, respectively, resulting from the “payment” of accrued interest expense. Beginning October 1, 2011, the interest on FDC’s senior PIK notes due 2015 will be required to be paid in cash and the first such payment will be due in March 2012.

During the six months ended June 30, 2011 and 2010, the Company entered into capital leases totaling approximately $116 million and $45 million, respectively.

Refer to Note 9 of these Consolidated Financial Statements for information concerning the Company’s stock-based compensation plans.

Note 3: Restructuring

Restructuring Charges and Reversal of Restructuring Accruals

A summary of net pretax benefits (charges), incurred by segment, for each period is as follows:


			Pretax Benefit (Charge)
Three months ended June 30, 2011 (in millions)	Approximate Number of Employees		Retail and Alliance Services			Financial Services			International			All Other and Corporate			Totals
Restructuring charges		260	$	(1.2	)	$	(0.4	)	$	(16.0	)	$	(1.6	)	$	(19.2	)
Restructuring accrual reversal				0.1			—			0.2			0.5			0.8

Total pretax charge, net of reversals			$	(1.1	)	$	(0.4	)	$	(15.8	)	$	(1.1	)	$	(18.4	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


			��	Pretax Benefit (Charge)
Six months ended June 30, 2011 (in millions)	Approximate Number of Employees			Retail and Alliance Services			Financial Services			International			All Other and Corporate			Totals
Restructuring charges		520		$	(2.7	)	$	(5.6	)	$	(22.5	)	$	(2.8	)	$	(33.6	)
Restructuring accrual reversal					0.8			—			0.9			0.9			2.6

Total pretax charge, net of reversals				$	(1.9	)	$	(5.6	)	$	(21.6	)	$	(1.9	)	$	(31.0	)


				Pretax Benefit (Charge)
Three months ended June 30, 2010 (in millions)	Approximate Number of Employees			Retail and Alliance Services			Financial Services			International			All Other and Corporate			Totals
Restructuring charges		580		$	(6.0	)	$	(1.7	)	$	(6.3	)	$	(13.3	)	$	(27.3	)
Restructuring accrual reversal					0.1			0.5			1.9			0.9			3.4

Total pretax charge, net of reversals				$	(5.9	)	$	(1.2	)	$	(4.4	)	$	(12.4	)	$	(23.9	)


				Pretax Benefit (Charge)
Six months ended June 30, 2010 (in millions)	Approximate Number of Employees			Retail and Alliance Services			Financial Services			International			All Other and Corporate			Totals
Restructuring charges		720		$	(6.7	)	$	(7.1	)	$	(12.7	)	$	(17.4	)	$	(43.9	)
Restructuring accrual reversal					0.3			0.7			4.2			2.3			7.5

Total pretax charge, net of reversals				$	(6.4	)	$	(6.4	)	$	(8.5	)	$	(15.1	)	$	(36.4	)

The Company recorded restructuring charges during the three and six months ended June 30, 2011 and 2010 in connection with management’s alignment of the business with strategic objectives. Similar initiatives are expected to occur in future periods resulting in additional restructuring charges. Restructuring charges in 2010 also resulted from domestic site consolidations as well as the termination of certain management positions across the organization including the reorganization of executive officers.

The following table summarizes the Company’s utilization of restructuring accruals for the six months ended June 30, 2011:


(in millions)	Employee Severance			Facility Closure
Remaining accrual as of January 1, 2011	$	38.7		$	0.2
Expense provision		33.6			—
Cash payments and other		(34.2	)		—
Changes in estimates		(2.5	)		(0.1	)

Remaining accrual as of June 30, 2011	$	35.6		$	0.1

Note 4: Borrowings

Senior Secured Revolving Credit Facility

An affiliate of Lehman Brothers Holdings Inc. provided a commitment in the amount of $230.6 million of the Company’s revolving credit facility. After filing for bankruptcy in September 2008, the affiliate did not

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

participate in requests for funding under the Credit Agreement. In June 2011, the commitment was terminated. In addition, as discussed below, the aggregate revolving credit commitments were reduced by $254.1 million in April 2011.

As of June 30, 2011, FDC’s senior secured revolving credit facility had commitments from financial institutions to provide $1,515.3 million of credit. Up to $500 million of the senior secured revolving credit facility is available for letters of credit, of which $44.9 million and $51.9 million were issued as of June 30, 2011 and December 31, 2010, respectively. FDC had no borrowings outstanding against this facility as of June 30, 2011 or as of December 31, 2010 other than the letters of credit discussed above. At June 30, 2011, $1,470.4 million remained available under this facility after considering the outstanding letters of credit. The maximum amounts outstanding against this facility during both the three and six months ended June 30, 2011 were approximately $43 million.

Other Short-Term Borrowings

As of June 30, 2011 and December 31, 2010, FDC had approximately $367 million and $428 million available, respectively, under short-term lines of credit and other arrangements with foreign banks and alliance partners primarily to fund settlement activity. These arrangements are primarily associated with international operations and are in various functional currencies, the most significant of which are the Australian dollar, the Polish zloty and the euro. Certain of these arrangements are uncommitted but FDC had $74.2 million and $150.6 million of borrowings outstanding against them as of June 30, 2011 and December 31, 2010, respectively. The total amounts outstanding against short-term lines of credit and other arrangements were $77.1 million and $180.3 million as of June 30, 2011 and December 31, 2010, respectively.

Senior Secured Term Loan Facility

The original terms of FDC’s senior secured term loan facility required the Company to pay equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount. However, in conjunction with a debt modification in August 2010 as well as with the modification and amendment discussed below, proceeds from the issuance of new notes were used to prepay portions of the principal balances of FDC’s senior secured term loans which satisfied the future quarterly principal payments until March 2018. Therefore, the Company made no principal payments during the three and six months ended June 30, 2011. During the three and six months ended June 30, 2010, the Company paid $32.0 million and $64.1 million, respectively, of principal payments on the senior secured term loan facility in accordance with the original provisions, of which $29.8 million and $59.5 million, respectively, related to the U.S. dollar denominated loan and $2.2 million and $4.6 million, respectively, related to the euro denominated loan.

10.55% Senior Payment In-Kind (“PIK”) Notes

The terms of FDC’s 10.55% senior PIK notes due 2015 require that interest on the notes for the period up to and including September 30, 2011 be paid entirely by increasing the principal amount of the outstanding notes or by issuing senior PIK notes. During the six months ended June 30, 2011 and 2010, FDC increased the principal amount of these notes by $35.6 and $176.6 million, respectively, in accordance with this provision. The principal amount was not increased during the three months ended June 30, 2011 and 2010.

2010 Debt Financing Costs

During the six months ended June 30, 2011, the Company paid $18.6 million in fees that were recorded in 2010 related to the December 2010 debt exchange.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Modifications and Amendment to the Senior Secured Credit Facilities

On March 24, 2011, FDC executed a 2011 Extension Amendment (the “Amendment Agreement”) relating to its credit agreement, dated as of September 24, 2007, as amended and restated as of September 28, 2007, as further amended as of August 10, 2010, among FDC, the several lenders from time to time parties thereto and Credit Suisse AG, as administrative agent (the “Credit Agreement”). The Credit Agreement, as amended pursuant to the Amendment Agreement, is referred to below as the “Amended Credit Agreement.”

The Amendment Agreement, which became effective on April 13, 2011, among other things:

(i) resulted in the extension of the maturity date of $1.0 billion, after giving effect to the reduction discussed below, of the Company’s revolving credit commitments (the “Revolver Extension”) under the Amended Credit Agreement to the earliest of: (x) June 24, 2015, if on such date the aggregate outstanding principal amount of FDC’s 9.875% senior notes due 2015 and 10.55% senior PIK notes due 2015 exceeds $750.0 million, (y) December 31, 2015, if on such date the aggregate outstanding principal amount of FDC’s 11.25% senior subordinated notes due 2016 exceeds $750.0 million and (z) September 24, 2016;

(ii) resulted in the extension of the maturity date of approximately $5.0 billion of term loans (consisting of approximately $4.5 billion of dollar denominated term loans and an amount of euro denominated term loans the dollar equivalent of which is approximately $0.5 billion (the “Term Loan Extension”)) under the Amended Credit Agreement to March 24, 2018;

(iii) provided for an increase in the interest rate applicable to the revolving credit loans subject to the Revolver Extension and the term loans subject to the Term Loan Extension to a rate equal to, at FDC’s option, either (x) LIBOR for deposits in the applicable currency plus 400 basis points or (y) with regard to dollar denominated borrowings, a base rate plus 300 basis points;

(iv) provided for an increase in the commitment fee payable on the undrawn portion of the revolving credit commitments subject to the Revolver Extension to 75 basis points; and

(v) provided FDC with the ability to reduce the revolving credit commitments subject to the Revolver Extension while maintaining the revolving credit commitments not subject to the Revolver Extension in their original amount.

Accordingly, when the Amended Credit Agreement became effective, the Company immediately effected a permanent reduction of the revolving credit commitments that are subject to the Revolver Extension in an amount equal to $254.1 million.

Debt Offering.On April 13, 2011, FDC issued and sold $750 million aggregate principal amount of 7.375% senior secured notes due June 15, 2019. Interest on the notes will be payable semi-annually on June 15 and December 15 of each year, commencing on December 15, 2011. In accordance with the terms of FDC’s Amended Credit Agreement, FDC used the net proceeds from the offering to repay approximately $735 million of its outstanding senior secured term loans, including $0.3 billion of the $5.0 billion that was extended until 2018 under the Amendment Agreement discussed above.

FDC may redeem the Notes, in whole or in part, at any time on or after June 15, 2015 at a price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest to the redemption date and a make-whole premium. Thereafter, FDC may redeem the notes, in whole or in part, at established redemption prices. In addition, on or prior to June 15, 2014, FDC may redeem up to 35% of the aggregate principal amount of notes with the net cash proceeds from certain equity offerings at established redemption prices.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The notes will rank equally and ratably with all of FDC’s existing and future senior indebtedness and will be senior to any of FDC’s subordinated indebtedness. The notes will be guaranteed on a senior secured basis by each domestic subsidiary that guarantees FDC’s senior secured credit facilities.

The notes and guarantees also will be secured by first-priority liens, subject to permitted liens, on FDC’s and its subsidiary guarantors’ assets, subject to certain exceptions, that will from time to time secure FDC’s senior secured credit facilities and other first-lien indebtedness on a first-priority basis. The notes will share equally in the collateral securing FDC’s senior secured credit facilities.

Related Financing Costs.In connection with the debt modification and amendments and the debt offering discussed above, the Company incurred costs of $38.8 million, a significant portion of which was recorded as discounts on the debt and will be amortized to interest expense over the remaining terms of the loans.

Note 5: Segment Information

For a detailed discussion of the Company’s principles regarding its operating segments refer to Note 15 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

The following tables present the Company’s operating segment results for the three and six months ended June 30, 2011 and 2010:


Three months ended June 30, 2011 (in millions)	Retail and Alliance Services			Financial Services			International			All Other and Corporate			Totals
Revenues:
Transaction and processing service fees	$	740.9		$	337.7		$	341.5		$	28.0		$	1,448.1
Product sales and other		102.8			6.9			100.3			9.1			219.1
Equity earnings in affiliates(a)		—			—			9.7			—			9.7

Total segment reporting revenues	$	843.7		$	344.6		$	451.5		$	37.1		$	1,676.9

Internal revenue	$	4.6		$	9.8		$	2.4		$	—		$	16.8
External revenue		839.1			334.8			449.1			37.1			1,660.1
Depreciation and amortization		138.6			89.0			81.9			9.5			319.0
Segment EBITDA		352.2			142.5			119.1			(52.7	)		561.1
Other operating expenses and other income (expense) excluding divestitures		(21.5	)		(0.3	)		(14.1	)		17.0			(18.9	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


Three months ended June 30, 2010 (in millions)	Retail and Alliance Services		Financial Services		International			All Other and Corporate			Totals
Revenues:
Transaction and processing service fees	$	750.2	$	341.5	$	297.6		$	36.1		$	1,425.4
Product sales and other		103.5		9.9		82.5			13.5			209.4
Equity earnings in affiliates(a)		—		—		7.0			—			7.0

Total segment reporting revenues	$	853.7	$	351.4	$	387.1		$	49.6		$	1,641.8

Internal revenue	$	4.8	$	9.5	$	2.0		$	—		$	16.3
External revenue		848.9		341.9		385.1			49.6			1,625.5
Depreciation and amortization		168.8		91.9		68.4			10.2			339.3
Segment EBITDA		344.9		134.6		73.0			(39.6	)		512.9
Other operating expenses and other income (expense) excluding divestitures		16.2		0.5		(4.0	)		(10.1	)		2.6


Six months ended June 30, 2011 (in millions)	Retail and Alliance Services			Financial Services			International			All Other and Corporate			Totals
Revenues:
Transaction and processing service fees	$	1,405.0		$	669.2		$	665.2		$	60.2		$	2,799.6
Product sales and other		203.5			13.0			184.8	��		16.7			418.0
Equity earnings in affiliates(a)		—			—			16.8			—			16.8

Total segment reporting revenues	$	1,608.5		$	682.2		$	866.8		$	76.9		$	3,234.4

Internal revenue	$	9.0		$	20.5		$	4.6		$	—		$	34.1
External revenue		1,599.5			661.7			862.2			76.9			3,200.3
Depreciation and amortization		294.3			175.7			155.9			21.9			647.8
Segment EBITDA		637.7			279.2			210.8			(98.8	)		1,028.9
Other operating expenses and other income (expense) excluding divestitures		(21.8	)		(5.5	)		(19.8	)		(10.7	)		(57.8	)


Six months ended June 30, 2010 (in millions)	Retail and Alliance Services		Financial Services			International			All Other and Corporate			Totals
Revenues:
Transaction and processing service fees	$	1,401.8	$	679.8		$	598.7		$	75.0		$	2,755.3
Product sales and other		189.1		17.7			166.3			32.8			405.9
Equity earnings in affiliates(a)		—		—			13.8			—			13.8

Total segment reporting revenues	$	1,590.9	$	697.5		$	778.8		$	107.8		$	3,175.0

Internal revenue	$	9.0	$	18.0		$	4.2		$	—		$	31.2
External revenue		1,581.9		679.5			774.6			107.8			3,143.8
Depreciation and amortization		337.2		175.9			142.3			24.9			680.3
Segment EBITDA		594.2		267.7			151.1			(75.8	)		937.2
Other operating expenses and other income (expense) excluding divestitures		12.8		(4.4	)		(8.1	)		(21.7	)		(21.4	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

A reconciliation of reportable segment amounts to the Company’s consolidated balances is as follows:


		Three months ended June 30,						Six months ended June 30,
(in millions)		2011			2010			2011			2010
Segment Revenues:
Total reported segments		$	1,639.8		$	1,592.2		$	3,157.5		$	3,067.2
All Other and Corporate			37.1			49.6			76.9			107.8
Adjustment to reconcile to Adjusted revenue:
Official check and money order revenues(b)			(3.9	)		(4.7	)		(6.8	)		(14.6	)
Eliminations of intersegment revenues			(16.8	)		(16.3	)		(34.1	)		(31.2	)

Adjusted revenue			1,656.2			1,620.8			3,193.5			3,129.2

Adjustment to reconcile to Consolidated revenues:
Adjustments for non-wholly-owned entities(c)			50.1			57.7			98.1			110.1
Official check and money order revenues(b)			3.9			4.7			6.8			14.6
ISO commission expense			100.6			81.6			192.3			153.9
Reimbursable debit network fees, postage and other			939.0			849.9			1,803.3			1,609.0

Consolidated revenues		$	2,749.8		$	2,614.7		$	5,294.0		$	5,016.8

Segment EBITDA:
Total reported segments		$	613.8		$	552.5		$	1,127.7		$	1,013.0
All Other and Corporate			(52.7	)		(39.6	)		(98.8	)		(75.8	)

Adjusted EBITDA			561.1			512.9			1,028.9			937.2

Adjustments to reconcile to “Net loss attributable to First Data Corporation”:
Divested businesses			—			1.4			—			1.4
Adjustments for non-wholly-owned entities(c)			10.9			7.8			24.1			18.0
Depreciation and amortization			(329.8	)		(347.4	)		(671.6	)		(698.7	)
Interest expense			(462.3	)		(450.9	)		(904.6	)		(899.8	)
Interest income			1.9			1.4			3.8			3.4
Other items^(d)			(22.5	)		2.6			(66.9	)		(1.4	)
Income tax benefit			88.1			122.4			236.1			260.5
Stock-based compensation			(4.4	)		(1.2	)		(8.5	)		(6.5	)
Official check and money order EBITDA(b)			1.2			1.2			1.3			7.6
Costs of alliance conversions			(6.7	)		(5.9	)		(13.0	)		(11.7	)
Stock plan modification expenses	��		—			(7.8	)		—			(7.8	)
KKR related items			(9.8	)		(7.7	)		(19.0	)		(13.5	)
Debt issuance costs			(3.5	)		—			(3.5	)		—

Net loss attributable to First Data Corporation		$	(175.8	)	$	(171.2	)	$	(392.9	)	$	(411.3	)

(a)	Excludes equity losses that were recorded in expense and the amortization related to the excess of the investment balance over the Company’s proportionate share of the investee’s net book value for the International segment.

(b)	Represents an adjustment to exclude the official check and money order businesses from revenue and EBITDA due to the Company’s wind down of these businesses.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

(c)	Represents the net adjustment to reflect First Data’s proportionate share of alliance revenue and EBITDA within the Retail and Alliance Services segment and amortization related to equity method investments not included in segment EBITDA.

(d)	Includes restructuring, litigation and regulatory settlements, and impairments as applicable to the periods presented and “Other income (expense)” as presented in the Consolidated Statements of Operations.

Segment assets are as follows:


(in millions)	As of June 30, 2011		As of December 31, 2010
Assets:
Retail and Alliance Services	$	24,293.9	$	24,673.8
Financial Services		4,809.7		4,982.2
International		5,545.6		5,186.7
All Other and Corporate		2,641.1		2,701.4

Consolidated	$	37,290.3	$	37,544.1

A reconciliation of reportable segment depreciation and amortization amounts to the Company’s consolidated balances in the Consolidated Statements of Cash Flows is as follows:


	Three months ended June 30,				Six months ended June 30,
(in millions)	2011		2010		2011		2010
Depreciation and amortization:
Total reported segments	$	309.5	$	329.1	$	625.9	$	655.4
All Other and Corporate		9.5		10.2		21.9		24.9

		319.0		339.3		647.8		680.3

Adjustments to reconcile to consolidated depreciation and amortization:
Adjustments for non-wholly-owned entities		28.8		26.2		57.5		54.8
Amortization of initial payments for new contracts		10.1		9.1		19.7		18.7

Total consolidated depreciation and amortization	$	357.9	$	374.6	$	725.0	$	753.8

Note 6: Redeemable Noncontrolling Interest

The following table presents a summary of the redeemable noncontrolling interest activity:


	Six months ended June 30,
(in millions)	2011			2010
Balance as of January 1	$	28.1		$	226.9
Distributions		(16.9	)		(11.9	)
Share of income		15.3			18.3
Purchase of noncontrolling interests		—			(213.3	)
Adjustment to redemption value of redeemable noncontrolling interest		18.9			7.0
Other		—			0.1

Balance as of June 30	$	45.4		$	27.1

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 7: Commitments and Contingencies

The Company is involved in various legal proceedings. Accruals have been made with respect to these matters, where appropriate, which are reflected in the Company’s consolidated financial statements. The Company may enter into discussions regarding settlement of these matters, and may enter into settlement agreements, if it believes settlement is in the best interest of the Company. The matters discussed below, if decided adversely to or settled by the Company, individually or in the aggregate, may result in liability material to the Company’s financial condition and/or results of operations.

Legal

On July 2, 2004, a class action complaint was filed against the Company, its subsidiary Concord EFS, Inc., and various financial institutions. Plaintiffs claim that the defendants violated antitrust laws by conspiring to artificially inflate foreign ATM fees that were ultimately charged to ATM cardholders. Plaintiffs seek a declaratory judgment, injunctive relief, compensatory damages, attorneys’ fees, costs and such other relief as the nature of the case may require or as may seem just and proper to the court. Five similar suits were filed and served in July, August and October 2004 (referred to collectively as the “ATM Fee Antitrust Litigation”). The Court granted judgment in favor of the defendants, dismissing the case on September 17, 2010. On October 14, 2010, the plaintiffs appealed the summary judgment. The Company continues to believe the complaints are without merit and intends to vigorously defend them.

There are asserted claims against the Company where an unfavorable outcome is considered to be reasonably possible. These claims can generally be categorized in the following three areas: (1) patent infringement which results from claims that the Company is using technology that has been patented by another party; (2) Merchant customer matters often associated with alleged processing errors or disclosure issues and claims that one of the subsidiaries of the Company has violated a federal or state requirement regarding credit reporting or collection in connection with its check verification guarantee, and collection activities; and (3) other matters which may include issues such as employment. The Company’s estimates of the possible ranges of losses in excess of any amounts accrued are $0 to $2 million for patent infringement, $0 to $20 million for merchant customer matters and $0 to $4 million for other matters, resulting in a total estimated range of possible losses of $0 to $26 million for all of the matters described above.

The estimated range of reasonably possible losses is based on currently available information and involves elements of judgment and significant uncertainties. As additional information becomes available and the resolution of the uncertainties become more apparent, it is possible that actual losses may exceed even the high end of the estimated range.

Other

In the normal course of business, the Company is subject to claims and litigation, including indemnification obligations to purchasers of former subsidiaries. Management of the Company believes that such matters will not have a material adverse effect on the Company’s results of operations, liquidity or financial condition.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 8: Employee Benefit Plans

The following table provides the components of net periodic benefit expense for the Company’s defined benefit pension plans:


	Three months ended June 30,						Six months ended June 30,
(in millions)	2011			2010			2011			2010
Service costs	$	0.8		$	0.8		$	1.6		$	1.6
Interest costs		10.1			9.7			20.0			19.8
Expected return on plan assets		(11.8	)		(9.8	)		(23.4	)		(20.0	)
Amortization		0.3			0.5			0.6			1.1

Net periodic benefit expense/(income)	$	(0.6	)	$	1.2		$	(1.2	)	$	2.5

The Company estimates pension plan contributions for 2011 to be approximately $30 million. During the six months ended June 30, 2011, approximately $16 million was contributed to the United Kingdom plan and no contributions were made to the U.S. plan.

Note 9: Stock Compensation Plans

The Company recognizes stock-based compensation expense related to stock options and non-vested restricted stock awards and units that were granted prior to plan modifications made in May 2010. Due to the nature of call rights associated with options and restricted stock awards and units granted subsequent to the plan modifications in 2010, the Company will recognize expense related to such awards only upon certain liquidity or employment termination events.

Total stock-based compensation expense recognized in the “Selling, general and administrative” line item of the Consolidated Statements of Operations was as follows:


	Three months ended June 30,				Six months ended June 30,
(in millions)	2011		2010		2011		2010
Total stock-based compensation expense (pretax)	$	4.4	$	1.2	$	8.9	$	6.5

The amount of stock-based compensation expense recognized in the three months ended June 30, 2011 as compared to the same period in 2010 was higher due to a forfeiture rate adjustment made during the three months ended June 30, 2010.

Stock Options

During the six months ended June 30, 2011 time-based and performance-based options were granted under the stock plan. The time-based options granted vest equally over a three to five year period and performance-based options vest based upon the Company achieving certain EBITDA targets.

As of June 30, 2011 there was approximately $110 million of total unrecognized compensation expense, net of estimated forfeitures, related to non-vested stock options. Approximately $23 million will be recognized over a weighted-average period of approximately 2.5 years while approximately $87 million will only be recognized upon the occurrence of certain liquidity or employment termination events.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The fair value of Holdings stock options granted for the six months ended June 30, 2011 were estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:


	Six months ended June 30, 2011
Risk-free interest rate		2.89	%
Dividend yield		—
Volatility		54.72	%
Expected term (in years)		7
Fair value of stock	$	3
Fair value of options	$	2

A summary of Holdings stock option activity for the six months ended June 30, 2011 is as follows:


(options in millions)	Options			Weighted-Average Exercise Price
Outstanding at January 1, 2011		70.0		$	3
Granted		6.5		$	3
Cancelled / Forfeited		(3.0	)	$	3

Outstanding at June 30, 2011		73.5		$	3

Restricted Stock Awards and Restricted Stock Units

Restricted stock awards were granted under the stock plan during the six months ended June 30, 2011. As of June 30, 2011 there was approximately $32 million of total unrecognized compensation expense, net of estimated forfeitures, related to restricted stock. Approximately $2 million will be recognized over a weighted-average period of approximately 2 years while approximately $30 million will only be recognized upon the occurrence of certain liquidity or employment termination events.

A summary of Holdings restricted stock award and restricted stock unit activity for the six months ended June 30, 2011 is as follows:


(awards/units in millions)	Awards/Units			Weighted-Average Grant-Date Fair Value
Non-vested at January 1, 2011		8.4		$	3
Granted		2.8		$	3
Cancelled / Forfeited		(0.3	)	$	3

Non-vested at June 30, 2011		10.9		$	3

Note 10: Investment Securities

The majority of the Company’s investment securities are a component of settlement assets and represent the investment of funds received by FDC from the sale of payment instruments (official checks and financial institution money orders) by authorized agents. The Company’s investment securities included in current settlement assets primarily consists of money market funds, discounted and municipal commercial paper, corporate, state, and municipal bonds maturing within one year, and time deposits. The Company’s long-term

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

settlement assets are primarily comprised of student loan auction rate securities (“SLARS”) and corporate bonds. Realized gains and losses and other-than-temporary impairments (“OTTI”) on investments classified as settlement assets are recorded in the “Product sales and other” line item of the Consolidated Statements of Operations. The Company carried other investments including equity securities and shares of a money market fund which are carried at fair value and included in the “Other current assets” and “Other long-term assets” line items of the Consolidated Balance Sheets. Realized gains and losses on these investments are recorded in the “Other income (expense)” line item of the Consolidated Statements of Operations described in Note 2.

The principal components of the Company’s investment securities are as follows:


As of June 30, 2011 (in millions)	Cost(a)		Gross Unrealized Gain		Gross Unrealized (Loss) excluding OTTI(b)			OTTI Recognized in OCI(b)(c)		Fair Value(d)
Student loan auction rate securities	$	218.2	$	1.9	$	(1.8	)	$	—	$	218.3
Corporate bonds		62.4		0.1		—			—		62.5
State and municipal obligations		43.1		—		—			—		43.1
Other securities:
Cost method investments		24.0		—		—			—		24.0
Other		0.1		1.0		—			—		1.1

Total other		24.1		1.0		—			—		25.1

Totals	$	347.8	$	3.0	$	(1.8	)	$	—	$	349.0


As of December 31, 2010 (in millions)
Student loan auction rate securities	$	341.1	$	—	$	—		$	—	$	341.1
Corporate bonds		63.0		0.1		(0.1	)		—		63.0
State and municipal obligations^(e)		0.5		—		—			—		0.5
Other securities:
Cost method investments		24.5		—		—			—		24.5
Other		0.1		0.1		—			—		0.2

Total other		24.6		0.1		—			—		24.7

Totals	$	429.2	$	0.2	$	(0.1	)	$	—	$	429.3

(a)	Represents amortized cost for debt securities.

(b)	“OTTI” refers to other-than-temporary impairments.

(c)	For debt securities, represents the fair value adjustment excluding that attributable to credit losses.

(d)	Represents cost for cost method investments.

(e)	State and municipal obligations have been reclassed from “Other” to conform to current year presentation.


As of June 30, 2011 (in millions)	Less than 12 months					More than 12 months				Total Fair Value		Total Unrealized Losses
As of June 30, 2011 (in millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Total Fair Value		Total Unrealized Losses
Student loan auction rate securities	$	109.3	$	(1.8	)	$	—	$	—	$	109.3	$	(1.8	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	Less than 12 months					More than 12 months				Total Fair Value		Total Unrealized Losses
As of December 31, 2010 (in millions)	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Total Fair Value		Total Unrealized Losses
Corporate bonds	$	45.8	$	(0.1	)	$	—	$	—	$	45.8	$	(0.1	)

During the six months ended June 30, 2011, the Company sold and redeemed SLARS with an amortized cost basis of $122.9 million, resulting in net realized losses of $1.9 million. Also during the six months ended June 30, 2011, the Company sold corporate bonds with an amortized cost basis of $60.7 million, resulting in a realized gain of approximately $0.2 million.

In June 2011, the Company participated in a tender offer, tendering $35.7 million of its holdings in SLARS. The offer was accepted on June 30, 2011 and the Company anticipates a realized gain of approximately $1.6 million during the third quarter of 2011.

