Electronics For Imaging Inc. Annual Report 2008

FY2008 Annual Report · Electronics For Imaging Inc.

Loading PDF…

ELECTRONICS FOR IMAGING, INC.
2009 PROXY STATEMENT AND
2008 ANNUAL REPORT

FINANCIAL HIGHLIGHTS

RECONCILIATION OF REPORTED GAAP INCOME TO
NON-GAAP NET INCOME (UNAUDITED)

(In millions except per share data)
Net income (loss)
Amortization of identiﬁ able intangible
assets and in-process R&D
Restructuring and other
Gain on sale of product line
Bad Debt allowance adjustment
Stock-based compensation expense
Acquisition costs
Option review costs
Legal reserve
Goodwill and asset impairment
Tax effect of non-GAAP net income
Non-GAAP net income
After-tax adjustment of convertible
debt-related expense
Income for purposes of computing diluted
non-GAAP net income per share

For the Years Ended December 31,

2008

2007

2006

$(113.4)

$26.8

$(0.2)

32.0
11.0
—
—
33.4
—
1.8
(3.6)
111.9
(31.9)
$41.2

33.5
1.5
—
—
24.5
1.4
19.5
—
—
(29.3)
$77.9

1.3

3.0

44.0
1.0
(7.0)
(3.8)
23.7
1.0
4.0
—
—
13.9
$76.6

3.0

$42.5

$80.9

$79.6

Non-GAAP net income per share

$0.74

$1.19

$1.18

Shares for purposes of computing diluted
non-GAAP net income per share

57.2

68.1

67.6

REVENUE IN MILLIONS

620.6

564.6

560.4

GROSS MARGIN IN MILLIONS

361.1

335.2

317.4

NON-GAAP NET INCOME IN MILLIONS

76.6

77.9

41.2

$625

$575

$525

$475

$425

$375

$350

$325

$300

$275

$80

$60

$40

$20

NON-GAAP NET INCOME PER DILUTED SHARE

About our Non-GAAP Net Income and Adjustments

$1.18

$1.19

$0.74

$1.25

$0.95

$0.65

$0.35

$0.05

To supplement our consolidated ﬁ nancial results prepared under generally accepted accounting
principals, or GAAP, we use a non-GAAP measure of net income that is GAAP net income
adjusted to exclude certain costs, expenses and gains. Our non-GAAP net income gives an
indication of our baseline performance before gains, losses and other charges that are considered
by management to be outside our core operating results. In addition, non-GAAP net income
is among the primary indicators management uses as a basis for planning and forecasting
future periods. These measures are not in accordance with or an alternative for GAAP and
may be materially different from non-GAAP measures used by other companies. We compute
non-GAAP net income by adjusting GAAP net income with the impact of amortization of
acquisition-related intangibles, stock-based compensation and other non-recurring charges and
gains. The presentation of this additional information should not be considered in isolation or as
a substitute for net income prepared in accordance with GAAP.

ELECTRONICS FOR IMAGING, INC.
303 Velocity Way
Foster City, California 94404

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on June 19, 2009

TO THE STOCKHOLDERS:

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ELECTRONICS FOR IMAGING,
INC., a Delaware corporation (the “Company”), will be held on Friday, June 19, 2009 at 9:00 a.m., Pacific Time,
at the Company’s corporate headquarters, 303 Velocity Way, Foster City, California 94404 for the following
purposes:

y
x
o
r
P

To elect seven (7) directors to hold office until the next annual meeting or until their successors are
duly elected and qualified.

To approve the amendment and restatement of our Amended 2000 Employee Stock Purchase Plan to
provide for an increase in the number of shares authorized for issuance pursuant to such plan.

To approve the 2009 Equity Incentive Award Plan and the reservation of an aggregate of 5,000,000
shares of the Company’s common stock for issuance pursuant to such plan.

To approve a one-time fair value stock option exchange program for employees other than our named
executive officers.

To approve a one-time fair value stock option exchange program for our named executive officers,
exchanging time-based stock options for performance-based awards.

To ratify the appointment of the independent registered public accounting firm for the Company for the
fiscal year ending December 31, 2009.

To transact such other business as may properly come before the meeting or any adjournment or
postponement thereof.

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.

The Board of Directors has approved the proposals described in the Proxy Statement and recommends that you
vote “FOR” each proposal.

Only stockholders of record at the close of business on May 19, 2009 are entitled to notice of and to vote at

the Annual Meeting and at any adjournment or postponement thereof.

All stockholders are cordially invited to attend the Annual Meeting in person. However, to ensure your
representation at the Annual Meeting, you are urged to submit your proxy electronically, by telephone or by
marking, signing, dating and returning the enclosed proxy for that purpose. Any stockholder attending the
Annual Meeting may vote in person even if he or she has returned a proxy.

Sincerely,

/S/ BRYAN KO

Bryan Ko
Secretary

Foster City, California
May 20, 2009

YOUR VOTE IS IMPORTANT.
IN ORDER TO ENSURE YOUR REPRESENTATION AT THE MEETING,
YOU ARE REQUESTED TO SUBMIT YOUR PROXY ELECTRONICALLY, OR BY TELEPHONE,
AS DESCRIBED UNDER “SUBMISSION OF PROXIES; INTERNET AND TELEPHONE VOTING”
IN THE ATTACHED PROXY STATEMENT, OR
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.

y
x
o
r
P

ELECTRONICS FOR IMAGING, INC.

PROXY STATEMENT

FOR THE ANNUAL MEETING OF STOCKHOLDERS

JUNE 19, 2009

INFORMATION CONCERNING SOLICITATION AND VOTING

General

This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of
ELECTRONICS FOR IMAGING, INC., a Delaware corporation (the “Company”), for use at the Annual Meeting of
Stockholders to be held on Friday, June 19, 2009 at 9:00 a.m., Pacific Time (the “Annual Meeting”), or at any
adjournment or postponement thereof. The Annual Meeting will be held at the Company’s corporate headquarters,
303 Velocity Way, Foster City, California 94404. The Company intends to mail this Proxy Statement and
accompanying proxy card on or about May 26, 2009 to stockholders entitled to vote at the Annual Meeting.

At the Annual Meeting, the stockholders of the Company will be asked: (1) to elect seven (7) directors to
hold office until the next annual meeting or until their successors are duly elected and qualified; (2) to approve
the amendment and restatement of our Amended 2000 Employee Stock Purchase Plan to provide for an increase
in the number of shares authorized for issuance pursuant to such plan; (3) to approve the 2009 Equity Incentive
Award Plan and the reservation of an aggregate of 5,000,000 shares of the Company’s common stock for
issuance pursuant to such plan; (4) to approve a one-time fair value stock option exchange program for
employees other than our named executive officers; (5) to approve a one-time fair value stock option exchange
program for our named executive officers, exchanging time-based stock options for performance-based awards;
(6) to ratify the appointment of the Company’s independent registered public accounting firm for the Company
for the fiscal year ending December 31, 2009; and (7) to transact such other business as may properly come
before the meeting or any adjournment or postponement thereof. All proxies which are properly completed,
signed and returned to the Company or properly submitted electronically or by telephone prior to the Annual
Meeting will be voted.

Voting Rights and Outstanding Shares

Only stockholders of record at the close of business on May 19, 2009 (the “Record Date”) are entitled to
receive notice of and to vote at the Annual Meeting. As of the Record Date, the Company had outstanding and
entitled to vote 49,226,539 shares of common stock. A quorum is a majority of the voting power of the shares
entitled to vote at the Annual Meeting. As there were 49,226,539 eligible votes as of the record date, we will
need at least 24,613,270 votes present in person, by telephone or by proxy at the Annual Meeting for a quorum to
exist. Each holder of record of common stock on such date will be entitled to one vote per each share on all
matters to be voted upon by the stockholders and may not cumulate votes for the election of directors.

A plurality of the shares of common stock voting in person or by proxy is required to elect each of the

nominees for director. A plurality means that the nominees receiving the largest number of votes cast will be
elected. All votes will be tabulated by the inspector of election appointed for the meeting, who will separately
tabulate affirmative and negative votes, abstentions, withheld votes and broker non-votes. Abstentions, withheld
votes and broker non-votes (which occur when a broker, bank or other nominee holding shares for a beneficial
owner does not vote on a particular matter because such broker, bank or other nominee does not have
discretionary authority to vote on that matter and has not received voting instructions from the beneficial owner)
are counted as present for purposes of determining the presence of a quorum for the transaction of business at the
Annual Meeting. Withheld votes and broker non-votes will have no effect on the outcome of the election of
directors. All proposals other than the election of directors require the affirmative vote of a majority of shares
entitled to vote present in person or by proxy at the Annual Meeting. Abstentions have the same effect as
negative votes on these proposals, because they represent votes that are present but not cast. Broker non-votes are
not counted for any purpose in determining whether a matter has been approved.

Adjournment of Meeting

In the event that sufficient votes in favor of the proposals are not received by the date of the Annual

Meeting, the persons named as proxies may propose one or more adjournments of the Annual Meeting to permit
further solicitation of proxies. Any such adjournment will require the affirmative vote of a majority of shares
entitled to vote present in person or by proxy at the Annual Meeting.

Submission of Proxies; Internet and Telephone Voting

If you hold shares as a registered stockholder in your own name, you should complete, sign and date the

enclosed proxy card as promptly as possible and return it using the enclosed envelope. If your completed proxy
card is received prior to or at the meeting, your shares will be voted in accordance with your voting instructions.
If you sign and return your proxy card but do not give voting instructions, your shares will be voted FOR (1) the
election of the Company’s nominees as directors; (2) the amendment and restatement of our Amended 2000
Employee Stock Purchase Plan to provide for an increase in the number of shares authorized for issuance
pursuant to such plan; (3) the approval of the 2009 Equity Incentive Award Plan and the reservation of an
aggregate of 5,000,000 shares of the Company’s common stock for issuance pursuant to such plan; (4) the
approval of a one-time fair value stock option exchange program for employees other than the Company’s named
executive officers; (5) the approval of a one-time fair value stock option exchange program for the Company’s
named executive officers, exchanging time-based stock options for performance-based awards; (6) the
ratification of the appointment of the independent registered public accounting firm for the Company for the
fiscal year ending December 31, 2009; and (7) as the proxy holders deem advisable, in their discretion, on other
matters that may properly come before the Annual Meeting. If you hold shares through a bank or brokerage firm,
the bank or brokerage firm will provide you with separate voting instructions on a form you will receive from
them. Many such firms make telephone or Internet voting available, but the specific processes available will
depend on those firms’ individual arrangements.

Solicitation

The cost of preparing, assembling, printing and mailing the Proxy Statement, the Notice of Annual Meeting

and the enclosed proxy, as well as the cost of soliciting proxies relating to the Company’s proposals for the
Annual Meeting, will be borne by the Company. The Company will request banks, brokers, dealers and voting
trustees or other nominees to solicit their customers who are beneficial owners of shares listed of record in names
of nominees and will reimburse such nominees for the reasonable out-of-pocket expenses of such solicitations.
The original solicitation of proxies by mail may be supplemented by telephone, facsimile, telegram, email and
personal solicitation by directors, officers and regular employees of the Company or, at the Company’s request, a
proxy solicitation firm. No additional compensation will be paid to directors, officers or other regular employees
of the Company for such services, but a proxy solicitation firm will be paid its customary fee if it renders
solicitation services.

Revocability of Proxies

Any proxy given pursuant to this solicitation may be revoked by the person giving it at any time before its

use by delivering to the Secretary of the Company at the Company’s principal executive office, 303 Velocity
Way, Foster City, California 94404, a written notice of revocation or a duly executed proxy bearing a later date,
or it may be revoked by attending the Annual Meeting and voting in person. Attendance at the Annual Meeting
will not, by itself, revoke a proxy.

Stockholder Proposals To Be Presented at Next Annual Meeting

The deadline for submitting a stockholder proposal for inclusion in the Company’s proxy statement and

form of proxy for the Company’s annual meeting of stockholders to be held in 2010, pursuant to Rule 14a-8 of

the Securities and Exchange Commission (the “SEC”), is currently expected to be December 30, 2009. The rules
of the SEC also establish a deadline with respect to discretionary voting for submission of stockholder proposals
that are not intended to be included in the Company’s Proxy Statement (the “Discretionary Vote Deadline”). The
Discretionary Vote Deadline for the 2010 Annual Meeting is currently expected to be March 14, 2010. These
deadlines are subject to change if the date of the 2010 Annual Meeting is more than 30 calendar days from the
date of the 2009 Annual Meeting. If a stockholder gives notice of such proposal after the Discretionary Vote
Deadline, the Company’s proxy holders will be allowed to use their discretionary voting authority to vote the
shares they represent as the Board of Directors may recommend, which may include a vote against the
stockholder proposal when and if the proposal is raised at the Company’s 2010 Annual Meeting.

Additional Copies

The Company’s Annual Report for the fiscal year ended December 31, 2008 will be mailed concurrently
with the mailing of the Notice of Annual Meeting and Proxy Statement to all stockholders entitled to notice of
and to vote at the Annual Meeting. Except to the extent expressly incorporated by reference into this Proxy
Statement, the Annual Report does not constitute, and should not be considered, a part of this proxy solicitation
material.

If, for whatever reason, you need a copy of our Annual Report on Form 10-K, as amended, for the

fiscal year ended December 31, 2008, we will provide one to you free of charge upon your written request
to Investor Relations at Electronics For Imaging, Inc., 303 Velocity Way, Foster City, California 94404.

IMPORTANT NOTICE REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS

FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 19, 2009: The
Company’s Proxy Statement dated May 20, 2009 and Annual Report for the fiscal year ended
December 31, 2008 are available electronically at www.efi.com/irProxy.

y
x
o
r
P

PROPOSAL ONE

ELECTION OF DIRECTORS

Nominees

There are seven (7) nominees for the seven (7) Board positions authorized effective as of the Annual
Meeting of Stockholders. Unless otherwise instructed, the proxy holders will vote the proxies received by them
for the seven (7) nominees named below. Proxies cannot be voted for more directors than the seven (7) nominees
named. In the event that any management nominee is unable or declines to serve as a director at the time of the
Annual Meeting, the proxies will be voted for the nominee who shall be designated by the present Board of
Directors to fill the vacancy. In the event that additional persons are nominated for election as directors by the
present Board of Directors, the proxy holders intend to vote all proxies received by them in such a manner as will
assure the election of as many of the nominees listed below as possible. Each person has been recommended for
nomination by the Nominating and Governance Committee of the Board of Directors and has been nominated by
the Board of Directors for election. Each person nominated for election has agreed to serve, and the Company is
not aware of any nominee who will be unable or will decline to serve as a director. The term of office for each
person elected as a director will continue until the next Annual Meeting of Stockholders or until his successor has
been elected and qualified, or until such director’s earlier death, resignation or removal.

On August 22, 2008, our Board of Directors amended our Board of Director Guidelines and Nominating and

Governance Committee Charter to implement a majority voting policy for the election of directors in an
uncontested election. Under these amendments, in the event that a nominee for director in an uncontested
election receives more “withheld” votes for his or her election than “for” votes, the director must submit a
resignation to the Board of Directors. The Nominating and Governance Committee of the Board of Directors will
evaluate and make a recommendation to the Board of Directors with respect to the offered resignation. The
Board of Directors will take action on the recommendation within 90 days following certification of the
stockholder vote. No director who tenders a resignation may participate in the Nominating and Governance
Committee’s or the Board of Directors’ consideration of the matter. The Company will publicly disclose the
Board of Directors’ decision including, as applicable, the reasons for rejecting a resignation.

A holder of approximately 1% of our outstanding shares has notified us of its intent to nominate two persons
to be elected as directors at the Annual Meeting. To our knowledge, this stockholder has not yet begun soliciting
proxies for use at the Annual Meeting to vote in favor of its slate of directors. You may receive proxy solicitation
materials from this stockholder or other persons or entities affiliated with them, including an opposition proxy
statement and proxy card. We do not endorse the election of any of this stockholder’s nominees, or any other
nominees for director other than the persons named in this proxy who have been recommended for nomination by
the Nominating and Governance Committee of our Board of Directors and nominated by our Board of Directors
for election.

y
x
o
r
P

The names of the nominees, each of whom is currently a director of the Company elected by the

stockholders or appointed by the Board of Directors, and certain information about them as of March 31, 2009
are set forth below.

Name of Nominee and Principal Occupation

Age

Director Since

Gill Cogan(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Founding Partner, Opus Capital Ventures LLC

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chief Executive Officer of the Company

Thomas Georgens(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

President and Chief Operating Officer, NetApp, Inc.

James S. Greene(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Vice President, Cisco Systems, Inc.

Richard A. Kashnow(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consultant, Self-Employed

Dan Maydan(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Member, Board of Trustees, Palo Alto Medical Foundation

Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

President of the Company

1992

2000

2008

2000

2008

1996

2000

(1) Member of the Compensation Committee.
(2) Member of the Nominating and Governance Committee.
(3) Member of the Audit Committee.

Mr. Cogan has served as interim Chairman of the Board of the Company since June 28, 2007. Mr. Cogan is
a founding Partner of Opus Capital Ventures LLC, a venture capital firm established in 2005. Previously, he was
the Managing Partner of Lightspeed Venture Partners, a venture capital firm, from 2000 to 2005. From 1991 until
2000, Mr. Cogan was Managing General Partner of Weiss, Peck & Greer Venture Partners, L.P., a venture
capital firm. From 1986 to 1990, Mr. Cogan was a partner of Adler & Company, a venture capital group handling
technology-related investments. From 1983 to 1985, he was Chairman and Chief Executive Officer of Formtek,
Inc., an imaging and data management computer company, whose products were based upon technology
developed at Carnegie-Mellon University. Mr. Cogan is currently a director of several privately held companies.
Mr. Cogan holds an M.B.A. from the University of California at Los Angeles.

Mr. Gecht was appointed Chief Executive Officer of the Company on January 1, 2000. From July 1999 to
January 2000, he served as President of the Company. From January 1999 to July 1999, he was Vice President
and General Manager of Controllers Products of the Company. From October 1995 through January 1999, he
served as Director of Software Engineering. Prior to joining the Company, Mr. Gecht was Director of
Engineering at Interro Systems, Inc., a technology company, from 1993 to 1995. From 1991 to 1993, he served
as Software Manager of ASP Computer Products, a networking company and from 1990 to 1991 he served as
Manager of Networking Systems for Apple Israel, a technology company. From 1985 to 1990, he served as an
officer in the Israeli Defense Forces, managing an engineering development team, and later was an acting
manager of one of the IDF high-tech departments. Mr. Gecht currently serves as a member of the board of
directors, audit committee and compensation committee of Check Point Software Technologies Ltd., a global
information technology security company. Mr. Gecht holds a B.S. in Computer Science and Mathematics from
Ben Gurion University in Israel.

Mr. Georgens has served as a director of the Company since April 2008. Mr. Georgens is currently President

and Chief Operating Officer of NetApp, Inc., a provider of data management solutions. From January 2007 to
January 2008, Mr. Georgens was Executive Vice President, Product Operations and from October 2005 to January
2007, he was Executive Vice President and General Manager of Enterprise Storage Systems for NetApp. From
1996 to 2005, Mr. Georgens served LSI Logic and its subsidiaries, including Engenio, in various capacities,

including as President, Chief Executive Officer, Vice President and General Manager, and Director. Prior to
working with LSI Logic and its subsidiaries, Mr. Georgens spent 11 years at EMC Corporation in a variety of
engineering and marketing positions. Mr. Georgens graduated from Rensselaer Polytechnic Institute with a B.S.
and M.Eng degrees in computer and systems engineering, and also holds an M.B.A. from Babson College.

Mr. Greene is currently a Vice President of Cisco Systems, Inc., a communications and information
technology company, where he is responsible for the Global Financial Services business. From January 2004
until February 2005, Mr. Greene was the President and General Manager for the Global Financial Services
business of TeleTech Holdings, Inc., a customer management services company. From September 2001 until
February 2004, Mr. Greene was a Senior Vice President with Cap Gemini Ernst & Young, a consulting services
firm, where he served clients in the global financial services industries. Prior to that he was Chief Executive
Officer and President of Abilizer Solutions Inc., a global Enterprise Information Portal software business. Prior
to Abilizer, Mr. Greene was a Senior Partner with Accenture, a consulting firm. Mr. Greene joined Accenture in
1979 and left in 2000 as the Managing Partner of their Western Region. Mr. Greene received his B.A. in
Economics from the University of California at Davis and his M.B.A. from Santa Clara University.

Mr. Kashnow has served as a director of the Company since April 2008. Since 2003, Mr. Kashnow has been

self-employed as a consultant. From 1999 until 2003, Mr. Kashnow served as President of Tyco Ventures, the
venture capital unit he established for Tyco International, Inc., a diversified manufacturing and services
company. From 1995 to 1999, he served as Chairman, Chief Executive Officer, and President of Raychem
Corporation, a global technology materials company. He started his career as a physicist at General Electric’s
Corporate Research and Development Center in 1970. During his seventeen years with GE, he progressed
through a series of technical and general management assignments. Mr. Kashnow received a Ph.D. in physics
from Tufts University in 1968 and a B.S. in physics from Worcester Polytechnic Institute in 1963. He served in
the U.S. Army between 1968 and 1970 and completed his active duty tour as a Captain. He also serves on the
board of Ariba, Inc., a public company providing on-demand spend management solutions. Until March 2008, he
served as Chairman of ActivIdentity, a public software security company. Until September 2007, he also served
as Chairman of Komag, Inc., a public data storage media company which was acquired at that time by Western
Digital.

Dr. Maydan was President of Applied Materials Inc., a semiconductor manufacturing equipment company,
from January 1994 to April 2003 and a member of that company’s board of directors from June 1992 to October
2005. From March 1990 to January 1994, Dr. Maydan served as Applied Materials’ Executive Vice President,
with responsibility for all product lines and new product development. Before joining Applied Materials in
September 1980, Dr. Maydan spent thirteen years managing new technology development at Bell Laboratories
during which time he pioneered laser recording of data on thin-metal films and made significant advances in
photolithography and vapor deposition technology for semiconductor manufacturing. In 1998, Dr. Maydan was
elected to the National Academy of Engineering. He serves on the board of directors of Infinera Corporation, a
digital optical communications company and the board of directors of a privately held company. Dr. Maydan is a
member of the Board of Trustees of the Palo Alto Medical Foundation (P.A.M.F.). Dr. Maydan received his B.S.
and M.S. degrees in electrical engineering from Technion, the Israel Institute of Technology, and his Ph.D. in
Physics from Edinburgh University in Scotland.

Mr. Rosenzweig was appointed President of the Company as of January 1, 2000. From July 1999 to January

2004 he served as Chief Operating Officer of the Company. From August 1998 to July 1999, Mr. Rosenzweig
served as Executive Vice President. From January 1995 to August 1998, Mr. Rosenzweig served as Vice
President, Manufacturing and Support of the Company. From May 1993 to January 1995, Mr. Rosenzweig
served as Director of Manufacturing of the Company. Prior to joining the Company, from July 1992 to May
1993, he was a plant general manager at Tandem Computers Corporation, a computer company. From October
1989 to July 1992, Mr. Rosenzweig served as a systems and peripheral test manager at Tandem Computers
Corporation. Mr. Rosenzweig holds a B.S. in Metallurgical Engineering from The Pennsylvania State University
and an M.B.A. from the University of California at Berkeley.

Subject to the majority voting policy in our Board of Directors Guidelines, directors are elected by a

plurality of the votes present in person or represented by proxy and entitled to vote.

The Company’s Board of Directors recommends a vote “FOR” the election of all seven (7) nominees listed
above. Proxies received by the Company will be voted “FOR” the election of all nominees listed above
unless the stockholder specifies otherwise in the proxy.

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

Meetings of Board of Directors and Committees

The Board of Directors of the Company held a total of twelve (12) meetings in 2008. The Board of

Directors has established the following committees, among others, to assist the Board of Directors in discharging
its duties: (i) an Audit Committee, (ii) a Compensation Committee and (iii) a Nominating and Governance
Committee. Current copies of the charters for the Audit Committee, the Compensation Committee and the
Nominating and Governance Committee as well as the Board of Director Guidelines can be found on the
Company’s website at www.efi.com. Each director attended 75% or more of the total number of meetings of the
Board and of the committees thereof, if any, upon which such director served during 2008.

y
x
o
r
P

Audit Committee

The Audit Committee currently consists of Directors Georgens, Greene and Kashnow. The Audit
Committee conducted ten (10) meetings in 2008. The Audit Committee approves the engagement of and the
services to be performed by the Company’s independent auditors and reviews the Company’s accounting
principles and its system of internal accounting controls. The Board has determined that all members of the Audit
Committee are “independent” as that term is defined in Rule 5605(a)(2) of the NASDAQ rules and also meet the
additional criteria for independence of Audit Committee members set forth in Rule 10A-3(b)(1) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). In addition, our Board of Directors has
determined that Mr. Kashnow is an “audit committee financial expert” as defined by the SEC.

The Audit Committee oversees the Company’s Ethics Program, which presently includes, among other
things, the Company’s Code of Business Conduct and Ethics, the Company’s Code of Ethics for the Management
Team, the Company’s Code of Ethics for the Accounting and Finance Team and the Company’s Code of Ethics
for the Sales Team (collectively, the “Codes”), an Internal Audit Committee responsible for receiving and
investigating complaints, a 24-hour global toll-free hotline and an internal website whereby employees can
anonymously submit complaints via email. The Company’s Codes can be found on the Company’s website at
www.efi.com.

Compensation Committee

The Compensation Committee currently consists of Directors Cogan and Maydan. The Compensation

Committee held nine (9) meetings in 2008. The Board has determined that all members of the Compensation
Committee are “independent” as that term is defined in Rule 5605(a)(2) of the NASDAQ rules. The
Compensation Committee reviews and approves the Company’s executive compensation policy and administers
the Company’s stock plans. The Compensation Committee also reviews the Compensation Discussion and
Analysis contained in our proxy statement and prepares and approves the Compensation Committee Report for
inclusion in our proxy statement.

Compensation Committee Interlocks and Insider Participation

the board of directors or compensation committee of any entity that has one or more executive officers serving on
our Board of Directors or Compensation Committee.

Nominating and Governance Committee

The Nominating and Governance Committee currently consists of Directors Greene, Kashnow and Maydan.

The Nominating and Governance Committee met twice in 2008. The Board has determined that all members of
the Nominating and Governance Committee are “independent” as that term is defined in Rule 5605(a)(2) of the
NASDAQ rules. The Nominating and Governance Committee develops and recommends governance principles,
recommends director nominees to the Board of Directors and considers the resignation offers of any nominee for
director, in accordance with its charter and the Company’s Board of Director Guidelines.

Consideration of Director Nominees

Stockholder Nominees

The policy of the Nominating and Governance Committee is to consider properly submitted stockholder

nominations for candidates for membership on the Board as described below under “Identifying and Evaluating
Nominees for Directors.” In evaluating such nominations, the Nominating and Governance Committee seeks to
achieve a balance of knowledge, experience and capability on the Board and to address the membership criteria
set forth under “Director Qualifications.”

The Nominating and Governance Committee will consider suggestions of nominees from stockholders.

Stockholders may recommend individuals for consideration by submitting the materials set forth below to the
Company addressed to the Nominating and Governance Committee at the Company’s headquarters address. To
be timely, the written materials must be submitted within the time permitted for submission of a stockholder
proposal for inclusion in the Company’s proxy statement for the subject annual meeting.

The written materials must include: (1) all information relating to the individual recommended that is
required to be disclosed pursuant to Regulation 14A under the Exchange Act (including such person’s written
consent to being named in the proxy statement as a nominee and to serving as a director if elected); (2) the
name(s) and address(es) of the stockholders making the nomination and the amount of the Company’s securities
that is owned beneficially and of record by such stockholder(s); (3) appropriate biographical information
(including a business address and a telephone number) and a statement as to the individual’s qualifications, with
a focus on the criteria described below; (4) a representation that the stockholder is a holder of stock of the
Company entitled to vote on the date of submission of such written materials; and (5) any material interest of the
stockholder in the nomination.

In accordance with the Company’s majority voting policy, the Nominating and Governance Committee will
also consider the resignation offer of any nominee for director who, in an uncontested election, receives a greater
number of votes “withheld” from his or her election than votes “for” such election, and recommend to the Board
the action it deems appropriate to be taken with respect to such offered resignation.

Any stockholder nominations proposed for consideration by the Nominating and Governance Committee

should be addressed to:

Electronics For Imaging, Inc.
Attention: Nominating and Governance Committee
c/o Bryan Ko
303 Velocity Way
Foster City, CA 94404

Director Qualifications

The Nominating and Governance Committee has established the following minimum criteria for evaluating

prospective Board candidates:

• Reputation for integrity, strong moral character and adherence to high ethical standards.

• Holds or has held a generally recognized position of leadership in the community and/or chosen field

of endeavor, and has demonstrated high levels of accomplishment.

• Demonstrated business acumen and experience, and ability to exercise sound business judgment and

common sense in matters that relate to the current and long-term objectives of the Company.

• Ability to read and understand basic financial statements and other financial information pertaining to

y
x
o
r
P

the Company.

• Commitment to understand the Company and its business, industry and strategic objectives.

• Commitment and ability to regularly attend and participate in meetings of the Board of Directors,

Board Committees and stockholders, number of other company boards on which the candidate serves
and ability to generally fulfill all responsibilities as a director of the Company.

• Willingness to represent and act in the interests of all stockholders of the Company rather than the

interests of a particular group.

• Good health and ability to serve.

•

For prospective non-employee directors, independence under SEC and applicable stock exchange rules,
and the absence of any conflict of interest (whether due to a business or personal relationship) or legal
impediment to, or restriction on, the nominee serving as a director.

• Willingness to accept the nomination to serve as a director of the Company.

Other Factors for Potential Consideration

The Nominating and Governance Committee will also consider the following factors in connection with its

evaluation of each prospective nominee:

• Whether the prospective nominee will foster a diversity of skills and experiences.

• Whether the nominee possesses the requisite education, training and experience to qualify as

“financially literate” or as an “audit committee financial expert” under applicable SEC and NASDAQ
rules.

• Composition of the Board of Directors and whether the prospective nominee will add to or complement

the Board’s existing strengths.

Identifying and Evaluating Nominees for Directors

The Nominating and Governance Committee initiates the process by preparing a slate of potential

candidates who, based on their biographical information and other information available to the Nominating and
Governance Committee, appear to meet the criteria specified above and/or who have specific qualities, skills or
experience being sought (based on input from the full Board).

• Outside Advisors. The Nominating and Governance Committee may engage a third-party search firm

or other advisors to assist in identifying prospective nominees.

• Nomination of Incumbent Directors. The re-nomination of existing directors should not be viewed as

automatic, but should be based on continuing qualification under the criteria set forth above.

•

For incumbent directors standing for re-election, the Nominating and Governance Committee will
assess the incumbent director’s performance during his or her term, including the number of

meetings attended, level of participation and overall contribution to the Company, the number of
other company boards on which the individual serves, composition of the Board at that time and
any changed circumstances affecting the individual director which may bear on his or her ability
to continue to serve on the Board.

• Management Directors. The number of officers or employees of the Company serving at any time on
the Board should be limited such that, at all times, a majority of the directors is “independent” under
applicable SEC and NASDAQ rules.

After reviewing appropriate biographical information and qualifications, first-time candidates will be
interviewed by at least one member of the Nominating and Governance Committee and by the Chief Executive
Officer. Upon completion of the above procedures, the Nominating and Governance Committee will determine
the list of potential candidates to be recommended to the full Board for nomination at the annual meeting or
appointment to the Board of Directors between annual meetings. The Board of Directors will select the slate of
nominees only from candidates identified, screened and approved by the Nominating and Governance
Committee.

COMPENSATION OF DIRECTORS

The table below summarizes the compensation paid by the Company to non-employee directors for the

fiscal year ended December 31, 2008.

Name(1)
(a)

Fees earned or
paid in cash
($)
(b)

Stock
awards
($)(2)(3)
(c)

Option
awards
($)(2)(3)
(d)

Non-equity
incentive plan
compensation
($)
(e)

Change in
pension value
and
nonqualified
deferred
compensation
earnings ($)
(f)

All other
compensation
($)
(g)

Gill Cogan . . . . . . . . . . . .
Thomas Georgens . . . . . .
James S. Greene . . . . . . . .
Richard A. Kashnow . . . .
Dan Maydan . . . . . . . . . . .
Christopher Paisley . . . . .

$102,750
43,500
115,500
59,750
115,000
33,000

$82,223 $ 69,660
49,611
162,308
49,611
90,961
0

—
82,223
—
82,223
30,693

—
—
—
—
—
—

Total ($)
(h)

$254,633
93,111
360,031
109,361
288,184
63,693

(1) Guy Gecht, the Company’s Chief Executive Officer, and Fred Rosenzweig, the Company’s President, are

not included in this table as they are employees of the Company and thus receive no compensation for their
services as directors. The compensation received by Messrs. Gecht and Rosenzweig as employees of the
Company is shown in the Summary Compensation Table for 2008 on page 63 of this Proxy Statement.
Mr. Paisley did not stand for reelection to the Board of Directors at our 2008 Annual Meeting held on
May 20, 2008 and is no longer a director of the Company. Thomas Georgens and Richard Kashnow were
appointed to the Board in April 2008.

(2) At December 31, 2008, the aggregate number of stock awards outstanding for each independent director was
as follows: Gill Cogan 9,000, including 3,000 restricted stock awards and 6,000 restricted stock units;
Thomas Georgens 0; James S. Greene 9,000, including 3,000 restricted stock awards and 6,000 restricted
stock units; Richard Kashnow 0; Dan Maydan 9,000, including 3,000 restricted stock awards and 6,000
restricted stock units; Christopher Paisley 0. At December 31, 2008, the aggregate number of option awards
outstanding for each independent director was as follows: Gill Cogan 151,668, of which 121,043 were
vested and 30,625 were unvested; Thomas Georgens 40,000, all unvested; James S. Greene 81,623, of
which 25,534 were unvested and 56,089 were vested; Richard Kashnow 40,000, all unvested; Dan Maydan
25,000, all unvested; Christopher Paisley 0. During 2008, 15,000 shares of common stock subject to option
awards granted to Mr. Cogan in 1998 expired.

y
x
o
r
P

In addition, the following option awards to non-employee directors were repriced in connection with the
settlement of the derivative litigation.

