EPAM Systems
Annual Report 2012

Plain-text annual report

Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the Fiscal Year Ended December 31, 2012OR ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934Commission file number: 001-35418 EPAM SYSTEMS, INC.(Exact Name of Registrant as Specified in its Charter) Delaware 223536104(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.)EPAM Systems, Inc.41 University Drive,Suite 202Newtown, Pennsylvania 18940(Address of principal executive offices, including zip code)267-759-9000(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per share New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: None. Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant wasrequired to submit and post such files). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. ¨Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer ¨Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No xAs of June 30, 2012 the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $313 million basedon the closing sale price as reported on the New York Stock Exchange. Solely for purposes of the foregoing calculation, “affiliates” are deemed to consist ofeach officer and director of the registrant, and each person known to the registrant to own 10% or more of the outstanding voting power of the registrant.The number of shares of common stock, $0.001par value, of the registrant outstanding as of March 1, 2013 was 44,903,909 shares. DOCUMENTS INCORPORATED BY REFERENCEThe registrant intends to file a definitive Proxy Statement for its 2013 annual meeting of stockholders pursuant to Regulation 14A within 120 days of theend of the fiscal year ended December 31, 2012. Portions of the registrant’s Proxy Statement are incorporated by reference into Part III of this Form 10-K. Withthe exception of the portions of the Proxy Statement expressly incorporated by reference, such document shall not be deemed filed with this Form 10-K. Table of ContentsEPAM SYSTEMS, INC.FORM 10-KFOR THE YEAR ENDED DECEMBER 31, 2012TABLE OF CONTENTS PART I 2Item 1. Business 2Item 1A. Risk Factors 12Item 1B. Unresolved Staff Comments 30Item 2. Properties 31Item 3. Legal Proceedings 31Item 4. Mine Safety Disclosures 31PART II 32Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 32Item 6. Selected Financial Data 33Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 35Item 7A. Quantitative and Qualitative Disclosures About Market Risk 51Item 8. Financial Statements and Supplementary Data 53Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 53Item 9A. Controls and Procedures 53Item 9B. Other Information 54PART III 55Item 10. Directors, Executive Officers and Corporate Governance 55Item 11. Executive Compensation 55Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 55Item 13. Certain Relationships and Related Transactions, and Director Independence 55Item 14. Principal Accountant Fees and Services 55PART IV 56Item 15. Exhibits, Financial Statement Schedules 56 In this annual report, “EPAM,” “EPAM Systems, Inc.,” the “Company,” “we,” “us” and “our” refer to EPAM Systems, Inc. and its consolidatedsubsidiaries. “EPAM” is a trademark of EPAM Systems, Inc. “CMMI” is a trademark of the Software Engineering Institute of Carnegie Mellon University. “ISO9001:2000” and “ISO 27001:2005” are trademarks of the International Organization for Standardization. All other trademarks and servicemarks used hereinare the property of their respective owners. Unless otherwise indicated, information contained in this annual report concerning our industry and the markets in which we operate, including ourgeneral expectations and market position, market opportunity and market share, is based on information from various sources (including industrypublications, surveys and forecasts and our internal research), on assumptions that we have made, which we believe are reasonable, based on those data andother similar sources and on our knowledge of the markets for our services. The projections, assumptions and estimates of our future performance and thefuture performance of the industry in which we operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, includingthose described under “Item 1A. Risk Factors” and elsewhere in this annual report. These and other factors could cause results to differ materially from thoseexpressed in the estimates included in this annual report. iTable of ContentsSPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis annual report on Form 10-K contains estimates and forward-looking statements, principally in “Item 1. Business,” “Item 1A. Risk Factors” and“Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Our estimates and forward-looking statements are mainlybased on our current expectations and estimates of future events and trends, which affect or may affect our businesses and operations. Although we believethat these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are madein light of information currently available to us. Important factors, in addition to the factors described in this annual report, may adversely affect our resultsas indicated in forward-looking statements. You should read this annual report and the documents that we have filed as exhibits hereto completely and with theunderstanding that our actual future results may be materially different from what we expect.The words “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “might,” “would,”“continue” or the negative of these terms or other comparable terminology and similar words are intended to identify estimates and forward-looking statements.Estimates and forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation toupdate, to revise or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, theestimates and forward-looking statements discussed in this annual report might not occur and our future results, level of activity, performance orachievements may differ materially from those expressed in these forward-looking statements due to, including, but not limited to, the factors mentionedabove, and the differences may be material and adverse. Because of these uncertainties, you should not place undue reliance on these forward-lookingstatements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise,except as may be required under applicable law.EMERGING GROWTH COMPANY STATUSIn April 2012, several weeks after our initial public offering in February 2012, President Obama signed into law the Jumpstart Our Business StartupsAct of 2012 (the “JOBS Act”). The JOBS Act contains provisions that relax certain requirements for “emerging growth companies” that otherwise apply tolarger public companies. For as long as a company retains emerging growth company status, which may be until the fiscal year-end after the fifth anniversaryof its initial public offering, it will not be required to (1) provide an auditor’s attestation report on its management’s assessment of the effectiveness of itsinternal control over financial reporting, otherwise required by Section 404(b) of the Sarbanes-Oxley Act of 2002, (2) comply with any new or revised financialaccounting standard applicable to public companies until such standard is also applicable to private companies, (3) comply with certain new requirementsadopted by the Public Company Accounting Oversight Board, (4) provide certain disclosure regarding executive compensation required of larger publiccompanies or (5) hold shareholder advisory votes on matters relating to executive compensation.We are classified as an emerging growth company, under the JOBS Act and are eligible to take advantage of the accommodations described above for aslong as we retain this status. However, we have elected not to take advantage of the transition period described in (2) above, which is the exemption provided inSection 7(a)(2)(B) of the Securities Act of 1933 and Section 13(a) of the Securities Exchange Act of 1934 (in each case as amended by the JOBS Act) forcomplying with new or revised financial accounting standards. We will therefore comply with new or revised financial accounting standards to the same extentthat a non-emerging growth company is required to comply with such standards. 1Table of ContentsPART I Item 1.BusinessOverviewWe are a leading provider of complex software engineering solutions and technology services with delivery capacity distributed across Central andEastern Europe. Our clients rely on us to deliver a broad range of software engineering and IT services, with a significant share of proactive, domain-led, high-value services aimed at improving the client’s ability to innovate and cut time to market. We draw on our extensive vertical, technology andprocess/methodology expertise and leverage industry standard technology, tools, platforms as well a portfolio of internally and externally developed assets inour delivery. We primarily focus on building long-term partnerships with clients in industries that demand technologically advanced skills and solutions,such as independent software vendors, or ISVs and Technology, Banking and Finance, Business Information and Media, and Travel and Consumer. Wedeliver services to clients located primarily in North America, Western Europe, and Central and Eastern Europe, or CEE.Since our inception in 1993, we have been serving ISVs and Technology companies. These companies produce advanced software and technologyproducts that demand sophisticated software engineering talent, tools, methodologies and infrastructure to deliver solutions that support functionality andconfigurability to sustain multiple generations of platform innovation. The foundation we have built serving ISVs and technology companies has enabled us todifferentiate ourselves in the market for software engineering skills and technology capabilities. Our work with these clients exposes us to their customers’challenges across a variety of industry verticals. This has enabled us to develop vertical-specific domain expertise and grow our business in multiple industryverticals, including Banking and Financial Services, Business Information and Media, and Travel and Consumer.Our historical core competency is full lifecycle software development and product engineering services including design and prototyping, productdevelopment and testing, component design and integration, product deployment, performance tuning, porting and cross-platform migration. We havedeveloped extensive experience in each of these areas by working collaboratively with leading ISVs and technology companies, creating an unparalleledfoundation for the evolution of our other offerings, which include custom application development, application testing, enterprise application platforms,application maintenance and support, and infrastructure management.We believe the quality of our employees underpins our success and serves as a key point of differentiation in how we deliver a superior value propositionto our clients. Our delivery centers in Belarus, Ukraine, Russia, Hungary, Kazakhstan and Poland are strategically located in centers of software engineeringtalent and educational excellence across CEE, and the Commonwealth of Independent States, or the CIS. CEE includes Albania, Belarus, Bosnia andHerzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Republic of Macedonia, Romania, Russia, Serbia andMontenegro, Slovakia, Slovenia, the former Yugoslav Republic of Macedonia, Turkey and Ukraine. The CIS is comprised of constituents of the formerU.S.S.R., including Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine andUzbekistan. Our highly-skilled information technology, or IT, professionals, combined with our extensive experience in delivering custom solutions that meetour clients’ pressing business needs, has allowed us to develop a deep culture of software engineering excellence. We believe this culture enables us to attract,train and retain talented IT professionals.We employ highly-educated IT professionals, nearly all of whom hold a master’s equivalent university degree in math, science or engineering and areproficient in English. To ensure we attract the best candidates from this deep talent pool, we have developed close relationships with leading universities acrossCEE, whereby we actively support curriculum development and engage students to identify their talents and interests. We continue to expand these effortsthroughout the major talent hubs within CEE.Since inception, we have invested significant resources into developing a proprietary suite of internal applications and tools to manage all aspects of ourdelivery process. These applications and tools are effective in reducing risks, such as security breaches and cost overruns, while providing control andvisibility across all project lifecycle stages to both us and our clients. In addition, these applications and tools enable us to provide solutions using the optimalsoftware product development methodologies, including iterative methodologies such as Agile development. Our applications, tools, methodologies andinfrastructure allow us to seamlessly deliver services and solutions from our delivery centers to global clients, thereby further strengthening our relationshipswith them.We believe we are the only ISAE 3000 Type II certified IT services provider with multiple delivery centers in CEE, based on our analysis of publiclyavailable information of IT services providers. This certification is a widely recognized auditing standard developed by the American Institute of CertifiedPublic Accountants, or AICPA, and it serves as additional assurance to our clients that are required to validate the controls in place to protect the security oftheir sensitive data. Furthermore, this is an important certification for firms in data and information-intensive industries, as well as any organization that issubject to the internal controls certification requirements of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act. Our ISAE 3000 Type IIcertification, in addition to our multiple ISO/IEC 27001:2005 and ISO 9001:2000 attestations, underscores our focus on establishing stringent securitystandards and internal controls. 2Table of ContentsOur clients primarily consist of Forbes Global 2000 corporations located in North America, Europe and the CIS. We maintain a geographically diverseclient base with 47.7% of our 2012 revenues from clients located in North America, 35.8% from clients in Europe and 15.0% from clients in the CIS. Ourfocus on delivering quality to our clients is reflected by an average of 91.9% and 82.0% of our revenues in 2012 coming from clients that had used ourservices for at least one and two years, respectively. In addition, we have significantly grown the size of existing accounts. For example, from 2008 to 2012 thenumber of clients accounting for over $5.0 million in annual revenues increased from 7 to 16, and those accounting for $1.0 million or more in revenuesincreased from 42 to 81.Our ApproachSince our inception, we have focused on software product development services, which we have refined through repeat, multi-year engagements withmajor ISVs. Unlike custom application development, which is usually tailored to very specific business requirements, software products of ISVs must bedesigned with a high level of product configurability and operational performance to address the needs of a diverse set of end-users working in multipleindustries and operating in a variety of deployment environments. This demands a strong focus on upfront design and architecture, strict software engineeringpractices, and extensive testing procedures.Our focus on software product development services for ISVs and technology companies requires high-quality software engineering talent, advancedknowledge of up-to-date methodologies and productivity tools, and strong project management practices. As a result, we have developed a culture focused oninnovation, technology leadership and process excellence, which helps us maintain a strong reputation with our clients for technical expertise and high-qualityproject delivery.Our work with ISVs and technology companies, including both global leaders in enterprise software platforms and emerging, innovative technologycompanies focusing on new trends, exposes us to their customers’ business and strategic challenges, allowing us to develop vertical-specific domain expertise.In-depth understanding of how vertically-oriented ISVs and technology companies solve their clients’ challenges allows us to focus and grow our business inmultiple industries, including Banking and Financial Services, Business Information and Media, and Travel and Consumer.Our ServicesOur service offerings cover the full software and product development lifecycle from digital strategy and customer experience design to enterpriseapplication platforms implementation and program management services and from complex software development services to maintenance, support, customapplication development, application testing, and infrastructure management. Our key service offerings include:Software Product Development ServicesWe provide a comprehensive set of software product development services including product research, customer experience design and prototyping,program management, component design and integration, full lifecycle software testing, product deployment and end-user customization, performance tuning,product support and maintenance, managed services, as well as porting and cross-platform migration. We focus on software products covering a wide range ofbusiness applications as well as product development for multiple mobile platforms and embedded software product services.Custom Application Development ServicesWe offer complete custom application development services to meet the requirements of businesses with sophisticated application development needs notadequately supported by packaged applications or by existing custom solutions. Our custom application development services leverage our experience insoftware product development as well as our industry expertise, prebuilt application solution frameworks and specific software product assets. Our range ofservices includes business and technical requirements analysis, user experience design, solution architecture creation and validation, development, componentdesign and integration, quality assurance and testing, deployment, performance tuning, support and maintenance, legacy applications re-engineering/refactoring, porting and cross-platform migration and documentation.Application Testing ServicesWe maintain a dedicated group of testing and quality assurance professionals with experience across a wide range of technology platforms and industryverticals. Our Quality Management System complies with global quality standards such as ISO 9001:2000 and we employ industry-recognized andproprietary defect tracking tools to deliver a comprehensive range of testing services. Our application testing services include: (i) software application testing,including test automation tools and frameworks; (ii) testing for enterprise IT, including test management, automation, functional and non-functional testing,as well as defect management; and (iii) consulting services focused on helping clients improve their existing software testing and quality assurance practices. 3Table of ContentsEnterprise Application PlatformsAs a proven provider of software product development services to major ISVs, we have participated in the development of industry standard technologyand business application platforms and their components in such specific areas as customer relationship management and sales automation, enterpriseresource planning, enterprise content management, business intelligence, e-commerce, mobile, Software-as-a-Service and cloud deployment. Our experience insuch areas allows us to offer services around Enterprise Application Platforms, which include requirements analysis and platform selection, deep and complexcustomization, cross-platform migration, implementation and integration, as well as support and maintenance. We use our experience, custom tools andspecialized knowledge to integrate our clients’ chosen application platforms with their internal systems and processes and to create custom solutions filling thegaps in their platforms’ functionality necessary to address the needs of the clients’ users and customers.Application Maintenance and SupportWe deliver application maintenance and support services through a dedicated team of IT professionals. Our application maintenance and supportofferings meet rigorous CMMI and ISAE 3000 Type II requirements. Our clients benefit from our proprietary distributed project management processes andtools, which reduce the time and costs related to maintenance, enhancement and support activities. Our services include incident management, faultinvestigation diagnosis, work-around provision, application bug fixes, release management, application enhancements and third-party maintenance.Infrastructure Management ServicesGiven the increased need for tighter enterprise integration between software development, testing and maintenance with private, public and mobileinfrastructures, our service offerings also cover infrastructure management services. We have significant expertise in implementing large infrastructuremonitoring solutions, providing real-time notification and control from the low-level infrastructure up to and including applications. Our ISAE 3000 Type II,ISO/IEC 27001:2005 and ISO 9001:2000 certifications provide our clients with third-party verification of our information security policies. Our solutionscover the full lifecycle of infrastructure management including application, database, network, server, storage and systems operations management, as well asincident notification and resolution.Our VerticalsStrong vertical-specific domain knowledge backed by extensive experience merging technology with the business processes of our clients allows us todeliver tailored solutions to the following industry verticals: • ISVs and Technology; • Banking and Financial Services; • Business Information and Media; and • Travel and Consumer.We also serve the diverse technology needs of clients in the energy, telecommunications, automotive, manufacturing, insurance and life sciencesindustries and the government.The following table sets forth our revenues by vertical by amount and as a percentage of our revenues for the periods presented: Year Ended December 31, 2012 2011 2010 (in thousands, except percent) Vertical Banking and Financial Services $111,941 25.8% $76,645 22.9% $43,019 19.4% ISVs and Technology 106,852 24.6 84,246 25.2 64,905 29.3 Travel and Consumer 95,965 22.1 71,488 21.4 36,135 16.3 Business Information and Media 62,398 14.4 63,988 19.1 46,146 20.8 Other verticals 50,226 11.6 31,985 9.6 27,846 12.5 Reimbursable expenses and other revenues 6,417 1.5 6,176 1.8 3,773 1.7 Revenues $433,799 100.0% $334,528 100.0% $221,824 100.0% ISVs and Technology. ISVs and technology companies have a constant need for innovation and rapid time-to-market. Since inception, we have focusedon providing complex software product development services to leading global ISVs and technology companies to meet these demands. Through our experiencewith many industry leaders, we have developed rigorous standards for 4Table of Contentssoftware product development, as well as proprietary internal processes, methodologies and IT infrastructure. Our services span the complete softwaredevelopment lifecycle for software product development, testing and performance tuning, deployment and maintenance and support. We offer a comprehensiveset of software development methodologies, depending on client requirements, from linear or sequential methodologies such as waterfall, to iterativemethodologies such as Agile. In addition, we are establishing close partner relationships with many of our ISV and technology company clients and areoffering distributed professional services around their product offerings directly to our corporate clients.Banking and Financial Services. We established our Banking and Financial Services vertical in 2006 and have significant experience working withglobal retail and investment banks, investment firms, depositories, corporate treasuries, pension funds and market data providers. We offer a broad portfolioof services in asset and wealth management, corporate and retail banking, cards and payments, investment banking and brokerage, research and analysis, aswell as governance, risk and compliance. We have also established a Capital Markets Competency Center, which facilitates knowledge exchange, educationand collaboration across our organization and develops new software products, frameworks and components to further enhance our industry-specificsolutions and services.Business Information and Media. We have established long term relationships with leading business information and media companies, whichenable us to bring sustainable value creation and enhanced return-on-content for organizations within this vertical. Our solutions help clients develop newrevenue sources, accelerate the creation, collection, packaging and management of content and reach broader audiences. We serve clients in a range of businessinformation and media sub-sectors, including entertainment media, news providers, broadcasting companies, financial information providers, contentdistributors and advertising networks. Our Business Information Competency Center enables us to provide our clients with solutions that help them overcomechallenges related to operating legacy systems, manage varied content formats, rationalize their online assets and lower their cost of delivery. In addition, weprovide knowledge discovery platform services through our InfoNgen business, which combines custom taxonomy development with web crawling, internalfile and e-mail classification, newsletter and feed publication and content trend analysis.Travel and Consumer. We have extensive experience in designing, implementing and supporting solutions for the travel and hospitality industry. Thishas led to the development of a substantial repository of knowledge components and solutions, such as our Loyalty, Marketing and Booking Engineframeworks, which results in accelerated development and implementation of solutions, while ensuring enterprise-class reliability. Our capabilities span arange of platforms, applications and solutions that businesses in travel and hospitality use to serve their customers, capture management efficiencies, controloperating expenses and grow revenues.We also work closely with leading companies in the retail and consumer industry to enable our clients to better leverage technology and addresssimultaneous pressures of driving value for the consumer and offering a more engaging experience. Our expertise allows us to integrate our services with ourclients’ existing enterprise resource planning, billing fulfillment and customer relationship management solutions. Our digital strategy and experience designpractice, EPAM Empathy Lab, provides strategy, design, creative, and program management services for clients looking to improve their customer experience.We also offer deep expertise across several domains including business-to-business and business-to-consumer e-commerce, customer/partners self-service,employee portals, online merchandising and sales, web content management, mobile solutions and billing.Our Delivery ModelWe have delivery centers located in Belarus, Ukraine, Russia, Hungary, Kazakhstan and Poland. We have client management locations in the UnitedStates, Canada, United Kingdom, Germany, Sweden, Switzerland, Russia and Kazakhstan. We believe the development of a robust global delivery modelcreates a key competitive advantage, enabling us to better understand and meet our client’s diverse needs and provide a compelling value proposition.Our primary delivery centers with approximately 3,350 IT professionals are located in Belarus, the majority of which are located in Minsk, the capitalof Belarus, which is a major educational and industrial center in CEE. It is well-suited to serve as a prime IT outsourcing destination given its strongindustrial base, good educational infrastructure and legacy as the center of computer science for the former Soviet Union. Furthermore, the IT industry inBelarus has been strongly supported by the government, which has taken steps to encourage investment in the IT sector through long-term tax incentives.Our delivery centers in Ukraine have approximately 2,330 IT professionals. Ukraine promotes the growth of a domestic IT outsourcing export industrythat is supported by regulation, intellectual property protection and a favorable investment climate.Our delivery centers in Russia have approximately 1,210 IT professionals. Our locations in Ukraine and Russia offer many of the same benefits asBelarus, including educational infrastructure, availability of qualified software engineers and government sponsorship of the IT industry. We believe ourlocations in Ukraine and Russia, along with our delivery centers in Belarus, offer a strong and diversified delivery platform across CEE.Our delivery centers in Hungary have approximately 775 IT professionals and serve as the center for our nearshore delivery capabilities to Europeanclients. Hungary’s geographic proximity, cultural affinity and similar time zones with our clients in Europe 5Table of Contentsenables increased interaction that creates closer client relationships, increased responsiveness and more efficient delivery of our solutions.Our client management locations maintain account management and production personnel with significant project management capabilities, whichenable us to work seamlessly with our clients and delivery centers. Our onsite and offshore delivery teams are linked together through common processes andcollaboration applications and tools and a communications infrastructure that features a secure and redundant environment enabling global collaboration.Quality and Process ManagementWe have built complex proprietary applications and tools to manage quality, security and transparency of the delivery process in a distributedenvironment. Our proprietary ISO 9001:2000 and CMMI-certified Quality Management System has been documented, implemented and maintained to ensurethe timely delivery of software development services to our clients. We have also developed sophisticated project management techniques facilitated through ourProject Management Center, a web-based collaborative environment for software development which we consider critical to meeting or exceeding the servicelevels required by our clients.Our Quality Management System ensures that we provide timely delivery of software development services to enhance client satisfaction by enabling: • objective valuation of the performed process, work products and services against the client’s process descriptions, standards and procedures; • identification, documentation and timely resolution of noncompliance issues; • feedback to the client’s project staff and managers on the results of quality assurance activities; • monitoring and improvement of the software development process to ensure adopted standards and procedures are implemented and flaws aredetected and resolved in a timely manner; and • execution of planned and systematic problem prevention activities.Our proprietary Project Management Center supports our software development delivery model. Our Project Management Center is effective in reducingrisks and providing control and visibility across all project lifecycle stages based on the following features: • multi-site, multi-project capabilities; • activity-based software development lifecycle, which fully tracks the software development activities through the project documentation; • project, role-based access control, which can be available to us, clients and third parties; • fully configurable workflow engine with built-in notification and messaging; • extensive reporting capabilities and tracking of key performance indicators; and • integration with Microsoft Project and Outlook.The transparency and visibility into software development project deliverables, resource management, team messaging and project-related documentsand files provided by our Project Management Center promotes collaboration and strengthens our relationships with our clients. Improved traceability enablessignificant time savings and cost reductions for business users and IT management during change management for the software development lifecycle. Thecombination of our Project Management Center with our other proprietary internal applications enhances our offering by reducing errors, increasing qualityand improving maintenance time. Combining applications can lead to more efficient communications and oversight for both clients and our staff.Sales and MarketingOur sales and marketing strategy seeks to increase our revenues from new and existing clients through our account managers, sales and businessdevelopment managers, vertical specialists, technical specialists and subject-matter experts. Given our focus on complex application development and theneeds of our clients, we believe our IT professionals play an integral role in engaging with clients on potential business opportunities. For example, accountmanagers are organized vertically and maintain direct client relationships. In addition, they are responsible for handling inbound requests and referrals,identifying new business opportunities and responding to requests-for-proposals, or RFPs. Account managers typically engage technical and other specialistsin responding to RFPs and pursuing opportunities. This sales model has been effective in promoting repeated business and growth from within our existingclient base. 6Table of ContentsIn addition to effective client management, we believe that our reputation as a premium provider of software product development services drivesadditional business from inbound requests, referrals and RFPs. We enjoy published recognition from other third-party industry observers, such as ForresterResearch, Everest Group, Zinnov, Information Week, and Software Magazine.We also maintain a dedicated sales force as well as a marketing team, which coordinates corporate-level branding efforts that range from sponsorship ofprogramming competitions to participation in and hosting of industry conferences and events.ClientsOur clients primarily consist of Forbes Global 2000 corporations. During 2011 and 2010, one of our largest clients, Thomson Reuters, accounted forover 10% of our revenues; however, in 2012, Thomson Reuters accounted for 6.0% of our revenues and no other client accounted for over 10% of revenues inthat period.The following table sets forth the percentage of our revenues for the periods presented by client location: % of Revenues for Year Ended December 31, Client Location 2012 2011 2010 North America 47.7% 49.4% 52.8% Europe 35.8 32.0 26.4 CIS 15.0 16.8 19.1 Reimbursable expenses and other revenues 1.5 1.8 1.7 Revenues 100.0% 100.0% 100.0% Revenues by client location above differs from the segment information. Our operations consist of four reportable segments: North America, Europe,Russia and Other. This determination is based on the unique business practices and market specifics of each region and that each region engages in businessactivities from which it earns revenues and incurs expenses. Our reportable segments are based on managerial responsibility for a particular client. Becausemanagerial responsibility for a particular client relationship generally correlates with the client’s geographic location, there is a high degree of similarity betweenclient locations and the geographic boundaries of our reportable segments. In some specific cases, however, managerial responsibility for a particular client isassigned to a management team in another region, usually based on the strength of the relationship between client executives and particular members of oursenior management team. In a case like this, the client’s activity would be reported through the reportable segment. Information about our segments is presentedbelow: % of Segment Revenuesfor Year Ended December 31, Segment 2012 2011 2010 North America 45.5% 45.5% 49.7% Europe 38.9 36.9 30.9 Russia 11.7 13.8 14.2 Other 3.9 3.8 5.2 Segment Revenues 100.0% 100.0% 100.0% The following table sets forth the percentage of our revenues by client vertical for the periods presented: % of Revenues for Year Ended December 31, Vertical 2012 2011 2010 Banking and Financial Services 25.8% 22.9% 19.4% ISVs and Technology 24.6 25.2 29.3 Travel and Consumer 22.1 21.4 16.3 Business Information and Media 14.4 19.1 20.8 Other verticals 11.6 9.6 12.5 Reimbursable expenses and other revenues 1.5 1.8 1.7 Revenues 100.0% 100.0% 100.0% The following table shows the distribution of our clients by revenues for the periods presented: 7Table of ContentsRevenues Greater Than or Equal To 2012 2011 2010 $0.1 million 216 176 143 $0.5 million 114 98 72 $1 million 81 54 43 $5 million 16 15 10 $10 million 7 8 4 The following table sets forth our revenues by service offering by amount and as a percentage of our revenues for the periods presented: Year Ended December 31, Service Offering 2012 2011 2010 (in thousands, except percent) Software development $290,139 66.8% $219,211 65.5% $149,658 67.5% Application testing services 85,849 19.8 67,840 20.3 44,459 20.0 Application maintenance and support 36,056 8.3 29,287 8.8 19,262 8.7 Infrastructure services 12,424 2.9 8,488 2.5 2,823 1.3 Licensing 2,914 0.7 3,526 1.1 1,849 0.8 Reimbursable expenses and other revenues 6,417 1.5 6,176 1.8 3,773 1.7 Revenues $433,799 100.0% $334,528 100.0% $221,824 100.0% We typically enter into a master services agreement with our clients, which provides a framework for services that is then supplemented by statements ofwork, which specify the particulars of each individual engagement, including the services to be performed, pricing terms and performance criteria.For example, we have entered into a master services agreement with Thomson Reuters. Under this master services agreement, we may not usesubcontractors to perform the services without Thomson Reuters’ prior written consent. Our personnel must comply with Thomson Reuters’ security policies.The intellectual property rights to deliverables we make in the course of, or enabling the, performance of the services we provide to Thomson Reuters areowned by Thomson Reuters. Deliverables and services are subject to acceptance testing, and liquidated damages are prescribed for late delivery. Service creditsare prescribed for service-level failures and charges are subject to adjustment for deficiencies in services that are not measured by service levels. The masterservices agreement provides step-in rights, benchmarking, monitoring rights and audit rights. The master services agreement is not a commitment to purchaseour services, and may be terminated for various reasons including a time-limited right of termination upon a change-of-control event or without cause upon sixmonths’ notice.CompetitionThe markets in which we compete are changing rapidly and we face competition from both global IT services providers as well as those based in CEE.We believe that the principal competitive factors in our business include technical expertise and industry knowledge, end-to-end solution offerings, reputationand track record for high-quality and on-time delivery of work, effective employee recruiting, training and retention, responsiveness to clients’ business needs,scale, financial stability and price.We face competition primarily from: • India-based technology outsourcing IT services providers, such as Cognizant Technology Solutions, GlobalLogic, HCL Technologies, InfosysTechnologies, Mindtree, Sapient, Symphony Technology Group, Tata Consultancy Services and Wipro; • Local CEE technology outsourcing IT services providers; • Large global consulting and outsourcing firms, such as Accenture, Atos Origin, Capgemini, CSC and IBM; • China-based technology outsourcing IT services providers such as Camelot Information Services, and Pactera; and • In-house IT departments of our clients and potential clients.We are a leading global IT services provider of complex software product development and software engineering services in CEE. We believe that ourfocus on complex software product development solutions, our technical employee base, and the development and continuous improvement in processmethodologies, applications and tools position us well to compete effectively in the future. However, we face competition from offshore IT services providers inother outsourcing destinations with low wage costs, such as India and China, and from IT services providers that have more locations or that are based incountries more stable than some CIS and CEE countries. Our present and potential competitors may also have substantially greater financial, marketing ortechnical 8Table of Contentsresources; may also be able to respond more quickly to new technologies or processes and changes in client demands; may be able to devote greater resourcestowards the development, promotion and sale of their services than we can; and may also make strategic acquisitions or establish cooperative relationshipsamong themselves or with third parties that increase their ability to address the needs of our clients.Human CapitalOur people are critical to the success of our business. Attracting and retaining employees is a key factor in our ability to grow our revenues and meet ourclients’ needs. We had 10,043, 8,125 and 6,168 employees as of December 31, 2012, 2011 and 2010, respectively. Of these employees, approximately 93%were located in the CIS and CEE, 2% were located in Western Europe (excluding Hungary) and 5% were located in North America as of December 31, 2012.We believe that we maintain a good working relationship with our employees and we have not experienced any labor disputes. Our employees have not enteredinto any collective bargaining agreements.Recruitment and RetentionWe believe our company culture and reputation as a leading global IT services provider of complex software product development and softwareengineering services in CEE enhances our ability to recruit and retain highly sought-after employees. We have dedicated full-time employees that oversee allaspects of our human capital management process. Through our proprietary internal tools, we effectively plan our short-term and long-term recruitment needsand deploy the necessary personnel and processes to optimize utilization and to quickly satisfy the demands of our clients.We have developed our base of IT professionals by hiring highly-qualified, experienced IT professionals from this region and by recruiting studentsfrom leading universities in CEE. We have strong relationships with the leading institutions in CEE, such as the Belarusian State University, Belarusian StateUniversity of Informatics and Radioelectronics, the Saint Petersburg State University of Information Technologies, Mechanics and Optics, the Moscow StateUniversity, the Moscow Institute of Physics & Technology, the Moscow State University of Instrument Engineering and Computer Sciences and the NationalTechnical University of Ukraine, and we have established EPAM delivery centers near many of these campuses. The quality and academic prestige of theCEE educational system is renowned world-wide. For instance, in the 2012 ACM International Collegiate Programming Contest (ICPC), five out of 10 topranked finishers were from CEE, and two Belarus universities made it in the top 12. Our ongoing involvement with these universities includes supportingEPAM-branded research labs, developing training courses, providing teaching equipment, actively supporting curriculum development and engaging studentsto identify their talents and interests. Our relationships with these technical institutions provide us access to a highly-qualified talent pool of programmers, andallow us to consistently attract highly-skilled students from these institutions. We also conduct lateral hiring through a dedicated IT professional talentacquisition team whose objective is to locate and attract qualified and experienced IT professionals within the region.To attract, retain and motivate our IT professionals, we seek to provide an environment and culture that rewards entrepreneurial initiative andperformance. In addition, we offer a challenging work environment, ongoing skills development initiatives and attractive career advancement and promotionopportunities.Training and DevelopmentWe dedicate significant resources to the training and development of our IT professionals. We believe in the importance of supporting educationalinitiatives and we sponsor employees’ participation in internal and external training and certifications. Furthermore, we actively pursue partner engagementswith technical institutions in CEE.We provide training, continuing education and career development programs for both entry-level and experienced IT professionals. Entry-level ITprofessionals undergo a rigorous training program that consists of approximately three to six months of classroom training, as well as numerous hours ofhands-on training through actual engagements. This comprehensive program results in employees who are highly proficient and possess deep technicalexpertise that enables them to immediately serve our clients’ needs. For our mid-level and senior IT professionals, we offer continuing education programsaimed at helping them advance in their careers. We also provide mentoring opportunities, management and soft skills training, intensive workshops andmanagement and technical advancement programs. We are committed to systematically identifying and nurturing the development of middle and seniormanagement through formal leadership training, evaluation, development and promotion.Intellectual PropertyOur intellectual property rights are important to our business. We rely on a combination of intellectual property laws, trade secrets, confidentialityprocedures and contractual provisions to protect our intellectual property. We require our employees, independent contractors, vendors and clients to enter intowritten confidentiality agreements upon the commencement of their relationships with us. These agreements generally provide that any confidential orproprietary information disclosed or otherwise made available by us be kept confidential.We customarily enter into non-disclosure agreements with our clients with respect to the use of their software systems and platforms. Our clients usuallyown the intellectual property in the software or systems we develop for them. Furthermore, we usually 9Table of Contentsgrant a perpetual, worldwide, royalty-free, nonexclusive, transferable and non-revocable license to our clients to use our preexisting intellectual property, butonly to the extent necessary in order to use the software or systems we developed for them.Protecting our intellectual property rights is critical to our business. We have invested, and will continue to invest, in research and development toenhance our domain knowledge and create complex, specialized solutions for our clients.Long-lived AssetsThe table below sets forth the locations of our long-lived assets: As of December 31, Location 2012 2011 United States $2,048 $1,445 Belarus(1) 40,095 26,001 Ukraine 5,357 4,314 Russia 3,234 2,011 Hungary 1,744 1,108 Other 657 603 Total $53,135 $35,482 (1)At December 31, 2012 and 2011, the amounts included $15.4 million and $15.7 million, respectively, related to our building, and $15.6 million and$1.5 million, respectively, of capitalized construction costs related to our corporate facilities in Minsk, Belarus.AcquisitionsWe have acquired a number of companies in order to expand our vertical-specific domain expertise, geographic footprint, service portfolio, client baseand management expertise.In August 2010, we acquired the assets of Instant Information, Inc., a company with operations in the United States and Belarus with 53 ITprofessionals, in order to acquire an experienced management team and skilled IT professionals, thereby further strengthening our Business Information andMedia vertical, and to acquire the rights to the intellectual property embodied by our InfoNgen services and cloud deployment capabilities.In May 2012, we completed the acquisition of Thoughtcorp, a Canadian company with a 17-year history of successfully delivering high-value ITsolutions and complex software applications to some of Canada’s most prominent companies within the telecommunications, financial and retail sectors. Withthe Thoughtcorp acquisition we have strengthened our Banking and Financial Services, and Travel and Consumer verticals, and have gained significanttelecommunications expertise with a highly skilled and experienced employee base of approximately 50 IT professionals. The acquisition also expands ourNorth American geographic footprint and complements our global delivery capabilities with expertise in areas important for us, such as Agile Development,Enterprise Mobility and Business Intelligence.In December 2012, we completed the acquisition of Empathy Lab, LLC, a U.S.-based digital strategy and multi-channel experience design firm withapproximately 85 IT professionals. The acquisition is intended to enhance our strong capabilities in global delivery of software engineering services withEmpathy Lab’s proven expertise in two important growth areas - development and execution of enterprise-wide eCommerce initiatives and transformation ofmedia consumption and distribution channels. In addition to strengthening our Travel and Consumer and Business Information and Media verticals,Empathy Lab brings significant expertise in digital marketing strategy consulting and program management.RegulationsDue to the industry and geographic diversity of our operations and services, our operations are subject to a variety of rules and regulations, and severalBelarusian, Russian, Ukrainian, Hungarian, Kazakhstan and U.S. federal and state agencies regulate various aspects of our business. See “Item 1A. RiskFactors — Risks Relating to Our Business — Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, andviolations or unfavorable interpretation by authorities of these regulations could harm our business.” and “Item 1A. Risk Factors — Risks Relating to OurBusiness — We are subject to laws and regulations in the United States and other countries in which we operate concerning our operations, including exportrestrictions, U.S. economic sanctions and the Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws. If we are not in compliance withapplicable legal requirements, we may be subject to civil or criminal penalties and other remedial measures, which could adversely affect our business,financial condition and results of operations.” 10Table of ContentsWe benefit from certain tax incentives promulgated by the Belarusian and Hungarian governments. See “Item 7. Management’s Discussion and Analysisof Financial Condition and Results of Operations — Certain Income Statement Line Items — Provision for Income Taxes.”Corporate InformationEPAM Systems, Inc. was incorporated in the State of Delaware on December 18, 2002. Our predecessor entity was founded in 1993. Our principalexecutive offices are located at 41 University Drive, Suite 202, Newtown, Pennsylvania 18940 and our telephone number is 267-759-9000. We maintain awebsite at http://www.epam.com. Our website and the information accessible through our website are not incorporated into this annual report.We make certain filings with the Securities and Exchange Commission (“SEC”), including our annual report on Form 10-K, quarterly reports onForm 10-Q, current reports on Form 8-K, and all amendments and exhibits to those reports. We make such filings available free of charge through the InvestorRelations section of our website, http://investors.epam.com, as soon as reasonably practicable after they are filed with the SEC. The filings are also availablethrough the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549 or by calling 1-800-SEC-0330. Also, these filings areavailable on the internet at http://www.sec.gov. Our press releases and recent analyst presentations are also available on our website. The information on ourwebsite does not constitute a part of this annual report. 11Table of ContentsExecutive Officers of the RegistrantInformation about our executive officers required by this item is incorporated by reference to the information in Part III, “Item 10. Directors, ExecutiveOfficers and Corporate Governance” of this annual report. Item 1A.Risk FactorsRisk factors which could cause actual results to differ from our expectations and which could negatively impact our financial condition andresults of operations are discussed below and elsewhere in this annual report. The risks and uncertainties described below are not the only ones weface. If any of the risks or uncertainties described below or any additional risks and uncertainties actually occur, our business, results of operationsand financial condition could be materially and adversely affected. In particular, forward-looking statements are inherently subject to risks anduncertainties, some of which cannot be predicted or quantified. See “Special Note Regarding Forward-Looking Statements.”Risks Relating to Our BusinessWe may be unable to effectively manage our rapid growth or achieve anticipated growth, which could place significant strain on ourmanagement personnel, systems and resources.We have experienced rapid growth and significantly expanded our business over the past several years. Our revenues grew from $160.6 million in 2008to $433.8 million in 2012. We have also supplemented our organic growth with strategic acquisitions. As of December 31, 2012, we had 8,495 ITprofessionals, as compared to 2,890 IT professionals as of December 31, 2007. We intend to continue our expansion in the foreseeable future to pursueexisting and potential market opportunities.Our rapid growth has placed and will continue to place significant demands on our management and our administrative, operational and financialinfrastructure. Continued expansion increases the challenges we face in: • recruiting, training and retaining sufficiently skilled IT professionals and management personnel; • adhering to and further improving our high-quality and process execution standards and maintaining high levels of client satisfaction; • managing a larger number of clients in a greater number of industries and locations; • maintaining effective oversight of personnel and delivery centers; • preserving our culture, values and entrepreneurial environment; and • developing and improving our internal administrative infrastructure, particularly our financial, operational, communications and other internalsystems.As a result of these problems associated with expansion, our business, financial condition and results of operations could be materially adverselyaffected.Moreover, we intend to continue our expansion in the foreseeable future to pursue existing and potential market opportunities. As we introduce newservices or enter into new markets, we may face new market, technological and operational risks and challenges with which we are unfamiliar, and we maynot be able to mitigate these risks and challenges to successfully grow those services or markets. We may not be able to achieve our anticipated growth, whichcould materially adversely affect our business and prospects.If we fail to attract and retain highly skilled IT professionals, we may not have the necessary resources to properly staff projects, and failure tosuccessfully compete for such IT professionals could materially adversely affect our ability to provide high quality services to our clients.Our success depends largely on the contributions of our IT professionals and our ability to attract and retain qualified IT professionals. Competition forIT professionals in the markets in which we operate can be intense and, accordingly, we may not be able to retain or hire all of the IT professionals necessaryto meet our ongoing and future business needs. Any reductions in headcount for economic or business reasons, however temporary, could negatively affect ourreputation as an employer and our ability to hire IT professionals to meet our business requirements.The total attrition rates among our IT professionals who have worked for us for at least six months were 10.7%, 9.1% and 9.4% for 2012, 2011 and2010, respectively. We may encounter higher attrition rates in the future. A significant increase in the attrition rate among IT professionals with specializedskills could decrease our operating efficiency and productivity and could lead to a decline in demand for our services. The competition for highly-skilled ITprofessionals may require us to increase salaries, and we may be unable to pass on these increased costs to our clients. 12Table of ContentsIn addition, our ability to maintain and renew existing engagements and obtain new business will depend, in large part, on our ability to attract, trainand retain skilled IT professionals, including experienced management IT professionals, which enables us to keep pace with growing demands foroutsourcing, evolving industry standards and changing client preferences. If we are unable to attract and retain the highly-skilled IT professionals we need, wemay have to forgo projects for lack of resources or be unable to staff projects optimally. Our failure to attract, train and retain IT professionals with thequalifications necessary to fulfill the needs of our existing and future clients or to assimilate new IT professionals successfully could materially adverselyaffect our ability to provide high quality services to our clients.Increases in wages and other compensation expense for our IT professionals could prevent us from sustaining our competitive advantage.Wage costs for IT professionals in CIS and CEE countries are lower than comparable wage costs in more developed countries. However, wage costs inthe CIS and CEE IT services industry may increase at a faster rate than in the past, which ultimately may make us less competitive unless we are able toincrease the efficiency and productivity of our IT professionals as well as the prices we can charge for our services. Increases in wage costs may reduce ourprofitability.Additionally, we have granted certain options under our stock incentive plans and entered into certain other stock-based compensation arrangements inthe past, as a result of which we have recorded $6.8 million, $2.9 million and $2.9 million as stock-based compensation expenses for the years endedDecember 31, 2012, 2011 and 2010, respectively.Generally Accepted Accounting Principles (“GAAP”) prescribes how we account for stock-based compensation which could adversely or negativelyimpact our results of operations or the price of our common stock. GAAP requires us to recognize stock-based compensation as compensation expense in thestatement of operations generally based on the fair value of equity awards on the date of the grant, with compensation expense recognized over the period inwhich the recipient is required to provide service in exchange for the equity award. The expenses associated with stock-based compensation may reduce theattractiveness of issuing equity awards under our equity incentive plan. However, if we do not grant equity awards, or if we reduce the number of equityawards we grant, we may not be able to attract and retain key personnel. If we grant more equity awards to attract and retain key personnel, the expensesassociated with such additional equity awards could materially adversely affect our results of operations. The issuance of equity-based compensation to our ITprofessionals would also result in additional dilution to our stockholders.Our success depends substantially on the continuing efforts of our senior executives and other key personnel, and our business may beseverely disrupted if we lose their services.Our future success heavily depends upon the continued services of our senior executives and other key employees. We currently do not maintain keyman life insurance for any of the senior members of our management team or other key personnel. If one or more of our senior executives or key employees areunable or unwilling to continue in their present positions, it could disrupt our business operations, and we may not be able to replace them easily or at all. Inaddition, competition for senior executives and key personnel in our industry is intense, and we may be unable to retain our senior executives and keypersonnel or attract and retain new senior executives and key personnel in the future, in which case our business may be severely disrupted.If any of our senior executives or key personnel joins a competitor or forms a competing company, we may lose clients, suppliers, know-how and keyIT professionals and staff members to them. Also, if any of our business development managers, who generally keep a close relationship with our clients,joins a competitor or forms a competing company, we may lose clients, and our revenues may be materially adversely affected. Additionally, there could beunauthorized disclosure or use of our technical knowledge, practices or procedures by such personnel. If any dispute arises between our senior executives orkey personnel and us, any non-competition, non-solicitation and non-disclosure agreements we have with our senior executives or key personnel might notprovide effective protection to us, especially in CIS and CEE countries where some of our senior executives and most of our key employees reside, in light ofuncertainties with legal systems in CIS and CEE countries.Emerging markets such as the CIS and CEE countries are subject to greater risks than more developed markets, including significant legal,economic, tax and political risks.We have significant operations in CIS and CEE countries which are generally considered to be emerging markets. CEE includes Albania, Belarus,Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Republic of Macedonia, Romania, Russia,Serbia and Montenegro, Slovakia, Slovenia, the former Yugoslav Republic of Macedonia, Turkey and Ukraine. The CIS is comprised of constituents of theformer U.S.S.R., including Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine andUzbekistan. Investors in emerging markets should be aware that these markets are vulnerable to market downturns and economic slowdowns elsewhere in theworld and are subject to greater risks than more developed markets, including complying with foreign laws and regulations and the potential imposition oftrade or foreign exchange restrictions, tax increases, fluctuations in exchange rates, inflation and unstable political situations and labor issues. Investorsshould also note that emerging economies such as the economies of Belarus, Russia, Ukraine, Kazakhstan and 13Table of ContentsHungary are subject to rapid change and that the information set forth in this annual report may become outdated relatively quickly. Accordingly, investorsshould exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, an investment in our commonstock is appropriate.We generate a significant portion of our revenues from a small number of clients, and any loss of business from these clients could materiallyreduce our revenues.Our ability to maintain close relationships with our major clients is essential to the growth and profitability of our business. However, the volume ofwork performed for a specific client is likely to vary from year to year, especially since we generally are not our clients’ exclusive IT services provider and wedo not have long-term commitments from any clients to purchase our services. A major client in one year may not provide the same level of revenues for us inany subsequent year. The IT services we provide to our clients, and the revenues and net income from those services, may decline or vary as the type andquantity of IT services we provide change over time. Furthermore, our reliance on any individual client for a significant portion of our revenues may give thatclient a certain degree of pricing leverage against us when negotiating contracts and terms of service.In addition, a number of factors other than our performance could cause the loss of or reduction in business or revenues from a client, and these factorsare not predictable. For example, a client may decide to reduce spending on technology services or sourcing from us due to a challenging economic environmentor other factors, both internal and external, relating to its business. These factors, among others, may include corporate restructuring, pricing pressure,changes to its outsourcing strategy, switching to another IT services provider or returning work in-house.The loss of any of our major clients, or a significant decrease in the volume of work they outsource to us or the price at which we sell our services tothem, could materially adversely affect our revenues and thus our results of operations.Our revenues, operating results and profitability may experience significant variability and, as a result, it may be difficult to make accuratefinancial forecasts.Our revenues, operating results and profitability have varied in the past and are likely to vary in the future, which could make it difficult to makeaccurate financial forecasts. Factors that are likely to cause these variations include: • the number, timing, scope and contractual terms of IT projects in which we are engaged; • delays in project commencement or staffing delays due to difficulty in assigning appropriately skilled or experienced IT professionals; • the accuracy of estimates of resources, time and fees required to complete fixed-price projects and costs incurred in the performance of eachproject; • changes in pricing in response to client demand and competitive pressures; • changes in the allocation of onsite and offshore staffing; • the business decisions of our clients regarding the use of our services; • the ability to further grow revenues from existing clients; • the available leadership and senior technical resources compared to junior engineering resources staffed on each project; • seasonal trends, primarily our hiring cycle and the budget and work cycles of our clients; • delays or difficulties in expanding our operational facilities or infrastructure; • the ratio of fixed-price contracts to time-and-materials contracts in process; • employee wage levels and increases in compensation costs, including timing of promotions and annual pay increases; • unexpected changes in the utilization rate of our IT professionals; • unanticipated contract or project terminations; • the timing of collection of accounts receivable; • the continuing financial stability of our clients; and • general economic conditions.If we are unable to make accurate financial forecasts, it could materially adversely affect our business, financial condition and results of operations. 14Table of ContentsWe do not have long-term commitments from our clients, and our clients may terminate contracts before completion or choose not to renewcontracts.Our clients are generally not obligated for any long-term commitments to us. Although a substantial majority of our revenues are generated from repeatedbusiness, which we define as revenues from a client who also contributed to our revenues during the prior year, our engagements with our clients are typicallyfor projects that are singular in nature. In addition, our clients can terminate many of our master services agreements and work orders with or without cause,and in most cases without any cancellation charge. Therefore, we must seek to obtain new engagements when our current engagements are successfullycompleted or are terminated as well as maintain relationships with existing clients and secure new clients to expand our business.There are a number of factors relating to our clients that are outside of our control which might lead them to terminate a contract or project with us,including: • financial difficulties for the client; • a change in strategic priorities, resulting in elimination of the impetus for the project or a reduced level of technology spending; • a change in outsourcing strategy resulting in moving more work to the client’s in-house technology departments or to our competitors; • the replacement by our clients of existing software with packaged software supported by licensors; and • mergers and acquisitions or significant corporate restructurings.Failure to perform or observe any contractual obligations could result in cancellation or non-renewal of a contract, which could cause us to experience ahigher than expected number of unassigned employees and an increase in our cost of revenues as a percentage of revenues, until we are able to reduce orreallocate our headcount. The ability of our clients to terminate agreements makes our future revenues uncertain. We may not be able to replace any client thatelects to terminate or not renew its contract with us, which could materially adversely affect our revenues and thus our results of operations.In addition, some of our agreements specify that if a change of control of our company occurs during the term of the agreement, the client has the right toterminate the agreement. If any future event triggers any change-of-control provision in our client contracts, these master services agreements may beterminated, which would result in loss of revenues.Our revenues are highly dependent on clients primarily located in the United States and Europe. Worsening economic conditions or factorsthat negatively affect the economic health of the United States or Europe could reduce our revenues and thus adversely affect our results ofoperations.The recent crisis in the financial and credit markets in North America, Europe and Asia led to a global economic slowdown, with the economies of thoseregions showing significant signs of weakness. The IT services industry is particularly sensitive to the economic environment, and tends to decline duringgeneral economic downturns. We derive a significant portion of our revenues from clients in North America and Europe. If the North American or Europeaneconomies further weaken or slow, pricing for our services may be depressed and our clients may reduce or postpone their technology spending significantly,which may in turn lower the demand for our services and negatively affect our revenues and profitability.If we are unable to successfully anticipate changing economic and political conditions affecting the markets in which we operate, we may be unable toeffectively plan for or respond to those changes, and our results of operations could be adversely affected.Our profitability will suffer if we are not able to maintain our resource utilization levels and productivity levels.Our profitability is significantly impacted by our utilization levels of fixed-cost resources, including human resources as well as other resources such ascomputers and office space, and our ability to increase our productivity levels. We have expanded our operations significantly in recent years through organicgrowth and strategic acquisitions, which has resulted in a significant increase in our headcount and fixed overhead costs.Some of our IT professionals are specially trained to work for specific clients or on specific projects and some of our offshore development centers arededicated to specific clients or specific projects. Our ability to manage our utilization levels depends significantly on our ability to hire and train high-performing IT professionals and to staff projects appropriately and on the general economy and its effect on our clients and their business decisions regardingthe use of our services. If we experience a slowdown or stoppage of work for any client or on any project for which we have dedicated IT professionals orfacilities, we may not be able to efficiently reallocate these IT professionals and facilities to other clients and projects to keep their utilization and productivitylevels high. If we are not able to maintain optimal resource utilization levels without corresponding cost reductions or price increases, our profitability willsuffer. 15Table of ContentsWe face intense competition from onshore and offshore IT services companies, and increased competition, our inability to compete successfullyagainst competitors, pricing pressures or loss of market share could materially adversely affect our business.The market for IT services is highly competitive, and we expect competition to persist and intensify. We believe that the principal competitive factors inour markets are reputation and track record, industry expertise, breadth and depth of service offerings, quality of the services offered, language, marketingand selling skills, scalability of infrastructure, ability to address clients’ timing requirements and price.We face competition from offshore IT services providers in other outsourcing destinations with low wage costs such as India and China, as well ascompetition from large, global consulting and outsourcing firms and in-house IT departments of large corporations. Clients tend to engage multiple IT servicesproviders instead of using an exclusive IT services provider, which could reduce our revenues to the extent that clients obtain services from other competing ITservices providers. Clients may prefer IT services providers that have more locations or that are based in countries more cost-competitive or more stable thansome CIS and CEE countries.Our ability to compete successfully also depends in part on a number of factors beyond our control, including the ability of our competitors to recruit,train, develop and retain highly-skilled IT professionals, the price at which our competitors offer comparable services and our competitors’ responsiveness toclient needs. Some of our present and potential competitors may have substantially greater financial, marketing or technical resources. Our current andpotential competitors may also be able to respond more quickly to new technologies or processes and changes in client demands; may be able to devote greaterresources towards the development, promotion and sale of their services than we can; and may also make strategic acquisitions or establish cooperativerelationships among themselves or with third parties that increase their ability to address the needs of our clients. Client buying patterns can change if clientsbecome more price sensitive and accepting of low-cost suppliers. Therefore, we cannot assure you that we will be able to retain our clients while competingagainst such competitors. Increased competition, our inability to compete successfully, pricing pressures or loss of market share could materially adverselyaffect our business.We are investing substantial cash in new facilities and physical infrastructure, and our profitability could be reduced if our business does notgrow proportionately.We have made and continue to make significant contractual commitments related to capital expenditures on construction or expansion of our deliverycenters, such as in Minsk, Belarus. We may encounter cost overruns or project delays in connection with new facilities. These expansions will likely increaseour fixed costs and if we are unable to grow our business and revenues proportionately, our profitability may be reduced.Our revenues are highly dependent on a limited number of industries, and any decrease in demand for outsourced services in these industriescould reduce our revenues and adversely affect our results of operations.A substantial portion of our clients are concentrated in four specific industry verticals: ISVs and Technology, Banking and Financial Services,Business Information and Media, and Travel and Consumer. Clients in ISVs and Technology accounted for 24.6%, 25.2%, and 29.3% of our revenues in2012, 2011 and 2010, respectively. Clients in Banking and Financial Services accounted for 25.8%, 22.9%, and 19.4% of our revenues in 2012, 2011 and2010, respectively. Our business growth largely depends on continued demand for our services from clients in these five industry verticals and otherindustries that we may target in the future, as well as on trends in these industries to outsource IT services.A downturn in any of our targeted industries, a slowdown or reversal of the trend to outsource IT services in any of these industries or the introductionof regulations that restrict or discourage companies from outsourcing could result in a decrease in the demand for our services and materially adversely affectour business, financial condition and results of operations. For example, a worsening of economic conditions in the financial services industry and significantconsolidation in that industry may reduce the demand for our services and negatively affect our revenues and profitability.Other developments in the industries in which we operate may also lead to a decline in the demand for our services in these industries, and we may notbe able to successfully anticipate and prepare for any such changes. For example, consolidation in any of these industries or acquisitions, particularlyinvolving our clients, may decrease the potential number of buyers of our services. Our clients may experience rapid changes in their prospects, substantialprice competition and pressure on their profitability. This, in turn, may result in increasing pressure on us from clients in these key industries to lower ourprices, which could adversely affect our results of operations. 16Table of ContentsIf we are not successful in managing increasingly large and complex projects, we may not achieve our financial goals and our results ofoperations could be adversely affected.To successfully market our service offerings and obtain larger and more complex projects, we need to establish close relationships with our clients anddevelop a thorough understanding of their operations. In addition, we may face a number of challenges managing larger and more complex projects, including: • maintaining high-quality control and process execution standards; • maintaining planned resource utilization rates on a consistent basis; • maintaining productivity levels and implementing necessary process improvements; • controlling costs; • maintaining close client contact and high levels of client satisfaction; and • maintaining effective client relationships.Our ability to successfully manage large and complex projects depends significantly on the skills of our management personnel and IT professionals,some of whom do not have experience managing large-scale or complex projects. In addition, large and complex projects may involve multiple engagements orstages, and there is a risk that a client may choose not to retain us for additional stages or may cancel or delay additional planned engagements. Suchcancellations or delays may make it difficult to plan our project resource requirements. If we fail to successfully obtain engagements for large and complexprojects, we may not achieve our revenue growth and other financial goals. Even if we are successful in obtaining such engagements, a failure by us toeffectively manage these large and complex projects could damage our reputation, cause us to lose business, impact our margins and adversely affect ourbusiness and results of operations.If we are unable to adapt to rapidly changing technologies, methodologies and evolving industry standards we may lose clients and ourbusiness could be materially adversely affected.Rapidly changing technologies, methodologies and evolving industry standards characterize the market for our services. Our future success will dependin part upon our ability to anticipate developments in IT services, enhance our existing services and to develop and introduce new services to keep pace withsuch changes and developments and to meet changing client needs. The process of developing our client solutions is extremely complex and is expected tobecome increasingly complex and expensive in the future due to the introduction of new platforms, operating systems, technologies and methodologies. Ourability to keep up with technology, methodology and business changes is subject to a number of risks, including that: • we may find it difficult or costly to update our services, applications, tools and software and to develop new services quickly enough to meet ourclients’ needs; • we may find it difficult or costly to make some features of our software work effectively and securely over the Internet or with new or changedoperating systems; • we may find it difficult or costly to update our software and services to keep pace with business, evolving industry standards, methodologies,regulatory and other developments in the industries where our clients operate; and • we may find it difficult to maintain a high level of quality in implementing new technologies and methodologies.We may not be successful in anticipating or responding to these developments in a timely manner, or if we do respond, the services, technologies ormethodologies we develop or implement may not be successful in the marketplace. Further, services, technologies or methodologies that are developed by ourcompetitors may render our services non-competitive or obsolete. Our failure to enhance our existing services and to develop and introduce new services topromptly address the needs of our clients could cause us to lose clients and materially adversely affect our business.We face risks associated with having a long selling and implementation cycle for our services that require us to make significant resourcecommitments prior to realizing revenues for those services.We have a long selling cycle for our IT services, which requires significant investment of human resources and time by both our clients and us. Beforecommitting to use our services, potential clients require us to expend substantial time and resources educating them on the value of our services and our abilityto meet their requirements. Therefore, our selling cycle is subject to many risks and delays over which we have little or no control, including our clients’decision to choose alternatives to our services (such as other IT services providers or in-house resources) and the timing of our clients’ budget cycles andapproval processes. If our sales cycle unexpectedly lengthens for one or more large projects, it would negatively affect the timing of our revenues and hinder ourrevenue growth. For certain clients, we may begin work and incur costs prior to concluding the contract. A delay in our ability to obtain a signed agreement orother persuasive evidence of an arrangement, or to complete certain contract requirements in a particular quarter, could reduce our revenues in that quarter. 