All of the above investments, with the exception of cost method investments, were classified as available-for-sale. The Company uses specific identification to determine the cost of a security sold and the amount of gains and losses reclassified out of other comprehensive income (“OCI”) into the Consolidated Statements of Operations. Unrealized gains and losses on investments carried at fair value are included as a separate component of OCI, net of any related tax effects.

The following table presents additional information regarding available-for-sale securities:


	Three months ended June 30,				Six months ended June 30,
(in millions)	2011		2010		2011			2010
Proceeds from sales(a)	$	63.3	$	2.3	$	181.9		$	21.3
Gross realized gains included in earnings as a result of sales(a)		0.5		—		1.0			5.0
Gross realized (losses) included in earnings as a result of sales(a)		—		—		(2.7	)		—
Impairments included in earnings		—		—		—			(0.3	)
Net unrealized gains or (losses) included in OCI, net of tax		1.5		6.1		(0.5	)		5.8
Net gains or (losses) reclassified out of OCI into earnings, net of tax		0.3		—		(1.1	)		(0.2	)

(a)	Includes activity resulting from sales, redemptions, liquidations and related matters. Gains and losses are recorded in the “Product sales and other” or “Other income (expense)” line items of the Consolidated Statements of Operations.

The following table presents maturity information for the Company’s investments in debt securities as of June 30, 2011:


(in millions)	Fair Value
Due within one year	$	84.5
Due after one year through five years		21.1
Due after five years through 10 years		29.3
Due after 10 years		189.0

Total debt securities	$	323.9

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

indicator of impairment such as events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. As of June 30, 2011, there were no indicators of impairment. Where there are no indicators of impairment present, the Company estimates the fair value for the cost method investments only if it is practicable to do so. As of June 30, 2011, it was deemed impracticable to estimate the fair value on $18.6 million of cost method assets due to the lack of sufficient data upon which to develop a valuation model and the costs of obtaining an independent valuation in relation to the size of the investments. Realized pretax gains and losses associated with these investments are recognized in the “Other income (expense)” line item of the Consolidated Statements of Operations described in Note 2.

Note 11: Derivative Financial Instruments

Risk Management Objectives and Strategies

The Company is exposed to various financial and market risks, including those related to changes in interest rates and foreign currency exchange rates that exist as part of its ongoing business operations. The Company utilizes certain derivative financial instruments to enhance its ability to manage these risks.

As of June 30, 2011, the Company uses derivative instruments (i) to mitigate cash flow risks with respect to changes in interest rates (forecasted interest payments on variable rate debt), (ii) to preserve the ratio of fixed rate and floating rate debt that the Company held prior to the debt modifications and amendments discussed in Note 4 and (iii) to protect the initial net investment in certain foreign subsidiaries and/or affiliates with respect to changes in foreign currency exchange rates.

Derivative instruments are entered into for periods consistent with related underlying exposures and do not constitute positions independent of those exposures. The Company applies strict policies to manage each of these risks, including prohibition against derivatives trading, derivatives market-making or any other speculative activities. Although certain derivatives do not qualify for hedge accounting, they are maintained for economic hedge purposes and are not considered speculative.

The Company’s policy is to manage its cash flow and net investment exposures related to adverse changes in interest rates and foreign currency exchange rates. The Company’s objective is to engage in risk management strategies that provide adequate downside protection.

Accounting for Derivative Instruments and Hedging Activities

The Company recognizes all derivatives in the “Other long-term assets”, “Other current liabilities” and “Other long-term liabilities” captions in the Consolidated Balance Sheets at their fair values. The Company has designated certain of its interest rate swaps as cash flow hedges of forecasted interest rate payments related to its variable rate debt and a cross-currency swap as a foreign currency hedge of its net investment in a foreign subsidiary. Other interest rate swaps and cross-currency swaps on various foreign currencies no longer qualify or have not been designated as accounting hedges and do not receive hedge accounting treatment.

With respect to derivative instruments that are afforded hedge accounting, the effective portion of changes in the fair value of a derivative that is designated and qualifies as a cash flow hedge is recorded in OCI and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a net investment hedge that qualifies for hedge accounting are recorded as part of the cumulative translation adjustment in OCI. Any ineffectiveness associated with the aforementioned cash flow hedges, as well as any change in the fair value of a derivative that is not designated as a hedge, is recorded immediately in “Other income (expense)” in the Consolidated Statements of Operations.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Credit Risk

The Company monitors the financial stability of its derivative counterparties and all counterparties remain highly-rated (in the “A” category or higher). The credit risk inherent in these agreements represents the possibility that a loss may occur from the nonperformance of a counterparty to the agreements. The Company performs a review at inception of the hedge, as circumstances warrant, and at least on a quarterly basis of the credit risk of these counterparties. The Company also monitors the concentration of its contracts with individual counterparties. The Company’s exposures are in liquid currencies (primarily in U.S. dollars, euros and Australian dollars), so there is minimal risk that appropriate derivatives to maintain the hedging program would not be available in the future.

Derivatives Not Qualifying For Hedge Accounting

As of June 30, 2011, the Company had certain derivative instruments that functioned as economic hedges but no longer qualified or were not designated to qualify for hedge accounting. Such instruments included cross-currency swaps to mitigate foreign currency exposure on intercompany loans and interest rate swaps to mitigate the exposure on interest payments on variable rate debt to fluctuations in interest rates. Additionally, during 2011, the Company entered into a fixed to floating interest rate swap in order to preserve the ratio of fixed rate and floating rate debt that it held prior to the debt modification and amendments discussed in Note 4. The swap has a notional value of $750.0 million and expires on June 15, 2019.

During the first quarter of 2011, the Company held a foreign exchange rate collar with a notional value of $1.9 million that expired on March 31, 2011.

As of June 30, 2011, the Company held cross-currency swaps not qualifying for hedge accounting with a notional value of 91.1 million euro (approximately $130.2 million). The notional value of the interest rate swaps that do not qualify for hedge accounting was $2.3 billion.

The periodic change in the fair value of the derivative instruments not designated as accounting hedges is recorded immediately in the “Other income (expense)” line of the Consolidated Statements of Operations. For information on the location and amounts of derivative fair values in the Consolidated Balance Sheets and derivative gains and losses in the Consolidated Statements of Operations, see the tabular information presented below.

Derivatives That Qualify for Hedge Accounting

Hedge of a net investment in a foreign operation.As of June 30, 2011, the Company held a cross-currency swap that was designated as a hedge of a net investment in a foreign operation with an aggregate notional amount of 115.0 million Australian dollars (approximately $120.1 million).

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Cash flow hedges.As of June 30, 2011, the Company held interest rate swaps which were designated as cash flow hedges of the variability in the interest payments on $3.5 billion of the approximate $11.3 billion of variable rate senior secured term loan. Although these hedges remain highly effective on an ongoing basis in offsetting the variability in the interest payments, any ineffectiveness is recognized immediately in the Consolidated Statements of Operations.

At June 30, 2011, the maximum length of time over which the Company is hedging its exposure is approximately 1.2 years. The Company follows the hypothetical derivative method to measure hedge ineffectiveness which resulted mostly from the hedges being off-market at the time of designation. Ineffectiveness associated with these hedges is recognized immediately in the Consolidated Statements of Operations. The amount of losses in OCI related to the hedged transactions as of June 30, 2011 that is expected to be reclassified into the Consolidated Statements of Operations within the next 12 months is approximately $75.9 million.

For information on the location and amounts of derivative fair values in the Consolidated Balance Sheets and derivative gains and losses in the Consolidated Statements of Operations, see the tabular information presented below.

Fair Value of Derivative Instruments

Fair Value of Derivative Instruments in the Consolidated Balance Sheets


	As of June 30, 2011
(in millions)	Assets(a)		Liabilities(b)
Derivatives designated as hedging instruments
Interest rate contracts	$	—	$	(192.6	)
Foreign exchange contracts		—		(29.2	)

Total derivatives designated as hedging instruments	$	—	$	(221.8	)

Derivatives not designated as hedging instruments
Interest rate contracts	$	15.2	$	(80.3	)
Foreign exchange contracts		0.5		(3.0	)

Total derivatives not designated as hedging instruments		15.7		(83.3	)

Total derivatives	$	15.7	$	(305.1	)


	As of December 31, 2010
(in millions)	Assets(a)		Liabilities(b)
Derivatives designated as hedging instruments
Interest rate contracts	$	—	$	(252.2	)
Foreign exchange contracts		—		(21.3	)

Total derivatives designated as hedging instruments	$	—	$	(273.5	)

Derivatives not designated as hedging instruments
Interest rate contracts	$	—	$	(105.0	)
Foreign exchange contracts		7.7		(0.9	)

Total derivatives not designated as hedging instruments		7.7		(105.9	)

Total derivatives	$	7.7	$	(379.4	)

(a)	Derivative assets are included in the “Other long-term assets” line of the Consolidated Balance Sheets.

(b)	Derivative liabilities are included in the “Other current liabilities” and “Other long-term liabilities” lines of the Consolidated Balance Sheets.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Effect of Derivative Instruments on the Consolidated Statements of Operations


	Three months ended June 30,
	2011						2010
(in millions, pretax)	Interest Rate Contracts			Foreign Exchange Contracts			Interest Rate Contracts			Foreign Exchange Contracts
Derivatives in cash flow hedging relationships:
Amount of gain or (loss) recognized in OCI (effective portion)	$	12.8			—		$	(12.3	)		—
Amount of gain or (loss) reclassified from accumulated OCI into income(a)	$	(19.0	)		—		$	(44.1	)		—
Amount of gain or (loss) recognized in income (ineffective portion)(b)	$	(0.6	)		—		$	(1.3	)		—

Derivatives in net investment hedging relationships:
Amount of gain or (loss) recognized in OCI (effective portion)		—		$	(4.9	)		—		$	4.1
Amount of gain or (loss) recognized in income (ineffective portion)(b)		—			—			—		$	3.3
Derivatives not designated as hedging instruments
Amount of gain or (loss) recognized in income(b)	$	10.0		$	(3.2	)	$	(16.0	)	$	11.9

(a)	Gain (loss) is recognized in the “Interest expense” line of the Consolidated Statements of Operations.

(b)	Gain (loss) is recognized in the “Other income (expense)” line of the Consolidated Statements of Operations.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	Six months ended June 30,
	2011						2010
(in millions, pretax)	Interest Rate Contracts			Foreign Exchange Contracts			Interest Rate Contracts			Foreign Exchange Contracts
Derivatives in cash flow hedging relationships:
Amount of gain or (loss) recognized in OCI (effective portion)	$	32.3			—		$	(36.2	)		—
Amount of gain or (loss) reclassified from accumulated OCI into income(a)	$	(38.0	)		—		$	(83.6	)		—
Amount of gain or (loss) recognized in income (ineffective portion)(b)	$	(1.7	)		—		$	(3.5	)		—

Derivatives in net investment hedging relationships:
Amount of gain or (loss) recognized in OCI (effective portion)		—		$	(9.8	)		—		$	4.1
Amount of gain or (loss) recognized in income (ineffective portion)(b)		—			—			—		$	0.5
Derivatives not designated as hedging instruments
Amount of gain or (loss) recognized in income(b)	$	6.1		$	(9.5	)	$	(42.8	)	$	19.0

(a)	Gain (loss) is recognized in the “Interest expense” line of the Consolidated Statements of Operations.

(b)	Gain (loss) is recognized in the “Other income (expense)” line of the Consolidated Statements of Operations.

Accumulated Derivatives Gains and Losses

The following table summarizes activity in other comprehensive income for the six months ended June 30, 2011 related to derivative instruments classified as cash flow hedges and a net investment hedge held by the Company:


(in millions, after tax)	Six months ended June 30, 2011
Accumulated loss included in other comprehensive income (loss) at beginning of the period	$	(181.3	)
Less: Reclassifications into earnings from other comprehensive income (loss)		23.8

		(157.5	)
Net gain in fair value of derivatives^(a)		16.8

Accumulated loss included in other comprehensive income (loss) at end of the period	$	(140.7	)

(a)	Gains and losses are included in “Unrealized gains on hedging activities” and in “Foreign currency translation adjustment” on the Consolidated Statements of Equity.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Note 12: Fair Value Measurement ~~(Continued)~~

~~student loans substantially guaranteed by~~Fair Value of Financial Instruments

Carrying amounts for certain of the ~~United States government~~Company’s financial instruments (cash and ~~continued to pay interest in accordance with the terms of their respective security agreements.~~

The Company will not be able to access liquidity for these investments until the auction market successfully resumes, a secondary market is established for long-term investors, or issuers redeem the securities. The Company has the abilitycash equivalents and ~~intent to hold these securities~~short-term borrowings) approximate fair value due to their short maturities. Accordingly, these instruments are not presented in the ~~extended time period over which~~following table. The following table provides the wind-down of the official check and money order business, discussed in Note 1, will take place. Therefore, the lack of immediate liquidity is not viewed as significant due to the above noted intent and ability to hold the securities. As of March 31, 2008, theestimated fair values of the ~~ARS were provided by an independent third party pricing service~~remaining financial instruments:


As of June 30, 2011 (in millions)	Carrying Value		Fair Value(a)
Financial instruments:
Settlement assets:
Short-term investment securities	$	84.5	$	84.5
Long-term investment securities	$	240.0	$	240.0
Other long-term assets:
Long-term investment securities	$	0.5	$	0.5
Cost method investments	$	24.0	$	24.0
Derivative financial instruments	$	15.7	$	15.7
Other current liabilities:
Derivative financial instruments	$	4.5	$	4.5
Long-term borrowings:
Long-term borrowings	$	22,584.3	$	22,007.4
Other long-term liabilities:
Derivative financial instruments	$	300.6	$	300.6

(a)	Represents cost for cost method investments. Refer to Note 10 of these Consolidated Financial Statements for a more detailed discussion of cost method investments.

The estimated fair values of investment securities and ~~were~~derivative financial instruments are described below. Refer to Notes 10 and 11 of these Consolidated Financial Statements for additional information regarding the Company’s investment securities and derivative financial instruments, respectively.

The estimated fair market value of FDC’s long-term borrowings was primarily based on market trading prices. For additional information regarding the Company’s borrowings, refer to Note 4 of these Consolidated Financial Statements as well as to Note 8 of the Company’s Consolidated Financial Statements in Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.

Concentration of Credit Risk

The Company’s investment securities are diversified across multiple issuers within its investment portfolio (investment securities plus cash and cash equivalents). In addition to investment securities, the Company maintains other financial instruments with various financial institutions. The Company’s largest single issuer represents approximately 11% of the total carrying value of the investment portfolio and the Company limits its derivative financial instruments credit risk by maintaining contracts with counterparties having a credit rating of “A” or higher. The Company periodically reviews the credit standings of these institutions.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial instruments carried and measured at fair value on a recurring basis are classified in the table below according to the fair value hierarchy:


	Fair Value Measurement Using
As of June 30, 2011 (in millions)	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets:
Settlement assets:
Student loan auction rate securities	$	—	$	—	$	218.3	$	218.3
Corporate bonds		—		62.5		—		62.5
State and municipal obligations		—		42.6		—		42.6
Preferred stock		1.1		—		—		1.1

Total settlement assets		1.1		105.1		218.3		324.5
Other long-term assets:
Available-for-sale securities		—		0.5		—		0.5
Foreign currency derivative contracts		—		0.5		—		0.5
Interest rate swap contracts		—		15.2		—		15.2

Total other long-term assets		—		16.2		—		16.2

Total assets at fair value	$	1.1	$	121.3	$	218.3	$	340.7


Liabilities:
Other current liabilities:
Interest rate swap contracts	$	—	$	4.5	$	—	$	4.5
Other long-term liabilities:
Interest rate swap contracts		—		268.4		—		268.4
Foreign currency derivative contracts		—		32.2		—		32.2

Total liabilities at fair value	$	—	$	305.1	$	—	$	305.1

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	Fair Value Measurement Using
As of December 31, 2010 (in millions)	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total
Assets:
Settlement assets:
Student loan auction rate securities	$	—	$	—	$	341.1	$	341.1
Corporate bonds		—		63.0		—		63.0
Preferred stock		0.2		—		—		0.2

Total settlement assets		0.2		63.0		341.1		404.3

Other long-term assets:
Available-for-sale securities		—		0.5		—		0.5
Foreign currency derivative contracts		—		7.7		—		7.7

Total other long-term assets		—		8.2		—		8.2

Total assets at fair value	$	0.2	$	71.2	$	341.1	$	412.5


Liabilities:
Other current liabilities:
Interest rate swap contracts	$	—	$	4.4	$	—	$	4.4
Other long-term liabilities:
Interest rate swap contracts		—		352.8		—		352.8
Foreign currency derivative contracts		—		22.2		—		22.2

Total liabilities at fair value	$	—	$	379.4	$	—	$	379.4

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Settlement assets - Student loan auction rate securities. Due to the lack of observable market ~~inputs. To corroborate this pricing,~~activity for the SLARS held by the Company ~~considered various other factors, including~~as of June 30, 2011, the ~~strong credit quality~~Company, with the assistance of a third-party valuation firm upon which the Company in part relied, made certain assumptions, primarily relating to estimating both the weighted-average life for the securities held by the Company and the impact on the fair value of the ~~ARS,~~current inability to redeem the securities at par value. All key assumptions and valuations were determined by and are the responsibility of management. The securities were valued using an income approach based on a probability-weighted discounted cash flow analysis. The Company considered each security’s key terms including date of issuance, date of maturity, auction intervals, scheduled auction dates, maximum auction rates, ~~of interest received since the auction failures, the yields of securities similar to the~~as well as underlying ~~ARS~~collateral, ratings, and ~~ARS market conditions. At March 31, 2008, the market values~~guarantees or insurance. The impact of the ~~auction rate securities approximated their par values. Subsequent to March 31, 2008,~~Company’s judgment in the ~~market became even less liquid which may factor into~~valuation was significant and, accordingly, the ~~Company's consideration of the investments'~~resulting fair value ~~in future periods if such market conditions continue.~~

~~Other available-for-sale securities~~

~~The Company held preferred shares issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac") that are valued using quoted stock prices from the New York Stock Exchange and~~was classified as Level ~~1 above.~~3 within the fair value hierarchy. A 50 basis point change in liquidity risk premium, as well as slight changes in other factors, would impact the value of the SLARS by approximately $5 million. For additional information regarding sales, settlements and impairments of the SLARS, refer to Note 10 of these Consolidated Financial Statements.

The Company held certain investments in primarily short-term debt securities, including commercial paper (both discounted and interest bearing), money market funds, certificates of deposit (both domestic and Yankee), variable rate demand notes with a put back option and one fixed rate corporate bond.


(in millions)	Fair Value Measurement Using Significant Unobservable Inputs (Level 3) Student loan auction rate securities
Beginning balance as of January 1, 2011	$	341.1
Total gains or losses (realized or unrealized):
Included in other comprehensive income		0.1
Included in product sales and other		(1.9	)
Sales		(116.3	)
Settlements		(4.7	)
Transfers in (out) of Level 3		—

Ending balance as of June 30, 2011	$	218.3

Settlement assets - Other available-for-sale securities. Prices for ~~these securities~~the corporate bonds and state and municipal obligations are not quoted on active exchanges but are priced through an independent ~~third party~~third-party pricing service based on quotations from market-makers in the specific instruments or, where appropriate, from other market inputs. The bonds were valued under a market approach using observable inputs including ~~interest rates,~~reported trades, benchmark yields, ~~reported trades,~~broker/dealer quotes, issuer spreads ~~two sided markets, benchmark securities, bids, offers,~~ and ~~reference data. In certain instances, amortized cost~~other standard inputs. The municipal paper was valued under a market approach using observable inputs including maturity date, issue date, credit rating, current commercial paper rate and settlement date.

The Company’s experience with these types of investments and the expectations of the current investments held is ~~considered an appropriate approximation of market value.~~that they will be satisfied at the current carrying amount. These securities ~~are~~were classified as Level ~~2 above.~~2.

~~Other Assets~~

Derivative financial instruments. The Company maintains certain other investments (not included in the table above) that are classified as available-for-sale, carried at fair value and included in the "Other assets" line item in the Consolidated Balance Sheets. These totaled less than $1.0 million and include primarily equity securities which are valued based on Level 2 inputs.

~~Derivatives~~

~~As discussed in Note 8 to the Consolidated Financial Statements included in the Company's Consolidated Financial Statements for the year ended December 31, 2007, the~~ Company uses derivative instruments to mitigate certain risks. The ~~Company's~~Company’s derivatives are not exchange listed and ~~are~~ therefore ~~valued~~the fair value is estimated under an income approach using Bloomberg analytics models that are based on readily observable market inputs. These models reflect the contractual terms of the derivatives, such as notional value and expiration date, as well as market-based observables including interest and foreign currency exchange rates, yield

~~FIRST DATA CORPORATION~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)~~

~~(Unaudited)~~

~~Note 12: Fair Value Measurement (Continued)~~

curves and the credit quality of the counterparties. ~~As discussed above, effective January 1, 2008, the~~The models also incorporate the ~~Company's credit worthiness~~Company’s creditworthiness in order to appropriately reflect non-performance risk.

Inputs to the derivative pricing models are generally observable and do not contain a high level of ~~subjectivity. The degree to which~~subjectivity and, accordingly, the ~~Company's credit worthiness impacts the value does require some management judgment but as of March 31, 2008, the impact of this assessment on the overall value of the Company's~~Company’s derivatives ~~was not significant and the Company's derivatives are~~were classified within Level 2 of the fair value

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

hierarchy. While the Company believes its estimates result in a reasonable reflection of the fair value of these instruments, the estimated values may not be representative of actual values that could have been realized or that will be realized in the near future. Refer to Note 11 of these Consolidated Financial Statements for additional information regarding the Company’s derivative financial instruments.

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

During the six months ended June 30, 2011, the Company did not have any assets measured at fair value on a non-recurring basis.

Note 13: ~~Income Taxes~~

As of March 31, 2008, the Company anticipates that it is reasonably possible that its liability for unrecognized state tax benefits may significantly decrease within the next twelve months related to the expiration of the statute of limitations and negotiation of settlement agreements in certain states. Based on the potential expiration of certain state statutes of limitations and ongoing negotiations with various state tax authorities, the Company's unrecognized tax benefits could decrease by approximately $14 million, all of which would be recognized as a decrease to goodwill.

~~Note 14: Related Party Transactions~~

The Company has engaged in a transaction associated with Plane Fish, LLC, of which Mr. Labry, an executive officer of the Company, is the sole member. Plane Fish, LLC owned an aircraft which it leased to a charter company. The charter company made the aircraft available to its customers, including the Company, which used the aircraft solely in connection with business-related travel by Mr. Labry and other Company employees. On March 17, 2008, a third party leasing company acquired the aircraft from Plane Fish, LLC for $8.5 million and the Company now leases the plane from the third party leasing company through a capital lease. The Company negotiated the $8.5 million purchase price with Plane Fish, LLC and arranged for the third party leasing company to purchase the aircraft with the Company's commitment to lease the aircraft.

~~Note 15:~~Supplemental Guarantor Condensed Consolidating Financial Statements

~~On October 24, 2007, the Company issued in a private offering $2.2 billion aggregate principal amount of senior notes due 2015 as~~As described in Note ~~10 of~~8 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2007. The~~2010, FDC’s 9.875% senior notes, 12.625% senior notes, 10.55% senior PIK notes due 2015 and 11.25% senior subordinated notes are unconditionally guaranteed by substantially all existing and future, direct and indirect, ~~wholly owned, material~~wholly-owned, domestic subsidiaries of ~~the Company~~FDC other than Integrated Payment Systems Inc. ~~("Guarantors"~~(“Guarantors”). None of the other subsidiaries of ~~the Company,~~FDC, either direct or indirect, guarantee the ~~senior~~ notes ~~("Non-Guarantors"~~(“Non-Guarantors”). The Guarantors also unconditionally guarantee ~~the~~FDC’s senior secured revolving credit facility, ~~and~~ senior secured term loan facility, the 8.875% senior ~~unsecured term loan facilities~~secured notes and the 7.375% senior ~~subordinated unsecured term loan facility described in Note 10 of the Consolidated Financial Statements for the year ended December 31, 2007. The senior note guarantees are unsecured and~~secured notes which rank senior in right of payment to all existing and future ~~subordinated~~unsecured and second lien indebtedness of ~~the Company's~~FDC’s guarantor ~~subsidiaries~~subsidiaries. The Guarantors further unconditionally guarantee FDC’s 8.25% senior second lien notes and ~~its~~8.75%/10.00% PIK toggle senior second lien notes which rank senior in right of payment to all existing and future unsecured indebtedness of FDC’s guarantor subsidiaries. The 9.875% senior note, 12.625% senior note, 10.55% senior PIK note due 2015 and 11.25% senior subordinated ~~unsecured interim credit facility. The senior~~ note guarantees are unsecured and rank equally in right of payment with all existing and future senior indebtedness of the guarantor subsidiaries ~~including their~~but senior in right of payment to all existing and future subordinated indebtedness of FDC’s guarantor subsidiaries. The 11.25% senior subordinated note guarantees ~~under~~are unsecured and rank equally in right of payment with all existing and future senior subordinated indebtedness of the ~~senior unsecured interim credit facilities.~~guarantor subsidiaries.

The following tables present the results of operations, financial position and cash flows of ~~the Company ("Parent"~~FDC (“FDC Parent Company”), the Guarantor subsidiaries, the Non-Guarantor subsidiaries and ~~Eliminations~~consolidation adjustments for the three and six months ended ~~March 31, 2008~~June 30, 2011 and ~~2007,~~2010, and as of ~~March 31, 2008~~June 30, 2011 and December 31, ~~2007~~2010 to arrive at the information for ~~First Data Corporation~~FDC on a consolidated basis.