Repriced option awards

Name

Dan Maydan . . . . . . . . . . . . . . . . . . . . .

Gill Cogan . . . . . . . . . . . . . . . . . . . . . .

James S. Greene . . . . . . . . . . . . . . . . . .

Grant Date
(corrected as
required)

Number of
Options
Subject to
Amendment

Original
Exercise Price
Per Share

Amended Exercise
Price Per Share

06/08/99
11/25/03
10/05/98
06/08/99
02/12/01
11/25/03
11/25/03

18,000
2,934
15,000
18,000
20,000
22,000
22,000

$33.81
26.59
13.75
33.81
13.75
26.59
26.59

$48.38
26.85
20.19
48.38
22.06
26.85
26.85

In addition, the following option awards having Hull-White values as set forth in the table below were
surrendered by non-employee directors in connection with the settlement of the derivative litigation.

Surrendered option awards

Name

Dan Maydan* . . . . . . . . . . . . . . . . . . . .

Grant Date
(corrected as
required)

Number of
Surrendered
Options

06/08/99
03/15/06
11/25/03
07/22/05

18,000
25,000
2,934
25,000

James S. Greene . . . . . . . . . . . . . . . . . .

03/15/06
11/25/03

22,512
9,533

Hull-White
Value

Total Value of
Surrendered Options

$0.23
3.04
1.63
3.41

Total

$3.04
1.63

Total

4,140.00
76,000.00
4,782.42
85,250.00

$170,172.42

$ 68,436.48
15,538.79

$ 83,975.27

Mr. Maydan also repaid to the Company an amount of $19,456.

*
(3) Amounts included in the “Stock Awards” and “Option Awards” columns represent the compensation cost,
except disregarding estimated forfeitures, that was recognized by us in the year ended December 31, 2008
on all previously-granted awards and options in accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 123R, “Share-based Payments,” or “SFAS 123R.” See Note 12 of the
consolidated financial statements in the Company’s Annual Report on Form 10-K, as amended, for the
year ended December 31, 2008 regarding assumptions underlying valuation of equity awards.

The compensation of the non-employee directors serving on the Board is determined by the Compensation
Committee. Employee members of the Board currently receive cash and equity compensation in connection with
their service to the Company and do not receive any additional compensation for service on the Board.

Cash Compensation. Non-employee members of the Board of Directors receive cash compensation in the
form of the annual retainers and attendance fees per meeting of the Board of Directors and its committees as set
forth below:

. . . . . . . . . . . . . . . . .
Annual Retainer for Each Non-Employee Director
. . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee Chairperson Retainer
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee Member Retainer
. . . . . . . . . . . . . . . . . . .
Compensation Committee Chairperson Retainer
. . . . . . . . . . . . . . . . . . . . . .
Compensation Committee Member Retainer
Nominating and Governance Chairperson Retainer . . . . . . . . . . . . . . . . .
Nominating and Governance Member Retainer . . . . . . . . . . . . . . . . . . . .
Special Committee Member Compensation . . . . . . . . . . . . . . . . . . . . . . .
Board Meeting Attendance (in person) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Board Meeting Attendance (by telephone) . . . . . . . . . . . . . . . . . . . . . . . .
Audit Committee Meeting Attendance (in person) . . . . . . . . . . . . . . . . . .

Audit Committee Meeting Attendance (by telephone) . . . . . . . . . . . . . . .

Compensation Committee Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compensation Committee Attendance (by telephone) . . . . . . . . . . . . . . .

Nominating and Governance Committee Attendance . . . . . . . . . . . . . . . .

Nominating and Governance Committee Attendance (by telephone) . . . .

$25,000
$10,000
$ 5,000
$ 5,000
$ 2,500
$ 5,000
$ 2,500
$50,000
$ 2,000
$ 1,000
$ 4,000
$ 2,000
$ 2,000
$ 1,000
$ 2,000
$ 1,000
$ 1,000
500
$
$ 2,000
$ 1,000
$ 1,000
500
$

(Chairperson)
(other directors)
(Chairperson)
(other directors)
(Chairperson)
(other directors)
(Chairperson)
(other directors)
(Chairperson)
(other directors)
(Chairperson)
(other directors)

The Company also reimburses each non-employee member of the Board of Directors for out-of-pocket expenses
incurred in connection with attendance at meetings.

Equity Compensation. During 2008, each of Messrs. Cogan, Greene and Maydan was granted (i) an option
to purchase 25,000 shares of common stock at an exercise price of $16.32 per share, vesting with respect to 25%
of the shares on August 15, 2009, and thereafter with respect to an additional 2.5% of the shares each month,
with full vesting in 42 months and (ii) 6,000 Restricted Stock Units (“RSUs”), vesting with respect to one-fourth
of the shares on the first, second, third and fourth anniversaries of the date of grant. Each RSU represents a
contingent right to receive one share of Company’s common stock. Each of Messrs. Georgens and Kashnow, the
newly elected directors of the Company, was granted an option to purchase 40,000 shares of common stock at an
exercise price of $16.32 per share, vesting with respect to 25% of the shares on August 15, 2009, and thereafter
with respect to an additional 2.5% of the shares each month, with full vesting in 42 months.

CERTAIN RELATIONSHIPS, RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE

Indemnification of Officers and Directors

executive officers and directors in connection with the review of our historical stock option granting practices
and the related restatement, related government inquiries and derivative shareholder suits. The maximum
potential amount of future payments we may be obligated to make under these indemnification agreements is
unlimited; however, we have director and officer insurance coverage that limits our exposure and may enable us
to recover a portion of any future amounts paid.

Related Party Transactions

The Audit Committee of our Board was responsible for reviewing and approving in advance any proposed

related party transactions as defined under Item 404 of Regulation S-K during 2008.

y
x
o
r
P

The Company has previously entered into employment agreements with its named executive officers. These

agreements are described below under “Employment Agreements.”

There were no other related party transactions as defined under Item 404 of Regulation S-K during 2008.

Director Independence

The Board of Directors has determined that each of the non-employee directors is independent and that each

director who serves on each of its committees is independent, as the term is defined by NASDAQ rules and the
SEC.

COMMUNICATION WITH THE BOARD

The Board of Directors has established a process to receive communications from stockholders.
Stockholders who wish to communicate with any member (or all members) of the Board should send such
communications via regular mail addressed to the Company’s Corporate Secretary, at Electronics For Imaging,
Inc., 303 Velocity Way, Foster City, California 94404. The Corporate Secretary will review each such
communication and forward it to the appropriate Board member or members as he deems appropriate.

The Company encourages its directors to attend the annual meeting of stockholders. Three directors

attended the Company’s last annual meeting.

PROPOSAL TWO

APPROVAL OF THE AMENDMENT AND RESTATEMENT OF OUR
AMENDED 2000 EMPLOYEE STOCK PURCHASE PLAN

The Company’s stockholders are being asked to approve the amendment and restatement of the Electronics
For Imaging, Inc. Amended 2000 Employee Stock Purchase Plan (the “ESPP”) to provide for an increase in the
number of shares authorized for issuance under the ESPP of 3,000,000 shares. The amendment and restatement
of the ESPP does not include an automatic increase in the number of shares reserved for issuance under the
ESPP, in contrast to the existing ESPP, which provides for an automatic increase on an annual basis.

The purpose of the share increase is to ensure that we will continue to have a sufficient reserve of common

stock available under the ESPP to provide eligible employees of the Company and its participating affiliates with
the opportunity to acquire the common stock of the Company through participation in a payroll-deduction based
employee stock purchase program designed to operate in compliance with Section 423 of the Internal Revenue
Code. Of the currently authorized 3,154,509 shares, approximately 310,000 shares remain available for issuance
under the ESPP. If approved, the Company estimates that the approximate life of the amended and restated ESPP
will be three years at current stock price levels.

The amendment and restatement of the ESPP was approved by the Board on April 21, 2009, subject to
stockholder approval. If approved, the total number of shares of common stock authorized for issuance under the
ESPP will be a fixed number and will no longer increase automatically on an annual basis.

The affirmative vote of a majority of the shares present or represented by proxy at the Annual Meeting and
entitled to vote is required for the approval of the amendment and restatement of the ESPP. Abstentions will be
counted towards the tabulation of votes cast on proposals presented to the stockholders and will have the same
effect as negative votes. Broker non-votes are counted towards a quorum, but are not counted for any purpose in
determining whether a matter has been approved. Should such stockholder approval not be obtained, then the
amendment and restatement of the ESPP will not be implemented, and any purchase rights granted on the basis
of that increase will immediately terminate.

The Company’s Board of Directors unanimously recommends a vote “FOR” the amendment and
restatement of the ESPP.

Description of the ESPP

The essential features of the ESPP are outlined below. The following summary is qualified in its entirety by

the full text of the ESPP, which is attached as Appendix A to this Proxy Statement.

Purpose

The purpose of the ESPP is to provide a means by which employees of the Company (and any parent or

subsidiary of the Company designated by the Board to participate in the ESPP) may be given an opportunity to
purchase common stock of the Company through payroll deductions, to assist the Company in retaining the
services of its employees, to secure and retain the services of new employees, to provide incentives for such
persons to exert maximum efforts for the success of the Company and to better align the interests of our
employees with the interests of our stockholders. All of the Company’s approximately 1,865 employees, which
includes officers of the Company and employees of the Company’s subsidiaries, are eligible to participate in the
ESPP.

The rights to purchase common stock granted under the ESPP are intended to qualify as options issued
under an “employee stock purchase plan” as that term is defined in Section 423(b) of the Internal Revenue Code
of 1986, as amended (the “Code”).

Administration

The Board administers the ESPP and has the final power to construe and interpret both the ESPP and the

rights granted under it. The Board has the power, subject to the provisions of the ESPP, to determine when and
how rights to purchase common stock of the Company will be granted, the provisions of each offering of such
rights (which need not be identical), and whether employees of any parent or subsidiary of the Company will be
eligible to participate in the ESPP.

Under the terms of the ESPP, the Board has the power to delegate administration of the ESPP to a

committee composed of not fewer than two (2) members of the Board. As used herein with respect to the ESPP,
the “Board” refers to any committee the Board appoints, as well as to the Board itself.

y
x
o
r
P

Stock Subject to the ESPP

The current number of shares of common stock reserved for issuance under the ESPP is 3,154,509 of which

approximately 310,000 shares remain available for issuance. If this proposal is approved, this number of shares
of common stock reserved for issuance would be increased by 3,000,000 shares. The ESPP currently provides
that the number of available shares under the ESPP will automatically increase on the first trading day in January
of each calendar year during the term of the ESPP, beginning with calendar year 2006 and continuing through
calendar year 2012, by an amount equal to 0.75% of the total number of shares of common stock outstanding on
the last trading day of December in the immediately preceding calendar year. If this proposal is approved, the
number of shares reserved for issuance under the ESPP will no longer automatically increase.

Offerings

The ESPP is implemented by periodic offerings of rights to all eligible employees from time to time, as
determined by the Board. The maximum period of time for an offering is 27 months. The Board, when establishing
an offering, will determine the specific terms for such offering within the criteria permitted by the ESPP, including
the length of the offering and the date or dates on which purchases will occur during the offering.

Eligibility

The Board has the discretion, from time to time, and within the parameters specified in the ESPP, to

establish the eligibility requirements for employees to participate in any offering under the ESPP, including
whether employees of any of the Company’s subsidiaries are eligible and the length of time (if any) an employee
must have been employed by the Company or a participating subsidiary in order to become eligible. However,
the period of employment for eligibility may not exceed two (2) years. In addition, the Board may exclude
employees who customarily work twenty (20) or fewer hours per week and five (5) or fewer months per year.

No employee is eligible to participate in the ESPP if, immediately after the grant of purchase rights, the
employee would own, directly or indirectly, stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company or of any parent or subsidiary of the Company (including any stock
which such employee may purchase under all outstanding rights and options). In addition, no employee may
accrue rights to purchase common stock under the ESPP at an annual rate that would exceed $25,000 worth of
shares of common stock (determined at the fair market value of the shares at the time such rights are granted)
under all employee stock purchase plans of the Company and its affiliates. Officers and affiliates are eligible to
participate in the ESPP; however, the Board may provide that certain highly compensated employees may not be
eligible to participate in the ESPP.

Participation in the ESPP

Eligible employees will enroll in the ESPP by delivering to the Company, prior to the date selected by the
Board as the offering date for the offering, an agreement authorizing payroll deductions from such employees’

compensation during the offering. The Board for each offering shall define “compensation” that will be taken
into account for such purpose (for example, as base salary only or as total compensation, including bonuses and
commissions, etc.). The Board also shall designate the maximum amount of such compensation, not exceeding
10% thereof, that a participant may have withheld and contributed during the offering.

Purchase Price

The purchase price per share at which shares of common stock are sold in an offering under the ESPP will

be the lower of: (i) 85% of the fair market value of a share of common stock on the date the right to purchase
such shares was granted (generally the first day of the offering), or (ii) 85% of the fair market value of a share of
common stock on the applicable purchase date.

Payment of Purchase Price; Payroll Deductions

The amount used to purchase shares is accumulated by payroll deductions over the course of an offering.

Participants may increase, reduce or terminate their payroll deductions during an offering to the extent provided
by the Board in the terms of the offering. The Board also may provide the extent to which eligible employees,
including employees who were not yet eligible at the start of the offering, may commence participating in an
offering after the offering already has begun.

All payroll deductions made for a participant will be credited to his or her account under the ESPP and
deposited with the general funds of the Company. A participant may not make additional payments into such
account, unless specifically provided for in the offering terms and only if the maximum permitted amount has not
already been withheld.

Purchase of Stock

On each purchase date under the ESPP, the balance of payroll deductions then held by the Company for the

account of each participant will be applied to the purchase of shares of common stock for the participant. In
connection with each offering under the ESPP, the Board may specify a maximum number of shares of common
stock an employee may be granted the right to purchase on each purchase date or during an offering and a
maximum aggregate number of shares of common stock that may be purchased by all participants. If the aggregate
number of shares to be purchased upon exercise of rights granted in the offering would exceed the maximum
aggregate number of shares of common stock available, then the Board will make a pro rata allocation of available
shares in a uniform and equitable manner. Unless the employee’s participation is discontinued (see “Withdrawal”
below), his or her right to purchase shares is exercised automatically on each purchase date at the applicable price.

Withdrawal

A participant may withdraw from a given offering under the ESPP by terminating his or her payroll
deductions and by delivering to the Company a notice of such withdrawal. The terms of an offering established
by the Board may limit withdrawals to specified periods prior to a purchase date.

Upon any withdrawal from an offering by the employee, we will distribute to the employee his or her
accumulated payroll deductions without interest, less any accumulated deductions previously applied to the
purchase of shares of common stock on the employee’s behalf during such offering, and such employee’s interest
in the offering will be automatically terminated.

Termination of Employment

Rights granted pursuant to any offering under the ESPP terminate immediately upon cessation of an
employee’s employment for any reason, and we will distribute to such employee all of his or her accumulated
payroll deductions, without interest.

Restrictions on Transfer

Rights granted under the ESPP are not transferable and may be exercised only by the person to whom such

rights are granted.

Effective Date, Duration, Amendment and Termination

The ESPP initially became effective on August 1, 2000. If approved by the stockholders, the amended and

restated ESPP shall become effective as of April 21, 2009, the date of the Board approval.

The ESPP has no fixed expiration date although the Board may suspend or terminate the ESPP at any time.

The Board may also amend the ESPP at any time. Any amendment of the ESPP must be approved by the
Company’s stockholders within twelve (12) months of its adoption by the Board if the amendment would require
stockholder approval in order for the ESPP to comply with Section 423 of the Code or Rule 16b-3 under the
Securities Exchange Act of 1934, as amended.

y
x
o
r
P

Rights granted before amendment or termination of the ESPP may not be impaired by any amendment or
termination of the ESPP without consent of the employee to whom such rights were granted, except as may be
necessary to comply with any applicable law or Section 423 of the Code.

Effect of Certain Corporate Events

In the event of a dissolution, liquidation or specified type of merger of the Company, the surviving
corporation either will assume the rights under the ESPP or substitute similar rights, or the purchase date under
any ongoing offering will be accelerated such that the outstanding rights may be exercised immediately prior to,
or concurrent with, any such event. Any such determination will be made by the Board.

Stock Subject to ESPP

In the event any change is made to the outstanding shares of common stock by reason of any

recapitalization, reorganization, stock dividend, stock split, combination of shares, exchange of shares or other
change in capital structure effected without the Company’s receipt of consideration, appropriate adjustments will
be made to the class and maximum number of securities subject to the ESPP and the class and number of shares
and price per share of stock subject to each outstanding purchase right.

Federal Income Tax Information

The U.S. federal income tax consequences of the ESPP under current federal law, which is subject to
change, are summarized in the following discussion of the general tax principles applicable to the ESPP. This
summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or
foreign tax consequences. Tax considerations may vary from locality to locality and depending on individual
circumstances.

Rights granted under the ESPP are intended to qualify for favorable federal income tax treatment associated

with rights granted under an employee stock purchase plan which qualifies under provisions of Section 423 of
the Code.

A participant will be taxed on amounts withheld for the purchase of shares of common stock as if such
amounts were actually received. Otherwise, no income will be taxable to a participant until the sale or disposition
of the acquired shares, and the method of taxation will depend upon the holding period of the acquired shares.

If the stock is sold or otherwise disposed of for a gain more than two (2) years after the granting of the right

to purchase the stock (typically, the beginning of the offering period) and more than one (1) year after the

purchase date on which the stock is sold to the participant, then the lesser of (i) the excess of the fair market
value of the stock at the time of such disposition over the purchase price or (ii) the excess of the fair market value
of the stock as of the time the right was granted over the purchase price (determined as of the time the right was
granted) will be treated as ordinary income. Any further gain or any loss will be taxed as a long-term capital gain
or loss. Such capital gains currently are generally subject to lower tax rates than ordinary income.

If the stock is sold or otherwise disposed of before the expiration of either of the holding periods described
above (a “disqualifying disposition”), then the excess of the fair market value of the stock on the purchase date
over the purchase price will be treated as ordinary income at the time of such disposition. The balance of any
gain will be treated as capital gain. Even if the stock is later disposed of for less than its fair market value on the
purchase date, the same amount of ordinary income is recognized by the participant, and a capital loss is realized
equal to the difference between the sales price and the fair market value of the stock on such purchase date. Any
capital gain or loss will be short-term or long-term, depending on how long the stock has been held.

There are no federal income tax consequences to the Company by reason of the grant or exercise of rights

under the ESPP. The Company is entitled to a deduction to the extent amounts are taxed as ordinary income to a
participant in connection with a disqualifying disposition (subject to the requirement of reasonableness and the
satisfaction of tax reporting obligations). The Company will not be entitled to any deductions if the holding
periods above are satisfied.

Securities Underlying Awards

As of April 30, 2009 the closing price of our common stock as reported on the NASDAQ Global Select

Market was $9.82 per share.

New Plan Benefits

The benefits that will be received by or allocated to eligible employees under the ESPP cannot be
determined at this time because the amount of contributions set aside to purchase shares of our common stock
under the ESPP (subject to the limitations discussed below) is entirely within the discretion of each participant.

Since the inception of the ESPP, shares of our common stock have been purchased under the ESPP as
follows: Guy Gecht, Chief Executive Officer—13,889 shares; Fred Rosenzweig, President—0 shares; John
Ritchie, Chief Financial Officer—13,912 shares; Non-Executive Director Group—0 shares; and Non-Executive
Employee Group (including, for the purpose of this disclosure, a former named executive officer)—2,815,938
shares.

Vote Required

Adoption of the amendment and restatement of the ESPP requires approval by the affirmative vote of a
majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote. A “majority of
votes cast” means that the number of votes “FOR” the approval of the amendment and restatement of the ESPP
must exceed the number of votes “AGAINST” the approval of the amendment and restatement of the ESPP.

The Board of Directors recommends a vote in favor of Proposal Two.
Proxies received by the Company will be voted “FOR” this proposal unless the stockholder specifies
otherwise in the proxy.

PROPOSAL THREE

APPROVAL OF OUR 2009 EQUITY INCENTIVE AWARD PLAN AND THE
RESERVATION OF AN AGGREGATE OF 5,000,000 SHARES OF THE COMPANY’S
COMMON STOCK FOR ISSUANCE PURSUANT TO SUCH PLAN

The Company’s stockholders are being asked to approve the Electronics For Imaging, Inc. 2009 Equity

Incentive Award Plan (the “2009 Plan”) and the reservation of an aggregate of 5,000,000 shares of the
Company’s common stock for issuance pursuant to the 2009 Plan. If the 2009 Plan is approved, then no
additional grants will be made under the Company’s 2007 Equity Incentive Award Plan (the “Prior Plan”). The
2009 Plan, if approved by our stockholders, will replace the Prior Plan and be used to help attract, retain and
motivate employees, consultants and directors.

y
x
o
r
P

The affirmative vote of a majority of the shares present or represented by proxy at the Annual Meeting and
entitled to vote is required for the approval of the 2009 Plan. Abstentions will be counted towards the tabulation
of votes cast on proposals presented to the stockholders and will have the same effect as negative votes. Broker
non-votes are counted towards a quorum, but are not counted for any purpose in determining whether this
proposal has been approved. Should stockholder approval of this proposal not be obtained, then the 2009 Plan
will not be implemented.

The Company’s Board of Directors unanimously recommends a vote “FOR” the approval of the 2009 Plan.

The following summarizes the terms of the 2009 Plan, and the summary is qualified in its entirety by

reference to the full text of the 2009 Plan, which is attached as Appendix B to this Proxy Statement.

General

The Board has adopted, subject to stockholder approval, the 2009 Plan for employees and consultants of the
Company and its subsidiaries and members of the Board, or as applicable, members of the board of directors of a
subsidiary (collectively, “Directors”). The 2009 Plan is intended to replace the Prior Plan, which as of April 30,
2009, had approximately 500,000 shares available for issuance. The 2009 Plan will become effective upon its
approval by our stockholders pursuant to this Proposal Three. If the 2009 Plan becomes effective, then the Prior
Plan will be terminated on the date the 2009 Plan becomes effective, provided, that any awards outstanding under
the Prior Plan will remain outstanding pursuant to the terms of the Prior Plan.

The Board believes that the 2009 Plan will promote the success and enhance the value of the Company by

continuing to link the personal interests of participants to those of the Company and its stockholders and by
providing participants with an incentive for outstanding performance to generate superior returns to our
stockholders. The Board further believes that the 2009 Plan will provide flexibility to the Company in its ability
to motivate, attract and retain the services of employees, consultants and Directors upon whose judgment, interest
and special effort the successful operation of the Company is largely dependent.

The 2009 Plan provides for the grant of stock options (both incentive stock options and nonqualified stock

options), restricted stock, stock appreciation rights, performance shares, performance stock units, dividend
equivalents, stock payments, deferred stock, restricted stock units and performance-based awards to eligible
participants. A summary of the principal provisions of the 2009 Plan is set forth below.

Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) generally limits the
deductibility of compensation paid to certain executive officers of a publicly-held corporation to $1.0 million in
any taxable year of the corporation. Certain types of compensation, including “qualified performance-based
compensation,” are exempt from this deduction limitation. In order to qualify for the exemption for qualified
performance-based compensation, Section 162(m) of the Code generally requires that:

• The compensation be paid solely upon account of the attainment of one or more pre-established

objective performance goals;

• The performance goals must be established by a compensation committee comprised of two or more

“outside directors;”

• The material terms of the performance goals must be disclosed to and approved by the stockholders; and

• The compensation committee of “outside directors” must certify that the performance goals have

indeed been met prior to payment.

Section 162(m) contains a special rule for stock options and stock appreciation rights (“SARs”) which
provides that stock options and SARs will satisfy the qualified performance-based compensation exception if the
awards are made by a qualifying compensation committee, the plan sets forth the maximum number of shares
that can be granted to any person within a specified period and the compensation is based solely on an increase in
the stock price after the grant date. The 2009 Plan has been designed to permit a committee, which may be the
Board or a committee appointed by the Board (collectively, for the purposes of this Proposal Three, the
“Committee”), to grant stock options, SARs and other awards which may qualify as qualified performance-based
compensation under Section 162(m) of the Code.

Administration

The 2009 Plan will be administered by the Committee, except that with respect to awards granted to
independent directors, the Board will administer the 2009 Plan. Unless otherwise determined by the Board, the
Committee will consist solely of two or more Board members who are “outside directors” for purposes of
Section 162(m) of the Code, Non-Employee Directors (as defined in Rule 16b-3(b)(3) of the Exchange Act) and
“independent directors” under the NASDAQ rules. The Board or the Committee may delegate to a committee of one
or more Board members or one or more Company officers the authority to grant or amend awards under the 2009
Plan to participants other than (i) senior Company executives who are subject to Section 16 of the Exchange Act,
(ii) employees who are “covered employees” within the meaning of Section 162(m) of Code, and (iii) Company
officers or Directors to whom the authority to grant or amend awards under the 2009 Plan has been delegated.

The Committee will have the exclusive authority to administer the 2009 Plan, including the power to

(i) designate participants under the 2009 Plan, (ii) determine the types of awards granted to participants under the
2009 Plan, the number of such awards, and the number of shares of our common stock subject to such awards,
(iii) determine and interpret the terms and conditions of any awards under the 2009 Plan, including the vesting
schedule, exercise price, whether to settle, or accept the payment of any exercise price, in cash, common stock,
other awards or other property, and whether an award may be cancelled, forfeited or surrendered, (iv) prescribe
the form of each award agreement, and (v) adopt rules for the administration, interpretation and application of the
2009 Plan. The Committee will not have the authority to accelerate the vesting or waive the forfeiture of any
performance-based awards.

Eligibility

Persons eligible to participate in the 2009 Plan include all employees (which includes officers of the
Company), Directors and consultants of the Company and its subsidiaries, as determined by the Committee. As
of April 30, 2009, approximately 1,865 employees, 7 Directors and approximately 39 consultants would be
eligible to participate in the 2009 Plan.

Limitation on Awards and Shares Available

The aggregate number of shares of common stock that may be issued or transferred under the 2009 Plan is

5,000,000, provided, however, that the aggregate number of shares issued during the 2009 calendar year shall not
exceed 2,500,000, excluding shares issued under the one-time fair value stock option exchange programs described
in Proposals Four and Five. In addition, no more than 5,000,000 shares of our common stock may be issued upon
the exercise of incentive stock options. On the effective date of the 2009 Plan, the Prior Plan will be terminated,
provided, that any awards outstanding under the Prior Plan will remain outstanding pursuant to their terms.

y
x
o
r
P

The shares of common stock covered by the 2009 Plan may be treasury shares, authorized but unissued

shares, or shares purchased in the open market. If an award under the 2009 Plan is forfeited (including a
reimbursement of an unvested award upon a participant’s termination of employment at a price equal to the par
value of the common stock subject to the award) or expired, any shares of common stock subject to the award
may be used again for new grants under the 2009 Plan. The maximum number of shares of common stock subject
to one or more awards granted to any one employee under the 2009 Plan shall be (i) 2,000,000 as to awards
granted to an employee during the fiscal year of the Company in which the employee is initially employed by the
Company or any subsidiary and (ii) 1,000,000 as to awards granted to an employee in any subsequent fiscal year.

Awards

The 2009 Plan provides for grants of stock options (both incentive stock options and nonqualified stock

options), restricted stock, stock appreciation rights, performance shares, performance stock units, dividend
equivalents, stock payments, deferred stock, restricted stock units and performance-based awards. No
determination has been made as to the types or amounts of awards that will be granted to specific individuals
pursuant to the 2009 Plan.

During the 2009 calendar year, the vesting conditions of awards to be granted to our officers and Directors

shall be allocated equally between time-based conditions and performance-based conditions, with respect to
which the performance-based conditions may be metrics of either stock price appreciation or return on equity
based on annual non-GAAP results, as determined in the discretion of the Committee, provided that the
allocation between the two performance-based metrics must, for each metric, exceed zero percent.

Upon the approval by the Committee, any officer or Director award granted during the 2009 calendar year
utilizing the stock price appreciation metric will vest in four equal installments based upon the average price of
our common stock for 20 consecutive trading days as quoted on the NASDAQ Global Select Market, as follows:

•

25% when the average price equals or exceeds 150% of our closing stock price on the grant date;

25% when the average price equals or exceeds 175% of our closing stock price on the grant date;

25% when the average price equals or exceeds 200% of our closing stock price on the grant date; and

25% when the average price equals or exceeds 225% of our closing stock price on the grant date.

Upon the approval by the Committee, any officer or Director award granted during the 2009 calendar year

utilizing the return on equity metric will vest in five equal installments as follows:

•

20% when the Company’s annual return on equity percentage, on a non-GAAP basis, is equal to or
greater than two percentage points more than the percentage for the fiscal year 2008.

20% when the Company’s annual return on equity percentage, on a non-GAAP basis, is equal to or
greater than four percentage points more than the percentage for the fiscal year 2008.

20% when the Company’s annual return on equity percentage, on a non-GAAP basis, is equal to or
greater than six percentage points more than the percentage for the fiscal year 2008.

20% when the Company’s annual return on equity percentage, on a non-GAAP basis, is equal to or
greater than eight percentage points more than the percentage for the fiscal year 2008.

20% when the Company’s annual return on equity percentage, on a non-GAAP basis, is equal to or
greater than ten percentage points more than the percentage for the fiscal year 2008.

The Committee shall make the final determination of return on equity and return on equity percentage point

improvements. The determination of return on equity shall be derived from the Company’s audited financial
statements for the applicable calendar year and the base year. For example, if the Company’s 2008 return on

equity is 8% and an award of 1,000 stock options was granted using the return on equity metric, and in 2009 the
Company’s return on equity percentage was 14%, then upon such determination, 600 shares underlying such
stock options would vest immediately.

Stock Options. Stock options, including incentive stock options (as defined under Section 422 of the Code)

and nonqualified stock options may be granted pursuant to the 2009 Plan. The exercise price of incentive stock
options and nonqualified stock options granted pursuant to the 2009 Plan will not be less than 100% of the fair
market value of the common stock on the date of grant, unless incentive stock options are granted to any individual
who owns, as of the date of grant, stock possessing more than 10% of the total combined voting power of all classes
of our stock (the “Ten Percent Owner”), whereupon the exercise price of such incentive stock options will not be
less than 110% of the fair market value of the common stock on the date of grant. Incentive stock options and
nonqualified stock options may be exercised as determined by the Committee, but in no event after (i) the fifth
anniversary of the date of grant with respect to incentive stock options granted to a Ten Percent Owner, or (ii) the
tenth anniversary of the date of grant with respect to incentive stock options granted to other employees and
nonqualified stock options. Nonqualified stock options may be exercised as determined by the Committee. Upon the
exercise of a stock option, the exercise price must be paid in full in cash, by tendering previously-acquired shares of
common stock with a fair market value at the time of exercise equal to the aggregate exercise price of the option or
the exercised portion thereof or by tendering other property acceptable to the Committee.

Restricted Stock. Restricted stock awards may be granted pursuant to the 2009 Plan. A restricted stock
award is the grant of shares of common stock at a price determined by the Committee (including zero), that is
subject to transfer restrictions and may be subject to substantial risk of forfeiture until specific conditions are
met. Conditions may be based on continuing employment or achieving performance goals. During the period of
restriction, participants holding shares of restricted stock may have full voting and dividend rights with respect to
such shares. The restrictions will lapse in accordance with a schedule or other conditions determined by the
Committee.

Stock Appreciation Rights. A SAR is the right to receive payment of an amount equal to (i) the excess of
(A) the fair market value of a share of common stock on the date of exercise of the SAR over (B) the fair market
value of a share of common stock on the date of grant of the SAR, multiplied by (ii) the aggregate number of
shares of common stock subject to the SAR. Such payment will be in the form of cash, common stock or a
combination of cash and common stock, as determined by the Committee, and SARs settled in common stock
shall satisfy all of the restrictions imposed by the 2009 Plan upon stock option grants. Each SAR must be
evidenced by a written award agreement with terms and conditions consistent with the 2009 Plan. The
Committee shall determine the time or times at which a SAR may be exercised in whole or in part, provided that
the term of any SAR shall not exceed ten years.

Restricted stock units. Restricted stock units may be granted pursuant to the 2009 Plan, typically without

consideration from the participant. Restricted stock units may be subject to vesting conditions including
continued employment or achievement of performance criteria established by the Committee. Like restricted
stock, restricted stock units may not be sold or otherwise transferred or hypothecated until vesting conditions are
removed or expire. Unlike restricted stock, the common stock underlying restricted stock units will not be issued
until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting
or dividend rights prior to the time when vesting conditions are satisfied.

Performance shares. Awards of performance shares are denominated in a number of shares of common
stock and may be linked to any one or more performance criteria determined appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined by the Committee.

Performance stock units. Awards of performance stock units are denominated in unit equivalent of shares
of common stock and/or units of value, including dollar value of shares of common stock, and may be linked to
any one or more performance criteria determined appropriate by the Committee, in each case on a specified date
or dates or over any period or periods determined by the Committee.

Dividend equivalents. Dividend equivalents are rights to receive the equivalent value (in cash or common

stock) of dividends paid on common stock. Dividend equivalents represent the value of the dividends per share of
common stock paid by the Company, calculated with reference to the number of shares that are subject to any
award held by the participant. Dividend equivalents are converted to cash or additional shares of common stock
by such formula and at such time subject to such limitations as may be determined by the Committee. Dividend
equivalents granted with respect to options or SARs that are intended to be qualified performance-based
compensation within the meaning of Section 162(m) of the Code are payable with respect to pre-exercise periods,
regardless of whether such options or SARs are subsequently exercised.

Stock payments. Stock payments include payments in the form of common stock, options or other rights to

purchase common stock made in lieu of all or any portion of the compensation that would otherwise be paid to
the participant. The number of shares will be determined by the Committee and may be based upon performance
criteria determined appropriate by the Committee, determined on the date such stock payment is made or on any
date thereafter.

y
x
o
r
P

Deferred stock. Deferred stock may be awarded to participants and may be linked to any performance

criteria determined to be appropriate by the Committee. Common stock underlying a deferred stock award will
not be issued until the deferred stock award has vested, pursuant to a vesting schedule or performance criteria set
by the Committee, and unless otherwise provided by the Committee, recipients of deferred stock generally will
have no rights as a stockholder with respect to such deferred stock until the time the vesting conditions are
satisfied and the stock underlying the deferred stock award has been issued.