17Table of ContentsImplementing our services also involves a significant commitment of resources over an extended period of time from both our clients and us. Our clientsmay experience delays in obtaining internal approvals or delays associated with technology, thereby further delaying the implementation process. Our currentand future clients may not be willing or able to invest the time and resources necessary to implement our services, and we may fail to close sales with potentialclients to which we have devoted significant time and resources. Any significant failure to generate revenues or delays in recognizing revenues after incurringcosts related to our sales or services process could materially adversely affect our business.We may not be able to recognize revenues in the period in which our services are performed, which may cause our margins to fluctuate.Our services are performed under both time-and-material and fixed-price contract arrangements. All revenues are recognized pursuant to applicableaccounting standards. We recognize revenues when realized or realizable and earned, which is when the following criteria are met: persuasive evidence of anarrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is reasonably assured. If there is an uncertainty about theproject completion or receipt of payment for the services, revenues are deferred until the uncertainty is sufficiently resolved.Additionally, we recognize revenues from fixed-price contracts based on the proportional performance method. In instances where final acceptance of thesystem or solution is specified by the client, revenues are deferred until all acceptance criteria have been met. In absence of a sufficient basis to measureprogress towards completion, revenues are recognized upon receipt of final acceptance from the client. Our failure to meet all the acceptance criteria, orotherwise meet a client’s expectations, may result in our having to record the cost related to the performance of services in the period that services wererendered, but delay the timing of revenue recognition to a future period in which all acceptance criteria have been met.If our pricing structures are based on inaccurate expectations and assumptions regarding the cost and complexity of performing our work,then our contracts could be unprofitable.We negotiate pricing terms with our clients utilizing a range of pricing structures and conditions. Our pricing is highly dependent on our internalforecasts and predictions about our projects and the marketplace, which might be based on limited data and could turn out to be inaccurate. If we do notaccurately estimate the costs and timing for completing projects, our contracts could prove unprofitable for us. We face a number of risks when pricing ourcontracts, as many of our projects entail the coordination of operations and personnel in multiple locations with different skill sets and competencies. Ourpricing and cost estimates for the work that we perform sometimes include anticipated long-term cost savings from transformational and other initiatives thatwe expect to achieve and sustain over the life of the contract. There is a risk that we will underprice our projects, particularly with fixed-price contracts, fail toaccurately estimate the costs of performing the work or fail to accurately assess the risks associated with potential contracts. In particular, any increased orunexpected costs, delays or failures to achieve anticipated cost savings, or unexpected risks we encounter in connection with the performance of this work,including those caused by factors outside our control, could make these contracts less profitable or unprofitable.In addition, a number of our contracts contain pricing terms that condition a portion of the payment of fees by the client on our ability to meet definedperformance goals, service levels and completion schedules set forth in the contracts. Our failure to meet such performance goals, service levels or completionschedules or our failure to meet client expectations in such contracts may result in less profitable or unprofitable engagements.Our profitability could suffer if we are not able to maintain favorable pricing rates.Our profitability and operating results are dependent on the rates we are able to charge for our services. Our rates are affected by a number of factors,including: • our clients’ perception of our ability to add value through our services; • our competitors’ pricing policies; • bid practices of clients and their use of third-party vendors; • the mix of onsite and offshore staffing; • employee wage levels and increases in compensation costs, including timing of promotions and annual pay increases; • our ability to charge premium prices when justified by market demand or the type of service; and • general economic conditions.If we are not able to maintain favorable pricing for our services, our profitability could suffer. 18Table of ContentsIf we are unable to collect our receivables from, or bill our unbilled services to, our clients, our results of operations and cash flows could bematerially adversely affected.Our business depends on our ability to successfully obtain payment from our clients of the amounts they owe us for work performed. We usually billand collect on relatively short cycles. We maintain allowances against receivables. Actual losses on client balances could differ from those that we currentlyanticipate and, as a result, we might need to adjust our allowances. There is no guarantee that we will accurately assess the creditworthiness of our clients.Weak macroeconomic conditions and related turmoil in the global financial system could also result in financial difficulties, including limited access to thecredit markets, insolvency, or bankruptcy for our clients, and, as a result, could cause clients to delay payments to us, request modifications to theirpayment arrangements that could increase our receivables balance, or default on their payment obligations to us. Timely collection of client balances alsodepends on our ability to complete our contractual commitments and bill and collect our contracted revenues. If we are unable to meet our contractualrequirements, we might experience delays in collection of and/or be unable to collect our client balances, and if this occurs, our results of operations and cashflows could be materially adversely affected. Moreover, in the event of delays in payment from our governmental and quasi-governmental clients, we may havedifficulty collecting on receivables owed. In addition, if we experience an increase in the time to bill and collect for our services, our cash flows could bematerially adversely affected.Our ability to generate and retain business depends on our reputation in the marketplace.Our services are marketed to clients and prospective clients based on a number of factors. Since many of our specific client engagements involve uniqueservices and solutions, our corporate reputation is a significant factor in our clients’ evaluation of whether to engage our services. We believe the EPAM brandname and our reputation are important corporate assets that help distinguish our services from those of our competitors and also contribute to our efforts torecruit and retain talented employees. However, our corporate reputation is potentially susceptible to damage by actions or statements made by current orformer clients, competitors, vendors, adversaries in legal proceedings, government regulators, as well as members of the investment community and themedia. There is a risk that negative information about our company, even if based on false rumor or misunderstanding, could adversely affect our business.In particular, damage to our reputation could be difficult and time-consuming to repair, could make potential or existing clients reluctant to select us for newengagements, resulting in a loss of business, and could adversely affect our recruitment and retention efforts. Damage to our reputation could also reduce thevalue and effectiveness of the EPAM brand name and could reduce investor confidence in us.Our effective tax rate could be materially adversely affected by several factors.We conduct business globally and file income tax returns in multiple jurisdictions. Our effective tax rate could be materially adversely affected byseveral factors, including changes in the amount of income taxed by or allocated to the various jurisdictions in which we operate that have differing statutorytax rates; changing tax laws, regulations and interpretations of such tax laws in multiple jurisdictions; and the resolution of issues arising from tax audits orexaminations and any related interest or penalties.We report our results of operations based on our determination of the amount of taxes owed in the various jurisdictions in which we operate. We havetransfer pricing arrangements among our subsidiaries in relation to various aspects of our business, including operations, marketing, sales and deliveryfunctions. U.S. transfer pricing regulations, as well as regulations applicable in CIS and CEE countries in which we operate, require that any internationaltransaction involving associated enterprises be on arm’s-length terms. We consider the transactions among our subsidiaries to be on arm’s-length terms. Thedetermination of our consolidated provision for income taxes and other tax liabilities requires estimation, judgment and calculations where the ultimate taxdetermination may not be certain. Our determination of tax liability is always subject to review or examination by authorities in various jurisdictions.If a tax authority in any jurisdiction reviews any of our tax returns and proposes an adjustment, including as a result of a determination that the transferprices and terms we have applied are not appropriate, such an adjustment could have a negative impact on our business.Our earnings could be adversely affected if we change our intent not to repatriate earnings in the CIS and CEE or such earnings becomesubject to U.S. tax on a current basis.We do not accrue incremental U.S. taxes on all CIS and CEE earnings as these earnings (as well as other foreign earnings for all periods) are consideredto be indefinitely reinvested outside of the United States. While we have no plans to do so, events may occur in the future that could effectively force us tochange our intent not to repatriate our foreign earnings. If we change our intent and repatriate such earnings, we will have to accrue the applicable amount oftaxes associated with such earnings and pay taxes at a substantially higher rate than our effective income tax rate in 2013. These increased taxes couldmaterially adversely affect our financial condition and results of operations. 19Table of ContentsOur operating results may be negatively impacted by the loss of certain tax benefits provided by the governments of Belarus, Hungary andRussia to companies in our industry.Our subsidiary in Belarus is a member of the Belarus Hi-Tech Park, in which member technology companies are exempt or levied at a reduced rate on avariety of taxes, including a 100% exemption from Belarusian income tax (which as of the date of this annual report was 18% and an exemption from the valueadded tax, for a period of 15 consecutive years effective July 1, 2006). In addition, our subsidiary in Hungary benefits from a tax credit of 10% of qualifiedsalaries, taken over a four-year period, for up to 70% of the total tax due for that period. We have been able to take the full 70% credit for 2007 to 2012. TheHungarian tax authorities repealed the tax credit beginning with 2012. Credits earned in years prior to 2012, however, will be allowed through 2014. Weanticipate full utilization up to the 70% limit until 2014, with full phase out in 2015. Our subsidiary in Russia benefits from a substantially reduced rate onsocial contributions and an exemption on value added tax in certain circumstances, which is a benefit to qualified IT companies in Russia. If the tax holidayrelating to our Belarusian subsidiary, the tax incentives relating to our Hungarian subsidiary or the lower tax rates and social contributions relating to ourRussian subsidiary are changed, terminated, not extended or comparable new tax incentives are not introduced, we expect that our effective income tax rateand/or our operating expenses would increase significantly, which could materially adversely affect our financial condition and results of operations. See “Item7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Certain Income Statement Line Items — Provision for IncomeTaxes.”Our agreement with one of our largest clients gives it the option to assume the operations of one of our offshore development centers, and theexercise of that option could result in a loss of future revenues and adversely affect our results of operations.During the four-year term of our agreement with one of our largest clients, which ends in December 2014 unless extended by the client, the client isentitled to request us to transfer to it or its designees all of the operating relationships, including employment relationships with the employees dedicated to theoffshore development center and contracts with subcontractors, at a pre-determined transfer price dependent on the experience level of the transferred employeeand the duration such employee worked on projects for the client. We are required to transfer assets that have already been financed by the client under ouragreement, such as our offshore development center dedicated to the client, at a de minimis pre-agreed price. Since our client has already financed such assets,the carrying value of such assets is de minimis. In addition to the above amounts, the client is also required to pay a negotiated value or book value for theassets to be transferred that have not already been financed by the client. This client accounted for 9.2%, 6.3% and 2.9% of our revenues in 2012, 2011 and2010, respectively. In addition, under our agreement, the client has the right to step in and take over all or part of the offshore development center in certaininstances, including if we are in material default under certain provisions of our agreement, such as those related to the level or quality of our services, or theclient has determined it is otherwise obliged to do so in emergencies or for regulatory reasons. In the event the client takes over any services we provide underour agreement, it will not be obligated to pay us for the provision of those services. If the client exercises these rights, we would lose future revenues related tothe services we provide to the client, as well as lose some of our assets and key employees, and our losses may not be fully covered by the contractualpayment, which could adversely affect our results of operations.Undetected software design defects, errors or failures may result in loss of or delay in market acceptance of our services or in liabilities thatcould materially adversely affect our business.Our software development solutions involve a high degree of technological complexity and have unique specifications and could contain design defects orsoftware errors that are difficult to detect and correct. Errors or defects may result in the loss of current clients and loss of, or delay in, revenues, loss ofmarket share, loss of client data, a failure to attract new clients or achieve market acceptance, diversion of development resources and increased support orservice costs. We cannot assure you that, despite testing by us and our clients, errors will not be found in new software product development solutions, whichcould result in litigation and other claims for damages against us and thus could materially adversely affect our business.Disruptions in internet infrastructure, telecommunications or significant failure in our IT systems could harm our service model, which couldresult in a reduction of our revenue.Part of our service model is to maintain active voice and data communications, financial control, accounting, customer service and other data processingsystems between our clients’ offices, our delivery centers and our client management locations (including our headquarters in Newtown, PA). Our businessactivities may be materially disrupted in the event of a partial or complete failure of any of these internet, IT or communication systems, which could becaused by, among other things, software malfunction, computer virus attacks, conversion errors due to system upgrading, damage from fire, earthquake,power loss, telecommunications failure, unauthorized entry, demands placed on internet infrastructure by growing numbers of users and time spent online orincreased bandwidth requirements or other events beyond our control. Loss of all or part of the infrastructure or systems for a period of time could hinder ourperformance or our ability to complete client projects on time which, in turn, could lead to a reduction of our revenue or otherwise materially adversely affectour business and business reputation. 20Table of ContentsOur computer networks may be vulnerable to security risks that could disrupt our services and cause us to incur losses or liabilities that couldadversely affect our business.Our computer networks may be vulnerable to unauthorized access, computer hackers, computer viruses, worms, malicious applications and othersecurity problems caused by unauthorized access to, or improper use of, systems by third parties or employees. A hacker who circumvents security measurescould misappropriate proprietary information, including personally identifiable information, or cause interruptions or malfunctions in our operations.Although we intend to continue to implement security measures, computer attacks or disruptions may jeopardize the security of information stored in andtransmitted through our computer systems. Actual or perceived concerns that our systems may be vulnerable to such attacks or disruptions may deter ourclients from using our solutions or services. As a result, we may be required to expend significant resources to protect against the threat of these securitybreaches or to alleviate problems caused by these breaches.Data networks are also vulnerable to attacks, unauthorized access and disruptions. For example, in a number of public networks, hackers havebypassed firewalls and misappropriated confidential information, including personally identifiable information. It is possible that, despite existing safeguards,an employee could misappropriate our clients’ proprietary information or data, exposing us to a risk of loss or litigation and possible liability. Losses orliabilities that are incurred as a result of any of the foregoing could adversely affect our business.If we cause disruptions to our clients’ businesses or provide inadequate service, our clients may have claims for substantial damages againstus, which could cause us to lose clients, have a negative effect on our reputation and adversely affect our results of operations.If our IT professionals make errors in the course of delivering services to our clients or fail to consistently meet service requirements of a client, theseerrors or failures could disrupt the client’s business, which could result in a reduction in our revenues or a claim for substantial damages against us. Inaddition, a failure or inability to meet a contractual requirement could seriously damage our reputation and affect our ability to attract new business.The services we provide are often critical to our clients’ businesses. Certain of our client contracts require us to comply with security obligationsincluding maintaining network security and backup data, ensuring our network is virus-free, maintaining business continuity planning procedures, andverifying the integrity of employees that work with our clients by conducting background checks. Any failure in a client’s system or breach of securityrelating to the services we provide to the client could damage our reputation or result in a claim for substantial damages against us. Any significant failure ofour equipment or systems, or any major disruption to basic infrastructure like power and telecommunications in the locations in which we operate, couldimpede our ability to provide services to our clients, have a negative impact on our reputation, cause us to lose clients, and adversely affect our results ofoperations.Under our contracts with our clients, our liability for breach of our obligations is in some cases limited pursuant to the terms of the contract. Suchlimitations may be unenforceable or otherwise may not protect us from liability for damages. In addition, certain liabilities, such as claims of third parties forwhich we may be required to indemnify our clients, are generally not limited under our contracts. The successful assertion of one or more large claims againstus in amounts greater than those covered by our current insurance policies could materially adversely affect our business, financial condition and results ofoperations. Even if such assertions against us are unsuccessful, we may incur reputational harm and substantial legal fees.Our subcontracting practices may expose us to technical uncertainties, potential liabilities and reputational harm.In order to meet our personnel needs, increase workforce flexibility, and improve pricing competitiveness, we use subcontractors and freelancersprimarily to perform short-term assignments in certain specialty areas or on other projects where it is impractical to use our employees, or where we need tosupplement our resources. We also use subcontractors for internal assignments, such as assisting in development of internal systems, recruiting, training,human resources consulting and administration, and other similar support functions. Despite certain advantages of subcontracting, such arrangements alsogive rise to a number of risks.Although we try to source competent and credible third parties as our subcontractors, they may not be able to deliver the level of service that our clientsexpect us to deliver. Furthermore, we enter into confidentiality agreements with our subcontractors, but we cannot guarantee that they will not breach theconfidentiality of us or our clients and misappropriate our or our clients’ proprietary information and technology in the course of providing service. We, as theparty to the contract with the client, are directly responsible for the losses our subcontractors cause our clients. Under the subcontracting agreements we enterinto, our subcontractors generally promise to indemnify us for damages caused by their breach, but we may be unable to collect under these agreements.Moreover, their breaches may damage our reputation, cause us to lose existing business and adversely affect our ability to acquire new business in the future. 21Table of ContentsThere may be adverse tax and employment law consequences if the independent contractor status of our IT professionals or the exempt statusof our employees is successfully challenged.Some of our IT professionals are retained as independent contractors. Although we believe that we have properly classified these individuals asindependent contractors, there is nevertheless a risk that the IRS or another federal, state, provincial or foreign authority will take a different view.Furthermore, the tests governing the determination of whether an individual is considered to be an independent contractor or an employee are typically factsensitive and vary from jurisdiction to jurisdiction. Laws and regulations that govern the status and misclassification of independent contractors are subject tochange or interpretation by various authorities. If a federal, state, provincial or foreign authority or court enacts legislation or adopts regulations that change themanner in which employees and independent contractors are classified or makes any adverse determination with respect to some or all of our independentcontractors, we could incur significant costs under such laws and regulations, including for prior periods, in respect of tax withholding, social security taxesor payments, workers’ compensation and unemployment contributions, and recordkeeping, or we may be required to modify our business model, any ofwhich could materially adversely affect our business, financial condition and results of operations. There is also a risk that we may be subject to significantmonetary liabilities arising from fines or judgments as a result of any such actual or alleged non-compliance with federal, state, provincial or foreign tax laws.Further, if it were determined that any of our independent contractors should be treated as employees, we could possibly incur additional liabilities under ourapplicable employee benefit plans.In addition, we have classified all of our U.S. employees as “exempt” under the Federal Labor Standards Act, or the FLSA. If it were determined thatany of our U.S. employees should be classified as “non-exempt” under the FLSA, we may incur costs and liabilities for back wages, unpaid overtime, finesor penalties and/or be subject to employee litigation.Our insurance coverage may be inadequate to protect us against losses.Although we maintain some insurance coverage, including professional liability insurance, property insurance coverage for certain of our facilities andequipment and business interruption insurance coverage for certain of our operations, we do not insure for all risks in our operations. If any claims for injuryare brought against us, or if we experience any business disruption, litigation or natural disaster, we might incur substantial costs and diversion of resources.Most of the agreements we have entered into with our clients require us to purchase and maintain specified insurance coverage during the terms of theagreements, including commercial general insurance or public liability insurance, umbrella insurance, product liability insurance, and workers’compensation insurance. Some of these types of insurance are not available on reasonable terms or at all in CIS and CEE countries. Although to date no clienthas brought any claims against us for such failure, our clients have the right to terminate these agreements as a result of such failure.Our business could be negatively affected if we incur legal liability, including with respect to our indemnification obligations, in connectionwith providing our solutions and services.If we fail to meet our contractual obligations or otherwise breach obligations to our clients, we could be subject to legal liability. We may enter into non-standard agreements because we perceive an important economic opportunity or because our personnel did not adequately adhere to our guidelines. In addition,the contracting practices of our competitors may cause contract terms and conditions that are unfavorable to us to become standard in the marketplace. If wecannot or do not perform our obligations, we could face legal liability and our contracts might not always protect us adequately through limitations on thescope and/or amount of our potential liability. If we cannot, or do not, meet our contractual obligations to provide solutions and services, and if our exposure isnot adequately limited through the terms of our agreements, we might face significant legal liability and our financial condition and results of operations couldbe materially adversely affected.In the normal course of business and in conjunction with certain client engagements, we have entered into contractual arrangements through which wemay be obligated to indemnify clients or other parties with whom we conduct business with respect to certain matters. These arrangements can includeprovisions whereby we agree to defend and hold the indemnified party and certain of their affiliates harmless with respect to claims related to matters includingour breach of certain representations, warranties or covenants, or out of our intellectual property infringement, our gross negligence or willful misconduct, andcertain other claims. Payments by us under any of these arrangements are generally conditioned on the client making a claim and providing us with fullcontrol over the defense and settlement of such claim. It is not possible to determine the maximum potential amount under these indemnification agreements dueto the unique facts and circumstances involved in each particular agreement, and any claims under these agreements may not be subject to liability limits orexclusion of consequential, indirect or punitive damages. Historically, we have not made payments under these indemnification agreements so they have nothad any impact on our operating results, financial position, or cash flows. However, if events arise requiring us to make payment for indemnification claimsunder our indemnification obligations in contracts we have entered, such payments could have a material impact on our financial condition and results ofoperations. 22Table of ContentsWe may be liable to our clients for damages caused by a violation of intellectual property rights, the disclosure of other confidential information,including personally identifiable information, system failures, errors or unsatisfactory performance of services, and our insurance policiesmay not be sufficient to cover these damages.We often have access to, and are required to collect and store, sensitive or confidential client information, including personally identifiable information.Some of our client agreements do not limit our potential liability for breaches of confidentiality, infringement indemnity and certain other matters. Furthermore,breaches of confidentiality may entitle the aggrieved party to equitable remedies, including injunctive relief. If any person, including any of our employees,penetrates our network security or misappropriates sensitive or confidential client information, including personally identifiable information, we could besubject to significant liability from our clients or from our clients’ customers for breaching contractual confidentiality provisions or privacy laws. Theprotection of the intellectual property rights and other confidential information or personally identifiable information of our clients is particularly important forus since our operations are mainly based in CIS and CEE countries. CIS and CEE countries have not traditionally enforced intellectual property protection tothe same extent as countries such as the United States. Despite measures we take to protect the intellectual property and other confidential information orpersonally identifiable information of our clients, unauthorized parties, including our employees and subcontractors, may attempt to misappropriate certainintellectual property rights that are proprietary to our clients or otherwise breach our clients’ confidences. Unauthorized disclosure of sensitive or confidentialclient information, including personally identifiable information, or a violation of intellectual property rights, whether through employee misconduct, breach ofour computer systems, systems failure or otherwise, may subject us to liabilities, damage our reputation and cause us to lose clients.Many of our contracts involve projects that are critical to the operations of our clients’ businesses and provide benefits to our clients that may bedifficult to quantify. Any failure in a client’s system or any breach of security could result in a claim for substantial damages against us, regardless of ourresponsibility for such failure. Furthermore, any errors by our employees in the performance of services for a client, or poor execution of such services, couldresult in a client terminating our engagement and seeking damages from us.Although we attempt to limit our contractual liability for consequential damages in rendering our services, these limitations on liability may not apply inall circumstances, may be unenforceable in some cases, or may be insufficient to protect us from liability for damages. There may be instances whenliabilities for damages are greater than the insurance coverage we hold and we will have to internalize those losses, damages and liabilities not covered by ourinsurance.We may not be able to prevent unauthorized use of our intellectual property, and our intellectual property rights may not be adequate to protectour business and competitive position.We rely on a combination of copyright, trademark, unfair competition and trade secret laws, as well as confidentiality agreements and other methods toprotect our intellectual property rights. Implementation of intellectual property-related laws in CIS and CEE countries has historically been lacking, primarilybecause of ambiguities in the laws and difficulties in enforcement. Accordingly, protection of intellectual property rights and confidentiality in CIS and CEEcountries may not be as effective as that in the United States or other countries.To protect our and our clients’ proprietary information and other intellectual property, we require our employees, independent contractors, vendors andclients to enter into written confidentiality agreements with us. These agreements may not provide meaningful protection for trade secrets, know-how or otherproprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information.Policing unauthorized use of proprietary technology is difficult and expensive. The steps we have taken may be inadequate to prevent the misappropriation ofour and our clients’ proprietary technology. Reverse engineering, unauthorized copying or other misappropriation of our and our clients’ proprietarytechnologies, tools and applications could enable third parties to benefit from our or our clients’ technologies, tools and applications without paying us fordoing so, and our clients may hold us liable for that act and seek damages and compensation from us, which could harm our business and competitiveposition.We rely on our trademarks, trade names, service marks and brand names to distinguish our services and solutions from the services of ourcompetitors, and have registered or applied to register several of these trademarks. We cannot assure you that our trademark applications will be approved.Third parties may oppose our trademark applications, or otherwise challenge our use of our trademarks. For instance, in 2005, we entered into a Consent ofUse and Settlement Agreement that allowed a third party to use the mark “ePAM” (as capitalized in the foregoing) and restricted our ability to do so. For moreinformation see “Item 1. Business — Intellectual Property.” In the event that our trademarks are successfully challenged, we could be forced to rebrand ourservices and solutions, which could result in loss of brand recognition, and could require us to devote resources to advertising and marketing new brands.Further, we cannot assure you that competitors will not infringe our trademarks, or that we will have adequate resources to enforce our trademarks. 23Table of ContentsWe may need to enforce our intellectual property rights through litigation. Litigation relating to our intellectual property may not prove successful andmight result in substantial costs and diversion of resources and management attention.In addition, we rely on certain third-party software to conduct our business. If we lose the licenses which permit us to use such software, they may bedifficult to replace and it may be costly to do so.We may face intellectual property infringement claims that could be time-consuming and costly to defend. If we fail to defend ourselves againstsuch claims, we may lose significant intellectual property rights and may be unable to continue providing our existing services.Our success largely depends on our ability to use and develop our technology, tools, code, methodologies and services without infringing the intellectualproperty rights of third parties, including patents, copyrights, trade secrets and trademarks. We may be subject to litigation involving claims of patentinfringement or violation of other intellectual property rights of third parties. We typically indemnify clients who purchase our services and solutions againstpotential infringement of intellectual property rights, which subjects us to the risk of indemnification claims. These claims may require us to initiate or defendprotracted and costly litigation on behalf of our clients, regardless of the merits of these claims and are often not subject to liability limits or exclusion ofconsequential, indirect or punitive damages. If any of these claims succeed, we may be forced to pay damages on behalf of our clients, redesign or ceaseoffering our allegedly infringing services or solutions, or obtain licenses for the intellectual property such services or solutions allegedly infringe. If we cannotobtain all necessary licenses on commercially reasonable terms, our clients may be forced to stop using our services or solutions.The holders of patents and other intellectual property rights potentially relevant to our service offerings may make it difficult for us to acquire a licenseon commercially acceptable terms. Also, we may be unaware of intellectual property registrations or applications relating to our services that may give rise topotential infringement claims against us. There may also be technologies licensed to and relied on by us that are subject to infringement or other correspondingallegations or claims by third parties which may damage our ability to rely on such technologies.Further, our current and former employees and/or subcontractors could challenge our exclusive rights in the software they have developed in the courseof their employment. In Russia and certain other countries in which we operate, an employer is deemed to own the copyright in works created by its employeesduring the course, and within the scope, of their employment, but the employer may be required to satisfy additional legal requirements in order to makefurther use and dispose of such works. While we believe that we have complied with all such requirements, and have fulfilled all requirements necessary toacquire all rights in software developed by our independent contractors and/or subcontractors, these requirements are often ambiguously defined and enforced.As a result, we cannot assure that we would be successful in defending against any claim by our current or former employees, independent contractors and/orsubcontractors challenging our exclusive rights over the use and transfer of works those employees, independent contractors and/or subcontractors created orrequesting additional compensation for such works.We are subject to additional risks as a result of our recent and possible future acquisitions and the hiring of new employees who may misappropriateintellectual property from their former employers. The developers of the technology that we have acquired or may acquire may not have appropriately created,maintained or enforced intellectual property rights in such technology. Indemnification and other rights under acquisition documents may be limited in termand scope and may therefore provide little or no protection from these risks. Parties making infringement claims may be able to obtain an injunction to preventus from delivering our services or using technology involving the allegedly infringing intellectual property. Intellectual property litigation is expensive and time-consuming and could divert management’s attention from our business. A successful infringement claim against us, whether with or without merit, could,among others things, require us to pay substantial damages, develop non-infringing technology, or rebrand our name or enter into royalty or license agreementsthat may not be available on acceptable terms, if at all, and would require us to cease making, licensing or using products that have infringed a third party’sintellectual property rights. Protracted litigation could also result in existing or potential clients deferring or limiting their purchase or use of our softwareproduct development services or solutions until resolution of such litigation, or could require us to indemnify our clients against infringement claims in certaininstances. Any intellectual property claim or litigation in this area, whether we ultimately win or lose, could damage our reputation and materially adverselyaffect our business, financial condition and results of operations.Our global operations expose us to numerous and sometimes conflicting legal and regulatory requirements, and violations or unfavorableinterpretation by authorities of these regulations could harm our business.Because we provide IT services to clients throughout the world, we are subject to numerous, and sometimes conflicting, legal rules on matters as diverseas import/export controls, content requirements, trade restrictions, tariffs, taxation, sanctions, government affairs, internal and disclosure control obligations,data privacy and labor relations, particularly in the CIS and CEE countries in which we operate. Our systems and operations are located almost entirely in theCIS and CEE and laws and regulations that are applicable to us, but not to our competitors, may impede our ability to develop and offer services that competeeffectively with those offered by our non-CIS or -CEE based competitors and generally available worldwide. Violations of these laws or regulations in theconduct of our 24Table of Contentsbusiness could result in fines, criminal sanctions against us or our officers, prohibitions on doing business, damage to our reputation and other unintendedconsequences such as liability for monetary damages, fines and/or criminal prosecution, unfavorable publicity, restrictions on our ability to processinformation and allegations by our clients that we have not performed our contractual obligations. Due to the varying degrees of development of the legalsystems of the countries in which we operate, local laws might be insufficient to protect our rights. Our failure to comply with applicable legal and regulatoryrequirements could materially adversely affect our business.We are subject to laws and regulations in the United States and other countries in which we operate concerning our operations, includingexport restrictions, U.S. economic sanctions and the Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws. If we are not incompliance with applicable legal requirements, we may be subject to civil or criminal penalties and other remedial measures.Our operations are subject to laws and regulations restricting our operations, including activities involving restricted countries, organizations, entitiesand persons that have been identified as unlawful actors or that are subject to U.S. sanctions imposed by the Office of Foreign Assets Control, or OFAC, orother international economic sanctions that prohibit us from engaging in trade or financial transactions with certain countries, businesses, organizations andindividuals. We are subject to the FCPA, which prohibits U.S. companies and their intermediaries from bribing foreign officials for the purpose of obtainingor keeping business or otherwise obtaining favorable treatment, and other laws concerning our international operations. The FCPA’s foreign counterpartscontain similar prohibitions, although varying in both scope and jurisdiction. We operate in many parts of the world that have experienced governmentalcorruption to some degree, and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices.We have recently developed and are in the process of implementing formal controls and procedures to ensure that we are in compliance with the FCPA,OFAC sanctions, and similar sanctions, laws and regulations. The implementation of such procedures may be time consuming and expensive, and couldresult in the discovery of issues or violations with respect to the foregoing by us or our employees, independent contractors, subcontractors or agents of whichwe were previously unaware.Any violations of these laws, regulations and procedures by our employees, independent contractors, subcontractors and agents could expose us toadministrative, civil or criminal penalties, fines or restrictions on export activities (including other U.S. laws and regulations as well as foreign and local laws)and would adversely affect our reputation and the market for shares of our common stock and may require certain of our investors to disclose their investmentin our company under certain state laws. If we are not in compliance with export restrictions, U.S. or international economic sanctions or other laws andregulations that apply to our operations, we may be subject to civil or criminal penalties and other remedial measures.Anti-outsourcing legislation, if adopted, could harm our ability to compete effectively and impair our ability to service our clients.The issue of companies outsourcing services to organizations operating in other countries is a topic of political discussion in many countries, includingthe United States, which is our largest source of revenues. Many organizations and public figures in the United States and Europe have publicly expressedconcern about a perceived association between offshore outsourcing IT services providers and the loss of jobs in their home countries. For example, measuresaimed at limiting or restricting outsourcing by U.S. companies are periodically considered in Congress and in numerous state legislatures to address concernsover the perceived association between offshore outsourcing and the loss of jobs in the United States. A number of U.S. states have passed legislation thatrestricts state government entities from outsourcing certain work to offshore IT services providers. Given the ongoing debate over this issue, the introductionand consideration of other restrictive legislation is possible. If enacted, such measures may broaden restrictions on outsourcing by federal and state governmentagencies and on government contracts with firms that outsource services directly or indirectly, impact private industry with measures such as taxdisincentives or intellectual property transfer restrictions, and/or restrict the use of certain business visas. In the event that any of these measures becomes law,our ability to service our clients could be impaired and our business, financial condition and results of operations could be materially adversely affected.Legislation enacted in certain European jurisdictions and any future legislation in Europe or any other country in which we have clients restricting theperformance of services from an offshore location could also materially adversely affect our business, financial condition and results of operations. Forexample, legislation enacted in the United Kingdom, based on the 1977 EC Acquired Rights Directive, has been adopted in some form by many EuropeanUnion countries, and provides that if a company outsources all or part of its business to an IT services provider or changes its current IT services provider,the affected employees of the company or of the previous IT services provider are entitled to become employees of the new IT services provider, generally on thesame terms and conditions as their original employment. In addition, dismissals of employees who were employed by the company or the previous IT servicesprovider immediately prior to that transfer are automatically considered unfair dismissals that entitle such employees to compensation. As a result, in order toavoid unfair dismissal claims, we may have to offer, and become liable for, voluntary redundancy payments to the employees of our clients who outsourcebusiness to us in the United Kingdom and other European Union 25Table of Contentscountries who have adopted similar laws. This legislation could materially affect our ability to obtain new business from companies in the United Kingdomand European Union and to provide outsourced services to companies in the United Kingdom and European Union in a cost-effective manner.In addition, from time to time, there has been publicity about negative experiences associated with offshore outsourcing, such as theft andmisappropriation of sensitive client data. Current or prospective clients may elect to perform certain services themselves or may be discouraged fromtransferring services from onshore to offshore IT services providers to avoid negative perceptions that may be associated with using an offshore IT servicesprovider. Any slowdown or reversal of the existing industry trends toward offshore outsourcing would seriously harm our ability to compete effectively withcompetitors that provide services from within the country in which our clients operate.Our international sales and operations are subject to many uncertainties.Revenues from clients outside North America represented 50.8%, 48.8% and 45.5% of our revenues for 2012, 2011 and 2010, respectively. Weanticipate that clients outside North America will continue to account for a material portion of our revenues in the foreseeable future and may increase as weexpand our international presence, particularly in Europe and the CIS. In addition, the majority of our employees, along with our development and deliverycenters, are located in the CIS and CEE. As a result, we may be subject to risks inherently associated with international operations, including risks associatedwith foreign currency exchange rate fluctuations, which may cause volatility in our reported income, and risks associated with the application and impositionof protective legislation and regulations relating to import or export or otherwise resulting from foreign policy or the variability of foreign economic conditions.Additional risks associated with international operations include difficulties in enforcing intellectual property and/or contractual rights, the burdens ofcomplying with a wide variety of foreign laws, potentially adverse tax consequences, tariffs, quotas and other barriers and potential difficulties in collectingaccounts receivable. In addition, we may face competition in other countries from companies that may have more experience with operations in such countriesor with international operations. Additionally, such companies may have long-standing or well-established relationships with desired clients, which may putus at a competitive disadvantage. We may also face difficulties integrating new facilities in different countries into our existing operations, as well as integratingemployees that we hire in different countries into our existing corporate culture. Our international expansion plans may not be successful and we may not beable to compete effectively in other countries. There can be no assurance that these and other factors will not impede the success of our international expansionplans or limit our ability to compete effectively in other countries.Restrictions on immigration may affect our ability to compete for and provide services to clients in the United States or other countries, whichcould hamper our growth and cause our revenues to decline.The vast majority of our employees are nationals of CIS and CEE countries. Some of our projects require a portion of the work to be undertaken at ourclients’ facilities which are sometimes located outside the CIS and CEE. The ability of our employees to work in the United States, Europe, the CIS and othercountries outside the CIS and CEE depends on their ability to obtain the necessary visas and work permits. Historically, the process for obtaining visas fornationals of CIS and CEE countries to certain countries, including the United States and Europe, has been lengthy and cumbersome. Immigration laws in theUnited States and in other countries are subject to legislative change, as well as to variations in standards of application and enforcement due to political forcesand economic conditions. Particularly given the recent global economic downturn, it is possible that there could be a change in the existing laws or theenactment of new legislation imposing restrictions on the deployment of work visa holders at client locations, which could adversely impact our ability to dobusiness in the jurisdictions in which we have clients. However, it is generally difficult to predict the political and economic events that could affectimmigration laws, or the restrictive impact they could have on obtaining or maintaining business visas for our employees. Our reliance on visas for a numberof employees makes us vulnerable to such changes and variations as it affects our ability to staff projects with employees who are not citizens of the countrywhere the work is to be performed. As a result, we may not be able to obtain a sufficient number of visas for our employees or we may encounter delays oradditional costs in obtaining or maintaining such visas in which case we may not be able to provide services to our clients on a timely and cost-effective basisor manage our sales and delivery centers as efficiently as we otherwise could, any of which could hamper our growth and cause our revenues to decline.If we fail to integrate or manage acquired companies efficiently, or if the acquired companies are difficult to integrate, divert managementresources or do not perform to our expectations, we may not be able to realize the benefits envisioned for such acquisitions, and our overallprofitability and growth plans could be materially adversely affected.On occasion we have expanded our service capabilities and gained new clients through selective acquisitions. Our ability to successfully integrate anacquired entity and realize the benefits of an acquisition requires, among other things, successful integration of technologies, operations and personnel.Challenges we face in the acquisition and integration process include: • integrating operations, services and personnel in a timely and efficient manner; 26Table of Contents • diverting significant management attention and financial resources from our other operations and disrupting our ongoing business; • unforeseen or undisclosed liabilities and integration costs; • incurring liabilities from the acquired businesses for infringement of intellectual property rights or other claims for which we may not besuccessful in seeking indemnification; • incurring debt, amortization expenses related to intangible assets, large and immediate write-offs, assuming unforeseen or undisclosed liabilities,or issuing common stock that would dilute our existing stockholders’ ownership; • generating sufficient revenues and net income to offset acquisition costs; • potential loss of, or harm to, employee or client relationships; • properly structuring our acquisition consideration and any related post-acquisition earn-outs and successfully monitoring any earn-outcalculations and payments; • failing to realize the potential cost savings or other financial benefits and/or the strategic benefits of the acquisition; • retaining key senior management and key sales and marketing and research and development personnel, particularly those of the acquiredoperations; • potential incompatibility of solutions, services and technology or corporate cultures; • consolidating and rationalizing corporate, information technology and administrative infrastructures; • integrating and documenting processes and controls; • entry into unfamiliar markets; and • increased complexity from potentially operating additional geographically dispersed sites, particularly if we acquire a company or business withfacilities or operations outside of the countries in which we currently have operations.In addition, the primary value of many potential acquisition targets in the IT services industry lies in their skilled IT professionals and establishedclient relationships. Transitioning these types of assets to our business can be particularly difficult due to different corporate cultures and values, geographicdistance and other intangible factors. For example, some newly acquired employees may decide not to work with us or to leave shortly after their move to ourcompany and some acquired clients may decide to discontinue their commercial relationships with us. These challenges could disrupt our ongoing business,distract our management and employees and increase our expenses, including causing us to incur significant one-time expenses and write-offs, and make itmore difficult and complex for our management to effectively manage our operations. If we are not able to successfully integrate an acquired entity and itsoperations and to realize the benefits envisioned for such acquisition, our overall growth and profitability plans may be adversely affected.International hostilities, terrorist activities, other violence or war, natural disasters, pandemics and infrastructure disruptions, could delay orreduce the number of new service orders we receive and impair our ability to service our clients.Hostilities involving the United States and acts of terrorism, violence or war, natural disasters, global health risks or pandemics or the threat orperceived potential for these events could materially adversely affect our operations and our ability to provide services to our clients. We may be unable toprotect our people, facilities and systems against any such occurrences. Such events may cause clients to delay their decisions on spending for IT services andgive rise to sudden significant changes in regional and global economic conditions and cycles. These events also pose significant risks to our people and tophysical facilities and operations around the world, whether the facilities are ours or those of our clients, which could materially adversely affect our financialresults. By disrupting communications and travel, giving rise to travel restrictions, and increasing the difficulty of obtaining and retaining highly-skilled andqualified IT professionals, these events could make it difficult or impossible for us to deliver services to some or all of our clients. Travel restrictions couldcause us to incur additional unexpected labor costs and expenses or could restrain our ability to retain the skilled IT professionals we need for our operations.In addition, any extended disruptions of electricity, other public utilities or network services at our facilities, as well as system failures at, or security breachesin, our facilities or systems, could also adversely affect our ability to serve our clients.We may need additional capital, and a failure by us to raise additional capital on terms favorable to us, or at all, could limit our ability to growour business and develop or enhance our service offerings to respond to market demand or competitive challenges.We believe that our current cash, cash flow from operations and revolving line of credit should be sufficient to meet our anticipated cash needs for atleast the next 12 months. We may, however, require additional cash resources due to changed business conditions or other future developments, including anyinvestments or acquisitions we may decide to pursue. If these resources are insufficient to satisfy our cash requirements, we may seek to sell additional equityor debt securities or obtain another credit facility. 27Table of ContentsThe sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt serviceobligations and could require us to agree to operating and financing covenants that would restrict our operations. Our ability to obtain additional capital onacceptable terms is subject to a variety of uncertainties, including: • investors’ perception of, and demand for, securities of IT services companies; • conditions of the United States and other capital markets in which we may seek to raise funds; • our future results of operations and financial condition; • government regulation of foreign investment in the CIS and CEE; and • economic, political and other conditions in the CIS and CEE.Existing stockholders have substantial control over us and could limit your ability to influence the outcome of key transactions, including achange of control.As of March 1, 2013, to our knowledge, our greater than 5% stockholders, directors and executive officers and entities affiliated with them ownapproximately 50% of the outstanding shares of our common stock, which includes approximately 40% of the outstanding shares of our common stock ownedby affiliates of Siguler Guff & Company. As a result, these stockholders, if acting together, would be able to influence or control matters requiring approvalby our stockholders, including the election of directors, the approval of merger, consolidation or sale of all or substantially all of our assets and othersignificant business or corporate transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and whichmay be adverse to your interests. The concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company,could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect themarket price of our common stock.Companies doing business in emerging markets, such as CIS and CEE countries, are subject to significant economic risks.CIS and CEE countries are generally considered to be emerging markets. Investors in emerging markets should be aware that these markets are subject togreater risks than more developed markets, including significant economic risks. The economies of CIS and CEE countries, like other emerging economies,are vulnerable to market downturns and economic slowdowns elsewhere in the world. The economies of Belarus, Russia, Ukraine, Hungary and other CISand CEE countries where we operate have experienced periods of considerable instability and have been subject to abrupt downturns. As has happened in thepast, financial problems or an increase in the perceived risks associated with investing in emerging economies such as in the CIS and CEE could dampenforeign investment in these markets and materially adversely affect their economies. In addition, a deterioration in macroeconomic conditions, such as therecent debt crisis in Europe, could require us to reassess the value of goodwill for potential impairment. This goodwill is subject to impairment tests on anongoing basis. Weakening macroeconomic conditions in the countries in which we operate and/or a significant difference between the performance of anacquired company and the business case assumed at the time of acquisition could require us to write down the value of the goodwill or a portion of such value.These risks may be compounded by incomplete, unreliable or unavailable economic and statistical data on CIS and CEE countries, including elements of theinformation provided in this annual report. Similar statistics may be obtainable from other non-official sources, although the underlying assumptions andmethodology, and consequently the resulting data, may vary from source to source. Economic instability in CIS or CEE countries where we operate and anyfuture deterioration in the international economic situation could materially adversely affect our business, financial condition and results of operations.Fluctuations in currency exchange rates could materially adversely affect our financial condition and results of operations.We have significant international operations, and we earn our revenues and incur our expenses in multiple currencies. Doing business in different foreigncurrencies exposes us to foreign currency risks, including risks related to revenues and receivables, compensation of our personnel, purchases and capitalexpenditures. The majority of our revenues are in U.S. dollars, British pounds, Russian rubles and euros, and the majority of our expenses, particularlysalaries of IT professionals, are denominated in U.S. dollars but payable in Belarusian rubles or in other local currencies at the exchange rate in effect at thetime. To the extent that we increase our business and revenues which are denominated in Belarusian rubles, Ukrainian hryvnia, Hungarian forints or otherlocal currencies, we will also increase our receivables denominated in those currencies and therefore also increase our exposure to fluctuations in their exchangerates against the U.S. dollar, our reporting currency. Similarly, any capital expenditures, such as for computer equipment, which are payable in the localcurrency of the countries in which we operate but are imported to such countries, and any deposits we hold in local currencies, can be materially affected bydepreciation of the local currency against the U.S. dollar and the effect of such depreciation on the local economy. Certain foreign currency exposures, to someextent, are naturally offset on a consolidated basis. However, due to the increasing size of our international operations, fluctuations in foreign currencyexchange rates could materially impact our results. See “Item 7A. Quantitative and Qualitative Disclosures About Market Risk.” 28Table of ContentsThe banking and financial systems in the CIS remain less developed than those in some more developed markets, and a banking crisis couldplace liquidity constraints on our business and materially adversely affect our business and financial condition.Banking and other financial systems in the CIS are less developed and regulated than in some more developed markets, and legislation relating to banksand bank accounts is subject to varying interpretations and inconsistent application. Banks in the CIS generally do not meet the banking standards of moredeveloped markets, and the transparency of the banking sector lags behind international standards. Furthermore, in Russia, Belarus and other CIS countries,bank deposits made by corporate entities generally are not insured. As a result, the banking sector remains subject to periodic instability. Another bankingcrisis, or the bankruptcy or insolvency of banks through which we receive or with which we hold funds, particularly in Belarus, may result in the loss of ourdeposits or adversely affect our ability to complete banking transactions in the CIS, which could materially adversely affect our business and financialcondition.The legal systems in CIS countries can create an uncertain environment for business activity, which could materially adversely affect ourbusiness and operations in the CIS.The legal framework to support a market economy remains new and in flux in Belarus, Russia, Ukraine and other CIS countries and, as a result, theselegal systems can be characterized by: • inconsistencies between and among laws and governmental, ministerial and local regulations, orders, decisions, resolutions and other acts; • gaps in the regulatory structure resulting from the delay in adoption or absence of implementing regulations; • selective enforcement of laws or regulations, sometimes in ways that have been perceived as being motivated by political or financialconsiderations; • limited judicial and administrative guidance on interpreting legislation; • relatively limited experience of judges and courts in interpreting recent commercial legislation; • a perceived lack of judicial and prosecutorial independence from political, social and commercial forces; • inadequate court system resources; • a high degree of discretion on the part of the judiciary and governmental authorities; and • underdeveloped bankruptcy procedures that are subject to abuse.In addition, as is true of civil law systems generally, judicial precedents generally have no binding effect on subsequent decisions. Not all legislation andcourt decisions in CIS countries are readily available to the public or organized in a manner that facilitates understanding. Enforcement of court orders can inpractice be very difficult. All of these factors make judicial decisions difficult to predict and effective redress uncertain. Additionally, court claims andgovernmental prosecutions may be used in furtherance of what some perceive to be political aims.The untested nature of much of recent legislation in the countries in which we operate and the rapid evolution of their legal systems may result inambiguities, inconsistencies and anomalies in the application and interpretation of laws and regulations. Any of these factors may affect our ability to enforceour rights under our contracts or to defend ourselves against claims by others, or result in our being subject to unpredictable requirements, and couldmaterially adversely affect our business and operations in the CIS.These uncertainties also extend to property rights. For example, during the transformation of Russia, Belarus, Ukraine and other CIS countries fromcentrally planned economies to market economies, legislation has generally been enacted in each of these countries to protect private property againstuncompensated expropriation and nationalization. However, there is a risk that due to the lack of experience in enforcing these provisions and due to politicalfactors, these protections would not be enforced in the event of an attempted expropriation or nationalization. Expropriation or nationalization of any of ourentities, their assets or portions thereof, potentially without adequate compensation, could materially adversely affect our business, financial condition andresults of operations.Our CIS subsidiaries can be forced into liquidation on the basis of formal noncompliance with certain legal requirements.We operate in CIS countries primarily through locally organized subsidiaries. Certain provisions of Russian law and the laws of other CIS countriesmay allow a court to order liquidation of a locally organized legal entity on the basis of its formal noncompliance with certain requirements during formation,reorganization or during its operations.For example, in Russian corporate law, if the net assets of a Russian joint stock company calculated on the basis of Russian accounting standards arelower than its charter capital as at the end of its third or any subsequent financial year, the company must either decrease its charter capital or liquidate. If thecompany fails to comply with these requirements, governmental or local 29Table of Contentsauthorities can seek the involuntary liquidation of such company in court, and the company’s creditors will have the right to accelerate their claims or demandearly performance of the company’s obligations as well as demand compensation of any damages.Similarly, there have also been cases in CIS countries in which formal deficiencies in the establishment process of a legal entity or noncompliance withprovisions of law have been used by courts as a basis for liquidation of a legal entity. Weaknesses in the legal systems of CIS countries create an uncertainlegal environment, which makes the decisions of a court or a governmental authority difficult, if not impossible, to predict. If involuntary liquidation of anyof our subsidiaries were to occur, such liquidation could materially adversely affect our financial condition and results of operations.Any U.S. or other foreign judgments that may be obtained against us may be difficult to enforce in Belarus, Russia, Ukraine and other CIScountries.Although we are a Delaware corporation, subject to suit in the United States and other courts, many of our assets are located in Belarus, Russia,Ukraine and other CIS countries and one of our directors and his assets are located outside the United States. Although arbitration awards are generallyenforceable in CIS countries, judgments obtained in the United States or in other foreign courts, including those with respect to U.S. federal securities lawclaims, may not be enforceable in many CIS countries, including Belarus, Russia and Ukraine. There is no mutual recognition treaty between the UnitedStates and Belarus, Russia or Ukraine. Therefore, it may be difficult to enforce any U.S. or other foreign court judgment obtained against any of our operatingsubsidiaries in CIS countries.Our stock price is volatile.Our common stock has at times experienced substantial price volatility as a result of variations between our actual and anticipated financial results,announcements by us and our competitors, projections or speculation about our business or that of our competitors by the media or investment analysts oruncertainty about current global economic conditions. The stock market, as a whole, also has experienced extreme price and volume fluctuations that haveaffected the market price of many technology companies in ways that may have been unrelated to these companies’ operating performance. Furthermore, webelieve our stock price should reflect future growth and profitability expectations and, if we fail to meet these expectations, our stock price may significantlydecline.Compliance with changing regulation of corporate governance and public disclosure may result in additional expense and affect ouroperations.Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform andConsumer Protection Act, SEC regulations and New York Stock Exchange, or NYSE, rules, are creating uncertainty for companies such as ours. These newor changed laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, and as a result, theirapplication in practice may evolve over time as new guidance is provided by regulatory and governing bodies, which could result in continuing uncertaintyregarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and corporate governance practices. As a result, our efforts tocomply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expensesand a diversion of management time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new or changedlaws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, our reputation maybe harmed. Item 1B.Unresolved Staff CommentsNot applicable. 30Table of ContentsItem 2.PropertiesWe are incorporated in Delaware with headquarters in Newtown, PA, with multiple delivery centers located in Belarus, Ukraine, Russia, Hungary,Kazakhstan and Poland, and client management locations in the United States, Canada, the United Kingdom, Germany, Sweden, Switzerland, Russia andKazakhstan.The table below sets forth our principal properties: Location SquareMetersLeased SquareMetersOwned Total SquareMeters Delivery Centers and Client Management Locations: Belarus 24,104 7,655 31,759 Ukraine 22,007 — 22,007 Russia 12,761 — 12,761 Hungary 8,150 — 8,150 Kazakhstan 2,671 — 2,671 United States 2,398 — 2,398 Switzerland 379 — 379 Sweden 220 — 220 United Kingdom 126 — 126 Poland 86 — 86 Germany — — — Canada 810 — 810 Total 73,712 7,655 81,367 Executive Office: Newtown, PA, United States 932 — 932 Our facilities are used interchangeably amongst all of our segments. We believe that our existing facilities are adequate to meet our current requirements,and that suitable additional or substitute space will be available, if necessary. Item 3.Legal ProceedingsAlthough we may, from time to time, be involved in litigation and claims arising out of our operations in the normal course of business, we are notcurrently a party to any material legal proceeding. In addition, we are not aware of any material legal or governmental proceedings against us, or contemplatedto be brought against us. Item 4.Mine Safety DisclosuresNot applicable. 31Table of ContentsPART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOur common stock is traded on the New York Stock Exchange, or the NYSE, under the symbol “EPAM.”Our shares have been publicly traded since February 8, 2012. The following table shows the per share range of high and low sales prices for shares ofour common stock, as listed for quotation on the NYSE, and the quarterly cash dividends paid per share for the quarterly periods indicated. High Low Quarter Ended December 31, 2012 $20.99 $17.32 September 30, 2012 $19.64 $13.94 June 30, 2012 $23.62 $14.72 March 31, 2012 $21.25 $13.25 As of March 1, 2013, we had approximately 45 stockholders of record of our common stock. The number of record holders does not include holders ofshares in “street names” or persons, partnerships, associations, corporations or other entities identified in security position listings maintained by depositories.Dividend PolicyWe have not declared or paid any cash dividends on our common stock and currently do not anticipate paying any cash dividends in the foreseeablefuture. Instead, we intend to retain all available funds and any future earnings for use in the operation and expansion of our business. Any futuredetermination relating to dividend policy will be made at the discretion of our board of directors and will depend on our future earnings, capital requirements,financial condition, future prospects, applicable Delaware law, which provides that dividends are only payable out of surplus or current net profits, and otherfactors that our board of directors deems relevant. In addition, our credit facility restricts our ability to pay dividends.Performance GraphThe following graph compares the cumulative total stockholder return on our common stock with the cumulative total return on the S&P 500 Index anda Peer Group Index (capitalization weighted) for the period beginning February 8, 2012, which is the date of our IPO, and ending on the last day of our lastcompleted fiscal year. The stock performance shown on the graph below is not indicative of future price performance.COMPARISON OF CUMULATIVE TOTAL RETURN(1)(2)Among EPAM, the S&P 500 Index and a Peer Group Index(3) (Capitalization Weighted) Base Period 2/8/2012 3/31/2012 6/30/2012 9/30/2012 12/31/2012 Company / Index EPAM Systems, Inc. 100 146.57 121.36 135.29 129.29 S&P 500 Index 100 104.33 100.90 106.72 105.65 Peer Group Index 100 102.94 83.91 89.48 85.86 (1)Graph assumes $100 invested on February 8, 2012, in our common stock, the S&P 500 Index, and the Peer Group Index (capitalization weighted).(2)Cumulative total return assumes reinvestment of dividends.(3)We have constructed a Peer Group Index of other information technology consulting firms consisting of Virtusa Corporation (NASDAQ:VRTU),Cognizant Technology Solutions Corp. (NASDAQ:CTSH), Infosys Ltd ADR (NYSE:INFY), Sapient Corporation (NASDAQ:SAPE), Syntel, Inc.(NASDAQ:SYNT) and Wipro Ltd. (ADR) (NYSE:WIT).Equity Compensation Plan InformationThe following table sets forth securities authorized for issuance under our 2012 Long-Term Incentive Plan, 2006 Stock Option Plan, individualcompensation arrangements and any other compensation plans as of December 31, 2012. Plan Number ofsecuritiesto be issueduponexercise ofoutstandingoptions,warrantsand rights Weightedaverageexerciseprice ofoutstandingoptions,warrantsand rights Number ofsecuritiesremainingavailable forfutureissuanceunder equitycompensationplans(excludingsecuritiesreflected incolumn (a)) 2012 Long-Term Incentive Plan approved by shareholders (1) 1,380,315 16.79 7,866,485 2006 Stock Option Plan approved by shareholders (2) 4,916,394 4.91 859,808 Total 6,296,709 7.51 8,726,293 (1)On January 11, 2012, our Board of Directors approved the 2012 Long-Term Incentive Plan (“2012 Plan”), which will be used to issue equity grants toemployees. The Board authorized 9,246,800 shares of common stock to be reserved for issuance under the plan. This is in addition to 733,808 sharesthat remained available for issuance under the 2006 Plan as of January 11, 2012 and which are available for issuance under the 2012 Plan. In addition,up to 4,916,394 shares that are subject to outstanding awards as of December 31, 2012, under the 2006 Plan and that expire or terminate for any reasonprior to exercise or that would otherwise return to the 2006 Plan’s share reserve will be available for awards to be granted under the 2012 Plan. 32Table of Contents(2)Effective May 31, 2006, our Board of Directors adopted the 2006 Stock Option Plan (the “2006 Plan”). The 2006 Plan permitted the granting of optionsto directors, employees, and certain independent contractors. The Compensation Committee of the Board of Directors generally had the authority to selectindividuals who are to receive options and to specify the terms and conditions of each option so granted, including the number of shares covered by theoption, the exercise price, vesting provisions, and the overall option term. In January 2012, the 2006 Plan was discontinued; however, a total of859,808 shares remain available for issuance under the 2012 Plan as of December 31, 2012. All of the options issued pursuant to the 2006 Plan expireten years from the date of grant.Unregistered Sales of SecuritiesOn December 18, 2012, we issued an aggregate of 326,346 shares of our common stock as a partial consideration to the Empathy Lab sellers inconnection with the acquisition of substantially all of the assets of Empathy Lab, LLC. No underwriter was involved in the Empathy Lab acquisition and nounderwriting commissions were paid. This transaction was exempt from the registration requirements pursuant to the provisions of Section 4(2) of theSecurities Act of 1933, as amended.Purchases of Equity Securities by the Issuer and Affiliated PurchasersThere were no purchases of equity securities by the issuer and affiliated purchasers during the quarterly period ended December 31, 2012. Item 6.Selected Financial DataWe have derived the selected consolidated statements of income data for the years ended December 31, 2012, 2011 and 2010 and selected consolidatedbalance sheet data as of December 31, 2012 and 2011 from our audited consolidated financial statements and related notes included in this annual report. Wehave derived the selected consolidated statements of income data for the years ended December 31, 2009 and 2008 and the selected consolidated balance sheetdata as of December 31, 2010, 2009 and 2008 from our audited consolidated financial statements not included in this annual report. Our historical results arenot necessarily indicative of the results to be expected for any future period. The following selected financial data should be read in conjunction with “Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements and related notesincluded elsewhere in this annual report. Year Ended December 31, 2012 2011 2010 2009 2008 (in thousands, except per share data) Consolidated Statements of Income Data: Revenues $433,799 $334,528 $221,824 $149,939 $160,632 Operating expenses: Cost of revenues (exclusive of depreciation and amortization) 270,361 205,336 132,528 88,027 91,205 Selling, general and administrative expenses 85,868 64,930 47,635 39,248 53,913 Depreciation and amortization expense 10,882 7,538 6,242 5,618 4,889 Goodwill impairment loss — 1,697 — — — Other operating expenses, net 682 19 2,629 1,064 400 Income from operations $66,006 $55,008 $32,790 $15,982 $10,225 Interest and other income, net 1,941 1,422 486 42 1,345 Foreign exchange gain (loss) (2,084) (3,638) (2,181) (1,617) (3,819) Income before provision for income taxes $65,863 $52,792 $31,095 $14,407 $7,751 Provision for income taxes 11,379 8,439 2,787 879 3,701 Net income $54,484 $44,353 $28,308 $13,528 $4,050 Net income per share of common stock(1): Basic (common) $1.27 $0.69 $0.84 $0.23 $0.00 Basic (puttable common) $— $1.42 $0.84 $0.23 $0.00 Diluted (common) $1.17 $0.63 $0.79 $0.22 $0.00 Diluted (puttable common) $— $0.77 $0.79 $0.22 $0.00 Shares used in calculation of net income per share of common stock: Basic (common) 40,190 17,094 17,056 16,719 16,050 Basic (puttable common) — 18 141 153 114 33Table of Contents Year Ended December 31, 2012 2011 2010 2009 2008 (in thousands, except per share data) Diluted (common) 43,821 20,473 19,314 18,474 17,980 Diluted (puttable common) — 18 141 153 114 (1)In connection with the completion of our initial public offering, we effected an 8 for 1 common stock split as of January 19, 2012. All historicalcommon stock and per share information has been changed to reflect the common stock split. As of December 31, 2012 2011 2010 2009 2008 (in thousands) Consolidated Balance Sheet Data: Cash and cash equivalents $118,112 $88,796 $54,004 $52,927 $30,658 Accounts receivable, net 78,906 59,472 41,488 27,450 28,224 Unbilled revenues, net 33,414 24,475 23,883 13,952 9,777 Property and equipment, net 53,135 35,482 25,338 23,053 19,136 Total assets 350,814 235,613 170,858 135,407 106,924 Accrued expenses and other liabilities 19,814 24,782 15,031 4,928 7,103 Deferred revenue 7,632 6,949 5,151 4,417 990 Revolving line of credit — — — 7,000 — Total liabilities 64,534 54,614 35,900 30,196 18,793 Preferred stock; Series A-1 convertible redeemable preferred stock and Series A-2convertible redeemable preferred stock — 85,940 68,377 87,413 82,990 Total stockholders’ equity $286,280 $95,059 $66,249 $16,534 $4,098 34Table of ContentsItem 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsYou should read the following discussion and analysis of our financial condition and results of operations together with our audited consolidatedfinancial statements and the related notes included elsewhere in this annual report. In addition to historical information, this discussion containsforward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from management’sexpectations. Factors that could cause such differences are discussed in the sections entitled “Special Note Regarding Forward-Looking Statements”and “Item 7A. Risk Factors.” We assume no obligation to update any of these forward-looking statements. Please note that we effected an 8 for 1common stock split on January 19, 2012, and all historical common stock and per share information has been changed to reflect the common stocksplit.Executive SummaryWe are a leading global IT services provider focused on complex software product development services, software engineering and vertically-orientedcustom development solutions. Since our inception in 1993, we have been serving independent software vendors, or ISVs, and technology companies. Thefoundation we have built serving ISVs and technology companies has enabled us to differentiate ourselves in the market for software engineering skills andtechnology capabilities. Our work with these clients exposes us to their customers’ challenges across a variety of industry “verticals.” This has enabled us todevelop vertical-specific domain expertise and grow our business in multiple industry verticals, including Banking and Financial Services, BusinessInformation and Media, and Travel and Consumer.We have client management locations in the United States, Canada, the United Kingdom, Germany, Sweden, Russia, Switzerland and Kazakhstan.Our clients primarily consist of Forbes Global 2000 corporations located in North America, Europe and the CIS. Our delivery centers in Belarus, Ukraine,Russia, Hungary, Kazakhstan and Poland are strategically located in centers of software engineering talent and educational excellence across Central andEastern Europe (“CEE”) or the Commonwealth of Independent States (the “CIS”). The majority of our employees are located in these delivery centers withcompensation and benefits related to this pool of resources being the primary component of our operating expenses. Additionally, our global delivery model andcentralized support functions, combined with the benefits of scale from the shared use of fixed-cost resources, such as computers and office space, enhanceour productivity levels and enable us to better manage efficiency of our global operations by maintaining adequate resource utilization levels and implementingcompany-wide cost-management programs. As a result, we have managed to create a relatively homogeneous delivery base whereby our applications, tools,methodologies and infrastructure allow us to seamlessly deliver services and solutions from our delivery centers to global clients across all geographies,thereby further strengthening our relationships with them.Our focus on delivering quality to our clients is reflected by an average of 91.9% and 82.0% of our revenues in 2012 coming from clients that had usedour services for at least one and two years, respectively.Recent developmentsOn February 13, 2012, we completed our initial public offering of 6,900,000 shares of our common stock, which included 900,000 shares of ourcommon stock sold by us pursuant to an over-allotment option granted to the underwriters, sold at a price to the public of $12.00 per share. Of the 6,900,000shares of common stock sold, we issued and sold 2,900,000 shares of common stock and our selling stockholders sold 4,000,000 shares of common stock,resulting in gross proceeds to us of $34.8 million, and $29.0 million in net proceeds to us after deducting underwriting discounts and commissions of $2.4million and offering expenses of $3.4 million. We did not receive any proceeds from the sale of common stock by the selling stockholders.On May 25, 2012 we completed the acquisition of Thoughtcorp, a Canadian company with a 17-year history of successfully delivering high-value ITsolutions and complex software applications to some of Canada’s most prominent companies within the telecommunications, financial and retail industries.With the Thoughtcorp acquisition we have strengthened our Banking and Financial Services and Travel and Consumer verticals, and have gained significanttelecommunications expertise with a highly skilled and experienced employee base. The acquisition also expands our North American geographic footprint andcomplements our global delivery capabilities with expertise in areas important for us, such as Agile Development, Enterprise Mobility and BusinessIntelligence.On December 18, 2012 we completed the acquisition of Empathy Lab, LLC, a U.S.