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~Note 15: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS~~

~~(Successor)~~

~~(in millions)~~

~~(unaudited)~~

Three Months Ended March 31, 2008

Parent
Company Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Revenues:

Transaction and processing service fees
$ 0.8 $ 964.5 $ 415.6 $ (1.2 ) $ 1,379.7

Investment income, net
— 8.3 47.7 — 56.0

Product sales and other
— 141.2 76.8 (6.0 ) 212.0

Reimbursable debit network fees, postage and other
— 457.0 21.8 — 478.8

0.8 1,571.0 561.9 (7.2 ) 2,126.5

Expenses:

Cost of services (exclusive of items shown below)
— 528.3 229.7 (1.2 ) 756.8

Cost of products sold
— 48.9 28.0 (6.0 ) 70.9

Selling, general and administrative
55.9 156.5 91.9 — 304.3

Reimbursable debit network fees, postage and other
— 457.0 21.8 — 478.8

Depreciation and amortization
1.4 233.6 84.1 — 319.1

57.3 1,424.3 455.5 (7.2 ) 1,929.9

Operating (loss) profit
(56.5 ) 146.7 106.4 — 196.6

Interest income
4.0 1.0 4.0 — 9.0
Interest expense
(511.5 ) (1.3 ) (4.9 ) — (517.7 )
Interest (expense) income from intercompany notes
(26.3 ) 20.8 5.5 — —
Other income (expense)
(110.2 ) 0.5 66.5 — (43.2 )
Equity earnings from consolidated subsidiaries
218.4 22.1 — (240.5 ) —

(425.6 ) 43.1 71.1 (240.5 ) (551.9 )

(Loss) income before income taxes, minority interest and equity earnings in affiliates
(482.1 ) 189.8 177.5 (240.5 ) (355.3 )
Income tax (benefit) expense
(256.7 ) 80.8 45.4 — (130.5 )
Minority interest
— (0.2 ) (28.8 ) — (29.0 )
Equity earnings in affiliates
3.7 27.3 1.1 — 32.1

Net (loss) income
$ (221.7 ) $ 136.1 $ 104.4 $ (240.5 ) $ (221.7 )


(in millions)	Three months ended June 30, 2011
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	—		$	1,015.6		$	619.8		$	(42.0	)	$	1,593.4
Product sales and other		—			136.5			97.0			(16.1	)		217.4
Reimbursable debit network fees, postage and other		—			634.1			325.5			(20.6	)		939.0

		—			1,786.2			1,042.3			(78.7	)		2,749.8

Expenses:
Cost of services (exclusive of items shown below)		—			489.6			271.9			(42.0	)		719.5
Cost of products sold		—			66.9			41.7			(16.1	)		92.5
Selling, general and administrative		70.7			242.2			125.7			—			438.6
Reimbursable debit network fees, postage and other		—			634.1			325.5			(20.6	)		939.0
Depreciation and amortization		2.1			202.2			125.5			—			329.8
Other operating expenses:
Restructuring, net		(0.3	)		4.8			13.9			—			18.4

		72.5			1,639.8			904.2			(78.7	)		2,537.8

Operating (loss) profit		(72.5	)		146.4			138.1			—			212.0

Interest income		0.1			0.2			1.6			—			1.9
Interest expense		(456.9	)		(2.1	)		(3.3	)		—			(462.3	)
Interest income (expense) from intercompany notes		39.9			(42.9	)		3.0			—			—
Other income (expense)		(15.7	)		—			14.3			—			(1.4	)
Equity earnings from consolidated subsidiaries		149.8			33.4			—			(183.2	)		—

		(282.8	)		(11.4	)		15.6			(183.2	)		(461.8	)

(Loss) income before income taxes and equity earnings in affiliates		(355.3	)		135.0			153.7			(183.2	)		(249.8	)
Income tax (benefit) expense		(179.5	)		68.1			23.3			—			(88.1	)
Equity earnings in affiliates		—			33.0			0.5			—			33.5

Net (loss) income		(175.8	)		99.9			130.9			(183.2	)		(128.2	)
Less: Net income attributable to noncontrolling interests		—			0.2			14.3			33.1			47.6

Net (loss) income attributable to First Data Corporation	$	(175.8	)	$	99.7		$	116.6		$	(216.3	)	$	(175.8	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~Note 15: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS~~

~~(Predecessor)~~

~~(in millions)~~

~~(unaudited)~~

Three Months Ended March 31, 2007

Parent
Company Guarantor
Subsidiaries Non-
Guarantor
Subsidiaries Eliminations Consolidated
Revenues:

Transaction and processing service fees
$ 0.8 $ 921.8 $ 345.9 $ (0.8 ) $ 1,267.7

Investment income, net
— 10.8 (41.1 ) — (30.3 )

Product sales and other
— 119.3 76.2 (7.5 ) 188.0

Reimbursable debit network fees, postage and other
— 395.9 15.0 — 410.9

0.8 1,447.8 396.0 (8.3 ) 1,836.3

Expenses:

Cost of services (exclusive of items shown below)
13.0 494.5 185.6 (1.7 ) 691.4

Cost of products sold
— 48.9 24.4 (6.6 ) 66.7

Selling, general and administrative
63.0 153.0 78.8 — 294.8

Reimbursable debit network fees, postage and other
— 395.9 15.0 — 410.9

Depreciation and amortization
1.9 117.7 39.2 — 158.8

Other operating expenses:

Restructuring, net
(0.3 ) 2.6 (0.3 ) — 2.0

Impairments
— — 16.3 — 16.3

77.6 1,212.6 359.0 (8.3 ) 1,640.9

Operating (loss) profit
(76.8 ) 235.2 37.0 — 195.4

Interest income
2.6 1.1 4.3 — 8.0
Interest expense
(30.7 ) (0.7 ) (3.1 ) — (34.5 )
Interest (expense) income from intercompany notes
(9.4 ) 12.7 (3.3 ) — —
Other income (expense)
(0.2 ) 1.2 — — 1.0
Equity earnings from consolidated subsidiaries
238.3 38.7 — (277.0 ) —

200.6 53.0 (2.1 ) (277.0 ) (25.5 )

Income before income taxes, minority interest, equity earnings in affiliates and discontinued operations
123.8 288.2 34.9 (277.0 ) 169.9
Income tax (benefit) expense(1)
(41.0 ) 139.8 (61.4 ) — 37.4
Minority interest
— (1.3 ) (27.8 ) — (29.1 )
Equity earnings in affiliates
10.4 56.4 1.5 — 68.3

Income from continuing operations
$ 175.2 $ 203.5 $ 70.0 $ (277.0 ) $ 171.7
Income from discontinued operations, net of taxes
— — 3.5 — 3.5

Net income
$ 175.2 $ 203.5 $ 73.5 $ (277.0 ) $ 175.2

~~(1)~~: The Non-Guarantor tax benefit for the quarter ended March 31, 2007 is predominately attributable to tax losses of Integrated Payments Systems, Inc. ("IPS"), a wholly owned subsidiary of the Parent. Under tax sharing agreements, IPS receives the tax benefit for tax losses utilized in the Parent's consolidated tax return. The losses are in large part due to IPS historically investing its investment portfolio in non-taxable municipal bonds at the instruction of Parent. The IPS tax benefit included for the predecessor three-month period ended March 31, 2007 was $65.8 million. As of January 1, 2008, with the wind-down of the official check and money order business and the shift from tax exempt investments to a taxable portfolio, IPS is no longer in a taxable loss position.


(in millions)	Six months ended June 30, 2011
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	—		$	1,966.3		$	1,188.6		$	(78.5	)	$	3,076.4
Product sales and other		—			267.5			177.4			(30.6	)		414.3
Reimbursable debit network fees, postage and other		—			1,225.6			617.9			(40.2	)		1,803.3

		—			3,459.4			1,983.9			(149.3	)		5,294.0

Expenses:
Cost of services (exclusive of items shown below)		—			952.7			561.8			(78.5	)		1,436.0
Cost of products sold		—			135.2			78.7			(30.6	)		183.3
Selling, general and administrative		134.2			471.1			245.0			—			850.3
Reimbursable debit network fees, postage and other		—			1,225.6			617.9			(40.2	)		1,803.3
Depreciation and amortization		4.3			418.3			249.0			—			671.6
Other operating expenses:
Restructuring, net		(0.4	)		15.5			15.9			—			31.0

		138.1			3,218.4			1,768.3			(149.3	)		4,975.5

Operating (loss) profit		(138.1	)		241.0			215.6			—			318.5

Interest income		0.2			0.4			3.2			—			3.8
Interest expense		(894.2	)		(3.7	)		(6.7	)		—			(904.6	)
Interest income (expense) from intercompany notes		75.7			(84.7	)		9.0			—			—
Other income (expense)		(99.9	)		9.3			62.9			—			(27.7	)
Equity earnings from consolidated subsidiaries		279.2			56.2			—			(335.4	)		—

		(639.0	)		(22.5	)		68.4			(335.4	)		(928.5	)

(Loss) income before income taxes and equity earnings in affiliates		(777.1	)		218.5			284.0			(335.4	)		(610.0	)
Income tax (benefit) expense		(384.2	)		125.2			22.9			—			(236.1	)
Equity earnings in affiliates		—			60.8			0.4			—			61.2

Net (loss) income		(392.9	)		154.1			261.5			(335.4	)		(312.7	)
Less: Net income attributable to noncontrolling interests		—			0.2			27.1			52.9			80.2

Net (loss) income attributable to First Data Corporation	$	(392.9	)	$	153.9		$	234.4		$	(388.3	)	$	(392.9	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~Note 15: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~
~~CONDENSED CONSOLIDATING BALANCE SHEET~~
~~(Successor)~~
~~(in millions)~~
~~(unaudited)~~

March 31, 2008

Parent
Company Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
ASSETS

Current assets:

Cash and cash equivalents
$ 146.1 $ 79.8 $ 476.0 — $ 701.9

Accounts receivable, net of allowance for doubtful accounts
14.0 1,201.7 1,000.5 — 2,216.2

Settlement assets(2)
— 4,473.8 10,958.5 — 15,432.3

Other current assets
89.8 245.3 127.7 — 462.8

Total current assets
249.9 6,000.6 12,562.7 — 18,813.2

Property and equipment, net of accumulated depreciation
26.2 612.4 336.5 — 975.1
Goodwill
— 11,964.5 5,110.3 — 17,074.8
Customer relationships, net of accumulated amortization
— 4,979.2 1,718.3 — 6,697.5
Other intangibles, net of accumulated amortization
3.4 1,068.1 695.2 — 1,766.7
Investment in affiliates
526.3 2,703.0 261.3 — 3,490.6
Long-term settlement assets(2)
— — 567.8 — 567.8
Other long-term assets
621.3 226.3 37.8 — 885.4
Investment in consolidated subsidiaries
30,858.9 2,215.4 — $ (33,074.3 ) —

Total assets
$ 32,286.0 $ 29,769.5 $ 21,289.9 $ (33,074.3 ) $ 50,271.1

LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:

Accounts payable
$ 2.1 $ 70.4 $ 84.3 — $ 156.8

Short-term and current portion of long-term borrowings
299.2 21.7 293.1 — 614.0

Settlement obligations(2)
— 4,473.8 11,527.3 — 16,001.1

Other current liabilities
207.5 661.3 435.2 — 1,304.0

Total current liabilities
508.8 5,227.2 12,339.9 — 18,075.9

Long-term borrowings
21,960.6 27.7 110.3 — 22,098.6
Deferred long-term tax (assets) liabilities
(506.8 ) 2,270.5 343.6 — 2,107.3
Intercompany payable (receivable)
1,005.2 (655.0 ) (350.2 ) — —
Intercompany notes
1,567.2 (1,226.4 ) (340.8 ) — —
Other long-term liabilities
972.2 155.9 82.4 — 1,210.5

Total liabilities
25,507.2 5,799.9 12,185.2 — 43,492.3

Stockholder's equity
6,778.8 23,969.6 9,104.7 $ (33,074.3 ) 6,778.8

Total liabilities and stockholder's equity
$ 32,286.0 $ 29,769.5 $ 21,289.9 $ (33,074.3 ) $ 50,271.1


	Three months ended June 30, 2010
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	—		$	1,011.0		$	582.8		$	(36.5	)	$	1,557.3
Product sales and other		—			140.3			80.3			(13.1	)		207.5
Reimbursable debit network fees, postage and other		—			579.5			288.7			(18.3	)		849.9

		—			1,730.8			951.8			(67.9	)		2,614.7

Expenses:
Cost of services (exclusive of items shown below)		—			484.3			305.0			(36.5	)		752.8
Cost of products sold		—			65.2			47.6			(13.1	)		99.7
Selling, general and administrative		66.5			219.5			109.9			—			395.9
Reimbursable debit network fees, postage and other		—			579.5			288.7			(18.3	)		849.9
Depreciation and amortization		2.2			231.9			113.3			—			347.4
Other operating expenses:
Restructuring, net		10.6			8.6			4.7			—			23.9
Litigation and regulatory settlements		—			(1.7	)		—			—			(1.7	)

		79.3			1,587.3			869.2			(67.9	)		2,467.9

Operating (loss) profit		(79.3	)		143.5			82.6			—			146.8

Interest income		0.2			(0.2	)		1.4			—			1.4
Interest expense		(446.9	)		(1.7	)		(2.3	)		—			(450.9	)
Interest income (expense) from intercompany notes		41.0			(49.3	)		8.3			—			—
Other income (expense)		56.8			42.2			(48.2	)		(26.0	)		24.8
Equity earnings from consolidated subsidiaries		95.1			29.7			—			(124.8	)		—

		(253.8	)		20.7			(40.8	)		(150.8	)		(424.7	)

(Loss) income before income taxes and equity earnings in affiliates		(333.1	)		164.2			41.8			(150.8	)		(277.9	)
Income tax (benefit) expense		(161.9	)		40.1			(0.6	)		—			(122.4	)
Equity earnings in affiliates		—			34.0			0.4			(1.1	)		33.3

Net (loss) income		(171.2	)		158.1			42.8			(151.9	)		(122.2	)
Less: Net income attributable to noncontrolling interests		—			—			11.8			37.2			49.0

Net (loss) income attributable to First Data Corporation	$	(171.2	)	$	158.1		$	31.0		$	(189.1	)	$	(171.2	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~Note 15: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~
~~CONDENSED CONSOLIDATING BALANCE SHEET~~
~~(Successor)~~
~~(in millions)~~

~~(2)~~: The majority of the guarantor settlement assets relates to our merchant acquiring business. We believe the settlement assets are not available to satisfy any claims other than those related to the settlement liabilities.


	Six months ended June 30, 2010
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
Revenues:
Transaction and processing service fees	$	—		$	1,947.7		$	1,127.7		$	(69.9	)	$	3,005.5
Product sales and other		—			259.5			167.9			(25.1	)		402.3
Reimbursable debit network fees, postage and other		—			1,112.0			532.1			(35.1	)		1,609.0

		—			3,319.2			1,827.7			(130.1	)		5,016.8

Expenses:
Cost of services (exclusive of items shown below)		—			909.3			668.9			(69.9	)		1,508.3
Cost of products sold		—			125.2			74.9			(25.1	)		175.0
Selling, general and administrative		127.4			428.8			218.4			—			774.6
Reimbursable debit network fees, postage and other		—			1,112.0			532.1			(35.1	)		1,609.0
Depreciation and amortization		4.0			463.7			231.0			—			698.7
Other operating expenses:
Restructuring, net		9.9			18.1			8.4			—			36.4
Litigation and regulatory settlements		—			(2.0	)		—			—			(2.0	)

		141.3			3,055.1			1,733.7			(130.1	)		4,800.0

Operating (loss) profit		(141.3	)		264.1			94.0			—			216.8

Interest income		0.5			0.2			2.7			—			3.4
Interest expense		(888.4	)		(3.6	)		(7.8	)		—			(899.8	)
Interest income (expense) from intercompany notes		67.4			(84.1	)		16.7			—			—
Other income (expense)		91.8			43.9			(76.7	)		(26.0	)		33.0
Equity earnings from consolidated subsidiaries		138.4			55.7			—			(194.1	)		—

		(590.3	)		12.1			(65.1	)		(220.1	)		(863.4	)

(Loss) income before income taxes and equity earnings in affiliates		(731.6	)		276.2			28.9			(220.1	)		(646.6	)
Income tax (benefit) expense		(320.3	)		48.8			11.0			—			(260.5	)
Equity earnings in affiliates		—			57.0			0.4			(1.9	)		55.5

Net (loss) income		(411.3	)		284.4			18.3			(222.0	)		(330.6	)
Less: Net (loss) income attributable to noncontrolling interests		—			(0.2	)		23.3			57.6			80.7

Net (loss) income attributable to First Data Corporation	$	(411.3	)	$	284.6		$	(5.0	)	$	(279.6	)	$	(411.3	)

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

~~Note 15: Guarantor Condensed Consolidating Financial Statements (Continued)~~

~~FIRST DATA CORPORATION~~
~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~
~~(Successor)~~
~~(in millions)~~
~~(unaudited)~~

Three months ended March 31, 2008

Parent
Company Guarantor
Subsidiaries Non-
Guarantor
Subsidiaries Eliminations Consolidated
Cash and cash equivalents at beginning of period
$ 60.6 $ 60.7 $ 485.2 — $ 606.5

CASH FLOWS FROM OPERATING ACTIVITIES

Net (loss) income
(221.7 ) 136.1 104.4 $ (240.5 ) (221.7 )

Adjustments to reconcile to net cash provided by operating activities:

Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)
9.7 275.7 83.0 — 368.4

Charges (gains) related to restructuring, impairments and other income (expense)
110.2 (0.5 ) (66.5 ) — 43.2

Other non-cash and non-operating items, net
(156.2 ) (87.8 ) (1.4 ) 240.5 (4.9 )

(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions
(191.8 ) 238.9 51.9 — 99.0

Net cash (used in) provided by operating activities
(449.8 ) 562.4 171.4 — 284.0

CASH FLOWS FROM INVESTING ACTIVITIES

Current period acquisitions, net of cash acquired
(17.6 ) — (175.7 ) — (193.3 )

Payments related to other businesses previously acquired
— (18.1 ) (0.2 ) — (18.3 )

Additions to property and equipment, net
(1.5 ) (34.8 ) (17.1 ) — (53.4 )

Payments to secure customer service contracts, including outlays for conversion and capitalized systems development costs
(1.3 ) (26.6 ) (12.9 ) — (40.8 )

Proceeds from the sale of marketable securities
— 0.2 52.1 — 52.3

Other investing activities
(1.5 ) — — — (1.5 )

Net cash used in investing activities
(21.9 ) (79.3 ) (153.8 ) — (255.0 )

CASH FLOWS FROM FINANCING ACTIVITIES

Short-term borrowings, net
30.0 — (45.0 ) — (15.0 )

Principal payments on long-term debt
(32.2 ) (4.7 ) (8.0 ) — (44.9 )

Capital contributed by Parent
105.1 — — — 105.1

Intercompany
454.3 (459.3 ) 5.0 — —

Net cash provided by (used in) financing activities
557.2 (464.0 ) (48.0 ) — 45.2

Effect of exchange rate changes on cash and cash equivalents
— — 21.2 — 21.2

Change in cash and cash equivalents
85.5 19.1 (9.2 ) — 95.4

Cash and cash equivalents at end of period
$ 146.1 $ 79.8 $ 476.0 $ — $ 701.9


(in millions)	As of June 30, 2011
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	207.7		$	22.3		$	381.5		$	—		$	611.5
Accounts receivable, net of allowance for doubtful accounts		2.7			957.1			916.6			—			1,876.4
Settlement assets(a)		—			3,699.7			3,183.9			—			6,883.6
Other current assets		83.5			274.9			80.7			—			439.1

Total current assets		293.9			4,954.0			4,562.7			—			9,810.6

Property and equipment, net of accumulated depreciation		32.5			645.2			285.2			—			962.9
Goodwill		—			9,495.9			7,948.6			—			17,444.5
Customer relationships, net of accumulated amortization		—			2,727.6			2,167.0			—			4,894.6
Other intangibles, net of accumulated amortization		606.3			645.7			678.1			—			1,930.1
Investment in affiliates		—			1,162.1			39.6			—			1,201.7
Long-term settlement assets(a)		—			—			242.7			—			242.7
Other long-term assets		459.0			302.0			42.2			—			803.2
Investment in consolidated subsidiaries		25,302.6			5,541.8			—			(30,844.4	)		—

Total assets	$	26,694.3		$	25,474.3		$	15,966.1		$	(30,844.4	)	$	37,290.3


LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1.3		$	97.9		$	97.8		$	—		$	197.0
Short-term and current portion of long-term borrowings		32.4			42.2			95.1			—			169.7
Settlement obligations(a)		—			3,699.7			3,425.5			—			7,125.2
Other current liabilities		582.1			539.7			378.3			—			1,500.1

Total current liabilities		615.8			4,379.5			3,996.7			—			8,992.0

Long-term borrowings		22,471.6			74.1			38.6			—			22,584.3
Long-term deferred tax (assets) liabilities		(1,034.0	)		1,739.1			121.3			—			826.4
Intercompany payable (receivable)		5,001.6			(4,090.4	)		(911.2	)		—			—
Intercompany notes		(1,659.7	)		1,779.0			(119.3	)		—			—
Other long-term liabilities		906.3			96.0			21.4			—			1,023.7

Total liabilities		26,301.6			3,977.3			3,147.5			—			33,426.4

Redeemable equity interest		—			—			45.4			(45.4	)		—
Redeemable noncontrolling interest		—			—			—			45.4			45.4
First Data Corporation stockholder’s equity		392.7			21,497.0			5,861.8			(27,358.8	)		392.7
Noncontrolling interests		—			—			65.7			3,360.1			3,425.8
Equity of consolidated alliance		—			—			6,845.7			(6,845.7	)		—

Total equity		392.7			21,497.0			12,773.2			(30,844.4	)		3,818.5

Total liabilities and equity	$	26,694.3		$	25,474.3		$	15,966.1		$	(30,844.4	)	$	37,290.3

FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


(in millions)	As of December 31, 2010
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
ASSETS
Current assets:
Cash and cash equivalents	$	164.1		$	21.1		$	324.3		$	—		$	509.5
Accounts receivable, net of allowance for doubtful accounts		2.6			1,121.1			1,045.9			—			2,169.6
Settlement assets(a)		—			3,476.2			3,217.8			—			6,694.0
Other current assets		86.0			262.4			65.0			—			413.4

Total current assets		252.7			4,880.8			4,653.0			—			9,786.5

Property and equipment, net of accumulated depreciation		30.3			637.2			284.5			—			952.0
Goodwill		—			9,468.3			7,828.6			—			17,296.9
Customer relationships, net of accumulated amortization		—			2,923.8			2,299.9			—			5,223.7
Other intangibles, net of accumulated amortization		606.9			665.4			658.7			—			1,931.0
Investment in affiliates		—			1,169.9			38.3			—			1,208.2
Long-term settlement assets(a)		—			—			365.1			—			365.1
Other long-term assets		482.4			265.5			32.8			—			780.7
Investment in consolidated subsidiaries		25,074.4			5,361.4			—			(30,435.8	)		—

Total assets	$	26,446.7		$	25,372.3		$	16,160.9		$	(30,435.8	)	$	37,544.1


LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	0.4		$	95.2		$	85.3		$	—		$	180.9
Short-term and current portion of long-term borrowings		31.7			44.9			193.9			—			270.5
Settlement obligations(a)		—			3,476.2			3,582.7			—			7,058.9
Other current liabilities		301.1			651.3			401.3			—			1,353.7

Total current liabilities		333.2			4,267.6			4,263.2			—			8,864.0

Long-term borrowings		22,376.0			21.8			41.0			—			22,438.8
Long-term deferred tax (assets) liabilities		(928.5	)		1,838.6			103.6			—			1,013.7
Intercompany payable (receivable)		4,298.1			(3,496.7	)		(801.4	)		—			—
Intercompany notes		(1,253.2	)		1,621.1			(367.9	)		—			—
Other long-term liabilities		1,026.8			89.7			23.1			—			1,139.6

Total liabilities		25,852.4			4,342.1			3,261.6			—			33,456.1

Redeemable equity interest		—			—			28.1			(28.1	)		—
Redeemable noncontrolling interest		—			—			—			28.1			28.1
First Data Corporation stockholder’s equity		594.3			21,030.4			5,864.5			(26,894.9	)		594.3
Noncontrolling interests		—			(0.2	)		52.5			3,413.3			3,465.6
Equity of consolidated alliance		—			—			6,954.2			(6,954.2	)		—

Total equity		594.3			21,030.2			12,871.2			(30,435.8	)		4,059.9

Total liabilities and equity	$	26,446.7		$	25,372.3		$	16,160.9		$	(30,435.8	)	$	37,544.1

(a)	The majority of the Guarantor settlement assets relate to FDC’s merchant acquiring business. FDC believes the settlement assets are not available to satisfy any claims other than those related to the settlement liabilities.

~~Note 15: Guarantor Condensed Consolidating Financial Statements~~FIRST DATA CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

~~FIRST DATA CORPORATION~~

~~CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS~~

~~(Predecessor)~~

~~(in millions)~~

~~(unaudited)~~
(Unaudited)

Three months ended March 31, 2007

Parent
Company Guarantor
Subsidiaries Non-Guarantor
Subsidiaries Eliminations Consolidated
Cash and cash equivalents at beginning of period
$ 82.9 $ 190.6 $ 880.7 — $ 1,154.2

CASH FLOWS FROM OPERATING ACTIVITIES

Net income from continuing operations
175.2 203.5 70.0 $ (277.0 ) 171.7

Net income from discontinued operations
— — 3.5 — 3.5

Adjustments to reconcile to net cash provided by operating activities:

Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)
4.2 136.1 40.5 — 180.8

Charges (gains) related to restructuring, impairments and other income (expense)
(0.1 ) 1.4 16.0 — 17.3

Other non-cash and non-operating items, net
(227.3 ) (99.1 ) (7.4 ) 277.0 (56.8 )

(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions
(59.3 ) 216.5 (38.1 ) — 119.1

Net cash (used in) provided by operating activities from continuing operations
(107.3 ) 458.4 81.0 — 432.1

Net cash used in operating activities from discontinued operations
— — (9.7 ) — (9.7 )

Net cash (used in) provided by operating activities
(107.3 ) 458.4 71.3 — 422.4

CASH FLOWS FROM INVESTING ACTIVITIES

Current period acquisitions, net of cash acquired
(228.6 ) (10.5 ) (0.8 ) — (239.9 )

Payments related to other businesses previously acquired
(14.2 ) (32.8 ) (3.8 ) — (50.8 )

Additions to property and equipment, net
— (40.6 ) (16.1 ) — (56.7 )

Payments to secure customer service contracts, including outlays for conversion and capitalized systems development costs
(1.3 ) (35.1 ) (4.6 ) — (41.0 )

Proceeds from the sale of marketable securities
— 11.2 — — 11.2

Other investing activities
10.9 2.5 0.1 — 13.5

Net cash used in investing activities
(233.2 ) (105.3 ) (25.2 ) — (363.7 )

CASH FLOWS FROM FINANCING ACTIVITIES

Short-term borrowings, net
— — (49.3 ) — (49.3 )

Principal payments on long-term debt
(88.3 ) (7.0 ) (6.5 ) — (101.8 )

Proceeds from issuance of common stock
61.8 — — — 61.8

Excess tax benefit from share-based payment arrangement
12.4 — — — 12.4

Purchase of treasury shares
(117.1 ) — — — (117.1 )

Cash dividends
(22.6 ) — — — (22.6 )

Intercompany
722.3 (432.3 ) (290.0 ) — —

Net cash provided by (used in) financing activities
568.5 (439.3 ) (345.8 ) — (216.6 )

Effect of exchange rate changes on cash and cash equivalents
— 1.8 6.2 — 8.0

Change in cash and cash equivalents
228.0 (84.4 ) (293.5 ) — (149.9 )

Cash and cash equivalents at end of period
$ 310.9 $ 106.2 $ 587.2 $ — $ 1,004.3

~~Combined Financial Statements and Report of Independent Registered Public Accounting Firm for Chase Paymentech~~

~~The following financial statements are included in this prospectus pursuant to Regulations S-X Rule 3-09:~~

~~(1)~~: ~~Chase Paymentech.~~
~~Combined Financial Statements and Report of Independent Registered Public Accounting Firm For the fiscal years ended December 31, 2007, 2006 and 2005 (unaudited).~~


	Six months ended June 30, 2011
(in millions)	FDC Parent Company			Guarantor Subsidiaries			Non-Guarantor Subsidiaries			Consolidation Adjustments			Consolidated
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$	(392.9	)	$	154.1		$	261.5		$	(335.4	)	$	(312.7	)
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization (including amortization netted against equity earnings in affiliates and revenues)		4.3			465.3			255.4			—			725.0
Charges (gains) related to other operating expenses and other income (expense)		99.5			6.2			(47.0	)		—			58.7
Other non-cash and non-operating items, net		(223.4	)		(117.1	)		3.9			335.4			(1.2	)
(Decrease) increase in cash resulting from changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions		(111.0	)		171.3			104.7			—			165.0

Net cash (used in) provided by operating activities		(623.5	)		679.8			578.5			—			634.8

CASH FLOWS FROM INVESTING ACTIVITIES
Current period acquisitions		—			(13.2	)		(0.1	)		—			(13.3	)
Proceeds from dispositions, net of expenses paid and cash diposed		—			—			1.7			—			1.7
Additions to property and equipment		(4.1	)		(56.7	)		(51.0	)		—			(111.8	)
Payments to secure customer service contracts, including outlays for conversion, and capitalized systems development costs		(0.1	)		(80.1	)		(23.5	)		—			(103.7	)
Distributions and dividends from subsidiaries		45.6			110.4			—			(156.0	)		—
Other investing activities		0.7			1.6			(1.6	)		—			0.7

Net cash provided by (used in) investing activities		42.1			(38.0	)		(74.5	)		(156.0	)		(226.4	)

CASH FLOWS FROM FINANCING ACTIVITIES
Short-term borrowings, net		—			—			(110.1	)		—			(110.1	)
Debt modification and related financing costs		(39.7	)		—			—			—			(39.7	)
Principal payments on long-term debt		(0.1	)		(26.9	)		(8.0	)		—			(35.0	)
Proceeds from sale of leaseback transactions		—			—			7.3			—			7.3
Distributions and dividends paid to noncontrolling interests and redeemable noncontrolling interests		—			—			(25.2	)		(106.0	)		(131.2	)
Distributions paid to equity holders		—			—			(216.4	)		216.4			—
Redemption of Parent’s redeemable common stock		(0.3	)		—			—			—			(0.3	)
Cash dividends		—			—			(45.6	)		45.6			—
Intercompany		665.1			(603.3	)		(61.8	)		—			—

Net cash provided by (used in) financing activities		625.0			(630.2	)		(459.8	)		156.0			(309.0	)

Effect of exchange rate changes on cash and cash equivalents		—			(10.4	)		13.0			—			2.6

Change in cash and cash equivalents		43.6			1.2			57.2			—			102.0

Cash and cash equivalents at beginning of period		164.1			21.1			324.3			—			509.5

Cash and cash equivalents at end of period	$	207.7		$	22.3		$	381.5		$	—		$	611.5

~~Report of Independent Registered Public Accounting Firm~~

~~Board of Managers~~
~~Chase Paymentech Solutions, LLC~~

We have audited the accompanying combined balance sheets of Chase Paymentech (the Company) as of December 31, 2007 and 2006, and the related combined statements of income and comprehensive income, changes in owners' equity and cash flows for the years then ended. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit 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 Company's 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 combined financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Chase Paymentech as of December 31, 2007 and 2006, and the results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

As described in Note 1 to the combined financial statements, First Data Corporation (FDC) was acquired by Kohlberg, Kravis, Roberts & Co. in 2007, which resulted in a change in control of FDC. This change in control gave JPMorgan Chase & Co. (JPMorgan Chase) the option to terminate the Company, giving FDC and JPMorgan Chase the right to receive their respective shares of the Company's net assets. On May 23, 2008, FDC and JPMorgan Chase entered into an agreement to end the joint ownership of the Company. Accordingly, the Company will not continue in its current form. The accompanying financial statements do not include any adjustments that might result from this transaction.