Performance-based awards. The Committee may grant awards to employees who are or may be “covered

employees,” as defined in Section 162(m) of the Code, that are intended to be qualified performance-based
compensation within the meaning of Section 162(m) of the Code in order to preserve the deductibility of these
awards for federal income tax purposes. Participants are only entitled to receive payment for a performance-
based award for any given performance period to the extent that pre-established performance goals set by the
Committee for the period are satisfied. With regard to a particular performance period, the Committee will have
the discretion to select the length of the performance period, the type of performance-based awards to be granted,
and the goals that will be used to measure the performance for the period. In determining the actual size of an
individual performance-based award for a performance period, the Committee may reduce or eliminate (but not
increase) the award. Generally, a participant will have to be employed by the Company or any qualifying
subsidiaries on the date the performance-based award is paid to be eligible for a performance-based award for
any period. Stock options and SARs granted under the 2009 Plan will generally satisfy the exception for qualified
performance-based compensation since they will be made by a qualifying compensation committee, the plan sets
forth the maximum number of shares of common stock which may be subject to awards granted to any one
participant during any calendar year, and the per share exercise price of options and SARs must be at least equal
to the fair market value of a share of common stock on the date of grant.

Pre-established performance goals for awards intended to be qualified performance-based compensation

within the meaning of Section 162(m) of the Code must be based on one or more of the following performance
criteria: net earnings (either before or after interest, taxes, depreciation and amortization), economic value-added,
sales or revenue, net income (either before or after taxes), operating earnings, cash flow (including, but not
limited to, operating cash flow and free cash flow), cash flow return on capital, return on net assets, return on
stockholders’ equity, return on assets, return on capital, stockholder returns, return on sales, gross or net profit
margin, productivity, expense, margins, operating efficiency, customer satisfaction, working capital, earnings per
share, price per share of common stock and market share, any of which may be measured either in absolute terms
or as compared to any incremental increase or as compared to results of a peer group.

Full value award limitations. Except as may be determined by the Committee in the event of a

participant’s death, disability or retirement, or in connection with a change in control event, “Full Value Awards”
(that is, restricted stock awards, performance share awards, performance stock unit awards, stock payment

awards, dividend equivalents awards, deferred stock awards or restricted stock unit awards) that vest solely based
on the passage of time must vest over a period of not less than three years and performance awards must vest
over a period of not less than one year (which shall include fully-vested awards granted in lieu of cash awards
that have been earned based on a performance period of at least one year). These vesting limitations shall not
apply to a limited basket consisting of up to 10% of the shares of common stock available for issuance (as
described in more detail above) or to awards granted to newly hired employees.

Transferability of awards. Awards cannot be assigned, transferred or otherwise disposed of by a
participant other than by will or the laws of descent and distribution or pursuant to beneficiary designation
procedures approved from time to time by the Committee. The Committee may provide in any award agreement
that an award may be transferred to certain persons or entities related to a participant in the 2009 Plan, including
but not limited to members of the participant’s family, charitable institutions or trusts or other entities whose
beneficiaries or beneficial owners are members of the participant’s family and/or charitable institutions, or to
such other persons or entities as may be expressly permitted by the Committee. Such permitted assignees shall be
bound by and subject to such terms and conditions as determined by the Committee.

Adjustments to Awards

If there is a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend,

stock split, spin-off, rights offering or recapitalization through a large, nonrecurring cash dividend, that affects
the shares of common stock (or other securities of the Company) or the stock price of common stock (or other
securities) and causes a change in the per share value of the common stock underlying outstanding awards, then
the Committee shall make equitable adjustments to the number and type of securities subject to each outstanding
award under the 2009 Plan, and the exercise price or grant price of such outstanding award (if applicable). The
Committee can make other equitable adjustments it determines are appropriate to reflect such an event with
respect to the aggregate number and kind of shares that may be issued under the 2009 Plan.

If there is any other combination or exchange of shares, merger, consolidation or other distribution (other

than normal cash dividends) of Company assets to stockholders, or other change affecting the shares of common
stock or the stock price of the common stock (other than an event described in the preceding paragraph), the
Committee may, in its discretion:

•

equitably adjust the aggregate number and type of shares of common stock subject to the 2009 Plan,
the terms and conditions of any outstanding awards (including any performance targets or criteria with
respect thereto), and the grant or exercise price per share of outstanding awards;

provide for the termination of any award in exchange for an amount of cash (if any) and/or other
property equal to the amount that would have been attained upon the exercise of such award or
realization of the participant’s rights;

provide for the replacement of any award with other rights or property selected by the Committee in its
sole discretion;

provide that any outstanding award cannot vest, be exercised or become payable after such event;

provide that awards may be exercisable, payable or fully vested as to shares of common stock covered
thereby;

provide that any surviving corporation (or its parent or subsidiary) shall assume awards outstanding
under the 2009 Plan or shall substitute similar awards for those outstanding under the 2009 Plan, with
appropriate adjustment of the number and kind of shares and the prices of such awards; or

• make adjustments (i) in the number and type of shares of common stock (or other securities or

property) subject to outstanding awards or in the number and type of shares of restricted stock or
deferred stock or (ii) to the terms and conditions of (including the grant or exercise price) and the
criteria included in, outstanding rights, options and awards or future rights, options and awards.

Effect of a Change in Control

In the event of a change in control of the Company, an award shall become fully exercisable and all

forfeiture restrictions on such award shall lapse, unless any surviving or acquiring entity assumes the
participant’s outstanding award or substitutes an equivalent award.

Amendment and Termination

The Committee, subject to approval of the Board, may terminate, amend or modify the 2009 Plan at any

time; provided, however, that stockholder approval will be obtained (i) for any amendment to the extent
necessary and desirable to comply with any applicable law, regulation or stock exchange rule, (ii) to increase the
number of shares of common stock available under the 2009 Plan, (iii) to permit options to be granted with a per
share exercise price lower than fair market value on the date of grant, and (iv) to permit the Committee to extend
the exercise period for an option beyond ten years from the date of grant. In addition, no option may be amended
to reduce the per share exercise price of the shares subject to the option below the per share exercise price as of
the date of grant and, except as described in the “Adjustments to Awards” section above or upon a change in
control of the Company, no option may be granted in exchange for, or in connection with, the cancellation or
surrender of an option having a higher per share exercise price.

y
x
o
r
P

In no event may an award be granted pursuant to the 2009 Plan on or after the tenth anniversary of the date

the 2009 Plan was adopted by our Board.

Federal Income Tax Consequences

The U.S. federal income tax consequences of the 2009 Plan under current federal law, which is subject to

change, are summarized in the following discussion of the general tax principles applicable to the 2009 Plan.
This summary is not intended to be exhaustive and, among other considerations, does not describe state, local, or
foreign tax consequences. Tax considerations may vary from locality to locality and depending on individual
circumstances.

Section 409A of the Code. Certain types of awards under the 2009 Plan, including deferred stock and
restricted stock units, may constitute, or provide for, a deferral of compensation subject to Section 409A of the
Code. Unless certain requirements set forth in Section 409A are complied with, holders of such awards may be
taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and
may be subject to an additional 20% penalty tax (and, potentially, certain interest penalties). To the extent
applicable, the 2009 Plan and awards granted under the plan will be structured and interpreted to comply with, or
be exempt from, Section 409A of the Code and the Department of Treasury regulations and other interpretive
guidance that may be issued under Section 409A. To the extent determined necessary or appropriate by the
Committee, the 2009 Plan and applicable award agreements may be amended without award holder consent to
exempt the applicable awards from Section 409A of the Code or to comply with Section 409A.

Non-Qualified Stock Options. For federal income tax purposes, if participants are granted non-qualified
stock options under the 2009 Plan, participants generally will not have taxable income on the grant of the option,
nor will we be entitled to any deduction. Generally, on exercise of non-qualified stock options, participants will
recognize ordinary income, and we will be entitled to a deduction, in an amount equal to the difference between
the option exercise price and the fair market value of the common stock on the date of exercise. The basis that
participants have in shares of common stock, for purposes of determining their gain or loss on subsequent
disposition of such shares of common stock generally, will be the fair market value of the shares of common
stock on the date the participants exercise their options. Any subsequent gain or loss will be generally taxable as
capital gains or losses.

Incentive Stock Options. There is no taxable income to participants when participants are granted an
incentive stock option or when that option is exercised. However, the amount by which the fair market value of

the shares of common stock at the time of exercise exceeds the option price will be an “item of adjustment” for
participants for purposes of the alternative minimum tax. Gain realized by participants on the sale of an incentive
stock option is taxable at capital gains rates, and no tax deduction is available to the Company, unless
participants dispose of the shares of common stock within (i) two years after the date of grant of the option or
(ii) within one year of the date the shares of common stock were transferred to the participant. If the shares of
common stock are sold or otherwise disposed of before the end of the one-year and two-year periods specified
above, the difference between the option exercise price and the fair market value of the shares of common stock
on the date of the option’s exercise (or the date of sale, if less) will be taxed at ordinary income rates, and we will
be entitled to a deduction to the extent that participants must recognize ordinary income. If such a sale or
disposition takes place in the year in which participants exercise their options, the income such participants
recognize upon sale or disposition of the shares of common stock will not be considered income for alternative
minimum tax purposes.

Incentive stock options exercised more than three months after a participant terminates employment, other
than by reason of death or disability, will be taxed as a non-qualified stock option, and the participant will have
been deemed to have received income on the exercise taxable at ordinary income rates. We will be entitled to a
tax deduction equal to the ordinary income, if any, realized by the participant.

Restricted Stock. For federal income tax purposes, the grantee generally will not have taxable income on

the grant of restricted stock, nor will we then be entitled to any deduction, unless the grantee makes a valid
election under Section 83(b) of the Code. However, when restrictions on shares of restricted stock lapse, such
that the shares are no longer subject to a substantial risk of forfeiture, the grantee generally will recognize
ordinary income, and we will be entitled to a corresponding deduction, for an amount equal to the difference
between the fair market value of the shares at the date such restrictions lapse over the purchase price for the
restricted stock.

Stock Appreciation Rights. No taxable income is realized upon the receipt of a SAR, but upon exercise of
the SAR, the fair market value of the shares of common stock received, determined on the date of exercise of the
SAR, or the amount of cash received in lieu of shares, must be treated as compensation taxable as ordinary
income to the grantee in the year of such exercise. We will be entitled to a deduction for compensation paid in
the same amount which the grantee realized as ordinary income.

Performance Shares. The grantee generally will not realize taxable income at the time of the grant of the
performance shares, and we will not be entitled to a deduction at that time. When the award is paid, whether in
cash or common stock, the grantee will have ordinary income, and we will be entitled to a corresponding
deduction.

Performance Stock Units. The grantee generally will not realize taxable income at the time of the grant of

the performance stock units, and we will not be entitled to a deduction at that time. When the award is paid,
whether in cash or common stock, the grantee will have ordinary income, and we will be entitled to a
corresponding deduction.

Dividend Equivalents. The grantee generally will not realize taxable income at the time of the grant of the
dividend equivalents, and we will not be entitled to a deduction at that time. When a dividend equivalent is paid,
the grantee will recognize ordinary income, and we will be entitled to a corresponding deduction.

Stock Payments.

If the grantee receives a stock payment in lieu of a cash payment that would otherwise
have been made, he or she generally will be taxed as if the cash payment has been received, and we will have a
deduction in the same amount.

Deferred Stock. The grantee generally will not have taxable income upon the issuance of the deferred
stock and we will not then be entitled to a deduction. However, when deferred stock vests and is issued to the

grantee, he or she will realize ordinary income and we will be entitled to a deduction in an amount equal to the
difference between the fair market value of the shares at the date of issuance over the purchase price, if any, for
the deferred stock. Deferred stock may be subject to Section 409A of the Code, and the failure of any award of
deferred stock that is subject to Section 409A to comply with Section 409A may result in taxable income to the
grantee upon the grant or vesting of the award. Furthermore, an additional 20% penalty tax may be imposed
pursuant to Section 409A of the Code, and certain interest penalties may apply.

Restricted Stock Units. The grantee generally will not realize taxable income at the time of the grant of the

restricted stock units, and we will not be entitled to a deduction at that time. When an award is paid, whether in
cash or common stock, the grantee will have ordinary income, and we will be entitled to a corresponding
deduction. Restricted stock units may be subject to Section 409A of the Code, and the failure of any restricted
stock unit that is subject to Section 409A to comply with Section 409A may result in taxable income to the
grantee upon vesting (rather than at such time as the award is paid). Furthermore, an additional 20% penalty tax
may be imposed under Section 409A of the Code, and certain interest penalties may apply.

y
x
o
r
P

Section 162(m) of the Code. As described above, in general, under Section 162(m) of the Code, income

tax deductions of publicly-held corporations may be limited to the extent total compensation (including base
salary, annual bonus, stock option exercises and non-qualified benefits) for certain executive officers exceeds
$1.0 million (less the amount of any “excess parachute payments” as defined in Section 280G of the Code) in any
taxable year of the corporation. However, under Section 162(m) of the Code, the deduction limit does not apply
to certain “qualified performance-based compensation.”

In order to qualify for the exemption for qualified performance-based compensation, Section 162(m) of the

Code generally requires that:

• The compensation be paid solely upon account of the attainment of one or more pre-established

objective performance goals;

• The performance goals must be established by a compensation committee comprised of two or more

“outside directors;”

• The material terms of the performance goals must be disclosed to and approved by the stockholders; and

• The compensation committee of “outside directors” must certify that the performance goals have

indeed been met prior to payment.

Pursuant to a special rule under Section 162(m), stock options and stock appreciation rights will satisfy the
“qualified performance-based compensation” exception if (i) the awards are made by a qualifying compensation
committee, (ii) the plan sets the maximum number of shares that can be granted to any person within a specified
period and (iii) the compensation is based solely on an increase in the stock price after the grant date. The 2009
Plan has been designed to permit the Committee to grant stock options and stock appreciation rights which will
qualify as “qualified performance-based compensation.” In addition, performance-based awards are intended to
qualify as “qualified performance-based compensation.”

New Plan Benefits

No awards will be granted pursuant to the 2009 Plan until it is approved by the Company’s stockholders. In

addition, awards are subject to the discretion of the Committee. Therefore, it is not possible to determine the
benefits that will be received in the future by participants in the 2009 Plan or the benefits that would have been
received by such participants if the 2009 Plan had been in effect in the year ended December 31, 2008. See the
Grants of Plan-Based Awards Table for a listing of options and other awards granted to our named executive
officers during year ending December 31, 2008 under the Prior Plan.

Adoption of the 2009 Plan requires approval by the affirmative vote of a majority of the shares present or
represented by proxy at the meeting and entitled to vote. A “majority of votes cast” means that the number of
votes “FOR” the approval of the 2009 Plan must exceed the number of votes “AGAINST” the approval of the
2009 Plan.

The Board of Directors recommends a vote in favor of Proposal Three.
Proxies received by the Company will be voted “FOR” this proposal unless the stockholder specifies
otherwise in the proxy.

APPROVAL OF A ONE-TIME FAIR VALUE STOCK OPTION EXCHANGE PROGRAM FOR
EMPLOYEES OTHER THAN OUR NAMED EXECUTIVE OFFICERS

PROPOSAL FOUR

The Company’s stockholders are being asked to approve a one-time fair value stock option exchange
program, or option exchange, that, if implemented, would permit our eligible employees and employees of our
majority-owned subsidiaries to surrender certain outstanding stock options for cancellation in exchange for a
lesser number of stock options or restricted stock units (“RSUs”) to be granted under the 2009 Plan. Prior to the
commencement of the option exchange, the Board of Directors or Compensation Committee will determine
whether newly issued stock options or RSUs will be exchanged for the cancelled options. If stock options are
issued in the exchange, the options will cover a lesser number of shares of our common stock and have an
exercise price equal to the fair market value of our common stock on the date of the completion of the option
exchange. If RSUs are issued in the option exchange, each RSU will represent an unfunded right to receive one
share of our common stock on one or more specified future dates when the RSU vests.

y
x
o
r
P

The Board of Directors, upon recommendation by the Compensation Committee, authorized the option
exchange on April 21, 2009, subject to stockholder approval. The Company will use exchange ratios in the option
exchange that are intended to result in the aggregate fair value of the newly issued options or RSUs in the option
exchange being equal to or less than the aggregate fair value of the stock options that are surrendered. Only those
stock options that are “underwater” (i.e., those options with a per share exercise price that is greater than the per
share closing price of our common stock as quoted on the NASDAQ Global Select Market as of the trading day
immediately preceding the date the option exchange commences) will be eligible for the option exchange. In certain
limited cases, instead of RSUs or stock options, a small cash payment will be issued in exchange for surrendered
options. Our named executive officers and members of the Board will be excluded from participating in the option
exchange described in this proposal. In addition, options granted within the six-month period immediately prior to
the commencement of the option exchange and options with a remaining term of less than six months immediately
following the completion of the option exchange will not be eligible for exchange.

We believe this option exchange, as designed, is in the best interests of our stockholders and our employees

and positions us well for the future in these uncertain economic times. If approved by stockholders, we believe
the option exchange would enable us to:

• Better align the interests of our employees with the interest of our stockholders;

• Motivate and engage our eligible employees to continue to build stockholder value;

• Reduce our overhang by reducing the number of outstanding stock options; and

• Recapture value from the compensation expense that we record with respect to certain eligible options.

In designing this option exchange, we have taken into account our stockholders’ interests through a focus on

the following exchange principles:

• Named executive officers will be excluded from participating in the option exchange described in this
proposal. All other employees holding eligible grants of stock options will generally be eligible to
participate. The non-employee members of the Board will be excluded from each of the option
exchange programs described in this Proxy.

•

Stock options that have a per share exercise price that is greater than the per share closing price of our
common stock as quoted on the NASDAQ Global Select Market as of the trading day immediately
preceding the date the option exchange commences will be eligible to be exchanged for a smaller
number of stock options or RSUs. However, stock options granted within the six-month period
immediately prior to the commencement of the exchange and options that will expire within the
six-month period immediately following the completion of the exchange will not be eligible.

• The exchange ratios will be determined so that the newly issued RSUs or options granted will have an
aggregate fair value intended to be equal to or less than the aggregate fair value of the surrendered
options.

• None of the new options or RSUs will be vested on the date of grant. The new options or RSUs will not

vest for at least six months after the completion of the option exchange.

• The stock options surrendered in the exchange will be cancelled and will not be eligible to be reissued.

Stockholder approval of the option exchange is required under the NASDAQ listing rules and the terms of

our equity incentive plans.

If our stockholders approve this proposal and Proposal Three of this Proxy Statement with respect to the
2009 Plan, and the Board, Compensation Committee or named executive officers determine to implement the
option exchange, the option exchange would commence within 12 months of its approval by the Company’s
stockholders.

Approval of this proposal requires the affirmative vote of a majority of the shares present or represented by
proxy at the meeting and entitled to vote. A “majority of votes cast” means that the number of votes “FOR” the
approval of this proposal must exceed the number of votes “AGAINST” the approval of this proposal.

OVERVIEW

Like many companies, we have experienced a significant decline in our stock price over the last year in light

of the current global financial and economic crisis. This stock price decline has been caused by, among other
things, the deteriorating global economy and spending environment and the difficulty for our customers to obtain
financing. For example, during 2008 and 2009, our inkjet business was affected by a difficult credit environment
and the global slowdown in advertising and marketing spending. While our diversified business model helps to
cushion the impact of declines in any of our particular product lines, the current economic downturn has
impacted all of our product lines and has affected our stock price considerably. Generally poor economic
conditions have also caused an impairment of the value of some of our long-lived assets, which may have
affected our stock price during the last 12 months. As a result, a considerable number of our employees hold
stock options with exercise prices significantly above the recent market price of our common stock. The market
for key employees remains competitive, notwithstanding the current economic turmoil, making retention of key
employees a significant issue for our success.

While we believe the current economic situation presents us with an opportunity to gain market share for

our industry-leading products and employees who hold significantly underwater options may not think that they
will be likely to participate in any gains provided to stockholders from our efforts to deliver long-term value
through such growth opportunities.

Additionally, in order to contain costs in this challenging economic environment, we have implemented

salary reductions of 5% for most of our employees, if and as permitted by applicable laws, and 10% for senior
management, excluding our named executive officers for whom we have implemented voluntary salary
reductions of 10%-15%, as well as significant headcount reductions and the suspension of our 401(k) Plan
matching contribution. These reductions in salary and headcount and the suspension of our 401(k) Plan matching
contribution have negatively affected employee morale.

We believe that restoring morale and providing effective incentives to our employees is important to our
success. Because of the continued challenging economic environment, our recent stock price decline, and the
uncertain outcome of our current efforts to increase market share for our leading products, we believe our
employees’ significantly underwater stock options are no longer effective as incentives to motivate and retain our
employees. We believe that employees perceive their significantly underwater options as having little or no

value. This option exchange will accomplish our objective of increasing employee morale and providing
effective incentives by replacing underwater options which we believe are perceived by employees as having
little value with options or RSUs which would increase in proportion to any increases in our stock price. In
addition, we believe that the cancellation of options in the exchange will benefit stockholders because although
stock options are not likely to be exercised as long as our stock price is lower than the applicable exercise price,
they will remain on our books with the potential to dilute stockholders’ interests for up to the full term of the
options, while delivering little or no retentive or incentive value.

The objective of our equity incentive programs has been, and continues to be, to link the personal interests

of equity incentive plan participants to those of our stockholders. We believe that, if approved by our
stockholders, the option exchange would be an important component in our efforts to:

y
x
o
r
P

• Better align the interests of our employees with the interests of our stockholders while motivating
eligible employees to continue to build stockholder value and achieve future stock price growth by
exchanging stock options having a per share exercise price that is greater than the per share closing
price of our common stock as quoted on the NASDAQ Global Select Market as of the trading day
immediately prior to the date the option exchange commences for newly issued RSUs with modified
vesting periods, which have a value that moves directly in line with our stock price, or for newly issued
stock options with modified vesting periods. As of April 30, 2009, approximately 100% of stock
options held by our eligible employees had a per share exercise price greater than $9.82, the per share
closing price of our common stock as quoted on the NASDAQ Global Select Market on April 30, 2009.
We believe that these stock options no longer align the interests of our employees with the interests of
our stockholders. In addition, these stock options no longer represent effective incentives to motivate or
help retain our employees. We believe that the option exchange would better align the interests of our
employees with the interests of our stockholders and aid both motivation and retention of those
employees participating in the option exchange.

• Reduce our total number of outstanding stock options, or overhang, since a smaller number of stock

options or a smaller number of RSUs will be issued for the surrendered stock options. The number of
stock options having a per share exercise price that is greater than the closing price of our common
stock as quoted on the NASDAQ Global Select Market as of the trading day immediately preceding the
date the option exchange commences that would be eligible for the option exchange is approximately
3.6 million. Because we will be exchanging a smaller number of RSUs or a smaller number of newly
issued stock options for the options surrendered, our overhang and the potential dilution of
stockholders’ interests provided by these awards will decrease. We believe that after the option
exchange, the overhang resulting from our equity awards, including the newly issued RSUs and
options, would represent an appropriate balance between the objectives of our equity incentive plans
and our stockholders’ interest in minimizing overhang and potential dilution.

• Recapture value from the compensation expense that we record with respect to certain eligible options.
We believe it is not an efficient use of our resources to recognize compensation expense on options that
are not perceived by our employees as providing value. By exchanging options that have little or no
retention or incentive value for newly issued options or RSUs that will provide both retention and
incentive value while not creating any material additional compensation expense (other than expense
that might result from fluctuations in our stock price after the exchange ratios have been set but before
the exchange actually occurs), we will be making efficient use of our resources. If our stock price does
not fluctuate between the establishment of the exchange ratios and the date the exchange actually
occurs, then, as a result of the option exchange, we would expect to recognize a non-cash accounting
charge of approximately $0.9 million over the vesting period of the new options or RSUs for eligible
employees.

As of April 30, 2009 there would be approximately 3.6 million shares of our common stock subject to stock

options that would be eligible for the option exchange, having a weighted average exercise price of $22.24 per

share and a weighted average remaining life of 2.7 years, assuming that the per share closing price of our
common stock as quoted on the NASDAQ Global Select Market as of the trading day immediately preceding the
date the option exchange commences is $9.82.

If our stockholders do not approve the option exchange and the 2009 Plan under Proposal Three of

this Proxy Statement, eligible options will remain outstanding in accordance with their existing terms. We
will continue to recognize compensation expense for these eligible options, even though these options may
have little or no retentive or incentive value.

Summary of Material Terms

The option exchange, if approved by our stockholders, would provide for the following:

• The option exchange will be open to all eligible employees (except where we determine that it is
impermissible to offer the option exchange under local regulations as described below) who are
employed by us or one of our majority-owned subsidiaries as of the commencement of the option
exchange and remain employed by us or one of our majority-owned subsidiaries through the
completion date of the option exchange. While the Board or Compensation Committee will determine
whether options or RSUs will be offered in the option exchange, eligible employees will be permitted
to elect on a grant-by-grant basis which of their eligible options they wish to exchange for the newly
issued options or RSUs.

• Our named executive officers will not be eligible to participate in the option exchange described in this
proposal. The non-employee members of the Board will not be eligible to participate in any of the
option exchange programs described in this Proxy.

•

Stock options granted within the six-month period immediately prior to the commencement date of the
option exchange will not be eligible for exchange.

Stock options which have a remaining term of less than six months immediately following the
completion of the option exchange (based on their terms as of their original grant date) will not be
eligible for exchange.

• The exchange ratios used in the option exchange will be intended to result in the aggregate fair value of
the newly issued options or RSUs in the option exchange being equal to or less than the aggregate fair
value of the stock options that are surrendered. The exchange ratios will be established shortly before
the commencement of the option exchange and will depend on the then-current fair value of the
eligible option (calculated using the Black-Scholes-Merton option pricing model or other generally
accepted valuation model such as the Lattice Valuation model), the fair market value of our common
stock and the original exercise price of the eligible option. The option exchange will not be a
one-for-one exchange. Instead, participating employees will receive a smaller number of newly issued
RSUs or a smaller number of options than the number of shares that are covered by the surrendered
eligible options.

• None of the newly issued RSUs or options in exchange for eligible options will be vested on the date of
grant. The newly issued RSUs or options will vest, subject to the participant’s continued employment,
in equal annual installments for newly issued RSUs and equal monthly installments for newly issued
options, in each case, beginning on the six month anniversary of the completion of the option
exchange. Additional information regarding the vesting of the newly issued RSUs and options are
provided under the heading “Details of the Stock Option Exchange Vesting of Newly Issued RSUs and
Options” below.

y
x
o
r
P

•

In certain limited cases, instead of a small number of newly issued RSUs or options, a cash payment
will be made in exchange for surrendered eligible options. In these limited cases, the cash provided will
have a fair value intended to be equal to or less than approximately 100% of the fair value of the
surrendered options. The Company expects that the aggregate amount of such cash payments will not
exceed $100,000.

• The option exchange will commence, if at all, within 12 months of the date of stockholders approval. If

the option exchange does not commence within 12 months of stockholders approval, we would
consider any future option exchange or similar program to require new stockholder approval before it
can be implemented.

While the terms of the option exchange are expected to be materially similar to the terms described in

this proposal, the Board, Compensation Committee and named executive officers may, in their sole
discretion, change the terms of the option exchange to take into account a change in circumstances, as
described below, and may determine not to implement the option exchange even if stockholder approval of
the option exchange is obtained.

Reasons for the Option Exchange

We believe that to be successful, our employees need to think like stockholders. Consistent with this

philosophy, our equity program continues to be broad-based. This broad-based equity program provides us with a
competitive advantage, particularly in our efforts to hire and retain top talent in technology-related fields.

Due to the significant decline of our stock price during the last year, many of our employees now hold stock

options with exercise prices significantly higher than the current market price of our common stock. For
example, the closing price of our common stock on the NASDAQ Global Select Market on April 30, 2009 was
$9.82, whereas the weighted average exercise price of all outstanding options held by our employees was $21.41.
As of April 30, 2009, approximately 98% of outstanding stock options held by our employees had a per share
exercise price greater than $9.82 and 100% of stock options eligible for exchange had a per share price greater
than $9.82. Although we continue to believe that equity awards are an important component of our employees’
total incentive benefits and provide us with a competitive advantage, we also believe that many of our employees
view their existing options as having little or no value due to the significant difference between the exercise
prices and the current market price of our common stock. The market for key employees remains competitive
notwithstanding the current economic turmoil. As a result, for many employees, we believe that these underwater
options are ineffective at providing the incentives that the Board and Compensation Committee believe are
necessary to motivate and retain our employees.

Alternatives Considered

When considering how best to continue to provide incentives to and reward our employees who hold

options that are underwater, we considered the following alternatives:

•

Increase cash compensation. To replace equity incentives, we considered whether we could
substantially increase base and target bonus cash compensation. However, significant increases in cash
compensation would substantially increase our cash compensation expenses and reduce our cash flow
from operations, which could adversely affect our business and operating results. In addition, these
increases would not reduce our overhang and would not align the interests of our employees with those
of our stockholders. Further, in some non-U.S. jurisdictions, cash compensation is treated as a different
type of benefit than equity awards and often has less favorable tax treatment than equity awards, so the
long-term incentive and retention value would be diminished. Moreover, in order to contain costs in
this challenging economic environment, we have implemented salary reductions of 5% for most of our
employees if and as permitted by applicable laws, and 10% for senior management, excluding our
named executive officers for whom we implemented voluntary salary reductions of 10%-15%, as well
as significant headcount reductions and the suspension of our 401(k) Plan matching contribution.

• Grant additional equity awards. We also considered special grants of additional stock options at
current market prices or RSUs. However, these additional grants would substantially increase our
overhang and dilute the interests of our stockholders. In addition, the number of shares available for
issuance under our Prior Plan is limited.

• Exchange options for cash. We also considered implementing a program to exchange underwater

options for cash payments. However, an exchange program where options are generally exchanged for
cash would substantially increase our compensation expenses and reduce our cash flow from
operations, which could adversely affect our business and operating results. In addition, we do not
believe that such a program would have significant long-term retention value. However, in certain
limited cases where we have determined that offering new RSUs or options in exchange for
surrendered options would provide minimal retentive value, would be overly burdensome to administer
or would not provide a meaningful benefit to holders of eligible options, we will provide for a cash
payment in exchange for their surrendered options.

The Option Exchange

After weighing each of these alternatives, subject to the exceptions described in this proposal, we have

decided to provide eligible employees the opportunity to exchange options for newly issued RSUs or options,
pending stockholder approval. We have determined that a program under which our employees generally could
exchange stock options having a per share exercise price that is greater than the per share closing price of our
common stock as quoted on the NASDAQ Global Select Market as of the trading day immediately preceding the
date the option exchange commences for a smaller number of RSUs or a smaller number of newly issued options
was the most attractive alternative for a number of reasons, including the following:

•

The option exchange offers a reasonable, balanced and meaningful incentive for our eligible
employees. Participating employees would surrender eligible options having a per share exercise
price greater than the per share closing price of our common stock as quoted on the NASDAQ Global
Select Market as of the trading day immediately preceding the date the option exchange commences for
a smaller number of newly issued options or RSUs. None of the newly issued options or RSUs will vest
until at least six months after the completion of the option exchange. We believe that the lower number
of newly issued options or RSUs issued represents a reasonable and balanced option exchange with the
potential for a significant positive impact on employee retention, motivation and performance.
Additionally, the value of the RSUs directly correlates with movements in the market price of our
common stock, and options with positive movements in the market price of our common stock, over
time, thereby aligning employee and stockholder interests.

The exchange ratios will be calculated to minimize accounting costs. We will calculate the exchange
ratios in a manner intended to result in the aggregate fair value, for accounting purposes, of the newly
issued RSUs or options granted in the option exchange being equal to or less than the aggregate fair
value of the stock options that are surrendered.

The option exchange will reduce our equity award overhang. Not only do the options having a per
share exercise price that is greater than the per share closing price of our common stock as quoted on
the NASDAQ Global Select Market as of the trading day immediately preceding the date the option
exchange commences have little or no retention value, they cannot be removed from our equity award
overhang until they are exercised, expire or the employee who holds them leaves our employment. The
option exchange will reduce our overhang while eliminating the ineffective options that are currently
outstanding. Because a lesser number of shares will be subject to options or RSUs issued in exchange
for eligible options, the number of shares of stock subject to all outstanding equity awards will be
reduced, thereby reducing our overhang. Based on the assumptions described below, if all eligible
options are exchanged, options to purchase approximately 3.6 million shares would be surrendered and
cancelled, while approximately 1.1 million shares would be subject to options issued in the option
exchange, resulting in a net reduction in the equity award overhang by approximately 2.5 million

shares. If instead the Board or Compensation Committee chooses to issue RSUs in the option
exchange, approximately 0.3 million RSUs would be issued, resulting in a net reduction to the equity
award overhang by approximately 3.3 million shares. All eligible options that are not exchanged will
remain outstanding and in effect in accordance with their existing terms.

• Our named executive officers and non-employee members of the Board will not be eligible to

participate in the option exchange described in this proposal. Although our named executive officers
also hold options that are underwater, these individuals are not eligible to participate in the option
exchange described in this proposal because we believe that their compensation should remain at
greater risk based on our stock price. Accordingly, we have concurrently proposed a separate exchange
program for named executive officers, under which no newly issued option or RSU of a named
executive officer would vest until such time as the average price of our common stock as quoted on the
NASDAQ Global Select Market equals or exceeds for 20 consecutive trading days 225% of the closing
price of our common stock as quoted on the NASDAQ Global Select Market on the date the option
exchange for named executive officers is completed, as described more fully in Proposal Five. While
our non-employee members of the Board also hold options that are underwater, they will not be eligible
to participate in any of the option exchange programs described in this Proxy.

y
x
o
r
P

DETAILS OF THE OPTION EXCHANGE

Implementing the Option Exchange

We have not commenced the option exchange and will not do so unless our stockholders approve the option
exchange and approve the 2009 Plan under Proposal Three of this Proxy Statement. Upon the recommendation of
the Compensation Committee, the Board authorized the option exchange on April 21, 2009, subject to
stockholder approval. If this proposal is approved, the offer to surrender eligible options in exchange for newly
issued RSUs or options, as the Board or Compensation Committee may determine, would commence, if at all,
within 12 months of the date of stockholders approval of this proposal.