-based digital strategy and multi-channel experience design firm.The acquisition is intended to enhance our strong capabilities in global delivery of software engineering services with Empathy Lab’s proven expertise in twoimportant growth areas - development and execution of enterprise-wide eCommerce initiatives and transformation of Media consumption and distributionchannels. In addition to strengthening our Travel and Consumer and Business Information and Media verticals, Empathy Lab brings significant expertise indigital marketing strategy consulting and program management.We expect to continue to seek opportunities to deepen our industry expertise and technology capabilities necessary to deliver complex mission-criticalsolutions as part of our ongoing growth strategy. 35Table of ContentsChange in Presentation of Certain Financial InformationAs part of our discussion and analysis, we analyze revenues by vertical. The composition and organization of our verticals is fluid and the structurechanges regularly in response to overall growth, new business acquisitions and changes in reporting structure. Prior to the third quarter of 2012, certainindividually insignificant customers pertaining to acquired operations were aggregated for the purposes of presenting revenue by vertical. Effective thirdquarter of 2012, we have individually reassigned these customers to corresponding verticals. We believe this change is preferable as it allows us to moreeffectively analyze our verticals by aligning presentation of existing and acquired customers using a standardized approach. These changes do not result inany adjustments to our previously issued financial statements and were applied retrospectively beginning on January 1, 2010 as presented in the tables below.Additionally, we have revised our disclosures to present Travel and Hospitality and Retail and Consumer verticals as a single Travel and Consumer vertical. Year Ended December 31, 2011 As PreviouslyReported After Reclassification (in thousands, except percentages) Vertical ISVs and Technology $87,369 26.2% $84,246 25.2% Banking and Financial Services 76,419 22.8 76,645 22.9 Travel and Consumer 71,706 21.4 71,488 21.4 Business Information and Media 62,350 18.6 63,988 19.1 Other verticals 30,508 9.2 31,985 9.6 Reimbursable expenses and other revenues 6,176 1.8 6,176 1.8 Revenues $334,528 100.0% $334,528 100.0% Year Ended December 31, 2010 As PreviouslyReported After Reclassification (in thousands, except percentages) Vertical ISVs and Technology $68,727 31.0% $64,905 29.3% Business Information and Media 45,749 20.6 36,135 16.3 Banking and Financial Services 42,835 19.3 43,019 19.4 Travel and Consumer 36,461 16.5 46,146 20.8 Other verticals 24,279 10.9 27,846 12.5 Reimbursable expenses and other revenues 3,773 1.7 3,773 1.7 Revenues $221,824 100.0% $221,824 100.0% Summary of Results of Operations and Non-GAAP Financial MeasuresThe following tables present a summary of our results of operations, by amount and as a percentage of revenues, for the years ended December 31,2012, 2011 and 2010: Year Ended December 31, 2012 2011 2010 (in thousands, except percent) Revenues $433,799 100.0% $334,528 100.0% $221,824 100.0% Income from operations 66,006 15.2% 55,008 16.4% 32,790 14.8% Net income $54,484 12.6% $44,353 13.3% $28,308 12.8% The key drivers of our consolidated results in 2012 as compared to 2011 were as follows: • Broad-based revenue growth from clients in most of our key verticals, and in particular within Banking and Financial Services, which increasedrevenues by $35.3 million, or 46.1%, ISV and Technology and Travel and Consumer with a $22.6 million, or 26.8%, and a $24.5 million, or 34.2%,growth in 2012 revenues as compared to 2011, respectively; 36Table of Contents • Continued penetration of the European market where we experienced revenue growth of $48.1 million, or 45.0%, in 2012 compared to $48.5 million, or82.8% in 2011; • Strong revenue contribution from our top clients. Revenues attributable to our top ten clients as of December 31, 2012 increased by $43.3 million ascompared to 2011 as we continued to leverage long-term relationships to generate repeat revenue and expand existing revenue streams; • Completion of a strategic acquisitions of Thoughtcorp, Inc. (“Thoughtcorp”) in May, 2012 and Empathy Lab, LLC (“Empathy Lab”) in December,2012, which contributed another $7.7 million in revenues; • Decrease in our income from operations in 2012 as compared to 2011 by 1.2% as a percentage of revenues mainly due to an increase in incentivecompensation our IT professionals combined with an increase in stock-based compensation of 0.7% over 2011 as a percentage of revenues.The operating results in any period are not necessarily indicative of the results that may be expected for any future period.In our quarterly earnings press releases and conference calls, we discuss two key measures that are not calculated according to generally acceptedaccounting principles (“GAAP”). The first non-GAAP measure is income from operations, as reported on our consolidated and condensed statements ofincome and comprehensive income, excluding certain expenses and benefits, which we refer to as “non-GAAP income from operations”. The second measurecalculates non-GAAP income from operations as a percentage of reported revenues, which we refer to as “non-GAAP operating margin”. We believe that thesenon-GAAP measures help illustrate underlying trends in our business, and we use these measures to establish budgets and operational goals (communicatedinternally and externally), manage our business, and evaluate our performance. We also believe these measures help investors compare our operatingperformance with our results in prior periods and compare our operating results with those of similar companies. We exclude certain expenses and benefitsfrom non-GAAP income from operations that we believe are not reflective of these underlying business trends and are not useful measures in determining ouroperational performance and overall business strategy. Because our reported non-GAAP financial measures are not calculated according to GAAP, thesemeasures are not comparable to GAAP and may not be comparable to similarly described non-GAAP measures reported by other companies within ourindustry. Consequently, our non-GAAP financial measures should not be evaluated in isolation from or supplant comparable GAAP measures, but, rather,should be considered together with our consolidated and condensed financial statements, which are prepared according to GAAP. The following table presentsa reconciliation of income from operations as reported on our consolidated statements of income and comprehensive income to non-GAAP income fromoperations and non-GAAP operating margin for the years ended December 31, 2012 and 2011: Year Ended December 31, 2012 2011 2010 (in thousands, except percent) GAAP Income from operations $66,006 $55,008 $32,790 Stock-based compensation(1) 6,826 2,866 2,939 One-time charges 584 — — Goodwill impairment — 1,697 — Amortization of purchased intangible assets 1,024 779 999 M&A costs 500 527 109 Legal claims — — 2,608 Write-off and recovery — — (1,686) Non-GAAP Income from operations 74,940 60,877 37,759 GAAP Operating margin 15.2% 16.4% 14.8% Effect of the adjustments detailed above 2.1 1.8 2.2 Non-GAAP Operating margin 17.3% 18.2% 17.0% (1)Cost of revenue includes stock-based compensation expense of $2,809, $1,365 and $1,314 for the years ended December 31, 2012, 2011 and 2010,respectively. Selling, general and administrative expenses include stock-based compensation expense of $4,017, $1,501 and $1,625 for the yearsended December 31, 2012, 2011 and 2010, respectively. 37Table of ContentsEffects of InflationEconomies in CIS countries such as Belarus, Russia and Ukraine have periodically experienced high rates of inflation. In particular, over a three-yearperiod ending December 31, 2012, significant inflation has been reported in Belarus. The National Statistical Committee of Belarus estimated that inflationwas approximately 109.7% in 2012, 153.2% in 2011 and 9.9% in 2010. In 2012, 2011 and 2010 we had 0.5%, 0.8% and 1.2% of our revenues,respectively, denominated in Belarusian rubles.The measures currently used by the Belarusian government to control this recent inflation include monetary policy and pricing instruments, includingincreasing interest rates and the use of anti-monopoly laws to prevent the increase in pricing of goods, as well as privatization and using foreign borrowings toreplenish the budget and stabilize local currency. Inflation, government actions to combat inflation and public speculation about possible additional actionshave also contributed materially to economic uncertainty in Belarus. Belarus may experience high levels of inflation in the future. The Russian and Ukrainiangovernments have historically implemented similar measures as Belarus to fight inflation.Periods of higher inflation may slow economic growth in those countries. Inflation also is likely to increase some of our costs and expenses, which wemay not be able to pass on to our clients and, as a result, may reduce our profitability. Inflationary pressures could also affect our ability to access financialmarkets and lead to counter-inflationary measures that may harm our financial condition, results of operations or adversely affect the market price of oursecurities.Results of OperationsThe following table sets forth a summary of our consolidated results of operations by amount and as a percentage of our revenues for the periodsindicated. This information should be read together with our audited consolidated financial statements and related notes included elsewhere in this annualreport. The operating results in any period are not necessarily indicative of the results that may be expected for any future period. Year Ended December 31, 2012 2011 2010 (in thousands, except percent) Revenues $433,799 100.0% $334,528 100.0% $221,824 100.0% Operating expenses: Cost of revenues (exclusive of depreciation and amortization)(1) 270,361 62.3 205,336 61.4 132,528 59.7 Selling, general and administrative expenses(2) 85,868 19.8 64,930 19.4 47,635 21.5 Depreciation and amortization expense 10,882 2.5 7,538 2.3 6,242 2.8 Goodwill impairment loss — 0.0 1,697 0.5 — — Other operating expenses, net 682 0.2 19 0.0 2,629 1.2 Income from operations 66,006 15.2% 55,008 16.4% 32,790 14.8% Interest and other income, net 1,941 0.5 1,422 0.4 486 0.3 Foreign exchange (loss) (2,084) -0.5 (3,638) -1.1 (2,181) -1.0 Income before provision for income taxes 65,863 15.2% 52,792 15.7% 31,095 14.1% Provision for income taxes 11,379 2.6 8,439 2.5 2,787 1.3 Net income $54,484 12.6% $44,353 13.2% $28,308 12.8% (1)Includes stock-based compensation expense of $2,809, $1,365 and $1,314 for the years ended December 31, 2012, 2011 and 2010, respectively.(2)Includes stock-based compensation expense of $4,017, $1,501 and $1,625 for the years ended December 31, 2011, 2011 and 2010, respectively.RevenuesRevenues are derived primarily from providing software development services to our clients. We discuss below the breakdown of our revenues byservice offering, vertical, client location, contract type and client concentration. Revenues consist of IT services revenues and reimbursable expenses and otherrevenues, which primarily include travel and entertainment costs that are chargeable to clients. 38Table of ContentsRevenues by Service OfferingSoftware development includes software product development, custom application development services and enterprise application platforms services,and has historically represented, and we expect to continue to represent, the substantial majority of our business. The following table sets forth revenues byservice offering by amount and as a percentage of our revenues for the periods indicated: Year Ended December 31, 2012 2011 2010 (in thousands, except percent) Service Offering Software development $290,139 66.8% $219,211 65.5% $149,658 67.5% Application testing services 85,849 19.8 67,840 20.3 44,459 20.0 Application maintenance and support 36,056 8.3 29,287 8.8 19,262 8.7 Infrastructure services 12,424 2.9 8,488 2.5 2,823 1.3 Licensing 2,914 0.7 3,526 1.1 1,849 0.8 Reimbursable expenses and other revenues 6,417 1.5 6,176 1.8 3,773 1.7 Revenues $433,799 100.0% $334,528 100.0% $221,824 100.0% Revenues by VerticalThe foundation we have built with ISVs and technology companies has enabled us to leverage our strong domain knowledge and industry-specificknowledge capabilities to become a premier IT services provider to a range of additional verticals such as Banking and Financial Services, BusinessInformation and Media, and Travel and Consumer. Additionally, we have substantial expertise in other industries such as Oil and Gas, Telecommunications,Healthcare and several others, which are currently reported in aggregate under Other verticals. The following table sets forth revenues by vertical by amountand as a percentage of our revenues for the periods indicated: Year Ended December 31, 2012 2011 2010 (in thousands, except percent) Vertical Banking and Financial Services $111,941 25.8% $76,645 22.9% $43,019 19.4% ISVs and Technology 106,852 24.6 84,246 25.2 64,905 29.3 Travel and Consumer 95,965 22.1 71,488 21.4 36,135 16.3 Business Information and Media 62,398 14.4 63,988 19.1 46,146 20.8 Other verticals 50,226 11.6 31,985 9.6 27,846 12.5 Reimbursable expenses and other revenues 6,417 1.5 6,176 1.8 3,773 1.7 Revenues $433,799 100.0% $334,528 100.0% $221,824 100.0% Revenues by Client LocationOur revenues are sourced from three geographic markets: North America, Europe and the CIS. We present and discuss our revenues by client locationbased on the location of the specific client site that we serve, irrespective of the location of the headquarters of the client or the location of the delivery centerwhere the work is performed. As such, revenues by client location differ from the segment information in our audited consolidated financial statementsincluded elsewhere in this annual report, which is not solely based on the geographic location of the clients but rather is based on managerial responsibility fora particular client regardless of client location. The following table sets forth revenues by client location by amount and as a percentage of our revenues for theperiods indicated: Year Ended December 31, 2012 2011 2010 (in thousands, except percent) Client Location North America $206,901 47.7% $165,126 49.4% $117,027 52.8% Europe 155,168 35.8% 107,041 32.0% 58,567 26.4% United Kingdom 98,346 22.7 70,989 21.2 32,584 14.7 Other 56,822 13.1 36,052 10.8 25,983 11.7 CIS 65,313 15.0% 56,185 16.8% 42,457 19.1% Russia 47,536 11.0 43,799 13.1 31,488 14.2 Other 17,777 4.0 12,386 3.7 10,969 4.9 Reimbursable expenses and other revenues 6,417 1.5 6,176 1.8 3,773 1.7 39Table of Contents Year Ended December 31, 2012 2011 2010 (in thousands, except percent) Revenues $433,799 100.0% $334,528 100.0% $221,824 100.0% Revenues by Contract TypeOur services are performed under both time-and-material and fixed-price arrangements. Our engagement models depend on the type of services providedto a client, the mix and locations of professionals involved and the business outcomes our clients are looking to achieve. Historically, the majority of ourrevenues have been generated under time-and-material contracts. Under time-and-material contracts, we are compensated for actual time incurred by our ITprofessionals at negotiated hourly, daily or monthly rates. Fixed-price contracts require us to perform services throughout the contractual period and we arepaid in installments on pre-agreed intervals. We expect time-and-material arrangements to continue to comprise the majority of our revenues in the future.The following table sets forth revenues by contract type by amount and as a percentage of our revenues for the periods indicated: Year Ended December 31, 2012 2011 2010 (in thousands, except percent) Contract Type Time-and-material $364,853 84.1% $287,965 86.1% $188,961 85.2% Fixed-price 59,615 13.7 36,861 11.0 27,241 12.3 Licensing 2,914 0.7 3,526 1.1 1,849 0.8 Reimbursable expenses and other revenues 6,417 1.5 6,176 1.8 3,773 1.7 Revenues $433,799 100.0% $334,528 100.0% $221,824 100.0% Revenues by Client ConcentrationWe have grown our revenues from our clients by continually expanding the scope and size of our engagements, and we have grown our key client basethrough internal business development efforts and several strategic acquisitions.Our focus on delivering quality to our clients is reflected by an average of 91.9% and 82.0% of our revenues in 2012 coming from clients that had usedour services for at least one and two years, respectively. In addition, we have significantly grown the size of existing accounts. The number of clients thataccounted for over $5.0 million in annual revenues increased to 16 in 2012 from 10 in 2010, and the number of clients that generated at least $0.5 million inrevenues increased to 114 in 2012 from 72 in 2010.The following table sets forth revenues contributed by our top five and top ten clients by amount and as a percentage of our revenues for the periodsindicated: Year Ended December 31, 2012 2011 2010 (in thousands, except percent) Top five clients $134,484 31.0% $107,171 32.0% $ 65,908 29.7% Top ten clients 192,426 44.4 149,094 44.6 94,529 42.6 During 2011 and 2010, one of our largest clients, Thomson Reuters, accounted for over 10% of our revenues; however, there were no customersaccounting for over 10% of our revenues in 2012. The volume of work we perform for specific clients is likely to vary from year to year, as we are typicallynot any client’s exclusive external IT services provider, and a major client in one year may not contribute the same amount or percentage of our revenues in anysubsequent year.Operating ExpensesCost of Revenues (Exclusive of Depreciation and Amortization)The principal components of our cost of revenues (exclusive of depreciation and amortization) are salaries, employee benefits and stock compensationexpense, travel costs and subcontractor fees. Salaries and other compensation expenses of our IT professionals are allocated to cost of revenues regardless ofwhether they are actually performing services during a given period. 40Table of ContentsSelling, General and Administrative ExpensesSelling, general and administrative expenses represent expenses associated with promoting and selling our services and include such items as seniormanagement, administrative personnel and sales and marketing personnel salaries, stock compensation expense and related fringe benefits, legal and auditexpenses, commissions, insurance, operating lease expenses, travel costs and the cost of advertising and other promotional activities. In addition, we pay amembership fee of 1% of revenues collected in Belarus to the administrative organization of the Belarus Hi-Tech Park.Our selling, general and administrative expenses have increased primarily as a result of our expanding operations, acquisitions, and the hiring of anumber of senior managers to support our growth. We expect our selling, general and administrative expenses to continue to increase in absolute terms as ourbusiness expands but will generally remain steady or slightly decrease as a percentage of our revenues.Provision for Income TaxesDetermining the consolidated provision for income tax expense, deferred income tax assets and liabilities and related valuation allowance, if any,involves judgment. As a global company, we are required to calculate and provide for income taxes in each of the jurisdictions in which we operate. During2012, 2011 and 2010, we had $56.6 million, $49.9 million and $30.3 million, respectively, in income before provision for income taxes attributed to ourforeign jurisdictions. The statutory tax rate in our foreign jurisdictions is lower than the statutory U.S. tax rate. Additionally, we have secured special taxbenefits in Belarus and Hungary as described below. As a result, our provision for income taxes is low in comparison to income before taxes due to the benefitreceived from increased income earned in low tax jurisdictions. The foreign tax rate differential represents this significant reduction. Changes in the geographicmix or estimated level of annual pre-tax income can also affect our overall effective income tax rate.Our provision for income taxes also includes the impact of provisions established for uncertain income tax positions, as well as the related net interest.Tax exposures can involve complex issues and may require an extended period to resolve. Although we believe we have adequately reserved for our uncertaintax positions, we cannot assure you that the final tax outcome of these matters will not be different from our current estimates. We adjust these reserves in lightof changing facts and circumstances, such as the closing of a tax audit, statute of limitation lapse or the refinement of an estimate. To the extent that the finaltax outcome of these matters differs from the amounts recorded, such differences will impact the provision for income taxes in the period in which suchdetermination is made.Our subsidiary in Belarus is a member of the Belarus Hi-Tech Park, in which member technology companies are 100% exempt from the currentBelarusian income tax rate of 18%. The “On High-Technologies Park” Decree, which created the Belarus Hi-Tech Park, is in effect for a period of 15 yearsfrom July 1, 2006.Our subsidiary in Hungary benefits from a tax credit of 10% of annual qualified salaries, taken over a four-year period, for up to 70% of the total taxdue for that period. We have been able to take the full 70% credit for 2007 to 2012. The Hungarian tax authorities repealed the tax credit beginning with 2012.Credits earned in years prior to 2012, however, will be allowed through 2014. We anticipate full utilization up to the 70% limit until 2014, with full phase outin 2015.Our domestic income before provision for income taxes differs from the North America segment income before provision for income taxes becausesegment operating profit is a management reporting measure, which does not take into account most corporate expenses, as well as the majority of non-operating costs and stock compensation expenses. We do not hold our segment managers accountable for these expenses, as they cannot influence these costswithin the scope of their operating authority, nor do we believe it is practical to allocate these costs to specific segments as they are not directly attributable toany specific segment. All our segments are treated consistently with respect to such expenses when determining segment operating profit.2012 Compared to 2011RevenuesRevenues for the year ended December 31, 2012 increased by $99.3 million, or 29.7%, as compared to the year ended December 31, 2011. Thisincrease is attributable to a $71.3 million increase from deeper penetration into existing customers, a $20.3 million increase from new customers and a $7.7million increase from acquisitions.Revenues in our North American and European geographies grew $41.8 million, or 25.3%, and $48.1 million, or 45.0%, respectively, primarily as aresult of strong revenue growth in our core service verticals. 41Table of ContentsGrowth in Banking and Financial Services was the driving force behind our revenue growth in Europe and accounted for 63.8% of total revenue growthin this geography. During 2012, Banking and Financial Services continued to outperform other verticals growing $35.3 million, or 46.1%, over the prior yearresults. Strong performance of this vertical can be attributed to an increased demand for our services and ongoing relationships with existing customers locatedin Europe. In particular, 30.3% of the consolidated revenue growth in 2012 can be attributed to increased business from certain of our largest Banking andFinancial Services customers located in the United Kingdom and Switzerland.Growth in our North American geography in 2012 was primarily attributable to performance of our ISVs and Technology vertical, which grew $23.6million, or 33.5%, in 2012 as compared to 2011, and, to a lesser extent, our 2012 acquisitions, which added $7.7 million in revenues and approximately 59new customers primarily within Business Information and Media, and Travel and Consumer verticals. These growth trends were in part offset by a decreasein revenues in Business Information and Media, which declined $2.4 million, or 4.3%, in 2012 as compared to 2011. This decrease was almost entirelyattributable to a $9.8 million decrease in revenue from one of our largest customers, Thomson Reuters.Revenues in the CIS region increased $9.1 million, or 16.2%, compared to the prior year which was almost entirely attributable to incremental revenuesfrom the completion of a long-term fixed-priced project, as well as the addition of a number of new customers within our Travel and Consumer vertical duringthe fourth quarter of 2012.Cost of Revenues (Exclusive of Depreciation and Amortization)Cost of revenues (exclusive of depreciation and amortization) was $270.4 million during the year ended December 31, 2012, representing an increase of31.7% over 2011. As a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) increased by 0.9% during the same period. Anincrease in stock-based compensation expense contributed 0.2% as a percentage of revenues for the year ended December 31, 2012.The remaining increase was mainly due to growth in compensation and benefits of our IT professionals during that period. The number of ITprofessionals increased from 6,968 at December 31, 2011 to 8,495 at December 31, 2012, which represented an average growth of 21.9% supporting a30.2% increase in IT services revenue.Selling, General and Administrative ExpensesSelling, general and administrative expenses were $85.9 million during the year ended December 31, 2012, representing an increase of 32.2% over2011. The growth was primarily attributable to increased overhead costs and non-production staff required to support the growth in our business. Non-production headcount increased by 391, or 33.8%, from 1,157 at December 31, 2011 to 1,548 at December 31, 2012. Stock compensation expense increasedby $2.5 million, or 0.5% as a percentage of revenues during the same period, of which $1.2 million was related to the acquisitions completed in 2012.Excluding stock compensation, selling, general and administrative expenses declined slightly as a percentage of revenues.Depreciation and Amortization ExpenseDepreciation and amortization expense was $10.9 million during the year ended December 31, 2012, representing an increase of 44.4% over 2011. Theincrease was primarily attributable to additional capital expenditures of IT equipment to support the growth in headcount, as well as amortization of intangibleassets acquired through the purchase of Thoughtcorp in the second quarter of 2012. As a percentage of revenues, depreciation and amortization expense was2.5% compared to 2.3% in 2011.Other Operating Expenses, NetDuring the year ended December 31, 2012, we reported $0.7 million of other expenses in our consolidated statements of income and comprehensiveincome. This was almost entirely attributable to the issuance of 53,336 shares of common stock to Instant Information Inc., a 2010 asset acquisition, upon thecompletion of our initial public offering in the first quarter of 2012.Interest and Other Income, NetNet interest and other income was $1.9 million during the year ended December 31, 2012, compared to $1.4 million in 2011. The increase wasprimarily attributable to the interest received on cash which increased 67.5% to an average balance of $111.6 million during 2012 from $66.6 million in2011.Foreign Exchange LossForeign exchange loss incurred during the year ended December 31, 2012 was $2.1 million representing a decrease of foreign exchange loss by $1.6million. Higher losses in 2011 were primarily driven by the movement of the Russian ruble, Belarusian ruble and the euro against the U.S. dollar in respectiveperiods. 42Table of ContentsProvision for Income TaxesProvision for income taxes was $11.4 million in 2012, increasing from $8.4 million in 2011. The increase was primarily attributable to significantgrowth in consolidated pre-tax income, an increase in our clients’ need for onsite resources in the North American geography, which increased our consolidatedeffective tax rate, a relative shift in offshore services performed in Belarus, where we are currently entitled to a 100% exemption from Belarusian income tax, toUkraine and, to a lesser extent, Russia, both of which have significantly higher tax rates. In 2012, our effective tax rate was 17.3 % as compared to oureffective tax rate of 16.0% in 2011.2011 Compared to 2010RevenuesRevenues were $334.5 million in 2011, representing an increase of 50.8% from $221.8 million in 2010. The increase was primarily driven by strongperformance across all of our key verticals combined with expansion of our service offerings which enabled us to cross-sell new services to our clients andmeet the rapidly growing demand for complex product development solutions.Similar to 2010, the North American geography continued to represent our biggest geography in 2011 with $165.1 million, or 49.4% of our consolidatedrevenues generated by customers located in this region. In year-on-year terms, the North American geography grew 41.1% from $117.0 million in 2010, whichwas primarily attributable to the growth in ISVs and Technology and Business Information and Media verticals. ISVs and Technologies grew $17.4 million,or 32.8%, to $70.6 million in revenues in 2011 as compared to 2010, and Business Information and Media grew $16.3 million, or 42.0% during the sameperiod, of which $9.9 million, or 60.7% of the total growth in this vertical was attributable to the growth in revenues from one of our largest customers,Thomson Reuters.Revenues from the European geography grew 82.8% to $107.0 million in 2011 from $58.6 million in 2010. This was mainly due to continuedpenetration of clients in Europe and in particular, our Banking and Financial Services customers located in the United Kingdom and Switzerland, whichaccounted for 46.9% of the overall growth in the region. Strong performance of the Banking and Financial Services vertical was also a primary reason for therevenue growth in Russia accounting for $9.4 million, or 76.3% of the total $12.3 million revenue growth in this geography in 2011, as compared to 2010.Overall, the Banking and Financial Services vertical continued to experience an increase in revenues and strong demand from existing clients, with revenuesgrowing by $33.6 million, or 78.2%, to $76.6 million in 2011 as compared to $43.0 million in 2010.Also, revenues from existing clients continued to increase in 2011 as compared to 2010 with $98.9 million of incremental revenues generated throughexpansion of our services with existing customers, and additional $11.7 million received from organic growth during that period. Revenues attributable to ourtop ten clients as of December 31, 2011 increased by 57.7% in 2011 as compared to December 31, 2010. This represented 48.4% of the overall increase inrevenues in 2011.Cost of Revenues (Exclusive of Depreciation and Amortization)Cost of revenues (exclusive of depreciation and amortization) was $205.3 million in 2011, representing an increase of 54.9% from $132.5 million in2010. The increase was primarily attributable to a net increase of 1,618 IT professionals from December 31, 2010 to December 31, 2011, to support thegrowth in demand for our services. As a percentage of revenues, cost of revenues (exclusive of depreciation and amortization) increased to 61.4% in 2011 from59.7% in 2010.Selling, General and Administrative ExpensesSelling, general and administrative expenses were $64.9 million in 2011, representing an increase of 36.3% from $47.6 million in 2010. The growthwas primarily attributable to increased overhead costs and non-production staff required to support the growth in the business. In 2011, non-production staffheadcount increased by 339, or 41.4%, from 818 at December 31, 2010, stock compensation expense decreased from $1.6 million to $1.5 million andfacilities expenses increased by $2.9 million, or 32.3%, to $12.0 million as compared to 2010. As a percentage of revenues, selling, general and administrativeexpenses decreased to 19.4% in 2011 from 21.5% in 2010.Depreciation and Amortization ExpenseDepreciation and amortization expense was $7.5 million in 2011, representing an increase of 20.8% from $6.2 million in 2010. The increase wasprimarily attributable to additional capital expenditures in IT equipment to support the growth in headcount. As a percentage of revenues, depreciation andamortization expense decreased to 2.3% in 2011 from 2.8% in 2010.Goodwill Impairment LossAs a result of an operating loss in the Other reporting unit for the three months ended June 30, 2011, we performed a goodwill impairment test. Inassessing impairment in accordance with Accounting Standards Codification, (“ASC”) No. 350, “Intangibles- 43Table of ContentsGoodwill and Other,” we determined that the fair value of the Other reporting unit, based on the total of the expected future discounted cash flows directlyrelated to the reporting unit, was below the carrying value of the reporting unit. We completed the second step of the goodwill impairment test, resulting in animpairment charge of $1.7 million. In the fourth quarter of 2011, we completed the annual impairment testing of recorded goodwill and determined there wasno additional impairment as of December 31, 2011.Interest and Other Income, NetInterest income was $1.3 million in 2011, representing an increase of 134.0% from $0.6 million in 2010. The increase was primarily driven by theinterest paid on cash and cash equivalents which increased 64.4% from an average balance of $40.8 million during 2010 to $64.2 million during 2011.Foreign Exchange LossForeign exchange loss was $3.6 million in 2011, representing an increase of 66.8% from a $2.2 million loss in 2010. The increase was primaryattributable to the movement of the Russian ruble, Belarusian ruble and the euro against the U.S. dollar.Provision for Income TaxesProvision for income taxes was $8.4 million in 2011, increasing from $2.8 million in 2010. The increase was primarily attributable to significantgrowth in consolidated pre-tax income, an increase in our clients’ need for onsite resources in North America and the United Kingdom, which increased ourconsolidated effective tax rate, a relative shift in offshore services performed in Belarus, where we are currently entitled to a 100% exemption from Belarusianincome tax, to Ukraine and, to a lesser extent, Russia, both of which have significantly higher tax rates. In 2011, our effective tax rate was 16.0% ascompared to our effective tax rate of 9.0% in 2010.Results by Business SegmentOur operations consist of four reportable segments: North America, Europe, Russia and Other. The segments represent components of EPAM for whichseparate financial information is available that is used on a regular basis by our chief executive officer, who is also our chief operating decision maker, indetermining how to allocate resources and evaluate performance. We use globally integrated support organizations to realize economies of scale and efficient useof resources. As a result, a majority of our expenses is shared by all segments. These shared expenses include Delivery, Recruitment and Development, Salesand Marketing, and support functions such as IT, Finance, Legal, and Human Resources. Generally, shared expenses are allocated based on measurabledrivers of expense, e.g., recorded hours or head count.Segment operating profit is defined as income from operations before unallocated costs. Certain expenses, such as stock-based compensation, are notallocated to specific segments when management does not believe it is practical to allocate such costs to individual segments because they are not directlyattributable to any specific segment. Accordingly, these expenses are separately disclosed as “unallocated” and adjusted only against our total income fromoperations.Revenues from external clients and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportablesegments were as follows for the years ended December 31: 2012 2011 2010 Total segment revenues: North America $197,271 $151,707 $110,179 Europe 168,913 123,510 68,420 Russia 50,552 46,219 31,388 Other 16,986 12,851 11,522 Total segment revenues $433,722 $334,287 $221,509 Segment operating profit: North America $38,671 $33,744 $28,496 Europe 32,750 25,098 15,057 Russia 9,049 10,445 3,119 Other 6,985 2,416 1,414 44Table of Contents 2012 2011 2010 Total segment operating profit $87,455 $71,703 $48,086 2012 Compared to 2011North America SegmentOur North America segment accounted for 45.5% of total segment revenues in both 2012 and 2011. North America revenues increased by $45.6million, or 30.0%, from $151.7 million in 2011 to $197.3 million in 2012. The increase in revenues was primarily driven by continued expansion of existingclient relationships as well as revenues contributed by new clients. Additionally, two acquisitions completed in 2012 contributed approximately $7.7 million,or 16.7%, to the overall segment growth during the period. Within the segment, revenue from our ISVs and Technologies and Travel and Consumer verticalsincreased by approximately $22.8 million and $10.8 million, respectively, as compared to 2011, representing 73.7% of the overall segment growth.Segment operating profit increased by $4.9 million, or 14.6%, from $33.7 million in 2011 to $38.7 million in 2012. The increase in segment operatingprofit was attributable primarily to increased revenues, partially offset by an increase in compensation and benefit costs resulting primarily from additionalheadcount to support our revenue growth and continued demand for onsite resources.Europe SegmentOur Europe segment accounted for 38.9% and 36.9% of total segment revenues in 2012 and 2011, respectively. Europe continues to be a rapidlygrowing segment in our portfolio, given our nearshore delivery capabilities, and our value proposition in delivering quality software engineering solutions andservices is continuing to gain considerable traction with European-based clients. As a result, revenue increased $45.4 million, or 36.8%, from $123.5 millionduring 2011 to $168.9 million in 2012. Within the segment, growth was the strongest in our Banking and Financial Services and Travel and Consumerverticals, where revenue increased by approximately $30.2 million and $11.2 million, respectively, in 2012 as compared to 2011.Segment operating profit increased by $7.7 million, or 30.5%, from $25.1 million during 2011 to $32.8 million during 2012. The increase in Europesegment operating profit was mainly attributable to increased revenues, partially offset by an increase in compensation and benefit costs primarily driven byadditional headcount to support our revenue growth and continued demand for increase in onsite resources.Russia SegmentOur Russia segment comprised 11.7% of total segment revenues in 2012, compared to 13.8% in 2011 with revenues increasing by $4.3 million, or9.4%, from $46.2 million in 2011 to $50.6 million in 2012. Within the segment, revenue from Travel and Consumer and ISVs and Technologies verticalsincreased by $3.2 million and $0.8 million, respectively, representing 93.0% of the overall segment growth in 2012.Segment operating profit decreased by $1.4 million, or 13.4%, from $10.4 million in 2011 to $9.0 million in 2012. The decrease in Russia’s operatingprofit was attributable to a combination of factors, including higher compensation and benefits of our IT professionals in 2012, as compared to 2011,subcontractor costs incurred in connection with initial implementation work on a long-term project with one of Russia’s leading consumer-electronic retailchains, and reduced utilization levels resulting from fluctuations in service volumes.Other SegmentRevenues from Other segment comprised 3.9% of total segment revenues, compared to 3.8% in 2011 with the majority of revenues derived from clientslocated in Kazakhstan and Ukraine. Other segment revenues increased by $4.1 million, or 32.2%, from $12.9 million in 2011 to $17.0 million in 2012. Thegrowth was primarily attributable to the successful completion and delivery of a large World Bank sponsored fixed fee project in Ukraine with $3.8 million ofincremental revenues recognized in 2012.Segment operating profit increased by $4.6 million, or 189.1%, from $2.4 million in 2011 to $7.0 million in 2012. The increase in segment operatingprofit was primarily attributable to the same project noted above. 45Table of Contents2011 Compared to 2010North America SegmentOur North America segment accounted for 45.5% and 49.7% of total segment revenues in 2011 and 2010, respectively. North America segment revenuesincreased by $41.5 million, or 37.7%, from $110.2 million in 2010 to $151.7 million in 2011. The increase in revenues was primarily driven by continuedexpansion of existing client relationships as well as revenues contributed by new clients. Within the segment, revenue from our ISVs and Technologies andBusiness Information and Media verticals increased by approximately $14.6 million and $16.6 million, respectively, as compared to 2010, representing75.2% of the overall segment growth. One of our largest customer, Thomson Reuters, accounted for 23.1% of the overall segment growth during that period.Segment operating profit increased by $5.2 million, or 18.4%, from $28.5 million in 2010 to $33.7 million in 2011. The increase in segment operatingprofit was attributable primarily to increased revenues, partially offset by an increase in compensation and benefit costs resulting primarily from additionalheadcount to support our revenue growth and continued demand for onsite resources.Europe SegmentOur Europe segment accounted for 36.9% and 30.9% of total segment revenues in 2011 and 2010, respectively. Europe continues to be a rapidlygrowing segment in our portfolio, as the location of our delivery sites is in relatively close proximity to major European cities, and our value proposition indelivering quality software engineering solutions and services is continuing to gain considerable traction with European-based clients. As a result, revenueincreased $55.1 million, or 80.5%, from $68.4 million during 2010 to $123.5 million in 2011. Within the segment, growth was the strongest in our Bankingand Financial Services and Travel and Consumer verticals, where revenue increased by approximately $22.7 million and $29.5 million, respectively, in2011 as compared to 2010.Segment operating profit increased by $10.0 million, or 66.7%, from $15.1 million in 2010 to $25.1 million in 2011. The increase in Europe operatingprofit was mainly attributable to increased revenues, partially offset by an increase in compensation and benefit costs primarily driven by additionalheadcount to support our revenue growth and continued demand for increase in onsite resources.Russia SegmentOur Russia segment comprised 13.8% of total segment revenues in 2011, compared to 14.2% in 2010 with revenues increasing by $14.8 million, or47.3%, from $31.4 million in 2010 to $46.2 million in 2011. Within the segment, revenue from Banking and Financial Services vertical increased by $10.0million representing 67.6% of the overall segment growth in 2011 mainly as a result of continued growth in revenues from certain of our largest clients in thatregion. In particular, revenues from these clients accounted for $5.1 million, or 34.5% of the overall segment growth.Segment operating profit increased by $7.3 million, or 234.9%, from $3.1 million in 2010 to $10.4 million in 2011 primarily as a result of higherrevenues in 2012, as compared to 2011, as well as continued efforts to improve our client portfolio in the region and increase profitability.Other SegmentRevenues from Other segment comprised 3.8% of total segment revenues, compared to 5.2% in 2010 with the majority of revenues derived from clientslocated in Kazakhstan and Ukraine. Other segment revenues increased by $1.3 million, or 11.5%, from $11.5 million in 2010 to $12.9 million in 2011. Thegrowth was primarily attributable to expansion of our services with one of our clients located in Kazakstan which accounted for 46.7% of the overall growth ofthe Other segment, as well as other clients within Travel and Consumer vertical.Segment operating profit increased by $1.0 million, or 70.9%, from $1.4 million in 2010 to $2.4 million in 2011. The increase in segment operatingprofit was primarily attributable to growth in revenues during that period. 46Table of ContentsLiquidity and Capital ResourcesCapital ResourcesAt December 31, 2012, our principal sources of liquidity were cash and cash equivalents totaling $118.1 million and $28.1 million of availableborrowings under our revolving line of credit. At December 31, 2012, of our total $118.1 million of cash and cash equivalents, $94.8 million was heldoutside the United States, including $50.0 million held in U.S. dollar denominated accounts in Belarus, which accrued at an average interest rate of 4.4%during the year ended December 31, 2012.We have a revolving line of credit with PNC Bank, National Association. Effective January 15, 2013, we entered into a new agreement with the Bank(2013 Credit Facility) which increased our borrowing capacity under the revolving line of credit from $30.0 million to $40.0 million and extended maturity ofthe new facility to January 15, 2015. Advances under the new line of credit accrue interest at an annual rate equal to the London Interbank Offer Rate, orLIBOR, plus 1.25%. The 2013 Credit Facility is secured by all of our domestic tangible and intangible assets, as well as by 100% of the stock of domesticsubsidiaries and 65% of the stock of certain foreign subsidiaries of EPAM Systems, Inc. The line of credit also contains customary financial and reportingcovenants and limitations. We are currently in compliance with all covenants contained in our revolving line of credit and believe that our revolving line ofcredit provides sufficient flexibility such that we will remain in compliance with its terms in the foreseeable future. At December 31, 2012, we had noborrowings outstanding under the then effective line of credit.Cash and cash equivalents held at locations outside of the United States are for future operating expenses and we have no intention of repatriating thosefunds. We are not, however, restricted in repatriating those funds back to the United States, if necessary. If we decide to remit funds to the United States in theform of dividends, $93.3 million would be subject to foreign withholding taxes, of which $87.8 million would also be subject to U.S. corporate income tax.We believe that our available cash and cash equivalents held in the United States and cash flow to be generated from domestic operations will be adequate tosatisfy our domestic liquidity needs in the foreseeable future. Our ability to expand and grow our business in accordance with current plans and to meet ourlong-term capital requirements will depend on many factors, including the rate, if any, at which our cash flows increase, our continued intent not to repatriateearnings from outside the United States and the availability of public and private debt and equity financing.To the extent we pursue one or more significant strategic acquisitions; we may incur debt or sell additional equity to finance those acquisitions.Cash FlowsThe following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2012 2011 2010 (in thousands) Consolidated Statements of Cash Flow Data: Net cash provided by operating activities $48,499 $54,520 $20,473 Net cash used in investing activities (59,627) (17,408) (10,826) Net cash provided by/(used in) financing activities 38,847 (1,558) (8,043) Effect of exchange-rate changes on cash and cash equivalents 1,597 (762) (527) Net increase in cash and cash equivalents $29,316 $34,792 $1,077 Cash and cash equivalents, beginning of period 88,796 54,004 52,927 Cash and cash equivalents, end of period $118,112 $88,796 $54,004 Operating ActivitiesNet cash provided by operations decreased by $6.0 million to $48.5 million during the year ended December 31, 2012 from $54.5 million net cashprovided by operations during the same period in 2011. The increase in net income of $11.0 million before accounting for non-cash items in 2012 was morethan offset by a decrease in accrued compensation of $15.3 million primarily as a result of higher bonus payments relating to 2011 performance made in 2012compared to such payments made in 2011.Net cash provided by operations increased by $34.0 million to $54.5 million during 2011 from $20.5 million net cash provided by operations during2010, primarily attributable to higher net income that increased by $17.7 million before accounting for non-cash items in 2011 as compared to 2010. Revenuesincreased by 50.8% in 2011 as compared to 2010, causing net trade and unbilled accounts receivable to increase $18.6 million, or 28.4%, from $65.4million as of December 31, 2010 to $83.9 million as of December 31, 2011. Amounts due to employees, the majority of which represents payroll costs for themost recent period, increased 47Table of Contentsby $2.5 million, or 44.8%, from $5.7 million as of December 31, 2010 to $8.2 million as of December 31, 2011, driven by headcount growth.Investing ActivitiesNet cash of $59.6 million was used in investing activities during the year ended December 31, 2012 as compared to $17.4 million of net cash used ininvesting activities during the same period in 2011. Capital expenditures decreased by $2.2 million in 2012, as compared to 2011, however, this decrease wasmore than offset by an increase of $12.2 million spent on construction of facilities in Belarus. Additionally, 2012 investing cash flows were impacted by atotal of $33.0 million of net cash paid to acquire operations of Thoughtcorp and Empathy Lab. See Note 2 of our consolidated financial statements in Part IV,“Item 15. Exhibits, Financial Statement Schedules — Audited Consolidated Financial Statements,” for further information regarding these acquisitions.Net cash of $17.4 million was used in investing activities during 2011 as compared to $10.8 million of net cash used in investing activities during2010. During 2011, capital expenditures increased by 104.3% to $17.1 million primarily primarily due to IT equipment acquisitions to support our growth inheadcount and $1.5 million spent on construction of a new building in Belarus.Financing ActivitiesNet cash provided by financing activities during the year ended December 31, 2012 increased by $40.4 million as compared to $1.6 million of net cashoutflow from financing activities in the same period in 2011. This was primarily due to net $30.6 million received in connection with the initial public offeringof our common stock in the first quarter of 2012 compared to the $1.6 million cash outflow related to offering issuance costs in the same period in 2011.Additionally, year-to-date 2012 financing cash flows improved by $8.3 million compared to the same period in 2011 as a result of proceeds received by usfrom stock option exercises and associated tax benefits.Net cash used in financing activities during 2011 decreased by $6.5 million to $1.6 million as compared to $8.0 million net cash used during 2010.This was primarily due to a decrease in the amount outstanding under our revolving line of credit of $7.0 million, partially offset by $1.6 million of publicoffering costs.Contractual Obligations and Future Capital RequirementsContractual ObligationsSet forth below is information concerning our fixed and determinable contractual obligations as of December 31, 2012. Total(1) Less than 1Year 1-3 Years 3-5 Years More than 5years (in thousands) Operating lease obligations $26,514 $10,505 $10,103 $4,022 $1,884 Other long-term obligations(1)(2) 6,042 6,042 — — — Employee housing program(3) 6,179 6,179 — — — Total $38,735 $22,726 $10,103 $4,022 $1,884 (1)On December 7, 2011, we entered into an agreement with IDEAB Project Eesti AS for approximately $17.2 million for the construction of a 14,071square meter office building within the High Technologies Park in Minsk, Belarus. During the year ended December 31 2012, total expectedconstruction cost increased to approximately $19.6 million. The building is expected to be operational in the first half of 2013. As of December 31,2012, our total outstanding commitment was $5.3 million.(2)In June 2012, we entered into an agreement for construction of 12 corporate apartments located within the High Technology Zone in Minsk, Belarus.During the third quarter of 2012, the agreement was amended and the number of apartments was increased to 26. As of December 31, 2012, the totalconstruction cost for these apartments is estimated at $1.0 million. Our outstanding commitment at December 31, 2012 was approximately $0.7 million.The construction is expected to be completed in 2013. We intend to use the apartments for general business purposes.(3)In the third quarter of 2012, our Board of Directors approved the Employee Housing Program (“the Housing Program”), which assists employees inpurchasing housing in Belarus. We do not bear any market risk in connection with the Housing Program as the housing will be sold directly toemployees by independent third parties. As part of the Housing Program, we will extend financing to employees up to an aggregate amount of$10 million. The loans will be issued in U.S. Dollars with a 5 year term and bear an interest rate of 7.5%, which is significantly below the marketinterest rate in Belarus. The Housing Program was designed to be a retention mechanism for our employees in Belarus and will be available to full-timeemployees who have been with EPAM for at least three years. 48Table of ContentsFuture Capital RequirementsWe believe that our existing cash and cash equivalents combined with our expected cash flow from operations will be sufficient to meet our projectedoperating and capital expenditure requirements for at least the next twelve months and that we possess the financial flexibility to execute our strategic objectives,including the ability to make acquisitions and strategic investments in the foreseeable future. Our ability to generate cash, however, is subject to ourperformance, general economic conditions, industry trends and other factors. To the extent that existing cash and cash equivalents and operating cash flow areinsufficient to fund our future activities and requirements, we may need to raise additional funds through public or private equity or debt financing. If weissue equity securities in order to raise additional funds, substantial dilution to existing stockholders may occur. If we raise cash through the issuance ofadditional indebtedness, we may be subject to additional contractual restrictions on our business. There is no assurance that we would be able to raiseadditional funds on favorable terms or at all.Off-Balance Sheet Commitments and ArrangementsWe do not have any obligations under guarantee contracts or other contractual arrangements within the scope of FASB ASC paragraph 460-10-15-4(Guarantees Topic) other than as disclosed in Note 17 of our consolidated financial statements in Part IV, “Item 15. Exhibits, Financial Statement Schedules— Audited Consolidated Financial Statements,”; nor do we have any investments in special purpose entities or undisclosed borrowings or debt. Accordingly,our results of operations, financial condition and cash flows are not subject to material off-balance sheet risks.Critical Accounting PoliciesWe prepare our audited consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP), which require us tomake judgments, estimates and assumptions that affect: (i) the reported amounts of assets and liabilities, (ii) disclosure of contingent assets and liabilities atthe end of each reporting period and (iii) the reported amounts of revenues and expenses during each reporting period. We evaluate these estimates andassumptions based on historical experience, knowledge and assessment of current business and other conditions, and expectations regarding the future basedon available information and reasonable assumptions, which together form a basis for making judgments about matters not readily apparent from othersources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those estimates. Some of ouraccounting policies require higher degrees of judgment than others in their application. When reviewing our audited consolidated financial statements, youshould consider (i) our selection of critical accounting policies, (ii) the judgment and other uncertainties affecting the application of such policies and (iii) thesensitivity of reported results to changes in conditions and assumptions. We consider the policies discussed below to be critical to an understanding of ouraudited consolidated financial statements as their application places significant demands on the judgment of our management.An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highlyuncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that arereasonably likely to occur periodically, could materially impact the audited consolidated financial statements. We believe that the following critical accountingpolicies are the most sensitive and require more significant estimates and assumptions used in the preparation of our audited consolidated financial statements.You should read the following descriptions of critical accounting policies, judgments and estimates in conjunction with our audited consolidated financialstatements and other disclosures included in this annual report.Revenue RecognitionWe generate revenues primarily from software development services. We recognize revenues when realized or realizable and earned, which is when thefollowing criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability isreasonably assured. If there is an uncertainty about the project completion or receipt of payment for the consulting services, revenues are deferred until theuncertainty is sufficiently resolved. At the time revenues are recognized, we provide for client incentive programs and reduce revenues accordingly.We defer amounts billed to our clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues as services are performed insubsequent periods. Unbilled revenues represent services provided which are billed subsequent to the period end in accordance with the contract terms. Allsuch amounts are anticipated to be realized in subsequent periods.Our services are performed under both time-and-material and fixed-price contracts arrangements. For revenues generated under time-and-materialcontracts, revenues are recognized as services are performed with the corresponding cost of providing those services reflected as cost of revenues whenincurred. The majority of such revenues are billed on an hourly, daily or monthly basis whereby actual time is charged directly to the client. 49Table of ContentsWe recognize revenues from fixed-price contracts based on the proportional performance method. In instances where final acceptance of the product,system or solution is specified by the client, revenues are deferred until all acceptance criteria have been met. In absence of a sufficient basis to measureprogress towards completion, revenues are recognized upon receipt of final acceptance from the client. The complexity of the estimation process and factorsrelating to the assumptions, risks and uncertainties inherent with the application of the proportional performance method of accounting affects the amounts ofrevenues and related expenses reported in our audited consolidated financial statements. A number of internal and external factors can affect our estimates,including labor hours and specification and testing requirement changes. The cumulative impact of any revision in estimates is reflected in the financialreporting period in which the change in estimate becomes known. Our fixed price contracts are generally recognized over a period of twelve months or less.We enter into multiple element arrangements with our clients under time-and-material and fixed-fee contracts. In October 2009, the FASB issued a newaccounting standard which provides guidance for arrangements with multiple deliverables. We adopted this standard effective January 1, 2010 for all new oramended contracts, and it did not have a material effect on our financial condition or consolidated results of operations, or change our units of accounting andhow we allocate the arrangement consideration to various units of accounting. These arrangements consist of development services and other servicedeliverables that qualify for separate units of accounting. These other services include maintenance and support services for our time-and-material contractsand separately priced warranties for our fixed-fee contracts. These deliverables qualify for multiple units of accounting and therefore arrangement considerationis allocated among the units of accounting based on their relative selling price. The relative selling price is based on the price charged for the deliverable when itis sold separately. For multiple element arrangements under time-and-material contracts, revenue is recognized as services are performed for each deliverable.For arrangements under fixed-fee contracts, revenue is recognized upon delivery of development services under the proportional performance method and on astraight-line basis over the warranty period. The warranty period is generally six months to two years.We report gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues in the consolidated statements of income.Accounts ReceivableAccounts receivable are recorded at net realizable value. We maintain an allowance for doubtful accounts for estimated losses resulting from the inabilityof our clients to make required payments. The allowance for doubtful accounts is determined by evaluating the relative creditworthiness of each client,historical collections experience and other information, including the aging of the receivables. Recoveries of losses from accounts receivable written off in prioryears are presented within income from operations on our consolidated statements of income.Goodwill and Other Intangible AssetsGoodwill is measured as the excess of the cost of an acquisition over the sum of the amounts assigned to tangible and intangible assets acquired lessliabilities assumed. The determination of the fair value of the intangible assets acquired involves certain judgments and estimates. These judgments caninclude, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriate weighted average cost of capital.We do not amortize goodwill but perform a test for impairment annually, or when indications of potential impairment exist, utilizing a fair valueapproach at the reporting unit level. We determine fair value using the income approach, which estimates the fair value of our reporting units based on thefuture discounted cash flows. In testing for a potential impairment of goodwill, we estimate the fair value of our reporting units to which goodwill relates anddetermine the carrying value (book value) of the assets and liabilities related to those reporting units.We amortize other intangible assets with determinable lives over their estimated useful lives. We record an impairment charge on these assets when wedetermine that their carrying value may not be recoverable. The carrying value is not recoverable if it exceeds the undiscounted future cash flows resulting fromthe use of the asset and its eventual disposition. When there exists one or more indicators of impairment, we measure any impairment of intangible assetsbased on the excess of the carrying value of the asset over its fair value. Its fair value is determined based on projected discounted cash flow method using adiscount rate determined by our management to be commensurate with the risk inherent in our business model. The estimates of future cash flows attributableto our other intangible assets require significant judgment based on our historical and anticipated results.Income TaxesThe provision for income taxes includes federal, state, local and foreign taxes. Deferred tax assets and liabilities are recognized for the estimated futuretax consequences of temporary differences between the audited consolidated financial statement carrying amounts and their respective tax bases. Deferred taxassets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to bereversed. Changes to enacted tax rates would result in either increases or decreases in the provision for income taxes in the period of changes. We evaluate therealizability of deferred tax assets and recognize a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not berealized. 50Table of ContentsThe realization of deferred tax assets is primarily dependent on future earnings. Any reduction in estimated forecasted results may require that we recordvaluation allowances against deferred tax assets. Once a valuation allowance has been established, it will be maintained until there is sufficient positiveevidence to conclude that it is no longer more likely than not that the deferred tax assets will not be realized. A pattern of sustained profitability will generally beconsidered as sufficient positive evidence to reverse a valuation allowance. If the allowance is reversed in a future period, the income tax provision will becorrespondingly reduced. Accordingly, the increase and decrease of valuation allowances could have a significant negative or positive impact on futureearnings.Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and our effective tax rate in the future. The American TaxpayerRelief Act of 2012 (the “Act”) was signed into law on January 2, 2013. Because a change in tax law is accounted for in the period of enactment, certainprovisions of the Act benefiting our 2012 U.S. federal taxes, including the Subpart F controlled foreign corporation look-through exception cannot berecognized in our 2012 financial results. The impact, if any, will be reflected in our 2013 financial results.Accounting for Stock-Based Employee Compensation PlansStock-based compensation expense for awards of equity instruments to employees and non-employee directors is determined based on the grant-date fairvalue of the awards ultimately expected to vest. We recognize these compensation costs on a straight-line basis over the requisite service period of the award,which is generally the option vesting term of four years.We estimate forfeitures at the time of grant and revise our estimates, if necessary, in subsequent periods if actual forfeitures or vesting differ from thoseestimates. Such revisions could have a material effect on our operating results. The assumptions used in the valuation model are based on subjective futureexpectations combined with management judgment. If any of the assumptions used in the valuation model change significantly, stock-based compensation forfuture awards may differ materially compared to the awards previously granted.Earnings per ShareBasic EPS is computed by dividing the net income applicable to common stockholders for the period by the weighted average number of shares ofcommon stock outstanding during the same period. Our Series A-1 Preferred, Series A-2 Preferred, and Series A-3 Preferred Stock, that had been outstandingand convertible into common stock until February 13, 2012 (the date of our initial public offering), and our puttable common stock were consideredparticipating securities since these securities had non-forfeitable rights to dividends or dividend equivalents during the contractual period and thus required thetwo-class method of computing EPS. When calculating diluted EPS, the numerator is computed by adding back the undistributed earnings allocated to theparticipating securities in arriving at the basic EPS and then reallocating such undistributed earnings among our common stock, participating securities andthe potential common shares that result from the assumed exercise of all dilutive options. The denominator is increased to include the number of additionalcommon shares that would have been outstanding had the options been issued.No preferred stock was outstanding as of December 31, 2012, as a result of our initial public offering on February 13, 2012 when all convertiblepreferred stock was converted into common stock.Recent Accounting PronouncementsSee Note 1 to the audited consolidated financial statements included in Part IV, “Item 15. Exhibits, Financial Statement Schedules — AuditedConsolidated Financial Statements,” regarding the impact of certain recent accounting pronouncements on our audited consolidated financial statements. Item 7A.Quantitative and Qualitative Disclosures About Market RiskWe are exposed to certain market risks in the ordinary course of our business. These risks result primarily from changes in foreign currency exchangerates and interest rates, and concentration of credit risks. In addition, our international operations are subject to risks related to differing economic conditions,changes in political climate, differing tax structures, and other regulations and restrictions. 51Table of ContentsConcentration of Credit and Other RiskFinancial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents, tradeaccounts receivable and unbilled revenues. These financial instruments approximate fair value due to short-term maturities. We maintain our cash and cashequivalents and short-term investments with financial institutions. We believe that our credit policies reflect normal industry terms and business risk. We donot anticipate non-performance by the counterparties and, accordingly, do not require collateral.We maintain our cash with financial institutions. As of December 31, 2012, $76.2 million of total cash was held in CIS countries, with $50.6 millionof that in Belarus. Banking and other financial systems in the CIS are less developed and regulated than in some more developed markets, and legislationrelating to banks and bank accounts is subject to varying interpretations and inconsistent application. Banks in the CIS generally do not meet the bankingstandards of more developed markets, and the transparency of the banking sector lags behind international standards. Furthermore, bank deposits made bycorporate entities in CIS are not insured. As a result, the banking sector remains subject to periodic instability. Another banking crisis, or the bankruptcy orinsolvency of banks through which we receive or with which we hold funds, particularly in Belarus, may result in the loss of our deposits or adversely affectour ability to complete banking transactions in the CIS, which could materially adversely affect our business and financial condition.Trade accounts receivable and unbilled revenues are generally dispersed across our clients in proportion to their revenues. During the years endedDecember 31, 2012 and 2011, our top five clients accounted for 44.4% and 44.6% of our total revenues, respectively. During 2011 and 2010, our largestclient, Thomson Reuters, accounted for over 10% of our revenues; however, there were no customers accounting for over 10% of our revenues in 2012.Accounts receivable and unbilled revenues for this client were 15.9% and 15.0% of total accounts receivable and unbilled revenues, respectively, as ofDecember 31, 2011.Credit losses and write-offs of trade accounts receivable balances have historically not been material to our audited consolidated financial statements.Interest Rate RiskOur exposure to market risk for changes in interest rates relates primarily to our cash and cash equivalents and our revolving line of credit bearinginterest at LIBOR plus 1.25% rate. We do not use derivative financial instruments to hedge our risk of interest rate volatility.We have not been exposed to material risks due to changes in market interest rates. However, our future interest expense may increase and interest incomemay fall due to changes in market interest rates.Foreign Exchange RiskOur audited consolidated financial statements are reported in U.S. dollars. Our international operations expose us to foreign currency exchange ratechanges that could impact translations of foreign denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactionsdenominated in different currencies. Our exposure to currency exchange rate changes is diversified due to the number of different countries in which weconduct business. We operate outside the United States primarily through wholly owned subsidiaries in Canada, Europe, the CIS and CEE regions andgenerate a significant portion of our revenues in certain non-U.S. dollar currencies, principally, euros, British pounds and Russian rubles. We incurexpenditures in non-U.S. dollar currencies, principally in Hungarian forints, euros and Russian rubles associated with our delivery centers located in CEE.We are exposed to fluctuations in foreign currency exchange rates primarily on accounts receivable and unbilled revenues from sales in these foreign currenciesand cash flows for expenditures in foreign currencies. We do not use derivative financial instruments to hedge the risk of foreign exchange volatility. Ourresults of operations can be affected if the euro and/or the British pound appreciate or depreciate against the U.S. dollar. Our exchange rate risk primarilyarises from our foreign currency revenues and expenses. Based on our results of operations for the year ended December 31, 2012, a 1.0% appreciation /(depreciation) of the euro against the U.S. dollar would result in an estimated increase / (decrease) of approximately $0.3 million in net income, and 1.0%appreciation / (depreciation) of the British pound against the U.S. dollar would result in an estimated increase / (decrease) of approximately $0.3 million in netincome.To the extent that we need to convert U.S. dollars into foreign currencies for our operations, appreciation of such foreign currencies against the U.S.dollar would adversely affect the amount of such foreign currencies we receive from the conversion. Sensitivity analysis is used as a primary tool in evaluatingthe effects of changes in foreign currency exchange rates, interest rates and commodity prices on our business operations. The analysis quantifies the impactof potential changes in these rates and prices on our earnings, cash flows and fair values of assets and liabilities during the forecast period, most commonlywithin a one-year period. The ranges of changes used for the purpose of this analysis reflect our view of changes that are reasonably possible over the forecastperiod. Fair values are the present value of projected future cash flows based on market rates and chosen prices. 52Table of ContentsChanges in the currency exchange rates resulted in our reporting a net transactional foreign currency exchange loss of $1.8 million, $4.0 million and$1.5 million in 2012, 2011 and 2010, respectively, which are included in the consolidated statements of income and comprehensive income.Additionally, foreign currency translation adjustments from translating financials statements of our foreign subsidiaries from local currency to the U.S.dollars are recorded as a separate component of stockholders’ equity or included in the consolidated statements of income and comprehensive income if localcurrencies of our foreign subsidiaries differ from their functional currencies. During the years ended December 31, 2012, 2011, and 2010 we recorded $2.5million of translation gain, and $1.3 million and $0.4 million of translation losses within our consolidated accumulated other comprehensive income,respectively. Additionally, we recorded $0.3 million and $0.7 million of translation losses in 2012 and 2010, and $0.3 million of translation gain in 2011within our consolidated statements of income and comprehensive income. Item 8.Financial Statements and Supplementary DataThe information required is included in this annual report as set forth in Part IV, “Item 15. Exhibits, Financial Statement Schedules — AuditedConsolidated Financial Statements.” Item 9.Changes In and Disagreements with Accountants on Accounting and Financial DisclosureNone. Item 9A.Controls and ProceduresConclusion Regarding the Effectiveness of Disclosure Controls and ProceduresAs of December 31, 2012, we carried out an evaluation under the supervision and with the participation of our management, including our ChiefExecutive Officer and Chief Financial Officer, as to the effectiveness, design and operation of our disclosure controls and procedures. The term “disclosurecontrols and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, meanscontrols and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files orsubmits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in thereports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive andprincipal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our management, including our Chief Executive Officerand Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent and/or detect all errors and allfraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the controlsystem are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be consideredrelative to their costs. Because of the inherent limitation in all control systems, no evaluation of controls can provide absolute assurance that all control issuesand instances of fraud, if any, within our company have been detected. Our disclosure controls and procedures are designed to provide reasonable assuranceof achieving their objectives and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined inthe Exchange Act Rules 13a- 15(e) and 15d-15(e)) were effective as of December 31, 2012.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with U.S. generallyaccepted accounting principles. Because of its inherent limitations, a system of internal control over financial reporting can provide only reasonable assuranceand may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controlsmay become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, weconducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework set forth in Internal Control — IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission. 53Table of ContentsBased on this assessment, management concluded that our internal control over financial reporting was effective at December 31, 2012.This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.Management’s report was not subject to attestation by the our independent registered public accounting firm pursuant to the rules of the Securities ExchangeCommission that permit us to provide only management’s report in this annual report.Changes in Internal Control Over Financial ReportingThere has been no change in our internal control over financial reporting during the quarter ended December 31, 2012, that has materially affected, or isreasonably likely to materially affect, our internal control over financial reporting. Item 9B.Other InformationNone. 54Table of ContentsPART III Item 10.Directors, Executive Officers and Corporate GovernanceThe information required by this item is set forth under the sections “Election of Directors,” “Our Executive Officers,” “Section 16(a) BeneficialOwnership Reporting Compliance” and “Corporate Governance” in in our definitive Proxy Statement (the “2013 Proxy Statement”) for our annual generalmeeting of stockholders to be held on June 13, 2013, which sections are incorporated herein by reference. Item 11.Executive CompensationInformation required by this item is set forth under the sections “Executive Compensation Tables” and “Compensation Committee Interlocks and InsiderParticipation” in the 2013 Proxy Statement, which sections are incorporated herein by reference. Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersInformation required by this item is set forth under the section “Security Ownership of Certain Beneficial Owners and Management” in the 2013 ProxyStatement, which section is incorporated herein by reference. Item 13.Certain Relationships and Related Transactions, and Director IndependenceInformation required by this item is set forth under the section “Certain Relationships and Related Transactions and Director Independence” in the 2013Proxy Statement, which section is incorporated herein by reference. Item 14.Principal Accountant Fees and ServicesInformation required by this item is set forth under the section “Independent Registered Public Accounting Firm Fees and Other Matters” in the 2013Proxy Statement, which section is incorporated herein by reference. 55Table of ContentsPART IV Item 15.Exhibits, Financial Statement Schedules (a)We have filed the following documents as part of this annual report: 1.Audited Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2012 and 2011 F-3 Consolidated Statements of Income and Comprehensive Income for Years Ended December 31, 2012, 2011 and 2010 F-4 Consolidated Statements of Changes in Redeemable Preferred Stock and Stockholders’ Equity for Years Ended December 31, 2012, 2011 and2010 F-5 Consolidated Statements of Cash Flows for Years Ended December 31, 2012, 2011 and 2010 F-7 Notes to Consolidated Financial Statements for Years Ended December 31, 2012, 2011 and 2010 F-8 2.Financial Statement SchedulesFinancial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notesthereto. 