The accompanying combined statements of income and comprehensive income, changes in owners' equity and cash flows of Chase Paymentech for the year ended December 31, 2005 were not audited by us and, accordingly, we do not express an opinion on them.


~~/s/ GRANT THORNTON LLP~~
~~Dallas, Texas~~ ~~March 10, 2008 (except for Note 1, as to which the date is May 23, 2008)~~

~~Chase Paymentech~~

~~COMBINED BALANCE SHEETS~~
~~(In thousands)~~

December 31,

2007 2006
ASSETS

Current assets

Cash and cash equivalents
$ 3,527,983 $ 1,315,890

Receivables related to merchant processing
1,995,948 3,771,418

Investments
74,588 136,202

Accounts receivable, net of allowance for doubtful accounts of $10,196 and $12,397 as of December 31, 2007 and 2006, respectively
476,424 394,054

Deferred income taxes
271 199

Prepaid expenses and other current assets
14,123 9,843

Total current assets
6,089,337 5,627,606
Property and equipment, net
103,032 84,292
Goodwill
394,141 372,284
Intangible assets, net of accumulated amortization of $524,515 and $498,048 as of December 31, 2007 and 2006, respectively
72,948 61,859
Other assets
32,902 34,908

Total assets
$ 6,692,360 $ 6,180,949

LIABILITIES AND EQUITY

Current liabilities

Liabilities related to merchant processing
$ 4,740,827 $ 4,287,726

Accounts payable
33,021 27,838

Payables to related parties
36,189 41,751

Merchant deposits
524,150 651,672

Accrued assessments
24,989 25,346

Other accrued expenses
108,053 119,975

Current portion of long-term debt
— 16,922

Total current liabilities
5,467,229 5,171,230
Deferred income taxes
30,864 28,044
Other liabilities
29,129 24,606

Total liabilities
5,527,222 5,223,880

Minority interest
240 437
Commitments and contingencies (Note 5)

Temporary equity
6,937 8,523
Accumulated other comprehensive income
62,868 23,744
Owners' equity
1,095,093 924,365

Total owners' equity
1,157,961 948,109

Total liabilities and equity
$ 6,692,360 $ 6,180,949

~~Chase Paymentech~~

~~COMBINED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME~~
~~For the years ended~~
~~(In thousands)~~

December 31,

2007 2006 2005
(unaudited)
Revenue
$ 1,286,232 $ 1,206,583 $ 809,098
Expenses

Operating
402,613 398,352 247,603

Salaries and employee benefits
232,981 213,133 164,393

Depreciation and amortization
66,793 113,663 76,522

Total expenses
702,387 725,148 488,518

Operating income
583,845 481,435 320,580

Other income (expense), net

Interest and other income
94,552 85,202 32,072

Interest expense
(16,661 ) (18,372 ) (5,413 )

Foreign currency exchange
1,314 (149 ) (529 )

Total other income, net
79,205 66,681 26,130

Income before income taxes and minority interest

663,050
548,116
346,710
Provision for income taxes
80,413 71,766 61,575
Minority interest
(191 ) (398 ) (1,606 )

Net income
$ 582,446 $ 475,952 $ 283,529

Comprehensive income

Net income
$ 582,446 $ 475,952 $ 283,529

Other comprehensive income (loss), net of tax:

Net unrealized gains on investments
1,064 209 1,133

Cash flow hedges
— (5 ) 31

Foreign currency translation adjustment
38,184 (1,826 ) 3,037

Pension and SERP liability adjustments
(124 ) 105 (280 )

Comprehensive income
$ 621,570 $ 474,435 $ 287,450

~~Chase Paymentech~~

~~COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY~~
~~(In thousands)~~

Corporations Partnerships
and LLC's

Total Accumulated
Other
Comprehensive
Income Common
Stock Additional
Paid-In
Capital Retained
Earnings Partners'
Capital and
Members'
Equity
Balances at December 31, 2004 (unaudited)
$ 767,559 $ 21,358 — $ 225,523 $ 105,188 $ 415,490
Net income
283,529 — — — 87,379 196,150
Other comprehensive income
3,921 3,921 — — — —
Cash dividends and distributions
(191,952 ) — — — (60,145 ) (131,807 )
Non-cash distributions
(473 ) — — — — (473 )
Contributions
30,434 — — — — 30,434
Integration of CMS (Note 1)
40,603 — — (122,426 ) 15,397 147,632
Stock issuance, repurchases and other
(60,612 ) — — (62,544 ) 1,932 —

Balances at December 31, 2005 (unaudited)
$ 873,009 $ 25,279 $ — $ 40,553 $ 149,751 $ 657,426
Net income
475,952 — — — 91,387 384,565
Other comprehensive income (loss)
(1,517 ) (1,517 ) — — — —
Cash dividends and distributions
(477,562 ) — — — (103,522 ) (374,040 )
Non-cash distributions
(610 ) — — — — (610 )
Contributions
95,641 — — — — 95,641
Stock issuance, repurchases and other
(16,786 ) — — (18,454 ) 1,605 63
Adjustment to initially apply SFAS 158, net of tax
(18 ) (18 ) — — — —

Balances at December 31, 2006
$ 948,109 $ 23,744 $ — $ 22,099 $ 139,221 $ 763,045
Net income
582,446 — — — 114,885 467,561
Other comprehensive income
39,124 39,124 — — — —
Cash dividends and distributions
(432,263 ) — — — (82,745 ) (349,518 )
Non-cash distributions
(137 ) — — — — (137 )
Contributions
21,058 — — — — 21,058
Stock issuance, repurchases and other
(376 ) — — (1,942 ) 398 1,168

Balances at December 31, 2007
$ 1,157,961 $ 62,868 $ — $ 20,157 $ 171,759 $ 903,177

~~Chase Paymentech~~

~~COMBINED STATEMENTS OF CASH FLOWS~~
~~For the years ended~~
~~(In thousands)~~

December 31,

2007 2006 2005
(unaudited)
Operating activities

Net income
$ 582,446 $ 475,952 $ 283,529

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization
66,793 113,663 76,522

Deferred income taxes
4,510 9,286 4,214

Minority interest
191 398 1,606

Provision for doubtful accounts
7,240 8,512 8,530

Losses on investments
1,156 137 298

Other non-cash expense
5,549 5,661 2,728

Changes in operating assets and liabilities:

Receivables related to merchant processing
1,798,190 (1,729,913 ) (846,071 )

Accounts receivable
(81,186 ) (19,390 ) (41,426 )

Prepaid expenses and other assets
(7,974 ) 25,893 (31,575 )

Accounts payable
(2,140 ) (5,786 ) 73,970

Liabilities related to merchant processing
428,061 1,604,049 804,559

Accrued assessments
(438 ) 4,680 2,360

Merchant deposits
(128,727 ) 64,769 139,501

Other accrued expenses and liabilities
(10,238 ) 39,509 28,126

Net cash provided by operating activities
2,663,433 597,420 506,871
Investing activities

Purchases of property and equipment
(66,190 ) (50,823 ) (33,494 )

Purchases of merchant portfolios
(23,399 ) (1,566 ) (750 )

Purchases of investments
(106,283 ) (226,631 ) (287,727 )

Sales of investments
107,304 11,520 35,675

Maturities of investments
60,572 178,052 237,364

Net cash used in investing activities

(27,996
)
(89,448
)
(48,932
)
Financing activities

Dividends and distributions
(432,459 ) (478,152 ) (193,795 )

Capital contributions
21,058 95,641 —

Cash retained as a result of excess tax benefits relating to employee share-based awards
410 2,304 (2,661 )

Proceeds from issuance of common stock related to employee share-based awards
1,112 2,471 1,840

Share repurchases related to employee share-based awards
(4,065 ) (6,469 ) (26,682 )

Payments on short-term financing
— (23,867 ) —

Payments on long-term debt
(21,113 ) (17,648 ) (17,023 )

Operating cash attributed to the integration of CMS on October 1, 2005
— — 568,383

Net cash provided by (used in) financing activities
(435,057 ) (425,720 ) 330,062
Effect of exchange rate changes on cash and cash equivalents
11,713 270 967

Increase in cash and cash equivalents
2,212,093 82,522 788,968
Cash and cash equivalents at beginning of year
1,315,890 1,233,368 444,400

Cash and cash equivalents at end of year
$ 3,527,983 $ 1,315,890 $ 1,233,368

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited)~~

~~NOTE 1—ORGANIZATION AND BUSINESS~~

~~Organization~~

The accompanying combined financial statements include all entities commonly owned by First Data Corporation and its subsidiaries (FDC) and JPMorgan Chase & Co. and its subsidiaries (JPMorgan Chase). The common ownership of these entities, which are primarily joint ventures, occurred over the course of several years and involved multiple transactions between FDC, JPMorgan Chase, Bank One Corporation (Bank One) and the joint ventures. The commonly owned entities include corporations, a general partnership and limited liability companies (LLCs) and are functionally grouped into two operating divisions and a group of holding companies. These entities and their form are shown below, by functional grouping, and are collectively referred to as Chase Paymentech, or the Company:

~~Name of Entity~~		~~Form of Entity~~

~~Holding Companies~~
~~FDC Offer Corp.~~		~~Corporation (incorporated in Delaware in 1999)~~
	~~Subsidiaries:~~
	~~Paymentech, Inc.~~	~~Corporation (incorporated in Delaware in 1995)~~
	~~Paymentech Management Resources, Inc.~~	~~Corporation (incorporated in Delaware in 1995)~~
	~~Paymentech Employee Resources LLC~~	~~LLC (formed in Delaware in 1999)~~
~~Chase Merchant Services, LLC~~		~~LLC (formed in Delaware in 1997)~~
~~Chase Paymentech—U.S. Operations~~
~~Chase Paymentech Solutions, LLC~~		~~LLC (formed in Delaware in 1996)~~
	~~Subsidiaries:~~
	~~Merchant-Link, LLC~~	~~LLC (formed in Delaware in 1999)~~
	~~Paymentech Salem Services, LLC~~	~~LLC (formed in Delaware in 2003)~~
	~~S3 Financial Services, LLC~~	~~LLC (formed in Delaware in 2005)~~
	~~Chase Alliance Partners, LLC~~	~~LLC (formed in Delaware in 2007)~~
	~~Paymentech, LLC~~	~~LLC (formed in Delaware in 2007)~~
~~Chase Paymentech—Canadian Operations~~
~~Chase Paymentech Solutions~~		~~General Partnership (formed in Ontario in 2002)~~

In June 2007, PTI General Partner, LLC and BOPS Holding, LLC, formerly subsidiaries of Chase Paymentech Solutions, LLC, were merged into Chase Paymentech Solutions, LLC. Also in June 2007, Chase Alliance Partners, L.P. and Paymentech, L.P., formerly subsidiaries of Chase Paymentech Solutions, LLC, were merged into Chase Alliance Partners, LLC and Paymentech, LLC, respectively. These mergers had no impact on the operations of the Company.

The aggregate beneficial ownership in Chase Paymentech is approximately 51% ownership by JPMorgan Chase and approximately 49% ownership by FDC. On September 24, 2007, FDC was acquired by Kohlberg Kravis Roberts & Co (KKR). KKR's acquisition of FDC is a change in control, which gave JPMorgan Chase the option to terminate the Company. On May 23, 2008, FDC and JPMorgan Chase entered into an agreement (the "Separation Agreement") to end the joint ownership of the Company. The Separation Agreement allows for each owner to receive their ownership share of

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 1—ORGANIZATION AND BUSINESS (Continued)~~

the Company's net assets including merchant contracts, by value, and their share of sales and certain service professionals. The separation is anticipated to occur prior to December 31, 2008. The accompanying financial statements do not include any adjustments that might result from the outcome of this transaction.

With respect to FDC's ownership interest in Chase Paymentech, the Company met the significant subsidiary test provided in SEC Regulation S-X Rule 1-02(w), in that FDC's equity earnings in the Company exceeded 20% of FDC's consolidated income from continuing operations before income taxes for the period from January 1, 2007 through September 24, 2007 (the predecessor period), and for the year ended December 31, 2006. In accordance with SEC Regulation S-X Rule 3-09, these combined financial statements are filed with this prospectus. The Company did not meet the significant subsidiary test for the year ended December 31, 2005, as FDC's equity earnings in the Company did not exceed the 20% threshold in SEC Regulation S-X Rule 1-02(w). While the combined financial statements present financial information for the year ended December 31, 2005, this information is unaudited because the Company was not audited in its combined form for that period.

~~Holding Companies~~

FDC Offer Corp. and its subsidiaries, Paymentech, Inc. and Paymentech Management Resources, Inc. (PMRI), are primarily holding companies whose main source of income results from their ownership interests in the Company's U.S. operations. Paymentech Employee Resources LLC is the employer of substantially all employees associated with the U.S. operations. The accompanying combined financial statements include the financial position, results of operations, changes in owners' equity and cash flows for these entities for all periods presented.

Chase Merchant Services, LLC (CMS) is a joint venture formed by FDC and JPMorgan Chase in 1997. As discussed below, effective October 1, 2005, all of the assets and liabilities of CMS were transferred to the Company's U.S. operations in exchange for an ownership interest in Chase Paymentech Solutions, LLC. Subsequent to the October 1, 2005 transaction, CMS' primary source of income results from its ownership interests in the Company's U.S. operations. The accompanying combined financial statements include the financial position, results of operations, changes in owners' equity and cash flows for CMS for all periods subsequent to October 1, 2005.

~~U.S. Operations~~

Chase Paymentech Solutions, LLC (Chase Paymentech—U.S. or the Company's U.S. operations), formerly Banc One Payment Services, L.L.C. (BOPS), and its subsidiaries comprise the Company's U.S.-based operations. Chase Paymentech—U.S. is a joint venture beneficially owned by FDC and JPMorgan Chase, through direct investments as well as through investments in FDC Offer Corp. and CMS. Each of these members in the joint venture hold membership interests which are of a single class and have substantially the same rights and privileges.

BOPS was originally formed as a joint venture between FDC and Bank One in 1996. As a result of JPMorgan Chase's merger with Bank One in July 2004, FDC and JPMorgan Chase beneficially owned both BOPS and CMS, which while commonly owned, were controlled by different management committees and were competitors in the marketplace. To benefit from the complementary technological

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 1—ORGANIZATION AND BUSINESS (Continued)~~

and management knowledge, as well as the market presence of each of these joint ventures, on October 1, 2005, through a series of transactions, all of the assets and liabilities of CMS were transferred to BOPS, and the joint venture was subsequently renamed Chase Paymentech Solutions, LLC.

The results of the Company's U.S. operations and cash flows included in the accompanying combined financial statements for the nine month period ended on September 30, 2005 represent the historical results of BOPS. The financial position, results of operations, changes in owners' equity and cash flows for all periods presented subsequent to October 1, 2005 reflect the operations of Chase Paymentech—U.S. in its current form.

~~Canadian Operations~~

Chase Paymentech Solutions (Chase Paymentech—Canada or the Company's Canadian operations), formerly Paymentech Canada, is a joint venture beneficially owned by FDC and JPMorgan Chase and comprises the Company's entire Canadian operations. Each of the partners in the joint venture holds partnership interests which are of a single class and have the same rights and privileges.

~~Business~~

The Company engages in the electronic payment processing industry for businesses accepting credit, debit, fleet, and stored value card payments, as well as alternative methods of payment via point-of-sale, internet, catalog and recurring billings. The Company provides these services for transactions that originate throughout the world for financial institutions, sales agents and the Company's direct merchants, which are primarily located in North America.

~~NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES~~

~~Basis of Presentation~~

The accompanying combined financial statements are presented in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). All intercompany profits, accounts, and transactions have been eliminated.

~~Unaudited Financial Information~~

The unaudited combined financial statements for the year ended December 31, 2005 have been prepared in accordance with U.S. GAAP. These financial statements were prepared on the same basis as the combined financial statements as of December 31, 2007 and 2006 and for the years then ended, and in the opinion of management, reflect all adjustments and accruals considered necessary to fairly present the Company's combined results of operations, changes in owners' equity and cash flows.

~~Reclassifications~~

Certain activities related to the Company's investments have been reclassified in the Company's combined statements of cash flows in order to present gross cash flows from purchases, sales and maturities of investments in accordance with Statement of Financial Accounting Standards (SFAS)

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

~~No. 115,~~~~Accounting for Certain Investments in Debt and Equity Securities~~. As a result, cash flows from operating activities and investing activities differ from previously filed documents, which presented these activities on a net basis. Certain eliminations of the Company's intercompany activities have been reclassified to each of the appropriate components of owners' equity in the Company's combined statements of changes in owners' equity. Although these reclassifications do not affect owners' equity in total, the components of owners' equity differ from previously filed documents, which presented these eliminations separately. These reclassifications did not impact the combined balance sheets and statements of income and comprehensive income. The Company's deferred contract incentives have been reclassified from current to non-current assets and certain liabilities, primarily related to the Company's deferred compensation, long-term incentive, and pension benefit plans, have been reclassified from current to non-current liabilities in the Company's combined balance sheets. The change in classification to non-current reflects the long-term nature of the respective asset or liability. As a result, total current assets and total current liabilities differ from previously filed documents. These reclassifications did not impact total assets, total liabilities or the combined statements of income and comprehensive income. Management does not believe that these reclassifications are material to the combined financial statements.

~~Use of Estimates~~

The preparation of combined financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported on the combined financial statements and accompanying notes. Actual results could differ from those estimates.

~~Foreign Currency Translation~~

The Company's Canadian operation uses its local currency, the Canadian dollar (CAD), as its functional currency. The assets and liabilities related to the Canadian operations in the accompanying combined balance sheets are translated at period end exchange rates. Resulting translation adjustments are reported as a separate component of owners' equity in accumulated other comprehensive income. All income and expense items are translated using the average exchange rate for the period. Net transaction gains and losses are included in earnings. Unless otherwise stated, amounts presented herein related to the Canadian operations are in U.S. dollars.

~~Cash and Cash Equivalents~~

~~The Company considers cash, certificates of deposit, money market funds, and all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents.~~

~~Receivables Related to Merchant Processing~~

~~Receivables related to merchant processing represent amounts due from card brands for transactions that have been processed.~~

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

~~Marketable and other securities~~

The Company has investments in marketable securities, as well as investments in non-marketable equity securities. Investments in marketable securities are classified as available-for-sale and consist of government, government-backed, corporate debt securities, and short term bond mutual funds. Available-for-sale securities are stated at fair value based on quoted market prices, with unrealized gains or losses on the securities, net of any related tax effects, recorded as a separate component of comprehensive income. The cost basis of debt securities is adjusted for the amortization of premiums and accretion of discounts to maturity. Amortization and accretion, as well as interest and dividend income earned, and realized gains and losses on sales of securities are recorded in interest and other income. Realized gains and losses are derived using the average cost method for determining the cost of securities sold. A decline in market value of any available-for-sale security below cost that is deemed to be other-than-temporary results in an impairment charge to earnings, and a new cost basis for the security is established.

Investments in non-marketable equity securities are accounted for under the cost method as such investments do not meet the equity method criteria. The Company assesses the potential for impairments to cost method investments when impairment indicators are present. Any resulting impairment that is deemed other-than-temporary is charged to earnings.

~~Concentrations of Credit Risk~~

The Company maintains cash and cash equivalents with financial institutions in excess of federally insured levels. The Company believes that the concentration of credit risk with respect to these balances is minimal due to the credit standing of the financial institutions. Concentrations of credit risk with respect to accounts receivable are considered minimal. Amounts receivable are generally deducted from customers' accounts either monthly or as debit and credit card transactions are processed. No single customer accounted for more than ten percent of receivables at December 31, 2007 or 2006, or of revenue for the years ended December 31, 2007, 2006, or 2005.

~~Property and Equipment~~

Property and equipment are carried at cost, net of accumulated depreciation and amortization. Depreciation for furniture and equipment is recorded on a straight-line basis over periods generally ranging from three to five years. Leasehold improvements are amortized over the lesser of the economic useful life of the improvement or the term of the lease. The Company capitalizes computer software costs in accordance with Statement of Position No. 98-1,~~Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.~~ ~~These costs are amortized on a straight-line basis over the period of benefit ranging from three to five years.~~

~~Advertising~~

Advertising costs are expensed as incurred. For the years ended December 31, 2007, 2006, and 2005, the Company incurred $5.2 million, $5.3 million, and $4.1 million in advertising expense, respectively.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

~~Goodwill and Intangible Assets~~

Goodwill represents the excess of purchase price over identifiable assets acquired, less liabilities assumed from business combinations. The Company's annual impairment tests did not identify any impairment in 2007, 2006, or 2005.

Intangible assets primarily consist of purchased merchant portfolios, technology-based intangible assets, and non-compete/referral agreements. These intangible assets are amortized over their estimated useful lives and are subject to impairment testing whenever events occur that would affect the recoverability of the asset. The Company amortizes these intangible assets, primarily on a straight-line basis, over the estimated period to be benefited. On January 1, 2006, a change in the estimated amortization period for purchased merchant portfolios occurred (as discussed in Note 7). These periods range from four to ten years for the years ended December 31, 2007 and 2006.

~~Other Assets~~

Other assets consist primarily of deferred charges, company-owned life insurance (COLI) policies held in trust for the Company's deferred compensation plan and deferred contract incentives. Deferred charges represent contributions for services paid on the Company's behalf, which are amortized on a straight-line basis over the period that the services are to be performed. COLI assets are carried at the policies' respective cash surrender values. Deferred contract incentives represent initial payments to merchants for new contracts and contract renewals, which are capitalized to the extent recoverable through future operations and are amortized over the term of the contract as a reduction of the associated revenue.

~~Liabilities Related to Merchant Processing~~

~~Liabilities related to merchant processing primarily represent payables to merchants for transactions that have been processed.~~

~~Accrued Assessments~~

~~Accrued assessments represent fees payable to card brands for debit and credit card transactions that have been processed.~~

~~Other Liabilities~~

Other liabilities consist primarily of accrued liabilities for employee benefit plans, including the defined benefit pension plan, Supplemental Executive Retirement Plan (SERP), deferred compensation plan and long-term incentive plan. The Company adopted 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 158) as of December 31, 2006 for its pension plan and SERP. SFAS 158 requires a company to recognize the funded status of a benefit plan as an asset or liability in its statement of financial position and to recognize previously unrecognized gains/(losses) and prior service costs as components of comprehensive income, net of tax. The effect of applying the recognition provisions of SFAS 158 to the Company's pension plan was a $28 thousand (pre-tax) decrease in

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

~~intangible assets related to unrecognized prior service costs and a corresponding increase in accumulated other comprehensive income on the combined balance sheet as of December 31, 2006.~~

~~Minority Interest~~

Minority interest represents the minority stockholders' proportionate share of the equity and earnings of Paymentech, Inc. Minority interest represented 0.2%, 0.3% and 0.8% of Paymentech, Inc.'s outstanding stock at December 31, 2007, 2006, and 2005, respectively.

~~Cash Flow Hedges~~

The Company's Canadian operations utilize forward contracts to hedge exposure to foreign currency fluctuations in the exchange rate for U.S. dollars. Derivative instruments are accounted for as cash flow hedges in accordance with SFAS No. 133,~~Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities~~ (SFAS 133). The Company includes derivatives in prepaid expenses and other current assets or other accrued expenses, as appropriate, on the combined balance sheets at fair value. Changes in the fair value of derivative contracts designated as cash flow hedges are recorded as a component of accumulated other comprehensive income, and reclassified into foreign currency exchange in the combined statements of income and comprehensive income when the underlying hedged item affects earnings.

~~Share-Based Payments~~

~~Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123R,~~~~Share-Based Payment~~ (SFAS 123R) and all related interpretations under the modified prospective method. SFAS 123R requires all share-based payments to employees, including employee stock options and stock appreciation rights (SARs), to be measured at their grant date fair values and expensed over the requisite service periods. The Company had previously adopted the expense provisions of SFAS No. 123,~~Accounting for Stock-Based Compensation~~~~. As a result of certain redemption features, discussed in Note 15, concurrent with the adoption of SFAS 123R, the Company also applies the provisions of Accounting Series Release 268,~~~~Redeemable Preferred Stocks~~ (ASR 268). ASR 268 requires the Company to reclassify amounts relating to outstanding options, and shares issued as a result of exercise of these options, outside of permanent equity (to temporary equity). There were no effects on the Company's results of operations or cash flows as a result of adopting the provisions of SFAS 123R or ASR 268.

~~Comprehensive Income~~

Comprehensive income includes net income, changes in unrealized gains and losses on available-for-sale investments, amounts resulting from cash flow hedging activities, changes in the adjustment resulting from foreign currency translation, and certain adjustments to the Pension and SERP liabilities.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)~~

~~Revenue~~

Revenue represents fees earned for processing credit and debit card transactions for merchants (including merchant discount fees), partially offset by interchange fees and debit network fees. Revenue also includes amounts earned from third party credit and debit authorization services, incentive payments from card brands for participation in certain initiatives, the sale and rental of point-of-sale equipment, merchant call center help desk services, fees for the deployment of point-of-sale supplies and repair of point-of-sale equipment. Revenue is recorded as services are performed or as merchandise is shipped.

~~Income Taxes~~

The Company's functional groups discussed in Note 1 have various treatments for tax purposes. FDC Offer Corp. and its subsidiaries are treated as a corporation for U.S. federal and state income tax purposes. CMS is treated as a pass-through entity for U.S. federal and state income tax purposes. The members include their share of the Company's taxable income in their applicable tax returns. The Company's U.S. operations are also treated as a pass-through entity for U.S. federal and most state income tax purposes. Its members include their share of the Company's taxable income in their applicable tax returns. The Company's Canadian operation is treated as a pass-through entity for Canadian federal and provincial income tax purposes. Its partners include their share of the Company's taxable income in their applicable tax returns.

~~The Company uses the asset and liability method required by SFAS No. 109,~~~~Accounting for Income Taxes,~~ in accounting for income taxes. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, using statutory tax rates for the applicable entity in effect for the year in which the differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that such assets will be realized.

~~Asset Impairment~~

~~In accordance with the provisions of SFAS No. 144,~~~~Accounting for the Impairment or Disposal of Long-Lived Assets,~~ management reviews the carrying value of its long-lived assets whenever events indicate that their carrying amounts may not be recoverable. If, upon review, an impairment of the value of the asset is indicated, an impairment loss would be recorded in the period such determination is made. No impairments were recorded for the years ended December 31, 2007, 2006, or 2005.

~~NOTE 3—NEW ACCOUNTING PRONOUNCEMENTS~~

~~Accounting for Uncertainty in Income Taxes~~

~~In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. (FIN) 48,~~~~Accounting for Uncertainty in Income Taxes~~,~~An Interpretation of FASB Statement No. 109~~ ~~(FIN 48). FIN 48 provides a comprehensive model for how a company should recognize, measure,~~

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 3—NEW ACCOUNTING PRONOUNCEMENTS (Continued)~~

present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return. FIN 48 defines the threshold for recognizing tax return positions in the financial statements as "more likely than not" that the position is sustainable, based on its merits. FIN 48 also provides guidance on the measurement, classification and disclosure of tax return positions in the financial statements. FIN 48 is effective for nonpublic enterprises for fiscal years beginning after December 15, 2007, with the cumulative effect of the change in accounting principle recorded as an adjustment to the beginning balance of retained earnings in the period of adoption. The Company plans to adopt this interpretation in 2008 and is currently evaluating the impact of implementing FIN 48 on its combined financial statements.

~~Fair Value Measurements~~

~~In September 2006, the FASB issued SFAS No. 157,~~~~Fair Value Measurements~~. This statement defines fair value, establishes a fair value hierarchy to be used in U.S. GAAP, and expands disclosures about fair value measurements. Although this statement does not require any new fair value measurements, the application could change current practice. The statement is effective for recurring fair value measurements of assets and liabilities for fiscal years beginning after November 15, 2007, and for nonrecurring measurements of nonfinancial assets and liabilities for fiscal years beginning after November 15, 2008. The Company is currently evaluating the impact of implementing this statement on its combined financial statements.

~~The Fair Value Option~~

~~In February 2007, the FASB issued SFAS No. 159,~~~~The Fair Value Option for Financial Assets and Financial Liabilities—Including an Amendment of FASB Statement No. 11~~5 (SFAS 159). SFAS 159 gives entities the ability to elect to measure many financial instruments and certain other items at fair value. The fair value election is made on an instrument by instrument basis and is irrevocable. Unrealized gains and losses on items elected for fair value accounting are reported in earnings at each subsequent reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. At this time, the Company does not anticipate electing the fair value option.