If stockholders approve this proposal and Proposal Three and the Board, the Compensation Committee or

named executive officers decide to commence the option exchange, eligible employees will be offered the
opportunity to participate in the option exchange pursuant to a written offer that will be distributed to all eligible
employees. Eligible employees will be given at least 20 business days in which to accept the offer of newly
issued RSUs or options in exchange for the surrender of their eligible options. The surrendered options will be
cancelled on the date the option exchange is completed. The newly issued RSUs or options will be issued under
the 2009 Plan on the date of the option exchange is completed. In those limited cases where cash payments will
be made in exchange for surrendered options, such payments also will be made on the date of the cancellation of
the surrendered options. The shares of our common stock subject to surrendered options will not be available for
future issuance under our equity incentive plans once the surrendered options are cancelled.

Prior to commencement of the option exchange, we will file the offer to exchange with the SEC as part of a
tender offer statement on Schedule TO. Eligible employees, as well as stockholders and members of the public,
will be able to review the offer to exchange and other related documents filed by us with the SEC free of charge
on the SEC’s website at www.sec.gov.

Eligibility

If implemented, the option exchange will be open to all of our employees, worldwide, including any
employees of our majority-owned subsidiaries, who hold options with a per share exercise price higher than the
per share closing price of our common stock as quoted on the NASDAQ Global Select Market as of the trading
day that immediately precedes the date the option exchange commences, except where we determine that it is
impermissible to offer the option exchange under local regulations. The option exchange described in this

proposal will not be available to our named executive officers. As of April 30, 2009, we estimate that
approximately 1,392 of our employees would be eligible to participate in the option exchange. The program also
will not be available to any former employees. None of the non-employee members of the Board will be eligible
to participate in any of the exchange programs described in this Proxy.

An employee who tenders his or her options for exchange must also have been continuously employed by us
or one of our majority-owned subsidiaries, and be an eligible employee at the completion of the option exchange
in order to receive the newly issued RSUs or options. If an option holder is no longer an employee with us or one
of our majority-owned subsidiaries for any reason, including layoff, termination, voluntary resignation, death or
disability, on the date that the option exchange is commenced, that option holder cannot participate in the option
exchange. If an option holder is no longer an employee with us or one of our majority-owned subsidiaries for any
reason on the date the option exchange is completed, even if he or she had elected to participate and had tendered
his or her options for exchange, such employee’s tender will automatically be deemed withdrawn and he or she
will not participate in the option exchange. He or she will retain his or her outstanding options in accordance with
their original terms and conditions, and he or she may exercise them during a limited period of time following
termination of employment in accordance with their terms and to the extent that they are vested. A vote by an
employee in favor of this proposal at the Annual Meeting does not constitute an election to participate in the
option exchange.

Of the outstanding options held by eligible employees as of April 30, 2009, the maximum number of shares
of common stock underlying options which could be surrendered for exchange is 3.6 million, and the maximum
number of shares of common stock which would be subject to awards granted under the proposed option
exchange, using estimated exchange ratios, would be 1.1 million in an option-for-option exchange or 0.3 million
in an option-for-RSU exchange. The maximum amount of cash that would be paid under the proposed option
exchange, using estimated exchange ratios, is expected not to exceed $100,000.

Exchange Ratios

Exchange ratios for the option exchange (that is, how many options an employee must surrender in order to

receive one new RSU or option) will be determined shortly prior to the commencement of the option exchange
using the Black-Scholes-Merton option pricing model or other generally accepted valuation model such as the
Lattice Valuation model. The valuation model is utilized to adopt exchange ratios that result in the aggregate fair
value of the newly issued options or RSUs provided being equal to or less than the aggregate fair value of the
stock options that are surrendered, and to avoid the stockholder dilution that occurs when all options are
exchanged on a one-for-one basis for RSUs or options. New RSU or option grants calculated according to the
exchange ratios will be rounded down to the nearest whole share on a grant-by-grant basis. Fractional RSUs will
not be issued, and new option grants will not be subject to fractional shares.

For example, if a surrendered option has a fair value of $100 on the date the option exchange commences,

the closing price for a share of our common stock on such date was $10.00 and the grant date fair value of an
option granted on such date was $2.50 per share, then 10 newly issued RSUs or options to purchase 40 shares of
our common stock, each of which would have a fair value of $100, would be granted to the eligible employee if
he or she elected to participate in the exchange.

Election to Participate

Participation in the option exchange will be voluntary. Under the option exchange, eligible employees may

make an election to surrender eligible stock options that have a per share exercise price that is greater than the
per share closing price of our common stock as quoted on the NASDAQ Global Select Market as of the trading
day immediately preceding the date the option exchange commences in exchange for newly issued RSUs or
options in accordance with the actual exchange ratios, which will be determined at the time the option exchange
commences.

Vesting of Newly Issued RSUs and Options

Newly issued RSUs and options issued in the option exchange will be unvested on their date of grant
regardless of whether the surrendered option, or any portion of the surrendered option, is vested. Instead, newly
issued RSUs and options issued in exchange for surrendered options that would have vested on or prior to the six
month anniversary of the completion of the option exchange (such six month anniversary, the “New Vesting Start
Date”), will vest on the New Vesting Start Date. Newly issued options issued in exchange for surrendered
options that would have been unvested as of the New Vesting Start Date will vest pursuant to the original vesting
schedule of such unvested surrendered options. Newly issued RSUs issued in exchange for surrendered options
that would have been unvested as of the New Vesting Start Date will vest pursuant to the original vesting
schedule of such surrendered options, except that the RSUs will vest in annual installments on each anniversary
of the New Vesting Start Date, with each annual installment consisting of that number of RSUs equal to the
number of shares subject to the surrendered option that would have vested, as adjusted in accordance with the
exchange ratios, in the twelve month period ending on such anniversary.

y
x
o
r
P

For example, if an eligible option were granted on July 1, 2007 and scheduled to vest with respect to 25% of
the shares subject to the eligible option on the first anniversary of the date of grant, with the remainder vesting as
to 2.5% of the shares over the subsequent 30 months, then the eligible option would have vested as to 55% of the
shares as of July 1, 2009 and will continue to vest as to 2.5% of the shares each month thereafter such that it will
be 70% vested on January 1, 2010 and fully vested on January 1, 2011. Assuming the option exchange is
completed and the eligible option is exchanged for a new option on July 1, 2009, then the Company will issue a
new option that will not begin vesting until the New Vesting Start Date, or January 1, 2010. On January 1, 2010,
the replacement option will vest as to 70% of the shares subject to the surrendered options, as adjusted in
accordance with the exchange ratios. Each month thereafter, an additional 2.5% of the shares subject to the
surrendered option, as adjusted in accordance with the exchange ratios, will vest until the new option is fully
vested on January 1, 2011.

Alternatively, if the surrendered option were exchanged for new RSUs on July 1, 2009, the hypothetical date
of completion of the option exchange and date of issuance of the new RSUs, then the new RSUs would vest with
respect to 70% of the RSUs that would have been subject to the original grant (after giving effect to the exchange
ratios) on the New Vesting Start Date, or January 1, 2010. Thereafter, the remaining 30% of the RSUs that would
have been subject to the original grant (after giving effect to the exchange ratios) would vest on January 1, 2011
(the first anniversary of the New Vesting Start Date).

Newly issued RSUs and options will only vest if the award holder remains an employee with us or one of

our majority-owned subsidiaries. Any portion of the newly issued RSUs or options that is not vested at
termination of employment will be forfeited. As described above, the newly issued RSUs and options will be
completely unvested on the date of grant, regardless of whether the surrendered options were partially or
completely vested.

Term and Conditions of Newly Issued RSUs and Options

The terms and conditions of the newly issued RSUs and options will be governed by the terms and
conditions of the 2009 Plan, and the RSU agreement or option agreement entered into thereunder. Each newly
issued option granted will retain the expiration date of the surrendered option it replaces.

Cash Payments

In certain limited cases where we have determined that offering newly issued RSUs or options would
provide minimal retentive value, would be overly burdensome to implement or administer or would not provide a
meaningful benefit to holders of eligible options, we will provide for a cash payment in exchange for surrendered
options. The amount of the cash payment will be calculated similar to the exchange ratios described above and in

a manner intended to provide those receiving cash payments with approximately 100% of the fair value of their
surrendered options, less any taxes and social insurance contributions due on the payments. The cash payments
will not be subject to any vesting schedule and will be made on the date the option exchange is completed. We
expect the amount of these cash payments will not exceed $100,000, assuming all eligible options are exchanged.

U.S. Federal Income Tax Consequences

The U.S. federal income tax consequences of the option exchange under current federal law, which is

subject to change, are summarized in the following discussion of the general tax principles applicable to the
option exchange. This summary is not intended to be exhaustive and, among other considerations, does not
describe state, local, or foreign tax consequences. Tax considerations may vary from locality to locality and
depending on individual circumstances.

The option exchange should be treated as a non-taxable exchange for U.S. federal income tax purposes, and

we and our participating employees should recognize no income for U.S. federal income tax purposes upon the
grant of newly issued options or the issuance of the new RSUs. Recipients of cash payments will recognize
ordinary income for U.S. federal income tax purposes on the date the cash payments are made to them, and the
payments will be subject to applicable tax withholdings. The tax consequences of the option exchange in foreign
jurisdictions will depend on applicable foreign tax rules and regulations but will be fully disclosed to participants
subject to the tax laws of foreign jurisdictions as part of the offer to exchange options.

Accounting Impact

The Company believes that the accounting benefit of the option exchange is that it will not result in the
Company incurring significant additional compensation expenses. Based on this objective, the aggregate fair
value of the newly issued RSUs or options to each employee in exchange for surrendered stock options,
measured as of the date the option exchange is completed, which is the date such newly issued RSUs or options
will be granted (and the amount of any cash payments made for eligible options) is intended to be equal to or less
than the aggregate fair value of the surrendered options (other than compensation expense that might result from
fluctuations in stock price after the exchange ratios have been set but before the exchange actually occurs). The
unamortized compensation expense from the surrendered options and incremental compensation expense, if any,
associated with the newly issued RSUs or options issued under the option exchange will be recognized over the
service period of the newly issued RSUs or options. If any portion of the newly issued RSUs or options issued is
forfeited due to termination of employment, the compensation cost for the forfeited portion of the newly issued
RSUs or options will not be recognized. Assuming the price of our stock does not materially fluctuate between
the establishment of the exchange ratios and the date the exchange actually occurs, then, as a result of the option
exchange, we would expect to recognize a non-cash accounting charge of approximately $0.9 million over the
vesting period of the newly issued RSUs or options. We will immediately recognize the remaining stock
compensation expense associated with any cash payments made in exchange for surrendered options.

Potential Modification to Terms to Comply with Governmental Requirements

The terms of the option exchange will be described in a tender offer document that will be filed with the

SEC. Although we do not anticipate that the SEC would require us to modify the terms materially, it is possible
that we will need to alter the terms of the option exchange to comply with potential SEC comments. In addition,
it is currently our intention to make the program available to our eligible employees, including eligible
employees of our majority-owned subsidiaries who are located outside of the United States, where permitted by
local law and where we determine it is permissible to do so. It is possible that we will make modifications to the
terms offered to employees in countries outside the United States to comply with local requirements, or for tax or
accounting reasons. The Compensation Committee will retain the discretion to make any such necessary or
desirable changes to the terms of the option exchange for purposes of complying with comments from the SEC or
optimizing the U.S. federal or foreign tax consequences.

Benefits of the Option Exchange to Eligible Employees

Because the decision whether to participate in the option exchange is completely voluntary, we are not able

to predict who will participate, how many options any particular group of employees will elect to exchange, or
the number of newly issued RSUs or options that we may grant. As noted above, however, our named executive
officers and members of the Board are not eligible to participate in the option exchange described in this
proposal. The option exchange also will not be available to any former employees of us or our majority-owned
subsidiaries.

Effect on Stockholders

The option exchange was designed to provide renewed incentives and motivate the eligible employees to
continue to create stockholder value and reduce the number of shares currently subject to outstanding options,
thereby avoiding the dilution in ownership that normally results from supplemental grants of new stock options
or other awards. We are unable to predict the precise impact of the option exchange on our stockholders because
we cannot predict which or how many employees will elect to participate in the option exchange, and which or
how many eligible options such employees will elect to exchange. Please see the “Details of the Option
Exchange—Eligibility” section above for the approximate reduction in the number of shares underlying options
outstanding assuming that 100% of eligible options are exchanged and new awards are issued in accordance with
exchange ratios.

y
x
o
r
P

VOTE REQUIRED

The Board of Directors recommends a vote in favor of Proposal Four.
Proxies received by the Company will be voted “FOR” this proposal unless the stockholder specifies
otherwise in the proxy.

PROPOSAL FIVE

APPROVAL OF A ONE-TIME FAIR VALUE STOCK OPTION EXCHANGE PROGRAM
FOR OUR NAMED EXECUTIVE OFFICERS,
EXCHANGING TIME-BASED STOCK OPTIONS FOR PERFORMANCE-BASED AWARDS

The Company’s stockholders are being asked to approve a one-time fair value stock option exchange
program for our named executive officers, or NEOs, exchanging time-based stock options for performance-based
awards. If implemented, this one-time fair value stock option exchange program for NEOs, or NEO option
exchange, would permit our NEOs to surrender certain outstanding time-based vesting stock options for
cancellation in exchange for a lesser number of stock options or RSUs with performance-based vesting to be
granted under the 2009 Plan. Prior to the commencement of the NEO option exchange, the Board of Directors or
Compensation Committee will determine whether newly issued stock options or RSUs will be granted in
exchange for the cancelled options. If stock options are issued in the exchange, the options will cover a lesser
number of shares of our common stock and have an exercise price equal to the fair market value of our common
stock on the date of the completion of the option exchange. If RSUs are issued in the option exchange, each RSU
will represent an unfunded right to receive one share of our common stock on one or more specified future dates
when the RSU vests. The newly issued options or RSUs for the NEO option exchange will not vest, however,
unless the average price of our common stock as quoted on the NASDAQ Global Select Market equals or
exceeds for 20 consecutive trading days 225% of the closing price of our common stock on the date the NEO
option exchange is completed.

The Board of Directors, upon recommendation by our Compensation Committee, authorized the NEO

option exchange on April 21, 2009, subject to stockholder approval. We will use exchange ratios in the NEO
option exchange that are intended to result in the aggregate fair value of the newly issued options or RSUs issued
to the NEOs being equal to or less than the aggregate fair value of the stock options that are surrendered. Only
stock options with a per share exercise price that is greater than the per share closing price of our common stock
as quoted on the NASDAQ Global Select Market as of the trading day immediately preceding the date the NEO
option exchange commences will be eligible for the NEO option exchange. Only our NEOs will participate in the
NEO option exchange. In addition, options granted within the six-month period immediately prior to the
commencement of the NEO option exchange and options with a remaining term of less than six months
immediately following the completion of the NEO option exchange will not be eligible for exchange.

We believe the NEO option exchange, as designed, is in the best interests of our stockholders and our NEOs

and positions us well for the future in these uncertain economic times. If approved by stockholders, we believe
the NEO option exchange would enable us to:

• Better align the interests of our NEOs with the interests of our stockholders;

• Motivate and engage our NEOs to continue to build stockholder value;

• Reduce our overhang by reducing the number of outstanding stock options; and

• Recapture value from the compensation expense that we record with respect to certain eligible options.

In designing the NEO option exchange as a complement to the option exchange described in Proposal Four,

we have taken into account our stockholders’ interests through a focus on the following exchange principles:

• The newly issued options or RSUs issued to the NEOs under the NEO option exchange will not vest

unless the average price of our common stock as quoted on the NASDAQ Global Select Market equals
or exceeds for 20 consecutive trading days 225% of the closing price of our common stock on the date
the NEO option exchange is completed.

•

Stock options with a per share exercise price that is greater than the per share closing price of our
common stock as quoted on the NASDAQ Global Select Market as of the trading day immediately

preceding the date the NEO option exchange commences will be eligible to be exchanged for a grant of
a smaller number of newly issued RSUs or options to purchase a smaller number of shares of common
stock. However, stock options granted within the six-month period immediately prior to the
commencement of the exchange and stock options that will expire within the six-month period
immediately following the completion of the exchange will not be eligible.

• The exchange ratios will be determined so that the newly issued RSUs or options issued to the NEOs
will have an aggregate fair value intended to be equal to or less than the aggregate fair value of the
NEOs’ surrendered options.

• The stock options surrendered in the exchange will be cancelled and will not be eligible to be reissued.

y
x
o
r
P

Stockholder approval of the NEO option exchange is required under the NASDAQ listing rules and the

terms of our equity incentive plans.

If our stockholders approve this proposal and the 2009 Plan under Proposal Three of this Proxy Statement,
and the Board or Compensation Committee determines to implement the NEO option exchange, the NEO option
exchange would commence within 12 months of the date of the stockholders approval.

The Company’s Board of Directors unanimously recommends a vote “FOR” the approval of the NEO
option exchange.

OVERVIEW

Like many companies, we have experienced a significant decline in our stock price over the last year in light

of the current global financial and economic crisis. This stock price decline has been caused by, among other
things, the deteriorating global economy and spending environment and the difficulty for our customers to obtain
financing. For example, during 2008 and 2009, our inkjet business was affected by a difficult credit environment
and the global slowdown in advertising and marketing spending. While our diversified business model helps to
cushion the impact of declines in any of our particular product lines, the current economic downturn has
impacted all of our product lines and has affected our stock price considerably. Generally poor economic
conditions have also caused an impairment of the value of some of our long-lived assets, which may have
affected our stock price during the last twelve months. As a result, our NEOs hold stock options with exercise
prices significantly above the recent market price of our common stock. The market for talented executive
officers remains competitive, notwithstanding the current economic turmoil.

Additionally, in order to contain costs in this challenging economic environment, we have implemented
voluntary salary reductions of 10-15% for our NEOs that were approved and accepted by the Compensation
Committee. The Board believes that these salary reductions combined with how significantly underwater some of
the options held by our NEOs are, could reduce the incentives provided to our NEOs and increase the risk that
our NEOs would seek other employment opportunities.

Maintaining high morale and effective incentives for all of our employees, but particularly our senior
management, is important to the success of the Company. Because of the continued challenging economic
environment and our recent stock price decline, we believe that the significantly underwater stock options held
by our NEOs are no longer effective as incentives to motivate and retain them. This NEO option exchange will
accomplish our objective of increasing the incentives provided to our NEOs and their morale by replacing our
NEOs’ underwater options with options that reflect the current trading range of our common stock. In addition,
although these stock options are not likely to be exercised as long as our stock price is lower than the applicable

exercise price, they will remain on our books with the potential to dilute stockholders’ interests for up to the full
term of the options, while delivering little or no retentive or incentive value, unless they are surrendered or
cancelled. Because the newly issued RSUs or options granted to our NEOs will not vest unless the average price
of our common stock as quoted on the NASDAQ Global Select Market equals or exceeds for 20 consecutive
trading days 225% of the closing price of our common stock on the date the NEO option exchange is completed,
our NEOs’ compensation through this NEO option exchange will be closely aligned with the success of our
company and will remain at significantly greater risk than compensation received by our employees who are not
NEOs through the option exchange described in Proposal Four of this Proxy Statement.

The objective of our equity incentive programs has been, and continues to be, to link the personal interests

of equity incentive plan participants to those of our stockholders. We believe that, if approved by our
stockholders, the NEO option exchange would be an important component in our efforts to:

• Better align the interests of our NEOs with the interests of our stockholders while motivating our NEOs

to continue to build stockholder value and achieve future stock price growth by exchanging stock
options having a per share exercise price that is greater than the per share closing price of our common
stock as quoted on the NASDAQ Global Select Market as of the trading day immediately preceding the
date the NEO option exchange commences for newly issued RSUs or stock options that will not vest
without significant stock price appreciation. As of April 30, 2009, approximately 100% of stock
options held by our NEOs have a per share exercise price equal to or greater than $9.82, the per share
closing price of our common stock as quoted on the NASDAQ Global Select Market on April 30, 2009.
We believe that these stock options no longer align the interests of our NEOs with the interests of our
stockholders. In addition, these stock options no longer represent effective incentives to motivate or
help retain our NEOs. We believe that the NEO option exchange would better align the interests of our
NEOs with the interests of our stockholders and aid both motivation and retention of those NEOs
participating in the NEO option exchange.

• Reduce our total number of outstanding stock options, or overhang, since a smaller number of RSUs or
a smaller number of stock options will be issued for the surrendered stock options. The number of
stock options that would be eligible for the NEO option exchange is approximately 1.1 million.
Because we will be exchanging a smaller number of newly issued RSUs or a smaller number of new
stock options for the options surrendered, our overhang and the potential dilution of stockholders’
interests provided by these stock options will decrease. We believe that after the NEO option exchange,
the overhang resulting from our equity awards, including the newly issued RSUs or options, would
represent an appropriate balance between the objectives of our equity incentive plans and our
stockholders’ interest in minimizing overhang and potential dilution.

As of April 30, 2009 there would be approximately 1.1 million shares of our common stock subject to stock
options that would be eligible for the NEO option exchange, having a weighted average exercise price of $16.39
per share and a weighted average remaining life of 4.6 years, assuming that the per share closing price of our
common stock as quoted on the NASDAQ Global Select Market as of the trading day immediately preceding the
date the option exchange commences is $9.82.

If our stockholders do not approve the NEO option exchange and the 2009 Plan under Proposal Three

of this Proxy Statement, eligible options will remain outstanding in accordance with their existing terms.

We will continue to recognize compensation expense for these eligible options, even though these options
may have little or no retentive or incentive value.

Summary of Material Terms

The NEO option exchange, if approved by our stockholders, would provide for the following:

• The NEO option exchange will be open to all employees who are NEOs as of the commencement of

the NEO option exchange and remain employed by us through the completion date of the NEO option
exchange. While the Board or Compensation Committee will determine whether options or RSUs will
be offered in the NEO option exchange, NEOs will be permitted to elect which of their eligible options
they wish to exchange for newly issued RSUs or options on a grant-by-grant basis.

y
x
o
r
P

• Our members of the Board who are not NEOs will not be eligible to participate in the NEO option

exchange.

•

Stock options granted within the six-month period immediately prior to the commencement date of the
NEO option exchange will not be eligible for exchange.

Stock options which have a remaining term of less than six months immediately following the
completion of the NEO option exchange (based on their terms as of their original grant date) will not
be eligible for exchange.

• The exchange ratios used in the NEO option exchange will be intended to result in the aggregate fair

value of the newly issued options or RSUs granted to the NEOs being equal to or less than the
aggregate fair value of the stock options that are surrendered. The exchange ratios will be established
shortly before the commencement of the NEO option exchange and will depend on the then-current fair
value of the eligible option (calculated using the Black-Scholes-Merton option pricing model or other
generally accepted valuation model such as the Lattice Valuation model), the fair market value of our
common stock and the original exercise price of the eligible option. The NEO option exchange will not
be a one-for-one exchange. Instead, participating NEOs will receive a smaller number of newly issued
options or a smaller number of RSUs than the number of shares that are covered by the surrendered
eligible options.

• None of the newly issued RSUs or options granted in exchange for eligible options will be vested on
the date of grant. The newly issued RSUs or options will not vest unless the average price of our
common stock as quoted on the NASDAQ Global Select Market equals or exceeds for 20 consecutive
trading days 225% of the closing price of our common stock on the date the NEO option exchange is
completed. If the average price of our common stock as quoted on the NASDAQ Global Select Market
equals or exceeds for 20 consecutive trading days 225% of the closing price of our common stock on
the date the NEO option exchange is completed, then the newly issued RSUs or options will
immediately vest in full.

• The NEO option exchange will commence, if at all, within 12 months of the date of stockholders

approval. If the NEO option exchange does not commence within 12 months of stockholders approval,
we would consider any future option exchange or similar program to require new stockholder approval
before it can be implemented.

While the terms of the NEO option exchange are expected to be materially similar to the terms
described in this proposal, the Board or Compensation Committee may, in its sole discretion, change the
terms of the NEO option exchange to take into account a change in circumstances, as described below, and
may determine not to implement the NEO option exchange even if stockholder approval of the NEO option
exchange is obtained.

Reasons for the NEO Option Exchange

Due to the significant decline of our stock price during the last year, our NEOs now hold stock options with
exercise prices significantly higher than the current market price of our common stock. For example, the closing
price of our common stock on the NASDAQ Global Select Market on April 30, 2009 was $9.82, whereas the
weighted average exercise price of all outstanding options held by our NEOs was $16.39. As of April 30, 2009,
approximately 100% of outstanding stock options held by our NEOs have per share exercise prices greater than
the per share closing price of our common stock as quoted on the NASDAQ Global Select Market on April 30,
2009. Although we continue to believe that equity awards are an important component of our NEOs’ total
incentive benefits and provide us with a competitive advantage, we also believe that our NEOs view their
existing options as having little or no value due to the significant difference between the exercise prices and the
current market price of our common stock. The market for executive officers remains competitive
notwithstanding the current economic turmoil. As a result, for our NEOs, we believe that these underwater
options are ineffective at providing the incentives that the Board and Compensation Committee believe are
necessary to motivate and retain our NEOs.

Alternatives Considered

When considering how best to continue to provide incentives to and reward our NEOs in light of the options

that they hold that are underwater, we considered the following alternatives:

•

• Exchange options for cash. We also considered implementing a program to exchange underwater

The NEO Option Exchange

After weighing each of these alternatives, subject to the exceptions described in this proposal, we have
decided to provide our NEOs the opportunity to exchange underwater options for newly issued RSUs or options.
We have determined that a program under which our NEOs generally could exchange stock options having a per
share exercise price greater than the per share closing price of our common stock as quoted on the NASDAQ
Global Select Market as of the trading day immediately preceding the date the NEO option exchange commences
for a smaller number of new RSUs or a smaller number of new options was the most attractive alternative for a
number of reasons, including the following:

•

The NEO option exchange offers a reasonable, balanced and meaningful incentive for our
NEOs. Participating NEOs will surrender eligible options having a per share exercise price greater
than the per share closing price of our common stock as quoted on the NASDAQ Global Select

y
x
o
r
P

•

Market as of the trading day immediately preceding the date the NEO option exchange commences
for newly issued options covering fewer shares with a per share exercise price equal to the closing
price of our common stock on the date of the completion of the NEO option exchange and that will
vest with respect to all of the shares subject to the options when and if the average price of our
common stock as quoted on the NASDAQ Global Select Market equals or exceeds for 20
consecutive trading days 225% of the closing price of our common stock on the date the NEO option
exchange is completed.

The vesting for new grants received by NEOs under this NEO option exchange will place their
compensation at significantly greater risk than the newly issued awards received by employees who are
not NEOs if the option exchange described in Proposal Four of this Proxy Statement is approved by
our stockholders. We believe that the compensation of NEOs should remain at significantly greater
risk based on our stock price. Accordingly, each newly issued RSU or option granted under the NEO
option exchange will not vest unless the average price of our common stock as quoted on the
NASDAQ Global Select Market equals or exceeds for 20 consecutive trading days 225% of the closing
price of our common stock on the date the NEO option exchange is completed.

The exchange ratio will be calculated to minimize accounting costs. We will calculate the exchange
ratios in a manner intended to result in an aggregate fair value, for accounting purposes, of the newly
issued RSUs or options that will be equal to or less than the aggregate fair value of the eligible options
that are exchanged, which we believe will have no significant adverse impact on our reported earnings.

The NEO option exchange will reduce our equity award overhang. Not only do the options having a
per share exercise price that is greater than the per share closing price of our common stock as quoted
on the NASDAQ Global Select Market as of the trading day immediately preceding the date the NEO
option exchange commences have little or no retention value, they cannot be removed from our equity
award overhang until they are exercised, expire or the NEO who holds them leaves our employment.
The NEO option exchange will reduce our overhang while eliminating the ineffective options that are
currently outstanding. Because a lesser number of new RSUs will be granted or a lesser number of
shares will be subject to new options granted in exchange for eligible options, the number of shares of
stock subject to all outstanding equity awards will be reduced, thereby reducing our overhang. Based
on the assumptions described below, if all eligible options are exchanged, options to purchase
approximately 1.1 million shares would be surrendered and cancelled, while approximately 0.7 million
shares would be subject to options granted in the NEO option exchange, resulting in a net reduction in
the equity award overhang by approximately 0.4 million shares. If instead the Board or Compensation
Committee chooses to grant RSUs in the NEO option exchange, approximately 0.2 million RSUs
would be granted, resulting in a net reduction to the equity award overhang by approximately
0.9 million shares. All eligible options that are not exchanged will remain outstanding and in effect in
accordance with their existing terms.

DETAILS OF THE NEO OPTION EXCHANGE

Implementing the NEO Option Exchange

We have not commenced the NEO option exchange and will not do so unless our stockholders approve the

NEO option exchange and the 2009 Plan under Proposal Three of this Proxy Statement. The Board authorized the
NEO option exchange on April 21, 2009, subject to stockholder approval. If this proposal is approved, the offer
to surrender eligible options in exchange for newly issued RSUs or options, as the Board or Compensation
Committee may determine, would commence, if at all, within 12 months of the date of stockholders approval of
this proposal.

If stockholders approve this proposal and Proposal Three and the Board or Compensation Committee decide

to commence the NEO option exchange, NEOs will be offered the opportunity to participate in the NEO option
exchange pursuant to a written offer that will be distributed to the NEOs. NEOs will be given at least 20 business

days in which to accept the offer of newly issued RSUs or options in exchange for the surrender of their eligible
options. The surrendered options will be cancelled on the date the NEO option exchange is completed. The newly
issued RSUs or options will be granted under the 2009 Plan on the date the NEO option exchange is completed.
The shares of our common stock subject to surrendered options will not be available for future issuance under
our equity incentive plans once the surrendered options are cancelled.

Prior to commencement of the NEO option exchange, we will file the offer to exchange with the SEC as

part of a tender offer statement on Schedule TO. NEOs, as well as stockholders and members of the public, will
be able to review the offer to exchange and other related documents filed by us with the SEC free of charge on
the SEC’s website at www.sec.gov.

Eligibility

If implemented, the NEO option exchange will be open to all of our NEOs. Each of our NEOs hold
options with per share exercise prices that are greater than the current trading range of our common stock. The
NEO option exchange will not be available to employees who are not NEOs or non-employee members of the
Board. NEOs must be employed by us at both the start and completion of the NEO option exchange in order to
remain eligible for the exchange. If an NEO is no longer an employee with us for any reason, including layoff,
termination, voluntary resignation, death or disability, on the date that the NEO option exchange is
commenced, that NEO cannot participate in the NEO option exchange. If an NEO is no longer an employee
with us for any reason on the date of the completion of the NEO option exchange, even if he had elected to
participate and had tendered his options for exchange, such NEO’s tender will automatically be deemed
withdrawn and he will not participate in the NEO option exchange. He will retain his outstanding options in
accordance with their original terms and conditions, and he may exercise them during a limited period of time
following termination of employment in accordance with their terms and to the extent that they are vested. A
vote by an NEO in favor of this proposal at the Annual Meeting does not constitute an election to participate
in the NEO option exchange.

Of the outstanding options held by NEOs as of April 30, 2009, the maximum number of shares of common
stock underlying options which could be surrendered for exchange is 1.1 million, and the maximum number of
shares of common stock which would be subject to awards granted under the proposed NEO option exchange,
using estimated exchange ratios, would be 0.7 million in an option-for-option exchange or 0.2 million in an
option-for-RSU exchange.

Exchange Ratios

The exchange ratios for the NEO option exchange (that is, how many options an NEO must surrender in
order to receive one newly issued RSU or option) will be determined using the Black-Scholes-Merton option
pricing model or other generally accepted valuation model such as the Lattice Valuation model. The valuation
model is utilized to adopt exchange ratios that result in the aggregate fair value of the newly issued RSUs or
options issued being equal to or less than the aggregate fair value of the stock options that are surrendered, and to
avoid the stockholder dilution that occurs when all options are exchanged on a one-for-one basis for newly issued
RSUs or options. Newly issued RSU or option grants calculated according to the exchange ratios will be rounded
down to the nearest whole share on a grant-by-grant basis. Fractional RSUs or options will not be issued.

For example, if a surrendered option has a fair value of $100 on the date the NEO option exchange
commences, the closing price for a share of our common stock on such date was $10.00 and the grant date fair
value of an option granted on such date was $2.50 per share, then 10 newly issued RSUs or options to purchase
40 shares of our common stock, each of which would have a fair value of $100, would be granted to the NEO if
he elected to participate in the exchange.

y
x
o
r
P

Election to Participate

Participation in the NEO option exchange will be voluntary. Under the NEO option exchange, NEOs may
make an election to surrender eligible stock options that have a per share exercise price that is greater than the
per share closing price of our common stock as quoted on the NASDAQ Global Select Market as of the trading
day immediately preceding the date the NEO option exchange commences in exchange for newly issued RSUs or
options in accordance with the actual exchange ratios, which will be determined at the time the NEO option
exchange commences.

Vesting of Newly Issued RSUs and Options

Newly issued RSUs or options granted in the NEO option exchange will not be vested on their date of grant

regardless of whether the surrendered option was fully vested. Instead, the newly issued RSUs or options will
vest fully if and when the average price of our common stock as quoted on the NASDAQ Global Select Market
equals or exceeds for 20 consecutive trading days 225% of the closing price of our common stock on the date the
NEO option exchange is completed.

For example, if, on the date the NEO option exchange is completed, the closing price of our common stock
was $10.00, then none of the newly issued RSUs or options would vest unless and until our stock price reached
$22.50 and averaged at or above that price for 20 consecutive trading days. On the date that the stock price
reached $22.50 and averaged at or above that price for 20 consecutive trading days, all of the newly issued RSUs
or options would vest.

Term and Conditions of Newly Issued RSUs and Options

The terms and conditions of the newly issued RSUs or options will be governed by the terms and conditions
of the 2009 Plan and the RSU agreement or option agreement entered into thereunder. Each newly issued option
will retain the expiration date of the surrendered option it replaces.