3.ExhibitsA list of exhibits required to be filed as part of this annual report is set forth in the Exhibit Index, which immediately precedes such exhibits and isincorporated herein by reference. 56Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized, on the 11 day of March, 2013. EPAM SYSTEMS, INC.By: /s/ Arkadiy Dobkin Name: Arkadiy Dobkin Title: Chairman, Chief Executive Officer and PresidentPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date/s/ Arkadiy DobkinArkadiy Dobkin Chairman, Chief Executive Officer andPresident (principal executive officer) March 11, 2013/s/ Ilya CantorIlya Cantor Senior Vice President, Chief Financial Officer and Treasurer(principal financialofficer and principal accounting officer) March 11, 2013/s/ Karl RobbKarl Robb Director March 11, 2013/s/ Andrew J. GuffAndrew J. Guff Director March 11, 2013/s/ Donald P. SpencerDonald P. Spencer Director March 11, 2013/s/ Richard Michael MayorasRichard Michael Mayoras Director March 11, 2013/s/ Robert SegertRobert Segert Director March 11, 2013/s/ Ronald VargoRonald Vargo Director March 11, 2013 57Table of ContentsINDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Audited Consolidated Financial Statements Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2012 and 2011 F-3 Consolidated Statements of Income and Comprehensive Income for Years Ended December 31, 2012, 2011 and 2010 F-4 Consolidated Statements of Changes in Redeemable Preferred Stock and Stockholders’ Equity for Years Ended December 31, 2012, 2011 and2010 F-5 Consolidated Statements of Cash Flows for Years Ended December 31, 2012, 2011 and 2010 F-7 Notes to Consolidated Financial Statements for Years Ended December 31, 2012, 2011 and 2010 F-8 F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Stockholders ofEPAM Systems, Inc.Newtown, PAWe have audited the accompanying consolidated balance sheets of EPAM Systems, Inc. and subsidiaries (the “Company”) as of December 31, 2012and 2011, and the related consolidated statements of income and comprehensive income, changes in redeemable preferred stock and stockholders’ equity, andcash flows for each of the three years in the period ended December 31, 2012. These 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 standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. TheCompany is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration ofinternal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of EPAM Systems, Inc. andsubsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period endedDecember 31, 2012, in conformity with accounting principles generally accepted in the United States of America./s/ DELOITTE & TOUCHE LLPPhiladelphia, PAMarch 11, 2013 F-2Table of ContentsEPAM SYSTEMS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS As ofDecember 31,2012 As ofDecember 31,2011 (in thousands, except shareand per share data) Assets Current assets Cash and cash equivalents $118,112 $88,796 Accounts receivable, net of allowance of $2,203 and $2,250, respectively 78,906 59,472 Unbilled revenues 33,414 24,475 Prepaid and other current assets 12,264 6,436 Time deposits 1,006 — Restricted cash, current 660 — Deferred tax assets, current 6,593 4,384 Total current assets 250,955 183,563 Property and equipment, net 53,135 35,482 Restricted cash, long-term 467 2,582 Intangible assets, net 16,834 1,251 Goodwill 22,698 8,169 Deferred tax assets, long-term 6,093 1,875 Other long-term assets 632 2,691 Total assets $350,814 $235,613 Liabilities Current liabilities Accounts payable $6,095 $2,714 Accrued expenses and other liabilities 19,814 24,782 Deferred revenue 6,369 6,949 Due to employees 12,026 8,234 Taxes payable 14,557 8,712 Deferred tax liabilities, current 491 1,736 Total current liabilities 59,352 53,127 Deferred revenue, long-term 1,263 — Taxes payable, long-term 1,228 1,204 Deferred tax liabilities, long-term 2,691 283 Total liabilities 64,534 54,614 Commitments and contingencies (Note 17) Preferred stock, $.001 par value; 0 and 5,000,000 authorized at December 31, 2012 and December 31, 2011, 0 and2,054,935 Series A-1 convertible redeemable preferred stock issued and outstanding at December 31, 2012 andDecember 31, 2011; $.001 par value 0 and 945,114 authorized at December 31, 2012 and December 31, 2011, 0 and384,804 Series A-2 convertible redeemable preferred stock issued and outstanding at December 31, 2012 andDecember 31, 2011 — 85,940 Stockholders’ equity Common stock, $.001 par value; 160,000,000 authorized; 45,398,523 and 18,914,616 shares issued, 44,442,494 and17,158,904 shares outstanding at December 31, 2012 and December 31, 2011, respectively 44 17 Preferred stock, $.001 par value; 0 and 290,277 authorized Series A-3 convertible preferred stock issued and outstandingat December 31, 2012 and December 31, 2011, respectively — — Additional paid-in capital 166,962 40,020 Retained earnings 128,992 74,508 Treasury stock (8,697) (15,972) Accumulated other comprehensive loss (1,021) (3,514) Total stockholders’ equity 286,280 95,059 Total liabilities and stockholders’ equity $350,814 $235,613 The accompanying notes are an integral part of the consolidated financial statements F-3Table of ContentsEPAM SYSTEMS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME For the Years Ended December 31, 2012 2011 2010 (in thousands, except per share data) Revenues $433,799 $334,528 $221,824 Operating expenses: Cost of revenues (exclusive of depreciation and amortization) 270,361 205,336 132,528 Selling, general and administrative expenses 85,868 64,930 47,635 Depreciation and amortization expense 10,882 7,538 6,242 Goodwill impairment loss — 1,697 — Other operating expenses, net 682 19 2,629 Income from operations 66,006 55,008 32,790 Interest and other income, net 1,941 1,422 486 Foreign exchange loss (2,084) (3,638) (2,181) Income before provision for income taxes 65,863 52,792 31,095 Provision for income taxes 11,379 8,439 2,787 Net income $54,484 $44,353 $28,308 Cumulative translation adjustment 2,493 (1,250) (397) Comprehensive income $56,977 $43,103 $27,911 Accretion of preferred stock — (17,563) (1,432) Net income allocated to participating securities (3,341) (15,025) (17,984) Effect on income available from redemption of preferred stock — — 5,418 Net income available for common stockholders 51,143 11,765 14,310 Net income per share of common stock: Basic (common) $1.27 $0.69 $0.84 Basic (puttable common) $— $1.42 $0.84 Diluted (common) $1.17 $0.63 $0.79 Diluted (puttable common) $— $0.77 $0.79 Shares used in calculation of net income per share of common stock: Basic (common) 40,190 17,094 17,056 Basic (puttable common) — 18 141 Diluted (common) 43,821 20,473 19,314 Diluted (puttable common) — 18 141 The accompanying notes are an integral part of the consolidated financial statements F-4Table of ContentsEPAM SYSTEMS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES INREDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY For the years ended December 31, 2012, 2011 and 2010 Series A-1 andA-2, ConvertibleRedeemablePreferred Stock PuttableCommon Stock Common Stock Series A-3ConvertiblePreferred Stock AdditionalPaid-inCapital RetainedEarnings TreasuryStock AccumulatedOtherComprehensiveIncome TotalStockholders’Equity Shares Amount Shares Amount Shares Amount Shares Amount (in thousands, except share data) Balance, December 31, 2009 2,730,016 $87,413 171,312 $1,264 17,060,504 $17 — $— $12,582 $20,842 $(15,040) $(1,867) $16,534 Repurchase and retirement of Series A-2convertible redeemable preferred stock (290,277) (20,468) — — — — — — 5,418 — — — 5,418 Issue of Series A-3 convertible preferred stock — — — — — — 290,277 — 14,971 — — — 14,971 Accretion of A-1 preferred stock to redemptionvalue — 1,432 — — — — — — — (1,432) — — (1,432) Purchase of common stock (Note 13) — — — — — — — — — — (6,392) — (6,392) Net proceeds from sale of common stock(Note 13) — — — — — — — — (58) — 6,392 — 6,334 Purchase of puttable stock (Note 13) — — (114,416) (932) — — — — 932 — (932) — — Adjustment of shares issued in connectionwith acquisition of Rodmon — — — — (11,696) — — — (60) — — (60) Stock-based compensation expense — — — — — — — — 2,939 — — — 2,939 Proceeds from stock options exercise — — — — 5,600 — — — 26 — — — 26 Currency translation adjustment — — — — — — — — — — — (397) (397) Net income — — — — — — — — — 28,308 — — 28,308 Balance, December 31, 2010 2,439,739 68,377 56,896 332 17,054,408 17 290,277 — 36,750 47,718 (15,972) (2,264) 66,249 Accretion of A-2 preferred stock toredemption value — 17,563 — — — — — — (17,563) — — (17,563) Stock-based compensation expense — — — — — — — — 2,866 — — — 2,866 Proceeds from stock options exercise — — — — 47,600 — — — 72 — — — 72 Put option expiry — — (56,896) (332) 56,896 — — — 332 — — — 332 Currency translation adjustment — — — — — — — — — — — (1,250) (1,250) Net income — — — — — — — — — 44,353 — — 44,353 Balance, December 31, 2011 2,439,739 $85,940 — $— 17,158,904 $17 290,277 $— $40,020 $74,508 $(15,972) $(3,514) $95,059 F-5Table of ContentsEPAM SYSTEMS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CHANGES INREDEEMABLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (CONT’D) For the years ended December 31, 2012, 2011 and 2010 Series A-1 andA-2, ConvertibleRedeemablePreferred Stock Common Stock Series A-3ConvertiblePreferred Stock AdditionalPaid-inCapital RetainedEarnings TreasuryStock AccumulatedOtherComprehensiveIncome TotalStockholders’Equity Shares Amount Shares Amount Shares Amount (in thousands, except share data) Balance, December 31, 2011 2,439,739 $85,940 17,158,904 $17 290,277 $— $40,020 $74,508 $(15,972) $(3,514) $95,059 Conversion to common stock (2,439,739) (85,940) 21,840,128 22 (290,277) — 85,918 — — — 85,940 Initial public offering of common stock — — 2,900,000 3 — — 32,361 — — — 32,364 Offering issuance costs — — — — — — (3,395) — — — (3,395) Issuance of restricted stock (Note 14) — — 213,656 — — — — — — — — Stock issued in connection with acquisition of Instant Information(Note 2) — — 53,336 — — — 640 — — — 640 Stock issued in connection with acquisition of Thoughtcorp, Inc.(Note 2) — — 434,546 — — — (346) — 3,953 — 3,607 Stock issued in connection with acquisition of Empathy Lab,LLC (Note 2) — — 326,344 — — — (2,969) — 2,969 — — Stock-based compensation expense — — — — — — 6,826 — — — 6,826 Proceeds from stock options exercises — — 1,515,580 2 — — 4,963 — — — 4,965 Treasury stock retirement — — — — — — (353) — 353 — — Excess tax benefits — — — — — — 3,297 — — — 3,297 Currency translation adjustment — — — — — — — — — 2,493 2,493 Net income — — — — — — — 54,484 — — 54,484 Balance, December 31, 2012 — $— 44,442,494 $44 — $— $166,962 $128,992 $(8,697) $(1,021) $286,280 (Concluded)The accompanying notes are an integral part of the consolidated financial statements F-6Table of ContentsEPAM SYSTEMS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS For the Years EndedDecember 31, 2012 2011 2010 (in thousands) Cash flows from operating activities: Net Income $54,484 $44,353 $28,308 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,882 7,538 6,242 Bad debt expense 662 727 202 Deferred taxes (3,933) 497 (2,704) Stock-based compensation 6,826 2,866 2,939 Goodwill impairment loss — 1,697 — Excess tax benefits on stock-based compensation plans (3,297) — — Non-cash stock charge (Note 2) 640 — — Other (66) 777 335 Change in operating assets and liabilities (net of effects of acquisitions): (Increase)/decrease in: Accounts receivable (12,664) (19,030) (13,791) Unbilled revenues (6,905) (1,004) (10,653) Prepaid expenses and other assets (1,339) (1,694) (2,253) Accounts payable 1,407 254 (2,646) Accrued expenses and other liabilities (5,825) 9,474 10,065 Deferred revenue (767) 1,843 209 Due to employees 2,896 2,796 2,545 Taxes payable 5,498 3,426 1,675 Net cash provided by operating activities 48,499 54,520 20,473 Cash flows from investing activities: Purchases of property and equipment (13,376) (15,548) (8,365) Payment for construction of corporate facilities (13,701) (1,545) — Decrease/(increase) in restricted cash, net (Note 4) 470 (144) (1,958) Increase in other long-term assets, net (69) (171) (91) Acquisition of businesses, net of cash acquired (Note 2) (32,951) — (412) Net cash used in investing activities (59,627) (17,408) (10,826) Cash flows from financing activities: Net proceeds from issuance of common stock in initial public offering 32,364 — — Costs related to stock issue (1,765) (1,630) — Proceeds related to stock options exercises 4,951 72 26 Excess tax benefits on stock-based compensation plans 3,297 — — Purchase of treasury stock — — (7,324) Proceeds from sale of treasury stock, net of costs — — 6,334 Repurchase of Series A-2 convertible redeemable preferred stock — — (15,050) Proceeds from issue of Series A-3 convertible preferred stock, net of costs — — 14,971 Proceeds related to line of credit — 5,000 — Repayment related to line of credit — (5,000) (7,000) Net cash provided by/(used in) financing activities 38,847 (1,558) (8,043) Effect of exchange-rate changes on cash and cash equivalents 1,597 (762) (527) Net increase in cash and cash equivalents 29,316 34,792 1,077 Cash and cash equivalents, beginning of year-January 1 88,796 54,004 52,927 Cash and cash equivalents, end of year $118,112 $88,796 $54,004 Supplemental disclosures of cash flow information: Cash paid during the year for: Income taxes $13,065 $7,007 $5,577 Bank interest 14 37 101 Summary of non-cash investing and financing transactions: • Accretion of Series A-1 convertible redeemable preferred stock was $0 in 2012, $0 in 2011, and $1,432 in 2010. • Accretion of Series A-2 convertible redeemable preferred stock was $0 in 2012, $17,563 in 2011, and $0 in 2010. • Total incurred but not paid costs related to stock issue were $0 in 2012, $470 in 2011 and $0 in 2010. • Total incurred but not paid costs related to acquisition of businesses were $96 in 2012, and $0 in 2011 and 2010.The accompanying notes are an integral part of the consolidated financial statements. F-7Table of ContentsEPAM SYSTEMS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSAS OF DECEMBER 31, 2012 AND 2011AND FOR THE YEARS ENDED DECEMBER 31, 2012, 2011 AND 2010(US DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 1.NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIESEPAM Systems, Inc. (the Company or EPAM) is a leading provider of complex software engineering solutions and a leader in Central and EasternEuropean IT services delivery. The Company provides these solutions to primarily Fortune Global 2000 companies in multiple verticals, includingIndependent Software Vendors (ISVs) and Technology, Banking and Financial services, Business Information and Media, Travel and Consumer.Since EPAM’s inception in 1993, the Company has focused on providing software product development services, software engineering and vertically-oriented custom development solutions through its global delivery model. This has served as a foundation for the Company’s other solutions, includingcustom application development, application testing, platform-based solutions, application maintenance and support, and infrastructure management.The Company is incorporated in Delaware with headquarters in Newtown, PA, with multiple delivery centers located in Belarus, Ukraine, Russia,Hungary, Kazakhstan and Poland, and client management locations in the United States, Canada, the United Kingdom, Germany, Sweden, Switzerland,Russia and Kazakhstan.Emerging growth company status — In April 2012, several weeks after EPAM’s initial public offering in February 2012, President Obama signedinto law the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). The JOBS Act contains provisions that relax certain requirements for “emerginggrowth companies” that otherwise apply to larger public companies. For as long as a company retains emerging growth company status, which may be untilthe fiscal year-end after the fifth anniversary of its initial public offering, it will not be required to (1) provide an auditor’s attestation report on itsmanagement’s assessment of the effectiveness of its internal control over financial reporting, otherwise required by Section 404(b) of the Sarbanes-Oxley Act of2002, (2) comply with any new or revised financial accounting standard applicable to public companies until such standard is also applicable to privatecompanies, (3) comply with certain new requirements adopted by the Public Company Accounting Oversight Board, (4) provide certain disclosure regardingexecutive compensation required of larger public companies or (5) hold shareholder advisory votes on matters relating to executive compensation.EPAM is classified as an emerging growth company under the JOBS Act and is eligible to take advantage of the accommodations described above for aslong as it retains this status. However, EPAM has elected not to take advantage of the transition period described in (2) above, which is the exemption providedin Section 7(a)(2)(B) of the Securities Act of 1933 and Section 13(a) of the Securities Exchange Act of 1934 (in each case as amended by the JOBS Act) forcomplying with new or revised financial accounting standards. EPAM will therefore comply with new or revised financial accounting standards to the sameextent that a non-emerging growth company is required to comply with such standards.Principles of Consolidation — The consolidated financial statements include the financial statements of EPAM Systems, Inc. and its subsidiaries. Allintercompany balances and transactions have been eliminated.Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions. These estimates and assumptions affect reported amounts of assets and liabilities and the disclosure ofcontingent assets and liabilities at the date of the consolidated financial statements, as well as revenues and expenses during the reporting period. TheCompany bases its estimates and judgments on historical experience, knowledge of current conditions and its beliefs of what could occur in the future, givenavailable information. Actual results could differ from those estimates, and such differences may be material to the financial statements.Revenue Recognition — The Company recognizes revenue when realized or realizable and earned, which is when the following criteria are met:persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. If there isan uncertainty about the project completion or receipt of payment for the consulting services, revenues are deferred F-8Table of Contentsuntil the uncertainty is sufficiently resolved. At the time revenues are recognized, we provide for client incentive programs and reduce revenues accordingly.The Company defers amounts billed to its clients for revenues not yet earned. Such amounts are anticipated to be recorded as revenues as services areperformed in subsequent periods. Unbilled revenues represent services provided which are billed subsequent to the period end in accordance with the contractterms.The majority of the Company’s revenues (84.1% of revenues in 2012, 86.1% in 2011 and 85.2% in 2010) is generated under time-and-materialcontracts whereby revenues are recognized as services are performed with the corresponding cost of providing those services reflected as cost of revenues whenincurred. The majority of the revenues are billed on an hourly, daily or monthly basis whereby actual time is charged directly to the client.Revenues from fixed-price contracts (13.7% of revenues in 2012, 11.0% in 2011 and 12.3% in 2010) are determined using the proportional performancemethod. In instances where final acceptance of the product, system, or solution is specified by the client, revenues are deferred until all acceptance criteria havebeen met. In absence of a sufficient basis to measure progress towards completion, revenue is recognized upon receipt of final acceptance from the client. Thecomplexity of the estimation process and factors relating to the assumptions, risks and uncertainties inherent with the application of the proportionalperformance method of accounting affects the amounts of revenues and related expenses reported in our consolidated financial statements. A number of internaland external factors can affect our estimates, including labor hours and specification and testing requirement changes. In order to estimate the amount ofrevenue for the period under the proportional performance method, the Company determines the percentage of actual labor hours incurred as compared toestimated total labor hours and applies that percentage to the consideration allocated to the deliverable. The cumulative impact of any revision in estimates isreflected in the financial reporting period in which the change in estimate becomes known. Our fixed price contracts are generally recognized over a period oftwelve months or less.The Company enters into multiple element arrangements with our clients under time-and-material and fixed-fee contracts. In October 2009, the FASBissued a new accounting standard which provides guidance for arrangements with multiple deliverables. We adopted this standard effective January 1, 2010for all new or amended contracts, and it did not have a material effect on our financial condition or consolidated results of operations, or change our units ofaccounting and how we allocate the arrangement consideration to various units of accounting. These arrangements consist of development services and otherservice deliverables that qualify for separate units of accounting. These other services include maintenance and support services for our time and materialcontracts and separately priced warranties for our fixed-fee contracts. These deliverables qualify for multiple units of accounting and therefore arrangementconsideration is allocated among the units of accounting based on their relative selling price. The relative selling price is based on the price charged for thedeliverable when it is sold separately. For multiple element arrangements under time-and-material contracts, revenue is recognized as services are performed foreach deliverable. For arrangements under fixed-fee contracts, revenue is recognized upon delivery of development services under the proportional performancemethod and on a straight-line basis over the warranty period. The warranty period is generally six months to two years.The Company reports gross reimbursable “out-of-pocket” expenses incurred as both revenues and cost of revenues in the consolidated statements ofincome.Cost of revenues (exclusive of depreciation and amortization) — Consists principally of salaries, employee benefits and stock compensationexpense, reimbursable and non-reimbursable travel costs and subcontractor fees.Selling, general and administrative expenses — Consist of expenses associated with promoting and selling the Company’s services and includesuch items as sales and marketing personnel salaries, stock compensation expense and related fringe benefits, commissions, travel, and the cost of advertisingand other promotional activities. General and administrative expenses include other operating items such as officers’ and administrative personnel salaries,marketing personnel salaries, stock compensation expense and related fringe benefits, legal and audit expenses, insurance, provision for doubtful accounts,and operating lease expenses.Cash and Cash Equivalents — Cash equivalents are short-term, highly liquid investments that are readily convertible into cash, with maturities ofthree months or less at the date acquired. As of December 31, 2012 and 2011 all amounts are in cash. F-9Table of ContentsRestricted Cash — Restricted cash represents cash that is restricted by agreements with third parties for special purposes (see Note 4).Accounts Receivable — Accounts receivable are recorded at net realizable value. The Company maintains an allowance for doubtful accounts forestimated losses resulting from the inability of its clients to make required payments. The allowance for doubtful accounts is determined by evaluating therelative credit-worthiness of each client, historical collections experience and other information, including the aging of the receivables.Recoveries of losses from accounts receivable written off in prior years are presented within income from operations on the Company’s consolidatedstatements of income. Collections in respect of prior year write-offs amounted to $0 for the year ended December 31, 2012, and $0 and $1,686 in each of thetwo years ended December 2011 and 2010, respectively.The table below summarizes movements in qualifying accounts for the years ended December 31, 2012, 2011 and 2010: Balance atBeginning ofPeriod Charged toCostsand Expenses Deductions/Other Balance at Endof Year Allowance for Doubtful Accounts (billed and unbilled): Fiscal Year 2010 $3,246 $1,493 $(3,068) $1,671 Fiscal Year 2011 1,671 1,234 (655) 2,250 Fiscal Year 2012 2,250 1,244 (1,291) 2,203 Property and Equipment — Property and equipment acquired in the ordinary course of the Company’s operations are stated at cost, net ofaccumulated depreciation. Depreciation is calculated on the straight-line basis over the estimated useful lives of the assets generally ranging from 3 to 50 years.Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement.Maintenance and repairs are expensed as incurred, while renewals and betterments are capitalized.Goodwill and Other Intangible Assets — Goodwill is measured as the excess of the cost of an acquisition over the sum of the amounts assigned totangible and intangible assets acquired less liabilities assumed. The determination of the fair value of the intangible assets acquired involves certain judgmentsand estimates. These judgments can include, but are not limited to, the cash flows that an asset is expected to generate in the future and the appropriateweighted average cost of capital.The Company does not amortize goodwill but performs a test for impairment annually, or when indications of potential impairment exist, utilizing a fairvalue approach at the reporting unit level. The Company determines fair value using the income approach which estimates the fair value of its reporting unitsbased on the future discounted cash flows. In testing for a potential impairment of goodwill, the Company estimates the fair value of its reporting units towhich goodwill relates and estimates the carrying value (book value) of the assets and liabilities related to those reporting units.As a result of an operating loss in the Other reporting unit for the three months ended June 30, 2011, the Company performed a goodwill impairmenttest. In assessing impairment in accordance with Accounting Standards Codification, (“ASC”) No. 350, “Intangibles-Goodwill and Other,” the Companydetermined that the fair value of the Other reporting unit, based on the total of the expected future discounted cash flows directly related to the reporting unit,was below the carrying value of the reporting unit. The Company completed the second step of the goodwill impairment test, resulting in an impairment chargeof $1,697.In the fourth quarter of fiscal 2012, 2011 and 2010, the Company completed its annual impairment testing of goodwill and determined there was noimpairment.The Company amortizes other intangible assets with determinable lives over their estimated useful lives. The Company records an impairment charge onthese assets when it determines that their carrying value may not be recoverable. The carrying value is not recoverable if it exceeds the undiscounted futurecash flows resulting from the use of the asset and its eventual disposition. When there exists one or more indicators of impairment, the Company measuresany impairment of intangible assets based on the excess of the carrying value of the asset over its fair value. Its fair value is determined based on a projecteddiscounted cash flow F-10Table of Contentsmethod using a discount rate determined by the Company’s management to be commensurate with the risk inherent in its business model. The Company’sestimates of future cash flows attributable to its other intangible assets require significant judgment based on the Company’s historical and anticipated results.All of the Company’s intangible assets have finite lives and the Company did not incur any impairments of its intangible assets for the years endedDecember 31, 2012, 2011 and 2010.Impairment of Long-Lived Assets — Long-lived assets, such as property, plant, and equipment are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may not be recoverable. The assessment for potential impairment is based primarily onthe Company’s ability to recover the carrying value of its long-lived assets from expected future cash flows from its operations on an undiscounted basis ateach reporting date. If such assets are determined to be impaired, the impairment recognized is the amount by which the carrying value of the assets exceeds thefair value of the assets. Property and equipment to be disposed of by sale is carried at the lower of the then current carrying value or fair value less estimatedcosts to sell. The Company did not incur any impairments of long-lived assets for 2012, 2011, or 2010.FASB ASC Topic 820 establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. Thefair value test for impairment of long-lived assets is classified as a Level 3 measurement under FASB ASC Topic 820.Income Taxes — The provision for income taxes includes federal, state, local and foreign taxes. Deferred tax assets and liabilities are recognized for theestimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases. Deferred tax assetsand liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to bereversed. Changes to enacted tax rates would result in either increases or decreases in the provision for income taxes in the period of changes. The Companyevaluates the realizability of deferred tax assets and recognizes a valuation allowance when it is more likely than not that all, or a portion of, deferred tax assetswill not be realized.The realization of deferred tax assets is primarily dependent on future earnings. Any reduction in estimated forecasted results may require that we recordvaluation allowances against deferred tax assets. Once a valuation allowance has been established, it will be maintained until there is sufficient positiveevidence to conclude that it is more likely than not that the deferred tax assets will be realized. A pattern of sustained profitability will generally be consideredas sufficient positive evidence to reverse a valuation allowance. If the allowance is reversed in a future period, the income tax provision will be correspondinglyreduced. Accordingly, the increase and decrease of valuation allowances could have a significant negative or positive impact on future earnings. See Note 10 tothe consolidated financial statements for further information.Changes in tax laws and rates may affect recorded deferred tax assets and liabilities and our effective tax rate in the future. The American TaxpayerRelief Act of 2012 (the “Act”) was signed into law on January 2, 2013. Because a change in tax law is accounted for in the period of enactment, certainprovisions of the Act benefiting the Company’s 2012 U.S. federal taxes, including the Subpart F controlled foreign corporation look-through exception cannotbe recognized in the Company’s 2012 financial results and instead will be reflected in the Company’s 2013 financial results.Earnings per ShareBasic EPS is computed by dividing the net income applicable to common stockholders for the period by the weighted average number of shares ofcommon stock outstanding during the same period. Our Series A-1 Preferred, Series A-2 Preferred, and Series A-3 Preferred Stock, that had been outstandingand convertible into common stock until February 13, 2012 (the date of our IPO), and our puttable common stock were considered participating securitiessince these securities had non-forfeitable rights to dividends or dividend equivalents during the contractual period and thus required the two-class method ofcomputing EPS. When calculating diluted EPS, the numerator is computed by adding back the undistributed earnings allocated to the participating securitiesin arriving at the basic EPS and then reallocating such undistributed earnings among our common stock, participating securities and the potential commonshares that result from the assumed exercise of all dilutive options. The denominator is increased to include the number of additional common shares thatwould have been outstanding had the options been issued.Foreign Currency Translation — Assets and liabilities of consolidated foreign subsidiaries, whose functional currency is the local currency, aretranslated to U.S. dollars at period end exchange rates. Revenues F-11Table of Contentsand expenses are translated to U.S. dollars at daily exchange rates. The adjustment resulting from translating the financial statements of such foreignsubsidiaries to U.S. dollars is reflected as a cumulative translation adjustment and reported as a component of accumulated other comprehensive income.The Company reports the effect of exchange rate changes on cash balances held in foreign currencies as a separate item in the reconciliation of thechanges in cash and cash equivalents during the period. Transaction gains and losses are included in the period in which they occur.Risks and Uncertainties — Principally, all of the Company’s IT delivery centers and a majority of its employees are located in Central and EasternEurope. As a result, the Company may be subject to certain risks associated with international operations, risks associated with the application andimposition of protective legislation and regulations relating to import and export, or otherwise resulting from foreign policy or the variability of foreigneconomic or political conditions. Additional risks associated with international operations include difficulties in enforcing intellectual property rights, theburdens of complying with a wide variety of foreign laws, potential geo-political and other risks associated with potentially adverse tax consequences, tariffs,quotas and other barriers.Concentration of Credit — The Company maintains its cash with financial institutions. As of December 31, 2012, $76.2 million of total cash washeld in CIS countries, with $50.6 million of that in Belarus. Banking and other financial systems in the CIS are less developed and regulated than in somemore developed markets, and legislation relating to banks and bank accounts is subject to varying interpretations and inconsistent application. Banks in theCIS generally do not meet the banking standards of more developed markets, and the transparency of the banking sector lags behind international standards.Furthermore, bank deposits made by corporate entities in CIS are not insured. As a result, the banking sector remains subject to periodic instability. Anotherbanking crisis, or the bankruptcy or insolvency of banks through which the Company receives or with which it holds funds, particularly in Belarus, mayresult in the loss of its deposits or adversely affect its ability to complete banking transactions in the CIS, which could materially adversely affect theCompany’s business and financial condition.For the years ended December 31, 2012, 2011 and 2010 the top five clients accounted for 31.0%, 32.0% and 29.7% of revenues, respectively. For theyears ended December 31, 2012, 2011 and 2010 the top ten clients accounted for 44.4%, 44.6% and 42.6% of revenues, respectively. There were no customerswhich accounted for over 10% of revenues in 2012. One client, Thomson Reuters, accounted for $35.9 million, or 10.7% and $26.0 million, or 11.7%, ofrevenues in 2011 and 2010, respectively. Accounts receivable and unbilled revenues for this client were 15.9% and 15.0% of total accounts receivable andunbilled revenues as of December 31, 2011, respectively.During the years ended December 31, 2012, 2011 and 2010 the Company incurred subcontractor costs of $3,535, $4,545 and $12,219, respectively,to a vendor for staffing, consulting, training, recruiting and other logistical / support services provided for the Company’s delivery and developmentoperations in Eastern Europe. Such costs are included in cost of revenues and sales, general and administrative expenses, as appropriate, in the accompanyingconsolidated statements of income and comprehensive income.Foreign currency risk — The Company generates revenues in various global markets based on client contracts obtained in non-U.S. dollar currencies,principally, Euros, British pounds and Russian Rubles. The Company incurs expenditures in non-U.S. dollar currencies, principally in Hungarian Forints,Euros, and Russian Rubles associated with the IT delivery centers located in Central and Eastern Europe. The Company is exposed to fluctuations in foreigncurrency exchange rates primarily on accounts receivable and unbilled revenues from sales in these foreign currencies, and cash flows for expenditures inforeign currencies. The Company doesn’t use derivative financial instruments to hedge the risk of foreign exchange volatility.Interest rate risk — The Company’s exposure to market risk for changes in interest rates relates primarily to the Company’s cash and cash equivalentsand the LIBOR+1.25% rate long-term credit facility (see Note 7). The Company doesn’t use derivative financial instruments to hedge the risk of interest ratevolatility.Fair value of financial instruments — The Company’s financial instruments consist primarily of cash and cash equivalents, restricted cash andterm deposits, accounts receivable, accounts payable and other current assets and liabilities. The fair values of these instruments approximate their carryingvalues due to their short-term nature.Accounting for Stock-Based Employee Compensation Plans — Stock-based compensation expense for awards of equity instruments to employeesand non-employee directors is determined based on the grant-date fair value of the awards ultimately expected to vest. The Company recognizes thesecompensation costs on a F-12Table of Contentsstraight-line basis over the requisite service period of the award, which is generally the option vesting term of four years (See Note 14).The Company estimates forfeitures at the time of grant and revises its estimates, if necessary, in subsequent periods if actual forfeitures or vesting differfrom those estimates. Such revisions could have a material effect on the Company’s operating results. The assumptions used in the valuation model are basedon subjective future expectations combined with management judgment. If any of the assumptions used in the valuation model changes significantly, stock-based compensation for future awards may differ materially compared to the awards previously granted.Recent Accounting Pronouncements — In May 2011, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update(“ASU” or “Update”) No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and DisclosureRequirements in U.S. GAAP and IFRS” which is intended to create consistency between U.S. GAAP and International Financial Reporting Standards(“IFRS”). The amendments include clarification on the application of certain existing fair value measurement guidance and expanded disclosures for fair valuemeasurements that are estimated using significant unobservable (Level 3) inputs. This guidance was effective prospectively for public entities for interim andannual reporting periods beginning after December 15, 2011, with early adoption by public entities prohibited. The adoption of this standard did not have amaterial effect on the Company’s financial condition, results of operations and cash flows.In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” which requirescomprehensive income to be reported in either a single statement or in two consecutive statements reporting net income and other comprehensive income. Theamendment does not change what items are reported in other comprehensive income. Additionally, in December 2011, the FASB F-13Table of Contentsissued ASU No. 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of ItemsOut of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05” which indefinitely defers the requirement in ASUNo. 2011-05 to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net incomeis presented and the statement in which other comprehensive income is presented. During the deferral period, the existing requirements in U.S. GAAP for thepresentation of reclassification adjustments must continue to be followed. These standards were effective for interim and annual financial periods beginningafter December 15, 2011 and are to be applied retrospectively, with early adoption permitted. As these standards impact presentation requirements only, theadoption of this guidance did not have a material effect on the Company’s financial condition, results of operations and cash flows.In September 2011, the FASB issued new guidance allowing companies testing goodwill for impairment to have the option of performing a qualitativeassessment before calculating the fair value of the reporting unit (i.e. the first step of the goodwill impairment test). If companies determine, on the basis ofqualitative factors, that the fair value of the reporting unit is more likely than not less than the carrying amount, the two-step impairment test would berequired. This update is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with earlyadoption permitted. The Company adopted this standard effective October 1, 2011. The adoption of this standard did not have a material effect on theCompany’s financial condition, consolidated results of operations or disclosures.In testing its reporting units for goodwill impairment as of December 31, 2012 and 2011, the Company bypassed the qualitative assessment option andproceeded directly to performing the first step of the two-step goodwill impairment test. The Company may resume performing the qualitative assessment inany subsequent period.In October 2012, the FASB issued ASU No. 2012-04, “Technical Corrections and Improvements” which clarifies the Codification or correctsunintended application of guidance and includes amendments identifying when the use of fair value should be linked to the definition of fair value in Topic820, Fair Value Measurement. Amendments to the Codification without transition guidance are effective upon issuance effective for fiscal periods beginningafter December 15, 2012. The Company is currently evaluating the effect of the adoption of this pronouncement on its financial condition, results ofoperations and cash flows.In January 2013, the FASB issued ASU 2013-01, “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities”. The ASU clarifies thatordinary trade receivables and receivables are not in the scope of ASU 2011-11, “Disclosures about Offsetting Assets and Liabilities”. ASU 2011-11 appliesonly to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offsetin accordance with specific criteria contained in the Codification or subject to a master netting arrangement or similar agreement. The ASU if effective forfiscal years beginning on or after January 1, 2013, and interim periods within those annual periods and requires retrospective application for all comparativeperiods presented. The Company doesn’t expect the adoption of this standard to have a material effect on the Company’s financial condition, results ofoperations and cash flows.In February 2013, the FASB issued ASU 2013-02, which adds new disclosure requirements for items reclassified out of accumulated othercomprehensive income (“AOCI”). The ASU is intended to help entities improve the transparency of changes in other comprehensive income (OCI) and itemsreclassified out of AOCI in their financial statements. It does not amend any existing requirements for reporting net income or OCI in the financial statements.New disclosure requirements are effective for fiscal periods beginning after December 15, 2012 and should be applied prospectively. As the new ASU impactspresentation requirements only, the Company doesn’t expect the adoption of this standard to have a material effect on the Company’s financial condition,results of operations and cash flows. 2.ACQUISITIONSEmpathy Lab, LLC — On December 18, 2012, the Company acquired substantially all of the assets and assumed certain liabilities of EmpathyLab, LLC (“Empathy Lab”), a U.S.-based digital strategy and multi-channel experience design firm. The acquisition is intended to enhance the Company’sstrong capabilities in global delivery of software engineering services with the proven expertise in two important growth areas-development and execution ofenterprise-wide eCommerce initiatives and transformation of media consumption and distribution channels. In addition to strengthening our Travel andConsumer and Business Information and Media verticals, Empathy Lab brings significant expertise in digital marketing strategy consulting and programmanagement.The purchase price was comprised of approximately $27,257 payable in cash, of which approximately 10% was placed in escrow for a period of 18months as a security for the indemnification obligations of the sellers under the asset purchase agreement. Additionally, the Company issued to the sellers326,344 shares of non-vested (“restricted”) common stock contingent on their continued employment with the Company (Note 14), of which 65,268 shareswere placed in escrow for a period of 18 months as a security for the indemnification obligations of the sellers under the asset purchase agreement. Therestricted stock has an estimated value of $6,755 and will be recorded as a stock-based compensation expense over an associated service period of three years.Additionally, the Company agreed to issue stock options to certain employees acquired through the Empathy Lab acquisition. The stock options will beissued in the amount by which the acquiree’s revenue exceeds the target revenue for the first half of 2013, as defined by the purchase agreement. The stockoptions will be issued under the Company’s current long-term incentive plan and will be subject to all vesting restrictions and other terms and conditionscustomary for the Company.The purchase price was allocated to the assets acquired based on their related fair values, as follows: Cash and cash equivalents $1,191 Trade receivables and other current assets 5,983 Property and equipment 186 Deferred tax asset 30 Acquired intangible assets 11,200 Goodwill 11,359 Goodwill 11,359 Total assets acquired 29,949 Accounts payable and accrued expenses 1,028 Deferred revenue and other liabilities 1,664 F-14Table of ContentsTotal liabilities assumed 2,692 Net assets acquired $27,257 The Company performed a valuation analysis to determine the fair values of certain intangible assets of Empathy Lab as of the acquisition date. As partof the valuation process, the excess earnings method was used to determine the value of customer relationships. Fair values of trade name and non-competitionagreements were determined using the relief from royalty and discounted earnings methods, respectively. The Company expects approximately $11,470 of taxgoodwill amortizable over a15-year period.The following table presents the estimated fair values and useful lives of intangible assets acquired: December 18,2012 WeightedAverageUsefulLife (inyears) Customer relationships $6,900 10 Trade names 3,900 5 Non-competition agreements 400 4 Total $11,200 The above estimated fair values of the assets acquired and liabilities assumed are provisional and based on information available as of the acquisitiondate to estimate the fair values of the assets acquired and liabilities assumed. The Company believes such information provides a reasonable basis forestimating the fair values but the Company is waiting for additional information necessary to finalize those amounts, particularly with respect to the estimatedfair values of intangible assets and deferred income taxes. Thus, the provisional measurements of fair value reflected are subject to change. Such changescould be significant. The Company expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one yearfrom the Empathy Lab acquisition date.Included in consolidated statements of income and comprehensive income for the year ended December 31, 2012 are $545 of revenues and $104 of netincome of the acquiree, respectively.Total acquisition-related post-combination compensation expense recognized for the year ended December 31, 2012 was $79 and is presented withinselling, general and administrative expenses. Total acquisition-related costs were $81 and are presented within selling, general and administrative expenses forthe year ended December 31, 2012, respectively.Pro forma results of operations for the Empathy Lab acquisition completed during the year ended December 31, 2012 have not been presented becausethe effects of the acquisition were not material, individually and in aggregate with other acquisitions completed by the Company during 2012, to theCompany’s consolidated results of operations.Thoughtcorp, Inc. — On May 23, 2012, the Company acquired substantially all of the assets and assumed certain liabilities of Thoughtcorp, Inc., aToronto-based software solutions provider (“Thoughtcorp”). The acquisition is intended to expand the Company’s geographic footprint within North America,and complement its global delivery capabilities with expertise in areas such as agile development, enterprise mobility and business intelligence. In addition,Thoughtcorp brings significant telecommunications expertise, and is also expected to expand and enhance the Company’s offering within the Banking andFinancial Services and Travel and Consumer verticals.The purchase price was comprised of $7,497 paid in cash and 217,274 shares of common stock with a fair value of $3,607 at the acquisition date.Half of these shares were placed in escrow for a period of 18 months as a security for the indemnification obligations of the sellers under the asset purchaseagreement. Additionally, the Company issued to the sellers 217,272 shares of non-vested (“restricted”) common stock contingent on their continuedemployment with the Company (Note 14). These shares have an estimated value of $3,607 and will be recorded as stock-based compensation expense over anassociated service period of two years. A deferred tax asset has been recognized for the tax effect of the fair value of the portion of the shares that were placed inescrow.The purchase price was allocated to the assets acquired based on their related fair values, as follows: Cash and cash equivalents $1,111 F-15Table of ContentsTrade receivables and other current assets 2,484 Property and equipment 92 Deferred tax asset 1,348 Acquired intangible assets 5,296 Goodwill 2,935 Total assets acquired 13,266 Accounts payable and accrued expenses 461 Assumed shareholder and director loans 1,290 Deferred revenue and other liabilities 411 Total liabilities assumed 2,162 Net assets acquired $11,104 The Company performed a valuation analysis to determine the fair values of certain intangible assets of Thoughtcorp as of the acquisition date. As partof the valuation process, the excess earnings method was used to determine the value of customer relationships. Fair values of trade name and non-competitionagreements were determined using the relief from royalty and discounted earnings methods, respectively. The Company expects approximately $8,310 of taxgoodwill, of which 75% is deductible at 7% per annum on a declining basis.The following table presents the fair values and useful lives of intangible assets acquired: May 23,2012 WeightedAverageUsefulLife (inyears) Customer relationships $2,810 10 Trade names 2,014 5 Non-competition agreements 472 5 Total $5,296 Included in consolidated statements of income for the year ended December 31, 2012 are $7,184 of revenues and $206 of net losses of the acquiree,respectively.Total acquisition-related post-combination compensation expense recognized for the year ended December 31, 2012 was $1,252 and is presented withinselling, general and administrative expenses. Total acquisition-related costs were $420 and are presented within selling, general and administrative expenses forthe year ended December 31, 2012, respectively.Pro forma results of operations for the Thoughtcorp acquisition completed during the year ended December 31, 2012 have not been presented because theeffects of the acquisition, individually and in aggregate with other acquisitions completed by the Company during 2012, were not material to the Company’sconsolidated results of operations.Instant Information, Inc. — On August 20, 2010 EPAM agreed to acquire certain assets and assume certain liabilities of Instant Information, Inc. Theprimary purpose of this acquisition was to acquire skilled workforce and experienced management, the rights to the intellectual property embodied by ourInfoNgen services and cloud deployment capabilities, as well as to strengthen our existing Business Information and Media vertical.The purchase price consisted of $360 cash plus contingent consideration of $1,000 in Company stock subject to accelerated issuance in the event ofcompletion by the Company of an Initial Public Offering during the period specified. Contingent consideration was dependent upon the acquiree’s meetingspecified level of performance over calendar years of 2010-2012. The fair value of the contingent consideration was based on the Company’s probabilityassessment of the established profitability measures and was estimated to be nil as of the December 31, 2011 and 2010. During the first quarter of 2012, theCompany completed an initial public offering of its common stock and issued 53,336 shares to the acquiree pursuant to the accelerated issuance provision.The resultant charge of $640 was recorded within the sales, general and administrative expenses in the consolidated statements of income and comprehensiveincome.Under the acquisition method of accounting the Company has allocated the purchase price to the tangible and intangible assets and liabilities acquiredbased on their fair values. As part of the process, the Company F-16Table of Contentsperformed a valuation analysis to determine the fair values of certain intangible assets of Instant Information, Inc. as of the acquisition date. As part of thevaluation process, relief from royalty method was used to determine the fair value of the trade name of $216. The intangible is being amortized over a 5 yearlife. Goodwill is amortizable over 15 years for tax purposes.The purchase price was allocated to the assets acquired based on their related fair values, as follows: Cash and cash equivalents $11 Restricted cash 107 Trade receivables 273 Prepaid and other assets 53 Property and equipment 113 Software 19 Trade name 216 Goodwill 838 Total assets acquired 1,630 Accounts payable 580 Accrued expenses 186 Deferred revenue 448 Liability under capital leases 36 Other taxes payable 20 Total liabilities assumed 1,270 Net assets acquired $360 The results of Instant Information, Inc. are included in the Company’s consolidated financial statements from August 21, 2010.Included in consolidated statements of income and comprehensive income for the year ended December 31, 2010 are $677 and $873 of revenues and netlosses of the acquiree, respectively.Total acquisition-related costs were $63 and are presented within selling, general and administrative expenses for the year ended December 31, 2010.Pro forma results of operations for the Instant Information, Inc. acquisition completed in 2010 have not been presented because the effects of theacquisition were not material to the Company’s consolidated results of operations. 3.GOODWILL AND INTANGIBLE ASSETS — NETGoodwill by reportable segment was as follows: North America EU Russia Other Total Balance as of January 1, 2011 Goodwill $2,286 $2,864 $3,185 $1,697 $10,032 Accumulated impairment losses — — — — — 2,286 2,864 3,185 1,697 10,032 Goodwill written off — — — (1,697) (1,697) Effect of net foreign currency exchange rate changes — — (166) — (166) Balance as of December 31, 2011 Goodwill 2,286 2,864 3,019 1,697 9,866 Accumulated impairment losses — — — (1,697) (1,697) 2,286 2,864 3,019 — 8,169 Acquisition of Thoughtcorp (Note 2) 2,935 — — — 2,935 Acquisition of Empathy Lab (Note 2) 11,359 — — — 11,359 Effect of net foreign currency exchange rate changes 63 — 172 — 235 F-17Table of Contents North America EU Russia Other Total Balance as of December 31, 2012 Goodwill 16,643 2,864 3,191 1,697 24,395 Accumulated impairment losses — — — (1,697) (1,697) $16,643 $2,864 $3,191 — $22,698 The Company values goodwill at fair value on a non-recurring basis. When testing for impairment, the Company first compares the fair value of itsreporting units to the recorded values. Valuation methods used to determine fair value are based on the analysis of the discounted future cash flows that areporting unit is expected to generate (“Income Approach”). These valuations are considered Level 3 measurements under FASB ASC Topic 820. TheCompany utilizes estimates to determine the fair value of the reporting units such as future cash flows, growth rates, capital requirements, effective tax ratesand projected margins, among other factors. Estimates utilized in the future evaluations of goodwill for impairment could differ from estimates used in thecurrent period calculations. If the carrying amount of the reporting units exceeds its fair value, goodwill is considered potentially impaired and a second step isperformed to measure the amount of impairment loss.As a result of an operating loss in the Other reporting unit for the three months ended June 30, 2011, the Company performed a goodwill impairmenttest. In assessing impairment in accordance with Accounting Standards Codification, (“ASC”) No. 350, “Intangibles-Goodwill and Other,” the Companydetermined that the fair value of the Other reporting unit, based on the total of the expected future discounted cash flows directly related to the reporting unit,was below the carrying value of the reporting unit. The Company completed the second step of the goodwill impairment test, resulting in an impairment chargeof $1,697. The Company completed its annual impairment testing as of December 31, 2012, 2011 and 2010, and found no indication of impairment for itsNorth America, EU, and Russia reporting units.As part of the Thoughtcorp acquisition, substantially all of the employees of the acquiree accepted employment with the Company. The Companybelieves the amount of goodwill resulting from the allocation of purchase price to acquire Thoughtcorp is attributable to the workforce of the acquired business.All of the goodwill was allocated to the Company’s Canadian operations and is presented within North America.As part of the Empathy Lab acquisition, substantially all of the employees of the acquiree accepted employment with the Company. The Companybelieves the amount of goodwill resulting from the allocation of purchase price to acquire Empathy Lab is attributable to the workforce of the acquiredbusiness. All of the goodwill was allocated to the Company’s U.S. operations and is presented within North America.Components of intangible assets were as follows: 2012 Weightedaverage life atacquisition Grosscarryingamount Accumulatedamortization Net carryingamount Client relationships 9 years $13,724 $(3,640) $10,084 Trade name 5 years 6,372 (439) 5,933 Non-competition agreements 5 years 881 (64) 817 Total $20,977 $(4,143) $16,834 2011 Weightedaverage life atacquisition Grosscarryingamount Accumulatedamortization Net carryingamount Client relationships 5 years $3,918 $(2,976) $942 Trade name 8 years 415 (106) 309 Total $ 4,333 $(3,082) $ 1,251 All of the intangible assets have finite lives and as such are subject to amortization. Amortization of intangibles for the years ended December 31 ispresented in the table below: F-18Table of Contents 2012 2011 2010 Client relationships $627 $720 $871 Trade name 333 59 19 Non-competition agreements 64 — — Developed technology — — 109 Total $1,024 $779 $999 Estimated amortization expenses of the Company’s existing intangible assets for the next five years are as follows: Year Ending December 31, Amount 2013 $2,811 2014 2,538 2015 2,412 2016 2,385 2017 1,947 Thereafter 4,741 Total $16,834 4.RESTRICTED CASH AND TIME DEPOSITSRestricted cash and time deposits consist of the following: 2012 2011 Time deposits $1,006 $— Short-term security deposits under client contracts 660 — Long-term security deposits under client contracts — 2,082 Long-term deposits under employee loan programs 360 393 Long-term deposits under operating leases 107 107 Total $2,133 $2,582 Included in time deposits as of December 31, 2012, was a bank deposit of $1,006 with remaining maturity of nine months from the reporting datewhich earned an interest rate of 2.95%. The Company doesn’t intend to withdraw the deposit prior to its maturity.At December 31, 2012 and 2011 short-term and long-term security deposits under client contracts included fixed amounts placed in respect of letters ofcredit and a bank guarantee intended to secure appropriate performance under respective contracts. The Company estimates the probability of non-performanceunder the contracts as remote, therefore, no provision for losses has been created in respect of these amounts as of December 31, 2012 and 2011.Also included in restricted cash as of December 31, 2012 and 2011 were deposits of $360 and $393, respectively, placed in connection with certainemployee loan programs (See Note 17). 5.PREPAID AND OTHER CURRENT ASSETSPrepaid and other current assets consist of the following: 2012 2011 Prepaid expenses $3,825 $2,424 Taxes receivable 4,522 783 Prepaid equipment 1,695 — Security deposits under operating leases 837 783 Unamortized software licenses and subscriptions 616 1,076 Employee loans 429 503 Due from employees 104 193 Tender guarantee deposit — 422 Other 236 252 F-19Table of Contents 2011 2011 Total $12,264 $6,436 6.PROPERTY AND EQUIPMENT — NETProperty and equipment consists of the following: Useful Life 2012 2011 Computer hardware 3 years $24,239 $19,145 Leasehold improvements 9 years 5,527 4,107 Purchased computer software 3 years 4,452 2,653 Furniture and fixtures 7 years 4,351 3,789 Office equipment 7 years 4,325 3,646 Building 50 years 16,534 16,534 Construction in progress (Note 17) n/a 15,561 1,545 74,989 51,419 Less accumulated depreciation and amortization (21,854) (15,937) Total $53,135 $35,482 Depreciation and amortization expense related to property and equipment was $9,858, $6,759 and $5,243 for the years ended December 31, 2012,2011 and 2010, respectively. 7.LONG-TERM DEBTRevolving Line of Credit — In November 2006, the Company entered into a revolving credit loan and security agreement (collectively “Credit Facility”or “Facility”) with a bank (the “Bank”). The Credit Facility is comprised of a five year revolving line of credit pursuant to which the Company can borrowup to $7,000 at any point in time based on borrowing availability, as defined, at LIBOR plus 1.25%. On July 25, 2011, the Company and the Bank agreedto amend the Facility to increase the borrowing capacity to $30,000. As of December 31, 2012 and 2011, the borrowing capacity was $28,124 and $30,000,respectively. The maximum borrowing availability under the Facility is based upon a percentage of eligible accounts receivable and US cash. The facilityexpires on October 15, 2013 (Note 18).The Facility is collateralized by 85% of US trade receivables, as defined, and US cash representing the lesser of (a) available cash on hand, and(b) $10,000, $5,000 and $0 for the periods ended December 31, 2011 and 2012, and October 15, 2013, respectively. The Facility contains affirmative andnegative covenants, including financial and coverage ratios. As of December 31, 2012 and 2011, the Company had no outstanding borrowing under thefacility and was in compliance with all debt covenants as of that date (Note 18). 8.ACCRUED EXPENSES AND OTHER LIABILITIESAccrued expenses consist of the following: 2012 2011 Compensation $15,450 $17,768 Subcontractor costs 1,915 4,635 Professional fees 544 611 Facilities costs 297 189 Stock issue costs — 411 Other 1,608 1,168 Total $19,814 $24,782 9.TAXES PAYABLETaxes payable consist of the following: F-20Table of Contents 2012 2011 Corporate profit tax $3,315 $1,918 Value added taxes 6,274 4,586 Payroll taxes and social security 4,968 2,208 Total $14,557 $8,712 10.INCOME TAXESIncome before provision for income taxes shown below is based on the geographic location to which such income is attributed for years endedDecember 31: 2012 2011 2010 Income before income tax expense: Domestic $9,291 $2,872 $809 Foreign 56,572 49,920 30,286 Total $65,863 $52,792 $31,095 Income tax expense (benefit) consists of: Current Federal $6,881 $4,878 $2,918 State 319 389 160 Foreign 7,969 2,483 2,573 Deferred Federal (625) (1,629) (1,016) State 24 (72) (76) Foreign (3,189) 2,390 (1,772) Total $11,379 $8,439 $2,787 Deferred tax assets and liabilities are provided for the effects of temporary differences between the tax basis of an asset and liability and its reportedamount in the consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.The components of the Company’s deferred tax assets and liabilities are as follows: 2012 2011 Deferred tax assets: Fixed assets $703 $771 Intangible assets 4,737 514 Accrued expenses 4,042 2,412 Net operating loss carryforward — 18 Deferred revenue 1,583 1,847 Stock-based compensation 413 1,226 Valuation allowance (489) — Restricted stock options 1,616 500 Other assets 1,214 862 Deferred tax assets 13,819 8,150 Deferred tax liabilities: Fixed assets 742 774 Accrued revenue and expenses 737 2,453 Deferred intercompany gain 405 663 Equity compensation 2,431 — Other liabilities — 20 Deferred tax liability 4,315 3,910 Net deferred tax asset $9,504 $4,240 F-21Table of ContentsAt December 31, 2012, the Company had current and non-current deferred tax assets of $6,593 and $6,093, respectively, and current and non-currenttax liabilities of $491 and $2,691, respectively. At December 31, 2011, the Company had current and non-current deferred tax assets of $4,384 and $1,875,respectively and current and non-current tax liabilities of $1,736 and $283, respectively.Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existingdeferred tax assets. A significant piece of objective negative evidence evaluated was the amount of tax holiday the company can use in Hungary before the creditexpires that jurisdiction in 2015. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.On the basis of this evaluation, as of December 31, 2012, a valuation allowance of $489 has been recorded to record only the portion of the deferred taxasset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of futuretaxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer presentand additional weight may be given to subjective evidence such as our projections for growth.At December 31, 2012, the Company had utilized all of its federal net operating losses.No provision has been made for U.S. or non-U.S. income taxes on the undistributed earnings of subsidiaries or for unrecognized deferred tax liabilitiesfor temporary differences related to basis differences in investments in subsidiaries, as such earnings are expected to be permanently reinvested, theinvestments are essentially permanent in duration, or the Company has concluded that no additional tax liability will arise as a result of the distribution ofsuch earnings. As of December 31, 2012, certain subsidiaries had approximately $188.7 million of undistributed earnings that we intend to permanentlyreinvest. A liability could arise if our intention to permanently reinvest such earnings were to change and amounts are distributed by such subsidiaries or ifsuch subsidiaries are ultimately disposed. It is not practicable to estimate the additional income taxes related to permanently reinvested earnings or the basisdifferences related to investments in subsidiaries.The provision for income taxes differs from the amount of income tax determined by applying the applicable US statutory federal income tax rate topretax income as follows: 2012 2011 2010 Statutory federal tax $22,393 $18,482 $10,572 Increase (decrease) in taxes resulting from: State taxes, net of federal benefit 280 266 216 Provision adjustment for current year uncertain tax position — 178 — Effect of permanent differences 2,177 2,816 1,957 Stock compensation 1,165 — — Rate differential between U.S. and foreign (14,472) (13,297) (9,947) Change in foreign tax rate 148 (22) 101 Change in valuation allowance (489) — — Other 177 16 (112) Income tax expense $11,379 $8,439 $2,787 The growth in the permanent differences in the year ended December 31, 2012 related to increases in non-deductible expenses incurred by foreignsubsidiaries. The growth in the permanent differences in the year ended December 31, 2011 related to goodwill impairment loss and increases in non-deductible expenses incurred by foreign subsidiaries.On September 22, 2005, the president of Belarus signed the decree “On the High-Technologies Park” (the “Decree”). The Decree is aimed at boosting thecountry’s high-technology sector. The Decree stipulates that member technology companies have a 100% exemption from Belarusian income tax of 18%effective July 1, 2006. The Decree is in effect for a period of 15 years from date of signing.The Company’s subsidiary in Hungary benefits from a tax credit of 10% of annual qualified salaries, taken over a four-year period, for up to 70% ofthe total tax due for that period. The Company has been able to take the full 70% credit for 2008 - 2012. The Hungarian tax authorities repealed the tax creditbeginning with 2012. Credits earned in years prior to 2012, will be allowed until fully utilized. The Company anticipates full utilization up to the 70% limituntil 2014, with full phase out in 2015.The aggregate dollar benefits derived from these tax holidays approximated $8.5 million, $21.0 million and $9.0 million for the years endedDecember 31, 2012, 2011 and 2010, respectively. The decrease in aggregate dollar benefits derived from these tax holidays in 2012, as compared to 2011, wasprimarily due to a decrease in statutory tax rate in Belarus. The benefit the tax holiday had on diluted net income per share approximated $0.19, $0.49 and$0.22 for the years ended December 31, 2012, 2011 and 2010, respectively.The liability for unrecognized tax benefits is included in income tax liability within the consolidated balance sheets at December 31, 2012 and 2011. AtDecember 31, 2012 and 2011, the total amount of gross unrecognized tax benefits (excluding the federal benefit received from state tax positions) was $1,271and $1,271, respectively, (excluding penalties and interest of $125 and $55, respectively). Of this total, $1,354 and $1,266, respectively, (net of the federalbenefit on state tax issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods. F-22Table of ContentsThe Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of its provision for income taxes. The totalamount of accrued interest and penalties resulting from such unrecognized tax benefits was $125, $55 and $3 at December 31, 2012, 2011 and 2010,respectively.The beginning to ending reconciliation of the gross unrecognized tax benefits are as follows: 2012 2011 2010 Gross Balance at January 1 $1,271 $56 $274 Increases in tax positions in current year — 178 — Increases in tax positions in prior year — 1,093 — Decreases due to settlement — (56) (218) Balance at December 31 $1,271 $1,271 $56 There are no tax positions for which it is reasonably possible that unrecognized tax benefits will significantly increase or decrease within 12 months ofthe reporting date.The Company files income tax returns in the United States and in various states, local and foreign jurisdictions. The Company’s significant taxjurisdictions are the U.S. Federal, Pennsylvania, Canada, Russia, Denmark, Germany, Ukraine, the United Kingdom, Hungary, Switzerland andKazakhstan. The tax years subsequent to 2009 remain open to examination by the Internal Revenue Service. Generally, the tax years subsequent to 2009remain open to examination by various state and local taxing authorities and various foreign taxing authorities. 11.FAIR VALUE MEASUREMENTSThe Company accounts for certain assets and liabilities at fair value. The authoritative guidance defines fair value as the exit price, or the amount thatwould be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Theauthoritative guidance also establishes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and relateddisclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable.Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sourceswhile unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions.The following table represents the Company’s fair value hierarchy for its financial assets and liabilities as of December 31 2012, and 2011. Fair Value Measurements at December 31, 2012Using Level 1 Level 2 Level 3 Cash and cash equivalents 118,112 — — Time deposits and restricted cash — 2,133 — Employee loans — — 429 Total $118,112 $2,133 $429 Fair Value Measurements at December 31, 2011Using Level 1 Level 2 Level 3 Cash and cash equivalents 88,796 — — Time deposits and restricted cash — 2,582 — Employee loans — — 503 Total $ 88,796 $2,582 $503 Cash and Cash Equivalents — are considered Level 1 measurements. For short-term financial assets such as cash and cash equivalents, thecarrying amount is a reasonable estimate of fair value due to the relatively short time between the origination of the instrument and its expected realization. F-23Table of ContentsRestricted cash and time deposits — are considered Level 2 measurements. Fair values of Level 2 measurements are determined by analyzing quotedprices for similar assets in an active market, quoted prices for identical or similar assets in markets that are not active, inputs other than quoted prices that areobservable and market-corroborated inputs which are derived principally from or corroborated by observable market data. The carrying values of restrictedcash and time deposits approximated their fair values as of December 31, 2012, and December 31, 2011.Employee loans — are primarily comprised of short-term non-interest bearing relocation loans and are considered Level 3 measurements. TheComapny’s Level 3, unobservable inputs reflect its assumptions about the factors that market participants use in pricing similar receivables, and are based onthe best information available in the circumstances. Due to a short-term nature of employee loans, the carrying amount is a reasonable estimate of fair valuedue to the relatively short time between the origination of the instrument and its expected realization. During the years ended December 31, 2012 and 2011, theCompany issued a total of $566 and $443 of loans to its employees, respectively, and received $640 and $372 in loan repayments during the same periods,respectively.During the years ended December 31, 2012 and 2011, there were no transfers amongst Level 1, Level 2, or Level 3 financial assets and liabilities. 