~~Business Combinations~~

~~In December 2007, the FASB issued SFAS No. 141(R),~~~~Business Combinations~~ (SFAS 141R). Under Statement 141R, an acquiring entity will be required to recognize all the assets acquired, liabilities assumed, and noncontrolling interests at the acquisition-date fair value. These acquisition-date fair value provisions apply to contingent consideration, in-process research and development and acquisition contingencies. The new standard also requires expensing associated acquisition costs and restructuring charges. SFAS 141R is effective as of the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company plans to adopt the provisions of this statement prospectively for business combinations with closing dates after January 1, 2009.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 3—NEW ACCOUNTING PRONOUNCEMENTS (Continued)~~

~~Noncontrolling Interests~~

~~In December 2007, the FASB issued SFAS No. 160,~~~~Noncontrolling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51~~ (SFAS 160). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This standard requires the recognition of a noncontrolling interest (minority interest) as a component of equity in the consolidated financial statements and separate from the parent's equity. The amount of net income attributable to the noncontrolling interest will be included in consolidated net income on the face of the income statement. SFAS 160 is effective for the Company's fiscal year beginning after December 15, 2008, and will be applied prospectively except for the presentation and disclosure requirements, which must be applied retrospectively for all periods presented. The Company is currently evaluating the impact that adopting SFAS 160 will have on its combined financial statements.

~~NOTE 4—PROPERTY AND EQUIPMENT~~

~~A summary of property and equipment by major class as of December 31, 2007 and 2006 is as follows (in thousands):~~

2007 2006
Furniture and equipment
$ 179,343 $ 153,266
Capitalized software
103,765 92,809
Leasehold improvements
14,364 12,005

297,472 258,080
Less accumulated depreciation and amortization
(194,440 ) (173,788 )

Property and equipment, net
$ 103,032 $ 84,292

Depreciation and amortization expense related to property and equipment was $47.4 million, $38.8 million, and $34.4 million for the years ended December 31, 2007, 2006, and 2005, respectively. For the years ended December 31, 2007 and 2006, software costs of $13.8 million and $11.4 million were capitalized, respectively.

~~NOTE 5—COMMITMENTS AND CONTINGENCIES~~

~~Operating Leases~~

The Company leases office space and certain equipment under operating leases with remaining terms ranging up to eleven years. The office space leases contain renewal options and generally require the Company to pay certain operating expenses.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 5—COMMITMENTS AND CONTINGENCIES (Continued)~~

~~Future minimum lease commitments under non-cancelable leases as of December 31, 2007 are as follows (in thousands):~~

2008
$ 8,645
2009
8,970
2010
9,631
2011
8,990
2012
9,122
Thereafter
33,169

$ 78,527

The combined statements of income and comprehensive income include rental expense for operating leases of $11.7 million, $9.7 million, and $8.6 million for the years ended December 31, 2007, 2006, and 2005, respectively.

~~Guarantees~~

Under the card brand rules, when a merchant acquirer processes bankcard transactions, it has certain obligations for those transactions. These obligations arise from disputes between cardholders and merchants due to the cardholders' dissatisfaction with merchandise quality or the merchants' service, which are not resolved with the merchant. In such cases, the transactions are "charged back" to the respective merchants and the related purchase amounts are refunded to the cardholders by the card issuer. If the merchant does not fund the refund due to insolvency, bankruptcy or other extraneous reasons, the Company, in certain circumstances is liable for the full amount of the transaction. This obligation is considered a guarantee under FIN No. 45,~~Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others~~.

A cardholder generally has until the later of four months from the date of purchase or delivery of products or services to present a chargeback. Management believes that the maximum exposure for its obligation at any time does not exceed the total amount of bankcard transactions processed for the preceding four-month period. For the four-month periods from September through December 2007, 2006, and 2005, these amounts were $254.3 billion, $231.5 billion, and $175.0 billion, respectively.

The Company records a provision for its estimated obligation based upon factors surrounding the credit risk of specific customers, historical credit losses, current processing volume and other relevant factors. As shown in Note 6, for the years ended December 31, 2007, 2006, and 2005, the Company incurred aggregate merchant credit losses, net of recoveries, of $9.6 million, $9.0 million, and $9.6 million, respectively, on total processed volumes of $719.1 billion, $660.6 billion, and $332.1 billion, respectively.

The Company calculates its provision and evaluates the appropriateness of its reserve on a monthly basis. The provision for credit losses is included in operating expenses on the combined statements of income and comprehensive income. The reserve for this obligation is included in accounts receivable on the combined balance sheets. The Company believes the recorded reserve approximates the fair value of its contingent obligation.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 5—COMMITMENTS AND CONTINGENCIES (Continued)~~

The Company also requires cash deposits, guarantees and letters of credit from certain merchants to minimize its obligation. As of December 31, 2007 and 2006, the Company held cash deposits of $524.2 million and $651.7 million, respectively, which were classified as merchant deposits on the combined balance sheets. The Company also held collateral in the form of letters of credit totaling $203.2 million and $192.1 million at December 31, 2007 and 2006, respectively, and merchant certificates of deposit totaling $51.9 million and $49.0 million at December 31, 2007 and 2006, respectively.

~~Other Contingencies~~

Both the Company and its customers handle sensitive information, such as credit card numbers and personal consumer data, utilizing computer and telecommunications systems operated by the Company, its customers and outside third party providers. Despite internal controls and card brand imposed data security rules, which are in place to protect this information, ever-evolving technology presents inherent risks of data compromises. Data compromises of customers' systems can result in significant financial liability to the Company if the fines and liability for fraudulent card usage exceeds its customers' financial capacity. While the Company has not experienced significant losses in the past, data compromise of sensitive data processed by the Company or a third party vendor could have a material impact on the Company's financial position and results of operations.

In the course of business, the Company is a defendant in various lawsuits. Management believes that the resolution of these lawsuits will not have a material impact on the Company's combined financial position or results of operations.

~~NOTE 6—ALLOWANCE FOR DOUBTFUL ACCOUNTS~~

The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other relevant factors, as discussed in Note 5. Write-offs are recorded as a reduction to the allowance for doubtful accounts when deemed uncollectible.

~~A summary of the allowance for doubtful accounts is as follows (in thousands):~~

2007 2006 2005
Reserve balance at beginning of year
$ 12,397 $ 12,941 $ 8,489

Additional reserve attributed to the integration of CMS on October 1, 2005
— — 5,449

Provision for doubtful accounts
7,240 8,512 8,530

Write-offs, net
(9,562 ) (9,032 ) (9,612 )

Effects of foreign currency translation
121 (24 ) 85

Reserve balance at end of year
$ 10,196 $ 12,397 $ 12,941

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 7—GOODWILL AND INTANGIBLE ASSETS~~

~~Goodwill~~

~~A summary of goodwill is as follows (in thousands):~~

2007 2006
Balance at beginning of year
$ 372,284 $ 372,563
Effects of foreign currency translation
21,857 (279 )

Balance at end of year
$ 394,141 $ 372,284

~~Intangible Assets~~

~~A summary of intangible assets and accumulated amortization by intangible asset category as of December 31, 2007 and 2006 is as follows (in thousands):~~

Gross Carrying Amount

Merchant
Portfolios Non-compete/
Referral
Agreements Pension
Intangibles Total
Balance at December 31, 2005
$ 543,995 $ 14,529 $ 28 $ 558,552
Additions
1,566 — — 1,566
Effects of foreign currency translation
(151 ) (32 ) — (183 )
Adjustment for SFAS 158 (Note 14)
— — (28 ) (28 )

Balance at December 31, 2006
545,410 14,497 — 559,907
Additions
23,399 — — 23,399
Effects of foreign currency translation
11,617 2,540 — 14,157

Balance at December 31, 2007
$ 580,426 $ 17,037 $ — $ 597,463

Accumulated Amortization

Merchant
Portfolios Non-compete/
Referral Agreements Pension
Intangibles Total
Balance at December 31, 2005
$ (418,634 ) $ (4,823 ) $ — $ (423,457 )
Additions
(73,433 ) (1,456 ) — (74,889 )
Effects of foreign currency translation
249 49 — 298

Balance at December 31, 2006
(491,818 ) (6,230 ) — (498,048 )
Additions
(17,904 ) (1,544 ) — (19,448 )
Effects of foreign currency translation
(5,806 ) (1,213 ) — (7,019 )

Balance at December 31, 2007
$ (515,528 ) $ (8,987 ) $ — $ (524,515 )

~~Amortization expense related to intangible assets was $19.4 million, $74.9 million, and $42.1 million for the years ended December 31, 2007, 2006, and 2005, respectively.~~

The Company periodically evaluates the appropriateness of the amortization period to determine whether circumstances warrant revised estimates of the useful lives of its contributed and purchased merchant portfolios and other intangible assets. If, upon review, such revision of useful life is necessary, the remaining unamortized cost would be amortized over the revised useful life. In performing these

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 7—GOODWILL AND INTANGIBLE ASSETS (Continued)~~

reviews, the Company takes into account all currently available data. As a result of additional analysis of attrition statistics and other data, the Company's U.S. operations revised the estimated useful lives of some of its purchased merchant portfolios effective January 1, 2006 from useful lives of eleven to forty years to useful lives of ten years. This change in estimate was applied on a prospective basis and resulted in additional amortization in 2006 of $13.8 million, which is included in depreciation and amortization on the combined statements of income and comprehensive income.

During 2007 and 2006, the Company purchased merchant portfolios totaling $23.4 million and $1.6 million, respectively, with a weighted-average amortization period of nine and four years, respectively, and no significant residual value.

~~The following table presents the Company's estimated amortization expense relating to intangible assets as of December 31, 2007, for the following years ending December 31, (in thousands):~~

2008
$ 17,448
2009
13,444
2010
11,989
2011
11,284
2012
9,492
Thereafter
9,291

$ 72,948

~~NOTE 8—FAIR VALUE OF FINANCIAL INSTRUMENTS~~

Carrying amounts for certain of the Company's financial instruments including cash and cash equivalents, accounts receivable, receivables related to merchant processing, accounts payable and liabilities related to merchant processing approximate fair value due to their short maturities. COLI policies included in other assets are recorded at their cash surrender values, which approximate fair value. Accordingly, these instruments are not presented in the following table. The following table provides carrying amounts and estimated fair values of certain financial instruments (in thousands):

2007 2006

Carrying
amount Estimated
fair value Carrying
amount Estimated
fair value
Marketable securities classified as investments
$ 71,772 $ 71,772 $ 133,385 $ 133,385
Current portion of long-term debt
— — 16,922 15,956

~~The following methods and assumptions were used to estimate the fair value of each class of financial instrument for which it is practicable to estimate that value:~~

~~Marketable securities classified as investments:~~ ~~These investments are carried at fair value, which is estimated based on quoted market prices.~~

~~Current portion of long-term debt:~~ ~~The fair value of the current portion of long-term debt is based on the present value of estimated cash flow for debt service based on the Company's incremental borrowing rate.~~

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 9—MARKETABLE AND OTHER SECURITIES~~

The Company's investments include marketable securities classified as available-for-sale and carried at fair market value, as well as $2.8 million in non-marketable equity securities at December 31, 2007 and 2006, accounted for under the cost method. The amortized cost and estimated fair value of available-for-sale securities, including certain highly liquid securities that are classified as cash equivalents on the combined balance sheets, were as follows for the dates indicated (in thousands):

At December 31, 2007

Amortized Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair Value
Debt securities:

U.S. Government obligations
$ 5,035 $ 85 $ (1 ) $ 5,119

Government agency obligations
9,825 104 (43 ) 9,886

Corporate obligations
25,310 23 (222 ) 25,111
Mutual funds
47,693 525 — 48,218

Total
$ 87,863 $ 737 $ (266 ) $ 88,334

At December 31, 2006

Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Estimated
Fair Value
Debt securities:

U.S. Government obligations
$ 6,052 $ 13 $ (60 ) $ 6,005

Government agency obligations
12,827 32 (119 ) 12,740

Corporate obligations
77,654 21 (25 ) 77,650
Mutual funds
37,463 — (473 ) 36,990

Total
$ 133,996 $ 66 $ (677 ) $ 133,385

The Company assesses the potential for other-than-temporary impairments of available-for-sale securities each reporting period and of cost method investments whose fair values are not readily determinable when impairment indicators are present. For the years ended December 31, 2007 and 2006, there were no declines in the value of investments deemed to be other-than-temporary. For the year ended December 31, 2005, the Company recognized an impairment of $126 thousand on a cost method investment for a decline in fair value deemed to be other-than-temporary.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 9—MARKETABLE AND OTHER SECURITIES (Continued)~~

The following table presents unrealized losses and fair value for securities that were in an unrealized loss position, including certain highly liquid securities classified as cash equivalents on the combined balance sheets, at December 31, 2007 and 2006 (in thousands):

At December 31, 2007

Less than 12 Months 12 Months or Greater Total

Estimated
Fair Value Unrealized
Loss Estimated
Fair Value Unrealized
Loss Estimated
Fair Value Unrealized
Loss
Debt securities:

U.S. Government obligations
$ — $ — $ 1,008 $ (1 ) $ 1,008 $ (1 )

Government agency obligations
— — 1,958 (43 ) 1,958 (43 )

Corporate obligations
1,130 (220 ) 56 (2 ) 1,186 (222 )

Total
$ 1,130 $ (220 ) $ 3,022 $ (46 ) $ 4,152 $ (266 )

At December 31, 2006

Less than 12 Months 12 Months or Greater Total

Estimated
Fair Value Unrealized
Loss Estimated
Fair Value Unrealized
Loss Estimated
Fair Value Unrealized
Loss
Debt securities:

U.S. Government obligations
$ 501 $ (2 ) $ 3,480 $ (58 ) $ 3,981 $ (60 )

Government agency obligations
632 (1 ) 7,118 (118 ) 7,750 (119 )

Corporate obligations
4,113 (1 ) 2,984 (24 ) 7,097 (25 )
Mutual Funds
— — 36,990 (473 ) 36,990 (473 )

Total
$ 5,246 $ (4 ) $ 50,572 $ (673 ) $ 55,818 $ (677 )

As the Company has both the intent and ability to hold securities with unrealized losses until a recovery of fair value, which may be at maturity, the Company does not consider such securities to be other-than-temporarily impaired at December 31, 2007. Realized gains and losses from sales of available-for-sale securities were $57 thousand and $1.2 million, respectively, during 2007. There were no significant realized gains and losses from sales of available-for-sale securities during 2006 or 2005.

The cost and estimated fair value of the Company's debt securities (including certain highly liquid securities that are classified as cash equivalents in the combined balance sheets) are shown below by contractual maturity (in thousands). Expected maturities may differ from contractual maturities based on the Company's investment policies.

2007 2006

Amortized
Cost Estimated
Fair Value Amortized
Cost Estimated
Fair Value
Due in one year or less
$ 29,291 $ 29,310 $ 71,370 $ 71,357
Due in one through five years
5,614 5,761 17,158 17,089
Due in five through ten years
1,258 1,245 1,478 1,468
Due after ten years
4,007 3,800 6,527 6,481

Total
$ 40,170 $ 40,116 $ 96,533 $ 96,395

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 10—DEBT~~

Pursuant to an asset purchase agreement, the Company was required to pay five annual non-interest bearing installments of CAD $20.0 million to The Bank of Nova Scotia (Scotiabank), the first of which was paid in November 2003. The final payment was made in November 2007. The combined balance sheet as of December 31, 2006 includes this amount as current portion of long-term debt, net of imputed interest (at a rate of 1.75%), of $246 thousand. Related interest expense of $264 thousand, $552 thousand, and $781 thousand, is included in interest expense in the combined statements of income and comprehensive income for the years ended December 31, 2007, 2006, and 2005, respectively.

~~NOTE 11—CASH FLOW HEDGES~~

The Company's Canadian operations utilizes derivative financial instruments to enhance its ability to manage cash flow risks with respect to changes in foreign currency exchange rates. These risks arise from the Canadian operation's U.S. dollar-denominated promissory note payable to the Company's U.S. operations, and the repayment of such debt. The Company's derivative instruments consist of short-term foreign currency forward contracts. In 2005, the maximum term of these forward contracts was three months. Throughout 2006 and 2007, the Company's strategy has been to hedge its foreign currency risks using contracts that mature within one month.

The Company designates its forward derivative contracts as cash flow hedges accounted for pursuant to SFAS 133. Changes in the fair value of the contracts are initially recorded to accumulated other comprehensive income, and in each reporting period, an amount that offsets the hedged item's transaction gain or loss is reclassified to foreign currency exchange on the accompanying combined statements of income and comprehensive income. The net loss on derivatives for the years ended December 31, 2007, 2006, and 2005, was $1.8 million, $2.3 million, and $956 thousand, respectively. No contracts were held as of December 31, 2007 or 2006.

The Company formally documents all relationships between hedging instruments and the underlying hedged items, as well as its risk management objective and strategy for undertaking the hedge transaction. The Company applies strict policies to manage risks, including prohibition against derivatives trading, derivatives market-making or any other speculative activities.

The Company's counterparty in all derivative transactions is JPMorgan Chase. The credit risk inherent in these agreements represents the possibility that a loss may occur from the nonperformance of the counterparty to the agreements. The Company believes its risk is minimal. The Company's exposure is in U.S. dollars, so there is minimal risk that appropriate derivatives to maintain the hedging program would not be available in the future.

~~NOTE 12—INCOME TAXES~~

~~The components of pretax income excluding minority interest are as follows (in thousands):~~

For the years ended December 31,

2007 2006 2005
Income before income taxes and minority interest—domestic
$ 638,157 $ 535,640 $ 350,123
Income before income taxes and minority interest—foreign
24,893 12,476 (3,413 )

Total
$ 663,050 $ 548,116 $ 346,710

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 12—INCOME TAXES (Continued)~~

~~The components of the provision for income taxes are as follows (in thousands):~~

For the years ended December 31,

2007 2006 2005
Current

Federal income taxes
$ 59,985 $ 50,289 $ 49,701

State income taxes, net of U.S. federal income tax benefit
15,930 12,090 7,822

Foreign income taxes
8 7 —

Total
75,923 62,386 57,523

Deferred

Federal income taxes
4,376 9,328 4,150

State income taxes, net of U.S. federal income tax benefit
114 52 (98 )

Total
4,490 9,380 4,052

Total provision for income taxes
$ 80,413 $ 71,766 $ 61,575

~~The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before income taxes and minority interest due to the following:~~

2007 2006 2005
Statutory tax rate applied to income before income taxes and minority interest
35.0 % 35.0 % 35.0 %
State income taxes, net of U.S. federal income tax benefit
1.6 % 1.4 % 1.4 %
Effect of flow-through income
(24.6 )% (23.5 )% (19.2 )%
Amortization of goodwill, merchant portfolios and other intangibles
0.1 % 0.1 % 0.2 %
Share-based payment excess deferred taxes
0.0 % 0.0 % 0.2 %
Other, net
0.0 % 0.1 % 0.2 %

Effective tax rate
12.1 % 13.1 % 17.8 %

The effective tax rates include the effect of flow-through income that is included in JPMorgan Chase's and FDC's applicable tax returns. The change in the effective tax rate from 2005 to 2006 is primarily the result of the integration of CMS in October 2005 that reduced the ownership percentage of FDC Offer Corp. and subsidiaries in the U.S. operations and in turn reduced the percentage of income subject to tax at FDC Offer Corp. and subsidiaries.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 12—INCOME TAXES (Continued)~~

~~components of the Company's deferred tax items consist of the following at December 31, (in thousands):~~

2007 2006
Deferred tax assets related to:

Accrued expenses and reserves
$ 187 $ 185

Accrued pension benefits
1,419 1,293

Other employee benefits
4,803 3,920

Tax attribute carryforwards
651 620

Other
117 14

Total deferred tax assets
7,177 6,032

Valuation allowance
(651 ) (620 )

Realizable deferred tax assets
6,526 5,412

Deferred tax liabilities related to:

Depreciation and amortization
(37,119 ) (33,257 )

Net deferred tax liabilities
$ (30,593 ) $ (27,845 )

As of December 31, 2007 and 2006, the Company had recorded a valuation allowance of $651 thousand and $620 thousand respectively, against U.S. capital loss carryforwards. It is more likely than not that the tax benefit of those capital losses will not be recognized due to statutory limitations.

Income tax payments of $72.3 million in 2007 are less than current expense primarily due to the benefit of deferral due to tax fiscal year and tax benefits associated with the exercise of stock options. Net income tax payments of $58.2 million in 2006 are less than current expense primarily due to refunds received from prior years, the benefit of deferral due to tax fiscal year and tax benefits associated with the exercise of stock options. Income tax payments of $51.8 million in 2005 are less than current expense primarily due to tax benefits associated with the exercise of stock options and the benefit of deferral due to tax fiscal year.

~~NOTE 13—SEGMENT REPORTING~~

~~Operating segments are defined by SFAS No. 131,~~~~Disclosures About Segments of an Enterprise and Related Information,~~ as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (CODM) in deciding how to allocate resources and in assessing performance. The Company's CODM is its Chief Executive Officer. The Company classifies its business into two reporting segments for financial reporting purposes consisting of its U.S. and Canadian operations.

~~The business segments measurements provided to, and evaluated by, the Company's CODM are computed in accordance with the accounting policies described in Note 2.~~

~~The Company's U.S. operations process electronic payments of credit, debit, fleet, and stored value card transactions primarily for merchants throughout North America.~~

~~The Company's Canadian operations process electronic payments of credit and debit card transactions, including the rental of point-of-sale equipment for merchants in Canada.~~

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 13—SEGMENT REPORTING (Continued)~~

~~Financial information for the Company's operating segments is summarized as follows (in thousands):~~

As of and for the year ended December 31, 2007

U.S. Canada Corporate and
eliminations Combined
Revenues:

Transaction and processing services
$ 1,170,621 $ 81,790 $ — $ 1,252,411

Transaction and processing services—inter-segment
17,152 — (17,152 ) —

Point-of-sale equipment and supplies
3,777 30,044 — 33,821

Total segment reporting revenues
$ 1,191,550 $ 111,834 $ (17,152 ) $ 1,286,232

As of and for the year ended December 31, 2007

U.S. Canada Corporate and
eliminations Combined
Interest and other, net
$ 76,425 $ 1,445 $ 21 $ 77,891
Depreciation and amortization
43,861 22,932 — 66,793
Income before income taxes and minority interest
638,634 24,813 (397 ) 663,050
Provision for income taxes
11,674 — 68,739 80,413
Total assets
6,291,384 417,137 (16,161 ) 6,692,360
Goodwill
247,549 146,592 — 394,141
Long-lived assets, net
96,518 79,462 — 175,980
Expenditures for long-lived assets
56,977 32,612 — 89,589

As of and for the year ended December 31, 2006

U.S. Canada Corporate and
Eliminations Combined
Revenues:

Transaction and processing services
$ 1,112,781 $ 66,892 $ — $ 1,179,673

Transaction and processing services—inter-segment
15,032 — (15,032 ) —

Point-of-sale equipment and supplies
1,477 25,433 — 26,910

Total segment reporting revenues
$ 1,129,290 $ 92,325 $ (15,032 ) $ 1,206,583

Interest and other, net
$ 66,790 $ (701 ) $ 741 $ 66,830
Depreciation and amortization
94,358 19,305 — 113,663
Income before income taxes and minority interest
535,461 12,476 179 548,116
Provision for income taxes
8,556 — 63,210 71,766
Total assets
5,731,888 463,806 (14,745 ) 6,180,949
Goodwill
247,549 124,735 — 372,284
Long-lived assets, net
83,410 62,741 — 146,151
Expenditures for long-lived assets
40,826 11,563 — 52,389

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 13—SEGMENT REPORTING (Continued)~~

As of and for the year ended December 31, 2005

U.S. Canada Corporate and
Eliminations Combined
Revenues:

Transaction and processing services
$ 728,255 $ 56,055 $ — $ 784,310

Transaction and processing services—inter-segment
14,066 — (14,066 ) —

Point-of-sale equipment and supplies
1,974 22,814 — 24,788

Total segment reporting revenues
$ 744,295 $ 78,869 $ (14,066 ) $ 809,098

Interest and other, net
$ 31,425 $ (6,104 ) $ 1,338 $ 26,659
Depreciation and amortization
60,285 16,237 — 76,522
Income (loss) before income taxes and minority interest
350,423 (3,413 ) (300 ) 346,710
Provision for income taxes
4,165 — 57,410 61,575
Total assets
4,133,085 383,679 (88,414 ) 4,428,350
Goodwill
247,549 125,014 — 372,563
Long-lived assets, net
135,488 70,396 — 205,884
Expenditures for long-lived assets
22,017 12,227 — 34,244

~~NOTE 14—BENEFIT PLANS~~

~~Defined Benefit Pension Plans~~

The Company provides a qualified noncontributory defined benefit pension plan (Pension Plan) for its eligible U.S. employees. The net periodic pension expense included in salaries and employee benefits on the combined statements of income and comprehensive income for the Pension Plan was $4.0 million, $3.6 million, and $2.8 million for the years ended December 31, 2007, 2006, and 2005, respectively.

The Company funds at least the minimum amount required under the Employee Retirement Income Security Act of 1974. Contributions are intended to provide not only for benefits attributed to compensation to date, but also for compensation increases to be earned in the future. Each participant's cash balance account is credited with an amount equal to 4% of the participant's eligible compensation, plus interest at a rate of 5% per year. Each participant becomes fully vested in benefits under this plan after five years of service. Prior to that time, no portion of a participant's benefit is vested. Effective January 1, 2008, the vesting period under this plan was reduced from five to three years.

The Company also provides a SERP for highly compensated employees that will provide certain benefits upon retirement, death, or disability. The net periodic expense included in salaries and employee benefits on the combined statements of income and comprehensive income for the SERP was $227 thousand, $173 thousand, and $77 thousand for the years ended December 31, 2007, 2006, and 2005, respectively.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 14—BENEFIT PLANS (Continued)~~

A summary of the Pension Plan's and the SERP's change in benefit obligation, change in plan assets, and funded status are as follows as of and for the years ended December 31, 2007 and 2006 (in thousands):

Pension Plan SERP

2007 2006 2007 2006
Change in benefit obligation:

Benefit obligation at beginning of year
$ 21,001 $ 18,445 $ 587 $ 443
Service cost
4,238 3,690 181 137
Interest cost
1,218 1,027 38 31
Benefits paid
(2,368 ) (2,590 ) (121 ) (133 )
Actuarial (gain)/loss
(283 ) 429 24 109

Benefit obligation at end of year
23,806 21,001 709 587
Change in plan assets:

Fair value of plan assets at beginning of year
17,766 14,897 — —
Actual return on plan assets
965 1,809 — —
Employer contributions
6,200 3,650 121 133
Benefits paid
(2,368 ) (2,590 ) (121 ) (133 )

Fair value of plan assets at end of year
22,563 17,766 — —

Funded status
$ (1,243 ) $ (3,235 ) $ (709 ) $ (587 )

~~Amounts related to the funded statuses of the Pension Plan and SERP are included in other non-current liabilities in the combined balance sheets.~~

~~Amounts recognized in accumulated other comprehensive income, net of tax, at December 31, 2007 and 2006 consisted of (in thousands):~~

Pension Plan SERP

2007 2006 2007 2006
Change in benefit obligation:

Adjustment for the adoption of SFAS 158
$ — $ 2,163 $ — $ 62
Net actuarial loss
2,264 — 80 —
Prior service cost/(credit)
14 — (9 ) —

Amounts recognized in accumulated other comprehensive income
$ 2,278 $ 2,163 $ 71 $ 62

The estimated net actuarial loss and prior service cost that will be amortized from accumulated other comprehensive income, pre-tax, into net periodic benefit cost during 2008 are $118 thousand and $5 thousand for the Pension Plan, respectively. The estimated net actuarial loss and prior service credit that will be amortized from accumulated comprehensive income, pre-tax, into net periodic benefit cost during 2008 are $5 thousand and $3 thousand for the SERP, respectively.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 14—BENEFIT PLANS (Continued)~~

The Pension Plan's and SERP's accumulated benefit obligations were $23.8 million and $709 thousand, respectively, at December 31, 2007, and $21.0 million and $587 thousand, respectively, at December 31, 2006.