U.S. Federal Income Tax Consequences

The U.S. federal income tax consequences of the NEO option exchange under current federal law, which is

subject to change, are summarized in the following discussion of the general tax principles applicable to the NEO
option exchange. This summary is not intended to be exhaustive and, among other considerations, does not
describe state, local, or foreign tax consequences. Tax considerations may vary from locality to locality and
depending on individual circumstances.

The NEO option exchange should be treated as a non-taxable exchange for U.S. federal income tax
purposes, and we and our participating NEOs should recognize no income for U.S. federal income tax purposes
upon the grant of newly issued RSUs or options.

Accounting Impact

The Company believes that the accounting benefit of the NEO option exchange is that it will not result in

the Company incurring significant additional compensation expenses. Based on this objective, the aggregate fair
value of the newly issued RSUs or options granted to each NEO in exchange for surrendered stock options,
measured as of the date the NEO option exchange is completed, which is the date such newly issued RSUs or
options will be granted is intended to be equal to or less than the aggregate fair value of the surrendered options
(other than compensation expense that might result from fluctuations in stock price after the exchange ratios have
been set but before the exchange actually occurs). The unamortized compensation expense from the surrendered
options and incremental compensation expense, if any, associated with the newly issued RSUs or options issued
under the NEO option exchange will be recognized over the service period of the newly issued RSUs or options.

If any portion of the newly issued RSUs or options granted is forfeited due to termination of employment, the
compensation cost for the forfeited portion of the newly issued RSUs or options will not be recognized.
Assuming the price of our stock does not materially fluctuate between the establishment of the exchange ratios
and the date the exchange actually occurs, then, as a result of the NEO option exchange, we would expect to
recognize a non-cash accounting charge of approximately $0.9 million over the vesting period of the newly
issued RSUs or options.

Potential Modification to Terms to Comply with Governmental Requirements

The terms of the NEO option exchange will be described in a tender offer document that will be filed with

the SEC. Although we do not anticipate that the SEC would require us to modify the terms materially, it is
possible that we will need to alter the terms of the NEO option exchange to comply with potential SEC
comments. The Compensation Committee will retain the discretion to make any such necessary or desirable
changes to the terms of the NEO option exchange for purposes of complying with comments from the SEC.

Benefits of the Option Exchange to NEOs

Because the decision whether to participate in the NEO option exchange is completely voluntary, we are not
able to predict who will participate, how many options the NEOs will elect to exchange, or the number of newly
issued RSUs or options that we may grant. As noted above, however, our non-employee members of the Board
and employees who are not NEOs are not eligible to participate in the NEO option exchange.

Effect on Stockholders

The NEO option exchange was designed to provide renewed incentives and motivate our NEOs to continue

to create stockholder value and reduce the number of shares currently subject to outstanding options, thereby
avoiding the dilution in ownership that normally results from supplemental grants of new stock options or other
awards. We are unable to predict the precise impact of the NEO option exchange on our stockholders because we
cannot predict which or how many NEOs will elect to participate in the NEO option exchange, and which or how
many eligible options such NEOs will elect to exchange. Please see the “Details of NEO Option Exchange—
Eligibility” section above for the approximate reduction in the number of shares underlying options outstanding
assuming that 100% of eligible options are exchanged and the newly issued RSUs or options are issued in
accordance with the exchange ratios.

VOTE REQUIRED

The Board of Directors recommends a vote in favor of Proposal Five.
Proxies received by the Company will be voted “FOR” this proposal unless the stockholder specifies
otherwise in the proxy.

PROPOSAL SIX

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PricewaterhouseCoopers LLP has served as the Company’s independent registered public accounting firm

since 1992 and has been appointed by the Audit Committee to continue as the Company’s independent registered
public accounting firm for the fiscal year ending December 31, 2009.

Stockholder ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent

registered public accounting firm for the fiscal year ending December 31, 2009 is not required by law, by the
NASDAQ listing requirements or by the Company’s certificate of incorporation or bylaws. However, the Board of
Directors is submitting the selection of PricewaterhouseCoopers LLP to the Company’s stockholders for ratification
as a matter of good corporate governance and practice. If the stockholders fail to ratify the appointment, the Board
of Directors will reconsider whether to retain that firm. Even if the selection is ratified, the Company may appoint a
different independent registered public accounting firm during the year if the Audit Committee of the Board of
Directors determines that such a change would be in the best interests of the Company and its stockholders.

y
x
o
r
P

During the fiscal years ended December 31, 2008 and 2007, PricewaterhouseCoopers LLP provided various

audit, audit related and non-audit services to the Company as follows (in thousands):

Audit fees(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit related fees(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax fees(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other fees(d)

2008

2007

$1,461
66
—
33

$4,417
482
—

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,560

$4,901

(a) Audit fees consist of fees billed for professional services rendered for the audit of the Company’s

consolidated financial statements and review of the interim consolidated financial statements included in
quarterly reports and services that are normally provided by PricewaterhouseCoopers LLP in connection
with statutory and regulatory filings or engagements.

(b) Audit related fees consist of fees billed for assurance and related services that are reasonably related to the

(c) Tax fees consist of fees billed for professional services for tax compliance, tax advice and tax planning.
These services include assistance regarding federal, state and international compliance and mergers and
acquisitions.

(d) All other fees consist of services provided in connection with other services.

The Audit Committee is responsible for pre-approving audit and non-audit services provided to the
Company by the independent auditors (or subsequently approving non-audit services in those circumstances
where a subsequent approval is necessary and permissible); in this regard, the Audit Committee has the sole
authority to approve the employment of the independent auditors, all audit engagement fees and terms and all
non-audit engagements, as may be permissible, with the independent auditors.

The Audit Committee of the Board of Directors has considered whether provision of the services described
in sections (b), (c) and (d) above is compatible with maintaining the independent auditors’ independence and has
determined that such services have not adversely affected PricewaterhouseCoopers LLP’s independence. All of
the services of each of (b), (c) and (d) were pre-approved by the Audit Committee.

Representatives of PricewaterhouseCoopers LLP are expected to be present at the annual meeting. The
representatives will have an opportunity to make a statement and will be available to respond to appropriate
questions.

The ratification of the selection of PricewaterhouseCoopers LLP requires the affirmative vote of the holders

of a majority of shares of common stock present, or represented, and entitled to vote thereon, at the annual
meeting.

The Company’s Board of Directors recommends a vote “FOR” the ratification of the appointment of the
Company’s independent registered public accounting firm for the fiscal year ending December 31, 2009.
Proxies received by the Company will be voted “FOR” this proposal unless the stockholder specifies
otherwise in the proxy.

SECURITY OWNERSHIP

Except as otherwise indicated below, the following table sets forth certain information regarding beneficial
ownership of common stock of the Company as of March 31, 2009 by: (1) each of our current directors; (2) each
of the named executive officers listed in the Summary Compensation Table for 2008 on page 63 of this Proxy
Statement (collectively, our “named executive officers”); (3) each person known to us to be the beneficial owner
of more than 5% of the outstanding shares of our common stock based upon Schedules 13G or 13D filed with the
SEC; and (4) all of our directors and executive officers as a group. As of March 31, 2009, there were 49,217,723
shares of our common stock outstanding.

Shares of common stock subject to options or other rights that are currently exercisable or exercisable
within 60 days of March 31, 2009 are considered outstanding and beneficially owned by the person holding the
options or other rights for the purpose of computing the percentage ownership of that person but are not treated
as outstanding for the purpose of computing the percentage ownership of any other person except with respect to
the percentage ownership of all directors and executive officers as a group. Unless otherwise indicated below, the
address of each beneficial owner listed below is c/o Electronics For Imaging, Inc., 303 Velocity Way, Foster
City, California 94404.

Name of beneficial owner(1)

Common Stock

Number of
shares

Percentage
owned

Ameriprise Financial, Inc.(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,962,138

16.18%

145 Ameriprise Financial Center
Minneapolis, MN 55474

Blum Capital Partners(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,008,213

10.18%

909 Montgomery Street
Suite 400
San Francisco, California 94133

Barclays Global Investors, NA(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,851,406

5.79%

y
x
o
r
P

500 Howard Street
San Francisco, California 94105
Third Avenue Management LLC(5)

622 Third Avenue
32nd Floor
New York, New York 10017

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,543,699

9.23%

Wellington Management Company, LLP(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,603,962

3.26%

75 State Street
Boston, Massachusetts 02109

Guy Gecht(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gill Cogan(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Ritchie(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
James S. Greene(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dan Maydan(12)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas Georgens(13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard A. Kashnow(14) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All current executive officers and directors as a group (8 persons)(15) . . . . . . . . . . . . . . .

553,627
428,185
146,168
112,849
68,386
12,060
0
0
1,321,275

1.12%
*
*
*
*
*
—
—
2.68%

Less than one percent.

*
(1) This table is based upon information supplied by officers, directors and principal stockholders and

Schedules 13D and 13G and Forms 3 and 4 filed with the SEC as of March 31, 2009. Unless otherwise
indicated in the footnotes to this table and subject to community property laws where applicable, each of

the stockholders named in this table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on 49,217,723 shares outstanding on
March 31, 2009 adjusted as required by rules promulgated by the SEC.

(2) Beneficial ownership information is based on information contained in Schedule 13G filed with the SEC
on February 5, 2009 by Ameriprise Financial, Inc. (“AFI”), RiverSource Investments, LLC (“RvS”) and
Seligman Communications and Information Fund, Inc. (“C&I Fund”). The Schedule 13G indicates that
each of AFI and RvS has shared voting power as to 396,508 shares and shared dispositive power as to
7,962,138 shares. C&I Fund has sole voting and dispositive powers as to 4,680,200 shares. RvS, in its
capacity as investment adviser, may be deemed to beneficially own the shares of common stock reported
by C&I Fund. AFI, as the parent company of RvS, may be deemed to beneficially own the shares reported
by RvS. AFI, together with RvS and C&I Fund beneficially own 7,962,138 shares.

(3) Beneficial ownership information is based on information contained in Form 4 filed with the SEC on
October 22, 2008 by Blum Capital Partners, L.P., Richard C. Blum & Associates, Inc., Blum Strategic
GP III, L.L.C., Blum Strategic GP III, L.P., Blum Strategic GP IV, L.L.C. and Saddlepoint Partners GP,
L.L.C. Together, the entities beneficially own 5,008,213 shares of common stock. The entities share voting
and investment power as to all 5,008,213 shares of common stock.

(4) Beneficial ownership information is based on information contained in Schedule 13G filed with the SEC

on February 5, 2009 by Barclays Global Investors, NA. Barclays Global Investors, NA and its affiliate,
Barclays Global Fund Advisors, together beneficially own 2,851,406 shares and together have sole voting
power and dispositive power as to 2,647,644 and 2,851,406 shares, respectively.

(5) Beneficial ownership information is based on information contained in Schedule 13G filed with the SEC
on February 13, 2009 by Third Avenue Management LLC. Third Avenue Management LLC has sole
voting power as to 4,341,724 shares of common stock and sole dispositive power as to 4,543,699 shares of
common stock.

(7)

(8)

(6) Beneficial ownership information is based on information contained in Schedule 13G/A filed with the SEC
on February 17, 2009 by Wellington Management Company, LLP (“WMC”). WMC, in its capacity as
investment adviser, may be deemed to beneficially own 1,603,962 shares of common stock which are held
of record by clients of WMC. WMC has shared voting power as to 1,158,962 shares of common stock and
shared dispositive power as to 1,603,962 shares of common stock.
Includes 336,589 shares of common stock issuable upon the exercise of options granted to Mr. Gecht under
the 2004 and 2007 equity incentive plans which are exercisable within 60 days of March 31, 2009.
Includes 297,933 shares of common stock issuable upon exercise of options granted to Mr. Rosenzweig
under the 1999, 2004 and 2007 equity incentive plans which are exercisable within 60 days of March 31,
2009.
Includes 124,168 shares of common stock issuable upon exercise of options granted to Mr. Cogan under
the 1990, 1999 and 2004 equity incentive plans which are exercisable within 60 days of March 31, 2009 of
which 18,000 will expire on May 20, 2009.
Includes 71,197 shares of common stock issuable upon the exercise of options granted to Mr. Ritchie under
the 1999, 2004 and 2007 equity incentive plans which are exercisable within 60 days of March 31, 2009.
Includes 78,668 shares of common stock issuable upon exercise of options granted to Mr. Greene under the
1999 and 2004 equity incentive plans which are exercisable within 60 days of March 31, 2009.

(9)

(10)

(11)

(12) No options granted to Dr. Maydan under the 2007 equity incentive plan are exercisable within 60 days of

March 31, 2009.

(13) No options granted to Mr. Georgens under the 2007 equity incentive plan are exercisable within 60 days of

March 31, 2009.

(14) No options granted to Mr. Kashnow under the 2007 equity incentive plan are exercisable within 60 days of

(15)

March 31, 2009.
Includes an aggregate of 886,273 shares of common stock issuable upon the exercise of options granted to
executive officers and directors collectively under the 1990, 1999, 2004 and 2007 equity incentive plans
which are exercisable within 60 days of March 31, 2009.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s officers, directors and persons who beneficially

own more than ten percent of a registered class of the Company’s equity securities to file reports of security
ownership and changes in such ownership with the SEC. Officers, directors and greater than ten percent
beneficial owners also are required by rules promulgated by the SEC to furnish the Company with copies of all
Section 16(a) forms they file.

Based solely upon a review of the copies of such forms furnished to the Company, or written representations

that no Form 5 filings were required, the Company believes that during the period from January 1, 2008 to
December 31, 2008, all Section 16(a) filing requirements were timely met.

y
x
o
r
P

EXECUTIVE OFFICERS

The following table lists certain information regarding the Company’s executive officers as of March 31,

2009.

Name

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Ritchie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Age

43
53
43

Position

Chief Executive Officer
President
Chief Financial Officer

Mr. Gecht was appointed Chief Executive Officer of the Company on January 1, 2000. From July 1999 to
January 2000, he served as President of the Company. From January 1999 to July 1999, he was Vice President
and General Manager of Controllers Products of the Company. From October 1995 through January 1999, he
served as Director of Software Engineering. Prior to joining the Company, Mr. Gecht was Director of
Engineering at Interro Systems, a technology company, from 1993 to 1995. From 1991 to 1993, he served as
Software Manager of ASP Computer Products, a networking company and from 1990 to 1991 he served as
Manager of Networking Systems for Apple Israel, a technology company. From 1985 to 1990, he served as an
officer in the Israeli Defense Forces, managing an engineering development team, and later was an acting
manager of one of the IDF high-tech departments. Mr. Gecht currently serves as a member of the board of
directors, audit committee and compensation committee of Check Point Software Technologies Ltd., a global
information technology security company. Mr. Gecht holds a B.S. in Computer Science and Mathematics from
Ben Gurion University in Israel.

Mr. Rosenzweig was appointed President of the Company as of January 1, 2000. From July 1999 to January

Mr. Ritchie was appointed Chief Financial Officer on April 1, 2006. From January 2001 to April 1, 2006,

Mr. Ritchie served as the Company’s Vice President of Finance. From March 1996 to January 2001, Mr. Ritchie
served in a variety of capacities at Splash Technology Holdings, Inc., a server company, most recently as Chief
Financial Officer. Prior to Splash, Mr. Ritchie held various accounting and finance positions at Western Waste
Industries, Inc., a waste services company, Oce-Bruning, Inc., a printer and copier company, and Mariani
Packing Company, an agricultural company. Mr. Ritchie holds a B.A. in Business Administration from San Jose
State University.

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Objectives and Philosophy

The Company’s compensation objectives and philosophy provide the guiding principles for decisions made
by the Compensation Committee of the Board of Directors (the “Committee”) for compensation to be paid to the
Company’s named executive officers, which, during fiscal year 2008, included Guy Gecht, Chief Executive
Officer; Fred Rosenzweig, President; and John Ritchie, Chief Financial Officer.

y
x
o
r
P

intended to create value for stockholders. In establishing compensation programs for the named executive
officers for fiscal year 2008, the Committee considered the following principles and objectives:

• Attract and retain individuals of superior ability and managerial talent;

• Ensure compensation is closely aligned with the Company’s corporate strategies, business and financial

objectives and the long-term interests of the Company’s stockholders;

• Create incentives to achieve key strategic and financial performance goals of the Company by linking

executive incentive award opportunities to the achievement of these goals; and

• Ensure that the total compensation is fair, reasonable and competitive.

The Compensation Committee of the Board of Directors

The Committee, serving under a charter adopted by the Board of Directors, is composed entirely of outside

directors who have never served as officers of the Company. Under the charter, the Committee has overall
responsibility for approving and evaluating the executive officer compensation plans, policies and programs of
the Company. This includes base salaries, incentive awards, stock option grants, employment agreements,
severance arrangements, change in control provisions, as well as any other benefits or compensation
arrangements for the named executive officers. In certain circumstances, the Committee may solicit input from
the full Board of Directors before making final decisions relating to executive compensation. Messrs. Cogan and
Maydan serve on the Committee as of the date of this Proxy Statement.

Role of Management in Assisting Compensation Decisions

Members of the executive management team of the Company, such as the named executive officers and the

Vice President of Human Resources (“Executive Management”), may assist and support the Committee in
determining compensation for the named executive officers. Members of Executive Management may provide
recommendations and information to the Committee to consider, analyze and review in connection with any
compensation proposal for the named executive officers. Members of Executive Management do not have any
final decision-making authority in regards to named executive officer compensation. The Committee reviews any
recommendations and information provided by Executive Management, and approves the final executive
compensation package for the named executive officers. During fiscal year 2008, members of Executive
Management provided the Committee with recommendations and proposals relating to each element of executive
compensation described below. These recommendations and proposals were based on competitive factors,
individual compensation histories, prior equity awards, and anticipated and projected operating results of the
Company for fiscal year 2008.

Use of Independent Third Party Consultants

The Committee may use consultants to assist in the evaluation of compensation for the named executive

officers. The Committee has the sole authority to retain and terminate any compensation consultant engaged to
perform these services. The Committee also has authority to obtain advice and assistance from internal or
external legal, accounting, or other advisers.

The Committee has retained Mercer (US) Inc. (“Mercer”) to provide information, analyses, and advice

regarding executive and director compensation, as described below. The Company also retains Mercer and its
related entities to perform other services. Mercer was selected as the consultant to the Committee in 2007 after an
interview process with several compensation consulting firms. The Committee evaluates Mercer on an annual
basis and has found its performance to be satisfactory. In 2008, the Compensation Committee requested Mercer
to advise it on a variety of compensation-related issues, including:

• Compensation strategy development

• Officer pay levels

• Officer Short-Term Incentive Pay

• Officer Long-Term Incentive Pay

•

Peer group review and refinement

• Board Compensation

• The Committee agenda and annual calendar

In the course of conducting its activities, Mercer attended meetings of the Committee and presented its

findings and recommendations for discussion. During the course of the year, Mercer met with management to
obtain and validate data, and review materials.

In addition to providing consulting advice to the Committee, Mercer has been engaged by the Company to

perform a review of its employment practices under applicable state law and international compensation
consulting. Mercer received approximately $417,000 from the Company in connection with the performance of
these services during fiscal year 2008. In addition, Mercer is a subsidiary of Marsh & McLennan Companies, Inc.
(“Marsh”), a diversified conglomerate of insurance, security and human resources consulting services. The
Company uses the brokerage services of Marsh for the casualty insurance portion of the Company’s risk
management and insurance program. During fiscal year 2008, Marsh received approximately $168,000 for the
brokerage services provided to the Company. The Committee has reviewed Mercer’s employment practice
review services as well as the Marsh brokerage services and has determined that these services do not constitute a
conflict of interest or prevent Mercer from being objective in its work for the Committee. Other than providing
the services described above and the work performed in its role as consultant to the Committee, Mercer provided
no other services to either the Company or the Committee in fiscal year 2008.

Benchmarking

The Committee does not apply a formulaic approach to setting of individual elements of the named

executive officers’ compensation or their total compensation amounts. However, the Committee reviews, at least
annually, market compensation levels to determine whether the total compensation opportunity for the
Company’s named executive officers is appropriate in light of the compensation arrangements at the Company’s
peers and makes adjustments when the Committee determines they are needed. For 2008, this assessment
included evaluation of base salary, annual incentives and long-term incentives against a peer group of high-
technology companies provided by Mercer, which is described below. The Committee also considers business
performance as compared to its peers as part of its assessment of appropriate payout levels for performance.
Because total compensation for the named executive officers is determined in part based on market compensation
levels, differences in compensation among the chief executive officer and other named executive officers are due
in part to differences of compensation among similarly situated executive officers in the market.

The basis for selection of companies in the peer group included the following:

•

Status—Peer companies should be publicly traded on a U.S. stock exchange.

• Revenue—Peer companies should be similarly sized to EFI for appropriate compensation

benchmarking.

•

Industry—Peer companies should be within similar industry sectors that have similar business
characteristics.

• Competitive Landscape—Peer companies should be competing with EFI for executive talent.

For 2008, the peer group included:

Palm, Inc.
3Com Corp.
Arris Group, Inc.
Zebra Technologies Corp.
Hutchinson Technology Inc.
QLogic Corp.
Zoran Corp.
Ariba Inc.

Executive Compensation Elements

ADC Telecommunications Inc.
Moduslink Global Solutions (formerly CMGI, Inc.)
Komag Inc.
Savvis Inc.
Avocent Corp.
Emulex Corp.
MRV Communications, Inc.
Openwave Systems Inc.

y
x
o
r
P

For the fiscal year 2008, the principal elements or components of compensation for the named executive

officers were: (1) base salary; (2) performance-based incentive compensation; and (3) long-term equity
compensation.

During 2008, for each element of executive compensation, the Committee considered a number of factors,
such as the executive’s employment experience, performance of the executive during the period, performance of
the Company during the period, achievement of Company performance targets set by the Board of Directors,
demonstrated leadership, potential to enhance long-term stockholder value, information relating to marketplace
competitiveness, current compensation levels, compensation history and prior equity awards. Since there are no
static or fixed policies regarding the amount and allocation for each component or element of executive
compensation, the determination and composition of total compensation is up to the discretion of the Committee
and is decided on a year by year basis.

The measurement or assessment of performance of the individual named executive officer, and his
demonstrated leadership and potential to enhance long-term stockholder value during 2008 was qualitative in
nature, and was determined using the judgment and discretion of the Committee. During 2008, the measurement
or assessment of the Company’s performance and the achievement of Company performance targets were
primarily quantitative with respect to the elements of incentive based compensation, and are addressed in greater
detail below. The factors relating to current compensation levels, compensation history and prior equity awards
for each of the executive officers were primarily used to assist in evaluating the appropriate levels of
compensation for each element of compensation for the 2008 fiscal year and any potential increase or decrease
from the prior year levels.

The disparity in the levels of compensation for each element of compensation between the named executive

officers reflects consideration of the executive’s roles and responsibilities, the executive’s tenure with the
Company as well as the other factors mentioned above. The Committee evaluates these factors in establishing
compensation for each named executive officer, individually.

The Committee considers the value of the entire compensation package when establishing the appropriate
levels of compensation for each element. As such, amounts paid under one element of compensation may affect
the amounts paid under another element of compensation. For example, the Company may reserve a significant
portion of executive compensation for performance-based incentive programs, while allocating a comparatively
lesser amount for fixed compensation elements. As noted above, however, the Company does not apply a
formulaic approach to the allocation of specific elements within the total compensation package available to the
named executive officers. The Committee exercises its judgment and discretion when approving the amount and
allocation of each element of the total compensation package.

Base Salary

employees of the Company. In setting base salaries for the named executive officers, the Committee considers a
number of factors, including the executive’s prior salary history, current compensation levels, individual
performance and marketplace competitiveness for executive officers.

The Committee considers changes to base salaries for the named executive officers on an annual basis.
There are no formulaic increases, and for 2008, Mr. Ritchie did not receive an increase in base salary as the
Committee determined that with the increase provided to Mr. Ritchie in 2007 his base salary remained
competitive. The Committee approved increases in the base salaries effective April 1, 2008 for Mr. Gecht and
Mr. Rosenzweig to $620,000 and $530,000, respectively. The adjustments reflected percentage increases of 8.8%
and 3.9%, respectively and were approved following the Committee’s consultation with Mercer and its
assessment of each of Messrs. Gecht’s and Rosenzweig’s target total cash compensation for fiscal year 2008
relative to the Company’s peer group and in light of the absence of any adjustments to Mr. Gecht’s or
Mr. Rosenzweig’s base salaries in 2005, 2006 or 2007.

On April 3, 2009, the Committee approved and accepted the voluntary reduction of the annual base salaries
of each of Messrs. Gecht, Rosenzweig and Ritchie by fifteen percent (15%) for Messrs. Gecht and Rosenzweig,
to equal $527,000 and $450,500, respectively, and by ten percent (10%) for Mr. Ritchie, to equal $279,000. This
reduction was volunteered by the named executive officers in support of the Company’s cost reduction activities
due to deteriorating global economic and industry conditions provided that such voluntarily reduced base annual
salaries would not be used in the calculation of any other benefits set forth in each named executive officer’s
current employment agreement. The temporarily reduced base annual salaries of each of the named executive
officers became effective as of April 16, 2009.

Performance-Based Incentive Compensation

The Company believes that a significant portion of executive compensation should be directly related to the
Company’s overall financial performance, stock price performance and other relevant financial factors that affect
stockholder value. Accordingly, the Company sets goals designed to link executive compensation to the
Company’s overall performance and reserves the largest potential compensation awards for performance-based
and incentive-based programs, which include both cash and equity awards.

Executive Incentive Plan

The executive incentive plan allows named executive officers to receive bonus compensation in the event

certain specified corporate and individual performance measures are achieved. For fiscal year 2008, bonuses
awarded under the executive bonus plan were weighted 80% based on Company performance and 20% based on
individual performance. The total potential bonus for each of the named executive officers is calculated as a
percentage of his base salary.

The Committee sets the percentage of base salary for each named executive officer’s target bonus based on
its review of total compensation and the bonus programs at the Company’s peer group and its assessment of the
past and expected future contributions of the named executive officers. The target bonus opportunity for the 2008
fiscal year for Mr. Gecht, Mr. Ritchie and Mr. Rosenzweig was 105%, 55% and 95% of annual base salary,
respectively. In addition to correlating with similar positions at the Company’s peer group, the differentiation in
percentages between Mr. Gecht, Mr. Ritchie and Mr. Rosenzweig correlate with their level of responsibility
within the Company.

The Company performance measures for determining bonuses for 2008 were equally weighted between the

Company’s total annual revenue and operating income and were approved by the Committee based on
information provided by Executive Management. For fiscal year 2008, the Company’s total annual revenue and
operating income targets were $630,000,000 and $74,762,000, respectively. In determining the bonus
compensation awarded to each executive officer, the executive incentive plan requires threshold performance of

both 94% of the total annual revenue target and 79% of the operating income target. If the Company does not
satisfy the thresholds, the named executive officers are not eligible to receive any bonus compensation with
respect to Company performance. In the event threshold performance levels are exceeded, the named
executive officers earn proportional awards linked to the Company’s performance. The proportional awards
for the cash portion of bonus compensation tied to Company performance were subject to formulaic
accelerators and decelerators, so that overachievement and underachievement of the target levels have a
multiplier affect. For example, if the applicable target levels are exceeded, the executive officers earn bonuses
that exceed their target cash bonuses by a factor of the percentage exceeding the target levels, up to a
maximum of 200%. On the other hand, if the applicable target levels are not met, the actual cash bonuses are
reduced by a factor of the percentage difference between the target levels and the actual levels of total annual
revenue and net income.

y
x
o
r
P

For fiscal year 2008, the Committee assessed the performance of the Company by comparing the actual total

fiscal year revenue and operating income results to the pre-determined target levels for each objective. During
the first quarter of 2009, the Committee determined that the total fiscal year revenue and net income targets
established by the Board of Directors were achieved at 88.9% and 55.6% of the respective total annual revenue
and operating income target amounts, such that the executive incentive plan payout with respect to Company
performance was at 0%.

Twenty percent of the target bonus under the executive incentive plan was payable based on the

individual performance of the named executive officers. For 2008, the Committee set individual performance
objectives for each named executive officer in line with the named executive officer’s roles and
responsibilities for the Company. For Mr. Gecht, these objectives were subjective and related to the vision and
strategy of the Company, the Company’s innovation and product leadership and Mr. Gecht’s leadership of the
Company. Mr. Ritchie’s individual objectives were also subjective and related to financial performance and
management, personnel development and compliance efforts. Mr. Rosenzweig’s individual objectives for 2008
related to product innovation, strategy execution, mentoring executives and evaluation of staffing. While the
achievement of many of the individual performance objectives is subjective, each of the individual
performance objectives were set by the Committee in a manner to require significant effort on the part of the
named executive officers to achieve, and these objectives have not been set to be achieved with average
performance. For fiscal year 2008, the Committee determined that no bonuses would currently be payable as a
result of the Company’s performance. The Committee also determined that given current economic conditions,
it did not currently intend to pay bonuses to the named executive officers based on the attainment of individual
performance goals. The Committee noted, however, that it retained discretion to pay bonuses or adjust salaries
at any time in the future based on, without limitation, individual performance or improved financial
performance of the Company.

Incentive amounts to be paid under the performance-based programs may be adjusted by the Committee to
account for unusual events such as extraordinary transactions, asset dispositions and purchases, and mergers and
acquisitions if, and to the extent, the Committee does not consider the effect of such events indicative of
Company performance. Payments under the executive incentive plan are contingent upon continued employment
and are at the discretion of the Committee. The Committee believes that the payment of bonuses under the
executive incentive plan provides incentives necessary to retain the named executive officers and reward them
for short-term Company performance.

Long-Term Performance-Based Equity Incentive Program

As indicated by its performance-based approach to compensation, the Company believes that equity

ownership in the Company is important to closely align the interests of executive officers with those of Company
stockholders and thereby promote incentives to achieve sustained, long-term revenue growth and profitability. To
meet these objectives, the Company’s named executive officers have received restricted stock that vests based
upon achieving the Company performance criteria described above.

Restricted stock that has been granted under this component is subject to forfeiture restrictions which lapse
if the Company meets pre-determined, threshold performance levels and specific performance target levels each
tied to total annual revenue and operating income, as determined by the Board each year, as mentioned above. If
the Company does not achieve the financial targets specified by the Board, then the restrictions on vesting will
remain in place until the threshold financial targets or plans have been met. To the extent vesting has been
deferred because the Company had not yet met the financial targets for such fiscal year, upon the achievement of
such financial targets or if the named executive officers continue to provide services to the Company for three
years after the final date the restricted stock awards would have vested had the targets been met, the shares will
vest.

Individual restricted stock grants under this component were made to each of our named executive officers
during 2005 and 2006 under the Company’s 2004 Equity Incentive Plan. The forfeiture restrictions lapse over a
three-and-a-half to four-year service vesting period in equal installments once the financial targets are met, and
the restricted stock entitles the holder to receive dividends in an amount per restricted share, both vested and
non-vested, equal to the dividends per share paid on the Company’s common stock. The financial objectives
required to be met for the 2005 restricted stock awards to fully vest were met by the Company on November 30,
2008. The Committee has also determined that the financial targets for the 2006 restricted stock awards were met
so that 25% of the restricted common stock vested on each of March 15, 2007 and March 15, 2008, and the
remaining portion is subject to forfeiture in the event service to the Company is not continued through the date of
vesting. Performance objectives were not met in 2008 with respect to the 2006 restricted stock grants;
accordingly, 25% of the restricted common stock did not vest on March 15, 2009.

Please see the Option Exercises and Stock Vested in 2008 Table on page 66 of this Proxy Statement for

restricted stock awards held by the named executive officers that vested during 2008.

On August 29, 2008, in connection with the previously completed review of historical stock option granting
practices by the special committee of the Company’s Board of Directors and the settlement of related shareholder
derivative litigation, each named executive officer entered into an Amendment of Stock Option Agreement and
Stock Option Repayment Agreement with the Company. Under these agreements, Mr. Gecht, Mr. Rosenzweig
and Mr. Ritchie forfeited options to purchase 282,248, 256,192 and 7,128 shares of Company common stock,
respectively, having respective Hull-White values of $678,109, $593,684 and $17,392. In addition, each named
executive officer amended outstanding options to reflect the measurement date determined by the special
committee of the Board of Directors. Mr. Gecht and Mr. Rosenzweig also forfeited additional options to acquire
62,863 and 54,775 shares of Company common stock, respectively, as additional consideration for the settlement
of the derivative litigation.

Discretionary Long-Term Equity Incentive Awards

The Company’s executive officers may receive an annual award of stock options, restricted stock and/or
restricted stock units at the discretion of the Committee. Guidelines for the number of stock options, restricted
stock and/or restricted stock unit awards granted to each executive officer are determined and approved by the
Committee based upon several factors, including the individual’s performance, the Company’s performance and
the value of the stock option at the time of grant. As a result, additional grants other than the annual award may
be made in the event there are significant changes in the performance of the Company or the individual executive
during the evaluation period. The Committee considers the same factors as described throughout this discussion
when evaluating these long-term discretionary equity awards.

Restricted stock units granted to executive officers typically have a three-year annual vesting schedule, and

stock options granted to executive officers typically have a three and a half year vesting schedule in order to
provide an incentive for continued employment and generally expire seven years from the date of the grant. This
term provides a reasonable time frame in which to align the executive officer with the price appreciation of the
Company’s stock, while managing the potential dilution to stockholders more effectively, as compared to a more

typical ten-year option term. The Company sets the exercise price of options granted under the Company’s stock
plans equal to 100% of the fair market value of the underlying stock on the date of grant.

On February 15, 2008, the Committee approved awards of 116,677, 66,677 and 50,000 restricted stock units to

Mr. Gecht, Mr. Rosenzweig and Mr. Ritchie, respectively, and options to purchase 350,000, 200,000 and 100,000
shares of the Company’s common stock, respectively, each with a grant date of February 26, 2008. The restricted
stock units vest annually over three years and the stock options vest with respect to 33% of the shares subject to the
options on February 26, 2009 and then in equal monthly installments over the subsequent two and a half years. The
Committee determined the size of these equity grants, as well as the differentiation in size of grant, after reviewing
the roles and responsibilities of each named executive officer, each executive’s total compensation, compensation
information from the Company’s peer group and recommendations from Executive Management.

y
x
o
r
P

On January 29, 2009, the Committee approved an award to Mr. Ritchie of 20,000 restricted stock units with

a grant date of January 30, 2009. The restricted stock units vest in equal installments on each of the first two
anniversaries of the date of grant. The Committee granted the restricted stock units to Mr. Ritchie in recognition
of his efforts and performance in the completion of a material real estate transaction. The Committee determined
the number of Mr. Ritchie’s restricted stock unit based on its subjective evaluation of the benefit to the Company
of the real estate transaction and Mr. Ritchie’s efforts in completing the transaction.