12.OPERATING SEGMENTSThe Company’s reportable segments are: North America, Europe, Russia and Other. This determination is based on the unique business practices andmarket specifics of each region and that each region engages in business activities from which it earns revenues and incurs expenses. The Company’sreportable segments are based on the allocation of managerial responsibility for its client base. Because managerial responsibility for a particular clientrelationship generally correlates with the client’s geographic location, there is a high degree of similarity between client locations and the geographic boundariesof the Company’s reportable segments. In some specific cases, however, managerial responsibility for a particular client is assigned to a management team inanother region, usually based on the strength of the relationship between client executives and particular members of EPAM’s senior management team. In acase like this, the client’s activity would be reported through the management team’s reportable segment.The Company’s Chief Operating Decision Maker (CODM) evaluates its performance and allocates resources based on segment revenues and operatingprofit. Segment operating profit is defined as income from operations before unallocated costs. Generally, operating expenses for each operating segment havesimilar characteristics and are subject to similar factors, pressures and challenges. Expenses included in segment operating profit consist principally of directselling and delivery costs as well as an allocation of certain shared services expenses. Certain expenses are not specifically allocated to specific segments asmanagement does not believe it is practical to allocate such costs to individual segments because they are not directly attributable to any specific segment.Further, stock based compensation expense is not allocated to individual segments in internal management reports used by the CODM. Accordingly, theseexpenses are separately disclosed as “unallocated” and adjusted only against the Company’s total income from operations.Revenues from external clients and segment operating profit, before unallocated expenses, for the North America, Europe, Russia and Other reportablesegments were as follows for the years ended December 31: 2012 2011 2010 Total segment revenues: North America $197,271 $151,707 $110,179 Europe 168,913 123,510 68,420 Russia 50,552 46,219 31,388 Other 16,986 12,851 11,522 Total segment revenues $433,722 $334,287 $221,509 Segment operating profit: North America $38,671 $33,744 $28,496 Europe 32,750 25,098 15,057 Russia 9,049 10,445 3,119 Other 6,985 2,416 1,414 Total segment operating profit $87,455 $71,703 $48,086 Intersegment transactions were excluded from the above on the basis they are neither included into the measure of a segment’s profit and loss by the chiefoperating decision maker, nor provided to the chief operating decision maker on a regular basis.Reconciliation of reportable segment revenues and operating profit to the consolidated income from operations for the years ended December 31 ispresented below: F-24Table of Contents 2012 2011 2010 Total segment revenues $433,722 $334,287 $221,509 Unallocated revenue 77 241 315 Revenues $433,799 $334,528 $221,824 2012 2011 2010 Total segment operating profit $ 87,455 $ 71,703 $ 48,086 Unallocated Amounts: Other revenue 77 241 315 Stock-based compensation expense (6,826) (2,866) (2,939) Stock charge (Note 2) (640) — — Non-corporate taxes (2,346) (2,722) (2,344) Professional fees (2,850) (2,802) (1,229) Depreciation and amortization (1,100) (810) (1,021) Bank charges (1,136) (793) (548) Goodwill impairment loss (Note 3) — (1,697) — Legal settlement — — (2,608) Provision for bad debts — — (265) Other corporate expenses (6,628) (5,246) (4,657) Income from operations 66,006 55,008 32,790 Interest and other income, net 1,941 1,422 486 Foreign exchange loss (2,084) (3,638) (2,181) Income before provision for income taxes $65,863 $52,792 $31,095 Geographic Area InformationManagement has determined that it is not practical to allocate identifiable assets by segment since such assets are used interchangeably amongst thesegments. Geographical information about the Company’s long-lived assets is based on physical location of the assets at the end of each of the years endedDecember 31: As of December 31,2012 As of December 31,2011 Belarus $40,095 $26,001 Ukraine 5,357 4,314 Russia 3,234 2,011 United States 2,048 1,445 Hungary 1,744 1,108 Other 657 603 Total $53,135 $35,482 Long-lived assets include property and equipment, net of accumulated depreciation and amortization.Information about the Company’s revenues by client location for each of the three years ended December 31 was as follows: 2012 2011 2010 United States $197,593 $163,068 $117,027 United Kingdom 98,346 70,989 32,584 Russia 47,507 43,799 31,488 Switzerland 30,120 15,870 9,751 Germany 16,391 7,909 7,239 Kazakhstan 11,352 8,845 7,480 Canada 9,256 2,058 — Sweden 4,913 5,292 3,034 Ukraine 4,733 891 924 Netherlands 3,127 4,031 5,399 Other locations 4,044 5,600 3,125 Reimbursable expenses and other revenues 6,417 6,176 3,773 Revenues $433,799 $334,528 $221,824 F-25Table of ContentsService Offering InformationInformation about the Company’s revenues by service offering for each of the three years ended December 31 is as follows: Year Ended December 31, 2012 2011 2010 Software development $290,139 $219,211 $149,658 Application testing services 85,849 67,840 44,459 Application maintenance and support 36,056 29,287 19,262 Infrastructure services 12,424 8,488 2,823 Licensing 2,914 3,526 1,849 Reimbursable expenses and other revenues 6,417 6,176 3,773 Revenues $433,799 $334,528 $221,824 13.COMMON AND PREFERRED STOCKOn January 19, 2012, the Company effected an 8-to-1 stock split of the Company’s common stock, on which date the number of authorized commonand preferred stock was increased to 160,000,000 and 40,000,000 shares, respectively. All shares of common stock, options to purchase common stock andper share information presented in the consolidated financial statements have been adjusted to reflect the stock split on a retroactive basis for all periodspresented. There was no change in the par value of the Company’s common stock. The ratio by which the then outstanding shares of Series A-1 Preferred,Series A-2 Preferred and Series A-3 Preferred Stock were convertible into shares of common stock was adjusted to reflect the effects of the common stock split,such that each share of preferred stock was convertible into eight shares of common stock.In February 2012, the Company completed an initial public offering of 6,900,000 shares of its common stock, which included 900,000 shares ofcommon stock sold by the Company pursuant to an over-allotment option granted to the underwriters, which were sold at a price to the public of $12.00 pershare. The offering commenced on February 7, 2012 and closed on February 13, 2012. Of the 6,900,000 shares of common stock sold, the Company issuedand sold 2,900,000 shares of common stock and its selling stockholders sold 4,000,000 shares of common stock, resulting in gross proceeds to the Companyof $34,800 and $28,969 in net proceeds after deducting underwriting discounts and commissions of $2,436 and offering expenses of $3,395. TheCompany did not receive any proceeds from the sale of common stock by the selling stockholders.On August 20, 2010, the Company entered into an agreement with Instant Information Inc. to issue shares of common stock to Instant Information Inc.as consideration for the acquisition of the assets of Instant Information Inc. subject to achievement of certain financial milestones or upon completion of aninitial public offering by the Company. A total of 53,336 shares of common stock were issued to Instant Information Inc. upon completion of the Company’sinitial public offering for an aggregate value of $640, which was expensed during the first quarter of 2012 (Note 2).Upon the closing of the initial public offering, all outstanding Series-A1 and Series-A2 convertible redeemable preferred stock, and Series A3 convertiblepreferred stock were converted into a total of 21,840,128 shares of common stock, as shown in the table below. ConversionShares Series A-1 Convertible Redeemable Preferred Stock 16,439,480 Series A-2 Convertible Redeemable Preferred Stock 3,078,432 Series A-3 Convertible Preferred Stock 2,322,216 Total 21,840,128 Series A-1 Convertible Redeemable Preferred Stock (“Series A-1 Preferred”) — On January 20, 2006, Siguler Guff LLC, a New York basedprivate equity investment firm, acting through its affiliated F-26Table of Contentsinvestment funds Russia Partners II LP (RPII) and Russia Partners EPAM Fund LP (RPE), purchased 657,354 shares of Series A-1 Preferred at $12.17 pershare or $8,000. At the same time, RPII and RPE also acquired 11,180,648 shares of the Company’s common stock from existing holders, and the Companyenabled RPII and RPE to convert such shares into 1,397,581 shares of Series A-1 Preferred. The difference between the share price of the Series A-1 Preferred($12.17 per share) and the common stock ($1.13 per share) exchanged of $6,803 has been recorded as a deemed dividend. The Company accreted the 12.5%compounded annual rate of return through April 15, 2010, in accordance with the redemption provision as detailed below. Annual accretion was $0, $0 and$1,432 for the years ended December 31, 2012, 2011 and 2010, respectively. The ending redemption value was $41,245 at December 31, 2011 and 2010.The terms of the Series A-1 Preferred were as follows:Dividends — No dividends will be paid on the Series A-1 Preferred unless dividends are paid on common stock.Liquidation — Before any payment to the common stockholders, the Series A-1 Preferred will receive their purchase price of the Series A-1 Preferred($12.17 per share) plus a 12.5% compounded annual rate of return on the purchase price.If the assets distributable to the holders of the Series A Preferred upon a liquidation are insufficient to pay the full Series A-1, A-2 and A-3 Preferredliquidation amounts, then such assets or the proceeds shall be distributed among the holders of the Series A-1, A-2 and A-3 Preferred ratably in proportion tothe respective amount to which they otherwise would be entitled.The liquidation amount is equal to the carrying value for all periods presented.Redemption — At any time after January 1, 2011, if the Company has not affected a qualified public offering, as defined, the holders of at least amajority of the then outstanding shares of Series A-1 Preferred, voting together as a separate class, may by written request, require the Company to redeem allor any number of shares of the Series A-1 Preferred in four equal semi-annual installments beginning thirty calendar days from the date of the redemptionelection and ending on the date one and one-half years after such date. The Company shall affect such redemptions on the applicable redemption date bypaying in cash in exchange for each share of Series A-1 Preferred to be redeemed then outstanding an amount equal to the Series A-1 Preferred liquidationamount ($12.17 per share plus a 12.5% compounded annual rate of return) on such redemption date.Pursuant to section 6.8 of the Series A-3 convertible preferred stock purchase agreement, the 12.5% compounded annual return related to the Series A-1Preferred, which has been part of the Series A-1 liquidation amount, ceases after the date of issuance of the Series A-3 Preferred. EPAM terminated the accretionrelated to this liquidation amount on or about April 15, 2010.Voting — Each holder of a share of Series A-1 Preferred shall be entitled to voting rights and powers equal to the voting rights and powers of thecommon stock (except as otherwise expressly provided or as required by law) voting together with the common stock as a single class on an as-converted tocommon stock basis. Each share of Series A-1 Preferred (including fractional shares) shall be entitled to one vote for each whole share of common stock thatwould be issuable upon conversion of such shares on the record date for determining eligibility to participate in the action being taken.Conversion Rights — Any holder of Series A-1 Preferred may convert any share of Series A-1 Preferred held by such holder into a number of shares ofcommon stock determined by dividing (i) the Series A-1 Preferred purchase price ($12.17 per share) by (ii) the Series A-1 conversion price then in effect. Theinitial conversion price for the Series A-1 Preferred (the “Series A-1 Conversion Price”) shall be equal to the purchase price ($12.17 per share). The Series A-1Conversion Price from time to time in effect is subject to adjustment, as defined. Each share of Series A-1 Preferred shall automatically be converted intoshares of common stock at the then effective applicable Series A-1 Conversion Price upon the earliest of (i) the date specified by vote or written consent oragreement of holders of at least a majority of the shares of Series A-1 Preferred then outstanding, (ii) effective immediately before a qualified public offering, asdefined, or (iii) effective upon the closing of a liquidation or a reorganization event, as defined, that results in the receipt of a per share amount of cashproceeds or non-cash property valued equal to or greater than the Series A-1 Preferred liquidation amount, as defined.Series A-2 Convertible Redeemable Preferred Stock (“Series A-2 Preferred”) — On February 19, 2008, the Company completed a privateplacement and raised net proceeds of $47,601 ($50,000 gross less $2,399 costs) from the sale of 675,081 shares of Series A-2 Preferred at a sale price of$74.07 per share. Annual F-27Table of Contentsaccretion was $0, $17,563 and $0 for the years ended December 31, 2012, 2011 and 2010, respectively. The ending carrying value was $0, $44,695 and$27,132 at December 31, 2012, 2011 and 2010, respectively.In connection with this private placement, the Company designated the Series A-2 Preferred as a new series of preferred stock and renamed the existingseries of shares of Series A preferred stock as Series A-1 Preferred.On January 19, 2010, the Company entered into a stock repurchase agreement with certain stockholders to repurchase 290,277 of Series A-2Convertible Redeemable Preferred Stock at a per share price of $51.85 for a total consideration of $15,050. On November 10, 2010, Board of Directors of theCompany voted to retire these shares.The Series A-2 Preferred shares had the following rights and preferences:Dividends — No dividends will be paid on the Series A-2 Preferred unless dividends are paid on common stock.Liquidation — Before any payment to the common stockholders, the Series A-2 Preferred holders will receive their liquidation preference.In the event of any liquidation that values 100% of the equity securities of the Company on a fully-diluted basis at an amount that is less than the SeriesA-2 post-money valuation, as defined, the holders of shares of Series A-2 Preferred shall be entitled to receive either their per share purchase price of the SeriesA-2 Preferred ($74.07) plus a 12.5% compounded annual rate of return if the purchase price is less than the percentage ceiling amount, defined for purposesof liquidation as 17.1% of cash proceeds or non-cash property received by the Company in the event of any liquidation, or the greater of (1) $74.07 per shareand (2) the percentage ceiling amount.In the event of liquidation that values 100% of the equity securities of the Company on a fully-diluted basis at an amount that is equal to or greater thanthe Series A-2 post-money valuation, as defined, the holders of shares of Series A-2 Preferred shall be entitled to receive either their per share purchase price ofthe Series A-2 Preferred ($74.07) plus a 12.5% to 18% compounded annual rate of return on the purchase price, if greater than the percentage ceiling amount,or the percentage ceiling amount.If the assets distributable to the holders of the Series A Preferred upon a liquidation are insufficient to pay the full Series A-1, A-2 and A-3 Preferredliquidation amounts, then such assets or the proceeds shall be distributed among the holders of the Series A-1, A-2 and A-3 Preferred ratably in proportion tothe respective amount to which they otherwise would be entitled.Redemption — At any time before January 1, 2011, if the Company has not effected a qualified public offering, as defined, the holders of at least amajority of the then outstanding shares of Series A-2 Preferred, may, by written request, require the Company to redeem all or any number of shares of theSeries A-2 Preferred in three equal installments payable no later than the 12th, 18th and 24th month following the date of the redemption election. TheCompany shall effect such redemptions on the applicable redemption date by paying in cash in exchange for each shares of Series A-2 Preferred to be redeemedthen outstanding, a per share amount equal to the lesser of (x) an amount that would provide a compounded annual return of 12.5% from the date of initialissuance date and (y) the percentage ceiling amount. At any time on or after January 1, 2011, the redemption per share amount is equal to the lesser of (x) thehurdle amount, an amount that would provide an annual IRR, as defined, from the initial issuance date of such share of at least 17%, provided, however, thatthe hurdle amount, as defined, shall cease to compound after December 31, 2010 and (y) the percentage ceiling amount, as defined. The percentage ceilingamount means, initially, 17.1% and thereafter adjusted pro rata for any changes in the percentage of capital stock of the Company owned by the holders ofshares of Series A-2 Preferred (on a fully diluted basis) multiplied by the aggregate value of all Common Stock (assuming conversion of the Series A Preferred)as reasonably determined by the Board in good faith.Voting — Each holder of a Series A-2 Preferred shall be entitled to voting rights and powers equal to the voting rights and powers of common stock(except as otherwise expressly provided or as required by law) voting together with the common stock as a single class on an as-converted to common stockbasis. Each share of Series A-2 Preferred (including fractional shares) shall be entitled to one vote for each whole share of common stock that would beissuable upon conversion of such shares on the record date for determining eligibility to participate in the action being taken. F-28Table of ContentsConversion rights — Any holder of Series A-2 Preferred may convert any share of Series A-2 Preferred held by such holder into a number of shares ofcommon stock determined by dividing (i) the Series A-2 Preferred purchase price ($74.07 per share) by (ii) the Series A-2 conversion price then in effect. Theinitial conversion price for the Series A-2 Preferred (the “Series A-2 Conversion Price”) shall be equal to the purchase price ($74.07 per share). The Series A-2Conversion Price from time in effect is subject to adjustment, as defined. Each share of Series A-2 Preferred shall automatically be converted into shares ofcommon stock at the then effective applicable Series A-2 Conversion Price upon the earliest of (i) the date specified by vote or written consent or agreement ofholders of at least a majority of the shares of Series A-2 Preferred then outstanding, (ii) effective immediately before a qualified public offering, as defined. or(iii) effective upon the closing of a liquidation or a reorganization event, as defined, that results in the receipt per share of amount of cash proceeds or non-cashproperty valued equal to or greater than, the lesser of (x) their purchase price of the Series A-2 Preferred ($74.07 per share) plus a 12.5% compounded annualrate of return on the purchase price and (y) the percentage ceiling amount, as defined.Registration Rights — The holders of at least majority of the Series A-2 Preferred holders, may, by written request, require the Company to file aregistration statement with certain limitations.Series A-3 Convertible Preferred Stock (“Series A-3 Preferred”) — On April 15, 2010, the Company created and issued 290,277 shares of SeriesA-3 Preferred at $51.85 per share, for a total consideration of $14,971, net of costs.The Series A-3 Preferred had the following rights and preferences:Dividends — No dividends will be paid on the Series A-3 Preferred unless dividends are paid on common stock.Liquidation — Before any payment to the common stockholders, the Series A-3 Preferred holders will receive their liquidation preference.In the event of liquidation that values 100% of the equity securities of the Company on a fully-diluted basis at an amount that is equal to or greater thanthe Series A-3 liquidation amount, as defined, the holders of shares of Series A-3 Preferred shall be entitled to receive their pro rata portion based on the pershare amount available to common stockholders.If the assets distributable to the holders of the Series A Preferred upon a liquidation are insufficient to pay the full Series A-1, A-2 and A-3 Preferredliquidation amounts, then such assets or the proceeds shall be distributed among the holders of the Series A-1, A-2 and A-3 Preferred ratably in proportion tothe respective amount to which they otherwise would be entitled.The liquidation amount is equal to the carrying value for all periods presented.Voting — Each holder of a Series A-3 Preferred shall be entitled to voting rights and powers equal to the voting rights and powers of common stock(except as otherwise expressly provided or as required by law) voting together with the common stock as a single class on an as-converted to common stockbasis. Each share of Series A-3 Preferred (including fractional shares) shall be entitled to one vote for each whole share of common stock that would beissuable upon conversion of such shares on the record date for determining eligibility to participate in the action being taken.Conversion rights — Any holder of Series A-3 Preferred may convert any share of Series A-3 Preferred held by such holder into a number of shares ofcommon stock determined by dividing (i) the Series A-3 Preferred purchase price ($51.85 per share) by (ii) the Series A-3 conversion price then in effect. Theinitial conversion price for the Series A-3 Preferred (the “Series A-3 Conversion Price”) shall be equal to the purchase price ($51.85 per share). The Series A-3Conversion Price from time in effect is subject to adjustment, as defined. Each share of Series A-3 Preferred shall automatically be converted into shares ofcommon stock at the then effective applicable Series A-3 Conversion Price upon the earliest of (i) the date specified by vote or written consent or agreement ofholders of at least a majority of the shares of Series A-3 Preferred then outstanding, (ii) effective immediately before a qualified public offering, as defined, or(iii) effective upon the closing of a liquidation or a reorganization event, as defined.Registration Rights — The holders of at least a majority of the Series A-3 Preferred holders, may, by written request, require the Company to file aregistration statement with certain limitations. F-29Table of ContentsPuttable Stock — As part of consideration paid in business combinations, the Company issued common stock to certain stockholders of the acquiredcompanies. The shares had an attached Put Option that provided the holders with the right to put the shares at the original per share value in the event theCompany did not have a qualified public offering or reorganization event within a specified period from the acquisition date. The Company issued 0 sharesfor the years ended December 31, 2012 and 2011, and 44,304 shares for the year ended December 31, 2010, respectively. During 2011, put options in respectof 56,896 of puttable common stock expired unexecuted.During 2010, the Company purchased 114,432 shares of puttable common stock, at a cost of $932, in connection with the execution of a stockholderput option.Treasury Stock — On December 18, 2012, the Company used treasury stock to issue a total of 326,344 shares of common stock in connection withthe acquisition of Empathy Lab. On May 25, 2012, the Company used treasury stock to issue a total of 434,546 shares of common stock in connection withthe acquisition of Thoughtcorp, Inc. (Note 2).In May 2012, Board of Directors of the Company voted to retire 38,792 shares of its treasury stock. 14.STOCK COMPENSATIONThe following costs related to the Company’s stock compensation plans are included in the consolidated statements of income and comprehensiveincome: 2012 2011 2010 Cost of revenues $2,809 $1,365 $1,314 Selling, general and administrative 4,017 1,501 1,625 Total $6,826 $2,866 $2,939 On January 16, 2012, the Company issued 194,800 shares of non-vested (“restricted”) common stock to Mr. Robb, President of EU Operations andExecutive Vice President. These restricted shares vested 25% on January 16, 2012, and are scheduled to vest 25% on each of January 1, 2013, 2014, and2015. On termination of Mr. Robb’s service to the Company with Cause or without Good Reason (in each case, as defined in the award agreement), anyunvested restricted shares will be forfeited. In addition, under the restricted stock award agreement, Mr. Robb is subject to perpetual confidentiality and non-disclosure obligations as well as non- competition and employee and customer non-solicitation obligations that survive for a period of 12 months after thetermination of his service to the Company. Fair market value of these restricted shares on the date of grant was $2,338. The stock-based compensation chargerelated to the shares granted for the year ended December 31, 2012, was $1,169.On May 25, 2012, the Company issued 217,272 shares of non-vested stock (“restricted”) common stock in connection with the acquisition ofThoughtcorp (Note 2). The shares vest 50% on each of the first and second anniversaries of the Closing Date. Upon termination of the Sellers’ services to theCompany with Cause or without Good Reason (in each case, as defined in the escrow agreement), any unvested shares will be forfeited. Fair value of theseshares on the date of grant was $3,607. The stock-based compensation charge related to the shares granted for the year ended December 31, 2012, was$1,096.On December 18, 2012, the Company issued 326,344 shares of non-vested (“restricted”) common stock in connection with the acquisition of EmpathyLab (Note 2). The shares vest 33.33% on each of the first, second and third anniversaries of the Closing Date. Upon termination of the recipients’ services tothe Company with Cause or without Good Reason (in each case, as defined in the escrow agreement), any unvested shares will be forfeited. Fair value of theseshares on the date of grant was $6,755. The stock-based compensation charge related to the shares granted for the year ended December 31, 2012, was $79.2012 Non-Employee Directors Compensation Plan — On January 11, 2012 the Company approved the 2012 Non-Employee DirectorsCompensation Plan (“2012 Directors Plan”), which will be used to issue equity grants to its non-employee directors. The Company authorized 600,000 sharesof common stock to be reserved for issuance under the plan. The 2012 Directors Plan will expire after ten years and will be administered by the Company’sboard of directors. F-30Table of ContentsOn January 18, 2012, the Company issued 11,764 shares of non-vested (“restricted”) common stock to its non-employee directors under the 2012Directors Plan. The shares will vest and become non-forfeitable 25% on each of the first four anniversaries of the grant date. On termination of service fromthe Board at any time, a portion of restricted shares shall vest as of the date of such termination on a pro rata basis, determined by the number of days that theparticipant served on the Board from the grant date through the date of such termination. Fair market value of these restricted shares on the date of grant was$141. The stock-based compensation charge related to the shares granted for the year ended December 31, 2012, was $34.On April 5, 2012, the Company granted 7,092 shares of non-vested (“restricted”) stock to its non-employee directors under the 2012 Non-EmployeeDirector Compensation Plan. The restricted stock vests and becomes 100% non-forfeitable on the first anniversary of the grant date. Upon termination ofservice from the Board at any time, a portion of the restricted stock shall vest as of the date of such termination on a pro rata basis for the number of days thatthe participant served on the Board from the grant date through the date of such termination. The fair market value of the restricted stock on date of grant was$150. The stock-based compensation charge related to the shares granted for the year ended December 31, 2012, was $111.2012 Long-Term Incentive Plan — On January 11, 2012 the Company approved the 2012 Long-Term Incentive Plan (“2012 Plan”), which will beused to issue equity grants to employees. The Company authorized 9,246,800 shares of common stock to be reserved for issuance under the plan. This is inaddition to 733,808 shares that remained available for issuance under the 2006 Plan as of January 11, 2012 and which are available for issuance under the2012 Plan. In addition, up to 4,916,394 shares that are subject to outstanding awards as of December 31, 2012, under the 2006 Plan and that expire orterminate for any reason prior to exercise or that would otherwise return to the 2006 Plan’s share reserve will be available for awards to be granted under the2012 Plan.During the year ended December 31, 2012, the Company issued 1,443,810 options to purchase common stock under the 2012 Plan with an aggregategrant date fair value of $10,870.As of December 31, 2012, a total of 8,726,293 shares remained available for issuance under the 2012 Plan.2006 Stock Option Plan — Effective May 31, 2006, the Board of Directors of the Company adopted the 2006 Stock Option Plan (the “2006 Plan”).The Company’s stock option plan permitted the granting of options to directors, employees, and certain independent contractors. The CompensationCommittee of the Board of Directors generally had the authority to select individuals who were to receive options and to specify the terms and conditions ofeach option so granted, including the number of shares covered by the option, the exercise price, vesting provisions, and the overall option term. In January2012, the 2006 Plan was discontinued; however, a total of 859,808 shares remain available for issuance under the 2012 Plan as of December 31, 2012. All ofthe options issued pursuant to the 2006 Plan expire ten years from the date of grant.Stock option activity under the Company’s plans is set forth below: Number ofOptions WeightedAverageExercise Price AggregateIntrinsic Value Options outstanding at January 1, 2010 3,827,312 $2.30 $13,277 Options granted 2,774,952 5.77 3,064 Options exercised (5,600) 4.63 (13) Options forfeited/cancelled (218,080) 2.98 (850) Options outstanding at December 31, 2010 6,378,584 $3.79 $19,708 Options granted 600,000 14.00 1,200 Options exercised (47,600) 1.52 (499) Options forfeited/cancelled (335,848) 5.30 (2,250) Options outstanding at December 31, 2011 6,595,136 $4.65 $48,447 Options granted 1,443,810 16.80 1,877 Options exercised (1,552,742) 3.53 (22,623) Options forfeited/cancelled (189,495) 11.35 (1,279) Options outstanding at December 31, 2012 6,296,709 $7.51 $66,682 Options vested and exercisable at December 31, 2012 3,708,466 $3.72 $53,328 F-31Table of Contents Number ofOptions WeightedAverageExercise Price AggregateIntrinsic Value Options expected to vest 2,432,143 $12.84 $12,793 The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The Company recognizes the fairvalue of each option as compensation expense ratably using the straight-line method over the service period (generally the vesting period). The Black-Scholesmodel incorporates the following assumptions:a. Expected volatility — the Company estimated the volatility of its common stock at the date of grant using historical volatility of peer publiccompanies for the years ended December 31, 2011 and December 31, 2010. In order to compare volatilities for different interval lengths, the Companyexpresses volatility in annual terms. The Company applied the same approach regarding the stock options issued in 2012 due to insufficiency of historicalvolatility data of its stock prices at the time of grant. The expected volatility was 46%, 43% and 43% in 2012, 2011 and 2010, respectively.b. Expected term — the Company estimates the expected term of options granted using the simplified method of determining expected term as outlined inSEC Staff Accounting Bulletin 107 as used for grants. The expected term was 6.25 years in 2012, 2011 and 2010.c. Risk-free interest rate — the Company estimates the risk-free interest rate using the U.S. Treasury yield curve for periods equal to the expected termof the options in effect at the time of grant. The risk-free rate was approximately 1.13%, 2.05% and 1.78% in 2012, 2011 and 2010.d. Dividends — the Company uses an expected dividend yield of zero since it has never declared or paid any dividends on its common stock. TheCompany intends to retain any earnings to fund future growth and the operation of its business and, therefore, does not anticipate paying any cash dividendsin the foreseeable future.Additionally, the Company estimates forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ fromthose estimates. It uses a combination of historical data and other factors to estimate pre-vesting option forfeitures and record share-based compensationexpense only for those awards that are expected to vest.As of December 31, 2012 there was $23,449 of total unrecognized compensation cost related to non-vested share-based compensation awards. That costis expected to be recognized over the next two years using the weighted average method.During the fourth quarter of 2010, the Company modified certain parameters pertaining to the stock option award issued on August 13, 2010. Summaryof the key terms of the modification follows: Aftermodification Beforemodification Number of grantees 20 20 Number of options granted 604,960 552,000 Strike price $6.88 $4.63 The modification had no impact on the estimated costs related to the stock options issued on August 13, 2010.Summary of restricted stock activity as of December 31, 2012, and changes during the years ended December 31 is presented below: Number ofShares WeightedAverageGrantDate FairValuePer Share Unvested restricted stock outstanding at January 1, 2010 — $— Restricted stock granted — — Restricted stock vested — — F-32Table of Contents Number ofShares WeightedAverageGrantDate FairValuePer Share Unvested restricted stock outstanding at December 31, 2010 — $— Restricted stock granted — — Restricted stock vested — — Unvested restricted stock outstanding at December 31, 2011 — $— Restricted stock granted 757,272 17.15 Restricted stock vested (97,400) 12.00 Unvested restricted stock outstanding at December 31, 2012 659,872 $17.92 15.EARNINGS PER SHAREBasic EPS is computed by dividing the net income applicable to common stockholders for the period by the weighted average number of shares ofcommon stock outstanding during the same period. Our Series A-1 Preferred, Series A-2 Preferred, Series A-3 Preferred, restricted stock units and puttablecommon stock were considered participating securities since these securities had non-forfeitable rights to dividends or dividend equivalents during thecontractual period of the award and thus required the two-class method of computing EPS. When calculating diluted EPS, the numerator is computed byadding back the undistributed earnings allocated to the participating securities in arriving at the basic EPS and then reallocating such undistributed earningsamong the company’s common stock, participating securities and the potential common shares that result from the assumed exercise of all dilutive options.The denominator is increased to include the number of additional common shares that would have been outstanding had the options been issued.The following table sets forth the computation of basic and diluted earnings per share as follows: 2012 2011 2010 Numerator for common earnings per share: Net income $54,484 $44,353 $28,308 Accretion of preferred stock — (17,563) (1,432) Net income allocated to participating securities (3,341) (15,025) (17,984) Effect on income available from redemption of preferred stock — — 5,418 Numerator for basic (common) earnings per share 51,143 11,765 14,310 Effect on income available from reallocation of options 261 1,185 996 Numerator for diluted (common) earnings per share $51,404 $12,950 $15,306 Numerator for (puttable common) earnings per share: Net income allocated to basic (puttable common) — 26 118 Effect on income available from reallocation of options — (12) (7) Numerator for diluted (puttable common) earnings per share — 14 111 Denominator for basic (common) earnings per share: Weighted average common shares outstanding 40,190 17,094 17,056 Effect of dilutive securities: Stock options 3,631 3,379 2,258 Denominator for diluted (common) earnings per share 43,821 20,473 19,314 Denominator for basic and diluted (puttable common) earnings per share: Weighted average puttable common shares outstanding — 18 141 Earnings per share: Basic (common) $1.27 $0.69 $0.84 Basic (puttable common) $— $1.42 $0.84 Diluted (common) $1.17 $0.63 $0.79 Diluted (puttable common) $— $0.77 $0.79 Excluded Options due to Anti-Dilutive 1,534 572 1,803 F-33Table of Contents16.QUARTERLY FINANCIAL DATA (UNAUDITED)Summarized quarterly results for the two years ended December 31, 2012 and 2011 are as follows: Three Months Ended 2012 March 31 June 30 September 30 December 31 Full Year Revenues $94,383 $103,800 $110,078 $125,538 $433,799 Operating expenses: Cost of revenues (exclusive of depreciation and amortization) 60,175 63,803 69,099 77,284 270,361 Selling, general and administrative expenses 17,627 20,711 21,153 26,377 85,868 Depreciation and amortization expense 2,211 2,423 3,040 3,208 10,882 Other operating expenses, net 586 33 50 13 682 Income from operations 13,784 16,830 16,736 18,656 66,006 Interest and other income, net 476 460 486 519 1,941 Foreign exchange gain/(loss) 80 (1,394) (635) (135) (2,084) Income before provision for income taxes 14,340 15,896 16,587 19,040 65,863 Provision for income taxes 2,241 2,575 2,522 4,041 11,379 Net income $12,099 $13,321 $14,065 $14,999 $54,484 Comprehensive income $13,711 $10,857 $16,769 $15,640 $56,977 Basic net income per share(1) $0.30 $0.31 $0.33 $0.35 $1.27 Diluted net income per share(1) $0.27 $0.29 $0.30 $0.32 $1.17 (1)Earnings per share amounts for each quarter may not necessarily total to the yearly earnings per share due to the weighting of shares outstanding on aquarterly and year-to-date basis. Three Months Ended 2011 March 31 June 30 September 30 December 31 Full Year Revenues $72,802 $ 80,176 $ 86,423 $ 95,127 $334,528 Operating expenses: Cost of revenues (exclusive of depreciation and amortization) 45,505 48,816 51,627 59,388 205,336 Selling, general and administrative expenses 13,793 16,805 15,822 18,510 64,930 Depreciation and amortization expense 1,690 1,959 2,083 1,806 7,538 Goodwill impairment loss — 1,697 — — 1,697 Other operating expenses, net 2 21 — (4) 19 Income from operations 11,812 10,878 16,891 15,427 55,008 Interest and other income, net 187 428 385 422 1,422 Foreign exchange loss (134) (703) (2,301) (500) (3,638) Income before provision for income taxes 11,865 10,603 14,975 15,349 52,792 Provision for income taxes 2,123 2,326 1,025 2,965 8,439 Net income $9,742 $8,277 $13,950 $12,384 $44,353 Comprehensive income $10,993 $8,445 $12,130 $11,535 $43,103 Basic net income/(loss) per share(1) $0.19 $(0.41) $0.36 $0.32 $0.69 Diluted net income/(loss) per share(1) $0.18 $(0.41) $0.33 $0.29 $0.63 (1)Earnings per share amounts for each quarter may not necessarily total to the yearly earnings per share due to the weighting of shares outstanding on aquarterly and year-to-date basis. 17.COMMITMENTS AND CONTINGENCIESLeases — The Company leases office space under operating leases, which expire at various dates through 2019. Certain leases contain renewalprovisions and generally require the Company to pay utilities, insurance, taxes, and other operating expenses. Rent expense under operating lease agreementsfor the years ended December 31, 2012, 2011 and 2010 was $11,594, $8,522, and $6,724 respectively. Future minimum rental payments under operatingleases that have initial or remaining lease terms in excess of one year as of December 31, 2012 are as follows: Year ending December 31, Operating Leases 2013 $10,505 2014 6,646 2015 3,457 2016 2,415 2017 1,607 Thereafter 1,884 Total minimum lease payments $26,514 F-34Table of ContentsEmployee Loan Program — Beginning in third quarter of 2006, the Company started to guarantee bank loans for certain of its key employees. Underthe conditions of the guarantees, the Company is required to maintain a security deposit of 30% of the value of loans outstanding at each reporting date. Whilethe program has been discontinued, total commitment of the Company under these guarantees remains at $492 as of December 31, 2012. The Companyestimates a probability of material losses under the program as remote, therefore, no provision for losses was recognized for the years ended December 31,2012, 2011 and 2010.Construction in progress — On December 7, 2011, the Company entered into an agreement with IDEAB Project Eesti AS for approximately $17,209for the construction of a 14,071 square meter office building within the High Technologies Park in Minsk, Belarus. During the year ended December 31 2012,total expected construction cost was increased to approximately $19,591. The building is expected to be operational in the first half of 2013. As ofDecember 31, 2012, total outstanding commitment of the Company was $5,325.Corporate Facilities — In June 2012, the Company entered into an agreement for the construction of 12 corporate apartments located within the HighTechnology Park in Minsk, Belarus. During the third quarter of 2012, the agreement was amended and the number of apartments was increased to 26. As ofDecember 31, 2012, total construction cost is estimated at $988. The Company’s outstanding commitment as of December 31, 2012 was approximately$717. The construction is expected to be completed in 2013. The Company intends to use the apartments for general business purposes.Employee Housing Program — In the third quarter of 2012, the Board of Directors of the Company approved the Employee Housing Program (“theHousing Program”), which assists employees in purchasing housing in Belarus. The Company does not bear any market risk in connection with the HousingProgram as the housing will be sold directly to employees by independent third parties. As part of the Housing Program, the Company will extend financing toemployees up to an aggregate amount of $10,000. The loans will be issued in U.S. Dollars with a 5 year term and bear an interest rate of 7.5% which is belowthe market interest rate in Belarus. The Housing Program was designed to be a retention mechanism for the Company’s employees in Belarus and will beavailable to full-time employees who have been with the Company for at least three years. As of December 31, 2012, the Company’s total outstandingcommitment under the Housing Program was $6,179.Litigation — From time to time, the Company is involved with litigation, claims or other contingencies. Management is not aware of any such matters,except as described below, that would have a material effect on the consolidated financial statements of the Company.In September 2010, the Company entered into a Settlement Agreement and Release (“Agreement”) with a former officer and their related parties (the“Plaintiffs”). In consideration and exchange for the releases, promises, and other covenants given by the Plaintiffs in this agreement, and for the purchase bythe Company of all the EPAM common stock held by the Plaintiffs, the Company agreed to make a one-time aggregate cash payment of $9 million to thePlaintiffs. The Company has determined that the fair value of 986,352 shares of common stock at the time of settlement was $6.48 per share, or roughly$6.4 million, which was recorded as treasury stock within Stockholders’ Equity. The remaining amount of $2.6 million was recorded as a current periodexpense within other operating expenses. Subsequently, the Company reissued 673,184 shares to the existing A-3 stockholders at $6.48 per share, and313,168 shares to existing A-2 stockholders also at $6.48 per share. 18.SUBSEQUENT EVENTSOn January 8, 2013, the Company issued 5,257 shares of non-vested (“restricted”) stock to its new non-employee director under the 2012 Non-Employee Directors Compensation Plan. The shares will vest and become unforfeitable 25% on each of the first, second, third and fourth anniversaries of thegrant date. Upon termination of service from the Board at any time, a portion of these shares shall vest as of the date of such termination on a pro rata basisdetermined by the number of days that the participant served on the Board from the grant date through the date of such termination. The fair value of therestricted shares at the time of grant was $101.On January 15, 2013, the Company and the Bank entered into a new revolving loan agreement (2013 Credit Facility) (Note 7). The new agreementincreased the Company’s maximum borrowing capacity to $40,000 and extended maturity to January 15, 2015. The 2013 Credit Facility is collaterized with:(a) all tangible and intangible assets of EPAM Systems, Inc., a Delaware Corporation, and its U.S.-based subsidiaries including all accounts, generalintangibles, intellectual property rights, equipment; and (b) all of the outstanding shares of capital stock and other equity interests in U.S.-based subsidiariesof EPAM F-35Table of ContentsSystems, Inc., a Delaware Corporation, and 65% of the outstanding shares of capital stock and other equity interests in certain of the Company’s foreignsubsidiaries.Beginning January 2013, the Company started issuing loans under its Employee Housing Program (Note 17).***** F-36Table of ContentsEXHIBIT INDEX ExhibitNumber Description 3.1 Certificate of incorporation (incorporated herein by reference to Exhibit 3.1 to the Company’s Form 10-K for the fiscal year ended December 31,2011, SEC File No. 001-35418, filed March 30, 2012 (the “2011 Form 10-K”)) 3.2 Bylaws (incorporated herein by reference to Exhibit 3.2 to the 2011 Form 10-K) 4.1 Form of Common Stock Certificate (incorporated herein by reference to Exhibit 4.1 to Amendment No. 6 to Form S-1, SEC File No. 333-174827, filed January 23, 2012 (“Amendment No. 6”)) 4.2 Amended and Restated Registration Rights Agreement dated February 19, 2008 (incorporated herein by reference to Exhibit 4.2 to Form S-1,SEC File No. 333-174827, filed June 10, 2011 (the “Registration Statement”)) 4.3 Registration Rights Agreement dated April 26, 2010 (incorporated herein by reference to Exhibit 4.3 to the Registration Statement) 10.1 Revolving line of credit between EPAM Systems, Inc. and PNC Bank, National Association dated November 22, 2006 (incorporated herein byreference to Exhibit 10.1 to the Registration Statement) 10.2 Security Agreement between EPAM Systems, Inc. and PNC Bank, National Association dated November 22, 2006 (incorporated herein byreference to Exhibit 10.2 to the Registration Statement) 10.3 Borrowing Base Rider between EPAM Systems, Inc. and PNC Bank, National Association dated November 22, 2006 (incorporated herein byreference to Exhibit 10.3 to the Registration Statement) 10.4 First Amendment to loan documents between EPAM Systems, Inc. and PNC Bank, National Association dated September 30, 2010(incorporated herein by reference to Exhibit 10.4 to the Registration Statement) 10.5 Amended and Restated Committed Line of Credit Note dated September 30, 2010 (incorporated herein by reference to Exhibit 10.5 to theRegistration Statement) 10.6 EPAM Systems, Inc. Amended and Restated 2006 Stock Option Plan (incorporated herein by reference to Exhibit 10.6 to Amendment No. 6) 10.7 Form of EPAM Systems, Inc. 2006 Stock Option Plan Award Agreement (under the EPAM Systems, Inc. Amended and Restated 2006 StockOption Plan) (incorporated herein by reference to Exhibit 10.7 to Amendment No. 6) 10.8 Second Amendment to loan documents between EPAM Systems, Inc. and PNC Bank, National Association dated July 25, 2011 (incorporatedby reference to Exhibit 10.11 to Amendment No. 3 to Form S-1, SEC File No. 333-17482, filed September 26, 2011(“Amendment No. 3”)) 10.9 Second Amended and Restated Committed Line of Credit Note dated July 25, 2011 (incorporated by reference to Exhibit 10.12 to AmendmentNo. 3) 10.10 EPAM Systems, Inc. 2012 Long Term Incentive Plan (incorporated herein by reference to Exhibit 10.12 to Amendment No. 6) 10.11 Form of Senior Management Non-Qualified Stock Option Award Agreement (under the EPAM Systems, Inc. 2012 Long Term Incentive Plan)(incorporated herein by reference to Exhibit 10.13 to Amendment No. 6) 10.12 Restricted Stock Award Agreement by and between Karl Robb and EPAM Systems, Inc. dated January 16, 2012 (incorporated herein byreference to Exhibit 10.14 to Amendment No. 6) 10.13 EPAM Systems, Inc. 2012 Non-Employee Directors Compensation Plan (incorporated herein by reference to Exhibit 10.15 to Amendment No. 6to Form S-1 SEC File No. 333-174827, filed January 23, 2012) 10.14 Form of Non-Employee Director Restricted Stock Award Agreement (under the EPAM Systems, Inc. 2012 Non-Employee DirectorsCompensation Plan) (incorporated herein by reference to Exhibit 10.16 to Amendment No. 6) 10.15 EPAM Systems, Inc. Non-Employee Director Compensation Policy (incorporated herein by reference to Exhibit 10.17 to Amendment No. 6) 10.16 Form of Director Offer Letter (incorporated herein by reference to Exhibit 10.18 to Amendment No. 6) 10.17 Executive Employment Agreement by and between Arkadiy Dobkin and EPAM Systems, Inc. dated January 20, 2006 (expired except withrespect to Section 8) (incorporated herein by reference to Exhibit 10.19 to Amendment No. 6) 10.18 Offer Letter by and between Ginger Mosier and EPAM Systems, Inc. dated February 24, 2010 (incorporated herein by reference to Exhibit 10.20to Amendment No. 6) 10.19 Employment Contract by and between Balazs Fejes and EPAM Systems (Switzerland) GmbH. dated June 15, 2009 (incorporated herein byreference to Exhibit 10.21 to Amendment No. 6) 10.20 Consultancy Agreement by and between Landmark Business Development Limited, Balazs Fejes and EPAM Systems, Inc. dated January 20,2006 (expired except with respect to Section 8) (incorporated herein by reference to Exhibit 10.22 to Amendment No. 6) 10.21 Consultancy Agreement by and between Landmark Business Development Limited, Karl Robb and EPAM Systems, Inc. dated January 20,2006 (expired except with respect to Section 8) (incorporated herein by reference to Exhibit 10.23 to Amendment No. 6) 10.22 Form of nondisclosure, noncompete and nonsolicitation agreement (incorporated herein by reference to Exhibit 10.24 to Amendment No. 6)Table of ContentsExhibitNumber Description 10.23 Form of Indemnification Agreement (incorporated herein by reference to Exhibit 10.25 to Amendment No. 6) 10.24 English translation of Agreement with IDEAB Project Eesti AS (incorporated herein by reference to Exhibit 10.26 to Amendment No. 6) 10.25* Credit Agreement by and among EPAM Systems, Inc., as Borrower, The Guarantors Parties Hereto, and PNC Bank, NationalAssociation, as Lender dated January 15, 2013 10.26* Guaranty and Suretyship Agreement between EPAM Systems LLC, a New Jersey limited liability company, and Vested Development,Inc., a Delaware corporation, and PNC Bank, National Association dated January 15, 2013 10.27* Security Agreement between EPAM Systems, Inc., a Delaware corporation, EPAM Systems LLC, a New Jersey limited liability company,and Vested Development, Inc., a Delaware corporation, and PNC Bank, National Association dated January 15, 2013 10.28* Pledge Agreement to loan documents between EPAM Systems, Inc. a Delaware corporation, EPAM Systems LLC, a New Jersey limitedliability company, and Vested Development, Inc., a Delaware corporation, and PNC Bank, National Association dated January 15, 2013 21.1* Subsidiaries of the Registrant 23.1* Consent of Independent Registered Public Accounting Firm 31.1* Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 31.2* Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934 32.1* Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2* Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002101.INS** XBRL Instance Document101.SCH** XBRL Taxonomy Extension Schema Document101.CAL** XBRL Taxonomy Extension Calculation Linkbase Document101.DEF** XBRL Taxonomy Extension Definition Linkbase Document101.LAB** XBRL Taxonomy Extension Label Linkbase Document101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document *Exhibits filed herewith**As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Section 11 and 12 of the Securities Act of1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended.Indicates management contracts or compensatory plans or arrangements.Exhibit 10.25$40,000,000 REVOLVING CREDIT FACILITYCREDIT AGREEMENTby and amongEPAM SYSTEMS INC., as Borrower,THE GUARANTORS PARTY HERETO,andPNC BANK, NATIONAL ASSOCIATION, as LenderDated: as of January 15, 2013TABLE OF CONTENTS Page 1. DEFINED TERMS 1 1.1 Certain Definitions. 1 1.2 Construction. 16 1.3 Accounting Principles; Changes in GAAP. 17 2. REVOLVING CREDIT FACILITY 17 2.1 Revolving Credit Commitment. 17 2.2 Nature of Lender’s Obligations with Respect to Revolving Credit Loans. 17 2.3 Commitment Fees. 18 2.4 Revolving Credit Loan Requests. 18 2.5 Repayment of Revolving Credit Loans. 18 2.6 Use of Proceeds. 18 2.7 Letter of Credit Subfacility. 19 2.7.1 Issuance of Letters of Credit. 19 2.7.2 Letter of Credit Fees. 19 2.7.3 Disbursements, Reimbursement. 19 2.7.4 Documentation. 20 2.7.5 Determinations to Honor Drawing Requests. 20 2.7.6 Nature of Participation and Reimbursement Obligations. 20 2.7.7 Indemnity. 21 2.7.8 Liability for Acts and Omissions. 22 3. RESERVED 23 4. INTEREST RATES 23 4.1 Interest Rate Options. 23 4.1.1 Revolving Credit Interest Rate Options. 23 4.1.2 Reserved. 24 4.1.3 Rate Quotations. 24 4.2 Interest Periods. 24 4.3 Interest After Default. 24 4.3.1 Letter of Credit Fees, Interest Rate. 24 4.3.2 Other Obligations. 24 4.3.3 Acknowledgment. 24 4.4 LIBOR Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available. 24 4.4.1 Unascertainable. 24 4.4.2 Illegality; Increased Costs; Deposits Not Available. 25 4.4.3 Lender’s Rights. 25 4.5 Selection of Interest Rate Options. 25 i5. PAYMENTS 26 5.1 Payments. 26 5.2 Interest Payment Dates. 26 5.3 Voluntary Prepayments or Revolving Credit Commitment Reductions. 26 5.4 Reserved. 26 5.5 Increased Costs; Yield Protection. 26 5.6 No Offsets. 27 5.7 Indemnity. 27 5.8 Interbank Market Presumption. 27 6. REPRESENTATIONS AND WARRANTIES 28 6.1.1 Organization and Qualification; Power and Authority; Compliance With Laws; Title to Properties; Event of Default. 28 6.1.2 Subsidiaries and Owners; Investment Companies. 28 6.1.3 Validity and Binding Effect. 28 6.1.4 No Conflict; Material Agreements; Consents. 29 6.1.5 Litigation. 29 6.1.6 Financial Statements. 29 6.1.7 Margin Stock. 30 6.1.8 Full Disclosure. 30 6.1.9 Taxes. 30 6.1.10 Patents, Trademarks, Copyrights, Licenses, Etc. 31 6.1.11 Liens in the Collateral. 31 6.1.12 Insurance. 31 6.1.13 ERISA Compliance. 31 6.1.14 Environmental Matters. 32 6.1.15 Solvency. 32 7. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT 32 7.1 First Loans and Letters of Credit. 32 7.1.1 Deliveries. 32 7.1.2 Payment of Fees. 33 7.2 Each Loan or Letter of Credit. 33 8. COVENANTS 33 8.1 Affirmative Covenants. 34 8.1.1 Preservation of Existence, Etc. 34 8.1.2 Payment of Liabilities, Including Taxes, Etc. 34 8.1.3 Maintenance of Insurance. 34 8.1.4 Maintenance of Properties and Leases. 34 8.1.5 Visitation Rights. 34 8.1.6 Keeping of Records and Books of Account. 34 8.1.7 Compliance with Laws; Use of Proceeds. 35 8.1.8 Further Assurances. 35 8.1.9 Depository Accounts. 35 8.2 Negative Covenants. 35 ii 8.2.1 Indebtedness. 35 8.2.2 Liens; Lien Covenants. 36 8.2.3 Guaranties. 36 8.2.4 Loans and Investments. 36 8.2.5 Dividends and Related Distributions. 37 8.2.6 Liquidations, Mergers, Consolidations, Acquisitions. 37 8.2.7 Dispositions of Assets or Subsidiaries. 38 8.2.8 Affiliate Transactions. 39 8.2.9 Subsidiaries. 39 8.2.10 Continuation of or Change in Business. 40 8.2.11 Fiscal Year. 40 8.2.12 Changes in Organizational Documents. 41 8.2.13 Maximum Debt Ratio. 41 8.2.14 Minimum Fixed Charge Coverage Ratio. 41 8.2.15 Negative Pledges. 41 8.3 Reporting Requirements. 41 8.3.1 Quarterly Financial Statements. 41 8.3.2 Annual Financial Statements. 42 8.3.3 Certificates of the Borrowers. 42 8.3.4 Notices. 42 9. DEFAULT 43 9.1 Events of Default. 43 9.1.1 Payments Under Loan Documents. 43 9.1.2 Breach of Warranty. 44 9.1.3 Breach of Negative Covenants or Visitation Rights. 44 9.1.4 Breach of Other Covenants. 44 9.1.5 Defaults in Other Agreements or Indebtedness. 44 9.1.6 [reserved]. 44 9.1.7 Final Judgments or Orders. 44 9.1.8 Loan Document Unenforceable. 44 9.1.9 Uninsured Losses; Proceedings Against Assets. 44 9.1.10 Events Relating to Plans and Benefit Arrangements. 45 9.1.11 Change in Control. 45 9.1.12 Relief Proceedings. 45 9.2 Consequences of Event of Default. 45 9.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings. 45 9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings. 45 9.2.3 Set-off. 46 9.2.4 Application of Proceeds. 46 10. MISCELLANEOUS 46 10.1 Modifications, Amendments or Waivers. 47 10.2 No Implied Waivers; Cumulative Remedies. 47 10.3 Expenses; Indemnity; Damage Waiver. 47 iii 10.3.1 Costs and Expenses. 47 10.3.2 Indemnification by the Borrowers. 47 10.3.3 Waiver of Consequential Damages, Etc. 48 10.3.4 Payments. 48 10.4 Holidays. 48 10.5 Notices; Effectiveness; Electronic Communication. 49 10.5.1 Notices Generally. 49 10.5.2 Electronic Communications. 49 10.5.3 Change of Address, Etc. 49 10.6 Severability. 49 10.7 Duration; Survival. 50 10.8 Successors and Assigns. 50 10.8.1 Successors and Assigns Generally. 50 10.8.2 Assignments by Lender. 50 10.8.3 Participations. 50 10.8.4 Certain Pledges. 50 10.9 Confidentiality. 51 10.9.1 General. 51 10.9.2 Sharing Information With Affiliates of the Lender. 51 10.10 Counterparts; Integration; Effectiveness. 51 10.10.1 Counterparts; Integration; Effectiveness. 51 10.11 CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURYTRIAL. 52 10.11.1 Governing Law. 52 10.11.2 SUBMISSION TO JURISDICTION. 52 10.11.3 WAIVER OF VENUE. 52 10.11.4 SERVICE OF PROCESS. 53 10.11.5 WAIVER OF JURY TRIAL. 53 10.12 USA Patriot Act Notice. 53 10.13 Anti-Money Laundering/International Trade Law Compliance. 53 ivLIST OF SCHEDULES AND EXHIBITSSCHEDULES SCHEDULE 1.1(A) - COMMITMENT OF LENDER AND ADDRESSES FOR NOTICESSCHEDULE 1.1(P) - EXISTING PERMITTED LIENSSCHEDULE 6.1.2 - SUBSIDIARIESSCHEDULE 6.1.14 - ENVIRONMENTAL DISCLOSURESSCHEDULE 8.2.1 - EXISTING PERMITTED INDEBTEDNESSEXHIBITS EXHIBIT 1.1(G)(1) - FORM OF GUARANTOR JOINDEREXHIBIT 1.1(G)(2) - FORM OF GUARANTY AGREEMENTEXHIBIT 1.1(N) - FORM OF REVOLVING CREDIT NOTEEXHIBIT 2.4 - FORM OF LOAN REQUESTEXHIBIT 8.3.3.1 - FORM OF COMPLIANCE CERTIFICATE vCREDIT AGREEMENTTHIS CREDIT AGREEMENT (as hereafter amended, modified, supplemented and restated, this “Agreement”) is dated as of January 15, 2013 and ismade by and among EPAM SYSTEMS INC., a Delaware corporation (the “Parent Company”), and any of its Subsidiaries that hereafter join thisAgreement as Borrowers (with the Parent Company, each a “Borrower” and collectively, the “Borrowers”), each of the GUARANTORS (as hereinafterdefined) party hereto, and PNC BANK, NATIONAL ASSOCIATION (the “Lender”).RECITALSThe Borrowers have requested the Lender to provide a revolving credit facility to the Borrowers in an aggregate principal amount not to exceed$40,000,000, on the terms and subject to the conditions set forth in this Agreement. In consideration of their mutual covenants and agreements hereinafter setforth and intending to be legally bound hereby, the parties hereto covenant and agree as follows:1. DEFINED TERMS1.1 Certain Definitions.In addition to words and terms defined elsewhere in this Agreement, the following words and terms shall have the following meanings,respectively, unless the context hereof clearly requires otherwise:Affiliate shall mean, with respect to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls oris Controlled by or is under common Control with the Person specified.Approved Fund shall mean any fund that is engaged in making, purchasing, holding or investing in bank loans and similar extensionsof credit in the ordinary course of business and that is administered or managed by (a) the Lender, (b) an Affiliate of the Lender or (c) an entity or an Affiliateof an entity that administers or manages the Lender.Authorized Officer shall mean, with respect to any Loan Party, the Chief Executive Officer, President, Chief Financial Officer orTreasurer of such Loan Party or such other individuals, designated by written notice to the Lender from the Borrowers, authorized to execute notices, reportsand other documents on behalf of the Loan Parties required hereunder. The Borrowers may amend such list of individuals from time to time by giving writtennotice of such amendment which shall be acknowledged by the Lender.Base Rate shall mean, for any day, a fluctuating per annum rate of interest equal to the highest of (a) the Federal Funds Open Rate, plus0.5%, (b) the Prime Rate, and (c) the Daily LIBOR Rate plus 100 basis points (1.0%). Any change in the Base Rate (or any component thereof) shall take effectat the opening of business on the day such change occurs. - 1 -Base Rate Option shall mean the option of the Borrowers to have Loans bear interest at the rate and under the terms set forth inSection 4.1.1(i) [Revolving Credit Base Rate Option].Borrower shall mean individually and Borrowers shall mean collectively the Parent Company and any of its Subsidiaries who hereafterjoin this Agreement as Borrowers.Borrowing Date shall mean, with respect to any Loan, the date for the making thereof or the renewal or conversion thereof at or to the sameor a different Interest Rate Option, which shall be a Business Day.Borrowing Tranche shall mean specified portions of Loans outstanding as follows: (a) any Loans to which a LIBOR Rate Option applieswhich become subject to the same Interest Rate Option under the same Loan Request by the Borrowers shall constitute one Borrowing Tranche, and (b) allLoans to which a Base Rate Option applies shall constitute one Borrowing Tranche.Business Day shall mean any day other than a Saturday or Sunday or a legal holiday on which commercial banks are authorized orrequired to be closed for business in Pittsburgh, Pennsylvania and if the applicable Business Day relates to any Loan to which the LIBOR Rate Optionapplies, such day must also be a day on which dealings are carried on in the London interbank market.Capital Lease shall mean, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of anasset and the incurrence of a liability in accordance with GAAP.Cash Collateralize shall mean to pledge and deposit with or deliver to the Lender, as collateral for the Letter of Credit Obligations, cash ordeposit account balances pursuant to documentation satisfactory to the Lender. Such cash collateral shall be maintained in blocked, non-interest bearingdeposit accounts at the Lender.Change in Control shall mean:(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excludingany employee benefit plan of such person or its subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary oradministrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that aperson or group shall be deemed to have “beneficial ownership” of all securities that such person or group has the right to acquire, whether such right isexercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of 50% or more of the equity securities of theParent Company entitled to vote for members of the board of directors or equivalent governing body of the Parent Company on a fully-diluted basis (andtaking into account all such securities that such person or group has the right to acquire pursuant to any option right); or - 2 -(b) any Person or two or more Persons acting in concert shall have acquired by contract or otherwise, or shall have entered into a contractor arrangement that, upon consummation thereof, will result in its or their acquisition of the power to exercise, directly or indirectly, a controlling influenceover the management or policies of the Parent Company, or control over the equity securities of the Parent Company entitled to vote for members of the board ofdirectors or equivalent governing body of the Parent Company on a fully-diluted basis (and taking into account all such securities that such Person or grouphas the right to acquire pursuant to any option right) representing 50% or more of the combined voting power of such securities.Closing Date shall mean January 15, 2013.Code shall mean the Internal Revenue Code of 1986, as the same may be amended or supplemented from time to time, and any successorstatute of similar import, and the rules and regulations thereunder, as from time to time in effect.Collateral shall mean the collateral under the Pledge Agreement, the Security Agreement and any cash collateral referred to in the definitionof Cash Collateralize.Commercial Letter of Credit shall mean any letter of credit which is a commercial letter of credit issued in respect of the purchase of goodsor services by one or more of the Loan Parties or any Subsidiary thereof in the ordinary course of their business.Commitment Fee shall have the meaning specified in Section 2.3 [Commitment Fees].Compliance Certificate shall have the meaning specified in Section 8.3.3 [Certificates of the Borrowers].Consolidated EBITDA for any period of determination shall mean the sum of net income, depreciation, amortization, interest expense andincome tax expense, and non-cash stock compensation expense, in each case of the Parent Company and its Subsidiaries for such period determined andconsolidated in accordance with GAAP.Control shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of aPerson, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.Current Maturities shall mean the scheduled payments of principal on all Indebtedness for borrowed money having an original term ofmore than one (1) year (including but not limited to amortization of Capital Lease obligations) as shown on the financial statements of the Parent Company andits Subsidiaries as of one year prior to the date of determination. - 3 -Daily LIBOR Rate shall mean, for any day, the rate per annum determined by the Lender by dividing (x) the Published Rate by (y) anumber equal to 1.00 minus the LIBOR Reserve Percentage on such day.Dollar, Dollars, U.S. Dollars and the symbol $ shall mean lawful money of the United States of America.Drawing Date shall have the meaning specified in Section 2.7.3 [Disbursements, Reimbursement].Environmental Laws shall mean all applicable federal, state, local, tribal, territorial and foreign Laws (including common law),constitutions, statutes, treaties, regulations, rules, ordinances and codes and any consent decrees, settlement agreements, judgments, orders, directives,policies or programs issued by or entered into with an Official Body pertaining or relating to: (i) pollution or pollution control; (ii) protection of human healthfrom exposure to regulated substances; (iii) protection of the environment and/or natural resources; (iv) employee safety in the workplace; (v) the presence,use, management, generation, manufacture, processing, extraction, treatment, recycling, refining, reclamation, labeling, packaging, sale, transport, storage,collection, distribution, disposal or release or threat of release of regulated substances; (vi) the presence of contamination; (vii) the protection of endangered orthreatened species; and (viii) the protection of environmentally sensitive areas.ERISA shall mean the Employee Retirement Income Security Act of 1974, as the same may be amended or supplemented from time totime, and any successor statute of similar import, and the rules and regulations thereunder, as from time to time in effect.ERISA Affiliate shall mean, at any time, any trade or business (whether or not incorporated) under common control with any of theBorrowers and are treated as a single employer under Section 414 of the Code.ERISA Event shall mean (a) a reportable event (under Section 4043 of ERISA and regulations thereunder) with respect to a Pension Plan;(b) a withdrawal by any Borrower or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was asubstantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations that is treated as such a withdrawal under Section 4062(e) ofERISA; (c) a complete or partial withdrawal by any Borrower or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan isin reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Sections 4041 or 4041A of ERISA,or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which constitutes groundsunder Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) theimposition of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA or contributions duebut not delinquent, upon any Borrower or any ERISA Affiliate.Event of Default shall mean any of the events described in Section 9.1 [Events of - 4 -Default] and referred to therein as an “Event of Default.”Evergreen Letter of Credit shall mean a Letter of Credit having an automatic renewal feature (subject to Lender’s annual right to not renewsuch Letter of Credit on terms acceptable to the Lender) and a final expiration date prior to the Expiration Date.Exchange Act shall mean the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgatedthereunder from time to time in effect.Expiration Date shall mean, with respect to the Revolving Credit Commitment, January 15, 2015.Federal Funds Open Rate for any day shall mean the rate per annum (based on a year of 360 days and actual days elapsed) which is thedaily federal funds open rate as quoted by ICAP North America, Inc. (or any successor) as set forth on the Bloomberg Screen BTMM for that day opposite thecaption “OPEN” (or on such other substitute Bloomberg Screen that displays such rate), or as set forth on such other recognized electronic source used for thepurpose of displaying such rate as selected by the Lender (for purposes of this definition, an “Alternate Source”) (or if such rate for such day does notappear on the Bloomberg Screen BTMM (or any substitute screen) or on any Alternate Source, or if there shall at any time, for any reason, no longer exist aBloomberg Screen BTMM (or any substitute screen) or any Alternate Source, a comparable replacement rate determined by the Lender at such time (whichdetermination shall be conclusive absent manifest error); provided however, that if such day is not a Business Day, the Federal Funds Open Rate for such dayshall be the “open” rate on the immediately preceding Business Day. If and when the Federal Funds Open Rate changes, the rate of interest hereunder withrespect to any advance to which the Federal Funds Open Rate applies will change automatically without notice to the Borrowers, effective on the date of anysuch change.Fixed Charge Coverage Ratio shall mean the ratio of Consolidated EBITDA to the sum of Current Maturities, interest expense, cash taxespaid, dividends and distributions and Unfunded Capital Expenditures, in each case of the Borrowers and their Subsidiaries for such period determined andconsolidated in accordance with GAAP.Funded Debt shall mean, without duplication, all Indebtedness for borrowed money, capitalized lease obligations, reimbursementobligations in respect of letters of credit (that are not fully collateralized by cash or cash equivalents, which is held by PNC), and guaranties of suchIndebtedness.GAAP shall mean generally accepted accounting principles as are in effect from time to time, subject to the provisions of Section 1.3[Accounting Principles], and applied on a consistent basis both as to classification of items and amounts.Guarantor shall mean each of the parties to this Agreement which is designated as a “Guarantor” on the signature page hereof and eachother Person which joins this Agreement as a Guarantor after the date hereof. As of the Closing Date, EPAM Systems LLC, a New Jersey - 5 -limited liability company, and Vested Development Inc., a Delaware corporation, are Guarantors.Guarantor Joinder shall mean a joinder by a Person as a Guarantor under the Loan Documents in the form of Exhibit 1.1(G)(1).Guaranty of any Person shall mean any obligation of such Person guaranteeing or in effect guaranteeing any liability or obligation of anyother Person in any manner, whether directly or indirectly, including any agreement to indemnify or hold harmless any other Person, any performance bond orother suretyship arrangement and any other form of assurance against loss, except endorsement of negotiable or other instruments for deposit or collection inthe ordinary course of business.Guaranty Agreement shall mean the Continuing Agreement of Guaranty and Suretyship in substantially the form of Exhibit 1.1(G)(2)executed and delivered by each of the Guarantors.Indebtedness shall mean, as to any Person at any time, without duplication:(a) its liabilities for borrowed money;(b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinarycourse of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property);(c) (i) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases and (ii) all liabilities which wouldappear on its balance sheet in accordance with GAAP in respect of Synthetic Leases assuming such Synthetic Leases were accounted for as Capital Leases;(d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it hasassumed or otherwise become liable for such liabilities);(e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks andother financial institutions (whether or not representing obligations for borrowed money);(f) the aggregate Swap Termination Value of all Interest Rate Hedges of such Person; and(g) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof. - 6 -Indebtedness of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extentsuch Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP.Indemnitee shall have the meaning specified in Section 10.3.2 [Indemnification by the Borrowers].Information shall mean all information received from the Loan Parties or any of their Subsidiaries relating to the Loan Parties or any ofsuch Subsidiaries or any of their respective businesses, other than any such information that is available to the Lender on a non-confidential basis prior todisclosure by the Loan Parties or any of their Subsidiaries.Insolvency Proceeding shall mean, with respect to any Person, (a) a case, action or proceeding with respect to such Person (i) before anycourt or any other Official Body under any bankruptcy, insolvency, reorganization or other similar Law now or hereafter in effect, or (ii) for the appointmentof a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any Loan Party or otherwise relating to the liquidation,dissolution, winding-up or relief of such Person, or (b) any general assignment for the benefit of creditors, composition, marshaling of assets for creditors, orother, similar arrangement in respect of such Person’s creditors generally or any substantial portion of its creditors undertaken under any Law.Interest Period shall mean the period of time selected by the Borrowers in connection with (and to apply to) any election permittedhereunder by the Borrowers to have Revolving Credit Loans bear interest under the LIBOR Rate Option. Subject to the last sentence of this definition, suchperiod shall be one, two, three or six Months. Such Interest Period shall commence on the effective date of such Interest Rate Option, which shall be (a) theBorrowing Date if the Borrowers are requesting new Loans, or (b) the date of renewal of or conversion to the LIBOR Rate Option if the Borrowers are renewingor converting to the LIBOR Rate Option applicable to outstanding Loans. Notwithstanding the second sentence hereof: (A) any Interest Period which wouldotherwise end on a date which is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in the nextcalendar month, in which case such Interest Period shall end on the next preceding Business Day, and (B) the Borrowers shall not select, convert to or renewan Interest Period for any portion of the Loans that would end after the Expiration Date.Interest Rate Hedge shall mean (a) any and all interest rate swap transactions, basis swap transactions, basis swaps, credit derivativetransactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bondor bond price or bond index swaps or options or forward foreign exchange transactions, cap transactions, floor transactions, currency options, spot contractsor any other similar transactions or any of the foregoing (including, but without limitation, any options to enter into any of the foregoing), and (b) any and alltransactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreementpublished by the International Swaps and Derivatives Association, Inc., - 7 -International Foreign Exchange Master Agreement.Interest Rate Option shall mean any LIBOR Rate Option or Base Rate Option.IRS shall mean the Internal Revenue Service.Law shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, opinion, release, ruling, order,injunction, writ, decree, bond, judgment, authorization or approval, lien or award by or settlement agreement with any Official Body.Lender shall mean PNC Bank, National Association, and its successors and assigns, as lender of the Loans hereunder and issuer ofLetters of Credit hereunder.Lender Provided Interest Rate Hedge shall mean an Interest Rate Hedge which is provided to any of the Loan Parties by the Lender or anyof its Affiliates.Letter of Credit shall have the meaning specified in Section 2.7.1 [Issuance of Letters of Credit].Letter of Credit Fee shall have the meaning specified in Section 2.7.2 [Letter of Credit Fees].Letter of Credit Obligation shall mean, as of any date of determination, the aggregate amount available to be drawn under all outstandingLetters of Credit on such date (if any Letter of Credit shall increase in amount automatically in the future, such aggregate amount available to be drawn shallcurrently give effect to any such future increase) plus without duplication the aggregate Reimbursement Obligations on such date.Letter of Credit Sublimit shall have the meaning specified in Section 2.7.1 [Issuance of Letters of Credit].LIBOR Rate shall mean with respect to the Loans comprising any Borrowing Tranche to which the LIBOR Rate Option applies for anyInterest Period, the interest rate per annum determined by the Lender by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100thof 1% per annum) (i) the rate which appears on the Bloomberg Page BBAM1 (or on such other substitute Bloomberg page that displays rates at which USdollar deposits are offered by leading banks in the London interbank deposit market), or the rate which is quoted by another source selected by the Lenderwhich has been approved by the British Bankers’ Association as an authorized information vendor for the purpose of displaying rates at which US dollardeposits are offered by leading banks in the London interbank deposit market (for purposes of this definition, an “Alternate Source”), at approximately11:00 a.m., London time, two (2) Business Days prior to the commencement of such Interest Period as the London interbank offered rate for U.S. Dollars foran amount comparable to such Borrowing Tranche and having a borrowing date and a maturity comparable to such Interest Period (or if there shall at - 8 -any time, for any reason, no longer exist a Bloomberg Page BBAM1 (or any substitute page) or any Alternate Source, a comparable replacement ratedetermined by the Lender at such time (which determination shall be conclusive absent manifest error)), by (ii) a number equal to 1.00 minus the LIBORReserve Percentage. LIBOR may also be expressed by the following formula: London interbank offered rates quoted by Bloomberg LIBOR Rate = or appropriate successor as shown on Bloomberg Page BBAM1 1.00 - LIBOR Reserve Percentage The LIBOR Rate shall be adjusted with respect to any Loan to which the LIBOR Rate Option applies that is outstanding on the effectivedate of any change in the LIBOR Reserve Percentage as of such effective date. The Lender shall give prompt notice to the Borrowers of the LIBOR Rate asdetermined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.LIBOR Rate Option shall mean the option of the Borrowers to have Loans bear interest at the rate and under the terms set forth inSection 4.1.1(ii) [Revolving Credit LIBOR Rate Option].LIBOR Reserve Percentage shall mean as of any day the maximum percentage in effect on such day, as prescribed by the Board ofGovernors of the Federal Reserve System (or any successor) for determining the reserve requirements (including supplemental, marginal and emergency reserverequirements) with respect to eurocurrency funding (currently referred to as “Eurocurrency Liabilities”).Lien shall mean any mortgage, deed of trust, pledge, lien, security interest, charge or other encumbrance or security arrangement of anynature whatsoever, whether voluntarily or involuntarily given, including any conditional sale or title retention arrangement, and any assignment, depositarrangement or lease intended as, or having the effect of, security and any filed financing statement or other notice of any of the foregoing (whether or not a lienor other encumbrance is created or exists at the time of the filing).Loan Documents shall mean this Agreement, the Guaranty Agreement, the Note, the Pledge Agreement, the Security Agreement and anyother instruments, certificates or documents delivered in connection herewith or therewith.Loan Parties shall mean the Borrowers and the Guarantors.Loan Request shall have the meaning specified in Section 2.4 [Revolving Credit Loan Requests].Loans shall mean collectively and Loan shall mean separately all Revolving Credit Loans or any Revolving Credit Loan.Material Adverse Change shall mean any set of circumstances or events which (a) has any material adverse effect upon the validity orenforceability of the Loan Documents taken as a whole, (b) is material and adverse to the business, assets, financial condition or results of - 9 -operations of the Loan Parties and their Subsidiaries taken as a whole, (c) impairs materially the ability of the Loan Parties taken as a whole to duly andpunctually pay or perform the Obligations, or (d) impairs materially the ability of the Lender, to the extent permitted, to enforce its legal remedies pursuant tothe Loan Documents taken as a whole (other than solely as a result of the action or inaction of the Lender).Month, with respect to an Interest Period under the LIBOR Rate Option, shall mean the interval between the days in consecutive calendarmonths numerically corresponding to the first day of such Interest Period. If any LIBOR Rate Interest Period begins on a day of a calendar month for whichthere is no numerically corresponding day in the month in which such Interest Period is to end, the final month of such Interest Period shall be deemed to endon the last Business Day of such final month.Multiemployer Plan shall mean any employee benefit plan which is a “multiemployer plan” within the meaning of Section 4001(a)(3) ofERISA and to which any Borrower or any ERISA Affiliate is then making or accruing an obligation to make contributions or, within the preceding five Planyears, has made or had an obligation to make such contributions.Note shall mean the promissory note in the form of Exhibit 1.1(N) evidencing the Revolving Credit Loan.Obligation shall mean any obligation or liability of any of the Loan Parties, howsoever created, arising or evidenced, whether direct orindirect, absolute or contingent, now or hereafter existing, or due or to become due, under or in connection with (i) this Agreement, the Notes, the Letters ofCredit, or any other Loan Document whether to the Lender or its Affiliates or other persons provided for under such Loan Documents, (ii) any LenderProvided Interest Rate Hedge and (iii) any Other Lender Provided Financial Service Product.Official Body shall mean the government of the United States of America or any other nation, or of any political subdivision thereof,whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial,taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union orthe European Central Bank) and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, withoutlimitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or anysuccessor or similar authority to any of the foregoing).Other Lender Provided Financial Service Product shall mean agreements or other arrangements under which the Lender or any Affiliate ofthe Lender provides any of the following products or services to any of the Loan Parties: (a) credit cards, (b) credit card processing services, (c) debit cards,(d) purchase cards, (e) ACH transactions, (f) cash management, including controlled disbursement, accounts or services, or (g) foreign currency exchange. - 10 -Parent Company shall mean EPAM Systems Inc., a Delaware corporation, its successors and assigns.Participant has the meaning specified in Section 10.8.3 [Participations].Payment Date shall mean the first day of each calendar quarter after the date hereof and on the Expiration Date or upon acceleration of theNotes.Payment In Full shall mean the indefeasible payment in full in cash of the Loans and other Obligations hereunder (other than futureobligations consisting of contingent Obligations that may be owing or for which no claims have been made and which expressly survive termination of theLoan Documents), termination of the Revolving Credit Commitment and cash collateralization, expiration or termination of all Letters of Credit.PBGC shall mean the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA or any successor.Pension Plan shall mean any “employee pension benefit plan” (as such term is defined in Section 3(2) of ERISA), other than aMultiemployer Plan, that is subject to Title IV of ERISA and is sponsored or maintained by any Borrower or any ERISA Affiliate or to which any Borrower orany ERISA Affiliate contributes or has an obligation to contribute, or in the case of a multiple employer or other plan described in Section 4064(a) of ERISA,has made contributions at any times during the immediately preceding five plan years.Permitted Acquisitions shall have the meaning assigned to such term in Section 8.2.6(ii).Permitted Investments shall mean:(a) direct obligations of the United States of America or any agency or instrumentality thereof or obligations backed by the full faith andcredit of the United States of America maturing in twelve (12) months or less from the date of acquisition;(b) short-term commercial paper, including variable amount master demand notes, in Dollars, carrying the highest rating by Standard &Poor’s or P-1 by Moody’s Investors Service, Inc. issued for corporations headquartered in the United States on the date of acquisition;(c) time certificates of deposit or repurchase agreements in Dollars maturing within one year in commercial banks carrying the highestrating by Standard & Poor’s or P-1 by Moody’s Investors Service, Inc. issued for commercial banks headquartered in the United States on the date ofacquisition or having capital, surplus and undivided profits in excess of $200,000,000;(d) corporate and municipal obligations maturing in twelve (12) months or less from the date of acquisition and having a rating of AA orbetter by Standard & Poor’s or Aa by Moody’s Investors Service, Inc.; and - 11 -(e) money market or mutual funds whose investments are limited to those types of investments described in clauses (a)-(d) above.Permitted Liens shall mean:(a) Liens for taxes, assessments, or similar charges, incurred in the ordinary course of business and which are not yet due and payable,or are being contested in good faith, with adequate reserves set aside, by appropriate proceedings diligently conducted;(b) Pledges or deposits made in the ordinary course of business to secure payment of workmen’s compensation, or to participate in anyfund in connection with workmen’s compensation, unemployment insurance, old-age pensions or other social security programs;(c) Liens of mechanics, materialmen, warehousemen, carriers, or other like Liens, securing obligations incurred in the ordinary course ofbusiness that are not yet due and payable and Liens of landlords securing obligations to pay lease payments that are not yet due and payable or in default;(d) Good-faith pledges or deposits made in the ordinary course of business to secure performance of bids, tenders, contracts (other thanfor the repayment of borrowed money) or leases, not in excess of the aggregate amount due thereunder, or to secure statutory obligations, or surety, appeal,indemnity, performance or other similar bonds required in the ordinary course of business;(e) Encumbrances consisting of zoning restrictions, easements or other restrictions on the use of real property, none of which materiallyimpairs the use of such property or the value thereof, and none of which is violated in any material respect by existing or proposed structures or land use;(f) Liens in favor of the Lender and its Affiliates securing the Obligations;(g) Liens on property leased by any Loan Party or Subsidiary of a Loan Party under operating leases securing obligations of such LoanParty or Subsidiary to the lessor under such leases;(h) Any Lien existing on the date of this Agreement and described on Schedule 1.1(P), together with any renewals thereof; provided that theprincipal amount secured thereby is not hereafter increased, and no additional assets become subject to such Lien;(i) Purchase Money Security Interests and capitalized leases securing Indebtedness permitted under Section 8.2.1(iv), so long as suchLiens extend only to the assets purchased (and proceeds thereof);(j) The following, (A) if the validity or amount thereof is being contested in good faith by appropriate and lawful proceedings diligentlyconducted so long as levy and execution thereon have been stayed and continue to be stayed or (B) if a final judgment is entered and such judgment isdischarged within forty-five (45) days of entry, and in either case - 12 -they do not affect the Collateral or, in the aggregate, materially impair the ability of any Loan Party to perform its Obligations hereunder or under the otherLoan Documents:(1) Claims or Liens for taxes, assessments or charges due and payable and subject to interest or penalty; provided that theapplicable Loan Party maintains such reserves or other appropriate provisions as shall be required by GAAP and pays all such taxes,assessments or charges forthwith upon the commencement of proceedings to foreclose any such Lien;(2) Claims, Liens or encumbrances upon, and defects of title to, real or personal property other than the Collateral, including anyattachment of personal or real property or other legal process prior to adjudication of a dispute on the merits;(3) Claims or Liens of mechanics, materialmen, warehousemen, carriers, or other statutory nonconsensual Liens; or(4) Liens resulting from final judgments or orders described in Section 9.1.7 [Final Judgments or Orders].