A summary of the components of net periodic pension expense and changes recognized in other comprehensive income, pre-tax, for the years ended December 31, 2007, 2006, and 2005 is as follows (in thousands):

Pension Plan

2007 2006 2005
Service cost
$ 4,238 $ 3,690 $ 2,817
Interest cost
1,218 1,027 821
Expected return on plan assets
(1,699 ) (1,351 ) (1,064 )
Amortization of net actuarial loss
212 261 201
Amortization of prior service cost
5 2 (1 )

Net periodic benefit cost
3,974 3,629 2,774

Other changes in plan assets and benefit obligations recognized in other comprehensive income:

Net actuarial loss
451 — —

Amortization of net actuarial loss
(212 ) — —

Amortization of prior service cost
(5 ) — —

Total recognized in other comprehensive income
234 — —

Total recognized in net periodic benefit cost and other comprehensive income
$ 4,208 $ 3,629 $ 2,774

SERP

2007 2006 2005
Service cost
$181 $137 $56
Interest cost
38 31 24
Amortization of net actuarial loss
11 8 —
Amortization of prior service credit
(3 ) (3 ) (3 )

Net periodic benefit cost
227 173 77

Other changes in plan assets and benefit obligations recognized in other comprehensive income:

Net actuarial loss
24 — —

Amortization of net actuarial loss
(11 ) — —

Amortization of prior service credit
3 — —

Total recognized in other comprehensive income
16 — —

Total recognized in net periodic benefit cost and other comprehensive income
$243 $173 $77

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 14—BENEFIT PLANS (Continued)~~

~~Weighted-average assumptions used to determine the benefit obligations of the Pension Plan and SERP at December 31, 2007 and 2006 were:~~

Pension Plan

2007 2006
Discount rate
6.25 % 5.75 %
Expected rate of increase in compensation levels
5.00 % 5.00 %
Expected long-term rate of return on assets
8.50 % 8.50 %

SERP

2007 2006
Discount rate
6.25 % 5.75 %
Expected rate of increase in compensation levels
5.00 % 5.00 %

~~Weighted-average assumptions used to determine net periodic benefit cost for the Pension Plan and SERP for the years ended December 31, 2007, 2006, and 2005 were:~~

Pension Plan

2007 2006 2005
Discount rate
5.75 % 5.50 % 5.50 %
Expected rate of increase in compensation levels
5.00 % 5.00 % 5.00 %
Expected long-term rate of return on assets
8.50 % 8.50 % 8.50 %

SERP

2007 2006 2005
Discount rate
5.75 % 5.50 % 5.50 %
Expected rate of increase in compensation levels
5.00 % 5.00 % 5.00 %

Future benefits are assumed to increase in a manner consistent with past experience of the Pension Plan and SERP, which includes assumed salary increases as presented above. In developing these assumptions, the Company evaluated input from actuaries and plan asset managers, including their review of asset class return expectations, historical average annual returns, and long-term inflation assumptions.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 14—BENEFIT PLANS (Continued)~~

~~The Pension Plan weighted-average asset allocation and target allocation as of December 31, 2007 and 2006 presented as a percentage of total plan assets were as follows:~~

Asset Allocation Target Allocation

2007 2006 2007 2006
Equity securities
69 % 72 % 70 % 70 %
Debt securities
29 23 25 25
Cash and cash equivalents
2 5 5 5

Total
100 % 100 % 100 % 100 %

It is the Company's policy to invest Pension Plan assets in a diversified portfolio utilizing the target asset allocation as a guide. Deviations from the target allocation may be authorized by the Employee Benefits Committee. Investment risk is limited by diversification both within and between asset classes. The investment objective for the Pension Plan is to earn long-term investment returns in excess of inflation and at least equal to the actuarial discount rate used to calculate the Pension Plan's liability. Contributions to and disbursements from the fund are used to rebalance towards the target allocation to the extent practical.

Pension Plan assets included shares of a money market fund managed by JPMorgan Asset Management, a subsidiary of JPMorgan Chase, with a fair value of $445 thousand and $819 thousand, representing 2% and 5%, of total plan assets as of December 31, 2007 and 2006, respectively.

The Company expects to contribute approximately $8.0 million to the Pension Plan in 2008. As of December 31, 2007, the future benefit payments expected to be paid by the Pension Plan and the SERP for each of the following years are as follows (in thousands):

Pension Plan SERP
2008
$ 1,945 $ 10
2009
2,215 19
2010
2,642 27
2011
2,820 34
2012
2,986 40
2013 through 2017
18,627 297

$ 31,235 $ 427

~~Defined Contribution Plans~~

The Company provides a Retirement Savings Plan (Savings Plan) for its eligible U.S. employees. The Savings Plan is a defined contribution plan under sections 401(a) and 401(k) of the Internal Revenue Code which provides savings and investment opportunities. Pretax contributions of up to 6% of an eligible employee's defined compensation are matched 50% by the Company. Salaries and employee benefits included $3.0 million, $2.2 million, and $1.7 million of expense relating to the Savings Plan on the combined statements of income and comprehensive income for the years ended

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 14—BENEFIT PLANS (Continued)~~

December 31, 2007, 2006, and 2005, respectively. Savings Plan assets included 31 thousand and 39 thousand shares of JPMorgan common stock, representing 2% and 3%, of plan assets as of December 31, 2007 and 2006, respectively.

The Company provides a Registered Retirement Savings Plan (Registered Savings Plan) for its eligible Canadian employees. The Registered Savings Plan is a defined contribution plan which provides savings and investment opportunities. Pretax contributions of up to 6% of an eligible employee's defined compensation are matched 50% by the Company. Salaries and employee benefits included $337 thousand, $300 thousand, and $262 thousand of expense relating to the Registered Savings Plan on the combined statements of income and comprehensive income for the years ended December 31, 2007, 2006, and 2005, respectively.

The Company provides a registered defined contributory pension plan for its eligible Canadian employees. The net periodic expense included in salaries and employee benefits for this plan was $657 thousand, $536 thousand, and $457 thousand on the combined statements of income and comprehensive income for the years ended December 31, 2007, 2006, and 2005, respectively.

~~Long-Term Incentive Plan~~

Certain employees of the Company are participants in a Long-Term Incentive Plan (LTIP), which provides for cash awards, subject to certain vesting periods and adjustments based on the performance of JPMorgan Chase and FDC. The LTIP began in 2005, and awards vest over a three-year period with 50% of the award vesting after two years of service and the remaining 50% vesting after the third year of service. The Company records expense using the accelerated expense attribution method over the related vesting periods. For the years ended December 31, 2007, 2006, and 2005, $14.5 million, $12.0 million, and $4.1 million, respectively, of expense relating to LTIP grants were included in salaries and employee benefits on the combined statements of income and comprehensive income. The related liability is included in other accrued liabilities on the combined balance sheets.

~~Deferred Compensation Plan~~

The Company has a deferred compensation plan, which provides highly compensated employees the opportunity to defer up to 90% of their annual base salary, 90% of their bonus compensation, and 90% of their LTIP. Each plan participant is fully vested in all deferred compensation and earnings credited to his or her account.

The liability under the deferred compensation plan was $10.9 million and $7.9 million at December 31, 2007 and 2006, respectively. The Company's expense under the deferred compensation plan, net of the investment return on related trust assets, totaled $453 thousand, $261 thousand, and $266 thousand for the years ended December 31, 2007, 2006, and 2005, respectively.

In connection with the deferred compensation plan, the Company has placed certain assets in a rabbi trust to enhance the security of the benefits payable under the plan. The assets of the trust, which consist of COLI policies and money market funds, are not generally available to the Company or its creditors, except to pay participants' benefits or in the event of the Company's insolvency. Trust assets of $11.0 million and $7.2 million at December 31, 2007 and 2006, respectively, were included in other

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 14—BENEFIT PLANS (Continued)~~

~~assets on the combined balance sheets. The COLI policies had cash surrender values of $9.3 million and $7.2 million at December 31, 2007 and 2006, respectively.~~

~~Stop Loss Insurance~~

The Company provides medical insurance through a variety of third party Administrative Services Agreements. In order to manage its insurance risk, the Company purchases individual and aggregate stop loss coverage policies. The policies provide for payment of eligible expenses in excess of the Company's individual obligation of $150 thousand per covered individual, not to exceed $2 million over the lifetime of a covered individual. Aggregate stop loss coverage provided for in the policies becomes effective at the Aggregate Benefit Attachment Point, which was $15.0 million, $11.6 million, and $7.4 million for 2007, 2006, and 2005 respectively. A risk exists to the Company with respect to recoveries under the stop loss contracts in the event the stop loss company is unable to meet its obligations.

The Company's estimated liability for claims incurred but not reported at December 31, 2007 and 2006 was $1.2 million and $1.8 million, respectively, which is included in other accrued expenses on the combined balance sheets.

~~NOTE 15—SHARE-BASED PAYMENT~~

Under a share-based payment plan (Stock Option Plan) established in 1999, the Company granted non-qualified stock options to certain employees. The purpose of the Stock Option Plan is to provide an incentive to key employees to better align their interests with the interests of the Company. The Company issued the last option grants under this plan in 2004 and does not intend to provide for any additional grants of options in the future.

The Stock Option Plan allows for grants of options to purchase up to 10 million shares of Class B Common Stock of Paymentech, Inc. ($0.01 par value) (the Shares). The options are granted with exercise prices equal to or greater than the fair market value of Paymentech, Inc.'s stock on the date of grant; have graded vesting over a period of three years with 50% of the award vesting on the second anniversary of the date of grant, and the remaining 50% on the third anniversary of the date of grant; and expire 10 years from the date of grant.

Upon exercise of the options for the issuance of Shares, the Shares become subject to both put and call redemption features. Holders of Shares may require the Company to repurchase any or all of such holder's Shares during the period beginning on the 180th day following the date of issuance of such Shares and ending at the end of the 200th day following the date of issuance of such Shares. If the holder does not elect to exercise their put right, the Company has the right, but not the obligation, to call for purchase any or all of such holder's Shares at any time beginning on the 201st day following the date of issuance. In either event, the purchase price for such Shares will be the fair market value of such Shares on the date of redemption. In addition to these restrictions, in the event the shareholder does not exercise their put rights and the Company does not exercise its call rights, the shareholder is obligated to offer their Shares to the Company for purchase upon the same terms they propose to sell such Shares to a third party. When options are exercised, the Company issues new shares.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 15—SHARE-BASED PAYMENT (Continued)~~

~~Accelerated Vesting and Modifications~~

The Stock Option Plan provides that, in the event of changes in equity securities by reason of change in capitalization, such as a reclassification, recapitalization, merger, consolidation, reorganization or other similar event, appropriate adjustments in the aggregate number of Shares subject to the Stock Option Plan and/or the exercise price and number of Shares purchasable upon the exercise of any option previously granted will be made. Additionally, the plan provides that upon such events, any unvested options would become fully vested.

As a result of JPMorgan Chase's merger with Bank One in July 2004, which was a change in control under the Stock Option Plan, all outstanding options became fully vested. As a result of the October 1, 2005 integration of CMS into the Company, which had a dilutive effect for the entity which provides the Stock Option Plan, the Company modified the exercise prices and number of outstanding options to maintain the value of the options to the option holders. The modification affected 241 option holders. As the value of the options was the same before and after the modification, no incremental expense was recorded in 2005 as a result of the modification.

~~The following schedule summarizes stock option activity for the year ended December 31, 2007 (in thousands, except per share data):~~

Number of
options Weighted-
average
exercise
price Weighted-
average
remaining
life (years)
Outstanding at December 31, 2006
360 $ 25.10

Exercised
(92 ) $ 24.93

Forfeited or expired
(9 ) $ 21.68

Outstanding at December 31, 2007
259 $ 25.28 3.9

Options exercisable at December 31, 2007
259 $ 25.28 3.9

The Company made no option grants and recognized no compensation cost related to options in 2007, 2006 or 2005. Tax expense related to stock option activity was $67 thousand, and $690 thousand for the years ended December 31, 2006 and 2005 respectively. No tax expense was recognized in 2007 related to stock option activity.

~~As a result of the redemption features in the Stock Option Plan, the Company expects to repurchase 61 thousand outstanding Shares in 2008.~~

The intrinsic value of options outstanding and exercisable as of December 31, 2007 was $5.6 million. The total intrinsic value of options exercised during the years ended December 31, 2007, 2006, and 2005, was $1.9 million, $3.9 million, and $9.0 million, respectively.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 16—SUPPLEMENTAL CASH FLOW INFORMATION~~

~~Supplemental cash flow disclosures and non-cash financing activities for the years ended December 31, 2007, 2006, and 2005 are as follows (in thousands):~~

2007 2006 2005
Supplemental cash flow information:

Cash paid for income taxes
$ 72,315 $ 58,195 $ 51,780

Cash paid for interest
15,693 17,687 4,340
Supplemental non-cash financing activities:

Capital contribution for services paid on the Company's behalf
$ — $ — $ 30,434

~~NOTE 17—RELATED PARTIES~~

~~The Company has multiple relationships with JPMorgan Chase and FDC as described below.~~

~~JPMorgan Chase~~

JPMorgan Chase serves as the Company's primary bank and provides depository accounts, as well as investment, treasury management, and hedging services. Amounts related to these services are included in interest and other income, interest expense and operating expenses on the combined statements of income and comprehensive income.

Pursuant to a referral agreement, JPMorgan Chase is obligated to refer customers for credit and debit card processing services to the Company. Fees related to these referrals offset revenue on the combined statements of income and comprehensive income. The payable related to these services is included in current liabilities on the combined balance sheets.

JPMorgan Chase has agreed to indemnify the Company against certain losses, if any, which would result from the provision of bankcard processing services to certain merchants. Pursuant to these indemnification agreements, the Company pays JPMorgan Chase an indemnification fee which is included in operating expenses on the combined statements of income and comprehensive income.

In addition to referral and indemnification agreements, the Company has entered into various contracts with JPMorgan Chase relating to transaction services. Under these contracts both the Company and JPMorgan Chase perform services for each other, such as merchant and private label transaction services, statement preparation, development and support services, as well as gateway services, sponsorship for VISA, MasterCard and other card brands and debit networks, and other services. The related revenue and fees for these services are included in revenue and operating expenses, respectively, on the combined statements of income and comprehensive income. The related receivable and amounts accrued for these services are included in accounts receivable and current liabilities, respectively, on the combined balance sheets.

~~JPMorgan Chase leases office space to the Company. Rent associated with these leases is included in operating expenses on the combined statements of income and comprehensive income.~~

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 17—RELATED PARTIES (Continued)~~

~~FDC~~

The Company has entered into agreements with various subsidiaries and affiliates of FDC, for the transaction servicing of some of the Company's U.S. and international merchant transactions, as well as the provision of related services, such as chargeback management, fraud monitoring, collections, merchant settlement, payer authentication, multi-currency, customer service, and MasterCard sponsorship necessary to process Canadian MasterCard transactions. The negotiation and execution of revised U.S. and Canadian agreements covering certain of the above described services are pending. Fees related to these services are included in operating expenses, and assessments offset revenue, on the combined statements of income and comprehensive income. The related payables are included in payables to related parties, other accrued expenses and accrued assessments on the combined balance sheets.

The Company utilizes the services of TASQ Technology, Inc. (TASQ), a wholly-owned subsidiary of FDC, for the deployment of card processing point-of-sale equipment and related software at customer locations in the U.S. The Company also purchases supplies from TASQ for distribution to its U.S. and Canadian merchants. Amounts accrued for these services are included in current liabilities on the combined balance sheets. Expenses related to these services and supplies offset revenue on the sale of point-of-sale equipment and are included in revenue on the combined statements of income and comprehensive income.

Pursuant to an agreement with a debit network owned by FDC, the Company processes debit card transactions via that debit network and is required to pay certain debit network fees. Fees paid related to this agreement are included in operating expenses on the combined statements of income and comprehensive income. Fees accrued related to these services are included in other accrued expenses on the combined balance sheets.

The Company entered into agreements with FDC to provide data transmission, authorization and portfolio management services. Revenue for these services is included in revenue on the combined statements of income and comprehensive income. The related receivable is included in accounts receivable on the combined balance sheets.

The Company entered into an employee lease arrangement under which FDC provided employees to work at the direction of the Company. The term of the agreement was from January 1, 2006 through December 31, 2006. Expenses incurred under this leasing arrangement are included in salaries and employee benefits on the combined statements of income and comprehensive income for the year ended December 31, 2006. The payable related to these services is included in payables to related parties and other accrued expenses on the combined balance sheet as of December 31, 2006.

The Company has various other arrangements with JPMorgan Chase and FDC under which other services may be provided or received. The related amount of revenues and expenses for these services are less than 1% of total revenues and expenses on the combined statements of income and comprehensive income, respectively, for the years ended December 31, 2007, 2006, and 2005.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 17—RELATED PARTIES (Continued)~~

A summary of the amounts included on the combined balance sheets as of December 31, 2007 and 2006 and the combined statements of income and comprehensive income for the years ended December 31, 2007, 2006, and 2005 is as follows (in thousands):

2007
Related Party
Nature of Relationship Receivables
from (payables to)
related parties, net Revenue
(expense), net
JPMorgan Chase

Banking and investment management services
$ (702 ) $ 50,052

Customer referral program
(1,288 ) (7,240 )

Transaction and related services, net
481 8,925

Indemnification agreements
(345 ) (1,382 )

Rent
— (2,761 )
FDC

Transaction servicing and related services

(31,923
)
(193,073
)

Point-of-sale equipment and supplies
(2,086 ) (23,091 )

Debit interchange
(3,712 ) (29,097 )

Data transmission, authorization and portfolio management services
1,632 9,605

2006
Related Party
Nature of Relationship Receivables
from (payables to)
related parties, net Revenue
(expense), net
JPMorgan Chase

Banking and investment management services
$ 2,411 $ 57,150

Customer referral program
(312 ) (3,267 )

Transaction and related services, net
1,085 2,966

Indemnification agreements
(333 ) (2,422 )

Rent
— (1,478 )
FDC

Transaction servicing and related services

(31,501
)
(214,356
)

Point-of-sale equipment and supplies
(11,554 ) (31,633 )

Debit interchange
(1,951 ) (16,936 )

Employee lease arrangement
(2,583 ) (14,921 )

Data transmission, authorization and portfolio management services
1,500 10,291

2005
Related Party
Nature of Relationship Revenue
(expense), net
JPMorgan Chase

Banking and investment management services
$ 19,804

Customer referral program
(1,543 )

Transaction and related services, net
(476 )

Rent
(1,667 )
FDC

Transaction servicing and related services

(99,843
)

Point-of-sale equipment and supplies
(22,714 )

Debit interchange
(12,294 )

Data transmission, authorization and portfolio management services
9,898

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 18—OWNERS' EQUITY~~

~~As discussed in Note 1, the Company includes a combination of corporations, LLCs and a general partnership. Information regarding the capital structure of these entities is shown below.~~

~~Corporations~~

~~FDC Offer Corp.~~

FDC Offer Corp.'s authorized and outstanding common stock as of December 31, 2007 and 2006 consisted of 1,000 shares of common stock (FDC Offer Corp. Common Stock), par value $0.01 per share. All FDC Offer Corp. Common Stock outstanding is owned by JPMorgan Chase and FDC. The shares of FDC Offer Corp. are restricted from transfer, without the consent of the other shareholder.

~~Paymentech, Inc.~~

Paymentech, Inc.'s authorized capital stock consists of a total of 70,000,000 shares, as follows: 60,000,000 shares of Class A Common Stock, par value $0.01 per share, and 10,000,000 Shares of Class B Common Stock, par value $0.01 per share.

As of December 31, 2007 and 2006 there were 36,451,566 shares of Class A Common Stock outstanding. FDC Offer Corp holds all issued and outstanding Class A Common Stock. Holders of shares of Class A Common Stock are entitled to one vote per share on all matters submitted to a vote of stockholders. There is no right to cumulative voting for the election of directors. Holders of shares of Class A Common Stock are entitled to receive dividends, paid in accordance with the instructions of the board of directors out of funds legally available therefore. In the event of liquidation, holders of shares of Class A Common Stock are entitled to share ratably in all assets remaining after payment of liabilities. Holders of shares of Class A Common Stock have no conversion, redemption or preemptive rights. The rights of the holders of Class B Common Stock will, in some instances, restrict the rights of the holders of Class A Common Stock.

As of December 31, 2007 and 2006 there were 60,615 and 113,966 Shares of Class B Common Stock outstanding, respectively. Unless otherwise noted, the holders of Shares of Class B Common Stock have the same rights as holders of shares of Class A Common Stock. Holders of shares of Class B Common Stock are entitled to one-tenth of one vote per share on all matters submitted to a vote of stockholders, and are entitled to receive dividends, paid in accordance with the instructions of the board of directors out of funds legally available therefore. Dividends so declared must be paid equally with respect to shares of Class A Common Stock and shares of Class B Common Stock. Likewise, in the event of liquidation, holders of Shares of Class B Common Stock are entitled to share ratably with holders of Class A Common Stock in all assets remaining after payment of liabilities. Holders of Class A Common Stock are prohibited from using their superior voting power to impair the rights of holders of Class B Common Stock.

As discussed in Note 15, the Class B Common Stock (or Class B Shares) is subject to certain redemption features. Additionally, should the Company undertake a public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, each outstanding share of Class B Common Stock would be automatically converted into one share of Class A Common Stock upon the date of the closing of the sale.

~~Chase Paymentech~~

~~NOTES TO COMBINED FINANCIAL STATEMENTS~~
~~For the years ended December 31, 2007 and 2006 and~~
~~the year ended December 31, 2005 (unaudited) (Continued)~~

~~NOTE 18—OWNERS' EQUITY (Continued)~~

~~LLC's~~

All of the Company's LLCs are governed by Limited Liability Company Agreements, by and among their respective owner(s) (the Members). All membership interests in the LLCs are of a single class and have the same rights and privileges. Certain of the Members of Chase Paymentech Solutions, LLC have the right to elect the LLC's managers.

~~Partnership~~

~~JPMorgan Chase and FDC partnership interests in Chase Paymentech Solutions are of a single class and have the same rights and privileges.~~

~~Other Comprehensive Income~~

~~The cumulative balance of each component of other comprehensive income, and associated income tax effects, are as follows (in thousands):~~

Beginning balance Pretax gain (loss) amount Tax benefit (expense) Ending balance
December 31, 2005

Net unrealized gains (losses) on investments
$ (1,944 ) $ 1,123 $ 10 $ (811 )
Cash flow hedges
(26 ) 31 — 5
Foreign currency translation adjustment
25,360 3,037 — 28,397
Minimum pension liability adjustment
(2,032 ) (432 ) 152 (2,312 )

$ 21,358 $ 3,759 $ 162 $ 25,279

December 31, 2006

Net unrealized gains (losses) on investments
$ (811 ) $ 224 $ (15 ) $ (602 )
Cash flow hedges
5 (5 ) — —
Foreign currency translation adjustment
28,397 (1,826 ) — 26,571
Minimum pension liability adjustment
(2,312 ) 194 (89 ) (2,207 )
Adjustment to initially apply SFAS 158
— (28 ) 10 (18 )

$ 25,279 $ (1,441 ) $ (94 ) $ 23,744

December 31, 2007

Net unrealized gains (losses) on investments
$ (602 ) $ 1,082 $ (18 ) $ 462
Foreign currency translation adjustment
26,571 38,184 — 64,755
Pension and SERP liability adjustments
(2,225 ) (250 ) 126 (2,349 )

$ 23,744 $ 39,016 $ 108 $ 62,868

FIRST DATA CORPORATION

Offer to Exchange

$~~2,200,000,000~~3,000,000,000 aggregate principal amount of 9⁷/8%12.625% Senior Notes due ~~2015,~~2021, which have been registered under the Securities Act of 1933, as amended, for any and all of its outstanding 9unregistered 12.625⁷/8% Senior Notes due ~~2015.~~2021,

Until the date that is 90 days from the date of this prospectus, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the ~~dealers'~~dealers’ obligation to deliver a prospectus when acting as underwriters with respect to their unsold allotments or subscriptions.

PART II

~~PART II~~

INFORMATION NOT REQUIRED IN PROSPECTUS

~~Item 20. Indemnification of Directors and Officers.~~

Item 20.

Indemnification of Directors and Officers.

Arizona Registrant

Concord Emerging Technologies, Inc. is incorporated under the laws of Arizona.

Article 5 of the Arizona Business Corporation Act of the State of Arizona, (the ~~"ABCA"~~“ABCA”), permits a corporation to indemnify a person made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than a proceeding by or in the right of the corporation or a proceeding charging improper personal benefit to the director), because he or she is or was a director or officer of the corporation or is or was serving at the ~~corporation's~~corporation’s request as a director, officer or partner, trustee, employee or agent of another corporation or other enterprise. A corporation may indemnify such persons against obligations to pay a judgment, settlement, penalty or fine or reasonable expenses incurred with respect to such proceedings if such individual conducted himself or herself in good faith and reasonably believed that such conduct was in the best interests of the corporation, that such conduct was at least not opposed to the best interests of the corporation and, in the case of any criminal proceeding, that the individual had no reasonable cause to believe such conduct was unlawful.

The ABCA allows a corporation to indemnify a director or officer in connection with a proceeding by or in the right of the corporation, against reasonable expenses, including attorney fees, unless the director or officer was adjudged liable to the corporation. A corporation may indemnify a director or officer in connection with a proceeding charging improper financial benefit to the director or officer unless the director or officer was adjudged liable on the basis that financial benefit was improperly received by the director or officer.

The bylaws of the Arizona Registrant provide, in relevant part, that each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"Proceeding"~~“Proceeding”), by reason of being or having been a director or officer of the corporation or serving or having served at the request of the corporation as a director, trustee, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an ~~"Indemnitee"~~“Indemnitee”), whether the basis of such proceeding is alleged action or failure to act in an official capacity as a director, trustee, officer, employee or agent or in any other capacity while serving as a director, trustee, officer, employee or agent, shall be indemnified and held harmless by the Registrant to the fullest extent authorized by the ABCA, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including ~~attorneys'~~attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee or agent and shall inure to the benefit of the ~~Indemnitee's~~Indemnitee’s heirs, executors and administrators; provided, however, that, the corporation shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the board of directors of the corporation.

~~II-1~~

if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a ~~"Final Adjudication"~~“Final Adjudication”) that such Indemnitee is not entitled to be indemnified for such expenses.

II-1

The Articles of Incorporation of the Arizona Registrant in this section (a) provide indemnification shall be mandatory in all circumstances in which indemnification is permitted by law.

California Registrants

~~Cardservice International, Inc., POS Holdings, Inc.,~~(a) Size Technologies, Inc. and TASQ Technology, Inc. are incorporated under the laws of California.

Section 317 of the California General Corporation Law sets forth the provisions pertaining to the indemnification of corporate ~~"agents."~~“agents.” For purposes of this law, an agent is any person who is or was a director, officer, employee or other agent of a corporation, or is or was serving at the request of the corporation in such capacity with respect to any other corporation, partnership, ~~join~~joint venture, trust or other enterprise. Indemnification for expenses, including amounts paid on settling or otherwise disposing of a threatened or pending action or defending against the same, can be made if it is determined that person acted in good faith or in a manner the person reasonably believed to be in the best interests of the corporation by action of the company through:

•: a majority vote of a quorum of the ~~corporation's~~corporation’s Board of Directors consisting of directors who are not party to the proceedings;
•

if such a quorum of directors is not obtainable, by independent legal counsel in a written opinion;

•

approval of the shareholders, with the shares owned by the person to be indemnified not being entitled to vote thereon; or

•

such court in which the proceeding is or was pending upon application by designated parties.

Under certain circumstances, an agent can be indemnified, even when found liable. Indemnification is mandatory where the ~~agent's~~agent’s defense is successful on the merits. The law allows a corporation to make advances of expenses for certain actions upon the receipt of an undertaking that the agent will reimburse the corporation if the agent is found liable. The indemnification provided by Section 317 for acts while serving as a director or officer of the corporation, but not involving breach of duty to the corporation and its shareholders, shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw to the extent authorized by the ~~corporation's~~corporation’s articles of the corporation.

The bylaws of the California Registrants provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. ~~"Not~~“Not opposed to the best interest of the ~~corporation"~~corporation” shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

The corporation shall pay the actual and reasonable expenses incurred in defending a proceeding, other than a proceeding by or in the right of the corporation, in advance of its final disposition if the corporation determines that the person likely will satisfy the requirements above and upon the receipt of an undertaking satisfactory to the corporation, which may require that such undertaking include a bond, security interest, or other security for such undertaking, by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the corporation.

~~(a) IPS Inc.~~(b) Cardservice International, LLC is ~~incorporated~~registered under the laws of ~~Colorado.~~California.

~~Sections 7-109-102 through 7-109-110~~Under Section 17155 of the ~~Colorado Business Corporation~~California Limited Liability Company Act, ~~(the "Act") grant~~except for a breach of duty, the ~~registrants' broad powers to indemnify~~articles of organization or written operating agreement of a limited liability company may provide for indemnification of any person, in connection with legal proceedings brought against him by reason of his present or past status as an officer or director of the registrant, provided with respect to conduct in an official capacity with the registrant, the person acted in good faith and in a manner he reasonably believed to be in the best interests of the registrant, with respect to all other conduct, the person believed the conduct to be at least not opposed to the best interests of the registrant, and with respect toincluding, without limitation, any criminal action or proceeding, the person had no reasonable cause to believe his conduct was unlawful. Indemnification is limited to reasonable expenses incurred in connection with the proceeding. No indemnification may be made (i) in connection with a proceeding by or in the right of the registrant in which the person was adjudged liable to the registrant; or (ii) in connection with any other proceedings charging that the person derived an improper personal benefit, whether or not involving action in an official capacity, in which proceeding the person was judged liable on the basis that he derived an improper personal benefit, unless and only to the extent the court in which such action was brought or another court of competent jurisdiction determines upon application that, despite such adjudication, but in view of all relevant circumstances, the person is fairly and reasonably entitled to indemnity for reasonable expenses as the court deems proper. In addition, to the extent that any such person is successful in the defense of any such legal proceeding, the registrant is required by the Act to indemnify him against reasonable expenses.