Severance Arrangements

Each named executive officer has entered into a three (3) year employment agreement with the Company,
subject to automatic one-year renewals if not terminated by either party, which provide for severance benefits
under certain events, such as a termination without cause or the executive resigning for good reason. The
employment agreements are designed to promote stability and continuity of senior management.

In addition, the Company recognizes that the possibility of a change of control may exist from time to time,

and that this possibility, and the uncertainty and questions it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company and its stockholders.
Accordingly, the Board has determined that appropriate steps should be taken to encourage the continued
attention and dedication of members of the Company’s management to their assigned duties without the
distraction that may arise from the possibility of a change of control. As a result, the employment agreements
include provisions relating to the payment of severance benefits under certain circumstances in the event of a
change of control. Under the change of control provisions, in order for severance benefits to be triggered, an
executive must be involuntarily terminated without cause or the executive must leave for good reason within 24
months after a change of control. The Committee approved the employment agreements during 2006, which
contain the severance benefits described below. The Committee considered information provided by Executive
Management in concert with data from Mercer and used its discretion when approving each element and amount
of the potential severance benefits payable to the named executive officers.

Information regarding applicable payments under such agreements for the named executive officers is
provided under the headings “Employment Agreements” and “Potential Payments upon Termination or Change
of Control” on page 67 of this Proxy Statement.

Other Elements of Compensation and Perquisites

There are no other material elements of compensation that the named executive officers receive. The named

executive officers may not defer any component of any annual incentive bonus earned at this time and do not
participate in another deferred compensation plan. Likewise, the Company does not maintain any defined benefit
pension plans for its employees. However, named executive officers are eligible to participate in the Company’s
401(k) savings plan on the same terms and conditions as other Company employees. In addition, the named
executive officers are eligible to participate in the Company’s group health and welfare plans on the same terms
and conditions as other Company employees.

The Company also provides the Chief Executive Officer and the President with an automobile allowance

during the term of their employment with the Company, as the Company in its sole discretion may from time to
time make available.

Tax Considerations

Deductibility of Executive Compensation

As part of its performance-based compensation program, the Company aims to compensate the named

executive officers in a manner that is tax effective for the Company. In practice, some of the annual
compensation delivered by the Company is tax-qualified under Section 162(m) of the Internal Revenue Code.
Section 162(m) of the Internal Revenue Code generally disallows a tax deduction to public corporations for
compensation over $1 million paid for any fiscal year to each of the corporation’s named executive officers,
other than the chief financial officer, as of the end of the fiscal year. However, Section 162(m) exempts
qualifying performance-based compensation from the deduction limit if certain requirements are met. Although
the Committee considers the impact of Section 162(m) when developing and implementing executive
compensation programs, the Committee believes that it is important and in the best interests of stockholders to
preserve flexibility in designing compensation programs. Accordingly, the Committee has not adopted a policy
that all compensation must qualify as deductible under Section 162(m). The Committee has from time to time
approved, and may in the future approve, compensation arrangements for certain officers that are not fully
deductible. Further, because of ambiguities and uncertainties as to the application and interpretation of
Section 162(m) and the regulations issued thereunder, no assurance can be given, notwithstanding the
Committee’s efforts, that compensation intended to satisfy the requirements for deductibility under
Section 162(m) does in fact do so.

Compensation Recovery Policy

The Company does not have a policy to seek the reimbursement of cash bonus awards paid to an executive
officer if such executive engages in misconduct that caused or partially caused a restatement of financial results.
However, as previously disclosed, a Special Committee of the Board of Directors recommended certain remedial
actions in connection with the Company’s investigation of its historical stock option practices which included the
repayment of certain amounts by certain current and former directors and executive officers of the Company.

Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee has at any time been one of our executive officers or
employees. None of our executive officers currently serves, or in the past fiscal year has served, as a member of
the board of directors or compensation committee of any entity that has one or more executive officers serving on
our Board of Directors or Compensation Committee.

COMPENSATION COMMITTEE REPORT

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion

and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and
discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and
Analysis be included in this Proxy Statement.

COMPENSATION COMMITTEE

Gill Cogan
Dan Maydan

Compensation of Executive Officers

Summary Compensation Table for 2008

The following table includes information concerning the compensation for the fiscal years ended

December 31, 2008, December 31, 2007 and December 31, 2006 of our executive officers (the “named executive
officers”).

Name and principal
position
(a)

Guy Gecht,

Year
(b)

Salary
(c)(1)

Bonus
(d)(1)(4)

Stock
awards
(e)(2)

Option
awards
(f)(2)(3)

Non-equity
incentive plan
compensation
(g)(1)(4)

Chief Executive
Officer . . . . . . . . . . 2008 $607,500 $ — $1,481,993 $1,366,071
2007 570,000 478,800
668,863
2006 570,000 256,979 1,291,485 1,247,393

889,943

Fred Rosenzweig,

President . . . . . . . . 2008 525,000

—
2007 510,000 385,560
2006 510,000 206,936

949,580
686,850
983,746

845,214
516,983
984,327

John Ritchie,

Chief Financial
Officer . . . . . . . . . . 2008 310,000

—
2007 310,000 143,220
62,126
2006 258,750

528,084
197,319
277,935

305,321
28,052
76,787

—
—
—

—
—

Change in
pension
value and
nonqualified
deferred
compensation
earnings
(h)

All other
compensation
(i)(1)(5)

Total
(j)

y
x
o
r
P

—
—
—

—
—

$ 8,300
21,914
8,131

$3,463,864
2,629,520
3,373,988

9,400
9,300
8,138

2,329,194
2,108,693
2,693,147

4,600
17,223
4,400

1,148,005
695,814
679,998

(1) All cash compensation earned by each executive officer for fiscal years 2008, 2007 and 2006 is found in either the

Salary, Bonus or All other compensation columns of this table. There were no deferred salaries or other compensation in
2008, 2007 or 2006.

(2) Amounts included in the “Stock Awards” and “Option Awards” columns represent the compensation cost, except

disregarding estimated forfeitures, that was recognized by us in the year ended December 31, 2008, 2007 and 2006 on all
previously granted awards and options in accordance with Statement of Financial Accounting Standards (“SFAS”)
No. 123R, “Share-based Payments,” or “SFAS 123R.” See Note 12 of the consolidated financial statements in the
Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2008 regarding assumptions
underlying valuation of equity awards.
In August 2008, certain options held by Messrs. Gecht, Rosenzweig and Ritchie were repriced in connection with the
settlement of the derivative litigation, as set forth in the table below:

(3)

Name

Guy Gecht

. . . . . . . . . . . . . . .

Fred Rosenzweig . . . . . . . . . .

John Ritchie . . . . . . . . . . . . . .

Grant Date
(corrected as
required)

Number of Options
Subject to
Amendment

Original Exercise
Price Per Share

Amended Exercise
Price Per Share

06/08/99
02/12/01
09/05/03
06/08/99
02/12/01
09/05/03
08/21/03

110,000
16,250
61,250
110,000
7,000
52,500
20,500

$33.81
13.75
19.45
33.81
13.75
19.45
19.45

$48.38
22.06
23.89
48.38
22.06
23.89
19.98

In addition, Messrs. Gecht, Rosenzweig and Ritchie forfeited options to purchase 282,248, 256,192 and
7,128 shares of Company common stock, respectively, having a respective Hull-White value of $678,109,
$593,684 and $17,392, as set forth in the table below.

Name

Guy Gecht

. . . . . . . . . . . . . . . .

Fred Rosenzweig . . . . . . . . . . .

Grant Date
(corrected as
required)

06/08/99
03/15/06
09/05/03
02/12/01
04/25/02
04/11/05

06/08/99
03/15/06
03/13/01
09/05/03
02/12/01
04/25/02
04/25/02

Number of
Surrendered Options

Hull-White
Value

Total Value of
Surrendered Options

55,228
108,333
61,250
8,159
30,250
19,028

58,502
83,333
10,000
52,500
3,723
31,467
16,667

$0.23
3.04
1.92
2.40
4.04
4.03

$0.23
3.04
2.27
1.92
2.40
4.04
4.04

$ 12,702.44
329,332.32
117,600.00
19,581.60
122,210.00
76,682.84

$678,109.20

$ 13,455.46
253,332.32
22,700.00
100,800.00
8,935.20
127,126.68
67,334.68

$593,684.34

John Ritchie . . . . . . . . . . . . . . .

08/21/03

7,128

$2.44

$ 17,392.32

Messrs. Gecht and Rosenzweig also forfeited additional options to acquire 62,863 and 54,775 shares of
Company common stock, respectively, as additional consideration for the settlement of the derivative
litigation.

(4) As a result of Company and individual performance during fiscal year 2008 and current economic

(5) For fiscal year 2008, includes auto allowances and 401(k) employer matching contributions, as indicated
below. Includes $4,800 and $3,500 in auto allowance and 401(k) employer matching contributions,
respectively, for Mr. Gecht. Includes $4,600 in 401(k) employer matching contributions for Mr. Ritchie.
Includes $4,800 and $4,600 in auto allowance and 401(k) employer matching contributions, respectively, for
Mr. Rosenzweig. For fiscal years 2007 and 2006, includes auto allowances, 401(k) employer matching
contributions and employee stock plan matching bonuses.

2008 Grants of Plan-Based Awards Table

The following options, restricted stock awards, restricted stock units and non-equity incentive plan-based
awards were granted during the fiscal year ended December 31, 2008 to each of our named executive officers.

y
x
o
r
P

Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)

Target ($)
(f)

Maximum ($)
(g)

$651,000

$1,302,000

$503,500

$1,007,000

$170,500

$ 341,000

Board of
Directors or
Compensation
Committee
Approval
Date
(d)

2/15/2008
2/15/2008

8/28/2008
8/28/2008
8/28/2008

2/15/2008
2/15/2008

8/28/2008
8/28/2008
8/28/2008

2/15/2008
2/15/2008

8/28/2008

All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#) (h)(2)

All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
(i)

Exercise
or Base
Price of
Option
Awards
($/Sh)
(j)

Grant
Date Fair
Value of
Stock and
Option
Awards ($)
(k)(4)

116,667

$1,852,672
350,000 $15.88 $1,952,956

110,000 $48.38 $
16,250 $22.06 $
61,250 $23.89 $

0
0
0

66,667

$1,058,672
200,000 $15.88 $1,115,541

110,000 $48.38 $
7,000 $22.06 $
52,500 $23.89 $

0
0
0

50,000

$ 794,000
100,000 $15.88 $ 557,771

20,500 $19.98 $

Name
(a)

Grant Type
(b)

Grant Date
(c)

Guy Gecht . . . . . . . Restricted Stock Units

2/26/2008
2/26/2008

Stock Options(3)
Annual Target Bonus
Repriced Stock Options(5) 6/8/1999
Repriced Stock Options(5) 2/12/2001
Repriced Stock Options(5) 9/5/2003

Fred Rosenzweig . . Restricted Stock Units

2/26/2008
2/26/2008

Stock Options(3)
Annual Target Bonus
Repriced Stock Options(5) 6/8/1999
Repriced Stock Options(5) 2/12/2001
Repriced Stock Options(5) 9/5/2003

John Ritchie . . . . . . Restricted Stock Units

2/26/2008
2/26/2008

Stock Options(3)
Annual Target Bonus
Repriced Stock Options(5) 8/21/2003

(1) Amounts reported as “Target” and “Maximum” in the “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” columns

represent amounts payable under the Company’s annual target bonus program. The maximum payable under the annual target bonus
program is 200% of a participant’s target bonus. No bonuses were payable for fiscal year 2008.

(2) Each restricted stock unit award vests with respect to one-third of the shares on the first, second, and third anniversaries of the date of

grant.

(3) Each option vests with respect to 33% of the shares subject thereto on the first anniversary of the date of grant and thereafter with respect

to an additional 2.23% of the shares each month, with full vesting in 42 months from the date of grant.

(4) Amounts included in the “Grant Date Fair Value of Stock or Option Awards” column represent the grant date fair value of the applicable
award calculated in accordance with SFAS 123R or, with respect to repriced stock options, the incremental fair value of the applicable
award as of the date of modification. See Note 12 of the consolidated financial statements in the Company’s Annual Report on Form
10-K for the year ended December 31, 2008 regarding assumptions underlying valuation of equity awards.

(5) Each repriced stock option is fully vested. Each stock option was repriced in connection with the completion of the historical stock
option granting practices by the special committee of the Company’s board of directors, and the proposed settlement of related
shareholder derivative litigation, each named executive officer entered into an Amendment of Stock Option Agreement and Stock Option
Repayment Agreement with the Company as further described on pages 59-60 of this Proxy under the heading “Long-Term
Performance-Based Equity Incentive Program”. The original exercise price of each repriced stock option is set forth in the footnote 3 of
the Summary Compensation Table on page 63 of this Proxy.

Outstanding Equity Awards at 2008 Fiscal Year-End Table

The following table includes certain information with respect to the value of all unexercised options

previously awarded to the named executive officers at the fiscal year end December 31, 2008.

Option Awards

Stock Awards

Number of
securities
underlying
unexercised
options
exercisable
(#)
(c)

197,639

Number of
securities
underlying
unexercised
options
unexercisable
(#)
(d)

Option
exercise
price
per
share
($)
(e)

Option
expiration
date
(f)

$17.00

4/11/2012

Number
of
shares
or units
of stock
that
have
not
vested
(#)
(g)

Market
value of
shares or
units of
stock that
have not
vested
(#)
(h)

51,866
166,667

13,372
18,125

350,000

15.88

2/26/2015

116,667 $1,115,337

17.50
17.00

4/24/2012
4/25/2012

200,000

15.88

2/26/2015

66,667

637,337

19.98
16.42

8/21/2010
4/18/2012

100,000

15.88

2/26/2015

50,000

478,000

Name
(a)

Guy Gecht . . . . . . . .

Fred Rosenzweig . . .

John Ritchie . . . . . .

Vesting
Commencement
Date
(b)

4/11/2005(1)
3/15/2006(2)
2/26/2008(3)
2/26/2008(4)

4/25/2002(1)
4/11/2005(1)
3/15/2006(2)
2/26/2008(3)
2/26/2008(4)

8/21/2003(1)
4/18/2005(1)
3/15/2006(2)
2/26/2008(3)
2/26/2008(4)

Equity
incentive
plan
awards:
number
of
unearned
shares,
units or
other
rights
that have
not
vested
(#)
(i)

Equity
incentive
plan
awards:
market
or
payout
value of
unearned
shares,
units
or other
rights
that have
not
vested
(j)

36,110

$345,212

27,776

265,539

8,000

76,480

(1) Option vests with respect to 25% of the shares subject thereto on the vesting commencement date and then at a rate of 2.5% of the total

(2)

number of shares subject to the option per month over the next thirty months.
Restricted stock award vests at the rate of 25% on each anniversary of the vesting commencement date if specified performance targets
are achieved.

(3) Option vests with respect to 33% of the shares subject thereto on the first anniversary of the date of grant and thereafter with respect to

an additional 2.23% of the shares each month, with full vesting in 42 months from the date of grant.
Restricted stock unit award vests with respect to one-third of the shares on the first, second and third anniversary of the date of grant.

(4)

Option Exercises and Stock Vested in 2008 Table

The following table includes certain information with respect to the options exercised and restricted stock

awards vested by the named executive officers during the fiscal year ended December 31, 2008.

Name
(a)

Guy Gecht
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Ritchie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Option Awards

Stock Awards

Number of
shares
acquired on
exercise (#)
(b)

Value realized
on exercise
($)
(c)

Number of
shares
acquired on
vesting (#)
(d)

39,722
30,555
9,000

Value
realized
on vesting
($)
(e)

$519,597
399,684
117,565

Pension Benefits

The Company does not provide Pension Benefits to its employees.

Nonqualified Deferred Compensation

The Company historically has not provided nonqualified deferred compensation to its employees.

Employment Agreements

We have entered into an employment agreement with each of our named executive officers. The
employment agreements, each effective as of August 1, 2006, have an initial term of three years and will
automatically renew for additional one year periods unless terminated by either party upon sixty days written
notice prior to the expiration of the agreement. Each named executive officer’s employment with the Company is
at-will, and either party may terminate the employment relationship at any time for any reason, with or without
cause and with or without notice.

y
x
o
r
P

Each employment agreement provides, among other things, that:

•

the named executive officer shall be eligible for bonuses under the annual management bonus plan as
approved by the Committee;

the named executive officer is eligible to receive stock options under the Company’s stock option
program and additional equity awards based on the named executive officer’s performance;

in the event that prior to or within two years following a change in control, the Company terminates the
named executive officer’s employment without cause or the named executive officer voluntarily
terminates his employment for good reason, the named executive officer is eligible for severance
benefits consisting of salary continuation, a pro-rata bonus, employer subsidized health benefit
continuation under COBRA and outplacement services;

if the named executive officer becomes entitled to receive severance, the vesting of the named
executive officer’s unvested stock options and equity awards shall be either partially or fully
accelerated and the post-termination exercise period for stock options shall be extended;

if the named executive officer is required to pay tax penalties under Section 409A of the Internal
Revenue Code in connection with his receipt of the severance benefits, the Company shall pay the
named executive officer a gross up payment to hold the named executive officer harmless, on an
after-tax basis, for any such penalties; and

the named executive officer is subject to a non-solicitation covenant during his employment and for
one year following termination of employment.

Potential Payments upon Termination or Change of Control

The section below describes the potential payments that may be made to our named executive officers upon

termination or a change of control, pursuant to their employment agreements or otherwise.

The tables below estimate the quantitative benefits that would have accrued to each of our named executive
officers employed by us on December 31, 2008. The estimate of quantitative benefits that would have accrued to
each of our named executive officers employed by us on December 31, 2008 assumes certain events as of
December 31, 2008, uses the closing sales price of our common stock on such date ($9.56), and assumes the
named executive officers could have exercised stock options and sold such underlying shares. Receipt of these
benefits is subject to the Company’s receipt of an executed separation agreement and full release of all claims
from the named executive officer. We cannot assure you that a termination or change of control would produce
the same or similar results as those described below if such event were to occur on any other date or at any other
price, or if any assumption is not correct in fact.

The table below provides information concerning potential payments to our named executive officers upon
termination by us without cause or termination by the named executive officer for good reason, other than within
the 24 month period commencing on a change in control.

Name

Lump sum
severance
payment
($)(1)

Outplacement
benefits ($)(2)

Continued
health care coverage
benefits ($)(3)

. . . . . . . . . . . . . . . . . . . . .
Guy Gecht
Fred Rosenzweig . . . . . . . . . . . . . . . .
John Ritchie . . . . . . . . . . . . . . . . . . . .

$1,891,000
1,298,500
635,500

$35,000
35,000
35,000

$24,103
24,411
24,411

Value of
accelerated
vesting of
stock options
and awards
($)(4)

$379,217
216,697
162,520

Total ($)

$2,329,319
1,574,607
857,431

(1) The amount shown is the lump sum severance payment that consists of 24 months of base salary for

Mr. Gecht and 18 months for each of Messrs. Ritchie and Rosenzweig, plus an amount equal to the bonus
that the named executive officer would have earned in 2008. If the named executive officer is terminated
during the year, the bonus is prorated for the portion of the year that the named executive officer was with
the Company.

(2) Messrs. Gecht, Ritchie and Rosenzweig are entitled to outplacement services up to a maximum of $35,000.
(3) Messrs. Gecht, Ritchie and Rosenzweig are entitled to premium reimbursement for health insurance

coverage under Part 6 of Title I of ERISA (COBRA) for up to 18 months.

(4) Messrs. Gecht, Ritchie and Rosenzweig are entitled to the accelerated vesting of options and restricted stock

awards with respect to that number of shares that would otherwise have vested during the six month period
following the termination date. For options and awards that vest on an annual basis, credit is given as if the
vesting accrued monthly. The value of the accelerated options and awards is calculated based on the
Company’s closing stock price at December 31, 2008 of $9.56 per share. The number of stock options and
restricted stock awards/units subject to acceleration for each named executive officer upon termination
without cause by us or upon termination by the named executive officer for good reason, are as follows:

Name

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Ritchie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock
Options
(#)

146,766
83,866
41,933

Restricted
Stock
awards/units
(#)

39,667
22,667
17,000

The table below provides information concerning potential payments to our named executive officers upon
termination without cause by us, or upon termination for good reason by the named executive officers, within 24
months following a change of control.

Name

Lump sum
severance
payment
($)(1)

Outplacement
benefits ($)(2)

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . .
John Ritchie . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,511,000
1,563,500
790,500

$35,000
35,000
35,000

Continued
health care
coverage
benefits
($)(3)

$24,103
24,411
24,411

Value of
accelerated
vesting of
stock options
and awards
($)(4)

$1,460,548
902,875
554,480

Total ($)

$4,030,651
2,525,786
1,404,391

(1) The amount shown is the lump sum severance payment that consists of 36 months of base salary for

Mr. Gecht and 24 months for each of Messrs. Ritchie and Rosenzweig, plus an amount equal to the bonus
that the named executive officer would have earned in 2008.

(2) Messrs. Gecht, Ritchie and Rosenzweig are entitled to outplacement services up to a maximum of $35,000.

(3) Messrs. Gecht, Ritchie and Rosenzweig are entitled to premium reimbursement for health insurance

coverage under Part 6 of Title I of ERISA (COBRA) for up to 18 months.

(4) Messrs. Gecht, Ritchie and Rosenzweig are entitled to accelerate vesting on 100% of all unvested options,
and restricted stock awards and units as of their termination date. The value of the accelerated options and
awards is calculated based on the Company’s closing stock price at December 31, 2008 of $9.56 per share.
The number of stock options and restricted stock awards/units subject to acceleration for each named
executive officer upon a change of control are as follows:

Name

Stock
Options
(#)

350,000
200,000
100,000

Restricted
Stock
awards/units
(#)

152,777
94,443
58,000

y
x
o
r
P

If any of the severance payments set forth in the tables above constitutes a deferral of compensation subject

to tax under Section 409A of the Internal Revenue Code, the Company will pay the named executive officer a
gross-up payment such that after the payment of all taxes on the gross-up payment, the named executive officer
retains an amount equal to the taxes imposed under Section 409A, including interest and penalties, imposed on
the severance pay.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2008 concerning securities that are authorized

under equity compensation plans.

Plan Category

Equity compensation plans approved by

(a) Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights

(b) Weighted-average
exercise price of
outstanding options,
warrants and rights

(c) Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))

security holders . . . . . . . . . . . . . . . . . . . . . .

7,927,271(1)

$21.67

903,760(2)

Equity compensation plans not approved by

security holders . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
7,927,271

—
21.67

—

903,760

(1)

(2)

Includes options outstanding as of December 31, 2008, representing 78,840 shares with an average exercise
price of $156.39 per share, that were assumed in connection with business combinations.
Includes 556,130 shares available under our 2007 Equity Incentive Award Plan and 337,630 shares
available under our 2000 Employee Stock Purchase Plan.

AUDIT COMMITTEE REPORT

The following is the report of the Audit Committee with respect to the Company’s audited financial

statements for the fiscal year ended December 31, 2008, included in the Company’s Annual Report on
Form 10-K, as amended, for that year.

The Audit Committee has reviewed and discussed these audited financial statements with management of

the Company.

The Audit Committee has discussed with the Company’s independent registered public accounting firm,
PricewaterhouseCoopers LLP, the matters required to be discussed by SAS 61 (Codification of Statements on
Auditing Standards, AU Section 380) as amended, as adopted by the Public Company Accounting Oversight
Board in Rule 3200T, which includes, among other items, matters related to the conduct of the audit of the
Company’s financial statements.

The Audit Committee has received the written disclosures and the letter from PricewaterhouseCoopers LLP

required by Independence Standards Board Standard No. 1 (“Independence Discussions with Audit
Committees”) as amended, and has discussed with PricewaterhouseCoopers LLP the independence of
PricewaterhouseCoopers LLP from the Company.

Based on the review and discussions referred to above in this report, the Audit Committee recommended to

the Company’s Board of Directors that the audited financial statements be included in the Company’s Annual
Report on Form 10-K, as amended, for the year ended December 31, 2008 for filing with the SEC.

Submitted by the Audit Committee
of the Board of Directors:

Richard A. Kashnow
James S. Greene
Thomas Georgens

FINANCIAL AND OTHER INFORMATION

We hereby incorporate by reference into this Proxy Statement Items 6, 7, 7A, 8 and 9 of our Annual Report

on Form 10-K for the fiscal year ended December 31, 2008, filed with the Commission on March 2, 2009, as
amended by Amendment No. 1 to Form 10-K, filed with the Commission on April 30, 2009, and Items 1, 2 and 3
of Part I of our Quarterly Report on Form 10-Q for the quarterly period ended on March 31, 2009, filed with the
Commission on May 11, 2009.

NO INCORPORATION BY REFERENCE

In our filings with the SEC, information is sometimes “incorporated by reference.” This means that we are
referring you to information that has previously been filed with the SEC and the information should be considered
as part of the particular filing. As provided under SEC regulations, the “Report of the Audit Committee” and the
“Report of the Compensation Committee” contained in this Proxy Statement specifically are not incorporated by
reference into any other filings with the SEC and shall not be deemed to be “Soliciting Material.” In addition, this
Proxy Statement includes several website addresses. These website addresses are intended to provide inactive,
textual references only. The information on these websites is not part of this Proxy Statement.

OTHER MATTERS

The Company knows of no other matters to be submitted at the meeting. If any other matters properly come
before the meeting, it is the intention of the persons named in the enclosed form of proxy to vote the shares they
represent as the Board of Directors may recommend.

By Order of the Board of Directors

/s/ BRYAN KO

Bryan Ko
Secretary

y
x
o
r
P

Dated: May 20, 2009

y
x
o
r
P

APPENDIX A

ELECTRONICS FOR IMAGING, INC.
AMENDED AND RESTATED
2000 EMPLOYEE STOCK PURCHASE PLAN
Original Effective Date: August 1, 2000
Amended and Restated: April 21, 2009

PURPOSE.

(a) The purpose of this Amended and Restated 2000 Employee Stock Purchase Plan (the “Plan”) is to
provide a means by which employees of Electronics For Imaging, Inc., a Delaware corporation (the “Company”),
and its Affiliates, as defined in subparagraph 1(b), which are designated as provided in subparagraph 2(b), may
be given an opportunity to purchase stock of the Company. This Plan amends and restates in its entirety the 2000
Employee Stock Purchase Plan, as amended.

(b) The word “Affiliate” as used in the Plan means any parent corporation or subsidiary corporation of the

Company, as those terms are defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code of
1986, as amended (the “Code”).

the services of new employees, and to provide incentives for such persons to exert maximum efforts for the
success of the Company.

(d) The Company intends that the rights to purchase stock of the Company granted under the Plan be
considered options issued under an “employee stock purchase plan” as that term is defined in Section 423(b) of
the Code.

2. ADMINISTRATION.

(a) The Plan shall be administered by the Board of Directors (the “Board”) of the Company unless and until

the Board delegates administration to a committee as provided in subparagraph 2(c). Whether or not the Board
has delegated administration, the Board shall have the final power to determine all questions of policy and
expediency that may arise in the administration of the Plan.

(b) The Board shall have the power, subject to, and within the limitations of, the express provisions of the

Plan:

(i) To determine when and how rights to purchase stock of the Company shall be granted and the

provisions of each offering of such rights (which need not be identical).

(ii) To designate from time to time which Affiliates of the Company shall be eligible to participate in

the Plan.

(iii) To construe and interpret the Plan and rights granted under it, and to establish, amend and revoke
rules and regulations for its administration. The Board, in the exercise of this power, may correct
any defect, omission or inconsistency in the Plan, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.

(iv) To amend the Plan as provided in paragraph 13.

(v) Generally, to exercise such powers and to perform such acts as the Board or the Committee deems
necessary or expedient to promote the best interests of the Company and its Affiliates and to carry
out the intent that the Plan be treated as an “employee stock purchase plan” within the meaning of
Section 423 of the Code.

A-1

(c) The Board may delegate administration of the Plan to a committee composed of not fewer than two
(2) members of the Board (the “Committee”). If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, subject,
however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in the Board the administration
of the Plan.

SHARES SUBJECT TO THE PLAN.

(a) Subject to the provisions of paragraph 12 relating to adjustments upon changes in stock, the aggregate
number of shares of the Company’s common stock (the “Common Stock”) reserved for issuance under the Plan
shall be six million one hundred fifty-four thousand five hundred nine (6,154,509).

(b) The stock subject to the Plan may be unissued, or reacquired, shares of Common Stock, bought on the

market or otherwise.

4. GRANT OF RIGHTS; OFFERING.

(a) The Board or the Committee may from time to time grant or provide for the grant of rights to purchase

Common Stock of the Company under the Plan to eligible employees (an “Offering”) on a date or dates (the
“Offering Date(s)”) selected by the Board or the Committee. Each Offering shall be in such form and shall
contain such terms and conditions as the Board or the Committee shall deem appropriate, which shall comply
with the requirements of Section 423(b)(5) of the Code that all employees granted rights to purchase stock under
the Plan shall have the same rights and privileges. The terms and conditions of an Offering shall be incorporated
by reference into the Plan and treated as part of the Plan. The provisions of separate Offerings need not be
identical, but each Offering shall include (through incorporation of the provisions of this Plan by reference in the
document comprising the Offering or otherwise) the period during which the Offering shall be effective, which
period shall not exceed twenty-seven (27) months beginning with the Offering Date, and the substance of the
provisions contained in paragraphs 5 through 8, inclusive.

(b) If an employee has more than one right outstanding under the Plan, unless he or she otherwise indicates

in agreements or notices delivered hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with a lower exercise price (or an
earlier-granted right, if two rights have identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two rights have identical exercise prices)
will be exercised.

ELIGIBILITY.

(a) Rights may be granted only to employees of the Company or, as the Board or the Committee may
designate as provided in subparagraph 2(b), to employees of any Affiliate of the Company. Except as provided in
subparagraph 5(b), an employee of the Company or any Affiliate shall not be eligible to be granted rights under
the Plan unless, on the Offering Date, such employee has been in the employ of the Company or any Affiliate for
such continuous period preceding such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be greater than two (2) years. In addition, unless otherwise
determined by the Board or the Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the Plan unless, on the Offering Date,
such employee’s customary employment with the Company or such Affiliate is for more than twenty (20) hours
per week and more than five (5) months per calendar year.

(b) The Board or the Committee may provide that each person who, during the course of an Offering, first

becomes an eligible employee of the Company or designated Affiliate will, on a date or dates specified in the

A-2

Offering which coincides with the day on which such person becomes an eligible employee or occurs thereafter,
receive a right under that Offering, which right shall thereafter be deemed to be a part of that Offering. Such right
shall have the same characteristics as any rights originally granted under that Offering, as described herein,
except that:

(i)

(ii)

the date on which such right is granted shall be the “Offering Date” of such right for all purposes,
including determination of the exercise price of such right;

the period of the Offering with respect to such right shall begin on its Offering Date and end
coincident with the end of such Offering; and

(iii) the Board or the Committee may provide that if such person first becomes an eligible employee

within a specified period of time before the end of the Offering, he or she will not receive any
right under that Offering.

y
x
o
r
P

rights are granted, such employee owns stock possessing five percent (5%) or more of the total combined voting
power or value of all classes of stock of the Company or of any Affiliate. For purposes of this subparagraph 5(c),
the rules of Section 424(d) of the Code shall apply in determining the stock ownership of any employee, and
stock which such employee may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.

(d) An eligible employee may be granted rights under the Plan only if such rights, together with any other

rights granted under “employee stock purchase plans” of the Company and any Affiliates, as specified by
Section 423(b)(8) of the Code, do not permit such employee’s rights to purchase stock of the Company or any
Affiliate to accrue at a rate which exceeds twenty-five thousand dollars ($25,000) of fair market value of such
stock (determined at the time such rights are granted) for each calendar year in which such rights are outstanding
at any time.

(e) Officers of the Company and any designated Affiliate shall be eligible to participate in Offerings under
the Plan, provided, however, that the Board or the Committee may provide in an Offering that certain employees
who are highly compensated employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.

6. RIGHTS; PURCHASE PRICE.

(a) On each Offering Date, each eligible employee, pursuant to an Offering made under the Plan, shall be
granted the right to purchase up to the number of shares of Common Stock of the Company purchasable with a
percentage designated by the Board or the Committee not exceeding ten percent (10%) of such employee’s
Earnings (as defined by the Board for each Offering) during the period which begins on the Offering Date (or
such later date as the Board or the Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The Board or the Committee shall
establish one or more dates during an Offering (each of which is hereinafter referred to as a “Purchase Date”) on
which rights granted under the Plan shall be exercised and purchases of Common Stock carried out in accordance
with such Offering.

(b) In connection with each Offering made under the Plan, the Board or the Committee may specify a
maximum number of shares that may be purchased by any employee as well as a maximum aggregate number of
shares that may be purchased by all eligible employees pursuant to such Offering. In addition, in connection with
each Offering that contains more than one Purchase Date, the Board or the Committee may specify a maximum
aggregate number of shares which may be purchased by all eligible employees on any given Purchase Date under
the Offering. If the aggregate purchase of shares upon exercise of rights granted under the Offering would exceed
any such maximum aggregate number, the Board or the Committee shall make a pro rata allocation of the shares
available in as nearly a uniform manner as shall be practicable and as it shall deem to be equitable.

A-3

lesser of:

(i)

an amount equal to eighty-five percent (85%) of the fair market value of the stock on the Offering
Date; or

(ii) an amount equal to eighty-five percent (85%) of the fair market value of the stock on the Purchase

Date.

PARTICIPATION; WITHDRAWAL; TERMINATION.