(k) Liens securing Indebtedness permitted under Section 8.2.1(viii), so long as (A) such Liens extend only to the assets acquired (andproceeds thereof), (B) such Liens were granted by the target of a Permitted Acquisition, and (C) such Liens were not granted in contemplation of suchPermitted Acquisition;(l) statutory or common law rights of setoff upon deposits of cash in favor of depository institutions; and(m) any title transfer, retention of title, hire purchase or conditional sale arrangements having similar effect arising in the ordinary courseof business in favor of the suppliers of goods or services to any Loan Party or Subsidiary thereof.provided that the only “Permitted Liens” on the Subsidiary Equity Interests and Collateral are the Liens of the Lender pursuant to the Pledge Agreement andSecurity Agreement and inchoate Liens for taxes not yet due and payable.Person shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust,unincorporated organization, joint venture, government or political subdivision or agency thereof, or any other entity.Pledge Agreement shall mean the Pledge Agreement of even date herewith granting Lender a lien on and security interest in (a) 65% of allissued and outstanding equity interests in each 1 tier foreign Subsidiary and (b) 100% all issued and outstanding equity interests in each domesticSubsidiary, as the same may be amended, restated or otherwise modified.Potential Default shall mean any event or condition which with notice or passage of time, or both, would constitute an Event of Default. - 13 -stPrime Rate shall mean the interest rate per annum announced from time to time by the Lender at its Principal Office as its then prime rate,which rate may not be the lowest or most favorable rate then being charged commercial borrowers or others by the Lender. Any change in the Prime Rate shalltake effect at the opening of business on the day such change is announced.Principal Office shall mean the main banking office of the Lender in Pittsburgh, Pennsylvania.Prior Security Interest shall mean a valid and enforceable perfected first-priority security interest under the Uniform Commercial Code inthe Collateral which is subject only to Liens of the Lender pursuant to the Loan Documents, and inchoate Liens for taxes not yet due and payable.Published Rate shall mean the rate of interest published each Business Day in The Wall Street Journal “Money Rates” listing under thecaption “London Interbank Offered Rates” for a one month period (or, if no such rate is published therein for any reason, then the Published Rate shall be therate at which U.S. dollar deposits are offered by leading banks in the London interbank deposit market for a one month period as published in anotherpublication selected by the Lender).Purchase Money Security Interest shall mean Liens upon tangible personal property securing loans to any Loan Party or Subsidiary of aLoan Party or deferred payments by such Loan Party or Subsidiary for the purchase of such tangible personal property.Reimbursement Obligation shall have the meaning specified in Section 2.7.3 [Disbursements, Reimbursement].Related Parties shall mean, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agentsand advisors of such Person and of such Person’s Affiliates.Relief Proceeding shall mean any proceeding seeking a decree or order for relief in respect of any Loan Party or Subsidiary of a Loan Partyin a voluntary or involuntary case under any applicable bankruptcy, insolvency, reorganization or other similar law now or hereafter in effect, or for theappointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator, conservator (or similar official) of any Loan Party or Subsidiary of a LoanParty for any substantial part of its property, or for the winding-up or liquidation of its affairs, or an assignment for the benefit of its creditors.Revolving Credit Commitment shall mean, as to the Lender at any time, the amount initially set forth opposite its name on Schedule1.1(A) in the column labeled “Amount of Commitment for Revolving Credit Loans,” as such Commitment is thereafter assigned or modified in accordancewith the terms of this Agreement.Revolving Credit Loans shall mean collectively and Revolving Credit Loan shall mean separately all Revolving Credit Loans or anyRevolving Credit Loan made by the Lender - 14 -to the Borrowers pursuant to Section 2.1 [Revolving Credit Commitment] or 2.7.3 [Disbursements, Reimbursement].Revolving Facility Usage shall mean at any time the sum of the outstanding Revolving Credit Loans and the Letter of Credit Obligations.Security Agreement shall mean the Security Agreement of even date herewith by the Loan Parties in favor of the Lender, as the same maybe amended, restated or otherwise modified.Solvent shall mean, with respect to any Person on any date of determination, taking into account such right of reimbursement,contribution or similar right available to such Person from other Persons, that on such date (a) the fair value of the property of such Person is greater than thetotal amount of liabilities, including, without limitation, contingent liabilities, of such Person, (b) the present fair saleable value of the assets of such Person isnot less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such Person isable to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course ofbusiness, (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts andliabilities mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which suchPerson’s property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Person isengaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of allthe facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.Standard & Poor’s shall mean Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.Statements shall have the meaning specified in Section 6.1.6(i) [Historical Statements].Subordinated Debt shall mean Funded Debt that has been subordinated to the Obligations pursuant to subordination terms and conditionssatisfactory to the Lender in its discretion.Subsidiary of a Person shall mean a corporation, partnership, joint venture, limited liability company or other business entity of which amajority of the shares of securities or other interests having ordinary voting power for the election of directors or other governing body (other than securities orinterests having such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwisecontrolled, directly, or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise specified, all references herein to a“Subsidiary” or to “Subsidiaries” shall refer to a Subsidiary or Subsidiaries of the Parent Company. - 15 -Subsidiary Equity Interests shall have the meaning specified in Section 6.1.2 [Subsidiaries and Owners; Investment Companies].Swap Termination Value shall mean, in respect of any one or more Interest Rate Hedges, after taking into account the effect of any legallyenforceable netting agreement relating to such Interest Rate Hedges, (a) for any date on or after the date such Interest Rate Hedges have been closed out andtermination value(s) determined in accordance therewith, such termination value(s), and (b) for any date prior to the date referenced in clause (a), theamounts(s) determined as the mark-to-market values(s) for such Interest Rate Hedges, as determined based upon one or more mid-market or other readilyavailable quotations provided by any recognized dealer in such Interest Rate Hedges.Synthetic Lease means, at any time, any lease (including leases that may be terminated by the lessee at any time) of any property (a) thatis accounted for as an operating lease under GAAP and (b) in respect of which the lessee retains or obtains ownership of the property so leased for U.S. federalincome tax purposes, other than any such lease under which such Person is the lessor.Taxes shall mean all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding),assessments, fees or other charges imposed by any Official Body, including any interest, additions to tax or penalties applicable thereto.Unfunded Capital Expenditures shall mean capital expenditures made from any Borrower’s funds other than funds borrowed as termdebt (including Capital Leases) to finance such capital expenditures.1.2 Construction. Unless the context of this Agreement otherwise clearly requires, the following rules of construction shall apply to this Agreementand each of the other Loan Documents: (i) references to the plural include the singular, the plural, the part and the whole and the words “include,” “includes”and “including” shall be deemed to be followed by the phrase “without limitation”; (ii) the words “hereof,” “herein,” “hereunder,” “hereto” and similar termsin this Agreement or any other Loan Document refer to this Agreement or such other Loan Document as a whole; (iii) article, section, subsection, clause,schedule and exhibit references are to this Agreement or other Loan Document, as the case may be, unless otherwise specified; (iv) reference to any Personincludes such Person’s successors and assigns; (v) reference to any agreement, including this Agreement and any other Loan Document together with theschedules and exhibits hereto or thereto, document or instrument means such agreement, document or instrument as amended, modified, replaced, substitutedfor, superseded or restated; (vi) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding,” and“through” means “through and including”; (vii) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to anyand all tangible and intangible assets and properties, including cash, securities, accounts and contract rights, (viii) section headings herein and in each otherLoan Document are included for convenience and shall not affect the interpretation of this Agreement or such Loan Document, and (ix) unless otherwisespecified, all references herein to times of day shall be references to Eastern Time. - 16 -1.3 Accounting Principles; Changes in GAAP. Except as otherwise provided in this Agreement, all computations and determinations as toaccounting or financial matters and all financial statements to be delivered pursuant to this Agreement shall be made and prepared in accordance with GAAP(including principles of consolidation where appropriate), and all accounting or financial terms shall have the meanings ascribed to such terms by GAAP;provided, however, that all accounting terms used in Section 8.2 [Negative Covenants] (and all defined terms used in the definition of any accounting termused in Section 8.2 shall have the meaning given to such terms (and defined terms) under GAAP as in effect on the date hereof applied on a basis consistentwith those used in preparing Statements referred to in Section 6.1.6(i) [Historical Statements]. Notwithstanding the foregoing, if the Borrowers notify theLender in writing that the Borrowers wish to amend any financial covenant in Section 8.2 of this Agreement and/or any related definition, Letter of Credit Feeand/or Commitment Fee determinations to eliminate the effect of any change in GAAP occurring after the Closing Date on the operation of such financialcovenants and/or interest, Letter of Credit Fee and/or Commitment Fee determinations (or if the Lender notifies the Borrower in writing that the Lender wishesto amend any financial covenant in Section 8.2 and/or any related definition, Letter of Credit Fee and/or Commitment Fee determinations to eliminate the effectof any such change in GAAP), then the Lender and the Borrowers shall negotiate in good faith to amend such ratios or requirements to preserve the originalintent thereof in light of such change in GAAP; provided that, until so amended, the Loan Parties’ compliance with such covenants, Letter of Credit Fee and/orCommitment Fee determinations shall be determined on the basis of GAAP in effect immediately before the relevant change in GAAP became effective, untileither such notice is withdrawn or such covenants or definitions are amended in a manner satisfactory to the Borrowers and the Lender, and the Loan Partiesshall provide to the Lender, when they deliver their financial statements pursuant to Section 8.3.1 [Quarterly Financial Statements] and 8.3.2 [AnnualFinancial Statements] of this Agreement, such reconciliation statements as shall be reasonably requested by the Lender.2. REVOLVING CREDIT FACILITY2.1 Revolving Credit Commitment. Subject to the terms and conditions hereof and relying upon the representations and warranties herein setforth, the Lender agrees to make Revolving Credit Loans to the Borrowers at any time or from time to time on or after the date hereof to the Expiration Date;provided that after giving effect to each such Loan (i) the aggregate amount of Revolving Credit Loans from the Lender shall not exceed the Lender’s RevolvingCredit Commitment minus the amount of Letter of Credit Obligations, and (ii) the Revolving Facility Usage shall not exceed the Revolving CreditCommitment. Within such limits of time and amount and subject to the other provisions of this Agreement, the Borrowers may borrow, repay and reborrowpursuant to this Section 2.1. The Obligation of the Borrowers to repay the aggregate unpaid principal amount of the Revolving Credit Loans made by theLender, together with interest thereon, shall be evidenced by a revolving credit Note, dated the Closing Date payable to the order of the Lender in a face amountequal to the Revolving Credit Commitment.2.2 Nature of Lender’s Obligations with Respect to Revolving Credit Loans. The aggregate of the Lender’s Revolving Credit Loans outstandinghereunder to the Borrowers at any - 17 -time shall never exceed its Revolving Credit Commitment minus the Letter of Credit Obligations. The Lender shall have no obligation to make Revolving CreditLoans hereunder on or after the Expiration Date.2.3 Commitment Fees. Accruing from the date hereof until the earlier to occur of the Expiration Date and the date on which the Revolving CreditCommitment is terminated, the Borrowers agree to pay to the Lender a nonrefundable commitment fee (the “Commitment Fee”) equal to 0.125% per annum(computed on the basis of a year of 360 days and actual days elapsed) multiplied by the average daily difference between the amount of (i) the RevolvingCredit Commitment and (ii) the Revolving Facility Usage.2.4 Revolving Credit Loan Requests. Except as otherwise provided herein, the Borrowers may from time to time prior to the Expiration Daterequest the Lender to make Revolving Credit Loans, or renew or convert the Interest Rate Option applicable to existing Revolving Credit Loans pursuant toSection 4.2 [Interest Periods], by delivering to the Lender, not later than 11:00 a.m., (i) three (3) Business Days prior to the proposed Borrowing Date withrespect to the making of Revolving Credit Loans to which the LIBOR Rate Option applies or the conversion to or the renewal of the LIBOR Rate Option for anyLoans, and (ii) the same Business Day of the proposed Borrowing Date with respect to the making of a Revolving Credit Loan to which the Base Rate Optionapplies or the last day of the preceding Interest Period with respect to the conversion to the Base Rate Option for any Loan, of a duly completed request thereforsubstantially in the form of Exhibit 2.4 or a request by telephone immediately confirmed in writing by letter, facsimile or telex in such form (each, a “LoanRequest”), it being understood that the Lender may rely on the authority of any individual making such a telephonic request without the necessity of receiptof such written confirmation. Each Loan Request shall specify the aggregate amount of the proposed Loans comprising each Borrowing Tranche, and, ifapplicable, the Interest Period.2.5 Repayment of Revolving Credit Loans. The Borrowers shall pay accrued interest on the unpaid principal balance of the Note in arrears:(a) for the portion of advances bearing interest under the Base Rate Option, on the [1] day of each month during the term hereof, (b) for the portion ofadvances bearing interest under the LIBOR Rate Option, on the last day of the respective Interest Period for such advance, (c) if any Interest Period is longerthan three (3) months, then also on the three (3) month anniversary of such interest period and every three (3) months thereafter, and (d) for all advances, atmaturity, whether by acceleration of the Note or otherwise, and after maturity, on demand until paid in full. All outstanding principal and accrued interesthereunder shall be due and payable in full on the Expiration Date. If any payment under this Agreement shall become due on a day other than a Business Day,such payment shall be made on the next succeeding Business Day and such extension of time shall be included in computing interest in connection with suchpayment. Each Borrower hereby authorizes the Lender to charge any Borrower’s deposit account at the Lender for any payment when due hereunder.2.6 Use of Proceeds. The proceeds of the Loans shall be used to (i) support working capital and general corporate needs, including the issuance ofLetters of Credit, and/or (ii) finance ongoing capital expenditures and Permitted Acquisitions. - 18 -st2.7 Letter of Credit Subfacility.2.7.1 Issuance of Letters of Credit. The Borrowers may at any time prior to the Expiration Date request the issuance of a standby or tradeletter of credit (a “Standby Letter of Credit”) or Commercial Letter of Credit (each a “Letter of Credit”) denominated in Dollars on behalf of itself oranother Loan Party or any other Subsidiary of the Parent Company, or the amendment or extension of an existing Letter of Credit, by delivering or having suchother Loan Party deliver to the Lender a completed application and agreement for letters of credit, or request for such amendment or extension, as applicable, insuch form as the Lender may specify from time to time by no later than 10:00 a.m. at least five (5) Business Days, or such shorter period as may be agreed toby the Lender, in advance of the proposed date of issuance. Subject to the terms and conditions hereof, the Lender or any of the Lender’s Affiliates will issue aLetter of Credit or agree to such amendment or extension, provided that each Letter of Credit shall (A) have a maximum maturity of twelve (12) months fromthe date of issuance, except in the case of an Evergreen Letter of Credit, and (B) in no event expire later than the date which is 364 days after the ExpirationDate and provided further that in no event shall (i) the Letter of Credit Obligations exceed, at any one time, $10,000,000 (the “Letter of Credit Sublimit”) or(ii) the Revolving Facility Usage exceed, at any one time, the Revolving Credit Commitment. Each request by the Borrowers for the issuance, amendment orextension of a Letter of Credit shall be deemed to be a representation by the Borrowers that they shall be in compliance with the preceding sentence and withSection 7 [Conditions of Lending and Issuance of Letters of Credit] after giving effect to the requested issuance, amendment or extension of such Letter ofCredit. Promptly after its delivery of any Letter of Credit or any amendment to a Letter of Credit to the beneficiary thereof, the Lender will also deliver toBorrowers a true and complete copy of such Letter of Credit or amendment. Upon the request of the Lender (i) if the Lender has honored any full or partialdrawing request under any Letter of Credit and has not been reimbursed therefor as required in this Agreement, or (ii) if, on the Expiration Date, any Letter ofCredit Obligation for any reason remains outstanding, the Borrowers shall, in each case, immediately Cash Collateralize the then outstanding amount of allLetter of Credit Obligations. The Borrowers hereby grant to the Lender a security interest in all cash collateral pledged pursuant to this Section or otherwiseunder this Agreement.2.7.2 Letter of Credit Fees. The Borrowers shall pay to the Lender a fee (the “Letter of Credit Fee”) equal to 1.25% for standby Letters ofCredit (computed on the basis of a year of 360 days and actual days elapsed), which fee shall be computed on the daily average of standby Letter of CreditObligations and shall be payable quarterly in arrears on each Payment Date following issuance of each standby Letter of Credit. The Borrowers shall also payto the Lender for the Lender’s sole account the Lender’s then in effect customary fees and administrative expenses payable with respect to the Letters of Creditas the Lender may generally charge or incur from time to time in connection with the issuance, maintenance, amendment (if any), assignment or transfer (ifany), negotiation, and administration of Letters of Credit to the extent invoiced by the Lender.2.7.3 Disbursements, Reimbursement. In the event of any request for a drawing under a Letter of Credit by the beneficiary or transfereethereof, the Lender will promptly notify the Borrowers thereof. Provided that it shall have received such notice, the - 19 -Borrowers shall reimburse (such obligation to reimburse the Lender shall sometimes be referred to as a “Reimbursement Obligation”) the Lender on each datethat an amount is paid by the Lender under any Letter of Credit (each such date, a “Drawing Date”) by paying to the Lender an amount equal to the amount sopaid by the Lender.2.7.4 Documentation. Each Loan Party agrees to be bound by the terms of the Lender’s application and agreement for letters of credit andthe Lender’s written regulations and customary practices relating to letters of credit, though such interpretation may be different from such Loan Party’s own.In the event of a conflict between such application or agreement and this Agreement, this Agreement shall govern. It is understood and agreed that, except in thecase of gross negligence or willful misconduct, the Lender shall not be liable for any error, negligence and/or mistakes, whether of omission or commission, infollowing any Loan Party’s instructions or those contained in the Letters of Credit or any modifications, amendments or supplements thereto.2.7.5 Determinations to Honor Drawing Requests. In determining whether to honor any request for drawing under any Letter of Credit bythe beneficiary thereof, the Lender shall be responsible only to determine that the documents and certificates required to be delivered under such Letter of Credithave been delivered and that they comply on their face with the requirements of such Letter of Credit.2.7.6 Nature of Participation and Reimbursement Obligations. The Obligations of the Borrowers to reimburse the Lender upon a drawunder a Letter of Credit shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Section 2.7 underall circumstances, including the following circumstances:(i) any set-off, counterclaim, recoupment, defense or other right which the Lender may have against the Borrowers or any other Person forany reason whatsoever, or which any Loan Party may have against the Lender or any of its Affiliates or any other Person for any reason whatsoever;(ii) any lack of validity or enforceability of any Letter of Credit;(iii) any claim of breach of warranty that might be made by any Loan Party or the Lender against any beneficiary of a Letter of Credit, orthe existence of any claim, set-off, recoupment, counterclaim, crossclaim, defense or other right which any Loan Party or the Lender may have at any timeagainst a beneficiary, successor beneficiary any transferee or assignee of any Letter of Credit or the proceeds thereof (or any Persons for whom any suchtransferee may be acting), the Lender or its Affiliates or any other Person, whether in connection with this Agreement, the transactions contemplated herein orany unrelated transaction (including any underlying transaction between any Loan Party or Subsidiaries of a Loan Party and the beneficiary for which anyLetter of Credit was procured);(iv) the lack of power or authority of any signer of (or any defect in or forgery of any signature or endorsement on) or the form of or lackof validity, sufficiency, accuracy, enforceability or genuineness of any draft, demand, instrument, certificate or other document - 20 -presented under or in connection with any Letter of Credit, or any fraud or alleged fraud in connection with any Letter of Credit, or the transport of anyproperty or provision of services relating to a Letter of Credit, in each case even if the Lender or any of its Affiliates has been notified thereof;(v) payment by the Lender or any of its Affiliates under any Letter of Credit against presentation of a demand, draft or certificate or otherdocument which does not comply with the terms of such Letter of Credit;(vi) the solvency of, or any acts or omissions by, any beneficiary of any Letter of Credit, or any other Person having a role in anytransaction or obligation relating to a Letter of Credit, or the existence, nature, quality, quantity, condition, value or other characteristic of any property orservices relating to a Letter of Credit;(vii) any failure by the Lender or any of its Affiliates to issue any Letter of Credit in the form requested by any Loan Party, unless theLender has received written notice from such Loan Party of such failure, has had sufficient time and the beneficiary thereof has agreed to amend such Letter ofCredit, and no drawing has been made thereon;(viii) any adverse change in the business, operations, properties, assets, condition (financial or otherwise) or prospects of any Loan Partyor Subsidiaries of a Loan Party;(ix) any breach of this Agreement or any other Loan Document by any party thereto;(x) the occurrence or continuance of an Insolvency Proceeding with respect to any Loan Party;(xi) the fact that an Event of Default or a Potential Default shall have occurred and be continuing;(xii) the fact that the Expiration Date shall have passed or this Agreement or the Revolving Credit Commitment hereunder shall have beenterminated; and(xiii) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing.2.7.7 Indemnity. The Borrowers, jointly and severally, hereby agree to protect, indemnify, pay and save harmless the Lender and any ofits Affiliates that has issued a Letter of Credit from and against any and all claims, demands, liabilities, damages, taxes, penalties, interest, judgments,losses, costs, charges and expenses (including reasonable fees, expenses and disbursements of counsel and allocated costs of internal counsel) which theLender or any of its Affiliates may incur or be subject to as a consequence, direct or indirect, of the issuance of any Letter of Credit, other than as a result of(A) the gross negligence or willful misconduct of the Lender as determined by a final non-appealable judgment of a court of competent jurisdiction or (B) thewrongful dishonor by the Lender or any of the Lender’s Affiliates of a proper demand for payment made under any Letter of Credit, except if such - 21 -dishonor resulted from any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or Official Body.2.7.8 Liability for Acts and Omissions. As between any Loan Party and the Lender, or the Lender’s Affiliates, such Loan Party assumesall risks of the acts and omissions of, or misuse of the Letters of Credit by, the respective beneficiaries of such Letters of Credit. In furtherance and not inlimitation of the foregoing, the Lender shall not be responsible for any of the following, including any losses or damages to any Loan Party or other Person orproperty relating therefrom: (i) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connectionwith the application for an issuance of any such Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate,fraudulent or forged (even if the Lender or its Affiliates shall have been notified thereof); (ii) the validity or sufficiency of any instrument transferring orassigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which mayprove to be invalid or ineffective for any reason; (iii) the failure of the beneficiary of any such Letter of Credit, or any other party to which such Letter ofCredit may be transferred, to comply fully with any conditions required in order to draw upon such Letter of Credit or any other claim of any Loan Partyagainst any beneficiary of such Letter of Credit, or any such transferee, or any dispute between or among any Loan Party and any beneficiary of any Letter ofCredit or any such transferee; (iv) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telegraph, telex orotherwise, whether or not they be in cipher; (v) errors in interpretation of technical terms; (vi) any loss or delay in the transmission or otherwise of anydocument required in order to make a drawing under any such Letter of Credit or of the proceeds thereof; (vii) the misapplication by the beneficiary of anysuch Letter of Credit of the proceeds of any drawing under such Letter of Credit; or (viii) any consequences arising from causes beyond the control of theLender or its Affiliates, as applicable, including any act or omission of any Official Body, and none of the above shall affect or impair, or prevent the vestingof, any of the Lender’s or its Affiliate’s rights or powers hereunder. Nothing in the preceding sentence shall relieve the Lender from liability for the Lender’sgross negligence or willful misconduct in connection with actions or omissions described in such clauses (i) through (viii) of such sentence. In no event shallthe Lender or its Affiliates be liable to any Loan Party for any indirect, consequential, incidental, punitive, exemplary or special damages or expenses(including without limitation attorneys’ fees), or for any damages resulting from any change in the value of any property relating to a Letter of Credit.Without limiting the generality of the foregoing, the Lender and each of its Affiliates (i) may rely on any oral or other communicationbelieved in good faith by the Lender or such Affiliate to have been authorized or given by or on behalf of the applicant for a Letter of Credit, (ii) may honor anypresentation if the documents presented appear on their face substantially to comply with the terms and conditions of the relevant Letter of Credit; (iii) mayhonor a previously dishonored presentation under a Letter of Credit, whether such dishonor was pursuant to a court order, to settle or compromise any claimof wrongful dishonor, or otherwise, and shall be entitled to reimbursement to the same extent as if such presentation had initially been honored, together withany interest paid by the Lender or its Affiliate; (iv) may honor any drawing that is payable upon presentation of a statement advising negotiation or payment,upon - 22 -receipt of such statement (even if such statement indicates that a draft or other document is being delivered separately), and shall not be liable for any failure ofany such draft or other document to arrive, or to conform in any way with the relevant Letter of Credit; (v) may pay any paying or negotiating bank claimingthat it rightfully honored under the laws or practices of the place where such bank is located; and (vi) may settle or adjust any claim or demand made on theLender or its Affiliate in any way related to any order issued at the applicant’s request to an air carrier, a letter of guarantee or of indemnity issued to a carrieror any similar document (each an “Order”) and honor any drawing in connection with any Letter of Credit that is the subject of such Order, notwithstandingthat any drafts or other documents presented in connection with such Letter of Credit fail to conform in any way with such Letter of Credit.In furtherance and extension and not in limitation of the specific provisions set forth above, any action taken or omitted by the Lender orits Affiliates under or in connection with the Letters of Credit issued by it or any documents and certificates delivered thereunder, if taken or omitted in goodfaith, shall not put the Lender or its Affiliates under any resulting liability to any Borrower or any other Loan Party.3. RESERVED4. INTEREST RATES4.1 Interest Rate Options. The Borrowers shall pay interest in respect of the outstanding unpaid principal amount of the Loans as selected by itfrom the Base Rate Option or LIBOR Rate Option set forth below applicable to the Loans, it being understood that, subject to the provisions of this Agreement,the Borrowers may select different Interest Rate Options and different Interest Periods to apply simultaneously to the Loans comprising different BorrowingTranches and may convert to or renew one or more Interest Rate Options with respect to all or any portion of the Loans comprising any Borrowing Tranche;provided that there shall not be at any one time outstanding more than six (6) Borrowing Tranches in the aggregate among all of the Loans and providedfurther that if an Event of Default exists and is continuing, the Borrowers may not request, convert to, or renew the LIBOR Rate Option for any Loans and theLender may demand that all existing Borrowing Tranches bearing interest under the LIBOR Rate Option shall be converted immediately to the Base RateOption, subject to the obligation of the Borrowers to pay any indemnity under Section 5.7 [Indemnity] in connection with such conversion. If at any time thedesignated rate applicable to any Loan made by the Lender exceeds the Lender’s highest lawful rate, the rate of interest on such Loan shall be limited to theLender’s highest lawful rate.4.1.1 Revolving Credit Interest Rate Options. The Borrowers shall have the right to select from the following Interest Rate Optionsapplicable to the Revolving Credit Loans:(i) Revolving Credit Base Rate Option: A fluctuating rate per annum (computed on the basis of a year of 365 or 366 days, as the casemay be, and actual days elapsed) equal to the Base Rate, such interest rate to change automatically from time to time effective as of the effective date of eachchange in the Base Rate; or - 23 -(ii) Revolving Credit LIBOR Rate Option: A rate per annum (computed on the basis of a year of 360 days and actual days elapsed) equalto the LIBOR Rate plus 1.25%.4.1.2 Reserved.4.1.3 Rate Quotations. The Borrowers may call the Lender on or before the date on which a Loan Request is to be delivered to receive anindication of the rates then in effect, but it is acknowledged that such projection shall not be binding on the Lender nor affect the rate of interest whichthereafter is actually in effect when the election is made.4.2 Interest Periods. At any time when the Borrowers shall select, convert to or renew a LIBOR Rate Option, the Borrowers shall notify the Lenderthereof at least three (3) Business Days prior to the effective date of such LIBOR Rate Option by delivering a Loan Request. The notice shall specify an InterestPeriod during which such Interest Rate Option shall apply. Notwithstanding the preceding sentence, in the case of the renewal of a LIBOR Rate Option at theend of an Interest Period, the first day of the new Interest Period shall be the last day of the preceding Interest Period, without duplication in payment of interestfor such day.4.3 Interest After Default. To the extent permitted by Law, upon the occurrence of an Event of Default and until such time such Event of Defaultshall have been cured or waived, and at the discretion of the Lender:4.3.1 Letter of Credit Fees, Interest Rate. The Letter of Credit Fees and the rate of interest for each Loan otherwise applicable pursuant toSection 2.7.2 [Letter of Credit Fees] or Section 4.1 [Interest Rate Options], respectively, shall be increased by 2.0% per annum;4.3.2 Other Obligations. Each other Obligation hereunder if not paid when due shall bear interest at a rate per annum equal to the sum ofthe rate of interest applicable under the Revolving Credit Base Rate Option plus an additional 2.0% per annum from the time such Obligation becomes due andpayable and until it is paid in full; and4.3.3 Acknowledgment. The Borrowers acknowledge that the increase in rates referred to in this Section 4.3 reflects, among other things,the fact that such Loans or other amounts have become a substantially greater risk given their default status and that the Lender is entitled to additionalcompensation for such risk; and all such interest shall be payable by Borrowers upon demand by Lender.4.4 LIBOR Rate Unascertainable; Illegality; Increased Costs; Deposits Not Available.4.4.1 Unascertainable. If on any date on which a LIBOR Rate would otherwise be determined, the Lender shall have determined that:(i) adequate and reasonable means do not exist for ascertaining such LIBOR Rate, or(ii) a contingency has occurred which materially and adversely affects the - 24 -London interbank eurodollar market relating to the LIBOR Rate,then the Lender shall have the rights specified in Section 4.4.3 [Lender’s Rights].4.4.2 Illegality; Increased Costs; Deposits Not Available. If at any time the Lender shall have determined that:(i) the making, maintenance or funding of any Loan to which a LIBOR Rate Option applies has been made impracticable or unlawful bycompliance by the Lender in good faith with any Law or any interpretation or application thereof by any Official Body or with any request or directive of anysuch Official Body (whether or not having the force of Law), or(ii) such LIBOR Rate Option will not adequately and fairly reflect the cost to the Lender of the establishment or maintenance of any suchLoan, or(iii) after making all reasonable efforts, deposits of the relevant amount in Dollars for the relevant Interest Period for a Loan, or to banksgenerally, to which a LIBOR Rate Option applies, respectively, are not available to the Lender with respect to such Loan, or to banks generally, in theinterbank eurodollar market,then the Lender shall have the rights specified in Section 4.4.3 [Lender’s Rights].4.4.3 Lender’s Rights. In the case of any event specified in Section 4.4.1 [Unascertainable] above, the Lender shall promptly so notify theBorrowers thereof, and in the case of an event specified in Section 4.4.2 [Illegality; Increased Costs; Deposits Not Available] above, the Lender shall promptlyso notify the Borrowers and endorse a certificate to such notice as to the specific circumstances of such notice. Upon such date as shall be specified in suchnotice (which shall not be earlier than the date such notice is given), the obligation of the Lender, to allow the Borrowers to select, convert to or renew a LIBORRate Option shall be suspended until the Lender shall have later notified the Borrowers, of the Lender’s determination that the circumstances giving rise tosuch previous determination no longer exist. If at any time the Lender makes a determination under Section 4.4.1 [Unascertainable] and the Borrowers havepreviously notified the Lender of its selection of, conversion to or renewal of a LIBOR Rate Option and such Interest Rate Option has not yet gone into effect,such notification shall be deemed to provide for selection of, conversion to or renewal of the Base Rate Option otherwise available with respect to such Loans. Ifthe Lender notifies the Borrowers of a determination under Section 4.4.2 [Illegality; Increased Costs; Deposits Not Available], the Borrowers shall, subject tothe Borrowers’ indemnification Obligations under Section 5.7 [Indemnity], as to any Loan of the Lender to which a LIBOR Rate Option applies, on the datespecified in such notice either (i) as applicable, convert such Loan to the Base Rate Option otherwise available with respect to such Loan, or (ii) prepay suchLoan in accordance with Section 5.3 [Voluntary Prepayments]. Absent due notice from the Borrowers of conversion or prepayment, such Loan shallautomatically be converted to the Base Rate Option otherwise available with respect to such Loan upon such specified date.4.5 Selection of Interest Rate Options. If the Borrowers fail to select a new Interest Period to apply to any Borrowing Tranche of Loans under theLIBOR Rate Option at the - 25 -expiration of an existing Interest Period applicable to such Borrowing Tranche in accordance with the provisions of Section 4.2 [Interest Periods], theBorrowers shall be deemed to have converted such Borrowing Tranche to the Revolving Credit Base Rate Option, commencing upon the last day of the existingInterest Period.5. PAYMENTS5.1 Payments. All payments and prepayments to be made in respect of principal, interest, Commitment Fees, Letter of Credit Fees or other fees oramounts due from the Borrowers hereunder shall be payable prior to 4:00 p.m. on the date when due without presentment, demand, protest or notice of anykind, all of which are hereby expressly waived by the Borrowers, and without set-off, counterclaim or other deduction of any nature, and an action thereforshall immediately accrue. Such payments shall be made to the Lender at the Principal Office for the account of the Lender in Dollars and in immediatelyavailable funds. The Lender’s statement of account, ledger or other relevant record shall, in the absence of manifest error, be conclusive as the statement of theamount of principal of and interest on the Loans and other amounts owing under this Agreement and shall be deemed an “account stated.”5.2 Interest Payment Dates. Interest on Loans to which the Base Rate Option applies shall be due and payable in arrears on the first day of eachcalendar month. Interest on Loans to which the LIBOR Rate Option applies shall be due and payable on the last day of each Interest Period for those Loans.Interest on the principal amount of each Loan or other monetary Obligation shall be due and payable on demand after such principal amount or other monetaryObligation becomes due and payable (whether on the stated Expiration Date, upon acceleration or otherwise).5.3 Voluntary Prepayments or Revolving Credit Commitment Reductions. The Borrowers shall have the right at their option from time to time toprepay the Loans or reduce the unborrowed Revolving Credit Commitment in whole or part without premium or penalty (except as provided in Section 5.5[Increased Costs; Yield Protection] and Section 5.7 [Indemnity]).5.4 Reserved.5.5 Increased Costs; Yield Protection. Within ten (10) Business Days of written demand therefor, together with written evidence of thejustification therefor, the Borrowers jointly and severally agree to pay the Lender all direct costs incurred, any losses suffered or payments made by the Lenderas a result of any Change in Law (hereinafter defined), imposing any reserve (without duplication of the LIBOR Reserve), deposit, allocation of capital orsimilar requirement (including without limitation, Regulation D of the Board of Governors of the Federal Reserve System) on the Lender, its holding companyor any of their respective assets relative to the Revolving Credit Commitment of Revolving Credit Loans. “Change in Law” means the occurrence, after thedate of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule,regulation or treaty or in the administration, interpretation, implementation or application thereof by any governmental authority or (c) the making or issuanceof any request, rule, guideline or directive (whether or not having the force of law) by any governmental authority; provided that - 26 -notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines ordirectives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Lender for InternationalSettlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in eachcase pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued. Notwithstanding theforegoing, Borrowers shall not be required to compensate the Lender pursuant to the foregoing provisions of this Section for any increased costs incurred orreductions suffered more than one (1) year prior to the date that Lender notifies the Borrowers of the change giving rise to such increased costs or reductionsand of Lender’s intention to claim compensation therefor (except that, if the change giving rise to such increased costs or reductions is retroactive, then the one(1) year period referred to above shall be extended to include the period of retroactive effect thereof).5.6 No Offsets. Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be withoutdeduction or withholding for any taxes, offsets or other deductions.5.7 Indemnity. Each Borrower jointly and severally agrees to indemnify the Lender against any liabilities, losses or expenses (including, withoutlimitation, loss of margin, any loss or expense sustained or incurred in liquidating or employing deposits from third parties, and any loss or expense incurredin connection with funds acquired to effect, fund or maintain any advance (or any part thereof) bearing interest under the LIBOR Rate Option which theLender sustains or incurs as a consequence of either (i) the Borrowers’ failure to make a payment on the due date thereof, (ii) the Borrowers’ revocation(expressly, by later inconsistent notices or otherwise) in whole or in part of any notice given to Lender to request, convert, renew or prepay any advance bearinginterest under the LIBOR Rate Option, or (iii) the Borrowers’ payment or prepayment (whether voluntary, after acceleration of the maturity of this Agreement orotherwise) or conversion of any advance bearing interest under the LIBOR Rate Option on a day other than the last day of the applicable Interest Period. Anotice as to any amounts payable pursuant to this paragraph (including calculations with a reasonable level of detail, when available) given to the Borrowersby the Lender shall, in the absence of manifest error, be conclusive and shall be payable within ten (10) Business Days of written demand therefor. TheBorrowers’ indemnification obligations hereunder shall survive the payment in full of the advances and all other amounts payable hereunder.5.8 Interbank Market Presumption. For all purposes of this Agreement and each Note with respect to any aspects of the LIBOR Rate, any Loanunder the LIBOR Rate Option, the Lender shall be presumed to have obtained rates, funding, currencies, deposits, and the like in the Relevant InterbankMarket regardless of whether it did so or not; and, the Lender’s determination of amounts payable under, and actions required or authorized by, Section 5.5[Increased Costs; Yield Protection] and Section 5.7 [Indemnity] shall be calculated, at the Lender’s option, as though the Lender funded each BorrowingTranche of Loans under the LIBOR Rate Option through the purchase of deposits of the types and maturities corresponding to the deposits used as a referencein accordance with the terms hereof in determining the LIBOR Rate applicable to such Loans, whether in fact that is the case. - 27 -6. REPRESENTATIONS AND WARRANTIESThe Loan Parties, jointly and severally, represent and warrant to the Lender as follows:6.1.1 Organization and Qualification; Power and Authority; Compliance With Laws; Title to Properties; Event of Default. Each LoanParty and each Subsidiary of each Loan Party (i) is a corporation, partnership or limited liability company duly organized, validly existing and in goodstanding under the laws of its jurisdiction of organization, (ii) has the lawful power to own or lease its properties and to engage in the business it presentlyconducts or proposes to conduct, (iii) is duly licensed or qualified and in good standing in each jurisdiction where the property owned or leased by it or thenature of the business transacted by it or both makes such licensing or qualification necessary, except where the failure to do so would not result in a MaterialAdverse Change, (iv) has full power to enter into, execute, deliver and carry out this Agreement and the other Loan Documents to which it is a party, to incurthe Indebtedness contemplated by the Loan Documents and to perform its Obligations under the Loan Documents to which it is a party, and all such actionshave been duly authorized by all necessary proceedings on its part, (v) is in compliance in all material respects with all applicable Laws (other thanEnvironmental Laws which are specifically addressed in Section 6.1.14 [Environmental Matters]) in all jurisdictions in which any Loan Party or Subsidiaryof any Loan Party is presently or will be doing business, except where the failure to do so would not constitute a Material Adverse Change, and (vi) has goodand marketable title to or valid leasehold interest in all properties, assets and other rights which it purports to own or lease or which are reflected as owned orleased on its books and records, free and clear of all Liens and encumbrances except Permitted Liens. No Event of Default or Potential Default exists or iscontinuing.6.1.2 Subsidiaries and Owners; Investment Companies. Schedule 6.1.2 states as of the Closing Date (i) the name of each of the ParentCompany’s Subsidiaries, its jurisdiction of organization and the amount, percentage and type of equity interests in such Subsidiary (the “SubsidiaryEquity Interests”), (ii) the name of each holder of an equity interest in the Parent Company (in the case of the Parent Company, such disclosure is limited toeach holder having an equity interest of 5% or more) and its Subsidiaries, the amount, percentage and type of such equity interest (the “Parent CompanyEquity Interests”), and (iii) any options, warrants or other rights outstanding to purchase any such equity interests referred to in clause (i) or(iii) (collectively with the Subsidiary Equity Interests and Parent Company Equity Interests, the “Equity Interests”). The Parent Company and each of itsSubsidiaries has good and marketable title to all of the Subsidiary Equity Interests it purports to own, free and clear in each case of any Lien, other thanPermitted Liens, and all such Subsidiary Equity Interests have been validly issued, fully paid and are nonassessable. None of the Loan Parties orSubsidiaries of any Loan Party is an “investment company” registered or required to be registered under the Investment Company Act of 1940 or under the“control” of an “investment company” as such terms are defined in the Investment Company Act of 1940 and shall not become such an “investmentcompany” or under such “control.”6.1.3 Validity and Binding Effect. This Agreement and each of the other Loan Documents (i) has been duly and validly executed anddelivered by each Loan Party named as a - 28 -party thereto, and (ii) constitutes, or will constitute, legal, valid and binding obligations of each Loan Party which is or will be a party thereto, enforceableagainst such Loan Party in accordance with its terms.6.1.4 No Conflict; Material Agreements; Consents. Neither the execution and delivery of this Agreement or the other Loan Documents byany Loan Party nor the consummation of the transactions herein or therein contemplated or compliance with the terms and provisions hereof or thereof by anyof them will conflict with, constitute a default under or result in any breach of (i) the terms and conditions of the certificate of incorporation, bylaws,certificate of limited partnership, partnership agreement, certificate of formation, limited liability company agreement or other organizational documents of anyLoan Party or (ii) any Law or any material agreement or instrument or order, writ, judgment, injunction or decree to which any Loan Party or any of itsSubsidiaries is a party or by which it or any of its Subsidiaries is bound or to which it is subject, or result in the creation or enforcement of any Lien, chargeor encumbrance whatsoever upon any property (now or hereafter acquired) of any Loan Party or any of its Subsidiaries (other than Liens granted under theLoan Documents). There is no default under such material agreement (referred to above) and none of the Loan Parties or their Subsidiaries is bound by anycontractual obligation, or subject to any restriction in any organization document, or any requirement of Law, in each case, which would result in a MaterialAdverse Change. No consent, approval, exemption, order or authorization of, or a registration or filing with, any Official Body or any other Person is requiredby any Law or any agreement in connection with the execution, delivery and carrying out of this Agreement and the other Loan Documents, except for suchconsents and approvals that have been duly obtained.6.1.5 Litigation. There are no actions, suits, proceedings or investigations pending or, to the knowledge of any Loan Party, threatenedagainst such Loan Party or any Subsidiary of such Loan Party at law or in equity before any Official Body which, if adversely determined, individually or inthe aggregate would result in any Material Adverse Change. None of the Loan Parties or any Subsidiaries of any Loan Party is in violation of any order, writ,injunction or any decree of any Official Body which would result in any Material Adverse Change.6.1.6 Financial Statements.(i) Historical Statements. The Parent Company and its Subsidiaries (including Borrowers) have delivered to the Lender copies (by filingthereof on EDGAR) of their audited consolidated year-end financial statements for and as of the end of the fiscal year ended December 31, 2011. In addition,the Parent Company and its Subsidiaries (including Borrowers) have delivered to the Lender copies of their (A) unaudited consolidated interim financialstatements for the fiscal year to date and as of the end of the fiscal quarter ended March 31, 2012 and (B) unaudited consolidated interim financial statementsfor the fiscal year to date as of the fiscal quarter ended June 30, 2012 (all such annual and interim statements being collectively referred to as the“Statements”). The Statements were compiled from the books and records maintained by the Parent Company and its Subsidiaries’ management, are correctand complete and fairly represent the consolidated and consolidating financial condition of the Parent Company and its Subsidiaries (including Borrowers) asof the respective dates thereof and the - 29 -results of operations for the fiscal periods then ended and have been prepared in accordance with GAAP consistently applied, subject (in the case of the interimstatements) to normal year-end audit adjustments.(ii) Accuracy of Financial Statements. Neither any Borrower nor any Subsidiary of the Borrowers has any liabilities, contingent orotherwise, or forward or long-term commitments that are not disclosed in the Statements or in the notes thereto, and except as disclosed therein there are nounrealized or anticipated losses from any commitments of any Borrower or any Subsidiary of the Borrowers which may cause a Material Adverse Change.Since December 31, 2011, and with respect to future advances, since the date of the most recently delivered audited financial statements delivered pursuant tothis Agreement, no Material Adverse Change has occurred.6.1.7 Margin Stock. None of the Loan Parties or any Subsidiaries of any Loan Party engages or intends to engage principally, or as one ofits important activities, in the business of extending credit for the purpose, immediately, incidentally or ultimately, of purchasing or carrying margin stock(within the meaning of Regulation U, T or X as promulgated by the Board of Governors of the Federal Reserve System). No part of the proceeds of any Loanhas been or will be used, immediately, incidentally or ultimately, to purchase or carry any margin stock or to extend credit to others for the purpose ofpurchasing or carrying any margin stock or which is inconsistent with the provisions of the regulations of the Board of Governors of the Federal ReserveSystem. None of the Loan Parties or any Subsidiary of any Loan Party holds or intends to hold margin stock in such amounts that more than 25% of thereasonable value of the assets of any Loan Party or Subsidiary of any Loan Party are or will be represented by margin stock.6.1.8 Full Disclosure. Neither this Agreement nor any other Loan Document, nor any certificate, statement, agreement or other documentsfurnished to the Lender in connection herewith or therewith (as modified or supplemented, but excluding financial projection information) contains anymaterial misstatement of fact or omits to state a material fact necessary in order to make the statements contained herein and therein, in light of thecircumstances under which they were made, not misleading. With respect to projected financial information, the Borrowers represent and warrant only thatsuch information reflects their good faith estimates as of the date of preparation thereof, based upon methods and data the Borrowers believe to be reasonableand accurate, notwithstanding that actual results may differ materially from such projected financial information.6.1.9 Taxes. All federal tax returns, and all state, local and other tax returns as to which the failure to file would result in a MaterialAdverse Change, required to have been filed with respect to each Loan Party and each Subsidiary of each Loan Party have been filed, and payment oradequate provision has been made for the payment of all taxes, fees, assessments and other governmental charges which have or may become due pursuant tosaid returns or to assessments received, except to the extent that such taxes, fees, assessments and other charges are being contested in good faith byappropriate proceedings diligently conducted and for which such reserves or other appropriate provisions, if any, as shall be required by GAAP shall havebeen made. - 30 -6.1.10 Patents, Trademarks, Copyrights, Licenses, Etc. Each Loan Party and each Subsidiary of each Loan Party owns or possesses allthe material patents, trademarks, service marks, trade names, copyrights, licenses, registrations, franchises, permits and rights necessary to own and operateits properties and to carry on its business as presently conducted and planned to be conducted by such Loan Party or Subsidiary, without known possible,alleged or actual conflict with the rights of others (except for any such conflict which would not result in a Material Adverse Change).6.1.11 Liens in the Collateral. The Liens in the Collateral granted to the Lender pursuant to the Loan Documents, other than Liens inSubsidiary Equity Interests in Foreign Subsidiaries as to which the Lender has not required that it obtain Prior Security Interests, constitute and will continueto constitute Prior Security Interests and are subject only to Permitted Liens. All filing fees and other expenses in connection with the perfection of such Lienshave been or will be paid by the Borrowers.6.1.12 Insurance. The properties of each Loan Party and each of its Subsidiaries are insured pursuant to policies and other bonds whichare valid and in full force and effect and which provide adequate coverage from reputable and financially sound insurers in amounts sufficient to insure theassets and risks of each such Loan Party and Subsidiary in accordance with prudent business practice in the industry of such Loan Parties and Subsidiaries.6.1.13 ERISA Compliance.(i) Each Pension Plan is in compliance in all material respects with the applicable provisions of ERISA, the Code and other federal or stateLaws, except where such failure to comply would not result in a Material Adverse Change. Each Pension Plan that is intended to qualify under Section 401(a)of the Code has received a favorable determination letter or prototype opinion letter from the IRS or an application for such a letter is currently being processedby the IRS with respect thereto and, to the best knowledge of Borrowers, nothing has occurred which would prevent, or cause the loss of, such qualification.Each Borrower and each ERISA Affiliate have made all required contributions to each Pension Plan, and no application for a funding waiver or an extension ofany amortization period pursuant to Section 412 of the Code has been made with respect to any Pension Plan.(ii) No ERISA Event has occurred or is reasonably expected to occur; (a) each Pension Plan is in compliance in all material respects withthe minimum funding requirements of Section 412 and 430 of the Code; (b) neither any Borrower nor any ERISA Affiliate has incurred, or reasonably expectsto incur, any liability under Title IV of ERISA with respect to any Pension Plan (other than premiums due and not delinquent under Section 4007 of ERISA orcontributions due and not delinquent); (c) neither any Borrower nor any ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and noevent has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Sections 4201 or 4243 of ERISA withrespect to a Multiemployer Plan; and (d) neither any Borrower nor any ERISA Affiliate has engaged in a transaction that could be subject to Sections 4069 or4212(c) of ERISA. - 31 -(iii) Notwithstanding the foregoing, as of the Closing Date, no Loan Party or ERISA Affiliate sponsors, maintains, participates in or hasany liability under any Pension Plan.6.1.14 Environmental Matters. Each Loan Party is and, to the knowledge of each respective Loan Party and each of its Subsidiaries isand has been (a) as of the Closing Date, in compliance with applicable Environmental Laws except as disclosed on Schedule 6.1.14, provided that suchmatters so disclosed would not in the aggregate result in a Material Adverse Change, and (b) as of any other date on which the representations set forth in thisSection 6.1.14 are or are deemed made, in compliance with applicable Environmental Laws, except for any non-compliance which would not result in aMaterial Adverse Change.6.1.15 Solvency. Before and after giving effect to the initial Loans hereunder, each of the Loan Parties is Solvent.7. CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDITThe obligation of the Lender to make Loans and to issue Letters of Credit hereunder is subject to the performance by each of the Loan Parties of itsObligations to be performed hereunder at or prior to the making of any such Loans or issuance of such Letters of Credit and to the satisfaction of the followingfurther conditions:7.1 First Loans and Letters of Credit.7.1.1 Deliveries. On the Closing Date, the Lender shall have received each of the following in form and substance satisfactory to theLender:(i) A certificate of each of the Loan Parties signed by an Authorized Officer, dated the Closing Date stating that (w) all representations andwarranties of the Loan Parties set forth in this Agreement are true and correct in all material respects (except for those representations and warranties that arequalified by reference to materiality, which shall be true and correct in all respects), (x) no Event of Default or Potential Default exists, and (y) no MaterialAdverse Change has occurred since December 31, 2011;(ii) A certificate dated the Closing Date and signed by the Secretary or an Assistant Secretary of each of the Loan Parties, certifying asappropriate as to: (a) all action taken by each Loan Party to duly authorize the execution, delivery and performance of this Agreement and the other LoanDocuments; (b) the names of the Authorized Officers authorized to sign the Loan Documents and their true signatures; (c) copies of its organizationaldocuments as in effect on the Closing Date certified by the appropriate state official where such documents are filed in a state office; and (d) certificates fromthe appropriate state officials as to the continued existence and good standing of each Loan Party in each state where organized;(iii) This Agreement and each of the other Loan Documents duly signed by an Authorized Officer and each other party thereto;(iv) All appropriate financing statements and appropriate stock powers and certificates evidencing the pledged Subsidiary Equity Interestsand valid perfection of the Liens - 32 -of the Loan Documents therein and in the Collateral as first priority Liens subject to no Liens except for Permitted Liens, including without limitation, exceptas relates to Subsidiary Equity Interests in Foreign Subsidiaries as to which the Lender has not required that it obtain Prior Security Interests, valid perfection(or foreign equivalent) of the Liens under applicable foreign law;(v) Written opinions of U.S. and foreign counsel for the Loan Parties, dated the Closing Date;(vi) Evidence that adequate insurance, including flood insurance, if applicable, required to be maintained under this Agreement is in fullforce and effect, in form and substance reasonably satisfactory to the Lender;(vii) A duly completed Compliance Certificate as of the last day of the fiscal quarter of Borrowers most recently ended prior to the ClosingDate, signed by an Authorized Officer of Borrowers;(viii) All material consents required to effectuate the transactions contemplated hereby;(ix) A Lien search in acceptable scope and with acceptable results;(x) Such environmental information and reports as the Lender may have requested;(xi) A certificate of the Borrowers certifying as the delivery of each of the deliveries of the Borrowers to the Lender required in Sections7.1.1(a) through (x) (but not certifying as to the Lender’s satisfaction therewith);(xii) A Loan Request for any Loans being requested on the Closing Date; and(xiii) Such other documents in connection with such transactions as the Lender or said counsel may have reasonably requested.7.1.2 Payment of Fees. The Borrowers shall have paid all fees payable on or before the Closing Date as required by this Agreement or anyother Loan Document.7.2 Each Loan or Letter of Credit. At the time of making any Loans or issuing, extending or increasing any Letters of Credit and after giving effectto the proposed extensions of credit: (i) the representations and warranties of the Loan Parties in the Loan Documents shall then be true and correct in allmaterial respects (except for those representations and warranties that are qualified by reference to materiality, which shall be true and correct in all respects),(ii) no Event of Default or Potential Default shall have occurred and be continuing, and (iii) the Borrowers shall have delivered to the Lender a duly executedand completed Loan Request or an application for a Letter of Credit, as the case may be.8. COVENANTS - 33 -The Loan Parties, jointly and severally, covenant and agree that until Payment In Full, the Loan Parties shall comply at all times with the followingcovenants:8.1 Affirmative Covenants.8.1.1 Preservation of Existence, Etc. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain its legal existence as acorporation, limited partnership or limited liability company and its license or qualification and good standing in each jurisdiction in which its ownership orlease of property or the nature of its business makes such license or qualification necessary, except as otherwise expressly permitted in Section 8.2.6[Liquidations, Mergers, Etc.].8.1.2 Payment of Liabilities, Including Taxes, Etc. Each Loan Party shall, and shall cause each of its Subsidiaries to, duly pay anddischarge all liabilities to which it is subject or which are asserted against it, promptly as and when the same shall become due and payable, including alltaxes, assessments and governmental charges upon it or any of its properties, assets, income or profits, prior to the date on which penalties attach thereto,except to the extent that such liabilities, including taxes, assessments or charges, are being contested in good faith and by appropriate and lawful proceedingsdiligently conducted and for which such reserve or other appropriate provisions, if any, as shall be required by GAAP shall have been made.8.1.3 Maintenance of Insurance. Each Loan Party shall, and shall cause each of its Subsidiaries to, insure its properties and assetsagainst loss or damage by fire and such other insurable hazards as such assets are commonly insured (including fire, extended coverage, property damage,workers’ compensation, public liability and business interruption insurance) and against other risks (including errors and omissions) in such amounts assimilar properties and assets are insured by prudent companies in similar circumstances carrying on similar businesses, and with reputable and financiallysound insurers.8.1.4 Maintenance of Properties and Leases. Each Loan Party shall, and shall cause each of its Subsidiaries to, maintain in good repair,working order and condition (ordinary wear and tear excepted) in accordance with the general practice of other businesses of similar character and size, all ofthose properties useful or necessary to its business, and from time to time, such Loan Party will make or cause to be made all commercially reasonablerepairs, renewals or replacements thereof.8.1.5 Visitation Rights. Each Loan Party shall, and shall cause each of its Subsidiaries to, permit any of the officers or authorizedemployees or representatives of the Lender to visit and inspect any of its properties and to examine and make excerpts from its books and records and discussits business affairs, finances and accounts with its officers, all in such detail and at such times and as often as the Lender may reasonably request, providedthat the Lender shall provide the Borrowers with reasonable notice prior to any visit or inspection.8.1.6 Keeping of Records and Books of Account. Each Borrower shall, and shall cause each Subsidiary of the Borrowers to, maintainand keep proper books of record and account which enable the Borrowers and their Subsidiaries to issue financial statements in - 34 -accordance with GAAP and as otherwise required by applicable Laws of any Official Body having jurisdiction over any Borrower or any Subsidiary of theBorrowers, and in which full, true and correct entries shall be made in all material respects of all its dealings and business and financial affairs.8.1.7 Compliance with Laws; Use of Proceeds. Each Loan Party shall, and shall cause each of its Subsidiaries to, comply with allapplicable Laws, including all Environmental Laws, in all material respects. The Loan Parties will use the Letters of Credit and the proceeds of the Loans onlyin accordance with Section 2.6 [Use of Proceeds] and as permitted by applicable Law.8.1.8 Further Assurances. Each Loan Party shall, from time to time, at its expense, faithfully preserve and protect the Lender’s Lien onand Prior Security Interest in the Collateral whether now owned or hereafter acquired as a continuing first priority perfected Lien, subject only to PermittedLiens, and shall do such other acts and things as the Lender in its sole discretion may deem necessary or advisable from time to time in order to preserve,perfect and protect the Liens granted under the Loan Documents and to exercise and enforce its rights and remedies thereunder with respect to the Collateral.8.1.9 Depository Accounts. The Borrowers shall maintain their primary depository accounts and treasury management services with theLender.8.2 Negative Covenants.8.2.1 Indebtedness. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time create, incur, assumeor suffer to exist any Indebtedness, except:(i) Indebtedness under the Loan Documents;(ii) [intentionally omitted];(iii) Existing Indebtedness as set forth on Schedule 8.2.1 (including any extensions or renewals thereof; provided there is no increase in theamount thereof or other significant change in the terms thereof unless otherwise specified on Schedule 8.2.1;(iv) Indebtedness incurred with respect to Purchase Money Security Interests and Capital Leases so long as no Potential Default or Eventof Default will be caused by the incurrence thereof hereunder (including without limitation under a financial covenant set forth herein);(v) Any (i) Lender Provided Interest Rate Hedge, (ii) other Interest Rate Hedges approved by the Lender and not otherwise causing aPotential Default or Event of Default hereunder (including without limitation under a financial covenant set forth herein), or (iii) Indebtedness under any OtherLender Provided Financial Services Product; provided however, the Loan Parties and their Subsidiaries shall enter into a Lender Provided Interest Rate Hedgesor other Interest Rate Hedges only for hedging (rather than speculative) purposes; - 35 -(vi) Guaranties permitted by Section 8.2.3 [Guaranties];(vii) Indebtedness arising from intercompany loans and advances permitted by Section 8.2.4 [Loans and Investments];(viii) Indebtedness assumed in a Permitted Acquisition so long as no Potential Default or Event of Default will be caused by the incurrencethereof hereunder (including without limitation under a financial covenant set forth herein);(ix) unsecured Subordinated Debt;(x) additional unsecured Indebtedness so long as no Potential Default or Event of Default will be caused by the incurrence thereof hereunder(including without limitation under a financial covenant set forth herein); and(xi) additional secured Indebtedness so long as no Potential Default or Event of Default will be caused by the incurrence thereof hereunder(including without limitation under a financial covenant set forth herein).8.2.2 Liens; Lien Covenants. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time create, incur,assume or suffer to exist any Lien on any of its property or assets, tangible or intangible, now owned or hereafter acquired, or agree or become liable to do so,except Permitted Liens.8.2.3 Guaranties. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time, directly or indirectly,become or be liable in respect of any Guaranty, or assume, guarantee, become surety for, endorse or otherwise agree, become or remain directly or contingentlyliable upon or with respect to any obligation or liability of any other Person, except for (i) Indebtedness in the form of Guaranties of Indebtedness permittedunder Section 8.2.1 [Indebtedness], provided that the aggregate amount of such Guaranties by the Parent Company or its domestic Subsidiaries of obligationsof foreign Subsidiaries shall not exceed in the aggregate at any time $5,000,000, and (iii) Guaranties in favor of the Lender.8.2.4 Loans and Investments. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, at any time make orsuffer to remain outstanding any loan or advance to, or purchase, acquire or own any stock, bonds, notes or securities of, or any partnership interest (whethergeneral or limited) or limited liability company interest in, or any other investment or interest in, or make any capital contribution to, any other Person, oragree, become or remain liable to do any of the foregoing, except:(i) trade credit extended on usual and customary terms in the ordinary course of business;(ii) loans or advances to employees in the ordinary course of business;(iii) Permitted Investments; - 36 -(iv) loans, advances and investments by: (A) any Loan Party in or to any other Loan Party; (B) any Subsidiary of the Parent Companythat is not a Loan Party in or to any other Subsidiary of the Parent Company that is not a Loan Party; (C) any Subsidiary of the Parent Company that is not aLoan Party in or to any Loan Party, which, if in the form of Indebtedness, is Subordinated Debt; and (D) any Loan Party in any Subsidiary of the ParentCompany that is not a Loan Party, in the case of this clause (D), in an aggregate amount not to exceed $5,000,000 outstanding at any time for all such loans,advances and investments;(v) investments made in connection with Permitted Acquisitions in accordance with Section 8.2.1 [Indebtedness], 8.2.6 [Liquidations,Mergers, Consolidations, Acquisitions] and/or Section 8.2.9 [Subsidiaries]; and(vi) additional loans, advances and investments in any aggregate amount not to exceed $5,000,000 outstanding at any time.8.2.5 Dividends and Related Distributions. Unless no Potential Default or Event of Default is occurring or would be triggered thereby(including without limitation under the financial covenants set forth herein), each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to,make or pay, or agree to become or remain liable to make or pay, any dividend or other distribution of any nature (whether in cash, property, securities orotherwise) on account of or in respect of its shares of capital stock, partnership interests or limited liability company interests on account of the purchase,redemption, retirement or acquisition of its shares of capital stock (or warrants, options or rights therefor), partnership interests or limited liability companyinterests, except dividends or other distributions payable to another Loan Party.8.2.6 Liquidations, Mergers, Consolidations, Acquisitions. Each of the Loan Parties shall not, and shall not permit any of itsSubsidiaries to, dissolve, liquidate or wind-up its affairs, or become a party to any merger or consolidation, or acquire by purchase, lease or otherwise all orsubstantially all of the assets or capital stock of any other Person other than dissolutions and liquidations permitted under Section 8.2.7; provided that:(i) (A) any Loan Party and any Subsidiary of a Loan Party (other than the Borrowers) may consolidate or merge into another Loan Party,and (B) any Subsidiary of the Parent Company that is not a Loan Party may consolidate or merge into a Loan Party or another Subsidiary of the ParentCompany that is not a Loan Party, and(ii) any Loan Party or any Subsidiary thereof may acquire, whether by purchase or by merger, (A) all of the ownership interests ofanother Person or (B) substantially all of assets of another Person or of a business or division of another Person (each, a “Permitted Acquisition”), providedthat each of the following requirements is met for each Permitted Acquisition:a) if such Loan Party or Subsidiary is acquiring the ownership interests in such Person, such Person shall comply with therequirements of Section 8.2.9 [Subsidiaries] promptly following such Permitted Acquisition; - 37 -b) the business acquired, or the business conducted by the Person whose ownership interests are being acquired shall comply withSection 8.2.10 [Continuation of or Change in Business];c) no Potential Default or Event of Default shall exist immediately prior to and after giving effect to such Permitted Acquisition;d) the Borrowers and their Subsidiaries shall be in compliance with the financial covenants set forth herein determined on a proforma basis after giving effect to such Permitted Acquisition (including in such computation (i) Indebtedness or other liabilities assumed or incurred inconnection with such Permitted Acquisition, and (ii) EBITDA attributable to the acquired Person, business or division as if such acquisition had occurred atthe beginning of such period of determination) and the Borrowers shall have delivered to the Lender a Compliance Certificate demonstrating such pro-formacompliance (such certificate to be in form and substance reasonably acceptable to the Lender), at least two (2) Business Days prior to consummating suchPermitted Acquisition; ande) the Loan Parties shall deliver to the Lender as soon as available prior to, or if not available prior to then within five (5) BusinessDays after the consummation of, a Permitted Acquisition copies of any agreements entered into by such Loan Party or Subsidiary in connection with suchPermitted Acquisition and shall deliver to the Lender such other information about such Person or its assets as any Loan Party may reasonably require.8.2.7 Dispositions of Assets or Subsidiaries. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, sell,convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily or involuntarily, any of its properties or assets, tangible or intangible (includingsale, assignment, discount or other disposition of accounts, contract rights, chattel paper, equipment or general intangibles with or without recourse or ofcapital stock, shares of beneficial interest, partnership interests or limited liability company interests of a Subsidiary of such Loan Party), except:(i) transactions involving the sale of inventory in the ordinary course of business;(ii) any sale, transfer or lease of assets in the ordinary course of business which are no longer necessary or required in the conduct of suchLoan Party’s or such Subsidiary’s business;(iii) any sale, transfer or lease of assets by:(A) any Loan Party to another Loan Party;(B) any Subsidiary of the Parent Company that is not a Loan Party to another Subsidiary of the Parent Company that is not a LoanParty;(C) any Subsidiary of the Parent Company that is not a Loan Party to - 38 -a Loan Party, or any Loan Party to any Subsidiary of the Parent Company that is not a Loan Party, in each case in the ordinary course of businesssubstantially consistent with past practice (“Ordinary Course”);(D) any Subsidiary of the Parent Company that is not a Loan Party to a Loan Party, outside the Ordinary Course, provided that theconsideration paid by such Loan Party (x) must not be greater than fair market value, (y) if paid as Indebtedness, is permitted under Section 8.2.1[Indebtedness], and (z) when added with the outstanding loans, investments and advances made by Loan Parties in Subsidiaries of the Parent Company thatare not Loan Parties pursuant to Section 8.2.4(iv)(D), does not exceed $5,000,000 in the aggregate; and(E) any Loan Party to any Subsidiary of the Parent Company that is not a Loan Party, outside the Ordinary Course, provided that(x) the consideration paid by such Subsidiary must not be less than fair market value, (y) if paid as Indebtedness, is permitted under Section 8.2.1[Indebtedness], and (z) the fair market value of such sold, transferred or leased assets, when added with the outstanding loans, investments and advancesmade by Loan Parties in Subsidiaries of the Parent Company that are not Loan Parties pursuant to Section 8.2.4(iv)(D), does not exceed $5,000,000 in theaggregate;(iv) any sale, transfer or lease of assets in the ordinary course of business which are replaced by substitute assets acquired or leased;(v) [intentionally omitted];(vi) dividends and distributions permitted by Section 8.2.5 [Dividends and Related Distributions];(vii) investments, advances and loans permitted by Section 8.2.4 [Loans and Investments];(viii) assignments, licenses and sublicenses of intellectual property in the ordinary course of business; and(ix) any additional sales, transfers or leases of assets for fair market value, the aggregate fair market value of which for all such sales,transfers or leases during any fiscal year does not exceed $2,000,000 for such fiscal year.8.2.8 Affiliate Transactions. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, enter into or carry out anytransaction with any Affiliate of any Loan Party (including purchasing property or services from or selling property or services to any Affiliate of any LoanParty or other Person) unless such transaction is not otherwise prohibited by this Agreement, is entered into in the ordinary course of business upon fair andreasonable arm’s-length terms and in accordance with all applicable Law.8.2.9 Subsidiaries. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to own or create directly or indirectlyany Subsidiaries other than: - 39 -(i) any domestic Subsidiary existing as of the Closing Date which has joined the Loan Documents as a Guarantor as of the Closing Date,and as to which (A) 100% of the issued and outstanding equity interests of such domestic Subsidiary have been pledged to the Lender under the PledgeAgreement and (B) the Lender has been granted a Lien in the Collateral of such domestic Subsidiary under the Security Agreement;(iv) any domestic Subsidiary created or acquired after the Closing Date which joins the Loan Documents as a Guarantor by delivering tothe Lender a signed Guarantor Joinder and other documents in the forms described in Section 7.1 [First Loans] modified as appropriate and in form andsubstance satisfactory to the Lender, and as to which (A) 100% of the issued and outstanding equity interests of such domestic Subsidiary have been pledgedto the Lender under the Pledge Agreement and (B) the Lender has been granted a Lien in the Collateral of such domestic Subsidiary under the SecurityAgreement;(v) any foreign Subsidiary, existing as of the Closing Date as to which, if it is a 1 tier foreign Subsidiary, 65% of all issued andoutstanding equity interests of such 1 tier foreign Subsidiary are pledged to the Lender under the Pledge Agreement, including delivery to the Lender ofdocuments necessary to grant and perfect Prior Security Interests to the Lender in equity interests of such 1 tier foreign Subsidiary under the laws of itsjurisdiction, all of which is satisfactory in form and substance to the Lender, provided that Lender shall not require perfection in such foreign jurisdiction tothe extent (i) such pledge would be unlawful under applicable Law, and (ii) in the reasonable discretion of the Lender (in consultation with the Borrowers), thecosts and burdens of obtaining such pledge are excessive in relation to the value of the security being afforded by such pledge; and(vi) any foreign Subsidiary created or acquired after the Closing Date as to which, if it is a 1 tier foreign Subsidiary, 65% of all issuedand outstanding equity interests of such foreign Subsidiary are pledged to the Lender under the Pledge Agreement, including delivery to the Lender ofdocuments necessary to grant and perfect Prior Security Interests to the Lender in equity interests of such foreign Subsidiary under the laws of its jurisdictionif so required by Lender, all of which is satisfactory in form and substance to the Lender, provided that Lender shall not require perfection in such foreignjurisdiction to the extent (i) such pledge would be unlawful under applicable Law, and (ii) in the reasonable discretion of the Lender (in consultation with theBorrowers), the costs and burdens of obtaining such pledge are excessive in relation to the value of the security being afforded by such pledge.8.2.10 Continuation of or Change in Business. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, engagein any business if, as a result, the general nature of the business in which the Loan Parties and their Subsidiaries, taken as a whole, would then be engagedwould be substantially changed from the general nature of the business in which the Loan Parties and their Subsidiaries, taken as a whole, are engaged on theClosing Date.8.2.11 Fiscal Year. Each Borrower shall not, and shall not permit any Subsidiary of the Borrowers to, change its fiscal year from thetwelve-month period beginning January 1 and ending December 31, without providing at least thirty (30) Business Days prior - 40 -ststststwritten notice to the Lender.8.2.12 Changes in Organizational Documents. Each of the Loan Parties shall not, and shall not permit any of its Subsidiaries to, amendin any respect its certificate of incorporation (including any provisions or resolutions relating to capital stock), by-laws, certificate of limited partnership,partnership agreement, certificate of formation, limited liability company agreement or other organizational documents without, if such change would bematerially adverse to the Lender, providing at least thirty (30) days’ prior written notice to the Lender. Notwithstanding the foregoing, if any Loan Party partyas a grantor under the Pledge Agreement or Security Agreement changes its jurisdiction of organization from that listed on Schedule 6.1.2 or anyone other thansuch Loan Party party as a grantor under the Pledge Agreement comes to own any equity interests pledged under the Pledge Agreement or if any new equityinterests (whether by increase of amount or creation of a new class or type, or otherwise) in any issuer referenced in the Pledge Agreement exist, Borrowers shallprovide Lender with immediate written notice thereof and promptly deliver such documents, instruments or certificates as Lender may require to perfect orcontinue perfection of its Lien pursuant to the Pledge Agreement and Security Agreement and promptly take any other actions required pursuant to the PledgeAgreement or Security Agreement.8.2.13 Maximum Debt Ratio. The Loan Parties shall not at any time permit the ratio of consolidated Funded Debt of the Borrowers andtheir Subsidiaries to Consolidated EBITDA, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, to exceed 2.0 to 1.0.8.2.14 Minimum Fixed Charge Coverage Ratio. The Loan Parties shall not permit the Fixed Charge Coverage Ratio of the Borrowers andtheir Subsidiaries, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, to be less than 1.25 to 1.0.8.2.15 Negative Pledges. Each of the Loan Parties covenants and agrees that it shall not, and shall not permit any of its Subsidiaries to,enter into any Agreement with any Person which, in any manner, whether directly or contingently, prohibits, restricts or limits the right of any of the LoanParties from granting any Liens to the Lender.8.3 Reporting Requirements. The Loan Parties will furnish or cause to be furnished to the Lender:8.3.1 Quarterly Financial Statements. As soon as available and in any event within sixty (60) calendar days after the end of each of thefirst three fiscal quarters in each fiscal year, financial statements of the Parent Company and its Subsidiaries (including Borrowers), consisting of aconsolidated balance sheet as of the end of such fiscal quarter and related consolidated statement of income and consolidated statement of cash flows for thefiscal quarter then ended and the fiscal year through that date, all in reasonable detail and certified (subject to normal year-end audit adjustments) by anAuthorized Officer of the Borrowers as having been prepared in accordance with GAAP, consistently applied, and setting forth in comparative form therespective financial statements for the corresponding date and period in the previous fiscal year. Delivery within the time period specified above of copies of theParent Company’s Report - 41 -on Form 10-Q prepared in compliance with the requirements thereunder and filed with the SEC shall be deemed to satisfy the requirements of this Section.8.3.2 Annual Financial Statements.8.3.2.1 Consolidated Financial Statements. As soon as available and in any event within one hundred twenty (120) days after theend of each fiscal year of the Borrowers, financial statements of the Parent Company and its Subsidiaries (including Borrowers) consisting of a consolidatedbalance sheet as of the end of such fiscal year, and related consolidated statement of income and stockholders’ equity and statement of cash flows for thefiscal year then ended, all in reasonable detail and setting forth in comparative form the financial statements as of the end of and for the preceding fiscal year,and certified by independent certified public accountants of nationally recognized standing reasonably satisfactory to the Lender as presenting fairly, in allmaterial respects, the financial position of the companies being reported upon and their results of operations and cash flows and having been prepared inconformity with GAAP. Delivery within the time period specified above of copies of the Parent Company’s Report on Form 10-K prepared in compliance withthe requirements thereunder and filed with the SEC shall be deemed to satisfy the requirements of this Section; and8.3.2.2 Consolidating Financial Statements. As soon as available and in any event within one hundred twenty (120) days after theend of each fiscal year of the Borrowers, financial statements of the Parent Company and its Subsidiaries (including Borrowers) consisting of a consolidatingbalance sheet as of the end of such fiscal year, and related consolidating statement of income and stockholders’ equity and statement of cash flows for thefiscal year then ended, all in reasonable detail and setting forth in comparative form the financial statements as of the end of and for the preceding fiscal year,and certified (subject to normal year-end audit adjustments) by an Authorized Officer of the Borrowers as having been prepared in accordance with GAAP,consistently applied, and setting forth in comparative form the respective financial statements for the corresponding date and period in the previous fiscal year(it being understood and agreed, however, that the aforementioned consolidating statements may utilize the Parent Company’s internal accounting formatconsistent with past practice).8.3.3 Certificates of the Borrowers. Concurrently with the financial statements of the Borrowers furnished to the Lender pursuant toSections 8.3.1 [Quarterly Financial Statements] and 8.3.2 [Annual Financial Statements], a certificate of the Borrowers signed by an Authorized Officer of theBorrowers in the form of Exhibit 8.3.3.1 (each a “Compliance Certificate”).8.3.4 Notices.8.3.4.1 Default. Promptly after any officer of any Loan Party has learned of the occurrence of an Event of Default or PotentialDefault, a certificate signed by an Authorized Officer setting forth the details of such Event of Default or Potential Default and the action which such LoanParty proposes to take with respect thereto. - 42 -8.3.4.2 Litigation. Promptly after the commencement thereof, notice of all actions, suits, proceedings or investigations before or byany Official Body or any other Person against any Loan Party or Subsidiary of any Loan Party which related to the Collateral or which if adverselydetermined would constitute a Material Adverse Change.8.3.4.3 Organizational Documents. If any amendment to the organizational documents of any Loan Party is required to be deliveredto Lender pursuant to Section 8.2.12, within the time limits set forth in Section 8.2.12 [Changes in Organizational Documents].8.3.4.4 Erroneous Financial Information. Promptly and any in event within five (5) Business Days in the event that the Borrowersor their accountants conclude or advise that any previously issued financial statement, audit report or interim review should no longer be relied upon or thatdisclosure should be made or action should be taken to prevent future reliance.8.3.4.5 ERISA Event. Promptly upon the occurrence of any ERISA Event.8.3.4.6 Other Reports. Promptly upon their becoming available to the Borrowers:(i) Financial Projections. If the Parent Company hereafter ceases to be publicly traded on a U.S. stock exchange, within sixty (60) daysafter commencement of each fiscal year of the Parent Company, the annual projections of the Parent Company and its Subsidiaries for the then-current fiscalyear.(ii) Material Management Letters. Any material reports including material management letters submitted to the Borrowers by independentaccountants in connection with any annual, interim or special audit, and(iii) Other Material Information. Copies of each material public filing as to any Loan Party or their Subsidiaries (or notice of the filingthereof on EDGAR), and such other reports and information as the Lender may from time to time reasonably request.9. DEFAULT9.1 Events of Default. An Event of Default shall mean the occurrence or existence of any one or more of the following events or conditions(whatever the reason therefor and whether voluntary, involuntary or effected by operation of Law):9.1.1 Payments Under Loan Documents. The Borrowers shall fail to pay any principal of any Loan (including scheduled installments,mandatory prepayments or the payment due at maturity), Reimbursement Obligation or Letter of Credit or Obligation or any interest on any Loan,Reimbursement Obligation or Letter of Credit Obligation or any other amount owing hereunder or under the other Loan Documents on the date on which suchprincipal, interest or other amount becomes due in accordance with the terms hereof or thereof; provided, however, - 43 -that the Borrowers shall have a grace period of three (3) Business Days for the payment of amounts owing hereunder or under the other Loan Documents otherthan principal and interest.9.1.2 Breach of Warranty. Any representation or warranty made at any time by any of the Loan Parties herein or by any of the LoanParties in any other Loan Document, or in any certificate, other instrument or statement furnished pursuant to the provisions hereof or thereof, shall prove tohave been false or misleading in any material respect as of the time it was made or furnished;9.1.3 Breach of Negative Covenants or Visitation Rights. Any of the Loan Parties shall default in the observance or performance of anycovenant contained in Section 8.1.5 [Visitation Rights] or Section 8.2 [Negative Covenants];9.1.4 Breach of Other Covenants. Any of the Loan Parties shall default in the observance or performance of any other covenant, conditionor provision hereof or of any other Loan Document and such default shall continue unremedied for a period of thirty (30) days (provided that no such graceperiod shall apply to Sections 8.3.1 [Quarterly Financial Statements], 8.3.2 [Annual Financial Statements] and 8.3.3 [Certificates of Borrowers]);9.1.5 Defaults in Other Agreements or Indebtedness. A default or event of default shall occur at any time under the terms of any otheragreement involving borrowed money or the extension of credit or any other Indebtedness under which any Loan Party or Subsidiary of any Loan Party maybe obligated as a borrower or guarantor in excess of $5,000,000 in the aggregate, and such breach, default or event of default consists of the failure to pay(beyond any period of grace permitted with respect thereto, whether waived or not) any Indebtedness when due (whether at stated maturity, by acceleration orotherwise) or if such breach or default permits or causes the acceleration of any Indebtedness (whether or not such right shall have been waived) or thetermination of any commitment to lend;9.1.6 [reserved].9.1.7 Final Judgments or Orders. Any final judgments or orders for the payment of money in excess of $5,000,000 in the aggregate, notcovered by insurance, shall be entered against any Loan Party or any Subsidiary of a Loan Party by a court having jurisdiction in the premises, whichjudgment or is not discharged, vacated, bonded or stayed pending appeal within a period of thirty (30) days from the date of entry;9.1.8 Loan Document Unenforceable. Any of the Loan Documents shall cease to be legal, valid and binding agreements enforceableagainst the party executing the same or such party’s successors and assigns (as permitted under the Loan Documents) in accordance with the respective termsthereof or shall in any way be terminated (except in accordance with its terms) or become or be declared ineffective or inoperative or shall in any way bechallenged or contested or cease to give or provide the respective Liens, security interests, rights, titles, interests, remedies, powers or privileges intended to becreated thereby;9.1.9 Uninsured Losses; Proceedings Against Assets. There shall occur any uninsured damage to or loss, theft or destruction of any ofassets or properties of the Loan Party - 44 -or any Subsidiary of a Loan Party in excess of $5,000,000 or any of the Loan Parties’ or any of their Subsidiaries’ assets with a fair market value of$5,000,000 or greater are attached, seized, levied upon or subjected to a writ or distress warrant; or such come within the possession of any receiver, trustee,custodian or assignee for the benefit of creditors and the same is not cured within thirty (30) days thereafter;9.1.10 Events Relating to Plans and Benefit Arrangements. (i) An ERISA Event occurs with respect to a Pension Plan or MultiemployerPlan which has resulted or could reasonably be expected to result in liability of any Loan Party or any Subsidiary of a Loan Party under Title IV of ERISA tothe Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $5,000,000, or (ii) any Loan Party or any Subsidiary of a Loan Partyor any ERISA Affiliate fails to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawalliability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $5,000,000;9.1.11 Change in Control. If any Change in Control shall occur.9.1.12 Relief Proceedings. (i) A Relief Proceeding shall have been instituted against any Loan Party or Subsidiary of a Loan Party andsuch Relief Proceeding shall remain undismissed or unstayed and in effect for a period of thirty (30) consecutive days or such court shall enter a decree ororder granting any of the relief sought in such Relief Proceeding, (ii) any Loan Party or Subsidiary of a Loan Party institutes, or takes any action infurtherance of, a Relief Proceeding, or (iii) any Loan Party or any Subsidiary of a Loan Party ceases to be Solvent or admits in writing its inability to pay itsdebts as they mature.9.2 Consequences of Event of Default.9.2.1 Events of Default Other Than Bankruptcy, Insolvency or Reorganization Proceedings. If an Event of Default specified underSections 9.1.1 through 9.1.11 shall occur and be continuing, the Lender shall be under no further obligation to make Loans or under no obligation to issueLetters of Credit and the Lender may (i) by written notice to the Borrowers, declare the unpaid principal amount of the Notes then outstanding and all interestaccrued thereon, any unpaid fees and all other Indebtedness of the Borrowers to the Lender hereunder and thereunder to be forthwith due and payable, and thesame shall thereupon become and be immediately due and payable to the Lender without presentment, demand, protest or any other notice of any kind, all ofwhich are hereby expressly waived, and (ii) require the Borrowers to, and the Borrowers shall thereupon, deposit in a non-interest-bearing account with theLender, as cash collateral for its Obligations under the Loan Documents, an amount equal to the maximum amount currently or at any time thereafter availableto be drawn on all outstanding Letters of Credit, and the Borrowers hereby pledge to the Lender, and grant to the Lender a security interest in, all such cash assecurity for such Obligations; and9.2.2 Bankruptcy, Insolvency or Reorganization Proceedings. If an Event of Default specified under Section 9.1.12 [Relief Proceedings]shall occur, the Lender shall be under no further obligations to make Loans hereunder and shall be under no obligation to issue Letters of Credit and theunpaid principal amount of the Loans then outstanding and all interest - 45 -accrued thereon, any unpaid fees and all other Indebtedness of the Borrowers to the Lender hereunder and thereunder shall be immediately due and payable,without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived; and9.2.3 Set-off. If an Event of Default shall have occurred and be continuing, the Lender and each of its Affiliates is hereby authorized atany time and from time to time, to the fullest extent permitted by applicable Law, to set off and apply any and all deposits (general or special, time or demand,provisional or final, in whatever currency) at any time held and other obligations (in whatever currency) at any time owing by the Lender or any such Affiliateto or for the credit or the account of any Loan Party against any and all of the Obligations of such Loan Party now or hereafter existing under this Agreement orany other Loan Document to the Lender or Affiliate, irrespective of whether or not the Lender or Affiliate shall have made any demand under this Agreement orany other Loan Document and although such Obligations of such Borrower or such Loan Party may be contingent or unmatured or are owed to a branch oroffice of the Lender different from the branch or office holding such deposit or obligated on such Indebtedness. The rights of the Lender and its Affiliatesunder this Section are in addition to other rights and remedies (including other rights of setoff) that the Lender or its Affiliates may have. The Lender agrees tonotify the Borrowers promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff andapplication; and9.2.4 Application of Proceeds. From and after the date on which the Lender has taken any action pursuant to this Section 9.2 and until allObligations of the Loan Parties have been paid in full, any and all proceeds received by the Lender from any sale or other disposition of any Collateral, or anypart thereof, or the exercise of any other remedy by the Lender, shall be applied as follows:(i) first, to reimburse the Lender for out-of-pocket costs, expenses and disbursements, including reasonable attorneys’ fees and expenses,incurred by the Lender in connection with realizing on any Collateral or collection of any Obligations of any of the Loan Parties under any of the LoanDocuments, including advances made by the Lender for the reasonable maintenance, preservation, protection or enforcement of, or realization upon, anyCollateral, including advances for taxes, insurance, repairs and the like and reasonable expenses incurred to sell or otherwise realize on, or prepare for sale orother realization on, any Collateral;(ii) second, to the repayment of all Obligations then due and unpaid of the Loan Parties to the Lender or its Affiliates incurred under thisAgreement or any of the other Loan Documents or agreements evidencing any Lender Provided Interest Rate Hedge or Other Lender Provided Financial ServicesObligations, whether of principal, interest, fees, expenses or otherwise and to cash collateralize the Letter of Credit Obligations, in such manner as the Lendermay determine in its discretion; and(iii) the balance, if any, as required by Law.10. MISCELLANEOUS - 46 -10.1 Modifications, Amendments or Waivers. The Lender and the Borrowers, on behalf of the Loan Parties, may from time to time enter intowritten agreements amending or changing any provision of this Agreement or any other Loan Document or the rights of the Lender or the Loan Partieshereunder or thereunder, or may grant written waivers or consents hereunder or thereunder. Any such agreement, waiver or consent made with such writtenconsent shall be effective to bind all the Loan Parties and the Lender.10.2 No Implied Waivers; Cumulative Remedies. No course of dealing and no delay or failure of the Lender in exercising any right, power,remedy or privilege under this Agreement or any other Loan Document shall affect any other or future exercise thereof or operate as a waiver thereof, nor shallany single or partial exercise thereof preclude any further exercise thereof or of any other right, power, remedy or privilege. The rights and remedies of theLender under this Agreement and any other Loan Documents are cumulative and not exclusive of any rights or remedies which it would otherwise have.10.3 Expenses; Indemnity; Damage Waiver.10.3.1 Costs and Expenses. The Borrowers shall pay (i) all out-of-pocket expenses incurred by the Lender and its Affiliates (including thereasonable fees, charges and disbursements of counsel for the Lender), and shall pay all fees and time charges and disbursements for attorneys who may beemployees of the Lender, in connection with the participation of the credit facilities provided for herein, the preparation, negotiation, execution, delivery andadministration of this Agreement and the other Loan Documents or any amendments, modifications or waivers of the provisions hereof or thereof (whether ornot the transactions contemplated hereby or thereby shall be consummated), (ii) all out-of-pocket expenses incurred by the Lender in connection with theissuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder, (iii) all out-of-pocket expenses incurred by theLender (including the fees, charges and disbursements of any counsel for the Lender), and shall pay all fees and time charges for attorneys who may beemployees of the Lender in connection with the enforcement or protection of its rights (A) in connection with this Agreement and the other Loan Documents,including its rights under this Section, or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of-pocketexpenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit, and (iv) all reasonable out-of-pocketexpenses of the Lender’s regular employees and agents engaged periodically to perform audits of the Loan Parties’ books, records and business properties.10.3.2 Indemnification by the Borrowers. The Borrowers shall jointly and severally indemnify the Lender (and any sub-agent thereof),and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”) against, and hold each Indemnitee harmless from,any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), andshall indemnify and hold harmless each Indemnitee from all fees and time charges and disbursements for attorneys who may be employees of any Indemnitee,incurred by any Indemnitee or asserted against any Indemnitee by any third party or by any Borrower or any other Loan Party arising out of, in connectionwith, or as a result of (i) the execution or delivery of this Agreement, any - 47 -other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance or nonperformance by the parties hereto of theirrespective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or theuse or proposed use of the proceeds therefrom (including any refusal by the Lender to honor a demand for payment under a Letter of Credit if the documentspresented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) breach of representations, warranties orcovenants of the Borrowers under the Loan Documents, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of theforegoing, including any such items or losses relating to or arising under Environmental Laws or pertaining to environmental matters, whether based oncontract, tort or any other theory, whether brought by a third party or by any Borrower or any other Loan Party, and regardless of whether any Indemnitee is aparty thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or relatedexpenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willfulmisconduct of such Indemnitee or (y) result from a claim brought by any Borrower or any other Loan Party against an Indemnitee for breach in bad faith ofsuch Indemnitee’s obligations hereunder or under any other Loan Document, if such Borrower or such Loan Party has obtained a final and nonappealablejudgment in its favor on such claim as determined by a court of competent jurisdiction. This Section 10.3.2 [Indemnification by the Borrowers] shall notapply with respect to Taxes other than Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.10.3.3 Waiver of Consequential Damages, Etc. To the fullest extent permitted by applicable Law, the Borrowers shall not assert, andhereby waives, any claim against any Indemnitee, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct oractual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document or any agreement or instrument contemplatedhereby, the transactions contemplated hereby or thereby, any Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee referred to inSection 10.3.2 [Indemnification by Borrowers] shall be liable for any damages arising from the use by unintended recipients of any information or othermaterials distributed by it through telecommunications, electronic or other information transmission systems in connection with this Agreement or the otherLoan Documents or the transactions contemplated hereby or thereby.10.3.4 Payments. All amounts due under this Section shall be payable not later than ten (10) Business Days after demand therefor.10.4 Holidays. Whenever payment of a Loan to be made or taken hereunder shall be due on a day which is not a Business Day such paymentshall be due on the next Business Day (except as provided in Section 4.2 [Interest Periods]) and such extension of time shall be included in computing interestand fees, except that the Loans shall be due on the Business Day preceding the Expiration Date if the Expiration Date is not a Business Day. Whenever anypayment or action to be made or taken hereunder (other than payment of the Loans) shall be stated to be due on a day which is not a Business Day, suchpayment or action shall be made or taken on the next following Business Day, and such extension of time shall not be included in - 48 -computing interest or fees, if any, in connection with such payment or action.10.5 Notices; Effectiveness; Electronic Communication.10.5.1 Notices Generally. Except in the case of notices and other communications expressly permitted to be given by telephone (and exceptas provided in Section 10.5.2 [Electronic Communications]), all notices and other communications provided for herein shall be in writing and shall bedelivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopier to the applicable party hereto at its address set forthon Schedule 1.1(A).Notices sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given whenreceived; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shallbe deemed to have been given at the opening of business on the next Business Day for the recipient). Notices delivered through electronic communications to theextent provided in Section 10.5.2 [Electronic Communications], shall be effective as provided in such Section.10.5.2 Electronic Communications. Notices and other communications to the Lender hereunder may be delivered or furnished byelectronic communication (including e-mail and Internet or intranet websites) pursuant to procedures approved by the Lender. The Lender or the Borrowersmay, in their discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved byit; provided that approval of such procedures may be limited to particular notices or communications. Unless the Lender otherwise prescribes, (i) notices andother communications sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such asby the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided that if such notice or other communicationis not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on thenext Business Day for the recipient, and (ii) notices or communications posted to an Internet or intranet website shall be deemed received upon the deemedreceipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that such notice or communication is available andidentifying the website address therefor.10.5.3 Change of Address, Etc. Any party hereto may change its address, e-mail address or telecopier number for notices and othercommunications hereunder by notice to the other parties hereto.10.6 Severability. The provisions of this Agreement are intended to be severable. If any provision of this Agreement shall be held invalid orunenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity orunenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in anyjurisdiction. - 49 -10.7 Duration; Survival. All representations and warranties of the Loan Parties contained herein or made in connection herewith shall survive theexecution and delivery of this Agreement, the completion of the transactions hereunder and Payment In Full. All covenants and agreements of the Borrowerscontained herein relating to the payment of principal, interest, premiums, additional compensation or expenses and indemnification, including those set forthin the Notes, Section 5 [Payments] and Section 10.3 [Expenses; Indemnity; Damage Waiver], shall survive Payment In Full. All other covenants andagreements of the Loan Parties shall continue in full force and effect from and after the date hereof and until Payment In Full.10.8 Successors and Assigns.10.8.1 Successors and Assigns Generally. The provisions of this Agreement shall be binding upon, and inure to the benefit of, the partieshereto and their respective successors and assigns permitted hereby, except that neither any Borrower nor any other Loan Party may assign or otherwisetransfer any of its rights or obligations hereunder without the prior written consent of the Lender and the Lender may not assign or otherwise transfer any of itsrights or obligations hereunder except (i) to an assignee in accordance with the provisions of Section 10.8.2 [Assignments by Lender], (ii) by way ofparticipation in accordance with the provisions of Section 10.8.3 [Participations], or (iii) by way of pledge or assignment of a security interest subject to therestrictions of Section 10.8.4 [Certain Pledges; Successors and Assigns Generally] (and any other attempted assignment or transfer by any party hereto shallbe null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respectivesuccessors and assigns permitted hereby, Participants to the extent provided in Section 10.8.3 [Participations] and, to the extent expressly contemplated hereby,the Related Parties of the Lender) any legal or equitable right, remedy or claim under or by reason of this Agreement.10.8.2 Assignments by Lender. The Lender may at any time assign to one or more assignees all or a portion of its rights and obligationsunder this Agreement (including all or a portion of its Revolving Credit Commitment and the Loans at the time owing to it). Any assignment by the Lenderunder this Section 10.8.2 when no Event of Default has occurred and is continuing shall be subject to the Borrowers’ consent (not to be unreasonablywithheld); provided, however, that if the Lender has requested Borrowers consent and no consent has been received for ten (10) days, such consent shall bedeemed granted.10.8.3 Participations. The Lender may at any time, without the consent of, or notice to, the Borrowers or the Lender, sell participations toany Person (other than a natural person or any Borrower or any of the Borrowers’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of theLender’s rights and/or obligations under this Agreement (including all or a portion of its Revolving Credit Commitment and/or the Loans owing to it); providedthat (i) the Lender’s obligations under this Agreement shall remain unchanged, (ii) the Lender shall remain solely responsible to the other parties hereto for theperformance of such obligations and (iii) the Borrowers and the Lender shall continue to deal solely and directly with the Lender in connection with theLender’s rights and obligations under this Agreement.10.8.4 Certain Pledges. The Lender may at any time pledge or assign a security - 50 -interest in all or any portion of its rights under this Agreement to secure obligations of the Lender, including any pledge or assignment to secure obligations to aFederal Reserve Bank; provided that no such pledge or assignment shall release the Lender from any of its obligations hereunder or substitute any such pledgeeor assignee for the Lender as a party hereto.10.9 Confidentiality.10.9.1 General. The Lender agrees to maintain the confidentiality of the Information, except that Information may be disclosed (i) to itsAffiliates and to its and its Affiliates’ respective partners, directors, officers, employees, agents, advisors and other representatives (the “Shared Affiliates”),(ii) to the extent requested by any regulatory authority purporting to have jurisdiction over it (including any self-regulatory authority, such as the NationalAssociation of Insurance Commissioners), (iii) to the extent required by applicable Laws or regulations or by any subpoena or similar legal process, (iv) toany other party hereto, (v) in connection with the exercise of any remedies hereunder or under any other Loan Document or any action or proceeding relating tothis Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (vi) subject to an agreement containing provisionssubstantially the same as those of this Section, to (A) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights orobligations under this Agreement or (B) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Borrowersand their obligations, (vii) with the consent of the Borrowers or (viii) to the extent such Information (Y) becomes publicly available other than as a result of abreach of this Section or (Z) becomes available to the Lender or any of its Affiliates on a nonconfidential basis from a source other than the Borrowers or theother Loan Parties. If any disclosure is made pursuant to clause (i) above of this Section to any Shared Affiliate, such Shared Affiliates are obligated tomaintain the confidential nature of such Information the same as Lender is pursuant to this Section and, if request by the Borrowers, shall reasonably confirmsaid obligation in writing. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have compliedwith its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person wouldaccord to its own confidential information.10.9.2 Sharing Information With Affiliates of the Lender. Each Loan Party acknowledges that from time to time financial advisory,investment banking and other services may be offered or provided to one or more Borrower or one or more of their Affiliates (in connection with this Agreementor otherwise) by the Lender or by one or more Subsidiaries or Affiliates of the Lender and each of the Loan Parties hereby authorizes the Lender to share anyinformation delivered to the Lender by such Loan Party and its Subsidiaries pursuant to this Agreement to any such Subsidiary or Affiliate subject to theprovisions of Section 10.9.1 [General].10.10 Counterparts; Integration; Effectiveness.10.10.1 Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto indifferent counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single - 51 -contract. This Agreement and the other Loan Documents, and any separate letter agreements with respect to fees payable to the Lender, constitute the entirecontract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating tothe subject matter hereof including any prior confidentiality agreements and commitments. Except as provided in Section 7 [Conditions Of Lending AndIssuance Of Letters Of Credit], this Agreement shall become effective when it shall have been executed by the Lender and when the Lender shall have receivedcounterparts hereof that, when taken together, bear the signatures of each of the other parties hereto. Delivery of an executed counterpart of a signature page ofthis Agreement by telecopy or e-mail shall be effective as delivery of a manually executed counterpart of this Agreement.10.11 CHOICE OF LAW; SUBMISSION TO JURISDICTION; WAIVER OF VENUE; SERVICE OF PROCESS; WAIVER OF JURYTRIAL.10.11.1 Governing Law. This Agreement shall be deemed to be a contract under the Laws of the State of New Jersey without regard to itsconflict of laws principles. Each standby Letter of Credit issued under this Agreement shall be subject either to the rules of the Uniform Customs and Practicefor Documentary Credits, as most recently published by the International Chamber of Commerce (the “ICC”) at the time of issuance (“UCP”) or the rules ofthe International Standby Practices (ICC Publication Number 590) (“ISP98”), as determined by the Lender, and each trade Letter of Credit shall be subject toUCP, and in each case to the extent not inconsistent therewith, the Laws of the State of New Jersey without regard to is conflict of laws principles.10.11.2 SUBMISSION TO JURISDICTION. EACH BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY ANDUNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERALCOURT OF THE STATE OF NEW JERSEY, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDINGARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENTOF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS INRESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW JERSEY STATE COURT OR, TOTHE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THATA FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHERJURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR INANY OTHER LOAN DOCUMENT SHALL AFFECT ANY RIGHT THAT THE LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION ORPROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AGAINST ANY BORROWER OR ANY OTHER LOANPARTY OR ITS PROPERTIES IN THE COURTS OF ANY JURISDICTION.10.11.3 WAIVER OF VENUE. EACH BORROWER AND EACH OTHER LOAN PARTY IRREVOCABLY ANDUNCONDITIONALLY WAIVES, TO THE FULLEST - 52 -EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUEOF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANYCOURT REFERRED TO IN THIS SECTION 10.11. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLESTEXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTIONOR PROCEEDING IN ANY SUCH COURT AND AGREES NOT ASSERT ANY SUCH DEFENSE.10.11.4 SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THEMANNER PROVIDED FOR NOTICES IN SECTION 10.5 [NOTICES; EFFECTIVENESS; ELECTRONIC COMMUNICATION]. NOTHING INTHIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BYAPPLICABLE LAW.10.11.5 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENTPERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY ORINDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONSCONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO(A) CERTIFIES THAT NO REPRESENTATIVE, LENDER OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OROTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOINGWAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THISAGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS INTHIS SECTION.10.12 USA Patriot Act Notice. To help the government fight the funding of terrorism and money laundering activities, Federal law requires allfinancial institutions to obtain, verify and record information that identifies each Loan Party or Subsidiary of a Loan Party that opens an account. What thismeans: when a Loan Party or Subsidiary of a Loan Party opens an account, the Lender will ask for the business name, business address, taxpayeridentifying number and other information that will allow the Lender to identify the Loan Party or Subsidiary of a Loan Party, such as organizationaldocuments. For some businesses and organizations, the Lender may also need to ask for identifying information and documentation relating to certainindividuals associated with the business or organization.10.13 Anti-Money Laundering/International Trade Law Compliance. Each Borrower represents and warrants to the Lender, as of the date of thisAgreement, as of the date of each advance of proceeds under the Revolving Credit Facility, as of the date of any renewal, extension or modification of thisAgreement, and at all times that any obligations exist hereunder that: (A) no Loan Party or Subsidiary thereof (i) is listed or otherwise recognized as a specially - 53 -designated, prohibited, sanctioned or debarred person or entity, or subject to any limitations or prohibitions (including but not limited to the blocking ofproperty or rejections of transactions) under any order or directive of any Compliance Authority; (ii) has any of its assets in a Sanctioned Country in violationof any law or regulation enforced by any Compliance Authority or in the possession, custody or control of a Sanctioned Person; or (iii) does business in orwith, or derives any of its operating income from investments in or transactions with, any Sanctioned Person or Sanctioned Country in violation of any law orregulation enforced by any Compliance Authority; (B) the proceeds of the Revolving Credit Facility will not be used to fund any operations in, finance anyinvestments or activities in, or make any payments to, a Sanctioned Person or, in violation of any law or regulation enforced by any Compliance Authority, aSanctioned Country; and (C) each Loan Party and Subsidiary of a Loan Party is in compliance with, and no Loan Party or Subsidiary of a Loan Partyengages in any dealings or transactions prohibited by, any laws of the United States including the USA Patriot Act, the Trading with the Enemy Act, or theU.S. Foreign Corrupt Practices Act of 1977, all as amended, supplemented or replaced from time to time. As used herein: “Compliance Authority” means eachand all of the (a) U.S. Department of the Treasury’s Office of Foreign Asset Control; (b) U.S. Treasury Department/Financial Crimes Enforcement Network;(c) U.S. State Department/Directorate of Defense Trade Controls; (d) U.S. Commerce Department/Bureau of Industry and Security; (e) U.S. Internal RevenueService; (f) U.S. Justice Department; and (g) U.S. Securities and Exchange Commission; “Sanctioned Country” means a country subject to a sanctionsprogram maintained by any Compliance Authority; and “Sanctioned Person” means any individual person, a group, regime, entity or thing subject to, orspecially designated under, any sanctions program maintained by any Compliance Authority. - 54 -IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Agreement as of the day and year firstabove written. BORROWER:EPAM SYSTEMS, INC.By: Name: Title: GUARANTORS:EPAM SYSTEMS, LLCBy: Name: Title: VESTED DEVELOPMENT, INC.By: Name: Title: LENDER:PNC BANK, NATIONAL ASSOCIATIONBy: Name: Title: SCHEDULE 1.1(A)COMMITMENT OF LENDER AND ADDRESSES FOR NOTICESPage 1 of 2Part 1 - Commitment of Lender and Address for Notice to Lender Lender Commitment PNC Bank, National Association $40,000,000 Two Tower Center Boulevard East Brunswick, NJ 08816 Attention: Virginia Alling, Managing Director Telephone: (732) 220-3875 Telecopy: (732) 220-3621 SCHEDULE 1.1(A)COMMITMENTS OF LENDER AND ADDRESSES FOR NOTICESPage 2 of 2Part 2 - Addresses for Notices to Borrowers and Guarantors:BORROWERS:Name: EPAM Systems Inc.Address: 41 University Drive#202 Newtown, PA 18940Attention: General CounselTelephone: (267) 759-9000 ext. 56612Telecopy: (267) 759-8989GUARANTORS:Name: c/o EPAM Systems Inc.Address: 41 University Drive#202 Newtown, PA 18940Attention: General CounselTelephone: (267) 759-9000 ext. 56612Telecopy: (267) 759-8989SCHEDULE 1.1(P)EXISTING LIENSNoneSCHEDULE 6.1.2SUBSIDIARIESEPAM Systems APS (Denmark)EPAM Corp Inform Systems (Belarus)EOAM Systems (Belarus)EPAM Systems (Poland) sp. z o.o.EPAM Systems (Ukraine)EPAM Solutions (Russia)EPAM Solutions LLC (Ukraine)EPAM Systems (Russia)EPAM Systems SARL (Luxembourg)EPAM KazakhstanDANIKA Ltd. (Cyprus)EPAM Systems (Cyprus) Ltd. (Cyprus)EPAM Systems GmbH (Germany)EPAM Systems Ltd. (UK)EPAM Systems Nordic AB (Sweden)EPAM Systems GmbH (Switzerland)TOO Plus Micro (Kazakhstan)EPAM Systems (Singapore)EPAM Systems Canada Ltd. (Canada)EPAM Systems, LLC (NJ)Vested Development, Inc. (DE)EPAM Systems KFT (Hungary)EPAM Systems SRL (Moldova)SCHEDULE 6.1.14Environmental DisclosuresNoneSCHEDULE 8.2.1Permitted IndebtednessNoneEXHIBIT 1.1(G)(1)FORM OFGUARANTOR JOINDER AND ASSUMPTION AGREEMENTTHIS GUARANTOR JOINDER AND ASSUMPTION AGREEMENT is made as of , 20 , by , a [corporation/partnership/limited liability company] (the “New Guarantor”).BackgroundReference is made to (i) the Credit Agreement dated as of January 15, 2013 (as the same may be modified, supplemented, restated or amended, the“Credit Agreement”) by and among EPAM Systems, Inc., a Delaware corporation (the “Borrower”), PNC Bank, National Association (“Lender”) and theguarantors party thereto (the “Guarantors”), (ii) the Guaranty and Suretyship Agreement dated as of January 15, 2013 (as the same may be modified,supplemented, restated or amended, the “Guaranty”) of Guarantors issued to the Lender and (iii) the other Loan Documents referred to in the CreditAgreement, as the same may be modified, supplemented, or amended.AgreementCapitalized terms defined in the Credit Agreement are used herein as defined therein. In consideration of the New Guarantor becoming a Guarantor underthe terms of the Credit Agreement and in consideration of the value of the direct and indirect benefits received by New Guarantor as a result of becomingaffiliated with the Borrower and the Guarantors, the New Guarantor hereby agrees that effective as of the date hereof it hereby is, and shall be deemed to be, aGuarantor under the Credit Agreement, the Guaranty and each of the other Loan Documents to which the Guarantors are a party and agrees that from the datehereof and so long as any Loan or any Commitment of the Lender shall remain outstanding and until Payment In Full, New Guarantor has assumed the jointand several obligations of a “Guarantor” under, and New Guarantor shall perform, comply with and be subject to and bound by, jointly and severally, eachof the terms, provisions and waivers of the Credit Agreement, the Guaranty and each of the other Loan Documents which are stated to apply to or are made bya “Guarantor”. Without limiting the generality of the foregoing, the New Guarantor hereby represents and warrants that (i) each of the representations andwarranties set forth in Article 6 of the Credit Agreement applicable to New Guarantor as a Guarantor is true and correct as to New Guarantor on and as of thedate hereof, and (ii) New Guarantor has heretofore received a true and correct copy of the Credit Agreement, the Guaranty, and each of the other LoanDocuments (including any modifications thereof or supplements or waivers thereto) in effect on the date hereof.New Guarantor hereby makes, affirms, and ratifies in favor of the Lender the Credit Agreement, the Guaranty and each of the other Loan Documentsgiven by the Guarantors to the Lender.New Guarantor is simultaneously delivering to the Lender the following documents together with the Guarantor Joinder required under Section 8.2.9[Subsidiaries, Partnerships and Joint Ventures]:Updated Schedules to Credit Agreement. [Note: updates to schedules do not cure any breach of warranties]. Schedule No. and Description Delivered NotDeliveredSchedule 6.1.1 - Qualifications To Do Business ¨ ¨Schedule 6.1.2 - Subsidiaries ¨ ¨Any other Schedules to Credit Agreement that necessitate updates after giving effect tothis Guarantor Joinder and Assumption Agreement ¨ ¨In furtherance of the foregoing, New Guarantor shall execute and deliver or cause to be executed and delivered at any time and from time to time suchfurther instruments and documents and do or cause to be done such further acts as may be reasonably necessary in the reasonable opinion of the Lender tocarry out more effectively the provisions and purposes of this Guarantor Joinder and Assumption Agreement.This Guarantor Joinder and Assumption Agreement may be executed in any number of counterparts, and by different parties hereto in separatecounterparts, each of which, when so executed, shall be deemed an original, but all such counterparts shall constitute one and the same instrument. NewGuarantor acknowledges and agrees that a telecopy transmission to the Lender of signature pages hereof purporting to be signed on behalf of New Guarantorshall constitute effective and binding execution and delivery hereof by New Guarantor. 2IN WITNESS WHEREOF, and intending to be legally bound hereby, the New Guarantor has duly executed this Guarantor Joinder and AssumptionAgreement and delivered the same to the Lender, as of the date and year first above written. By: Name: Title: Acknowledged and accepted:PNC BANK, NATIONAL ASSOCIATION,as Lender By: Name: Title: EXHIBIT 1.1(G)(2)FORM OF GUARANTY Guaranty and Suretyship Agreement THIS GUARANTY AND SURETYSHIP AGREEMENT (this “Guaranty”) is made and entered into as of this 15 day of January, 2013, byEPAM SYSTEMS, LLC, a New Jersey limited liability company and VESTED DEVELOPMENT, INC., a Delaware corporation (each, the“Guarantor” and, collectively, the “Guarantors”), with an address at 41 University Drive, Suite 202, Newton, PA 18940, in consideration of the extensionof credit by PNC BANK, NATIONAL ASSOCIATION (the “Bank”), with an address at Two Tower Center Boulevard, East Brunswick, NJ 08816, toEPAM SYSTEMS, INC., a Delaware corporation (the “Borrower”), and other good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged. Terms capitalized herein but not defined herein shall have the meaning given to such terms in the Credit Agreement between EPAMSystems, Inc. and Bank dated as of the date hereof (as amended, restated or otherwise modified, the “Credit Agreement”).1. Guaranty of Guarantied Obligations. The Guarantors hereby jointly, severally, irrevocably and unconditionally guarantee, and become suretyfor, the prompt payment and performance of all Obligations, covenants and duties owing by the Borrower to the Bank or to any other direct or indirectsubsidiary of The PNC Financial Services Group, Inc., of any kind or nature, present or future (including any interest accruing thereon after maturity, orafter the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether ornot a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect (including those acquired by assignment orparticipation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, whether or not (i) evidenced by any note,guaranty or other instrument, (ii) arising under any agreement, instrument or document, (iii) for the payment of money, (iv) arising by reason of an extensionof credit, opening of a letter of credit, loan, equipment lease or guarantee, (v) under any interest or currency swap, future, option or other interest rate protectionor similar agreement, (vi) under or by reason of any foreign currency transaction, forward, option or other similar transaction providing for the purchase ofone currency in exchange for the sale of another currency, or in any other manner, or (vii) arising out of overdrafts on deposit or other accounts or out ofelectronic funds transfers (whether by wire transfer or through automated clearing houses or otherwise) or out of the return unpaid of, or other failure of theBank to receive final payment for, any check, item, instrument, payment order or other deposit or credit to a deposit or other account, or out of the Bank’snon-receipt of or inability to collect funds or otherwise not being made whole in connection with depository or other similar arrangements; and anyamendments, extensions, renewals and increases of or to any of the foregoing, and all costs and expenses of the Bank incurred in the documentation,negotiation, modification, enforcement, collection and otherwise in connection with any of the foregoing, including reasonable attorneys’ fees and expenses(collectively, the “Guarantied Obligations”). If the Borrower defaults under any such Guarantied Obligations, the Guarantors will pay the amount due to theBank.2. Nature of Guaranty; Waivers. This is a guaranty of payment and not of collection and the Bank shall not be required or obligated, as a conditionof the Guarantors’ liability, to make any demand upon or to pursue any of its rights against the Borrower, or to pursue any rights which may be available to itwith respect to any other person who may be liable for the payment of the Guarantied Obligations.This is an absolute, unconditional, irrevocable and continuing guaranty and will remain in full force and effect until all of the Guarantied Obligationshave been indefeasibly paid in full, and the Bank has terminated this Guaranty or it has terminated in accordance with its terms. This Guaranty will remainin full force and effect 1theven if there is no principal balance outstanding under the Guarantied Obligations at a particular time or from time to time. This Guaranty will not be affectedby any surrender, exchange, acceptance, compromise or release by the Bank of any other party, or any other guaranty or any security held by it for any of theGuarantied Obligations, by any failure of the Bank to take any steps to perfect or maintain its lien or security interest in or to preserve its rights to anysecurity or other collateral for any of the Guarantied Obligations or any guaranty, or by any irregularity, unenforceability or invalidity of any of the GuarantiedObligations or any part thereof or any security or other guaranty thereof. The Guarantors’ obligations hereunder shall not be affected, modified or impaired byany counterclaim, set-off recoupment, deduction or defense based upon any claim the Guarantors may have (directly or indirectly) against the Borrower or theBank, except payment or performance of the Guarantied Obligations.Notice of acceptance of this Guaranty, notice of extensions of credit to the Borrower from time to time, notice of default, diligence, presentment, notice ofdishonor, protest, demand for payment, and any defense based upon the Bank’s failure to comply with the notice requirements under Sections 9-611 and 9-612 of the Uniform Commercial Code as in effect from time to time are hereby waived. The Guarantors waive all defenses based on suretyship or impairmentof collateral.The Bank at any time and from time to time, without notice to or the consent of the Guarantors, and without impairing or releasing, discharging ormodifying the Guarantors’ liabilities hereunder, may (a) change the manner, place, time or terms of payment or performance of or interest rates on, or otherterms relating to, any of the Guarantied Obligations; (b) renew, substitute, modify, amend or alter, or grant consents or waivers relating to any of theGuarantied Obligations, any other guaranties, or any security for any Guarantied Obligations or guaranties; (c) apply any and all payments by whomeverpaid or however realized including any proceeds of any collateral, to any Guarantied Obligations of the Borrower in such order, manner and amount as theBank may determine in its sole discretion; (d) settle, compromise or deal with any other person, including the Borrower or the Guarantors, with respect to anyGuarantied Obligations in such manner as the Bank deems appropriate in its sole discretion; (e) substitute, exchange or release any security or guaranty; or(f) take such actions and exercise such remedies hereunder as provided herein.3. Repayments or Recovery from the Bank. If any demand is made at any time upon the Bank for the repayment or recovery of any amount receivedby it in payment or on account of any of the Guarantied Obligations and if the Bank repays all or any part of such amount by reason of any judgment, decreeor order of any court or administrative body or by reason of any settlement or compromise of any such demand, the Guarantors will be and remain liablehereunder for the amount so repaid or recovered to the same extent as if such amount had never been received originally by the Bank. The provisions of thissection will be and remain effective notwithstanding any contrary action which may have been taken by the Guarantors in reliance upon such payment, andany such contrary action so taken will be without prejudice to the Bank’s rights hereunder and will be deemed to have been conditioned upon such paymenthaving become final and irrevocable.4. Financial Statements. If requested in writing by the Bank prior to the payment in full of all of the Guarantied Obligations, and without duplicationof any financial information delivered under the Credit Agreement, the Guarantors will promptly submit to the Bank such information relating to theGuarantors’ affairs (including but not limited to annual financial statements and tax returns for the Guarantors) or any security for the Guaranty as the Bankmay reasonably request.5. Enforceability of Guarantied Obligations. No modification, limitation or discharge of the Guarantied Obligations arising out of or by virtue ofany bankruptcy, reorganization or similar proceeding for relief of debtors under federal or state law will affect, modify, limit or discharge the Guarantors’liability in any manner whatsoever and this Guaranty will remain and continue in full force and effect and will be enforceable against the Guarantors to thesame extent and with the same force and effect as if any such proceeding had not been instituted. The Guarantors waive all rights and benefits which mightaccrue to it by reason of any such proceeding and will be liable to the full extent hereunder, irrespective of any modification, limitation or discharge of theliability of the Borrower that may result from any such proceeding. - 2 -The Guarantors expressly waive the effect of any statute of limitations or other limitations on any actions under this Guaranty.6. Events of Default. The happening of any Event of Default (or if there is no defined set of “Events of Default” therein, the occurrence of a defaultpast any applicable grace and/or cure periods thereunder) as defined in any of the Secured Obligations shall be an “Event of Default” hereunder. Upon theoccurrence of any Event of Default, (a) the Guarantors shall pay to the Bank the amount of the Guarantied Obligations; or (b) on demand of the Bank, theGuarantors shall immediately deposit with the Bank, in U.S. dollars, all amounts due or to become due under the Guarantied Obligations, and the Bank mayat any time use such funds to repay the Guarantied Obligations; or (c) the Bank in its discretion may exercise with respect to any collateral any one or more ofthe rights and remedies provided a secured party under the applicable version of the Uniform Commercial Code; or (d) the Bank in its discretion may exercisefrom time to time any other rights and remedies available to it at law, in equity or otherwise.7. Right of Setoff. In addition to all liens upon and rights of setoff against the Guarantors’ money, securities or other property given to the Bank bylaw, the Bank shall have, with respect to the Guarantors’ obligations to the Bank under this Guaranty and to the extent permitted by law, a contractualpossessory security interest in and a contractual right of setoff against, and the Guarantors hereby grant Bank a security interest in, and hereby assign,convey, deliver, pledge and transfer to the Bank all of the Guarantors’ right, title and interest in and to, all of the Guarantors’ deposits, moneys, securities andother property now or hereafter in the possession of or on deposit with, or in transit to, the Bank or any other direct or indirect subsidiary of The PNCFinancial Services Group, Inc., whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeepingor otherwise, excluding, however, all IRA, Keogh, and trust accounts. Every such security interest and right of setoff may be exercised without demand uponor notice to the Guarantors. Every such right of setoff shall be deemed to have been exercised immediately upon the occurrence of an Event of Default hereunderwithout any action of the Bank, although the Bank may enter such setoff on its books and records at a later time.8. Collateral. This Guaranty is secured by the property described in any collateral security documents which the Guarantors execute and deliver to theBank and by such other collateral as previously may have been or may in the future be granted to the Bank to secure any Guarantied Obligations of theGuarantors to the Bank.9. Costs. To the extent that the Bank incurs any costs or expenses in protecting or enforcing its rights under the Guarantied Obligations or thisGuaranty, including reasonable attorneys’ fees and the costs and expenses of litigation, such costs and expenses will be due on demand, will be included in theGuarantied Obligations and will bear interest from the incurring or payment thereof at the Default Rate (as defined in any of the Guarantied Obligations).10. Postponement of Subrogation. Until the Guarantied Obligations are indefeasibly paid in full, expire, are terminated and are not subject to anyright of revocation or rescission, the Guarantors postpone and subordinate in favor of the Bank or its designee (and any assignee or potential assignee) any andall rights which the Guarantors may have to (a) assert any claim whatsoever against the Borrower based on subrogation, exoneration, reimbursement, orindemnity or any right of recourse to security for the Guarantied Obligations with respect to payments made hereunder, and (b) any realization on any propertyof the Borrower, including participation in any marshalling of the Borrower’s assets.11. Notices. All notices, demands, requests, consents, approvals and other communications required or permitted hereunder (“Notices”) must be inwriting and will be effective upon receipt. Notices may be given - 3 -in any manner to which the Bank and the Guarantors may separately agree, including electronic mail. Without limiting the foregoing, first-class mail,facsimile transmission and commercial courier service are hereby agreed to as acceptable methods for giving Notices. Regardless of the manner in whichprovided, Notices may be sent to addresses for the Bank and the Guarantors as set forth above or to such other address as either may give to the other for suchpurpose in accordance with this section.12. Preservation of Rights. No delay or omission on the Bank’s part to exercise any right or power arising hereunder will impair any such right orpower or be considered a waiver of any such right or power, nor will the Bank’s action or inaction impair any such right or power. The Bank’s rights andremedies hereunder are cumulative and not exclusive of any other rights or remedies which the Bank may have under other agreements, at law or in equity. TheBank may proceed in any order against the Borrower, the Guarantors or any other obligor of, or any collateral securing, the Guarantied Obligations.13. Illegality. If any provision contained in this Guaranty should be invalid, illegal or unenforceable in any respect, it shall not affect or impair thevalidity, legality and enforceability of the remaining provisions of this Guaranty.14. Changes in Writing. No modification, amendment or waiver of, or consent to any departure by the Guarantors from, any provision of thisGuaranty will be effective unless made in a writing signed by the Bank, and then such waiver or consent shall be effective only in the specific instance andfor the purpose for which given. Notwithstanding the foregoing, the Bank may modify this Guaranty for the purposes of completing missing content orcorrecting erroneous content, without the need for a written amendment, provided that the Bank shall send a copy of any such modification to the Guarantors(which notice may be given by electronic mail). No notice to or demand on the Guarantors will entitle the Guarantors to any other or further notice or demandin the same, similar or other circumstance.15. Entire Agreement. This Guaranty (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes allother prior agreements and understandings, both written and oral, between the Guarantors and the Bank with respect to the subject matter hereof; provided,however, that this Guaranty is in addition to, and not in substitution for, any other guarantees from the Guarantors to the Bank.16. Successors and Assigns. This Guaranty will be binding upon and inure to the benefit of the Guarantors and the Bank and their respective heirs,executors, administrators, successors and assigns; provided, however, that the Guarantors may not assign this Guaranty in whole or in part without theBank’s prior written consent and the Bank at any time may assign this Guaranty in whole or in part.17. Interpretation. In this Guaranty, unless the Bank and the Guarantors otherwise agree in writing, the singular includes the plural and the plural thesingular; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; the word“or” shall be deemed to include “and/or”, the words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation”;and references to sections or exhibits are to those of this Guaranty. Section headings in this Guaranty are included for convenience of reference only and shallnot constitute a part of this Guaranty for any other purpose. If this Guaranty is executed by more than one party as Guarantors, the obligations of suchpersons or entities will be joint and several.18. Anti-Money Laundering/International Trade Law Compliance. The Guarantors represent and warrant to the Bank, as of the date of thisGuaranty, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any loan, and at all times anyGuarantied Obligations exist that: (A) no Guarantors (i) is listed or otherwise recognized as a specially designated, prohibited, sanctioned or debarred person orentity, or subject to any limitations or prohibitions (including but not limited to the blocking of property or rejections of transactions) under any order ordirective of any Compliance Authority; (ii) has any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person; or(iii) does - 4 -business in or with, or derives any of its operating income from investments in or transactions with, any Sanctioned Person or Sanctioned Country inviolation of any law or regulation enforced by any Compliance Authority; (B) the proceeds of any loan will not be used to fund any operations in, finance anyinvestments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Country; and (C) each Guarantor is in compliance with, and noGuarantor engages in any dealings or transactions prohibited by, any laws of the United States including the USA Patriot Act, the Trading with the EnemyAct, or the U.S. Foreign Corrupt Practices Act of 1977, all as amended, supplemented or replaced from time to time. As used herein: “ComplianceAuthority” means each and all of the (a) U.S. Department of the Treasury’s Office of Foreign Asset Control; (b) U.S. Treasury Department/Financial CrimesEnforcement Network; (c) U.S. State Department/Directorate of Defense Trade Controls; (d) U.S. Commerce Department/Bureau of Industry and Security;(e) U.S. Internal Revenue Service; (f) U.S. Justice Department; and (g) U.S. Securities and Exchange Commission. “Sanctioned Country” means a countrysubject to a sanctions program maintained by any Compliance Authority. “Sanctioned Person” means any individual person, a group, regime, entity or thingsubject to, or specially designated under, any sanctions program maintained by any Compliance Authority.19. Indemnity. The Guarantors agree to indemnify each of the Bank, each legal entity, if any, who controls, is controlled by or is under commoncontrol with the Bank and each of their respective directors, officers and employees (the “Indemnified Parties”), and to defend and hold each IndemnifiedParty harmless from and against, any and all claims, damages, losses, liabilities and expenses (including all fees and charges of internal or external counselwith whom any Indemnified Party may consult and all expenses of litigation and preparation therefor) which any Indemnified Party may incur or which maybe asserted against any Indemnified Party by any person, entity or governmental authority (including any person or entity claiming derivatively on behalf ofthe Guarantors), in connection with or arising out of or relating to the matters referred to in this Guaranty, whether (a) arising from or incurred in connectionwith any breach of a representation, warranty or covenant by the Guarantors, or (b) arising out of or resulting from any suit, action, claim, proceeding orgovernmental investigation, pending or threatened, whether based on statute, regulation or order, or tort, or contract or otherwise, before any court orgovernmental authority; provided, however, that the foregoing indemnity agreement shall not apply to any claims, damages, losses, liabilities and expensessolely attributable to an Indemnified Party’s gross negligence or willful misconduct. The indemnity agreement contained in this Section shall survive thetermination of this Guaranty and assignment of any rights hereunder. The Guarantors may participate at its expense in the defense of any such claim.20. Governing Law and Jurisdiction. This Guaranty has been delivered to and accepted by the Bank and will be deemed to be made in the Statewhere the Bank’s office indicated above is located. THIS GUARANTY WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK ANDTHE GUARANTORS DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK’S OFFICE INDICATED ABOVE IS LOCATED,EXCLUDING ITS CONFLICT OF LAWS RULES. The Guarantors hereby irrevocably consent to the exclusive jurisdiction of any state or federal court in thecounty or judicial district where the Bank’s office indicated above is located; provided that nothing contained in this Guaranty will prevent the Bank frombringing any action, enforcing any award or judgment or exercising any rights against the Guarantors individually, against any security or against anyproperty of the Guarantors within any other county, state or other foreign or domestic jurisdiction. The Guarantors acknowledge and agree that the venueprovided above is the most convenient forum for both the Bank and the Guarantors. The Guarantors waive any objection to venue and any objection based ona more convenient forum in any action instituted under this Guaranty.21. Equal Credit Opportunity Act. If the Guarantors are not an “applicants for credit” under Section 202.2 (e) of the Equal Credit Opportunity Actof 1974 (“ECOA”), the Guarantors acknowledge that (i) this Guaranty has been executed to provide credit support for the Guarantied Obligations, and (ii) theGuarantors were not required to execute this Guaranty in violation of Section 202.7(d) of the ECOA.REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - 5 -23. WAIVER OF JURY TRIAL. THE GUARANTORS IRREVOCABLY WAIVE ANY AND ALL RIGHT THE GUARANTORS MAY HAVE TO A TRIAL BYJURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS GUARANTY, ANY DOCUMENTS EXECUTED IN CONNECTIONWITH THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE GUARANTORS ACKNOWLEDGE THAT THEFOREGOING WAIVER IS KNOWING AND VOLUNTARY.The Guarantors acknowledge that each of them has read and understood all the provisions of this Guaranty, including the waiver of jurytrial, and has been advised by counsel as necessary or appropriate.WITNESS the due execution hereof as a document under seal, as of the date first written above, with the intent to be legally bound hereby. ATTEST: EPAM SYSTEMS, LLC, a New Jersey limited liability company By: (SEAL)Print Name: Print Name: Title: Title: ATTEST: VESTED DEVELOPMENT, INC., a Delaware corporation By: (SEAL)Print Name: Print Name: Title: Title: - 7 -EXHIBIT 1.1(N)(1)FORM OFREVOLVING CREDIT NOTE $40,000,000.00 January 15, 2013FOR VALUE RECEIVED, the undersigned, EPAM Systems, Inc., a Delaware corporation (the “Borrower”), hereby unconditionally promise to pay tothe order of PNC Bank, National Association (the “Lender”), the lesser of (i) the principal sum of Forty Million Dollars and 00/100 (US$ 40,000,000.00), or(ii) the aggregate unpaid principal balance of all Revolving Credit Loans made by the Lender to the Borrowers pursuant to Section 2.5 [Repayment ofRevolving Credit Loans] of the Credit Agreement, dated as of January 15, 2013, among the Borrower, the Guarantors now or hereafter party thereto and theLender (as amended, restated, modified, or supplemented from time to time, the “Credit Agreement”), together with all outstanding interest thereon on theExpiration Date.The Borrower shall pay interest on the unpaid principal balance hereof from time to time outstanding from the date hereof at the rate or rates per annumspecified by the Borrower pursuant to, or as otherwise provided in, the Credit Agreement. Subject to the provisions of the Credit Agreement, interest on thisRevolving Credit Note will be payable pursuant to Section 5.2 [Interest Payment Dates] of, or as otherwise provided in, the Credit Agreement. If any paymentor action to be made or taken hereunder shall be stated to be or become due on a day which is not a Business Day, such payment or action shall be made ortaken on the next following Business Day, unless otherwise provided in the Credit Agreement, and such extension of time shall be included in computinginterest or fees, if any, in connection with such payment or action. Upon the occurrence and during the continuation of an Event of Default and at the Lender’sdiscretion, the Borrower shall pay interest on the entire principal amount of the then outstanding Revolving Credit Loans evidenced by this Revolving CreditNote and all other obligations due and payable to the Lender pursuant to the Credit Agreement and the other Loan Documents at a rate per annum as set forth inSection 4.3 [Interest After Default] of the Credit Agreement. Such interest rate will accrue before and after any judgment has been entered.Subject to the provisions of the Credit Agreement, payments of both principal and interest shall be made without setoff, counterclaim or other deductionof any nature at the office of the Lender located at 500 First Avenue, Pittsburgh, Pennsylvania 15219 unless otherwise directed in writing by the Lender, inlawful money of the United States of America in immediately available funds.This Revolving Credit Note is one of the Notes referred to in, and is entitled to the benefits of, the Credit Agreement and the other Loan Documents,including the representations, warranties, covenants, conditions, security interests, if any, and Liens, if any, contained or granted therein. The CreditAgreement among other things contains provisions for accelerationof the maturity hereof upon the happening of certain stated events and also for prepayments, in certain circumstances, on account of principal hereof prior tomaturity upon the terms and conditions therein specified. The Borrower waives presentment, demand, notice, protest and all other demands and notices inconnection with the delivery, acceptance, performance, default or enforcement of this Revolving Credit Note and the Credit Agreement.This Revolving Credit Note shall bind the Borrower and its successors and assigns, and the benefits hereof shall inure to the benefit of the Lender andits successors and assigns. All references herein to the “Borrower” and the “Lender” shall be deemed to apply to the Borrower and the Lender, respectively, andtheir respective successors and assigns as permitted under the Credit Agreement.This Revolving Credit Note and any other documents delivered in connection herewith and the rights and obligations of the parties hereto and theretoshall for all purposes be governed, by and construed and enforced in accordance with, the internal laws of the State of New Jersey without giving effect to itsconflicts of law principles.All capitalized terms used herein shall, unless otherwise defined herein, have the same meanings given to such terms in the Credit Agreement andSection 1.2 [Construction] of the Credit Agreement shall apply to this Revolving Credit Note.[SIGNATURE PAGE FOLLOWS] 2[SIGNATURE PAGE TO REVOLVING CREDIT NOTE]IN WITNESS WHEREOF, and intending to be legally bound hereby, the undersigned has executed this Revolving Credit Note by its duly authorizedofficer. EPAM SYSTEMS, INC.By: Name: Title: EXHIBIT 2.4FORM OFLOAN REQUEST TO: PNC Bank, National AssociationTwo Tower Center Blvd., 17 FloorEast Brunswick, NJ 08816Attention: Virginia Alling, VPFROM: EPAM Systems, Inc., a Delaware corporation (as a “Borrower”).RE: Credit Agreement (as it may be amended, restated, modified or supplemented, the “Credit Agreement”), dated as of January 15, 2013, by andamong the Borrower, the Guarantors party thereto, and PNC Bank, National Association, as lender (the “Lender”).Capitalized terms not otherwise defined herein shall have the respective meanings ascribed to them by the Credit Agreement. A. Pursuant to Section 2.4 [Revolving Credit Loan Requests] of the Credit Agreement, the undersigned Borrower requests [check one line under 1.(a) belowand fill in blank space next to the line as appropriate]: 1(a) A new Loan [for [specify permitted recipient]] , OR Renewal of the LIBOR Rate Option applicable to an outstanding Revolving Credit Loan originally made on ,20 , OR Conversion of the Base Rate Option applicable to an outstanding Loan originally made on , 20 to a Loan towhich the LIBOR Rate Option applies, OR Conversion of the LIBOR Rate Option applicable to an outstanding Loan originally made on , 20 to a Loanto which the Base Rate Option applies. SUCH NEW, RENEWED OR CONVERTED LOAN SHALL BEAR INTEREST: [Check one line under 1.(b) below and fill in blank spaces in line next to line]: 1(b)(i) Under the Base Rate Option. Such Loan shall have a Borrowing Date of , 20 (which date shall be (i) the same BusinessDay of receipt by the Lender by 11:00 a.m. eastern time of this Loan Request for making a new Loan to which the Base Rate Optionapplies, or (ii) the last day of the preceding Interest Period if a Loan to which the LIBOR Rate Option applies is being converted to aLoan to which the Base Rate Option applies). ORth (ii) Under the LIBOR Rate Option. Such Loan shall have a Borrowing Date of , 20 (which date shall be three (3) BusinessDays, in the case of Loans to which the LIBOR Rate Option applies, subsequent to the Business Day of receipt by the Lender by11:00 a.m. eastern time of this Loan Request for making a new Loan to which the LIBOR Rate Option applies, renewing a Loan towhich the LIBOR Rate Option applies, or converting a Loan to which the Base Rate Option applies to a Loan to which the LIBORRate Option applies). 2 Such Loan is in the principal amount of U.S. $ [or the principal amount to be renewed or converted is U.S. $ ] 3 [Complete blank below if the Borrower is selecting the LIBOR Rate Option]: Such Loan shall have an Interest Period of one, two, three or six Month(s): B As of the date hereof and the date of making the above-requested Loan (and after giving effect thereto: (i) all of the representations and warranties containedin Article 6 of the Credit Agreement and in the other Loan Documents are true and correct in all material respects (except for those representations andwarranties that are qualified by reference to materiality, which shall be true and correct in all respects); (ii) no Event of Default or Potential Default hasoccurred and is continuing; and (iii) the making of such Loan shall not contravene any Law applicable to the any Loan Party or any Subsidiary of anyLoan Party or the Lender.C Each of the undersigned hereby irrevocably requests [check one line below and fill in blank spaces next to the line as appropriate]: 1 Funds to be deposited into a PNC Bank bank account per our current standing instructions. [Complete amount of deposit if not fullLoan advance amount:] U.S. $ . 2 Funds to be wired to per the following wire instructions: Amount of Wire Transfer: U.S. $ Bank Name: ABA: Account Number: Account Name: Reference: 2 3 Funds to be wired per the attached Funds Flow (multiple wire transfers).