The bylaws of the Colorado Registrant in this section (a) provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director,manager, member, officer, employee or agent of the ~~corporation,~~limited liability company, against judgments, settlements, penalties, fines or ~~is or was serving at the request~~expenses of ~~the corporation~~any kind incurred as a ~~director, officer, employee or agent~~result of ~~another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines~~acting in that capacity. A limited liability company shall have the power to purchase and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interestsmaintain insurance on behalf of ~~the corporation, and, with respect to~~ any ~~criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.~~

The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director,manager, member, officer, employee or agent of the ~~corporation,~~limited liability company against any liability asserted against or isincurred by the person in that capacity or ~~was serving at the request~~arising out of the ~~corporation~~person’s status as a ~~director,~~manager, member, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against expenses (including attorney's fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court oflimited liability company.

Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.Colorado Registrants

~~(b)~~ Concord Transaction Services, LLC and CTS Holdings, LLC are registered under the laws of Colorado.

Section 7-80-104(1)(k) of the Colorado Limited Liability Company Act permits a company to indemnify a member or manager or former member or manager of the limited liability company as provided in section 7-80-407. Under Section 7-80-407, a limited liability company shall reimburse a member or manager for payments made, and indemnify a member or manager for liabilities incurred by the member or manager, in the ordinary course of the business of the limited liability company or for the preservation of its business or property if such payments were made or liabilities incurred without violation of the ~~member's~~member’s or ~~manager's~~manager’s duties to the limited liability company.

The operating agreement of Concord Transaction Services, LLC in this section ~~(b)~~ provides, in relevant part, that no Member or officer shall be liable to the Company, any other Members or any other person or entity who has an interest in the Company for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Member or officer in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Member or officer by this Agreement, except that a Member or officer shall be liable for any such loss, damage or claim incurred by reason of such ~~Member's~~Member’s or ~~officer's~~officer’s gross negligence or willful misconduct. To the full extent permitted by applicable law, a Member or officers shall be entitled to indemnification from the Company for any loss, damage or claim incurred by such Member or officer in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of the authority conferred on such Member or officer by this Agreement, except that no Member or officer shall be entitled to be indemnified in respect of any loss, damage or claim incurred by such Member or officer by reason of gross negligence or willful misconduct with respect to such acts or omissions; provided, however, that any indemnity shall be provided out of and to the extent of Company assets only, and no Member shall have personal liability on account thereof.

The operating agreement of CTS Holdings, LLC in this section ~~(b)~~ provides, in relevant part, that the Members shall not have any liability for the obligations or liabilities of the Company except to the extent provided in the Act.

(a) ~~Achex, Inc., Atlantic States Bankcard Association, Inc., B1 PTI Services, Inc.,~~ Bankcard Investigative Group Inc., ~~Business Office Services, Inc.,~~ BUYPASS Inco Corporation, ~~Cardservice Delaware, Inc.,~~ CESI Holdings, Inc., ~~CIFS Corporation,~~ Concord Computing Corporation, Concord Corporate Services, Inc., Concord EFS Financial Services, Inc., Concord EFS, Inc., Concord Financial Technologies, Inc., Concord Processing, Inc., ~~Credit Performance Inc., DW Holdings, Inc.,~~ EPSF Corporation, ~~FDC International Inc., FDMS Partner, Inc.,~~ FDR Ireland Limited, FDR Limited, FDR Missouri Inc., ~~FDR Signet~~FDS Holdings, Inc.~~, FDR Subsidiary Corp.~~, First Data Capital, Inc., First Data Commercial Services Holdings, Inc., First Data Communications Corporation, First Data Corporation, First Data ~~Digital Certificates Inc., First Data~~ Government Solutions, ~~Inc., First Data Integrated Services~~ Inc., First Data Latin America Inc., First Data Mobile Holdings, Inc., First Data ~~Pittsburgh Alliance Partner Inc., First Data PS Acquisition Inc., First Data~~ Technologies, Inc., FSM Services Inc., FundsXpress, Inc., ~~FX Securities, Inc., ICVerify Inc., IDLogix, Inc., IPS Holdings Inc.,~~ MAS Inco

Corporation, MAS Ohio Corporation, ~~NPSF Corporation, Sagebrush Holdings Inc., Sagetown Holdings Inc.,~~ Star Networks, Inc., Star Processing, Inc., Star Systems Assets, Inc., Star Systems, Inc.~~, SurePay Real Estate Holdings, Inc., SY Holdings, Inc., TASQ Corporation,~~ and TeleCheck Services, ~~Inc.,~~

~~Transaction Solutions Holdings, Inc. and United Partner,~~ Inc. are incorporated under the laws of Delaware.

Section 145 of the Delaware General Corporation Law (the ~~"DGCL"~~“DGCL”) grants each corporation organized thereunder the power to indemnify any person who is or was a director, officer, employee or agent of a corporation or enterprise, against expenses, including ~~attorneys'~~attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation, by reason of being or having been in any such capacity, if he acted in good faith in a manner reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

Section 145(b) of the DGCL provides that a corporation may indemnify directors and officers in an action by or in the right of the corporation to procure a judgment in its favor under the same conditions, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Section 102(b)(7) of the DGCL enables a corporation in its certificate of incorporation or an amendment thereto to eliminate or limit the personal liability of a director to the corporation or its stockholders of monetary damages for violations of the ~~directors'~~directors’ fiduciary duty of care, except (i) for any breach of the ~~director's~~director’s duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL (providing for liability of directors for unlawful payment of dividends or unlawful stock purchases or redemptions) or (iv) for any transaction from which a director derived an improper personal benefit.

The bylaws and certificate of incorporation of First Data Corporation in this section (a) provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action, suit or proceeding by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was a director, officer, or employee of the corporation serving at the request of the corporation as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including ~~attorneys'~~attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with their defense of such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action, suit or proceeding, had no reasonable cause to believe their conduct was unlawful.

The corporation shall pay the actual and reasonable expenses incurred in investigating or defending a threatened or pending action, suit or proceeding, in advance of its final disposition if the corporation determines that the person likely will satisfy the requirements above and upon the receipt of an undertaking satisfactory to the corporation, which may require that such undertaking include a bond, security interest, or other security for such undertaking, by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the corporation.

The bylaws of ~~Achex, Inc., Atlantic States Bankcard Association, Inc., B1 PTI Services, Inc., Business Office Services, Inc., Cardservice Delaware, Inc.,~~ CESI Holdings, Inc., Concord EFS, Inc., Concord Financial Technologies, Inc., ~~Credit Performance Inc., DW Holdings, Inc., FDMS Partner, Inc.,~~ FDR Ireland Limited, FDR Missouri Inc., ~~FDR Signet~~FDS Holdings, Inc.~~, FDR Subsidiary Corp.~~, First Data Capital, Inc., First Data Commercial Services Holdings, Inc., First Data Communications Corporation, First Data ~~Digital Certificates Inc., First Data~~ Government Solutions, Inc. First Data ~~Integrates Services Inc., First Data~~ Mobile Holdings ~~Inc., First Data PS Acquisition~~ Inc., First Data Technologies, Inc., FSM Services Inc., FundsXpress, Inc., FX Securities, Inc., ICVerify Inc., IDLogix, Inc., IPS Holdings Inc., Sagebrush Holdings Inc., Sagetown Holdings Inc., SurePay Real Estate Holdings, Inc., SY Holdings, Inc., TASQ Corporation and ~~Transaction Solutions Holdings,~~FundsXpress, Inc. in this section (a)

provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. ~~"Not~~“Not opposed to the best interest of the ~~corporation"~~corporation” shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

The bylaws of BUYPASS Inco ~~Corporation, CIFS~~ Corporation, Concord Computing Corporation, Concord EFS Financial Services, Inc., Concord Processing, Inc., EPSF Corporation, ~~FDC International Inc.,~~ MAS Inco Corporation, MAS Ohio ~~Corporation, NPSF~~ Corporation, Star Networks, Inc., Star Processing, Inc., Star Systems Assets, Inc. and Star Systems, Inc. in this section (a) provide, in relevant part, that each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"Proceeding"~~“Proceeding”), by reason of being or having been a director or officer of the corporation or serving or having served at the request of the corporation as a director, trustee, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an ~~"Indemnitee"~~“Indemnitee”), whether the basis of such proceeding is alleged action or failure to act in an official capacity as a director, trustee, officer, employee or agent or in any other capacity while serving as a director, trustee, officer, employee or agent, shall be indemnified and held harmless by the Registrant to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including ~~attorneys'~~attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee or agent and shall inure to

the benefit of the ~~Indemnitee's~~Indemnitee’s heirs, executors and administrators; provided, however, that, the corporation shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the board of directors of the corporation.

The right to indemnification shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such Proceeding in advance of its final disposition (an ~~"Advancement~~“Advancement of ~~Expenses"~~Expenses”); provided, however, that, if the DGCL so requires, and Advancement of Expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking (an ~~"Undertaking"~~“Undertaking”), by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a ~~"Final Adjudication"~~“Final Adjudication”) that such Indemnitee is not entitled to be indemnified for such expenses.

The bylaws of Bankcard Investigative Group Inc., and First Data Latin America ~~Inc. and First Data Pittsburgh Alliance Partner~~ Inc. in this section (a) provide, in relevant part, that the corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened

to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”) by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The corporation shall be required to indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the corporation.

The corporation shall pay the expenses incurred in defending any proceeding in advance of its final disposition, provided, however, that the payment of expenses incurred by a director or officer in advance of the final disposition of the proceeding shall be made only upon receipt of an undertaking by the director or officer to repay all amounts advanced if it should be ultimately determined that the director or officer is not entitled to be indemnified.

The bylaws of FDR Limited in this section (a) provide, in relevant part, that the Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts pain in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The Company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Company, or is or was serving at the request of the Company a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plans or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; except that no indemnification

shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Company unless and only to the extent that the Court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.

Expenses incurred in defending or investigating a threatened or pending action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Company as authorized herein in these indemnification provisions.

The bylaws of TeleCheck Services, Inc. in this section (a) provide, in relevant part, that the corporation shall indemnify each person who is or was a director or officer of the corporation (including the heirs, executors, administrators or estate of such person) and is permitted to indemnify each person who is or was an employee or agent of the corporation (including the heirs, executors, administrators or estate of such person) or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise to the full extent permitted under Section 145 of the DGCL or any successor provisions of the laws of the State of Delaware, including without limitation the payment of fees and expenses of defense as incurred.

Expenses incurred by a person who is or was a director, officer, employee or agent of the corporation (including the heirs, executors, administrators or estate of such person) or is or was serving at the request of the corporation as a director, officer, employer or agent of another corporation, partnership, joint venture, trust or other enterprise in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, to the full extent permitted by and in accordance with Section 145 of the DGCL or any successor provisions of the laws of the State of Delaware.

(b) Call Interactive Holdings LLC, ~~CIFS LLC, Concord NN, LLC,~~ Concord One, ~~LLC, DDA Payment Services,~~ LLC, FDFS Holdings, LLC, FDGS ~~Holdings General Partner II, LLC, FDGS Holdings,~~Group, LLC, First Data ~~Aviation LLC, First Data Financial Services, L.L.C., First Data Government Solutions,~~EC, LLC, First Data Merchant Services Northeast, LLC, First Data Merchant Services Southeast, L.L.C., First Data Payment Services, LLC, First Data Real Estate Holdings L.L.C., First Data Resources, LLC, First Data Secure LLC, ~~First Data Solutions L.L.C., First Data, L.L.C.,~~ Gratitude Holdings ~~LLC, Initial Merchant Services,~~ LLC, Instant Cash Services, LLC, LoyaltyCo LLC, Money Network Financial, LLC, PayPoint Electronic Payment Systems, LLC, ~~QSAT Financial, LLC,~~ REMITCO LLC, ~~Sageville~~Sagebrush Holdings LLC, Star Systems, LLC, Strategic Investment Alternatives LLC, ~~Taxware, LLC, TeleCheck Acquisition LLC, TeleCheck Acquisition-Michigan,~~TASQ LLC, Transaction Solutions, LLC ~~Unibex, LLC,~~and ValueLink, ~~LLC, Virtual Financial Services, LLC and Yclip,~~ LLC are registered under the laws of Delaware.

Section 18-108 of the Delaware Limited Liability Company Act (the ~~"DLLCA"~~“DLLCA”) empowers a Delaware limited liability company to indemnify and hold harmless any member or manager of the limited liability company from and against any and all claims and demands whatsoever.

The operating agreements of Concord ~~NN, LLC, Concord~~ One, ~~LLC and DDA Payment Services,~~ LLC in this section (b) provide, in relevant part, that each Person ("(“Indemnified ~~Person"~~Person”) who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative ~~("Proceeding"~~(“Proceeding”), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding, by reason of the fact that he, or a Person of whom he is the legal representative, is or was a Member shall be indemnified by the Company against judgments, penalties

~~(including~~ (including excise and similar taxes and punitive damages), fines, settlements and reasonable costs and expenses (including, without limitation, ~~attorneys'~~attorneys’ fees) actually incurred by such Indemnified Person in connection with such Proceeding except to the extent such indemnification is prohibited by law.

The operating agreements of ~~CIFS LLC,~~ FDFS Holdings, LLC, ~~FDGS Holdings General Partner II, LLC,~~ First Data ~~Aviation LLC, First Data Financial Services, L.L.C., First Data Government Solutions,~~EC, LLC, First Data Merchant Services Southeast, L.L.C., First Data Merchant Services Northeast, LLC, First Data Payment Services, LLC, First Data Real Estate Holdings L.L.C., First Data Secure LLC, ~~First Data Solutions L.L.C., First Data, L.L.C.,~~ Gratitude Holdings ~~LLC, Initial Merchant Services,~~ LLC, Instant Cash Services, LLC, LoyaltyCo LLC, Money Network Financial, LLC, PayPoint Electronic Payment Systems, LLC, ~~QSAT Financial, LLC,~~ REMITCO LLC, ~~Sageville~~Sagebrush Holdings LLC, Star Systems, LLC, ~~Taxware, LLC, TeleCheck Acquisition-Michigan,~~TASQ LLC, Transaction Solutions, LLC ~~Unibex, LLC,~~and ValueLink, ~~LLC, Virtual Financial Services, LLC and Yclip,~~ LLC, in this section (b) provide, in relevant part, that the Members shall not have any liability for the debts, obligations or liabilities of the Company except to the extent provided by the Act.

The operating agreement of First Data Real Estate Holdings L.L.C. in this section (b) provides, in relevant part, that no manager or liquidator shall be liable for any monetary damages to the LLC or any Member for any breach of any duties.

The operating agreements of First Data Solutions LLC and TeleCheck Acquisition LLC in this section (b) provide, in relevant part, that the Members shall not have any liability for the obligations or liabilities of the Company except to the extent provided in the Act.

The operating agreement of Strategic Investment Alternatives LLC in this section (b) provides, in relevant part, that the Member shall not be personally liable for any debts, obligations or losses of the Company beyond its capital contributions to the Company and the undistributed profits.

Section 17-108 of the Delaware Revised Uniform Limited Partnership Act permits a limited partnership to indemnify and hold harmless any partner or other person from and against any and all claims and demands whatsoever.

The bylaws and limited partnership agreements of the Delaware Registrants in this section (c) provide, in relevant part, that the General Partner shall not have any liability for the debts, obligations or liabilities of the Partnership except to the extent provided by the Act.

(d) First Data Voice Services General Partnership is a general partnership under the laws of Delaware.

Section 15-110 of the Delaware Revised Uniform Partnership Act permits a partnership, subject to such standards and restrictions, if any, as are set forth in its partnership agreement, to indemnify and hold harmless any partner or other person from and against any and all claims and demands whatsoever.

The Partnership Agreement of the Delaware Registrant in this section (d), provides that the Partnership shall indemnify any officer or director made a party to any proceeding, other than an action, suit or proceeding by or in the right of the Partnership, against expenses (including ~~attorneys'~~attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with their defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the Partnership, and, with respect to any criminal action, suit or proceeding, had no reasonable cause to believe their conduct was unlawful.

The Partnership shall pay the actual and reasonable expenses incurred in investigating or defending a proceeding, in advance of its final disposition if the Partnership, at its discretion determines that the person likely will satisfy the requirements above and upon the receipt of an undertaking satisfactory to the Partnership, which may require that such undertaking include a bond, security interest, or other security for such undertaking, by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the Partnership hereunder.

First Data Merchant Services Corporation and PaySys International, Inc. are incorporated under the laws of Florida.

Section 607.0831 of the Florida Business Corporation Act provides, among other things, that a director is not personally liable for monetary damages to a company or any other person for any statement, vote, decision,

or failure to act, by the director, regarding corporate management or policy, unless the director breached or failed to perform his or her duties as a director and such breach or failure constitutes (a) a violation of criminal law, unless the director had reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful; (b) a transaction from which the director derived an improper personal benefit; (c) a circumstance under which the liability provisions of Section 607.0834 of the Florida Business Corporation Act (relating to the liability of the directors for improper distributions) are applicable; (d) willful misconduct or a conscious disregard for the best interest of the company in the case of a proceeding by or in the right of the company to procure a judgment in its favor or by or in the right of a stockholders; or (e) recklessness or an act or omission in bad faith or with malicious purpose of with wanton and willful disregard of human rights, safety or property, in a proceeding by or in the right of someone other than such company or a stockholder.

Section 607.0850 of the Florida Business Corporation Act authorizes, among other things, a company to indemnify any person who was or is a party to any proceeding (other than an action by or in the right of the company) by reason of the fact that he is or was a director, officer, employee or agent of the company (or is or was serving at the request of the company in such a position for any entity) against liability incurred in connection with such proceedings, if he or she acted in good faith and in a manner reasonably believed to be in the best interests of the company and, with respect to criminal proceedings, had no reasonable cause to believe his or her conduct was unlawful.

The Florida Business Corporation Act requires that a director, officer or employee be indemnified for actual and reasonable expenses (including ~~attorneys'~~attorneys’ fees) to the extent that he or she has been successful on the merits or otherwise in the defense of any proceeding. Florida law also allows expenses of defending a proceeding to be advanced by a company before the final disposition of the proceedings, provided that the officer, director or employee undertakes to repay such advance if it is ultimately determined that indemnification is not permitted.

The Florida Business Corporation Act states that the indemnification and advancement of expenses provided pursuant to Section 607.0850 is not exclusive and that indemnification may be provided by a company pursuant to other means, including agreements or bylaw provisions. Florida law prohibits indemnification or advancement of expenses, however, if a judgment or other final adjudication establishes that the actions of a director, officer or employee constitute (i) a violation of criminal law, unless he or she had reasonable cause to believe his or her conduct was lawful or had no reasonable cause to believe his or her conduct was unlawful; (ii) a transaction from which such person derived an improper personal benefit; (iii) willful misconduct or conscious disregard for the best interests of the company in the case of a derivative action or a proceeding by or in the right of a stockholder, or (iv) in the case of a director, a circumstance under which the liability provisions of Section 607.0834 of the Florida Corporation Act (relating to the liability of directors for improper distributions) are applicable.

The bylaws of First Data Merchant Services Corporation provide, in relevant part, that the corporation shall indemnify each person who is or was a director or officer of the corporation (including the heirs, executors, administrators or estate of such person) and is permitted to indemnify each person who is or was an employee or agent of the corporation (including the heirs, executors, administrators or estate of such person) or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise to the full extent permitted under Section 607.0850 of the Florida Business Corporation Act (the ~~"Act"~~“Act”) or any successor provisions of the laws of the State of Florida, including without limitation the payment of fees and expenses of defense as incurred.

Expenses incurred by a person who is or was a director, officer, employee or agent of the corporation (including the heirs, executors, administrators or estate of such person) or is or was serving at the request of the corporation as a director, officer, employer or agent of another corporation, partnership, joint venture, trust or other enterprise in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, to the full extent permitted by and in accordance with Section 607.0850 of the Act or any successor provisions of the laws of the State of Florida.

The bylaws of PaySys International, Inc. provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. ~~"Not~~“Not opposed to the best interest of the ~~corporation"~~corporation” shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

(a) Concord Payment Services, Inc., ~~Gibbs Management Group, Inc.,~~ New Payment Services, ~~Inc., Technology Solutions International, Inc., TeleCheck Holdings,~~ Inc. and TeleCheck International, Inc. are incorporated under the laws of Georgia.

Section 14-2-202(b)(4) of the Georgia Business Corporation Code (the ~~"Code"~~“Code”) provides that a ~~corporation's~~corporation’s articles of incorporation may include a provision that eliminates or limits the liability of directors for monetary damages to a corporation or its shareholders for any action taken, or failure to take any action, as a director. The section does not, however, authorize a corporation to eliminate or limit the liability of a director for appropriating, in violation of his or her duties, any business opportunity of the corporation, for acts or omissions which involve intentional misconduct or a knowing

violation of law, for any transaction from which the director received an improper personal benefit, or authorizing a dividend, stock repurchase or redemption, distribution of assets or other distribution in violation of Section 14-2-640 of the Code if it is established that the director did not perform his or her duties in compliance with Section 14-2-832 of the Code, which sets forth general standards for directors.

Sections 14-2-851 and 14-2-857 of the Code provide that a corporation may indemnify a director or officer if such individual conducted himself or herself in good faith and reasonably believed that such conduct was in the best interests of the corporation, that such conduct was at least not opposed to the best interests of the corporation and, in the case of any criminal proceeding, that the individual had no reasonable cause to believe such conduct was unlawful.

Sections 14-2-852 and 14-2-857 of the Code provide that any director or officer who is wholly successful in the defense of any proceeding to which he or she was a party because her or she was an officer or a director of the corporation are entitled to indemnification against reasonable expenses as of right. On the other hand, if the charges made in any action are sustained, the determination of whether the required standard of conduct has been met will be made, in accordance with the provisions of the Code Section 14-2-855, by either the Board of Directors or a committee thereof, acting by disinterested members, by special legal counsel or by the shareholders, but shares owned by or voted under the control of directors seeking indemnification may not be voted.

The bylaws of Concord Payment Services, Inc. in this section (a) provide, in relevant part, that each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"Proceeding"~~“Proceeding”), by reason of being or having been a director or officer of the corporation or serving or having served at the request of the corporation as a director, trustee, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an ~~"Indemnitee"~~“Indemnitee”), whether the basis of such proceeding is alleged action or failure to act in an official capacity as a director, trustee, officer, employee or agent or in any other capacity while serving as a director, trustee, officer, employee or agent, shall be indemnified and held harmless by the Registrant to the fullest extent authorized by the Code, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including ~~attorneys'~~attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee or agent and shall inure to the benefit of the ~~Indemnitee's~~Indemnitee’s heirs, executors and administrators; provided, however, that, the corporation shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the board of directors of the corporation.

The right to indemnification shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such Proceeding in advance of its final disposition (an ~~"Advancement~~“Advancement of ~~Expenses"~~Expenses”); provided, however, that, if the Code so requires, and Advancement of Expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking (an ~~"Undertaking"~~“Undertaking”), by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a ~~"Final Adjudication"~~“Final Adjudication”) that such Indemnitee is not entitled to be indemnified for such expenses.

The bylaws of ~~Gibbs Management Group, Inc.,~~ New Payment Services, ~~Inc. and Technology Solutions International,~~ Inc. in this section (a) provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened,

pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. ~~"Not~~“Not opposed to the best interest of the ~~corporation"~~corporation” shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

The bylaws of ~~TeleCheck Holdings, Inc. and~~ TeleCheck International, Inc. in this section (a) provide, in relevant part, that the corporation shall indemnify each person who is or was a director or officer of the corporation (including the heirs, executors, administrators or estate of such person) and is permitted to indemnify each person who is or was an employee or agent of the corporation (including the heirs, executors, administrators or estate of such person) or is or was

serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise to the full extent permitted under sections 14-2-851 and -852 (with respect to directors) and section 14-2-857 (with respect to non-director officers, employees and agents) of the Code or any successor provisions of the laws of the State of Georgia, including without limitation the payment of fees and expenses of defense as incurred.

Expenses incurred by a person who is or was a director, officer, employee or agent of the corporation (including the heirs, executors, administrators or estate of such person) or is or was serving at the request of the corporation as a director, officer, employer or agent of another corporation, partnership, joint venture, trust or other enterprise in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, to the full extent permitted by and in accordance with section 14-2-853 (with respect to directors) and 14-2-857 (with respect to non-director officers, employees or agents) of the Code or any successor provisions of the laws of the State of Georgia.

(b) Unified Merchant Services General Partnership is a general partnership under the laws of Georgia.

Section 14-8-18 of the Georgia Code provides that a partnership must indemnify every partner in respect of payments made and personal liabilities reasonably incurred by him in the ordinary and proper conduct of its business, or for the preservation of its business or property.

The Partnership Agreement of the Georgia Registrant in this section (b), provides, in relevant part, that the Partnership shall indemnify and hold harmless the Partners and their Affiliates and any director, officer, employee, or agent of a Partner, the Partnership, an Affiliate of the Partnership and the legal representatives of any of them, and each other person who may incur liability as a general partner or otherwise in connection with the management of the Partnership against any and all liabilities and expenses (including amounts paid in satisfaction of judgments, compromises, fines and

penalties, and as counsel fees) reasonably incurred by him/her or it in connection with the defense or disposition of any action, suit or other proceeding, whether civil or criminal, in which he/she or it may be involved or with which he/she or it may be threatened, while a Partner or serving in such other capacity or thereafter, by reason of his/her or its being or having been a Partner, or by serving in such other capacity, except with respect to any matter which constitutes willful misconduct, bad faith, gross negligence or reckless disregard of his/her or its duties, or criminal intent. The Partnership shall have the right to approve any counsel selected by any indemnified Person and to approve the terms of any proposed settlement.

The Partnership shall advance, in the sole discretion of the Partners, to an indemnified Person reasonable ~~attorneys'~~attorneys’ fees and other costs and expenses incurred in connection with the defense of any such action or proceeding. Each indemnified Person shall agree in writing prior to any such advancement that in the event he/she or it receives any such advance, such indemnified Person shall reimburse the Partnership for such fees, costs and expenses to the extent that it shall be determined that he/she or it was not entitled to indemnification.

Section 12:83 of the Louisiana Business Corporation Law provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any action, suit or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a director, officer, employee, or agent of the corporation, or is or was serving at the request of the Corporation as a director, officer, employee, or agent of another business, foreign or nonprofit corporation, partnership, joint venture, or other enterprise. The indemnity may include expenses, including attorney fees, judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit, or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

Section 12:83 further provides that a Louisiana corporation may indemnify officers and directors in an action by or in the right of the corporation under the same conditions except that no indemnification is permitted without judicial approval if the director or officer shall have been adjudged to be liable for willful or intentional misconduct in the performance of his duty to the corporation. Where an officer or director is successful on the merits or otherwise in any defense of any action referred to above or any claim therein, the corporation must indemnify him against such expenses that such officer or director actually incurred. Section 12:83 permits a corporation to pay expenses incurred by the officer or director in defending an action, suit or proceeding in advance of the final disposition thereof if approved by the board of directors.

The bylaws of the Louisiana Registrant provide, in relevant part, that corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding") by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The corporation shall be required to indemnify a person in connection with a proceeding

~~initiated by such person only if the proceeding was authorized by the Board of Directors of the corporation.~~

The bylaws and articles of incorporation of the Louisiana Registrant in this section (a) provide, in relevant part, that to the fullest extent permitted by the Louisiana Law, the indemnification provided therein shall include expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement and any such expenses shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding, upon receipt of an undertaking by or on behalf of the person seeking indemnification to repay such amounts if it is ultimately determined that he or she is not entitled to be indemnified.

Section 2-418 of the Maryland General Corporation (the ~~"MGCL"~~“MGCL”) Law permits a Maryland corporation to indemnify a director or officer who is made a party to any proceeding by reason of service in that capacity against judgments, penalties, fines, settlements and reasonable expenses actually incurred unless it is proven that the act or omission of the director or officer was material to the matter giving rise to the proceeding and was committed in bad faith or with active and deliberate dishonesty; the director or officer actually received an improper personal benefit; or in the case of a criminal proceeding, the director or officer had reason to believe that his conduct was unlawful. The MGCL provides that where a director or officer is a defendant in a

proceeding by or in the right of the corporation, the director or officer may not be indemnified if he or she is found liable to the corporation. The MGCL also provides that a director or officer may not be indemnified in respect of any proceeding alleging improper personal benefit in which he or she was found liable on the grounds that personal benefit was improperly received. A director or officer found liable in a proceeding by or in the right of the corporation or in a proceeding alleging improper personal benefit may petition a court to nevertheless order indemnification of expenses if the court determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances.