(a) An eligible employee may become a participant in the Plan pursuant to an Offering by delivering a
participation agreement to the Company within the time specified in the Offering, in such form as the Company
provides. Each such agreement shall authorize payroll deductions of up to the maximum percentage specified by
the Board or the Committee of such employee’s Earnings (as defined by the Board for each Offering) during the
Offering. The payroll deductions made for each participant shall be credited to an account for such participant
under the Plan and shall be deposited with the general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an eligible employee may begin such payroll
deductions, after the beginning of any Offering only as provided for in the Offering. A participant may make
additional payments into his or her account only if specifically provided for in the Offering and only if the
participant has not had the maximum amount withheld during the Offering.

(b) At any time during an Offering, a participant may terminate his or her payroll deductions under the Plan

and withdraw from the Offering by delivering to the Company a notice of withdrawal in such form as the
Company provides. Such withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal from the Offering by a
participant, the Company shall distribute to such participant all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used to acquire stock for the participant) under the
Offering, without interest, and such participant’s right to acquire Common Stock under that Offering shall be
automatically terminated. A participant’s withdrawal from an Offering will have no effect upon such
participant’s eligibility to participate in any other Offerings under the Plan but such participant will be required
to deliver a new participation agreement in order to participate in subsequent Offerings under the Plan.

participant’s employment with the Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll deductions (reduced to the extent, if
any, such deductions have been used to acquire stock for the terminated employee), under the Offering, without
interest.

(d) Rights granted under the Plan shall not be transferable by a participant other than by will or the laws of
descent and distribution, or by a beneficiary designation as provided in paragraph 14, and during a participant’s
lifetime, shall be exercisable only by such participant.

EXERCISE.

(a) On each Purchase Date specified in the relevant Offering, each participant’s accumulated payroll
deductions and any other additional payments specifically provided for in the Offering (without any increase for
interest) will be applied to the purchase of whole shares of stock of the Company, up to the maximum number of
shares permitted pursuant to the terms of the Plan and the applicable Offering, at the purchase price specified in
the Offering. Unless otherwise provided for in the applicable Offering, no fractional shares shall be issued upon
the exercise of rights granted under the Plan. The amount, if any, of accumulated payroll deductions remaining in
each participant’s account after the purchase of shares which is less than the amount required to purchase one
share of stock on the final Purchase Date of an Offering shall be held in each such participant’s account for the

A-4

y
x
o
r
P

purchase of shares under the next Offering under the Plan, unless such participant withdraws from such next
Offering, as provided in subparagraph 7(b), or is no longer eligible to be granted rights under the Plan, as
provided in paragraph 5, in which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll deductions remaining in any
participant’s account after the purchase of shares which is equal to the amount required to purchase whole shares
of Common Stock on the final Purchase Date of an Offering shall be distributed in full to the participant after
such Purchase Date, without interest.

(b) No rights granted under the Plan may be exercised to any extent unless the shares to be issued upon such

exercise under the Plan (including rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act of 1933, as amended (the “Securities Act”) and the Plan is in material compliance
with all applicable state, foreign and other securities and other laws applicable to the Plan. If on a Purchase Date
in any Offering hereunder the Plan is not so registered or in such compliance, no rights granted under the Plan or
any Offering shall be exercised on such Purchase Date, and the Purchase Date shall be delayed until the Plan is
subject to such an effective registration statement and such compliance, except that the Purchase Date shall not
be delayed more than twelve (12) months and the Purchase Date shall in no event be more than twenty-seven
(27) months from the Offering Date. If on the Purchase Date of any Offering hereunder, as delayed to the
maximum extent permissible, the Plan is not registered and in such compliance, no rights granted under the Plan
or any Offering shall be exercised then all payroll deductions accumulated during the Offering (reduced to the
extent, if any, such deductions have been used to acquire stock) shall be distributed to the participants, without
interest.

9. COVENANTS OF THE COMPANY.

(a) During the terms of the rights granted under the Plan, the Company shall at all times make reasonable
efforts to keep available the number of shares of stock required to satisfy such rights, provided that this section
shall not require the Company to take any action that would result in adverse tax, accounting or financial
consequences to the Company.

(b) The Company shall seek to obtain from each federal, state, foreign or other regulatory commission or

agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon
exercise of the rights granted under the Plan. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the Company deems necessary for the
lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to
issue and sell stock upon exercise of such rights unless and until such authority is obtained.

10. USE OF PROCEEDS FROM STOCK.

Proceeds from the sale of stock to participants pursuant to rights granted under the Plan shall constitute

general funds of the Company.

11. RIGHTS AS A STOCKHOLDER.

A participant shall not be deemed to be the holder of, or to have any of the rights of a holder with respect to,

any shares subject to rights granted under the Plan unless and until the participant’s shares acquired upon
exercise of rights hereunder are recorded in the books of the Company (or its transfer agent).

12. ADJUSTMENTS UPON CHANGES IN STOCK.

(a) If any change is made in the stock subject to the Plan, or subject to any rights granted under the Plan
(through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than
cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure

A-5

or other transaction not involving the receipt of consideration by the Company), the Plan and outstanding rights
will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the
class(es) and number of shares and price per share of stock subject to outstanding rights. Such adjustments shall
be made by the Board or the Committee, the determination of which shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as a “transaction not involving the
receipt of consideration by the Company.”)

(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a merger or consolidation in which

the Company is not the surviving corporation; or (3) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities, cash or otherwise, then, as determined
by the Board in its sole discretion, (i) any surviving or acquiring corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may continue in full force and effect, or
(iii) participants’ accumulated payroll deductions may be used to purchase Common Stock immediately prior to
the transaction described above and the participants’ rights under the ongoing Offering terminated.

13. AMENDMENT OF THE PLAN.

(a) The Board or the Committee at any time, and from time to time, may amend the Plan. However, except

as provided in paragraph 12 relating to adjustments upon changes in stock, no amendment shall be effective
unless approved by the stockholders of the Company within twelve (12) months before or after the adoption of
the amendment if such amendment requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act.

(b) The Board or the Committee may amend the Plan in any respect the Board or the Committee deems
necessary or advisable to provide eligible employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder relating to employee stock purchase
plans and/or to bring the Plan and/or rights granted under it into compliance therewith.

(c) Rights and obligations under any rights granted before amendment of the Plan shall not be altered or
impaired by any amendment of the Plan, except with the consent of the person to whom such rights were granted,
or except as necessary to comply with any laws or governmental regulations, or except as necessary to ensure
that the Plan and/or rights granted under the Plan comply with the requirements of Section 423 of the Code.

14. DESIGNATION OF BENEFICIARY.

(a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if

any, from the participant’s account under the Plan in the event of such participant’s death subsequent to the end
of an Offering but prior to delivery to the participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the participant’s account under the Plan in
the event of such participant’s death during an Offering.

(b) Such designation of beneficiary may be changed by the participant at any time by written notice in the
form prescribed by the Company. In the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such participant’s death, the Company shall deliver
such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company, in its sole discretion, may
deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or
if no spouse, dependent or relative is known to the Company, then to such other person as the Company may
designate.

A-6

15. TERMINATION OR SUSPENSION OF THE PLAN.

(a) The Board or the Committee in its discretion, may suspend or terminate the Plan at any time. No rights

may be granted under the Plan while the Plan is suspended or after it is terminated.

(b) Rights and obligations under any rights granted while the Plan is in effect shall not be altered or

impaired by suspension or termination of the Plan, except as expressly provided in the Plan or with the consent of
the person to whom such rights were granted, or except as necessary to comply with any laws or governmental
regulation, or except as necessary to ensure that the Plan and/or rights granted under the Plan comply with the
requirements of Section 423 of the Code.

16. EFFECTIVE DATE OF PLAN.

The Plan initially became effective on August 1, 2000 (the “Effective Date”). The Plan, as amended and
restated herein, shall become effective as of April 21, 2009, but no rights granted under the amended portions of
the Plan shall be exercised unless and until the amendment and restatement of the Plan has been approved by the
stockholders of the Company within twelve (12) months before or after the date the amendment and restatement
of the Plan is adopted by the Board.

y
x
o
r
P

A-7

APPENDIX B

ELECTRONICS FOR IMAGING, INC.
2009 EQUITY INCENTIVE AWARD PLAN

ARTICLE 1.

PURPOSE

The purpose of the Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan (the “Plan”) is to

promote the success and enhance the value of Electronics For Imaging, Inc. (the “Company”) by linking the
personal interests of the members of the Board, Employees, and Consultants to those of Company stockholders
and by providing such individuals with an incentive for outstanding performance to generate superior returns to
Company stockholders. The Plan is further intended to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of members of the Board, Employees, and Consultants upon whose
judgment, interest, and special effort the successful conduct of the Company’s operation is largely dependent.

y
x
o
r
P

ARTICLE 2.

DEFINITIONS AND CONSTRUCTION

Wherever the following terms are used in the Plan they shall have the meanings specified below, unless the
context clearly indicates otherwise. The singular pronoun shall include the plural where the context so indicates.

2.1 “Award” means an Option, a Restricted Stock award, a Stock Appreciation Right award, a Performance

Share award, a Performance Stock Unit award, a Dividend Equivalents award, a Stock Payment award, a
Deferred Stock award, a Restricted Stock Unit award, or a Performance-Based Award granted to a Participant
pursuant to the Plan.

2.2 “Award Agreement” means any written agreement, contract, or other instrument or document

evidencing an Award, including through electronic medium.

2.3 “Board” means the Board of Directors of the Company.

2.4 “Change in Control” means and includes each of the following:

(a) A transaction or series of transactions (other than an offering of Stock to the general public through

a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related
“group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) (other than the
Company, any of its subsidiaries, an employee benefit plan maintained by the Company or any of its subsidiaries
or a “person” that, prior to such transaction, directly or indirectly controls, is controlled by, or is under common
control with, the Company) directly or indirectly acquires beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of securities of the Company possessing more than 50% of the total combined
voting power of the Company’s securities outstanding immediately after such acquisition; or

(b) During any period of two consecutive years, individuals who, at the beginning of such period,

constitute the Board together with any new director(s) (other than a director designated by a person who shall
have entered into an agreement with the Company to effect a transaction described in Section 2.4 or
Section 2.4(b)) whose election by the Board or nomination for election by the Company’s stockholders was
approved by a vote of at least two-thirds of the directors then still in office who either were directors at the
beginning of the two-year period or whose election or nomination for election was previously so approved, cease
for any reason to constitute a majority thereof; or

B-1

involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or
business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets in any
single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in
each case other than a transaction:

(i) Which results in the Company’s voting securities outstanding immediately before the

transaction continuing to represent (either by remaining outstanding or by being converted into voting securities
of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or
owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business
of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority
of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the
transaction, and

(ii) After which no person or group beneficially owns voting securities representing 50% or more

of the combined voting power of the Successor Entity; provided, however, that no person or group shall be
treated for purposes of this Section 2.4(c)(i) as beneficially owning 50% or more of combined voting power of
the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the
transaction; or

(d) The Company’s stockholders approve a liquidation or dissolution of the Company.

The Committee shall have full and final authority, which shall be exercised in its discretion, to determine
conclusively whether a Change in Control of the Company has occurred pursuant to the above definition, and the
date of the occurrence of such Change in Control and any incidental matters relating thereto.

2.5 “Code” means the Internal Revenue Code of 1986, as amended.

2.6 “Committee” means the committee of the Board described in Article 12.

2.7 “Consultant” means any consultant or adviser if: (a) the consultant or adviser renders bona fide services

to the Company or any Subsidiary; (b) the services rendered by the consultant or adviser are not in connection
with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or
maintain a market for the Company’s securities; and (c) the consultant or adviser is a natural person.

2.8 “Covered Employee” means an Employee who is, or could be, a “covered employee” within the

meaning of Section 162(m) of the Code.

2.9 “Deferred Stock” means a right to receive a specified number of shares of Stock during specified time

periods pursuant to Section 8.4.

2.10 “Director” means a member of the Board, or as applicable, a member of the board of directors of a

Subsidiary.

2.11 “Disability” means that the Participant qualifies to receive long-term disability payments under the

Company’s long-term disability insurance program, as it may be amended from time to time.

2.12 “Dividend Equivalents” means a right granted to a Participant pursuant to Section 8.2 to receive the

equivalent value (in cash or Stock) of dividends paid on Stock.

2.13 “Effective Date” shall have the meaning set forth in Section ARTICLE 13.

B-2

2.14 “Eligible Individual” means any person who is an Employee, a Consultant or an Independent Director,

as determined by the Committee.

2.15 “Employee” means any officer or other employee (as defined in accordance with Section 3401(c) of the

Code) of the Company or any Subsidiary.

2.16 “Equity Restructuring” shall mean a nonreciprocal transaction between the Company and its
stockholders, such as a stock dividend, stock split, spin-off, rights offering or recapitalization through a large,
nonrecurring cash dividend, that affects the shares of Stock (or other securities of the Company) or the share
price of Stock (or other securities) and causes a change in the per share value of the Stock underlying outstanding
Awards.

y
x
o
r
P

2.17 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

2.18 “Fair Market Value” means, as of any given date, (a) if Stock is traded on any established stock
exchange, the closing price of a share of Stock as reported in the Wall Street Journal (or such other source as the
Company may deem reliable for such purposes) for such date, or if no sale occurred on such date, the first trading
date immediately prior to such date during which a sale occurred; or (b) if Stock is not traded on an exchange but
is quoted on a national market or other quotation system, the last sales price on such date, or if no sales occurred
on such date, then on the date immediately prior to such date on which sales prices are reported; or (c) if Stock is
not publicly traded, the fair market value established by the Committee acting in good faith (understanding that if
an Option or Stock Appreciation Right is intended by the Committee to be exempt from Section 409A of the
Code, the fair market value shall be established using a method that complies with Section 409A of the Code and
the Department of Treasury regulations and other guidance promulgated thereunder).

2.19 “Full Value Award” means any Award other than an Option or other Award for which the Participant

pays the intrinsic value (whether directly or by forgoing a right to receive a payment from the Company).

2.20 “Incentive Stock Option” means an Option that is intended to meet the requirements of Section 422 of

the Code or any successor provision thereto.

2.21 “Independent Director” means a Director who is not an Employee.

2.22 “Non-Employee Director” means a Director who qualifies as a “Non-Employee Director” as defined in

Rule 16b-3(b)(3) under the Exchange Act, or any successor rule.

2.23 “Non-Qualified Stock Option” means an Option that is not intended to be an Incentive Stock Option.

2.24 “Option” means a right granted to a Participant pursuant to Article 5 of the Plan to purchase a specified

number of shares of Stock at a specified price during specified time periods. An Option may be either an
Incentive Stock Option or a Non-Qualified Stock Option.

2.25 “Participant” means any Eligible Individual who, as a member of the Board, Consultant or Employee,

has been granted an Award pursuant to the Plan.

2.26 “Performance-Based Award” means an Award granted to selected Covered Employees pursuant to
Article 6 or 8, but which is subject to the terms and conditions set forth in Article 9. All Performance-Based
Awards are intended to qualify as Qualified Performance-Based Compensation.

2.27 “Performance Criteria” means the criteria that the Committee selects for purposes of establishing the
Performance Goal or Performance Goals for a Participant for a Performance Period. The Performance Criteria
that will be used to establish Performance Goals are limited to the following: net earnings (either before or after

B-3

interest, taxes, depreciation and amortization), economic value-added, sales or revenue, net income (either before
or after taxes), operating earnings, cash flow (including, but not limited to, operating cash flow and free cash
flow), cash flow return on capital, return on net assets, return on stockholders’ equity, return on assets, return on
capital, stockholder returns, return on sales, gross or net profit margin, productivity, expense, margins, operating
efficiency, customer satisfaction, working capital, earnings per share, price per share of Stock, and market share,
any of which may be measured either in absolute terms or as compared to any incremental increase or as
compared to results of a peer group. The Committee shall define in an objective fashion the manner of
calculating the Performance Criteria it selects to use for such Performance Period for such Participant.

2.28 “Performance Goals” means, for a Performance Period, the goals established in writing by the
Committee for the Performance Period based upon the Performance Criteria. Depending on the Performance
Criteria used to establish such Performance Goals, the Performance Goals may be expressed in terms of overall
Company performance or the performance of a division, business unit, or an individual. The Committee, in its
discretion, may, within the time prescribed by Section 162(m) of the Code, adjust or modify the calculation of
Performance Goals for such Performance Period in order to prevent the dilution or enlargement of the rights of
Participants (a) in the event of, or in anticipation of, any unusual or extraordinary corporate item, transaction,
event, or development, or (b) in recognition of, or in anticipation of, any other unusual or nonrecurring events
affecting the Company, or the financial statements of the Company, or in response to, or in anticipation of,
changes in applicable laws, regulations, accounting principles, or business conditions.

2.29 “Performance Period” means the one or more periods of time, which may be of varying and
overlapping durations, as the Committee may select, over which the attainment of one or more Performance
Goals will be measured for the purpose of determining a Participant’s right to, and the payment of, a
Performance-Based Award.

2.30 “Performance Share” means a right granted to a Participant pursuant to Section ARTICLE 8, to receive
Stock, the payment of which is contingent upon achieving certain Performance Goals or other performance-based
targets established by the Committee.

2.31 “Performance Stock Unit” means a right granted to a Participant pursuant to Section 8.1, to receive
Stock, the payment of which is contingent upon achieving certain Performance Goals or other performance-based
targets established by the Committee.

2.32 “Plan” means this Electronics For Imaging, Inc. 2009 Equity Incentive Award Plan, as it may be

amended from time to time.

2.33 “Qualified Performance-Based Compensation” means any compensation that is intended to qualify as

“qualified performance-based compensation” as described in Section 162(m)(4)(C) of the Code.

2.34 “Restricted Stock” means Stock awarded to a Participant pursuant to Article 6 that is subject to certain

restrictions and may be subject to risk of forfeiture.

2.35 “Restricted Stock Unit” means an Award granted pursuant to Section 8.5.

2.36 “Securities Act” shall mean the Securities Act of 1933, as amended.

2.37 “Stock” means the common stock of the Company and such other securities of the Company that may

be substituted for Stock pursuant to Article 11.

2.38 “Stock Appreciation Right” or “SAR” means a right granted pursuant to Article 7 to receive a payment

equal to the excess of the Fair Market Value of a specified number of shares of Stock on the date the SAR is
exercised over the Fair Market Value on the date the SAR was granted as set forth in the applicable Award
Agreement.

B-4

2.39 “Stock Payment” means (a) a payment in the form of shares of Stock, or (b) an option or other right to
purchase shares of Stock, as part of any bonus, deferred compensation or other arrangement, made in lieu of all
or any portion of the compensation, granted pursuant to Section 8.3(b).

2.40 “Subsidiary” means any “subsidiary corporation” as defined in Section 424(f) of the Code and any
applicable regulations promulgated thereunder or any other entity of which a majority of the outstanding voting
stock or voting power is beneficially owned directly or indirectly by the Company.

ARTICLE 3.

SHARES SUBJECT TO THE PLAN

y
x
o
r
P

3.1 Number of Shares.

(a) Subject to Article 11 and Section 3.1(b), the aggregate number of shares of Stock which may be
issued or transferred pursuant to Awards under the Plan is five million (5,000,000). No more than five million
(5,000,000) shares of Stock may be issued upon the exercise of Incentive Stock Options.

(b) To the extent that an Award terminates, expires, or lapses for any reason, any shares of Stock

subject to the Award shall again be available for the grant of an Award pursuant to the Plan. Additionally, any
shares of Stock tendered or withheld to satisfy the grant or exercise price or tax withholding obligation pursuant
to any Award shall again be available for the grant of an Award pursuant to the Plan. To the extent permitted by
applicable law or any exchange rule, shares of Stock issued in assumption of, or in substitution for, any
outstanding awards of any entity acquired in any form of combination by the Company or any Subsidiary shall
not be counted against shares of Stock available for grant pursuant to this Plan. The payment of Dividend
Equivalents in cash in conjunction with any outstanding Awards shall not be counted against the shares available
for issuance under the Plan. Notwithstanding the provisions of this Section 3.1(a), no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to
qualify as an incentive stock option under Section 422 of the Code.

3.2 Stock Distributed. Any Stock distributed pursuant to an Award may consist, in whole or in part, of

authorized and unissued Stock, treasury Stock or Stock purchased on the open market.

3.3 Limitation on Number of Shares Subject to Awards. Notwithstanding any provision in the Plan to the

contrary, and subject to Article 11, the maximum number of shares of Stock with respect to one or more Awards
that may be granted to any one Employee shall be (i) two million (2,000,000) as to Awards granted to an
Employee during the fiscal year of the Company in which the Employee is initially employed by the Company or
any Subsidiary and (ii) one million (1,000,000) as to Awards granted to an Employee during any subsequent
fiscal year of the Company.

ARTICLE 4.

ELIGIBILITY AND PARTICIPATION

4.1 Eligibility. Each Eligible Individual shall be eligible to be granted one or more Awards pursuant to the

Plan.

4.2 Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from

among all Eligible Individuals, those to whom Awards shall be granted and shall determine the nature and
amount of each Award. No Eligible Individual shall have any right to be granted an Award pursuant to this Plan.

B-5

4.3 Foreign Participants. Notwithstanding any provision of the Plan to the contrary, in order to comply with

the laws in other countries in which the Company and its Subsidiaries operate or have Eligible Individuals, the
Committee, in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries shall be
covered by the Plan; (ii) determine which Eligible Individuals outside the United States are eligible to participate
in the Plan; (iii) modify the terms and conditions of any Award granted to Eligible Individuals outside the United
States to comply with applicable foreign laws; (iv) establish subplans and modify exercise procedures and other
terms and procedures, to the extent such actions may be necessary or advisable (any such subplans and/or
modifications shall be attached to this Plan as appendices); provided, however, that no such subplans and/or
modifications shall increase the share limitations contained in Sections 3.1 and 3.2 of the Plan; and (v) take any
action, before or after an Award is made, that it deems advisable to obtain approval or comply with any necessary
local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Committee may not
take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act, the Code, any
securities law or governing statute or any other applicable law.

ARTICLE 5.

STOCK OPTIONS

5.1 General. The Committee is authorized to grant Options to Eligible Individuals on the following terms

and conditions:

(a) Exercise Price. The exercise price per share of Stock subject to an Option shall be determined by

the Committee and set forth in the Award Agreement; provided, that, subject to Section 5.2(c), the exercise price
for any Option shall not be less than 100% of the Fair Market Value of a share of Stock on the date of grant.

(b) Time and Conditions of Exercise. The Committee shall determine the time or times at which an

Option may be exercised in whole or in part; provided that the term of any Option granted under the Plan shall
not exceed ten years. The Committee shall also determine the performance or other conditions, if any, that must
be satisfied before all or part of an Option may be exercised.

may be paid, the form of payment, including, without limitation: (i) cash, (ii) shares of Stock held for such period
of time as may be required by the Committee in order to avoid adverse accounting consequences and having a
Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion
thereof, or (iii) other property acceptable to the Committee (including through the delivery of a notice that the
Participant has placed a market sell order with a broker with respect to shares of Stock then issuable upon
exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the
sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then
made to the Company upon settlement of such sale). The Committee shall also determine the methods by which
shares of Stock shall be delivered or deemed to be delivered to Participants. Notwithstanding any other provision
of the Plan to the contrary, no Participant who is a Director or an “executive officer” of the Company within the
meaning of Section 13(k) of the Exchange Act shall be permitted to pay the exercise price of an Option, or
continue any extension of credit with respect to the exercise price of an Option with a loan from the Company or
a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.

(d) Evidence of Grant. All Options shall be evidenced by an Award Agreement between the Company

and the Participant. The Award Agreement shall include such additional provisions as may be specified by the
Committee.

5.2 Incentive Stock Options. Incentive Stock Options shall be granted only to Employees and the terms of
any Incentive Stock Options granted pursuant to the Plan, in addition to the requirements of Section ARTICLE 5,
must comply with the provisions of this Section 5.1(d).

B-6

(a) Expiration. Subject to Section 5.2(b), an Incentive Stock Option shall expire and may not be

exercised to any extent by anyone after the first to occur of the following events:

(i) Ten years from the date it is granted, unless an earlier time is set in the Award Agreement;

(ii) Three months after the Participant’s termination of employment as an Employee; and

(iii) One year after the date of the Participant’s termination of employment or service on account
of Disability or death. Upon the Participant’s Disability or death, any Incentive Stock Options exercisable at the
Participant’s Disability or death may be exercised by the Participant’s legal representative or representatives, by
the person or persons entitled to do so pursuant to the Participant’s last will and testament, or, if the Participant
fails to make testamentary disposition of such Incentive Stock Option or dies intestate, by the person or persons
entitled to receive the Incentive Stock Option pursuant to the applicable laws of descent and distribution.

y
x
o
r
P

(b) Dollar Limitation. The aggregate Fair Market Value (determined as of the time the Option is

granted) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant
in any calendar year may not exceed $100,000 or such other limitation as imposed by Section 422(d) of the Code,
or any successor provision. To the extent that Incentive Stock Options are first exercisable by a Participant in
excess of such limitation, the excess shall be considered Non-Qualified Stock Options.

(c) Ten Percent Owners. An Incentive Stock Option shall be granted to any individual who, at the date
of grant, owns stock possessing more than ten percent of the total combined voting power of all classes of Stock
of the Company only if such Option is granted at a price that is not less than 110% of Fair Market Value on the
date of grant and the Option is exercisable for no more than five years from the date of grant.

(d) Notice of Disposition. The Participant shall give the Company prompt notice of any disposition of
shares of Stock acquired by exercise of an Incentive Stock Option within (i) two years from the date of grant of
such Incentive Stock Option or (ii) one year after the transfer of such shares of Stock to the Participant.

(e) Right to Exercise. During a Participant’s lifetime, an Incentive Stock Option may be exercised only

by the Participant.

(f) Failure to Meet Requirements. Any Option (or portion thereof) purported to be an Incentive Stock

Option, which, for any reason, fails to meet the requirements of Section 422 of the Code shall be considered a
Non-Qualified Stock Option.

ARTICLE 6.

RESTRICTED STOCK AWARDS

6.1 Grant of Restricted Stock. The Committee is authorized to make Awards of Restricted Stock to any

Eligible Individual selected by the Committee in such amounts and subject to such terms and conditions as
determined by the Committee. All Awards of Restricted Stock shall be evidenced by an Award Agreement.

6.2 Issuance and Restrictions. Subject to Section 10.6, Restricted Stock shall be subject to such restrictions
on transferability and other restrictions as the Committee may impose (including, without limitation, limitations
on the right to vote Restricted Stock or the right to receive dividends on the Restricted Stock). These restrictions
may lapse separately or in combination at such times, pursuant to such circumstances, in such installments, or
otherwise, as the Committee determines at the time of the grant of the Award or thereafter.

B-7

6.3 Forfeiture. Except as otherwise determined by the Committee at the time of the grant of the Award or
thereafter, upon termination of employment or service during the applicable restriction period, Restricted Stock
that is at that time subject to restrictions shall be forfeited; provided, however, that, except as otherwise provided
by Section 10.6, the Committee may (a) provide in any Restricted Stock Award Agreement that restrictions or
forfeiture conditions relating to Restricted Stock will be waived in whole or in part in the event of terminations
resulting from specified causes, and (b) in other cases waive in whole or in part restrictions or forfeiture
conditions relating to Restricted Stock.

6.4 Certificates for Restricted Stock. Restricted Stock granted pursuant to the Plan may be evidenced in such
manner as the Committee shall determine. If certificates representing shares of Restricted Stock are registered in
the name of the Participant, certificates must bear an appropriate legend referring to the terms, conditions, and
restrictions applicable to such Restricted Stock, and the Company may, at its discretion, retain physical
possession of the certificate until such time as all applicable restrictions lapse.

ARTICLE 7.

STOCK APPRECIATION RIGHTS

7.1 Grant of Stock Appreciation Rights.

(a) A Stock Appreciation Right may be granted to any Eligible Individual selected by the Committee.

A Stock Appreciation Right shall be subject to such terms and conditions not inconsistent with the Plan as the
Committee shall impose and shall be evidenced by an Award Agreement.

(b) A Stock Appreciation Right shall entitle the Participant (or other person entitled to exercise the
Stock Appreciation Right pursuant to the Plan) to exercise all or a specified portion of the Stock Appreciation
Right (to the extent then exercisable pursuant to its terms) and to receive from the Company an amount equal to
the product of (i) the excess of (A) the Fair Market Value of the Stock on the date the Stock Appreciation Right
is exercised over (B) the Fair Market Value of the Stock on the date the Stock Appreciation Right was granted
and (ii) the number of shares of Stock with respect to which the Stock Appreciation Right is exercised, subject to
any limitations the Committee may impose.

7.2 Payment and Limitations on Exercise.

(a) Subject to Sections 7.2(a) payment of the amounts determined under Sections 7.1(a) above shall be

in cash, in Stock (based on its Fair Market Value as of the date the Stock Appreciation Right is exercised) or a
combination of both, as determined by the Committee in the Award Agreement.

(b) To the extent any payment under Section 7.1(a) is effected in Stock, it shall be made subject to

satisfaction of all provisions of Article 5 above pertaining to Options

ARTICLE 8.

OTHER TYPES OF AWARDS

8.1 Performance Share Awards. Any Eligible Individual selected by the Committee may be granted one or
more Performance Share awards which shall be denominated in a number of shares of Stock and which may be
linked to any one or more of the Performance Criteria or other specific performance criteria determined
appropriate by the Committee, in each case on a specified date or dates or over any period or periods determined
by the Committee. In making such determinations, the Committee shall consider (among such other factors as it
deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation
of the particular Participant.

B-8

y
x
o
r
P

8.2 Performance Stock Units. Any Eligible Individual selected by the Committee may be granted one or
more Performance Stock Unit awards which shall be denominated in unit equivalent of shares of Stock and/or
units of value including dollar value of shares of Stock and which may be linked to any one or more of the
Performance Criteria or other specific performance criteria determined appropriate by the Committee, in each
case on a specified date or dates or over any period or periods determined by the Committee. In making such
determinations, the Committee shall consider (among such other factors as it deems relevant in light of the
specific type of award) the contributions, responsibilities and other compensation of the particular Participant.

8.3 Dividend Equivalents.

(a) Any Eligible Individual selected by the Committee may be granted Dividend Equivalents based on

the dividends declared on the shares of Stock that are subject to any Award, to be credited as of dividend
payment dates, during the period between the date the Award is granted and the date the Award is exercised,
vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or
additional shares of Stock by such formula and at such time and subject to such limitations as may be determined
by the Committee.

(b) Dividend Equivalents granted with respect to Options or SARs that are intended to be Qualified

Performance-Based Compensation shall be payable, with respect to pre-exercise periods, regardless of whether
such Option or SAR is subsequently exercised.

8.4 Stock Payments. Any Eligible Individual selected by the Committee may receive Stock Payments in the

manner determined from time to time by the Committee. The number of shares shall be determined by the
Committee and may be based upon the Performance Criteria or other specific performance criteria determined
appropriate by the Committee, determined on the date such Stock Payment is made or on any date thereafter.

8.5 Deferred Stock. Any Eligible Individual selected by the Committee may be granted an award of

Deferred Stock in the manner determined from time to time by the Committee. The number of shares of Deferred
Stock shall be determined by the Committee and may be linked to the Performance Criteria or other specific
performance criteria determined to be appropriate by the Committee, in each case on a specified date or dates or
over any period or periods determined by the Committee subject to Section 10.6. Stock underlying a Deferred
Stock award will not be issued until the Deferred Stock award has vested, pursuant to a vesting schedule or
performance criteria set by the Committee. Unless otherwise provided by the Committee, a Participant awarded
Deferred Stock shall have no rights as a Company stockholder with respect to such Deferred Stock until such
time as the Deferred Stock Award has vested and the Stock underlying the Deferred Stock Award has been
issued.

8.6 Restricted Stock Units. The Committee is authorized to make Awards of Restricted Stock Units to any

Eligible Individual selected by the Committee in such amounts and subject to such terms and conditions as
determined by the Committee. At the time of grant, the Committee shall specify the date or dates on which the
Restricted Stock Units shall become fully vested and nonforfeitable, and may specify such conditions to vesting
as it deems appropriate subject to Section 10.6. At the time of grant, the Committee shall specify the maturity
date applicable to each grant of Restricted Stock Units which shall be no earlier than the vesting date or dates of
the Award and may be determined at the election of the grantee. On the maturity date, the Company shall, subject
to Section 10.5(a), transfer to the Participant one unrestricted, fully transferable share of Stock for each
Restricted Stock Unit scheduled to be paid out on such date and not previously forfeited.

8.7 Term. Except as otherwise provided herein, the term of any Award of Performance Shares, Performance
Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock or Restricted Stock Units shall be set by the
Committee in its discretion.

8.8 Exercise or Purchase Price. The Committee may establish the exercise or purchase price, if any, of any

Award of Performance Shares, Performance Stock Units, Deferred Stock, Stock Payments or Restricted Stock

B-9

Units; provided, however, that such price shall not be less than the par value of a share of Stock on the date of
grant, unless otherwise permitted by applicable state law.

8.9 Exercise upon Termination of Employment or Service. An Award of Performance Shares, Performance

Stock Units, Dividend Equivalents, Deferred Stock, Stock Payments and Restricted Stock Units shall only be
exercisable or payable while the Participant is an Employee, Consultant or Director, as applicable; provided,
however, that the Committee in its sole and absolute discretion may provide that an Award of Performance
Shares, Performance Stock Units, Dividend Equivalents, Stock Payments, Deferred Stock or Restricted Stock
Units may be exercised or paid subsequent to a termination of employment or service, as applicable, or following
a Change in Control of the Company, or because of the Participant’s retirement, death or disability, or otherwise;
provided, however, that any such provision with respect to Performance Shares or Performance Stock Units shall
be subject to the requirements of Section 162(m) of the Code that apply to Qualified Performance-Based
Compensation.

8.10 Form of Payment. Payments with respect to any Awards granted under this Article 8 shall be made in

cash, in Stock or a combination of both, as determined by the Committee.

8.11 Award Agreement. All Awards under this Article 8 shall be subject to such additional terms and

conditions as determined by the Committee and shall be evidenced by an Award Agreement.

ARTICLE 9.