[SIGNATURE PAGE FOLLOWS] 3[SIGNATURE PAGE 1 OF 1 TO LOAN REQUEST]The Borrower certify to the Lender as to the accuracy of the foregoing on , 20 . BORROWER:EPAM SYSTEMS, INC.By: Name: Title: EXHIBIT 8.3.3QUARTERLY COMPLIANCE CERTIFICATEThis certificate is delivered pursuant to Section 8.3.3 of that certain Credit Agreement dated as of January 15, 2013 (the “Credit Agreement”) by andamong EPAM Systems, Inc., a Delaware corporation (the “Borrower”), the Guarantors party thereto (the “Guarantors”) and PNC Bank, NationalAssociation, as Lender (the “Lender”). Unless otherwise defined herein, terms defined in the Credit Agreement are used herein with the same meanings.The undersigned officer, , the [President/Chief Executive Officer/Chief Financial Officer/Treasurer/AssistantTreasurer/Controller] of the Borrower, in such capacity, does hereby certify on behalf of the Borrower as of the quarter/year ended , 20 (the “ReportDate”), as follows: (1) Maximum Debt Ratio (Credit Agreement Section 8.2.13). As of the Report Date, the Funded Debt to Consolidated EBITDA ratio of the Loan Parties is (insert ratio from Item (1)(C) below), which ratio shall not exceed 2.0 to 1.0. The Funded Debt to Consolidated EBITDA ratio shall be computed as follows: (A) Funded Debt of the Borrower and its Subsidiaries, as of the Report Date, calculated as follows: (i) Indebtedness of the Borrower and its Subsidiaries (on a consolidated basis) for the following (without duplication): a. Indebtedness for borrowed money $ b. capitalized lease obligations $ c. reimbursement obligations in respect of letters of credit (that are not fully collateralized by cash or cash equivalents, which isheld by PNC) $ d. guaranties of Indebtedness of the type referenced in Items (1)(A)(i)(a) through (1)(A)(i)(c) $ (ii) Funded Debt equals the sum of Items (1)(A)(i)(a) through (1)(A)(i)(d) $ PNC Bank, National Association, LenderPage 2 (B) Consolidated EBITDA of the Loan Parties, as of the Report Date for the four fiscal quarters then ended, calculated and consolidatedin accordance with GAAP as follows (i) net income $ (ii) to the extent deducted in determining net income: a. depreciation expense $ b. amortization expense $ c. interest expense $ d. income tax expense $ e. non-cash stock compensation expense $ f. the sum of Items (1)(B)(ii)(a) through (1)(B)(ii)(e) $ (iii) Consolidated EBITDA equals the sum of Items (1)(B)(i) plus (1)(B)(ii)(f) $ (C) Item (1)(A)(ii) divided by Item (1)(B)(iii) equals the Funded Debt to Consolidated EBITDA ratio calculated as of the end of eachfiscal quarter for the four fiscal quarters then ended, which ratio does not exceed 2.0 to 1.0 to 1.0 (2) Minimum Fixed Charge Coverage Ratio (Credit Agreement Section 8.2.14). As of the Report Date, the Fixed Charge Coverage Ratio of the Borrower andits Subsidiaries is (insert ratio from Item (2)(C) below), which ratio shall not be less than 1.25 to 1.0. The Interest Coverage Ratio shall be computed as follows: (A) Consolidated EBITDA (insert number from Item (1)(B)(iii) above) $ (B) the sum of scheduled payments of principal on all Indebtedness for borrowed money having an original term of more than one(1) year (including but not limited to amortization of Capital Lease obligations) as shown in the financial statements of the ParentCompany and its Subsidiaries as of one (1) year prior to the Report Date $ (C) Item (2)(A) divided by Item (2)(B) equals the Fixed Charge Coverage Ratio for the four fiscal quarters then ended, which ratio is notless than 1.25 to 1.0 to 1.0 PNC Bank, National Association, LenderPage 3 (3) Representations and Warranties. The representations and warranties contained in Article 6 of the Credit Agreement and in the other LoanDocuments are true and correct in all material respects (except for those representations and warranties that are qualified by reference tomateriality, which shall be true and correct in all respects) on and as of the date of this certificate. (4) Event of Default or Potential Default. No Event of Default or Potential Default exists as of the date hereof. [SIGNATURE PAGE FOLLOWS]SIGNATURE PAGE 1 OF 1 TOQUARTERLY COMPLIANCE CERTIFICATEIN WITNESS WHEREOF, the undersigned has executed this Certificate this day of , 20 . EPAM SYSTEMS, INC.By: Name: Title: Exhibit 10.26 Guaranty and Suretyship Agreement THIS GUARANTY AND SURETYSHIP AGREEMENT (this “Guaranty”) is made and entered into as of this 15 day of January, 2013, byEPAM SYSTEMS, LLC, a New Jersey limited liability company and VESTED DEVELOPMENT, INC., a Delaware corporation (each, the“Guarantor” and, collectively, the “Guarantors”), with an address at 41 University Drive, Suite 202, Newton, PA 18940, in consideration of the extensionof credit by PNC BANK, NATIONAL ASSOCIATION (the “Bank”), with an address at Two Tower Center Boulevard, East Brunswick, NJ 08816, toEPAM SYSTEMS, INC., a Delaware corporation (the “Borrower”), and other good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged. Terms capitalized herein but not defined herein shall have the meaning given to such terms in the Credit Agreement between EPAMSystems, Inc. and Bank dated as of the date hereof (as amended, restated or otherwise modified, the “Credit Agreement”).1. Guaranty of Guarantied Obligations. The Guarantors hereby jointly, severally, irrevocably and unconditionally guarantee, and become suretyfor, the prompt payment and performance of all Obligations, covenants and duties owing by the Borrower to the Bank or to any other direct or indirectsubsidiary of The PNC Financial Services Group, Inc., of any kind or nature, present or future (including any interest accruing thereon after maturity, orafter the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to the Borrower, whether ornot a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect (including those acquired by assignment orparticipation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, whether or not (i) evidenced by any note,guaranty or other instrument, (ii) arising under any agreement, instrument or document, (iii) for the payment of money, (iv) arising by reason of an extensionof credit, opening of a letter of credit, loan, equipment lease or guarantee, (v) under any interest or currency swap, future, option or other interest rate protectionor similar agreement, (vi) under or by reason of any foreign currency transaction, forward, option or other similar transaction providing for the purchase ofone currency in exchange for the sale of another currency, or in any other manner, or (vii) arising out of overdrafts on deposit or other accounts or out ofelectronic funds transfers (whether by wire transfer or through automated clearing houses or otherwise) or out of the return unpaid of, or other failure of theBank to receive final payment for, any check, item, instrument, payment order or other deposit or credit to a deposit or other account, or out of the Bank’snon-receipt of or inability to collect funds or otherwise not being made whole in connection with depository or other similar arrangements; and anyamendments, extensions, renewals and increases of or to any of the foregoing, and all costs and expenses of the Bank incurred in the documentation,negotiation, modification, enforcement, collection and otherwise in connection with any of the foregoing, including reasonable attorneys’ fees and expenses(collectively, the “Guarantied Obligations”). If the Borrower defaults under any such Guarantied Obligations, the Guarantors will pay the amount due to theBank.2. Nature of Guaranty; Waivers. This is a guaranty of payment and not of collection and the Bank shall not be required or obligated, as a conditionof the Guarantors’ liability, to make any demand upon or to pursue any of its rights against the Borrower, or to pursue any rights which may be available to itwith respect to any other person who may be liable for the payment of the Guarantied Obligations.This is an absolute, unconditional, irrevocable and continuing guaranty and will remain in full force and effect until all of the Guarantied Obligationshave been indefeasibly paid in full, and the Bank has terminated this Guaranty or it has terminated in accordance with its terms. This Guaranty will remainin full force and effect even if there is no principal balance outstanding under the Guarantied Obligations at a particular time or from time to time. ThisGuaranty will not be affected by any surrender, exchange, acceptance, compromise or release 1thby the Bank of any other party, or any other guaranty or any security held by it for any of the Guarantied Obligations, by any failure of the Bank to take anysteps to perfect or maintain its lien or security interest in or to preserve its rights to any security or other collateral for any of the Guarantied Obligations or anyguaranty, or by any irregularity, unenforceability or invalidity of any of the Guarantied Obligations or any part thereof or any security or other guarantythereof. The Guarantors’ obligations hereunder shall not be affected, modified or impaired by any counterclaim, set-off recoupment, deduction or defensebased upon any claim the Guarantors may have (directly or indirectly) against the Borrower or the Bank, except payment or performance of the GuarantiedObligations.Notice of acceptance of this Guaranty, notice of extensions of credit to the Borrower from time to time, notice of default, diligence, presentment, notice ofdishonor, protest, demand for payment, and any defense based upon the Bank’s failure to comply with the notice requirements under Sections 9-611 and 9-612 of the Uniform Commercial Code as in effect from time to time are hereby waived. The Guarantors waive all defenses based on suretyship or impairmentof collateral.The Bank at any time and from time to time, without notice to or the consent of the Guarantors, and without impairing or releasing, discharging ormodifying the Guarantors’ liabilities hereunder, may (a) change the manner, place, time or terms of payment or performance of or interest rates on, or otherterms relating to, any of the Guarantied Obligations; (b) renew, substitute, modify, amend or alter, or grant consents or waivers relating to any of theGuarantied Obligations, any other guaranties, or any security for any Guarantied Obligations or guaranties; (c) apply any and all payments by whomeverpaid or however realized including any proceeds of any collateral, to any Guarantied Obligations of the Borrower in such order, manner and amount as theBank may determine in its sole discretion; (d) settle, compromise or deal with any other person, including the Borrower or the Guarantors, with respect to anyGuarantied Obligations in such manner as the Bank deems appropriate in its sole discretion; (e) substitute, exchange or release any security or guaranty; or(f) take such actions and exercise such remedies hereunder as provided herein.3. Repayments or Recovery from the Bank. If any demand is made at any time upon the Bank for the repayment or recovery of any amount receivedby it in payment or on account of any of the Guarantied Obligations and if the Bank repays all or any part of such amount by reason of any judgment, decreeor order of any court or administrative body or by reason of any settlement or compromise of any such demand, the Guarantors will be and remain liablehereunder for the amount so repaid or recovered to the same extent as if such amount had never been received originally by the Bank. The provisions of thissection will be and remain effective notwithstanding any contrary action which may have been taken by the Guarantors in reliance upon such payment, andany such contrary action so taken will be without prejudice to the Bank’s rights hereunder and will be deemed to have been conditioned upon such paymenthaving become final and irrevocable.4. Financial Statements. If requested in writing by the Bank prior to the payment in full of all of the Guarantied Obligations, and without duplicationof any financial information delivered under the Credit Agreement, the Guarantors will promptly submit to the Bank such information relating to theGuarantors’ affairs (including but not limited to annual financial statements and tax returns for the Guarantors) or any security for the Guaranty as the Bankmay reasonably request.5. Enforceability of Guarantied Obligations. No modification, limitation or discharge of the Guarantied Obligations arising out of or by virtue ofany bankruptcy, reorganization or similar proceeding for relief of debtors under federal or state law will affect, modify, limit or discharge the Guarantors’liability in any manner whatsoever and this Guaranty will remain and continue in full force and effect and will be enforceable against the Guarantors to thesame extent and with the same force and effect as if any such proceeding had not been instituted. The Guarantors waive all rights and benefits which mightaccrue to it by reason of any such proceeding and will be liable to the full extent hereunder, irrespective of any modification, limitation or discharge of theliability of the Borrower that may result from any such proceeding. - 2 -The Guarantors expressly waive the effect of any statute of limitations or other limitations on any actions under this Guaranty.6. Events of Default. The happening of any Event of Default (or if there is no defined set of “Events of Default” therein, the occurrence of a defaultpast any applicable grace and/or cure periods thereunder) as defined in any of the Secured Obligations shall be an “Event of Default” hereunder. Upon theoccurrence of any Event of Default, (a) the Guarantors shall pay to the Bank the amount of the Guarantied Obligations; or (b) on demand of the Bank, theGuarantors shall immediately deposit with the Bank, in U.S. dollars, all amounts due or to become due under the Guarantied Obligations, and the Bank mayat any time use such funds to repay the Guarantied Obligations; or (c) the Bank in its discretion may exercise with respect to any collateral any one or more ofthe rights and remedies provided a secured party under the applicable version of the Uniform Commercial Code; or (d) the Bank in its discretion may exercisefrom time to time any other rights and remedies available to it at law, in equity or otherwise.7. Right of Setoff. In addition to all liens upon and rights of setoff against the Guarantors’ money, securities or other property given to the Bank bylaw, the Bank shall have, with respect to the Guarantors’ obligations to the Bank under this Guaranty and to the extent permitted by law, a contractualpossessory security interest in and a contractual right of setoff against, and the Guarantors hereby grant Bank a security interest in, and hereby assign,convey, deliver, pledge and transfer to the Bank all of the Guarantors’ right, title and interest in and to, all of the Guarantors’ deposits, moneys, securities andother property now or hereafter in the possession of or on deposit with, or in transit to, the Bank or any other direct or indirect subsidiary of The PNCFinancial Services Group, Inc., whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeepingor otherwise, excluding, however, all IRA, Keogh, and trust accounts. Every such security interest and right of setoff may be exercised without demand uponor notice to the Guarantors. Every such right of setoff shall be deemed to have been exercised immediately upon the occurrence of an Event of Default hereunderwithout any action of the Bank, although the Bank may enter such setoff on its books and records at a later time.8. Collateral. This Guaranty is secured by the property described in any collateral security documents which the Guarantors execute and deliver to theBank and by such other collateral as previously may have been or may in the future be granted to the Bank to secure any Guarantied Obligations of theGuarantors to the Bank.9. Costs. To the extent that the Bank incurs any costs or expenses in protecting or enforcing its rights under the Guarantied Obligations or thisGuaranty, including reasonable attorneys’ fees and the costs and expenses of litigation, such costs and expenses will be due on demand, will be included in theGuarantied Obligations and will bear interest from the incurring or payment thereof at the Default Rate (as defined in any of the Guarantied Obligations).10. Postponement of Subrogation. Until the Guarantied Obligations are indefeasibly paid in full, expire, are terminated and are not subject to anyright of revocation or rescission, the Guarantors postpone and subordinate in favor of the Bank or its designee (and any assignee or potential assignee) any andall rights which the Guarantors may have to (a) assert any claim whatsoever against the Borrower based on subrogation, exoneration, reimbursement, orindemnity or any right of recourse to security for the Guarantied Obligations with respect to payments made hereunder, and (b) any realization on any propertyof the Borrower, including participation in any marshalling of the Borrower’s assets.11. Notices. All notices, demands, requests, consents, approvals and other communications required or permitted hereunder (“Notices”) must be inwriting and will be effective upon receipt. Notices may be given in any manner to which the Bank and the Guarantors may separately agree, includingelectronic mail. Without limiting the foregoing, first-class mail, facsimile transmission and commercial courier service are hereby agreed to as acceptablemethods for giving Notices. Regardless of the manner in which provided, Notices may be sent to - 3 -addresses for the Bank and the Guarantors as set forth above or to such other address as either may give to the other for such purpose in accordance with thissection.12. Preservation of Rights. No delay or omission on the Bank’s part to exercise any right or power arising hereunder will impair any such right orpower or be considered a waiver of any such right or power, nor will the Bank’s action or inaction impair any such right or power. The Bank’s rights andremedies hereunder are cumulative and not exclusive of any other rights or remedies which the Bank may have under other agreements, at law or in equity. TheBank may proceed in any order against the Borrower, the Guarantors or any other obligor of, or any collateral securing, the Guarantied Obligations.13. Illegality. If any provision contained in this Guaranty should be invalid, illegal or unenforceable in any respect, it shall not affect or impair thevalidity, legality and enforceability of the remaining provisions of this Guaranty.14. Changes in Writing. No modification, amendment or waiver of, or consent to any departure by the Guarantors from, any provision of thisGuaranty will be effective unless made in a writing signed by the Bank, and then such waiver or consent shall be effective only in the specific instance andfor the purpose for which given. Notwithstanding the foregoing, the Bank may modify this Guaranty for the purposes of completing missing content orcorrecting erroneous content, without the need for a written amendment, provided that the Bank shall send a copy of any such modification to the Guarantors(which notice may be given by electronic mail). No notice to or demand on the Guarantors will entitle the Guarantors to any other or further notice or demandin the same, similar or other circumstance.15. Entire Agreement. This Guaranty (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes allother prior agreements and understandings, both written and oral, between the Guarantors and the Bank with respect to the subject matter hereof; provided,however, that this Guaranty is in addition to, and not in substitution for, any other guarantees from the Guarantors to the Bank.16. Successors and Assigns. This Guaranty will be binding upon and inure to the benefit of the Guarantors and the Bank and their respective heirs,executors, administrators, successors and assigns; provided, however, that the Guarantors may not assign this Guaranty in whole or in part without theBank’s prior written consent and the Bank at any time may assign this Guaranty in whole or in part.17. Interpretation. In this Guaranty, unless the Bank and the Guarantors otherwise agree in writing, the singular includes the plural and the plural thesingular; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referred to; the word“or” shall be deemed to include “and/or”, the words “including”, “includes” and “include” shall be deemed to be followed by the words “without limitation”;and references to sections or exhibits are to those of this Guaranty. Section headings in this Guaranty are included for convenience of reference only and shallnot constitute a part of this Guaranty for any other purpose. If this Guaranty is executed by more than one party as Guarantors, the obligations of suchpersons or entities will be joint and several.18. Anti-Money Laundering/International Trade Law Compliance. The Guarantors represent and warrant to the Bank, as of the date of thisGuaranty, as of the date of each disbursement of loan proceeds, as of the date of any renewal, extension or modification of any loan, and at all times anyGuarantied Obligations exist that: (A) no Guarantors (i) is listed or otherwise recognized as a specially designated, prohibited, sanctioned or debarred person orentity, or subject to any limitations or prohibitions (including but not limited to the blocking of property or rejections of transactions) under any order ordirective of any Compliance Authority; (ii) has any of its assets in a Sanctioned Country or in the possession, custody or control of a Sanctioned Person; or(iii) does business in or with, or derives any of its operating income from investments in or transactions with, any Sanctioned Person or Sanctioned Countryin violation of any law or regulation enforced by any Compliance Authority; (B) the proceeds of any loan will not be used to fund any operations in, financeany investments or - 4 -activities in, or make any payments to, a Sanctioned Person or a Sanctioned Country; and (C) each Guarantor is in compliance with, and no Guarantorengages in any dealings or transactions prohibited by, any laws of the United States including the USA Patriot Act, the Trading with the Enemy Act, or theU.S. Foreign Corrupt Practices Act of 1977, all as amended, supplemented or replaced from time to time. As used herein: “Compliance Authority” meanseach and all of the (a) U.S. Department of the Treasury’s Office of Foreign Asset Control; (b) U.S. Treasury Department/Financial Crimes EnforcementNetwork; (c) U.S. State Department/Directorate of Defense Trade Controls; (d) U.S. Commerce Department/Bureau of Industry and Security; (e) U.S.Internal Revenue Service; (f) U.S. Justice Department; and (g) U.S. Securities and Exchange Commission. “Sanctioned Country” means a country subject toa sanctions program maintained by any Compliance Authority. “Sanctioned Person” means any individual person, a group, regime, entity or thing subjectto, or specially designated under, any sanctions program maintained by any Compliance Authority.19. Indemnity. The Guarantors agree to indemnify each of the Bank, each legal entity, if any, who controls, is controlled by or is under commoncontrol with the Bank and each of their respective directors, officers and employees (the “Indemnified Parties”), and to defend and hold each IndemnifiedParty harmless from and against, any and all claims, damages, losses, liabilities and expenses (including all fees and charges of internal or external counselwith whom any Indemnified Party may consult and all expenses of litigation and preparation therefor) which any Indemnified Party may incur or which maybe asserted against any Indemnified Party by any person, entity or governmental authority (including any person or entity claiming derivatively on behalf ofthe Guarantors), in connection with or arising out of or relating to the matters referred to in this Guaranty, whether (a) arising from or incurred in connectionwith any breach of a representation, warranty or covenant by the Guarantors, or (b) arising out of or resulting from any suit, action, claim, proceeding orgovernmental investigation, pending or threatened, whether based on statute, regulation or order, or tort, or contract or otherwise, before any court orgovernmental authority; provided, however, that the foregoing indemnity agreement shall not apply to any claims, damages, losses, liabilities and expensessolely attributable to an Indemnified Party’s gross negligence or willful misconduct. The indemnity agreement contained in this Section shall survive thetermination of this Guaranty and assignment of any rights hereunder. The Guarantors may participate at its expense in the defense of any such claim.20. Governing Law and Jurisdiction. This Guaranty has been delivered to and accepted by the Bank and will be deemed to be made in the Statewhere the Bank’s office indicated above is located. THIS GUARANTY WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE BANK ANDTHE GUARANTORS DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK’S OFFICE INDICATED ABOVE IS LOCATED,EXCLUDING ITS CONFLICT OF LAWS RULES. The Guarantors hereby irrevocably consent to the exclusive jurisdiction of any state or federal court in thecounty or judicial district where the Bank’s office indicated above is located; provided that nothing contained in this Guaranty will prevent the Bank frombringing any action, enforcing any award or judgment or exercising any rights against the Guarantors individually, against any security or against anyproperty of the Guarantors within any other county, state or other foreign or domestic jurisdiction. The Guarantors acknowledge and agree that the venueprovided above is the most convenient forum for both the Bank and the Guarantors. The Guarantors waive any objection to venue and any objection based ona more convenient forum in any action instituted under this Guaranty.21. Equal Credit Opportunity Act. If the Guarantors are not an “applicants for credit” under Section 202.2 (e) of the Equal Credit Opportunity Actof 1974 (“ECOA”), the Guarantors acknowledge that (i) this Guaranty has been executed to provide credit support for the Guarantied Obligations, and (ii) theGuarantors were not required to execute this Guaranty in violation of Section 202.7(d) of the ECOA.REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - 5 -23. WAIVER OF JURY TRIAL. THE GUARANTORS IRREVOCABLY WAIVE ANY AND ALL RIGHT THE GUARANTORS MAY HAVE TO A TRIAL BYJURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS GUARANTY, ANY DOCUMENTS EXECUTED IN CONNECTIONWITH THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE GUARANTORS ACKNOWLEDGE THAT THEFOREGOING WAIVER IS KNOWING AND VOLUNTARY.The Guarantors acknowledge that each of them has read and understood all the provisions of this Guaranty, including the waiver of jurytrial, and has been advised by counsel as necessary or appropriate.WITNESS the due execution hereof as a document under seal, as of the date first written above, with the intent to be legally bound hereby. ATTEST: EPAM SYSTEMS, LLC, a New Jersey limited liability company By: (SEAL)Print Name: Print Name: Title: Title: ATTEST: VESTED DEVELOPMENT, INC.,a Delaware corporation By: (SEAL)Print Name: Print Name: Title: Title: - 6 -Exhibit 10.27 Security Agreement THIS SECURITY AGREEMENT (this “Agreement”), dated as of this 15 day of January, 2013, is made by EPAM SYSTEMS, INC., aDelaware corporation, EPAM SYSTEMS, LLC, a New Jersey limited liability company and VESTED DEVELOPMENT, INC., a Delaware corporation(collectively and individually, the “Grantor”), each with an address at 41 University Drive, Suite 202, Newton, PA 18940, in favor of PNC BANK,NATIONAL ASSOCIATION (the “Bank”), with an address at Two Tower Center Boulevard, East Brunswick, NJ 08816. Terms capitalized but notdefined herein shall have the meaning given to such terms in the Credit Agreement between EPAM Systems, Inc. and the Bank dated as of the date hereof (asamended, restated or otherwise modified, the “Credit Agreement”).Under the terms hereof, the Bank desires to obtain and the Grantor desires to grant the Bank security for all of the Secured Obligations (as hereinafterdefined).NOW, THEREFORE, the Grantor and the Bank, intending to be legally bound, hereby agree as follows:1. Definitions.(a) “Collateral” shall include all personal property of the Grantor, including the following, all whether now owned or hereafter acquired or arising andwherever located: (i) accounts (including health-care-insurance receivables and credit card receivables); (ii) securities entitlements, securities accounts,commodity accounts, commodity contracts and investment property; (iii) deposit accounts; (iv) instruments (including promissory notes); (v) documents(including warehouse receipts); (vi) chattel paper (including electronic chattel paper and tangible chattel paper); (vii) inventory, including raw materials, workin process, or materials used or consumed in Grantor’s business, items held for sale or lease or furnished or to be furnished under contracts of service, sale orlease, goods that are returned, reclaimed or repossessed; (viii) goods of every nature, including stock-in-trade, goods on consignment, standing timber that isto be cut and removed under a conveyance or contract for sale, the unborn young of animals, crops grown, growing, or to be grown, manufactured homes,computer programs embedded in such goods and farm products; (ix) equipment, including machinery, vehicles and furniture; (x) fixtures; (xi) agriculturalliens; (xii) as-extracted collateral; (xiii) commercial tort claims, if any, described on Exhibit “A” hereto; (xiv) letter of credit rights; (xv) general intangibles, ofevery kind and description, including payment intangibles, software, computer information, source codes, object codes, records and data, all existing andfuture customer lists, choses in action, claims (including claims for indemnification or breach of warranty), books, records, patents and patent applications,copyrights, trademarks, tradenames, tradestyles, trademark applications, goodwill, blueprints, drawings, designs and plans, trade secrets, contracts,licenses, license agreements, formulae, tax and any other types of refunds, returned and unearned insurance premiums, rights and claims under insurancepolicies; (xvi) all supporting obligations of all of the foregoing property; (xvii) all property of the Grantor now or hereafter in the Bank’s possession or intransit to or from, or under the custody or control of, the Bank or any affiliate thereof; (xviii) all cash and cash equivalents thereof; and (xix) all cash andnoncash proceeds (including insurance proceeds) of all of the foregoing property, all products thereof and all additions and accessions thereto, substitutionstherefor and replacements thereof. The Collateral shall also include any and all other tangible or intangible property that is described as being part of theCollateral pursuant to one or more Riders to Security Agreement that may be attached hereto or delivered in connection herewith, including the Rider to SecurityAgreement - Copyrights, the Rider to Security Agreement - Patents, the Rider to Security Agreement - Trademarks and the Rider to Security Agreement - CashCollateral Account; provided that the Collateral shall not include, and no security interest is hereby granted, pledged or collaterally assigned in the following(collectively, the “Excluded Collateral”): (i) any asset for which the 1thgranting of a security interest is prohibited by law and such prohibition is not over-ridden by the UCC or other applicable law (provided that this clause(i) shall not apply to cash Proceeds of dispositions thereof in accordance with applicable law, including, without limitation, rules and regulations of anygovernmental authority or agency), (ii) more than 65% of the issued and outstanding equity interest in any Foreign Subsidiary or (iii) any lease, license,contract or agreement to which any Grantor is a party, and any of its rights or interest thereunder, if and to the extent that a security interest is prohibited by orin violation of (A) any law, rule or regulation applicable to such Grantor, or (B) a term, provision or condition of any such lease, license, contract or agreement(unless such law, rule, regulation, term, provision or condition would be rendered ineffective with respect to the creation of the security interest hereunderpursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or any successor provision or provisions)); provided however that the Collateral shall include(and such security interest shall attach) immediately at such time as the contractual or legal prohibition shall no longer be applicable and to the extentseverable, shall attach immediately to any portion of such lease, license, contract or agreement not subject to the prohibitions specified in (A) or (B) above;provided further that the exclusions referred to in this clause (iii) shall not include any Proceeds of any such lease, license, contract or agreement.Notwithstanding that motor vehicles and other items of Collateral as to which perfection of a Lien is not governed by the UCC, but instead by state certificateof title laws are included in the Collateral, perfection of such Liens under such state laws by the Bank is not required as of the date of this Agreement, and theBank reserves its right to require such perfection under such state laws if any Event of Default occurs.(b) “Secured Obligations” shall include all Obligations, covenants and duties owing by the Grantor to the Bank or to any other direct or indirectsubsidiary of The PNC Financial Services Group, Inc., of any kind or nature, present or future (including any interest accruing thereon after maturity, orafter the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to the Grantor, whether or nota claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect (including those acquired by assignment orparticipation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, whether or not (i) evidenced by any note,guaranty or other instrument, (ii) arising under any agreement, instrument or document, (iii) for the payment of money, (iv) arising by reason of an extensionof credit, opening of a letter of credit, loan, equipment lease or guarantee, (v) under any interest or currency swap, future, option or other interest rate protectionor similar agreement, (vi) under or by reason of any foreign currency transaction, forward, option or other similar transaction providing for the purchase ofone currency in exchange for the sale of another currency, or in any other manner, (vii) arising out of overdrafts on deposit or other accounts or out ofelectronic funds transfers (whether by wire transfer or through automated clearing houses or otherwise) or out of the return unpaid of, or other failure of theBank to receive final payment for, any check, item, instrument, payment order or other deposit or credit to a deposit or other account, or out of the Bank’snon-receipt of or inability to collect funds or otherwise not being made whole in connection with depository or other similar arrangements; and anyamendments, extensions, renewals and increases of or to any of the foregoing, and all costs and expenses of the Bank incurred in the documentation,negotiation, modification, enforcement, collection and otherwise in connection with any of the foregoing, including reasonable attorneys’ fees and expenses.(c) “UCC” means the Uniform Commercial Code, as adopted and enacted and as in effect from time to time in the State whose law governs pursuant tothe Section of this Agreement entitled “Governing Law and Jurisdiction.” Terms used herein which are defined in the UCC and not otherwise defined hereinshall have the respective meanings ascribed to such terms in the UCC. To the extent the definition of any category or type of collateral is modified by anyamendment, modification or revision to the UCC, such modified definition will apply automatically as of the date of such amendment, modification orrevision.2. Grant of Security Interest. To secure the Secured Obligations, the Grantor, as debtor, hereby assigns and grants to the Bank, as secured party, acontinuing lien on and security interest in the Collateral. - 2 -3. Change in Name or Locations. The Grantor hereby agrees that if the location of the Collateral changes from the locations listed on Exhibit “A” hereto (tothe extent Collateral in excess of $250,000 is maintained at such location) and made part hereof, or if the Grantor changes its name, its type of organization, itsstate of organization (if Grantor is a registered organization), its chief executive office (if Grantor is a general partnership or non-registered organization), theGrantor will promptly notify the Bank in writing of the additions or changes.4. Representations and Warranties. The Grantor represents, warrants and covenants to the Bank that: (a) all information, including its type oforganization, jurisdiction of organization, chief executive office, and (for individuals only) principal residence are as set forth on Exhibit “A” hereto and aretrue and correct on the date hereof; (b) the Grantor has good, marketable and indefeasible title to the Collateral, except as otherwise contemplated or permittedunder Sections 6.1.11, 8.1.4 and 8.2.7 of the Credit Agreement, or except for claims for credit, allowance or adjustment by any account debtor or setoffs,defenses or counterclaims (collectively, “Setoffs”) in an aggregate amount at any time not to exceed $5,000,000, and has not made any prior sale, pledge,encumbrance, assignment or other disposition of any of the Collateral, and the Collateral is free from all encumbrances and Setoffs of any kind, other than infavor of the Bank, as contemplated or permitted under Sections 6.1.11, 8.1.4, 8.2.2 and 8.2.7 of the Credit Agreement or Setoffs in an aggregate amount atany time not to exceed $5,000,000; (c) each account and payment intangible, if included in the definition of Collateral, is genuine and enforceable inaccordance with its terms, except as otherwise contemplated or permitted under Sections 6.1.11, 8.1.4 and 8.2.7 of the Credit Agreement or except for Setoffsin an aggregate amount at any time not to exceed $5,000,000, and the Grantor will defend the same against all Setoffs at any time asserted other than thosearising from liens contemplated or permitted under Section 8.2.2 of the Credit Agreement or from Setoffs in an aggregate amount at any time not to exceed$5,000,000; and (d) except as otherwise contemplated or permitted under Sections 6.1.11, 8.1.4 and 8.2.7 of the Credit Agreement, at the time any account orpayment intangible becomes subject to this Agreement, such account or payment intangible will be a good and valid account or payment intangible representinga bona fide sale of goods or services by the Grantor and such goods will have been shipped to the respective account debtors or the services will have beenperformed for the respective account debtors, and no such account or general intangible will be subject to any Setoffs in an aggregate amount at any time inexcess of $5,000,000.5. Grantor’s Covenants. The Grantor covenants that it shall:(a) from time to time and at all reasonable times, but in accordance with Section 8.1.5 of the Credit Agreement, allow the Bank, by or through any of itsofficers, agents, attorneys, or accountants, to examine or inspect the Collateral, and obtain valuations and audits of the Collateral, at the Grantor’s expense,wherever located; provided that the Grantor shall not be obligated to pay the cost of more than one inspection in any fiscal year so long as no Event of Defaultexists. The Grantor shall do, obtain, make, execute and deliver all such additional and further acts, things, deeds, assurances and instruments as the Bankmay reasonably require to vest in and assure to the Bank its rights hereunder and in or to the Collateral, and the proceeds thereof, including using itscommercially reasonable efforts to obtain waivers from landlords, warehousemen and mortgagees. Upon and during the continuance of an Event of Default,the Grantor agrees that the Bank has the right to notify (on invoices or otherwise) account debtors and other obligors or payors on any Collateral of itsassignment to the Bank, and that all payments thereon should be made directly to the Bank, and that the Bank has full power and authority to collect,compromise, endorse, sell or otherwise deal with the Collateral in its own name or that of the Grantor at any time upon and during the continuation of an Eventof Default;(b) keep the Collateral in good order and repair at all times (ordinary wear and tear excepted) and promptly notify the Bank of any event causing amaterial loss or decline in value of the Collateral, taken as a whole, whether or not covered by insurance, and the amount of such loss or depreciation; - 3 -(c) except as otherwise contemplated in Section 8.1.7 of the Credit Agreement, only use or permit the Collateral to be used in accordance in all materialrespects with all applicable federal, state, county and municipal laws and regulations;(d) have and maintain insurance at all times with respect to all Collateral in accordance with Section 8.1.3 of the Credit Agreement. Each such casualtyinsurance policy shall contain a standard Lender’s Loss Payable Clause issued in favor of the Bank under which all losses thereunder shall be paid to theBank as the Bank’s interests may appear. Such policies shall expressly provide that the requisite insurance cannot be altered or canceled without at least thirty(30) days prior written notice to the Bank and shall insure the Bank notwithstanding the act or neglect of the Grantor. Upon the Bank’s demand, the Grantorshall furnish the Bank with duplicate original policies of insurance or such other evidence of insurance as the Bank may reasonably require. In the event offailure to provide insurance as herein provided, the Bank may, at its option, obtain such insurance and the Grantor shall pay to the Bank, on demand, thecost thereof. During the occurrence of an Event of Default, proceeds of insurance may be applied by the Bank to reduce the Secured Obligations or to repair orreplace Collateral, all in the Bank’s sole discretion;(e) not hereafter sell, pledge, encumber, assign or otherwise dispose of any of the Collateral or permit any Setoffs or any lien or security interest to existthereon other than in favor of the Bank, except as otherwise contemplated or permitted under Sections 8.1.4, 8.2.2 and 8.2.7 of the Credit Agreement (otherthan Setoffs) or Setoffs in an aggregate amount at any time not to exceed $5,000,000; and(f) subject to the preceding clause (e), defend the Collateral against all claims and demands of all persons at any time claiming the same or any interesttherein.6. Negative Pledge; No Transfer. Except as permitted under the Credit Agreement, the Grantor will not sell or offer to sell or otherwise transfer or grant orallow the imposition of a lien or security interest upon the Collateral.7. Covenants for Accounts. If accounts are included in the definition of Collateral:(a) The Grantor will, on the Bank’s demand upon and during the continuation of an Event of Default, make notations on its books and recordsshowing the Bank’s security interest and make available to the Bank shipping and delivery receipts evidencing the shipment of the goods that gave rise to anaccount, completion certificates or other proof of the satisfactory performance of services that gave rise to an account, a copy of the invoice for each accountand copies of any written contract or order from which an account arose. The Grantor shall promptly notify the Bank if an account in excess of $1,000,000becomes evidenced or secured by an instrument or chattel paper and upon the Bank’s request, will promptly deliver any such instrument or chattel paper tothe Bank, including any letter of credit delivered to the Grantor to support a shipment of inventory by the Grantor.(b) Upon and during the continuation of an Event of Default, the Grantor will upon request by the Bank promptly advise the Bank whenever anaccount debtor refuses to retain or returns any material goods from the sale of which an account arose and will comply with any reasonable instructions thatthe Bank may give regarding the sale or other disposition of such returns. From time to time as the Bank may request upon and during the continuation of anEvent of Default, the Grantor will report to the Bank all credits given to account debtors on all accounts.(c) The Grantor will immediately notify the Bank if any account in excess of $1,000,000 arises out of contracts with the United States or anydepartment, agency or instrumentality thereof, and, upon Bank’s reasonable request, will execute any instruments and take any steps required by the Bank sothat all monies due - 4 -and to become due under such contract shall be assigned to the Bank and notice of the assignment given to and acknowledged by the appropriate governmentagency or authority under the Federal Assignment of Claims Act.(d) At any time after the occurrence and during the continuation of an Event of Default, and without notice to the Grantor, the Bank may direct anypersons who are indebted to the Grantor on any Collateral consisting of accounts or general intangibles to make payment directly to the Bank of the amountsdue. The Bank is authorized to collect, compromise, endorse and sell any such Collateral in its own name or in the Grantor’s name and to give receipts to suchaccount debtors for any such payments and the account debtors will be protected in making such payments to the Bank. Upon the Bank’s written requestafter and during the continuation of an Event of Default, the Grantor will establish with the Bank and maintain a lockbox account (“Lockbox”) with theBank and a depository account(s) (“Cash Collateral Account”) with the Bank subject to the provisions of this subparagraph and such other relatedagreements as the Bank may require, and the Grantor shall notify its account debtors to remit payments directly to the Lockbox. Thereafter, funds collected inthe Lockbox shall be transferred to the Cash Collateral Account, and funds in the Cash Collateral Account shall be applied by the Bank, daily, to reduce theoutstanding Secured Obligations.8. Further Assurances. By its signature hereon, the Grantor hereby irrevocably authorizes the Bank to execute (on behalf of the Grantor) and file against theGrantor one or more financing, continuation or amendment statements pursuant to the UCC in form satisfactory to the Bank, and the Grantor will pay thecost of preparing and filing the same in all jurisdictions in which such filing is deemed by the Bank to be necessary or desirable in order to perfect, preserveand protect its security interests. If required by the Bank, the Grantor will execute all documentation necessary for the Bank to obtain and maintain perfectionof its security interests in the Collateral. At the Bank’s request, the Grantor will execute, in form satisfactory to the Bank, a Rider to Security Agreement -Copyrights (if any Collateral consists of registered or unregistered copyrights), a Rider to Security Agreement - Patents (if any Collateral consists of patents orpatent applications), a Rider to Security Agreement - Trademarks (if any Collateral consists of trademarks, tradenames, tradestyles or trademarkapplications). If any Collateral consists of letter of credit rights, electronic chattel paper, deposit accounts or supporting obligations not maintained with theBank or one of its affiliates, or any securities entitlement, securities account, commodities account, commodities contract or other investment property inexcess of $250,000, then at the Bank’s request the Grantor will execute, and will cause the depository institution or securities intermediary upon whose booksand records the ownership interest of the Grantor in such Collateral appears, to execute such Pledge Agreements, Notification and Control Agreements or otheragreements as the Bank deems necessary in order to perfect, prioritize and protect its security interest in such Collateral, in each case in a form satisfactory tothe Bank.9. Events of Default. The Grantor shall, at the Bank’s option, be in default under this Agreement upon the happening of any Event of Default (or if there isno defined set of “Events of Default” therein, the occurrence of a default past any applicable grace and/or cure periods thereunder) as defined in any of theSecured Obligations.10. Remedies. Upon the occurrence of any such Event of Default and at any time during the continuance thereof, the Bank may declare all SecuredObligations immediately due and payable and shall have, in addition to any remedies provided herein or by any applicable law or in equity, all the remedies ofa secured party under the UCC. The Bank’s remedies include, but are not limited to, the right to (a) peaceably by its own means or with judicial assistanceenter the Grantor’s premises and take possession of the Collateral without prior notice to the Grantor or the opportunity for a hearing, (b) render the Collateralunusable, (c) dispose of the Collateral on the Grantor’s premises, (d) require the Grantor to assemble the Collateral and make it available to the Bank at a placedesignated by the Bank, and (e) notify the United States Postal Service to send the Grantor’s mail to the Bank. Unless the Collateral is perishable or threatensto decline speedily in value or is of a type customarily sold on a recognized market, the Bank will give the Grantor reasonable notice of the time and place ofany public sale thereof or of the time after which any private sale or any other intended disposition thereof is to be made. The requirements of commerciallyreasonable notice shall be met if such notice is sent to the Grantor at least ten (10) days before the time of the intended sale or disposition. Expenses of retaking,holding, preparing for disposition, - 5 -disposing or the like shall include the Bank’s reasonable attorneys’ fees and legal expenses, incurred or expended by the Bank to enforce any payment due itunder this Agreement either as against the Grantor, or in the prosecution or defense of any action, or concerning any matter growing out of or connection withthe subject matter of this Agreement and the Collateral pledged hereunder. The Grantor waives all relief from all appraisement or exemption laws now in force orhereafter enacted.11. Power of Attorney. The Grantor does hereby make, constitute and appoint any officer or agent of the Bank as the Grantor’s true and lawful attorney-in-fact, with power presently granted and exercisable upon and during the continuation of an Event of Default to (a) endorse the name of the Grantor or any of theGrantor’s officers or agents upon any notes, checks, drafts, money orders, or other instruments of payment or Collateral that may come into the Bank’spossession in full or part payment of any Obligations; (b) sue for, compromise, settle and release all claims and disputes with respect to, the Collateral; and(c) sign, for the Grantor, such documentation required by the UCC, or supplemental intellectual property security agreements; granting to the Grantor’s saidattorney full power to do any and all things necessary to be done in and about the premises as fully and effectually as the Grantor might or could do. TheGrantor hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue hereof. This power of attorney is coupled with an interest, and isirrevocable.12. Payment of Expenses. At its option, the Bank may discharge taxes, liens, security interests or such other encumbrances as may attach to the Collateralwhich are not expressly permitted under the Loan Documents, may pay for required insurance on the Collateral if not obtained by the Grantor in accordancewith the Loan Documents and, in accordance with the Loan Documents, may pay for the maintenance, appraisal or reappraisal, and preservation of theCollateral. With duplication of Grantor’s expense reimbursement obligations set forth in the other Loan Documents, the Grantor will reimburse the Bank ondemand for any payment so made or any expense incurred by the Bank pursuant to the foregoing authorization, and the Collateral also will secure anyadvances or payments so made or expenses so incurred by the Bank.13. Notices. All notices, demands, requests, consents, approvals and other communications required or permitted hereunder (“Notices”) must be in writingand will be effective upon receipt. Notices may be given in any manner to which the parties may separately agree, including electronic mail. Without limitingthe foregoing, first-class mail, facsimile transmission and commercial courier service are hereby agreed to as acceptable methods for giving Notices. Regardlessof the manner in which provided, Notices may be sent to a party’s address as set forth above or to such other address as any party may give to the other forsuch purpose in accordance with this section.14. Preservation of Rights. No delay or omission on the Bank’s part to exercise any right or power arising hereunder will impair any such right or power orbe considered a waiver of any such right or power, nor will the Bank’s action or inaction impair any such right or power. The Bank’s rights and remedieshereunder are cumulative and not exclusive of any other rights or remedies which the Bank may have under other agreements, at law or in equity.15. Illegality. If any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, it shall not affect or impair the validity,legality and enforceability of the remaining provisions of this Agreement.16. Changes in Writing. No modification, amendment or waiver of, or consent to any departure by the Grantor from, any provision of this Agreement willbe effective unless made in a writing signed by the Bank, and then such waiver or consent shall be effective only in the specific instance and for the purposefor which given. No notice to or demand on the Grantor will entitle the Grantor to any other or further notice or demand in the same, similar or othercircumstance. - 6 -17. Entire Agreement. This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes all otherprior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof.18. Counterparts. This Agreement may be signed in any number of counterpart copies and by the parties hereto on separate counterparts, but all such copiesshall constitute one and the same instrument. Delivery of an executed counterpart of signature page to this Agreement by facsimile transmission shall beeffective as delivery of a manually executed counterpart. Any party so executing this Agreement by facsimile transmission shall promptly deliver a manuallyexecuted counterpart, provided that any failure to do so shall not affect the validity of the counterpart executed by facsimile transmission.19. Successors and Assigns. This Agreement will be binding upon and inure to the benefit of the Grantor and the Bank and their respective heirs, executors,administrators, successors and assigns; provided, however, that the Grantor may not assign this Agreement in whole or in part without the Bank’s priorwritten consent and the Bank at any time may assign this Agreement in whole or in part.20. Interpretation. In this Agreement, unless the Bank and the Grantor otherwise agree in writing, the singular includes the plural and the plural thesingular; words importing any gender include the other genders; references to statutes are to be construed as including all statutory provisions consolidating,amending or replacing the statute referred to; the word “or” shall be deemed to include “and/or”, the words “including”, “includes” and “include” shall bedeemed to be followed by the words “without limitation”; references to articles, sections (or subdivisions of sections) or exhibits are to those of this Agreement;and references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications to suchinstruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Agreement. Section headings in thisAgreement are included for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Unless otherwise specified inthis Agreement, all accounting terms shall be interpreted and all accounting determinations shall be made in accordance with GAAP. If this Agreement isexecuted by more than one Grantor, the obligations of such persons or entities will be joint and several.21. Indemnity. The Grantor agrees to indemnify each of the Bank, each legal entity, if any, who controls the Bank and each of their respective directors,officers and employees (the “Indemnified Parties”) and to defend and hold each Indemnified Party harmless from and against any and all claims, damages,losses, liabilities and expenses (including all fees and charges of internal or external counsel with whom any Indemnified Party may consult and all expenses oflitigation and preparation therefor) which any Indemnified Party may incur or which may be asserted against any Indemnified Party by any person, entity orgovernmental authority (including any person or entity claiming derivatively on behalf of the Grantor), in connection with or arising out of or relating to thematters referred to in this Agreement or the Secured Obligations, whether (a) arising from or incurred in connection with any breach of a representation,warranty or covenant by the Grantor, or (b) arising out of or resulting from any suit, action, claim, proceeding or governmental investigation, pending orthreatened, whether based on statute, regulation or order, or tort, or contract or otherwise, before any court or governmental authority; provided, however, thatthe foregoing indemnity agreement shall not apply to any claims, damages, losses, liabilities and expenses solely attributable to an Indemnified Party’s grossnegligence or willful misconduct. The indemnity agreement contained in this Section shall survive the termination of this Agreement, payment of the SecuredObligations and assignment of any rights hereunder. The Grantor may participate at its expense in the defense of any such claim.22. Governing Law and Jurisdiction. This Agreement has been delivered to and accepted by the Bank and will be deemed to be made in the State where theBank’s office indicated above is located. THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETODETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK’S OFFICE INDICATED ABOVE IS LOCATED, - 7 -EXCEPT THAT THE LAWS OF THE STATE WHERE ANY COLLATERAL IS LOCATED (IF DIFFERENT FROM THE STATE WHERE SUCH OFFICE OF THEBANK IS LOCATED) SHALL GOVERN THE CREATION, PERFECTION AND FORECLOSURE OF THE LIENS CREATED HEREUNDER ON SUCH PROPERTY ORANY INTEREST THEREIN. The Grantor hereby irrevocably consents to the exclusive jurisdiction of any state or federal court in the county or judicial districtwhere the Bank’s office indicated above is located; provided that nothing contained in this Agreement will prevent the Bank from bringing any action,enforcing any award or judgment or exercising any rights against the Grantor individually, against any security or against any property of the Grantor withinany other county, state or other foreign or domestic jurisdiction. The Bank and the Grantor agree that the venue provided above is the most convenient forumfor both the Bank and the Grantor. The Grantor waives any objection to venue and any objection based on a more convenient forum in any action institutedunder this Agreement.REMAINDER OF PAGE INTENTIONALLY LEFT BLANK - 8 -23. WAIVER OF JURY TRIAL. EACH OF THE GRANTOR AND THE BANK IRREVOCABLY WAIVES ANY AND ALL RIGHT IT MAYHAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANYDOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED IN ANY OFSUCH DOCUMENTS. THE GRANTOR AND THE BANK ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING ANDVOLUNTARY.The Grantor acknowledges that it has read and understood all the provisions of this Agreement, including the waiver of jury trial, and has beenadvised by counsel as necessary or appropriate.WITNESS the due execution hereof as a document under seal, as of the date first written above. EPAM SYSTEMS, INC., a Delaware corporationBy: Print Name: Title: EPAM SYSTEMS, LLC, a New Jersey limited liabilitycompanyBy: Print Name: Title: VESTED DEVELOPMENT, INC.,a Delaware corporationBy: Print Name: Title: - 9 -PNC BANK, NATIONAL ASSOCIATIONBy: Print Name: Virginia AllingTitle: Vice President - 10 -EXHIBIT “A”TO SECURITY AGREEMENT 1.Grantor’s form of organization (i.e., corporation, partnership, limited liability company): 2.Grantor’s State of organization, if a registered organization (i.e., corporation, limited partnership or limited liability company): 3.Grantor’s principal residence, if a natural person or general partnership: 4.Address of Grantor’s chief executive office, including the County: 5.Grantor’s EIN, if not a natural person: 6.Grantor’s organizational ID# (if any exists): 7.Address for books and records, if different: 8.Addresses of other Collateral locations, including Counties: 9.Name and address of landlord or owner if location is not owned by the Grantor: 10.List of all existing Commercial Tort Claims (by case title with court and brief description of claim): - 11 -Exhibit 10.28 Pledge Agreement(Stocks, Bonds and Commercial Paper) THIS PLEDGE AGREEMENT, dated as of this 15 day of January, 2013, is made by EPAM SYSTEMS, INC., a Delaware corporation,EPAM SYSTEMS, LLC, a New Jersey limited liability company and VESTED DEVELOPMENT, INC., a Delaware corporation (each, a “Pledgor”and, collectively, the “Pledgors”), each with an address at 41 University Drive, Suite 202, Newton, PA 18940, in favor of PNC BANK, NATIONALASSOCIATION (the “Secured Party”), with an address at Two Tower Center Boulevard, East Brunswick, NJ 08816. Terms capitalized but not definedherein shall have the meaning given to such terms in the Credit Agreement between EPAM Systems, Inc. and the Secured Party dated as of the date hereof (the“Credit Agreement”).1. Pledge. In order to induce the Secured Party to extend the Secured Obligations (as defined below), each of the Pledgors hereby grants a securityinterest in and pledge to the Secured Party, and to all other direct or indirect subsidiaries of The PNC Financial Services Group, Inc., all of the Pledgors’ right,title and interest in and to the investment property and other assets described in Exhibit A attached hereto and made a part hereof, and all security entitlementsof the Pledgors with respect thereto, whether now owned or hereafter acquired, together with all additions, substitutions, replacements and proceeds thereof andall income, interest, dividends and other distributions thereon (collectively, the “Collateral”). If the Collateral includes certificated securities, documents orinstruments, such certificates are herewith delivered to the Secured Party accompanied by duly executed blank stock or bond powers or assignments asapplicable. The Pledgors hereby authorize the transfer of possession of all certificates, instruments, documents and other evidence of the Collateral to theSecured Party.2. Secured Obligations. The Collateral secures payment of all Obligations, covenants and duties owing from the Pledgors to the Secured Party or toany other direct or indirect subsidiary of The PNC Financial Services Group, Inc., of any kind or nature, present or future (including any interest accruingthereon after maturity, or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding relating to thePledgors, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding), whether direct or indirect (including those acquired byassignment or participation), absolute or contingent, joint or several, due or to become due, now existing or hereafter arising, whether or not (i) evidenced byany note, guaranty or other instrument, (ii) arising under any agreement, instrument or document, (iii) for the payment of money, (iv) arising by reason of anextension of credit, opening of a letter of credit, loan, equipment lease or guarantee, (v) under any interest or currency swap, future, option or other interest rateprotection or similar agreement, (vi) under or by reason of any foreign currency transaction, forward, option or other similar transaction providing for thepurchase of one currency in exchange for the sale of another currency, or in any other manner, or (vii) arising out of overdrafts on deposit or other accounts orout of electronic funds transfers (whether by wire transfer or through automated clearing houses or otherwise) or out of the return unpaid of, or other failure ofthe Secured Party to receive final payment for, any check, item, instrument, payment order or other deposit or credit to a deposit or other account, or out of theSecured Party’s non-receipt of or inability to collect funds or otherwise not being made whole in connection with depository or other similar arrangements; andany amendments, extensions, renewals and increases of or to any of the foregoing, and all costs and expenses of the Secured Party incurred in thedocumentation, negotiation, modification, enforcement, collection and otherwise in connection with any of the foregoing, including reasonable attorneys’ feesand expenses (hereinafter referred to collectively as the “Secured Obligations”).3. Representations and Warranties. The Pledgors represent and warrant to the Secured Party as follows: 1th3.1 There are no restrictions on the pledge or transfer of any of the Collateral, other than (a) restrictions referenced on the face of any certificatesevidencing the Collateral, (b) in a foreign jurisdiction other than Canada and the United Kingdom, restrictions imposed on securities in a Foreign Subsidiaryunder local law of such foreign jurisdiction, and (c) customary restrictions set forth in Canadian formation documents designed to ensure that a Canadianentity is a “private company” under Canadian securities law.3.2 The Pledgors are the legal owners of the Collateral, which is registered in the name of each applicable Pledgor.3.3 The Collateral is free and clear of any security interests, pledges, liens, encumbrances, charges, agreements, claims or other arrangements orrestrictions of any kind, except as referenced in Section 3.1 above and any liens expressly permitted under the Loan Documents; and the Pledgors will notincur, create, assume or permit to exist any pledge, security interest, lien, charge or other encumbrance of any nature whatsoever on any of the Collateral orassign, pledge or otherwise encumber any right to receive income from the Collateral, other than in favor of the Secured Party or as expressly permitted underthe Loan Documents.3.4 Except as expressly permitted under the Loan Documents, the Pledgors have the right to transfer the Collateral free of any encumbrances andthe Pledgors will defend the Pledgors’ title to the Collateral against the claims of all persons, and any registration with, or consent or approval of, or otheraction by, any federal, state or other governmental authority or regulatory body which was or is necessary for the validity of the pledge of and grant of thesecurity interest in the Collateral has been obtained.3.5 The pledge of and grant of the security interest in the Collateral is effective to vest in the Secured Party a valid and perfected first prioritysecurity interest, superior to the rights of any other person (other than the rights of lienholders expressly permitted under the Loan Documents), in and to theCollateral as set forth herein.4. Covenants.4.1 If all or part of the Collateral constitutes “margin stock” within the meaning of Regulation U of the Federal Reserve Board, the Pledgors agree,or if the Pledgors are not the Borrower, it shall cause the Borrower, to execute and deliver Form U-1 to the Secured Party and, unless otherwise agreed inwriting between the Borrower and the Secured Party, no part of the proceeds of the Secured Obligations may be used to purchase or carry margin stock.4.2 Pledgors agree not to invoke, and hereby waive their rights under, any statute under any state or federal law which permits therecharacterization of any portion of the Collateral to be interest or income.5. Default.5.1 If any Event of Default (or if there is no defined set of “Events of Default” therein, the occurrence of a default past any applicable grace and/orcure periods thereunder) as defined in any of the Secured Obligations) occurs, then the Secured Party is authorized in its discretion to declare any or all of theSecured Obligations to be immediately due and payable without demand or notice, which are expressly waived, and may exercise any one or more of the rightsand remedies granted pursuant to this Pledge Agreement or given to a secured party under the Uniform Commercial Code of the applicable state, as it may beamended from time to time, or otherwise at law or in equity, including without limitation the right to issue a Notice of Exclusive Control (as defined in theControl Agreement) to the Custodian, and/or to sell or otherwise dispose of any or all of the Collateral at public or private sale, with or without advertisementthereof, upon such terms and conditions as it may deem advisable and at such prices as it may deem best.5.2 (a) At any bona fide public sale, and to the extent permitted by law, at any private sale, the Secured Party shall be free to purchase all or anypart of the Collateral, free of any right or equity of redemption in the Pledgors or Borrower, which right or equity is hereby waived and released. Any such salemay be on cash or credit. The Secured Party shall be authorized at any such sale (if it deems it advisable to do so) to - 2 -restrict the prospective bidders or purchasers to persons who will represent and agree that they are purchasing the Collateral for their own account incompliance with Regulation D of the Securities Act of 1933 (the “Act”) or any other applicable exemption available under such Act. The Secured Party will notbe obligated to make any sale if it determines not to do so, regardless of the fact that notice of the sale may have been given. The Secured Party may adjournany sale and sell at the time and place to which the sale is adjourned. If the Collateral is customarily sold on a recognized market or threatens to declinespeedily in value, the Secured Party may sell such Collateral at any time without giving prior notice to the Pledgors. Whenever notice is otherwise required bylaw to be sent by the Secured Party to the Pledgors of any sale or other disposition of the Collateral, ten (10) days written notice sent to the Pledgors at theiraddress specified above will be reasonable.(b) The Pledgors recognize that the Secured Party may be unable to effect or cause to be effected a public sale of the Collateral by reason ofcertain prohibitions contained in the Act, so that the Secured Party may be compelled to resort to one or more private sales to a restricted group of purchaserswho will be obligated to agree, among other things, to acquire the Collateral for their own account, for investment and without a view to the distribution orresale thereof. The Pledgors understand that private sales so made may be at prices and on other terms less favorable to the seller than if the Collateral weresold at public sales, and agree that the Secured Party has no obligation to delay or agree to delay the sale of any of the Collateral for the period of time necessaryto permit the issuer of the securities which are part of the Collateral (even if the issuer would agree), to register such securities for sale under the Act. ThePledgors agree that private sales made under the foregoing circumstances shall be deemed to have been made in a commercially reasonable manner.5.3 The net proceeds arising from the disposition of the Collateral after deducting expenses incurred by the Secured Party will be applied to theSecured Obligations in the order determined by the Secured Party. If any excess remains after the discharge of all of the Secured Obligations, the same will bepaid to the Pledgors. If after exhausting all of the Collateral there is a deficiency, the Pledgors or, if the Pledgors are not borrowing from the Secured Party orproviding a guaranty of the Borrower’s obligations, the Borrower will be liable therefor to the Secured Party; provided, however, that nothing contained hereinwill obligate the Secured Party to proceed against the Pledgors, the Borrower or any other party obligated under the Secured Obligations or against any othercollateral for the Secured Obligations prior to proceeding against the Collateral.5.4 If any demand is made at any time upon the Secured Party for the repayment or recovery of any amount received by it in payment or onaccount of any of the Secured Obligations and if the Secured Party repays all or any part of such amount by reason of any judgment, decree or order of anycourt or administrative body or by reason of any settlement or compromise of any such demand, the Pledgors will be and remain liable for the amounts sorepaid or recovered to the same extent as if such amount had never been originally received by the Secured Party. The provisions of this section will be andremain effective notwithstanding the release of any of the Collateral by the Secured Party in reliance upon such payment (in which case the Pledgors’ liabilitywill be limited to an amount equal to the fair market value of the Collateral determined as of the date such Collateral was released) and any such release will bewithout prejudice to the Secured Party’s rights hereunder and will be deemed to have been conditioned upon such payment having become final andirrevocable. This Section shall survive the termination of this Pledge Agreement.6. Voting Rights and Transfer. So long as no Event of Default exists, the Pledgors will have the right to exercise all voting rights with respect to theCollateral. At any time after the occurrence and during the continuation of an Event of Default, the Secured Party may transfer any or all of the Collateral intoits name or that of its nominee and may exercise all voting rights with respect to the Collateral, but no such transfer shall constitute a taking of such Collateralin satisfaction of any or all of the Secured Obligations unless the Secured Party expressly so indicates by written notice to the Pledgors.7. Dividends, Interest and Premiums. The Pledgors will have the right to receive all cash dividends, interest and premiums declared and paid on theCollateral prior to the occurrence and during the continuation of any Event of Default. In the event any additional shares are issued to the Pledgors as a stockdividend or in lieu of interest on any of the Collateral, as a result of any split of any of the Collateral, by - 3 -reclassification or otherwise, any certificates evidencing any such additional shares will be immediately delivered to the Secured Party and such shares will besubject to this Pledge Agreement and a part of the Collateral to the same extent as the original Collateral. At any time after the occurrence and during thecontinuation of an Event of Default, the Secured Party shall be entitled to receive all cash or stock dividends, interest and premiums declared or paid on theCollateral, all of which shall be subject to the Secured Party’s rights under Section 5 above.8. Securities Account. If any Event of Default exists, any of the Collateral includes securities or any other financial or other asset maintained in asecurities account not with the Bank, and the Bank so requests, then the Pledgors agree to cause the securities intermediary on whose books and records theownership interest of the Pledgors in the Collateral appears (the “Custodian”) to execute and deliver, contemporaneously herewith, a notification and controlagreement or other agreement (the “Control Agreement”) satisfactory to the Secured Party in order to perfect and protect the Secured Party’s security interestin the Collateral.9. Further Assurances. By its signature hereon, the Pledgors hereby irrevocably authorize the Secured Party, at any time and from time to time, toexecute (on behalf of the Pledgors), file and record against the Pledgors any notice, financing statement, continuation statement, amendment statement,instrument, document or agreement under the Uniform Commercial Code that the Secured Party may consider necessary or desirable to create, preserve,continue, perfect or validate any security interest granted hereunder or to enable the Secured Party to exercise or enforce its rights hereunder with respect to suchsecurity interest. Without limiting the generality of the foregoing, the Pledgors hereby irrevocably appoint the Secured Party as the Pledgors’ attorney-in-fact todo all acts and things in the Pledgors’ name that the Secured Party may deem necessary or desirable. This power of attorney is coupled with an interest withfull power of substitution and is irrevocable. The Pledgors hereby ratify all that said attorney shall lawfully do or cause to be done by virtue hereof.10. Notices. All notices, demands, requests, consents, approvals and other communications required or permitted hereunder (“Notices”) must be inwriting and will be effective upon receipt. Notices may be given in any manner to which the parties may separately agree, including electronic mail. Withoutlimiting the foregoing, first-class mail, facsimile transmission and commercial courier service are hereby agreed to as acceptable methods for giving Notices.Regardless of the manner in which provided, Notices may be sent to a party’s address as set forth above or to such other address as either the Pledgors or theSecured Party may give to the other for such purpose in accordance with this section.11. Preservation of Rights. (a) No delay or omission on the Secured Party’s part to exercise any right or power arising hereunder will impair any suchright or power or be considered a waiver of any such right or power, nor will the Secured Party’s action or inaction impair any such right or power. TheSecured Party’s rights and remedies hereunder are cumulative and not exclusive of any other rights or remedies which the Secured Party may have under otheragreements, at law or in equity.(b) The Secured Party may, at any time and from time to time, without notice to or the consent of the Pledgors unless otherwise expressly requiredpursuant to the terms of the Secured Obligations, and without impairing or releasing, discharging or modifying the Pledgors’ liabilities hereunder, (i) changethe manner, place, time or terms of payment or performance of or interest rates on, or other terms relating to, any of the Secured Obligations; (ii) renew,substitute, modify, amend or alter, or grant consents or waivers relating to any of the Secured Obligations, any other pledge or security agreements, or anysecurity for any Secured Obligations; (iii) apply any and all payments by whomever paid or however realized including any proceeds of any collateral, to anySecured Obligations of the Pledgors or the Borrower in such order, manner and amount as the Secured Party may determine in its sole discretion; (iv) dealwith any other person with respect to any Secured Obligations in such manner as the Secured Party deems appropriate in its sole discretion; (v) substitute,exchange or release any security or guaranty; or (vi) take such actions and exercise such remedies hereunder as provided herein. The Pledgors hereby waive(a) presentment, demand, protest, notice of dishonor and notice of non-payment and all other notices to which the Pledgors might otherwise be entitled, and(b) all defenses based on suretyship or impairment of collateral. - 4 -12. Illegality. In case any one or more of the provisions contained in this Pledge Agreement should be invalid, illegal or unenforceable in any respect, itshall not affect or impair the validity, legality and enforceability of the remaining provisions in this Pledge Agreement.13. Changes in Writing. No modification, amendment or waiver of, or consent to any departure by the Pledgors from, any provision of this PledgeAgreement will be effective unless made in a writing signed by the Secured Party, and then such waiver or consent shall be effective only in the specificinstance and for the purpose for which given. No notice to or demand on the Pledgors in any case will entitle the Pledgors to any other or further notice ordemand in the same, similar or other circumstance.14. Entire Agreement. This Pledge Agreement (including the documents and instruments referred to herein) constitutes the entire agreement andsupersedes all other prior agreements and understandings, both written and oral, between the Pledgors and the Secured Party with respect to the subject matterhereof.15. Successors and Assigns. This Pledge Agreement will be binding upon and inure to the benefit of the Pledgors and the Secured Party and theirrespective heirs, executors, administrators, successors and assigns; provided, however, that the Pledgors may not assign this Pledge Agreement in whole or inpart without the Secured Party’s prior written consent and the Secured Party at any time may assign this Pledge Agreement in whole or in part.16. Interpretation. In this Pledge Agreement, unless the Secured Party and the Pledgors otherwise agree in writing, the singular includes the plural andthe plural the singular; references to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute referredto; the word “or” shall be deemed to include “and/or”, the words “including”, “includes” and “include” shall be deemed to be followed by the words “withoutlimitation”; and references to agreements and other contractual instruments shall be deemed to include all subsequent amendments and other modifications tosuch instruments, but only to the extent such amendments and other modifications are not prohibited by the terms of this Pledge Agreement. Section headingsin this Pledge Agreement are included for convenience of reference only and shall not constitute a part of this Pledge Agreement for any other purpose. If thisPledge Agreement is executed by more than one party as Pledgors, the obligations of such persons or entities will be joint and several.17. Indemnity. The Pledgors agree to indemnify each of the Secured Party, each legal entity, if any, who controls, is controlled by or is under commoncontrol with the Secured Party, and each of their respective directors, officers and employees (the “Indemnified Parties”), and to hold each Indemnified Partyharmless from and against, any and all claims, damages, losses, liabilities and expenses (including all fees and charges of internal or external counsel withwhom any Indemnified Party may consult and all expenses of litigation or preparation therefor) which any Indemnified Party may incur, or which may beasserted against any Indemnified Party by any person, entity or governmental authority (including any person or entity claiming derivatively on behalf of thePledgors), in connection with or arising out of or relating to the matters referred to in this Pledge Agreement or under any Control Agreement, whether (a) arisingfrom or incurred in connection with any breach of a representation, warranty or covenant by the Pledgors, or (b) arising out of or resulting from any suit,action, claim, proceeding or governmental investigation, pending or threatened, whether based on statute, regulation or order, or tort, or contract or otherwise,before any court or governmental authority; provided, however, that the foregoing indemnity agreement shall not apply to claims, damages, losses, liabilitiesand expenses solely attributable to an Indemnified Party’s gross negligence or willful misconduct. The indemnity agreement contained in this Section shallsurvive the termination of this Pledge Agreement. The Pledgors may participate at its expense in the defense of any such action or claim.18. Governing Law and Jurisdiction. This Pledge Agreement has been delivered to and accepted by the Secured Party and will be deemed to be madein the State where the Secured Party’s office indicated above is located. THIS PLEDGE AGREEMENT WILL BE INTERPRETED AND THE RIGHTS ANDLIABILITIES OF THE PLEDGORS AND THE SECURED PARTY DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE SECUREDPARTY’S OFFICE INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. - 5 -The Pledgors hereby irrevocably consent to the exclusive jurisdiction of any state or federal court in the county or judicial district where the Secured Party’soffice indicated above is located; provided that nothing contained in this Pledge Agreement will prevent the Secured Party from bringing any action, enforcingany award or judgment or exercising any rights against the Pledgors individually, against any security or against any property of the Pledgors within any othercounty, state or other foreign or domestic jurisdiction. The Pledgors acknowledge and agree that the venue provided above is the most convenient forum forboth the Secured Party and the Pledgors. The Pledgors waive any objection to venue and any objection based on a more convenient forum in any actioninstituted under this Pledge Agreement. - 6 -19. WAIVER OF JURY TRIAL. THE PLEDGORS IRREVOCABLY WAIVE ANY AND ALL RIGHT THE PLEDGORS MAY HAVE TOA TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS PLEDGE AGREEMENT, ANYDOCUMENTS EXECUTED IN CONNECTION WITH THIS PLEDGE AGREEMENT OR ANY TRANSACTION CONTEMPLATED INANY OF SUCH DOCUMENTS. THE PLEDGORS ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING ANDVOLUNTARY.The Pledgors acknowledge that they have read and understood all the provisions of this Pledge Agreement, including the waiver of jury trial, andhave been advised by counsel as necessary or appropriate.WITNESS the due execution hereof as a document under seal, as of the date first written above, with the intent to be legally bound hereby. EPAM SYSTEMS, INC., a Delaware corporationBy: Print Name: Title: EPAM SYSTEMS, LLC, a New Jersey limited liabilitycompanyBy: Print Name: Title: VESTED DEVELOPMENT, INC., a Delaware corporationBy: Print Name: Title: - 7 -EXHIBIT A TO PLEDGE AGREEMENT(UNCERTIFICATED SECURITIES)The specific assets listed below are pledged as collateral and, to the extent set forth herein, are restricted from trading and withdrawals. Except as otherwise setforth herein, the Secured Party’s written approval is required prior to any trading or withdrawals of such assets.Description of Securities65% of the issued and outstanding equity interest in each 1 tier foreign subsidiary, including without limitation: a)EPAM Systems APS (Denmark) b)EPAM Corp Inform Systems (Belarus) c)EPAM Systems (Cyprus) Ltd. (Cyprus) d)EPAM Systems GmbH (Germany) e)EPAM Systems Nordic AB (Sweden) f)EPAM Systems GmbH (Switzerland) g)TOO Plus Micro (Kazakhstan) h)EPAM Systems (Singapore) i)EPAM Systems Canada Ltd. (Canada)100% of the issued and outstanding equity interests in each domestic subsidiary, including without limitation: a)EPAM Systems, LLC (NJ) b)Vested Development, Inc. (DE) A-1stEXHIBIT A TO PLEDGE AGREEMENT(CERTIFICATED SECURITIES)The specific assets listed below are pledged as collateral and, to the extent set forth herein, are restricted from trading and withdrawals. Except as otherwise setforth herein, the Secured Party’s written approval is required prior to any trading or withdrawals of such assets.Description of Securities65% of the issued and outstanding equity interest in each 1 tier foreign subsidiary, including without limitation shares in EPAM Systems Ltd. (UK)represented by certificate B-1stExhibit 21.1SUBSIDIARIES OF THE REGISTRANT EntityEPAM Systems, Inc.EPAM Systems, LLCEPAM Systems Ltd.EPAM Systems (Cyprus) LimitedEPAM Systems ApSEPAM Systems KftEPAM Systems GmbHEPAM Corporate Information SystemsEPAM SystemsEPAM Solutions, LLCEPAM SystemsEPAM Solutions (Novaya Vest Moscow), Ltd.Danika LimitedEPAM Systems Nordic ABEPAM Systems GmbHTOO Plus Micro Kazakhstan LPVDI YerevanEPAM Systems SARLEPAM Systems PTE Ltd.EPAM SystemsEPAM Systems SRLVested Development, Inc.TOO EPAM KazakhstanEPAM Systems Canada, Ltd.EPAM Systems (Poland) sp. z o.o.Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in EPAM Systems, Inc.’s Registration Statement No. 333-179409 on Form S-8 of our report datedMarch 11, 2013 relating to the audited consolidated financial statements of EPAM Systems, Inc. and subsidiaries, appearing in this Annual Report on Form10-K of EPAM Systems, Inc. for the year ended December 31, 2012./s/ DELOITTE & TOUCHE LLPPhiladelphia, PAMarch 11, 2013EXHIBIT 31.1Certification by Chief Executive OfficerPursuant to Securities Exchange Act Rule 13a-14(a)I, Arkadiy Dobkin, certify that: 1.I have reviewed this annual report on Form 10-K of EPAM Systems, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: March 11, 2013 /s/ Arkadiy DobkinArkadiy DobkinChairman, Chief Executive Officer and President(principal executive officer)EXHIBIT 31.2Certification by Chief Financial OfficerPursuant to Securities Exchange Act Rule 13a-14(a)I, Ilya Cantor, certify that: 1.I have reviewed this annual report on Form 10-K of EPAM Systems, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and 5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: March 11, 2013 /s/ Ilya CantorIlya CantorSenior Vice President, Chief Financial Officer and Treasurer(principal financial officer and principal accounting officer)EXHIBIT 32.1CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of EPAM Systems, Inc. (the “Company”) for the year ended December 31, 2012 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), Arkadiy Dobkin, as Chief Executive Officer of the Company, hereby certifies,pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: March 11, 2013 /s/ Arkadiy DobkinArkadiy DobkinChairman, Chief Executive Officer and President(principal executive officer)EXHIBIT 32.2CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of EPAM Systems, Inc. (the “Company”) for the year ended December 31, 2012 as filed with theSecurities and Exchange Commission on the date hereof (the “Report”), Ilya Cantor, as Chief Financial Officer of the Company, hereby certifies, pursuant to18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date: March 11, 2013 /s/ Ilya CantorIlya CantorSenior Vice President, Chief Financial Officer and Treasurer(principal financial officer and principal accounting officer)

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