Section 2-418 of the MGCL provides that unless limited by the charter of a Maryland corporation, a director or officer who is successful on the merits or otherwise in defense of any proceeding must be indemnified against reasonable expenses. Section 2-418 also provides that a Maryland corporation may advance reasonable expenses to a director or officer upon the ~~corporation's~~corporation’s receipt of a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation and a written undertaking by the director or officer or on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.

The bylaws of the Maryland Registrant provide, in relevant part, that the corporation shall indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any person who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”) by reason of the fact that he, or a person for whom he is the legal representative, is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person. The corporation shall be required to indemnify a person in connection with a proceeding initiated by such person only if the proceeding was authorized by the Board of Directors of the corporation.

~~CallTeleservices,~~Linkpoint International, Inc. is incorporated under the laws of ~~Nebraska.~~Nevada.

~~Section 21-2095~~Chapter 78 of the ~~Nebraska Business Corporation Act (the "NBCA"), provides~~Nevada Revised Statutes allows directors and officers to be indemnified against liabilities they may incur while serving in such capacities. Under the applicable statutory provisions, the registrant may indemnify its directors or officers who were or are a party or are threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that they are or were directors or officers of the corporation, or are or were serving at the request of the corporation as directors or officers of another corporation, partnership, joint venture, trust, or other enterprise, against expenses, including attorneys’ fees, judgments, fines, and amounts paid in settlement, actually and reasonably incurred by them in connection with the action, suit, or proceeding, unless it is ultimately determined by a ~~director is~~court of competent jurisdiction that they breached their fiduciary duties by intentional misconduct, fraud, or a knowing violation of law or did not ~~liable for action taken as a director, or any failure to take any action, if he or she acted~~act in good faith ~~with the care an ordinarily prudent person in a like position would exercise under similar circumstances,~~ and in a manner ~~he or she~~which they reasonably believed to be in ~~the best interests of the corporation. Sections 21-20,103 and 21-20,108 of the NBCA provide that a corporation may indemnify an individual who is a party to any proceeding because he~~ or she is a director or officer against liability incurred in a proceeding if he or she conducted himself or herself in good faith, and he or she reasonably believed, in the case of conduct in his or her official capacity with the corporation, that his or her conduct was in the best interests of the corporation, and in all other cases, that his or her conduct was at least not opposed to the best interests of the ~~corporation,~~registrant, and, ~~in the case of~~with respect to any criminal ~~proceeding, he~~action or ~~she~~proceeding, had no reasonable cause to believe ~~his or her~~their conduct was unlawful.

~~Section 21-20,104 of~~In addition, the ~~NBCA provides~~applicable statutory provisions mandate that ~~a corporation shall~~the registrant indemnify ~~a director or an officer~~its directors and officers who ~~was wholly~~have been successful on the merits or otherwise in ~~the~~ defense of any action, suit, or proceeding ~~to which he was a party because he was a director of the corporation~~ against ~~reasonable~~ expenses, including attorneys’ fees, actually and reasonably incurred by him ~~or her~~ in connection with the proceeding. In the case of a proceeding by or in the right of the corporation, section 21-20,103 of the NBCA provides that a corporation may not indemnify a director except for reasonable expenses incurred in connection with the proceeding if it is determined that the director was adjudged liable on the basis that he or she received financial benefit to which he or she was not entitled,defense.

Section 21-20,109 of the NBCA provides that a corporation may purchase and maintain insurance on behalf of directors or officers corporation, or who, while a director or officer of the corporation serves at the corporation's request as a director, officer, member of a limited liability company, partner, trustee, employee or agent of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other entity, against liability asserted against or incurred by him or her in that capacity, or arising from his or her status as a director or officer, whether or not the corporation would have the power to indemnify or advance expenses to him or her against the same liabilities under the NBCA.

The bylaws of the ~~Nebraska~~Nevada Registrant ~~provide,~~provides, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. ~~"Not~~“Not opposed to the best interest of the ~~corporation"~~corporation” shall include actions taken

in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

The corporation shall pay the actual and reasonable expenses incurred in defending a proceeding, other than a proceeding by or in the right of the corporation, in advance of its final disposition upon the receipt of an undertaking satisfactory to the corporation, which may require that such undertaking include a bond, security interest, or other security for such undertaking, by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the corporation.

~~EFTLogix, Inc., JOT, Inc. and Linkpoint International, Inc. are incorporated under the laws of Nevada.~~

Chapter 78 of the Nevada Revised Statutes allows directors and officers to be indemnified against liabilities they may incur while serving in such capacities. Under the applicable statutory provisions, the registrant may indemnify its directors or officers who were or are a party or are threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of the fact that they are or were directors or officers of the corporation, or are or were serving at the request of the corporation as directors or officers of another corporation, partnership, joint venture, trust, or other enterprise, against expenses, including attorneys' fees, judgments, fines, and amounts paid in settlement, actually and reasonably incurred by them in connection with the action, suit, or proceeding, unless it is ultimately determined by a court of competent jurisdiction that they breached their fiduciary duties by intentional misconduct, fraud, or a knowing violation of law or did not act in good faith and in a manner which they reasonably believed to be in or not opposed to the best interests of the registrant, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful.

In addition, the applicable statutory provisions mandate that the registrant indemnify its directors and officers who have been successful on the merits or otherwise in defense of any action, suit, or proceeding against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.

The bylaws of the Nevada Registrants provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. "Not opposed to the best interest of the corporation" shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

The corporation shall pay the actual and reasonable expenses incurred in defending a proceeding, other than a proceeding by or in the right of the corporation, in advance of its final disposition upon the receipt of an undertaking satisfactory to the corporation, which may require that such undertaking include a bond, security interest, or other security for such undertaking, by or on behalf of such person

~~to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the corporation.~~

~~FDR Interactive Technologies Corporation and~~ National Payment Services Inc. ~~are~~is incorporated under the laws of New York.

Section 722(a) of the New York Business Corporation Law (the ~~"NYBCL"~~“NYBCL”) provides that a corporation may indemnify any person made, or threatened to be made, a party to an action or proceeding (other than one by or in the right of the corporation to procure a judgment in its favor), whether civil or criminal, including an action by or in the right of any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, which any director or officer of the corporation served in any capacity at the request of the corporation, by reason of the fact that he, his testator or intestate, was a director or officer of the corporation, or served such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including ~~attorneys'~~attorneys’ fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein, if such director or officer acted, in good faith, for a purpose which he reasonably believed to be in, or, in the case of service for any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise, not opposed to, the best interests of the corporation and, in criminal actions or proceedings, in addition, had no reasonable cause to believe that his conduct was unlawful. Section 722(c) of the NYBCL provides that a corporation may indemnify directors and officers in an action by or in the right of the corporation to procure a judgment in its favor under the same conditions, except that no indemnification under this Section shall be made in respect of (i) a threatened action, or a pending action which is settled or otherwise disposed of, or (ii) any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the court in which the action was brought, or, if no action was brought, any court of competent jurisdiction, determines upon application that, in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such portion of the settlement amount and expenses as the court deems proper.

Section 723(a) of the NYBCL provides that a person who has been successful, on the merits or otherwise, in the defense of a civil or criminal action or proceeding of the character described in section 722 shall be entitled to indemnification as authorized in such section.

Section 721 of the NYBCL provides that the indemnification provided shall not be deemed exclusive of any other rights to which a director or officer seeking indemnification may be entitled, whether contained in the

certificate of incorporation or the bylaws, provided that no indemnification may be made to or on behalf of any director or officer if a judgment or other final adjudication adverse to the director or officer establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled.

The bylaws of FDR Interactive Technologies Corporation provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably

incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. "Not opposed to the best interest of the corporation" shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

The bylaws of National Payment Services Inc. provide, in relevant part, that each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"Proceeding"~~“Proceeding”), by reason of being or having been a director or officer of the corporation or serving or having served at the request of the corporation as a director, trustee, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an ~~"Indemnitee"~~“Indemnitee”), whether the basis of such proceeding is alleged action or failure to act in an official capacity as a director, trustee, officer, employee or agent or in any other capacity while serving as a director, trustee, officer, employee or agent, shall be indemnified and held harmless by the Registrant to the fullest extent authorized by the NYBCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including ~~attorneys'~~attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee or agent and shall inure to the benefit of the ~~Indemnitee's~~Indemnitee’s heirs, executors and administrators; provided, however, that, the corporation shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the board of directors of the corporation.

The right to indemnification shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such Proceeding in advance of its final disposition (an ~~"Advancement~~“Advancement of ~~Expenses"~~Expenses”); provided, however, that, if the NYBCL so requires, and Advancement of Expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking (an ~~"Undertaking"~~“Undertaking”), by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a ~~"Final Adjudication"~~“Final Adjudication”) that such Indemnitee is not entitled to be indemnified for such expenses.

~~Atlantic Bankcard Properties Corporation is incorporated under the laws of North Carolina.~~

Sections 55-8-50 through 55-8-58 of the North Carolina Business Corporation Act permit a corporation to indemnify its directors, officers, employees or agents under either or both a statutory or nonstatutory scheme of indemnification. Under the statutory scheme, a corporation may, with certain exceptions, indemnify a director, officer, employee or agent of the corporation who was, is, or is threatened to be made, a party to any threatened, pending or completed legal action, suit or

proceeding, whether civil, criminal, administrative or investigative, because such person is or was a director, officer, agent or employee of the corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. This indemnity may include the obligation to pay any judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan) and reasonable expenses incurred in connection with a proceeding (including counsel fees), but no such indemnification may be granted unless such director, officer, agent or employee conducted himself in good faith, reasonably believed that his conduct in his official capacity with the corporation was in the best interests of the corporation or that in all other cases his conduct at least was not opposed to the corporation's best interests, and in the case of any criminal proceeding, had no reasonable cause to believe his conduct was unlawful.

A corporation may not indemnify a director, officer, agent or employee under the statutory scheme in connection with a proceeding by or in the right of the corporation in which the director, officer, agent or employee was adjudged liable to the corporation or in connection with a proceeding in which a director, officer, agent or employee was adjudged liable on the basis of having received an improper personal benefit. In addition, Section 55-8-57 of the North Carolina Business Corporation Act permits a corporation to indemnify or agree to indemnify any of its directors, officers, employees or agents against liability and expenses (including counsel fees) in any proceeding (including proceedings brought by or on behalf of the corporation) arising out of their status as such or their activities in any of such capacities; provided, however, that a corporation may not indemnify or agree to indemnify a person against liability or expenses such person may incur on account of activities that were, at the time taken, known or believed by the person to be clearly in conflict with the best interests of the corporation.

Sections 55-8-52 and 55-8-56 of the North Carolina Business Corporation Act require a corporation, unless limited by its articles of incorporation, to indemnify a director or officer who has been wholly successful, on the merits or otherwise, in the defense of any proceeding to which such director or officer was a party because he is or was a director of officer of the corporation against reasonable expenses incurred in connection with the proceeding. Unless a corporation's articles of incorporation provide otherwise, a director or officer also may apply for and obtain court-ordered indemnification if the court determines that such director or officer is fairly and reasonably entitled to such indemnification as provided in Sections 55-8-54 and 55-8-56. Finally, Section 55-8-57 of the North Carolina Business Corporation Act provides that a corporation may purchase and maintain insurance on behalf of an individual who is or was a director, officer, employee or agent of the corporation against liability asserted against or incurred by such persons, whether or not the corporation is otherwise authorized by the North Carolina Business Corporation Act to indemnify such party.

The bylaws of the North Carolina Registrant provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a "proceeding"), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. "Not opposed to the best interest of the corporation" shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

The corporation shall pay the actual and reasonable expenses incurred in defending a proceeding, other than a proceeding by or in the right of the corporation, in advance of its final disposition upon the receipt of an undertaking satisfactory to the corporation, which may require that such undertaking include a bond, security interest, or other security for such undertaking, by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the corporation.

Section 1031 of the Oklahoma General Corporation Act provides that an Oklahoma corporation may indemnify any persons, including officers and directors, who are, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer or director of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including ~~attorneys'~~attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such officer or director acted in good faith and in a manner he reasonably believed to be in or not opposed to the ~~corporation's~~corporation’s best interests and, for criminal proceedings, had no reasonable cause to believe that his conduct was illegal. An Oklahoma corporation may indemnify officers and directors in an action by or in the right of the corporation ~~under~~for expenses, including attorneys’ fees actually and reasonably incurred by the ~~same conditions,~~person in connection with the defense or settlement of an action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and, except that, no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is

successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director actually and reasonably incurred.

The bylaws of the Oklahoma Registrant provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. ~~"Not~~“Not opposed to the best interest of the ~~corporation"~~corporation” shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

The corporation shall pay the actual and reasonable expenses incurred in defending a proceeding, other than a proceeding by or in the right of the corporation, in advance of its final disposition upon the receipt of an undertaking satisfactory to the corporation, which may require that such undertaking include a bond, security interest, or other security for such undertaking, by or on behalf of such person to repay such amount if it shall ultimately be determined that the person is not entitled to be indemnified by the corporation.

Sections 1741 and 1742 of the Pennsylvania Business Corporation Law ~~("PBCL"~~(“PBCL”), provides, that a corporation may indemnify directors and officers against liabilities they may incur as such, provided that the particular person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. In the case of actions against a director or officer by or in the right of the corporation, the power to indemnify generally does not exist if the person otherwise entitled to indemnification shall have been adjudged to be liable to the corporation unless it is judicially determined that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnification for specified expenses.

Under Section 1743 of the PBCL, the corporation is required to indemnify directors and officers against expenses they may incur in defending actions against them in such capacities if they are successful on the merits or otherwise in the defense of such actions. Under Section 1745 of the PBCL, a corporation may pay the expenses of a director or officer incurred in defending an action or proceeding in advance of the final disposition thereof upon receipt of an undertaking from such person to repay the amounts advanced unless it is ultimately determined that such person is entitled to indemnification from the corporation.

The bylaws of the Pennsylvania Registrant provide, in relevant part, that the corporation shall indemnify each person who is or was a director or officer of the corporation (including the heirs, executors, administrators or estate of such person) and is permitted to indemnify each person who is or was an employee, agent or representative of the corporation (including the heirs, executors, administrators or estate of such person) or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, all to the full extent permitted under Chapter 17, subchapter D of the PBCL or any successor provisions of the laws of the Commonwealth of Pennsylvania, including without limitation the payment of fees and expenses of defense as incurred.

Expenses incurred by a person who is or was a director, officer, employee, agent or representative of the corporation (including the heirs, executors, administrators or estate of such person) or is or was serving at the request of the corporation as a director, officer, employer or agent of another corporation, partnership, joint venture, trust or other enterprise in defending a civil or criminal action, suit, or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, to the full extent permitted by and in accordance with section 1745 of the PBCL or any successor provisions of the laws of the Commonwealth of Pennsylvania.

~~Concord Equipment Sales, Inc.,~~ CTS, ~~Inc., EFS Transportation Services,~~ Inc. and ~~H & F~~EFS Transportation Services, Inc. are incorporated under the laws of Tennessee.

The Tennessee Business Corporation Act ~~("TBCA"~~(“TBCA”) sets forth in Sections 48-18-502 through 48-18-508 the circumstances governing the indemnification of directors, officers, employees and agents of a corporation against liability incurred in the course of their official capacities. Section 48-18-502 of the TBCA provides that a corporation may indemnify any director against liability incurred in connection with a proceeding if the director acted in good faith, reasonably believed, in the case of conduct in his or her official capacity with the corporation, that such conduct was in the ~~corporation's~~corporation’s best interest, or, in all other cases, that his or her conduct was not opposed to the best interests of the corporation and in connection with any criminal proceeding, had no reasonable cause to believe that

his or her conduct was unlawful. In actions brought by or in the right of the corporation, however, the TBCA provides that no indemnification may be made if the director is adjudged to be liable to the corporation. Similarly, the TBCA prohibits indemnification in connection with any proceeding charging improper personal benefit to a director, if such director is adjudged liable on the basis that a personal benefit was improperly received. In cases where the director is wholly successful, on the merits or otherwise, in the defense of any proceeding instigated because of his or her status as a director of a corporation, Section 48-18-503 of the TBCA mandates that the corporation indemnify the director against reasonable expenses incurred in the proceeding. Notwithstanding the foregoing, Section 48-18-505 of the TBCA provides that a court of competent jurisdiction, upon application, may order that a director or officer be indemnified for reasonable expense if, in consideration of all relevant circumstances, the court determines that such individual is fairly and reasonably entitled to indemnification, whether or not the standard of conduct set forth above was met.

Officers, employees, and agents who are not directors are entitled, through the provisions of Section 48-18-507 of the TBCA to the same degree of indemnification afforded to directors under Sections 48-18-503 and 48-18-505.

The bylaws of ~~Concord Equipment Sales, Inc.,~~ EFS Transportation Services, Inc. ~~and H & F Services, Inc. provide,~~provides, in relevant part, that each person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"Proceeding"~~“Proceeding”), by reason of being or having been a director or officer of the corporation or serving or having served at the request of the corporation as a director, trustee, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan (an ~~"Indemnitee"~~“Indemnitee”), whether the basis of such proceeding is alleged action or failure to act in an official capacity as a director, trustee, officer, employee or agent or in any other capacity while serving as a director, trustee, officer, employee or agent, shall be indemnified and held harmless by the Registrant to the fullest extent authorized by the TBCA, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than permitted prior thereto), against all expense, liability and loss (including ~~attorneys'~~attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred or suffered by such Indemnitee in connection therewith and such indemnification shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee or agent and shall inure to the benefit of the ~~Indemnitee's~~Indemnitee’s heirs, executors and administrators; provided, however, that, the corporation shall indemnify any such Indemnitee in connection with a Proceeding (or part thereof) initiated by such Indemnitee only if such Proceeding (or part thereof) was authorized by the board of directors of the corporation.

The right to indemnification shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending any such Proceeding in advance of its final disposition (an ~~"Advancement~~“Advancement of ~~Expenses"~~Expenses”); provided, however, that, if the TBCA so requires, and Advancement of Expenses incurred by an Indemnitee shall be made only upon delivery to the corporation of an undertaking (an ~~"Undertaking"~~“Undertaking”), by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from which there is no further right to appeal (a ~~"Final Adjudication"~~“Final Adjudication”) that such Indemnitee is not entitled to be indemnified for such expenses.

The bylaws of CTS, Inc. provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust

or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. ~~"Not~~“Not opposed to the best interest of the ~~corporation"~~corporation” shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

(a) FundsXpress Financial Network, Inc. ~~and Shared Global Systems, Inc. are~~is incorporated under the laws of Texas.

Under Article 2.02-1 of the Texas Business Corporation Act ~~("TBCA"~~(“TBCA”), a company may indemnify any person who was, is or is threatened to be made a named defendant or respondent in a proceeding because the person is or was a director, officer, employee or agent against judgment, penalties (including excise and similar taxes), fines, settlements, and reasonable expenses (including court costs and ~~attorneys'~~attorneys’ fees) actually incurred by the person in connection with the proceeding if it is determined that the person seeking indemnification acted in good faith, reasonably believed that his or her conduct was in or at least not opposed to the ~~corporation's~~corporation’s best interests, and in the case of a criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.

A company is required by Article 2.02-1 of the TBCA to indemnify a director or officer against reasonable expenses (including court costs and ~~attorneys'~~attorneys’ fees) incurred by the director or officer in connection with a proceeding in which the director or officer is a named defendant or respondent because the director or officer is or was in that position if the director or officer has been wholly successful, on the merits or otherwise, in the defense of the proceeding. The TBCA prohibits a company from indemnifying a director or officer in respect of a proceeding in which the person is found liable to the company or on the basis that a personal benefit was improperly received by him or her, other than for reasonable expenses (including court costs and ~~attorneys'~~attorneys’ fees) actually incurred by him or her in connection with the proceeding; provided, that the TBCA further prohibits a company from indemnifying a director or officer in respect of any such proceeding in which the person is found liable for willful or intentional misconduct in the performance of his or her duties.

Under Article 2.02-1(J) of the TBCA, a court of competent jurisdiction may order a company to indemnify a director or officer if the court determines that the director or officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances; however, if the director or officer is found liable to the company or is found liable on the basis that a personal benefit was improperly received by him or her, the indemnification will be limited to reasonable expenses (including court costs and ~~attorneys'~~attorneys’ fees) actually incurred by him or her in connection with the proceeding.

A corporation may purchase and maintain insurance or another arrangement on behalf of a director or officer against any liability asserted against him and incurred by him in such a capacity or

arising out of his status as such a person, whether or not the corporation would have the power to indemnify him against that liability under this article.

The bylaws of the Texas ~~Registrants~~Registrant in this section (a) provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”), other than a proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. ~~"Not~~“Not opposed to the best interest of the ~~corporation"~~corporation” shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

Under the Texas Revised Limited Partnership Act (the ~~"TRLPA"~~“TRLPA”), a general partner must be indemnified by the limited partnership in cases in which the general partner is wholly successful on the merits or in the defense of the proceedings. Section 11.02 of the TRLPA provides that a limited partnership may indemnify a person who was, is or is threatened to be named a defendant in a proceeding only if that person acted in good faith, reasonably believed, in the case of conduct in the ~~person's~~person’s official capacity as a general partner of the limited partnership, that the ~~person's~~person’s conduct was in the limited ~~partnership's~~partnership’s best interests and in all other cases, that the ~~person's~~person’s conduct was at least not opposed to the limited ~~partnership's~~partnership’s best interests and in the case of a criminal proceeding, had no reasonable cause to believe that the ~~person's~~person’s conduct was unlawful. If a person is found liable to the limited partnership or the limited partners or is found liable on the basis that the person improperly received personal benefit, the indemnification is limited to reasonable expenses actually incurred by the person in connection with the proceeding and shall not be made in relation to a proceeding in which the person has been found liable for willful or intentional misconduct in the performance of the ~~person's~~person’s duty to the limited partnership or the limited partners. The TRLPA allows a Texas limited partnership to indemnify ~~anyone~~and advance expenses to persons who ~~was, is~~are not or ~~is threatened to be made~~were not limited partners, employees, or agents of the limited partnership but who are or were serving at the request of the limited partnership as a ~~defendant or respondent in a proceeding~~representative of another enterprise and allows a limited partnership to purchase and maintain liability insurance for such person, whether or not the partnership would have the power to indemnify such person against such liability.

The Limited Partnership Agreement of the Texas Registrant in this section (b), provides that neither the General Partner, any Limited Partner, nor any of their respective officers, directors, or employees shall be liable, responsible or accountable in damages or otherwise to the Partnership or the Partners for any act or omission performed or made (i) with respect to the General Partner and its officers, directors, or employees, by any of them in the capacity as a General Partner or any other capacity in which any of them act at the request of the Partnership or otherwise, and (ii) with respect to the Limited Partners and their officers, directors, or employees, by any of them in any capacity in

which any of them act at the request of the Partnership or otherwise, if, in either case, such Person shall not have been guilty of gross negligence or willful misconduct with respect to such act or omission. Without limitation of the foregoing, no Partner, its officers, directors, and employees shall be so liable, responsible or accountable for any allocation, distribution or other act or omission performed or made by them in good faith reliance on financial statements of the Partnership reported on by independent certified public accountants or for any act or omission performed or made by them in good faith reliance on advice of legal counsel. No Partner nor any of its officers, directors, or employees shall be liable, responsible or accountable in damages or otherwise to the Partnership or any other Partner for any act or omission if such Person shall have been merely negligent with respect to such act or omission.

The Partnership shall have the power and authority to and shall, and the General Partner is directed on behalf of the Partnership to, indemnify and hold harmless, and advance and reimburse expenses related thereto to, the General Partner, the Limited Partner, and any of their partners, members, officers, directors, shareholders and employees, to the fullest extent permitted by the Act and any other applicable law; provided, however, that this indemnification shall be satisfied only out of assets of the Partnership and not out of assets of the Partners.

Section 23B.08.510 of the Washington Business Corporation Act (the ~~"WBCA"~~“WBCA”) provides, in relevant part, that a corporation may indemnify an individual made a party to a proceeding because the individual is or was a director against liability incurred in the proceeding if the individual acted in good faith, if the individual reasonably believed in the case of conduct in the ~~individual's~~individual’s official capacity with the corporation, that the ~~individual's~~individual’s conduct was in its best interests; and in all other cases, that the ~~individual's~~individual’s conduct was at least not opposed to its best interests. In the case of any criminal proceeding, the individual must have had no reasonable cause to believe the ~~individual's~~individual’s conduct was unlawful. A corporation may not indemnify a director under this section in connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or in connection with any other proceeding charging improper personal benefit to the director, whether or not involving action in the ~~director's~~director’s official capacity, in which the director was adjudged liable on the basis that personal benefit was improperly received by the director. Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.

Section 23B.08.520 of the WBCA provides that unless limited by its articles of incorporation, a corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party because of being a director of the corporation against reasonable expenses incurred by the director in connection with the proceeding. Section 23B.08.570 provides that unless a ~~corporation's~~corporation’s articles of incorporation provide otherwise, an officer of the corporation who is not a director will be entitled to mandatory indemnification to the same extent as directors, and that a corporation may provide for indemnification of officers to the same extent as directors. A corporation may also indemnify an officer who is not a director to the extent, consistent with the law, that may be provided by its articles of incorporation, bylaws, general or specific action of its board of directors, or contract.

The bylaws of the Washington Registrant provide, in relevant part, that the corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a ~~"proceeding"~~“proceeding”), other than a

proceeding by or in the right of the corporation, by reason of the fact that the person is or was a director, officer, or employee of the corporation, or is or was serving at the

request of the corporation as a director, officer, or employee of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with the defense of such proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe their conduct was unlawful. ~~"Not~~“Not opposed to the best interest of the ~~corporation"~~corporation” shall include actions taken in service to an employee benefit plan that are in the interest of the participants and beneficiaries of the employee benefit plan.

First Data maintains a ~~directors'~~directors’ and ~~officers'~~officers’ liability insurance policy that covers the directors and officers of each of the registrants in amounts that First Data believes are customary for companies similarly situated, including for liabilities in connection with the registration, offering and sale of the notes.

In addition, pursuant to the Management Agreement entered into with the Sponsors and their affiliates, First Data has agreed to customary exculpation and indemnification provisions for the benefit of the Sponsors, their affiliates, directors, officers and certain other persons. See ~~"Certain~~“Certain Relationships and Related Party Transactions—Sponsor Management ~~Agreement"~~Agreement” in the prospectus included in this registration statement.

(b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

(c) Each of the undersigned registrants hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4 within one business day of receipt of such request and to send the incorporated documents by first class mail or equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.

(d) Each of the undersigned registrants ~~hereby~~ hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of ~~Greenwood Village,~~Atlanta, State of ~~Colorado,~~Georgia, on ~~August 13, 2008.~~October 17, 2011.

Each person whose signature appears below authorizes David R. Money, Stanley J. Andersen, or any of them, as his or her attorney in fact and agent, with full power of substitution and resubstitution, to execute, in his name and on his behalf, in any and all capacities, a Registration Statement on Form S-4 and any amendments including post-effective amendments thereto (and any additional registration statement related thereto permitted by Rule 462(b) promulgated under the Securities Act of 1933 (and all further amendments including post-effective amendments thereto)), relating to an offer to exchange 9⁷/8% Senior Notes due 2015 (the "Notes") of First Data Corporation, as contemplated under the Registration Rights Agreement, dated as of October 24, 2007, among First Data Corporation, the subsidiary guarantors party thereto, Citigroup Global Markets Inc., as representative of the several initial purchasers, and any amendments including post-effective amendments thereto, and to file the same, with all the exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, necessary or advisable to enable the registrant to comply with the Securities Act of 1933, and any rules, regulations and requirements of the Securities and Exchange Commission, in respect thereof, in connection with the registration of the Notes which are the subject of such Registration Statement, as the case may be, which amendments may make such changes in such Registration Statement, as the case may be, as such attorney may deem appropriate, and with full power and authority to perform and do any and all acts and things, whatsoever which any such attorney or substitute may deem necessary or advisable to be performed or done in connection with any or all of the above-described matters, as fully as each of the undersigned could do if personally present and acting, hereby ratifying and approving all acts of any such attorney or substitute.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of ~~Greenwood Village,~~Omaha, State of ~~Colorado,~~Nebraska, on ~~August 13, 2008.~~October 17, 2011.