PERFORMANCE-BASED AWARDS

9.1 Purpose. The purpose of this Article 9 is to provide the Committee the ability to qualify Awards

other than Options and SARs and that are granted pursuant to Articles 6 and 8 as Qualified Performance-Based
Compensation. If the Committee, in its discretion, decides to grant a Performance-Based Award to a Covered
Employee, the provisions of this Article 9 shall control over any contrary provision contained in Articles 6 or 8;
provided, however, that the Committee may in its discretion grant Awards to Covered Employees that are based
on Performance Criteria or Performance Goals but that do not satisfy the requirements of this Article 9.

9.2 Applicability. This Article 9 shall apply only to those Covered Employees selected by the
Committee to receive Performance-Based Awards. The designation of a Covered Employee as a Participant for a
Performance Period shall not in any manner entitle the Participant to receive an Award for the period. Moreover,
designation of a Covered Employee as a Participant for a particular Performance Period shall not require
designation of such Covered Employee as a Participant in any subsequent Performance Period and designation of
one Covered Employee as a Participant shall not require designation of any other Covered Employees as a
Participant in such period or in any other period.

9.3 Procedures with Respect to Performance-Based Awards. To the extent necessary to comply with

the Qualified Performance-Based Compensation requirements of Section 162(m)(4)(C) of the Code, with respect
to any Award granted under Articles 6 or 8 which may be granted to one or more Covered Employees, no later
than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal
period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code),
the Committee shall, in writing, (a) designate one or more Covered Employees, (b) select the Performance
Criteria applicable to the Performance Period, (c) establish the Performance Goals, and amounts of such Awards,
as applicable, which may be earned for such Performance Period, and (d) specify the relationship between
Performance Criteria and the Performance Goals and the amounts of such Awards, as applicable, to be earned by
each Covered Employee for such Performance Period. Following the completion of each Performance Period, the
Committee shall certify in writing whether the applicable Performance Goals have been achieved for such
Performance Period. In determining the amount earned by a Covered Employee, the Committee shall have the

B-10

right to reduce or eliminate (but not to increase) the amount payable at a given level of performance to take into
account additional factors that the Committee may deem relevant to the assessment of individual or corporate
performance for the Performance Period.

9.4 Payment of Performance-Based Awards. Unless otherwise provided in the applicable Award

Agreement, a Participant must be employed by the Company or a Subsidiary on the day a Performance-Based
Award for such Performance Period is paid to the Participant. Furthermore, a Participant shall be eligible to
receive payment pursuant to a Performance-Based Award for a Performance Period only if the Performance
Goals for such period are achieved. In determining the amount earned under a Performance-Based Award, the
Committee may reduce or eliminate the amount of the Performance-Based Award earned for the Performance
Period, if in its sole and absolute discretion, such reduction or elimination is appropriate.

y
x
o
r
P

9.5 Additional Limitations. Notwithstanding any other provision of the Plan, any Award which is

granted to a Covered Employee and is intended to constitute Qualified Performance-Based Compensation shall
be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to
Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for
qualification as qualified performance-based compensation as described in Section 162(m)(4)(C) of the Code,
and the Plan shall be deemed amended to the extent necessary to conform to such requirements.

ARTICLE 10.

PROVISIONS APPLICABLE TO AWARDS

10.1 Stand-Alone and Tandem Awards. Awards granted pursuant to the Plan may, in the discretion of

the Committee, be granted either alone, in addition to, or in tandem with, any other Award granted pursuant to
the Plan. Awards granted in addition to or in tandem with other Awards may be granted either at the same time as
or at a different time from the grant of such other Awards.

10.2 Award Agreement. Awards under the Plan shall be evidenced by Award Agreements that set forth

the terms, conditions and limitations for each Award which may include the term of an Award, the provisions
applicable in the event the Participant’s employment or service terminates, and the Company’s authority to
unilaterally or bilaterally amend, modify, suspend, cancel or rescind an Award.

10.3 Limits on Transfer. No right or interest of a Participant in any Award may be pledged, encumbered, or
hypothecated to or in favor of any party other than the Company or a Subsidiary, or shall be subject to any lien,
obligation, or liability of such Participant to any other party other than the Company or a Subsidiary. Except as
otherwise provided by the Committee, no Award shall be assigned, transferred, or otherwise disposed of by a
Participant other than by will or the laws of descent and distribution or pursuant to beneficiary designation
procedures approved from time to time by the Committee (or the Board in the case of Awards granted to
Independent Directors). The Committee by express provision in the Award or an amendment thereto may permit
an Award (other than an Incentive Stock Option) to be transferred to, exercised by and paid to certain persons or
entities related to the Participant, including but not limited to members of the Participant’s family, charitable
institutions, or trusts or other entities whose beneficiaries or beneficial owners are members of the Participant’s
family and/or charitable institutions, or to such other persons or entities as may be expressly approved by the
Committee, pursuant to such conditions and procedures as the Committee may establish. Any permitted transfer
shall be subject to the condition that the Committee receive evidence satisfactory to it that the transfer is being
made for estate and/or tax planning purposes (or to a “blind trust” in connection with the Participant’s
termination of employment or service with the Company or a Subsidiary to assume a position with a
governmental, charitable, educational or similar non-profit institution) and on a basis consistent with the
Company’s lawful issue of securities.

B-11

10.4 Beneficiaries. Notwithstanding Section 10.2, a Participant may, in the manner determined by the
Committee, designate a beneficiary to exercise the rights of the Participant and to receive any distribution with
respect to any Award upon the Participant’s death. A beneficiary, legal guardian, legal representative, or other
person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award
Agreement applicable to the Participant, except to the extent the Plan and Award Agreement otherwise provide,
and to any additional restrictions deemed necessary or appropriate by the Committee. If the Participant is married
and resides in a community property state, a designation of a person other than the Participant’s spouse as his or
her beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective
without the prior written consent of the Participant’s spouse. If no beneficiary has been designated or survives the
Participant, payment shall be made to the person entitled thereto pursuant to the Participant’s will or the laws of
descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by a
Participant at any time provided the change or revocation is filed with the Committee.

10.5 Stock Certificates; Book Entry Procedures.

(a) Notwithstanding anything herein to the contrary, the Company shall not be required to issue or

deliver any certificates evidencing shares of Stock pursuant to the exercise of any Award, unless and until the
Board has determined, with advice of counsel, that the issuance and delivery of such certificates is in compliance
with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any
exchange on which the shares of Stock are listed or traded. All Stock certificates delivered pursuant to the Plan
are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to
comply with federal, state, or foreign jurisdiction, securities or other laws, rules and regulations and the rules of
any national securities exchange or automated quotation system on which the Stock is listed, quoted, or traded.
The Committee may place legends on any Stock certificate to reference restrictions applicable to the Stock. In
addition to the terms and conditions provided herein, the Board may require that a Participant make such
reasonable covenants, agreements, and representations as the Board, in its discretion, deems advisable in order to
comply with any such laws, regulations, or requirements. The Committee shall have the right to require any
Participant to comply with any timing or other restrictions with respect to the settlement or exercise of any
Award, including a window-period limitation, as may be imposed in the discretion of the Committee.

(b) Notwithstanding any other provision of the Plan, unless otherwise determined by the Committee or

required by any applicable law, rule or regulation, the Company shall not deliver to any Participant certificates
evidencing shares of Stock issued in connection with any Award and instead such shares of Stock shall be
recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).

10.6 Full Value Award Vesting Limitations. Notwithstanding any other provision of this Plan to the
contrary, Full Value Awards made to Employees or Consultants shall become vested over a period of not less
than three years (or, in the case of vesting based upon the attainment of Performance Goals or other performance-
based objectives, over a period of not less than one year) following the date the Award is made; provided,
however, that, notwithstanding the foregoing, Full Value Awards that result in the issuance of an aggregate of up
to 10% of the shares of Stock available pursuant to Section 3.1(a) may be granted to any one or more Participants
without respect to such minimum vesting provisions.

10.7 Paperless Administration. In the event that the Company establishes, for itself or using the services of a

third party, an automated system for the documentation, granting or exercise of Awards, such as a system using
an internet website or interactive voice response, then the paperless documentation, granting or exercise of
Awards by a Participant may be permitted through the use of such an automated system.

B-12

ARTICLE 11.

CHANGES IN CAPITAL STRUCTURE

11.1 Adjustments.

(a) In the event of any combination or exchange of shares, merger, consolidation or other distribution
(other than normal cash dividends) of Company assets to stockholders, or any other change affecting the shares
of Stock or the share price of the Stock other than an Equity Restructuring, the Committee shall make such
equitable adjustments, if any, as the Committee in its discretion may deem appropriate to reflect such change
with respect to (a) the aggregate number and kind of shares that may be issued under the Plan (including, but not
limited to, adjustments of the limitations in Sections 3.1 and 3.2); (b) the terms and conditions of any outstanding
Awards (including, without limitation, any applicable performance targets or criteria with respect thereto); and
(c) the grant or exercise price per share for any outstanding Awards under the Plan. Any adjustment affecting an
Award intended as Qualified Performance-Based Compensation shall be made consistent with the requirements
of Section 162(m) of the Code.

y
x
o
r
P

(b) In the event of any transaction or event described in Section ARTICLE 11 or any unusual or
nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial
statements of the Company or any affiliate, or of changes in applicable laws, regulations or accounting
principles, the Committee, in its sole and absolute discretion, and on such terms and conditions as it deems
appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or
event and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of
the following actions whenever the Committee determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with
respect to any Award under the Plan, to facilitate such transactions or events or to give effect to such changes in
laws, regulations or principles:

(i) To provide for either (A) termination of any such Award in exchange for an amount of cash, if

any, equal to the amount that would have been attained upon the exercise of such Award or realization of the
Participant’s rights (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction or event
described in this Section 11.1(c)(ii) the Committee determines in good faith that no amount would have been
attained upon the exercise of such Award or realization of the Participant’s rights, then such Award may be
terminated by the Company without payment) or (B) the replacement of such Award with other rights or property
selected by the Committee in its sole discretion;

(ii) To provide that such Award be assumed by the successor or survivor corporation, or a parent

or subsidiary thereof, or shall be substituted for by similar options, rights or awards covering the stock of the
successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and prices;

(iii) To make adjustments in the number and type of shares of Common Stock (or other securities

or property) subject to outstanding Awards, and in the number and kind of outstanding Restricted Stock or
Deferred Stock and/or in the terms and conditions of (including the grant or exercise price), and the criteria
included in, outstanding options, rights and awards and options, rights and awards which may be granted in the
future;

(iv) To provide that such Award shall be exercisable or payable or fully vested with respect to all
shares covered thereby, notwithstanding anything to the contrary in the Plan or the applicable Award Agreement;
and

(v) To provide that the Award cannot vest, be exercised or become payable after such event.

B-13

contrary in Sections 11.1 and 11.1(a):

(i) The number and type of securities subject to each outstanding Award and the exercise

price or grant price thereof, if applicable, will be equitably adjusted. The adjustments provided under this
Section 11.1(c)(i) shall be nondiscretionary and shall be final and binding on the affected Participant and the
Company.

(ii) The Committee shall make such equitable adjustments, if any, as the Committee in its

discretion may deem appropriate to reflect such Equity Restructuring with respect to the aggregate number and
kind of shares that may be issued under the Plan (including, but not limited to, adjustments of the limitations in
Sections 3.1 and 3.3).

11.2 Acceleration Upon a Change in Control. Notwithstanding Section ARTICLE 11, and except as may

otherwise be provided in any applicable Award Agreement or other written agreement entered into between the
Company and a Participant, if a Change in Control occurs and a Participant’s Awards are not converted,
assumed, or replaced by a successor entity, then at least ten days prior to the Change in Control such Awards
shall become fully exercisable and all forfeiture restrictions on such Awards shall lapse. Upon, or in anticipation
of, a Change in Control, the Committee may cause any and all Awards outstanding hereunder to terminate at a
specific time in the future, including but not limited to the date of such Change in Control, and shall give each
Participant the right to exercise such Awards during a period of time as the Committee, in its sole and absolute
discretion, shall determine. In the event that the terms of any agreement between the Company or any Company
subsidiary or affiliate and a Participant contains provisions that conflict with and are more restrictive than the
provisions of this Section 11.1(c)(ii), this Section 11.1(c)(ii) shall prevail and control and the more restrictive
terms of such agreement (and only such terms) shall be of no force or effect.

11.3 No Other Rights. Except as expressly provided in the Plan, no Participant shall have any rights by
reason of any subdivision or consolidation of shares of stock of any class, the payment of any dividend, any
increase or decrease in the number of shares of stock of any class or any dissolution, liquidation, merger, or
consolidation of the Company or any other corporation. Except as expressly provided in the Plan or pursuant to
action of the Committee under the Plan, no issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of shares of Stock subject to an Award or the grant or exercise price of any Award.

ARTICLE 12.

ADMINISTRATION

12.1 Committee. Unless and until the Board delegates administration of the Plan to a Committee as set forth

below, the Plan shall be administered by the full Board, and for such purposes the term “Committee” as used in
this Plan shall be deemed to refer to the Board. The Board, at its discretion or as otherwise necessary to comply
with the requirements of Section 162(m) of the Code, Rule 16b-3 promulgated under the Exchange Act or to the
extent required by any other applicable rule or regulation, may delegate administration of the Plan to a
Committee consisting of two or more members of the Board. Unless otherwise determined by the Board, the
Committee shall consist solely of two or more members of the Board each of whom is an “outside director,”
within the meaning of Section 162(m) of the Code, a Non-Employee Director and an “independent director”
under the rules of the NASDAQ Global Select Market (or other principal securities market on which shares of
Stock are traded); provided that any action taken by the Committee shall be valid and effective, whether or not
members of the Committee at the time of such action are later determined not to have satisfied the requirements
for membership set forth in this Section ARTICLE 12 or otherwise provided in any charter of the Committee.
Notwithstanding the foregoing: (a) the full Board, acting by a majority of its members in office, shall conduct the
general administration of the Plan with respect to all Awards granted to Independent Directors and for purposes

B-14

y
x
o
r
P

of such Awards the term “Committee” as used in this Plan shall be deemed to refer to the Board and (b) the
Committee may delegate its authority hereunder to the extent permitted by Section 12.4. In its sole discretion, the
Board may at any time and from time to time exercise any and all rights and duties of the Committee under the
Plan except with respect to matters which under Rule 16b-3 under the Exchange Act or Section 162(m) of the
Code, or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the
Committee. Except as may otherwise be provided in any charter of the Committee, appointment of Committee
members shall be effective upon acceptance of appointment; Committee members may resign at any time by
delivering written notice to the Board; and vacancies in the Committee may only be filled by the Board.

12.2 Action by the Committee. Unless otherwise established by the Board or in any charter of the
Committee, a majority of the Committee shall constitute a quorum and the acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved in writing by a majority of the
Committee in lieu of a meeting, shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information furnished to that member by any officer
or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants,
or any executive compensation consultant or other professional retained by the Company to assist in the
administration of the Plan.

12.3 Authority of Committee. Subject to any specific designation in the Plan, the Committee has the

exclusive power, authority and discretion to:

(a) Designate Participants to receive Awards;

(b) Determine the type or types of Awards to be granted to each Participant;

Award will relate;

(d) Determine the terms and conditions of any Award granted pursuant to the Plan, including, but not
limited to, the exercise price, grant price, or purchase price, any reload provision, any restrictions or limitations
on the Award, any schedule for lapse of forfeiture restrictions or restrictions on the exercisability of an Award,
and accelerations or waivers thereof, any provisions related to non-competition and recapture of gain on an
Award, based in each case on such considerations as the Committee in its sole discretion determines; provided,
however, that the Committee shall not have the authority to accelerate the vesting or waive the forfeiture of any
Performance-Based Awards;

(e) Determine whether, to what extent, and pursuant to what circumstances an Award may be settled in,
or the exercise price of an Award may be paid in, cash, Stock, other Awards, or other property, or an Award may
be canceled, forfeited, or surrendered;

(f) Prescribe the form of each Award Agreement, which need not be identical for each Participant;

(g) Decide all other matters that must be determined in connection with an Award;

(h) Establish, adopt, or revise any rules and regulations as it may deem necessary or advisable to

administer the Plan;

(i) Interpret the terms of, and any matter arising pursuant to, the Plan or any Award Agreement; and

(j) Make all other decisions and determinations that may be required pursuant to the Plan or as the

Committee deems necessary or advisable to administer the Plan.

B-15

12.4 Decisions Binding. The Committee’s interpretation of the Plan, any Awards granted pursuant to the

Plan, any Award Agreement and all decisions and determinations by the Committee with respect to the Plan are
final, binding, and conclusive on all parties.

12.5 Delegation of Authority. To the extent permitted by applicable law, the Board may from time to time

delegate to a committee of one or more members of the Board or one or more officers of the Company the
authority to grant or amend Awards to Participants other than (a) Employees who are subject to Section 16 of the
Exchange Act, (b) Covered Employees, or (c) officers of the Company (or Directors) to whom authority to grant
or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and
limits that the Board specifies at the time of such delegation, and the Board may at any time rescind the authority
so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 12.4 shall serve
in such capacity at the pleasure of the Board.

ARTICLE 13.

EFFECTIVE AND EXPIRATION DATE

13.1 Effective Date. The Plan is effective as of the date the Plan is approved by the Company’s stockholders

(the “Effective Date”). The Plan will be deemed to be approved by the stockholders if it is approved either:

(a) By a majority of the votes cast at a duly held stockholders meeting at which a quorum representing

a representing a majority of outstanding voting stock is, either in person or by proxy, present and voting on the
plan; or

(b) By a method and in a degree that would be treated as adequate under Delaware law in the case of an

action requiring stockholder approval.

13.2 Expiration Date. The Plan will expire on, and no Award may be granted pursuant to the Plan after the

tenth anniversary of the Effective Date, except that no Incentive Stock Options may be granted under the Plan
after the earlier of the tenth anniversary of (a) the date the Plan is approved by the Board or (b) the Effective
Date. Any Awards that are outstanding on the tenth anniversary of the Effective Date shall remain in force
according to the terms of the Plan and the applicable Award Agreement.

ARTICLE 14.

AMENDMENT, MODIFICATION, AND TERMINATION

14.1 Amendment, Modification, and Termination. Subject to Section 15.13, with the approval of the Board,
at any time and from time to time, the Committee may terminate, amend or modify the Plan; provided, however,
that (a) to the extent necessary and desirable to comply with any applicable law, regulation, or stock exchange
rule, the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required, and (b) stockholder approval shall be required for any amendment to the Plan that
(i) increases the number of shares available under the Plan (other than any adjustment as provided by Article 11),
(ii) permits the Committee to grant Options with an exercise price that is below Fair Market Value on the date of
grant, or (iii) permits the Committee to extend the exercise period for an Option beyond ten years from the date
of grant. Notwithstanding any provision in this Plan to the contrary, absent approval of the stockholders of the
Company, no Option may be amended to reduce the per share exercise price of the shares subject to such Option
below the per share exercise price as of the date the Option is granted and, except as permitted by Article 11, no
Option may be granted in exchange for, or in connection with, the cancellation or surrender of an Option having
a higher per share exercise price.

B-16

14.2 Awards Previously Granted. Except with respect to amendments made pursuant to Section 15.13, no

termination, amendment, or modification of the Plan shall adversely affect in any material way any Award
previously granted pursuant to the Plan without the prior written consent of the Participant.

ARTICLE 15.

GENERAL PROVISIONS

15.1 No Rights to Awards. No Eligible Individual or other person shall have any claim to be granted any

Award pursuant to the Plan, and neither the Company nor the Committee is obligated to treat Eligible
Individuals, Participants or any other persons uniformly.

y
x
o
r
P

15.2 No Stockholders Rights. Except as otherwise provided herein, a Participant shall have none of the
rights of a stockholder with respect to shares of Stock covered by any Award until the Participant becomes the
record owner of such shares of Stock.

15.3 Withholding. The Company or any Subsidiary shall have the authority and the right to deduct or
withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy federal, state, local and
foreign taxes (including the Participant’s employment tax obligations) required by law to be withheld with
respect to any taxable event concerning a Participant arising as a result of this Plan. The Committee may in its
discretion and in satisfaction of the foregoing requirement allow a Participant to elect to have the Company
withhold shares of Stock otherwise issuable under an Award (or allow the return of shares of Stock) having a Fair
Market Value equal to the sums required to be withheld. Notwithstanding any other provision of the Plan, the
number of shares of Stock which may be withheld with respect to the issuance, vesting, exercise or payment of
any Award (or which may be repurchased from the Participant of such Award within six months (or such other
period as may be determined by the Committee) after such shares of Stock were acquired by the Participant from
the Company) in order to satisfy the Participant’s federal, state, local and foreign income and payroll tax
liabilities with respect to the issuance, vesting, exercise or payment of the Award shall be limited to the number
of shares which have a Fair Market Value on the date of withholding or repurchase equal to the aggregate amount
of such liabilities based on the minimum statutory withholding rates for federal, state, local and foreign income
tax and payroll tax purposes that are applicable to such supplemental taxable income.

15.4 No Right to Employment or Services. Nothing in the Plan or any Award Agreement shall interfere with

or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment or
services at any time, nor confer upon any Participant any right to continue in the employ or service of the
Company or any Subsidiary.

15.5 Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation.

With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan
or any Award Agreement shall give the Participant any rights that are greater than those of a general creditor of
the Company or any Subsidiary.

15.6 Indemnification. To the extent allowable pursuant to applicable law, each member of the Committee or

of the Board shall be indemnified and held harmless by the Company from any loss, cost, liability, or expense
that may be imposed upon or reasonably incurred by such member in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by
reason of any action or failure to act pursuant to the Plan and against and from any and all amounts paid by him
or her in satisfaction of judgment in such action, suit, or proceeding against him or her; provided he or she gives
the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to
handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of
any other rights of indemnification to which such persons may be entitled pursuant to the Company’s Certificate

B-17

of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.

15.7 Relationship to other Benefits. No payment pursuant to the Plan shall be taken into account in

determining any benefits pursuant to any pension, retirement, savings, profit sharing, group insurance, welfare or
other benefit plan of the Company or any Subsidiary except to the extent otherwise expressly provided in writing
in such other plan or an agreement thereunder.

15.8 Expenses. The expenses of administering the Plan shall be borne by the Company and its Subsidiaries.

Unless otherwise determined by the Committee, the expenses of exercising an Award or purchasing or trading
the underlying shares of Stock of an Award and any similar expenses shall be borne solely by the Participant.

15.9 Titles and Headings. The titles and headings of the Sections in the Plan are for convenience of
reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall
control.

15.10 Fractional Shares. No fractional shares of Stock shall be issued and the Committee shall determine, in

its discretion, whether cash shall be given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up or down as appropriate.

15.11 Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the
Plan, and any Award granted or awarded to any Participant who is then subject to Section 16 of the Exchange
Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of
the Exchange Act (including any amendment to Rule 16b-3 under the Exchange Act) that are requirements for
the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted
or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive
rule.

15.12 Government and Other Regulations. The obligation of the Company to make payment of awards in

Stock or otherwise shall be subject to all applicable laws, rules, and regulations, and to such approvals by
government agencies as may be required. The Company shall be under no obligation to register pursuant to the
Securities Act, as amended, any of the shares of Stock paid pursuant to the Plan. If the shares paid pursuant to the
Plan may in certain circumstances be exempt from registration pursuant to the Securities Act, as amended, the
Company may restrict the transfer of such shares in such manner as it deems advisable to ensure the availability
of any such exemption.

15.13 Governing Law. The Plan and all Award Agreements shall be construed in accordance with and

governed by the laws of the State of Delaware.

15.14 Section 409A. To the extent that the Committee determines that any Award granted under the Plan is
subject to Section 409A of the Code, the Award Agreement evidencing such Award shall incorporate the terms
and conditions required by Section 409A of the Code. To the extent applicable, the Plan and Award Agreements
shall be interpreted in accordance with Section 409A of the Code and Department of Treasury regulations and
other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance
that may be issued after the Effective Date. Notwithstanding any provision of the Plan to the contrary, in the
event that following the Effective Date the Committee determines that any Award may be subject to
Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury
guidance as may be issued after the Effective Date), the Committee may adopt such amendments to the Plan and
the applicable Award Agreement or adopt other policies and procedures (including amendments, policies and
procedures with retroactive effect), or take any other actions, that the Committee determines are necessary or
appropriate to (a) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment
of the benefits provided with respect to the Award, or (b) comply with the requirements of Section 409A of the

B-18

Code and related Department of Treasury guidance and thereby avoid the application of any penalty taxes under
such Section.

* * * * *

I hereby certify that the foregoing Plan was duly adopted by the Board of Directors of Electronics For Imaging,
Inc. on

, 2009.

* * * * *

I hereby certify that the foregoing Plan was approved by the stockholders of Electronics For Imaging, Inc. on

, 2009.

Executed on this

day of

, 2009.

y
x
o
r
P

Corporate Secretary

B-19

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

For the fiscal year ended December 31, 2008

EXCHANGE ACT OF 1934

Commission File Number: 000-18805

ELECTRONICS FOR IMAGING, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other Jurisdiction of
incorporation or organization)

94-3086355
(I.R.S. Employer
Identification No.)

303 Velocity Way, Foster City, CA 94404
(Address of principal executive offices) (Zip Code)

(650) 357-3500
(Registrant’s telephone number, including area code)

K
-
0
1
m
r
o
F

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

Title of Each Class

Common Stock, $.01 Par Value

Name of Exchange on which Registered

The NASDAQ Stock Market LLC

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90 days. Yes È 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 the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. È
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act).

Large accelerated filer È
Non-accelerated filer ‘

‘
Accelerated filer
Smaller reporting company ‘

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the 2009 Annual Meeting of
Stockholders are incorporated by reference into Part III hereof.
** Based upon the last trade price of the Common Stock reported on the NASDAQ Global Select Market on June 30, 2008, the last
business day of the registrant’s second quarter of the 2008 fiscal year. Excludes approximately 18,179,704 shares of common stock
held by directors, executive officers and holders known to the registrant to hold 10% or more of the registrant’s outstanding
Common Stock in that such persons may be deemed to be affiliates. This determination of executive officer or affiliate status is not
necessarily a conclusive determination for other purposes. Exclusion of shares held by any person should not be construed to
indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of
the registrant, or that such person is controlled by or under common control with the registrant.

TABLE OF CONTENTS

PART I

ITEM 1
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1A Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 1B Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 2
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 3
Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 4

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

PART III
ITEM 10 Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 12

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 13 Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . .
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 14

PART IV
ITEM 15 Exhibits, Financial Statement Schedules and Reports on Form 10-K . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT INDEX
EXHIBIT 10.32
EXHIBIT 12.1
EXHIBIT 21
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1

1
12
26
26
27
29

30
33
34
55
57
101
101
101

102
102

102
103
103

104
109

PART I

This Annual Report on Form 10-K includes certain registered trademarks, trademarks, and trade names of
Electronics For Imaging, Inc., its subsidiaries (collectively, “EFI” or the “Company”) and others. Digital
StoreFront, DocStream, Electronics For Imaging, Fiery, Inkware, Jetrion, and VUTEk are registered trademarks
of the Company. EFI, the Fiery Prints logo, Hagen, Logic, Monarch, Pace, PrintSmith, and Rastek, are
trademarks of the Company. All other terms and product names may be trademarks or registered trademarks of
their respective owners, and are hereby acknowledged.

Certain of the information contained in this Annual Report on Form 10-K, including without limitation,
statements made under this Part I, Item 1 “Business” and Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and Item 7A, “Quantitative and Qualitative
Disclosures about Market Risk” which are not historical facts, may include “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended (“Exchange Act”) and is subject to risks and uncertainties and actual results
or events may differ materially. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,”
“intend,” “will,” “may,” “should,” “plan,” “potential,” “seek,” “continue” and similar expressions as they relate
to the Company or its management are intended to identify such statements as “forward-looking statements.”
Such statements reflect the current views of the Company and its management with respect to future events and
are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, the Company’s actual results, performance or
achievements could differ materially from the results expressed in, or implied by, these forward-looking
statements. Important factors that could cause the Company’s actual results to differ materially from those
included in the forward-looking statements made herein include, without limitation, those factors discussed in
Item 1 “Business,” in Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K and in the
Company’s other filings with the Securities and Exchange Commission (“SEC”), including the Company’s most
recent Quarterly Report on Form 10-Q and current reports on Form 8-K, and any amendments thereto. The
Company assumes no obligation to revise or update these forward-looking statements to reflect actual results,
events or changes in factors or assumptions affecting such forward-looking statements.

Item 1: Business

Filings

We file annual reports, quarterly reports, proxy statements and other documents with the SEC under the
Exchange Act. The public may read and copy any materials that we file with the SEC at the SEC’s Public
Reference Room at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains
an Internet website that contains reports, proxy and information statements and other information regarding
issuers, including EFI, that file electronically with the SEC. The public can obtain any documents that we file
with the SEC at http://www.sec.gov.

We also make available free of charge through our Internet website (http://www.efi.com) our Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to
those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the SEC.

General

EFI was incorporated in Delaware in 1988 and commenced operations in 1989. In 1992, we made our initial
public offering of common stock. Our common stock is traded on the NASDAQ Global Select Market under the
symbol EFII. Our corporate offices are located at 303 Velocity Way, Foster City, California 94404.

K
-
0
1
m
r
o
F

We are the world leader in color digital print controllers, super-wide format printers and inks and print
management solutions. Our award-winning solutions, integrated from creation to print, deliver increased
performance, cost savings and productivity. Our robust product portfolio includes Fiery digital color print
servers, VUTEk super-wide digital inkjet printers, UV and solvent inks, Jetrion industrial inkjet printing systems,
Rastek wide-format digital inkjet printers, print production workflow and management information software, and
corporate printing solutions. Our integrated solutions and award-winning technologies are designed to automate
print and business processes, streamline workflow, provide profitable value-added services and produce accurate
digital output.

Products and Services

Controllers

Headlined by EFI’s flagship Fiery brand, our controller technologies transform digital copiers and printers into
networked printing devices. Once networked, EFI-powered printers and copiers can be shared across
workgroups, departments, the enterprise and the Internet to quickly and economically produce high-quality color
and black & white documents. Our color digital print controllers provide solutions for a broad range of the
printing market—from entry-level desktop printers to production-level digital copiers. Our color digital print
controller line of products is sold to original equipment manufacturers (“OEMs”) for sale to customers, and
consists of: (i) stand-alone print controllers which are connected to digital copiers and other peripheral devices
and (ii) embedded and design-licensed solutions which are used in digital copiers, desktop laser printers and
multifunctional devices.

Our main controller platforms, primary OEMs and user environments are as follows:

Platform

Primary OEM

User environment

Fiery external print
servers

Canon, Fuji Xerox, IKON, Konica
Minolta, OKI Data, Ricoh, Sharp,
Toshiba, Xerox

Print for Pay, Corporate Reprographic
Departments, Graphic Arts, Advertising
Agencies, Transactional Printers, Commercial
Printers

Fiery embedded servers
(boards and chipsets)

Canon, Fuji Xerox, IKON, Konica
Minolta, OKI Data, Ricoh, Sharp,
Toshiba, Xerox

Office Environments

Splash

MicroPress

Xerox

Graphic Arts, Advertising Agencies

Canon, Danka, IKON, Konica
Minolta, Ricoh

Corporate Reprographic Departments,
Commercial Printers

Inkjet Products—Vutek, Jetrion, and Rastek (“Inkjet”)

Vutek. Our industry-leading VUTEk super-wide format digital inkjet printers and inks are used by billboard
graphics printers, commercial photo labs, large sign shops, graphic screen printers and digital graphics providers
to print billboards, building wraps, banners, art exhibits, point of purchase signage and other large displays.
VUTEk printers are divided into two categories, printers using solvent inks and printers using ultra violet (“UV”)
curable inks. In 2007, we introduced a new addition to our QS series of high-speed, high-resolution super-wide
printers. This new printer can accommodate high-volume and flexible substrates.

Some of our more popular printers and features are as follows:

Printer Type

Models

Capabilities

Applications

Solvent

UltraVU Series
VUTEk 3360

Printing widths of 1.5 to 5.0 meters;
4, 6, and 8 colors; Flexible substrates

PressVu Series QS
Series

Printing widths up to 2.0 to 3.2 meters;
4, 6, and 7 colors; Flexible and rigid
substrates; UV curable inks

Jetrion

4000 Series

Print resolutions up to 1000dpi; 4 or 6
colors; Precise color-color registration

Banners, Billboards,
Signage, Building Wraps,
and Flags

Point of purchase and
exhibition signage, Backlit
displays, and Photo-quality
graphics

Primary and secondary
label applications,
Industrial label or flexible
packaging markets

Rastek

H700 UV Hybrid
Flatbed

Speeds up to 24 square meters per hour
and up to 1,200dpi; Handles media of
thicknesses up to 5 centimeters

Indoor and outdoor
graphics with photographic
image quality

Jetrion. Our Jetrion products specialize in digital printing and provide a wide array of industrial inkjet systems,
custom high-performance integration solutions, and specialty inks to the converting, packaging and direct mail
industries. In 2008, we launched our Jetrion 4000 Full Color Digital Label printer focused on short run,
on-demand, color label printing. We also manufacture the inks used in our inkjet printers. Each of our inks is
customized for each of our printers to provide optimum performance on that printer. In addition, we manufacture
and sell private label inks to third-party inkjet printer manufacturers. Our inks provide a renewable revenue
stream generated from sales to our existing customer base as well as sales to third parties.

Rastek. To further expand our current market segment and Inkjet line of products, we acquired Raster Printers,
Inc. (“Raster”) on December 2, 2008, which was re-branded as Rastek post-acquisition. Rastek develops,
manufacturers, and markets Hybrid and Flatbed UV wide format graphics printers in the mid-range market
sector.

K
-
0
1
m
r
o
F

Advanced Professional Print Software (“APPS”)

To provide our customers with print solutions, we have developed technology that enhances printing workflow
and makes printing operations more powerful, productive and easier to manage from one centralized user
interface. Most of our software solutions have been developed with the express goal of automating print
processes and streamlining workflow via open, integrated and interoperable EFI products, services and solutions.

Our enterprise resource planning and collaborative supply chain software print management solutions are
designed to enable printers and print buyers to improve productivity and customer service while reducing costs.
Procurement applications for print buyers and print producers facilitate web-based collaboration across the print
supply chain. Customers recognize that print management information systems, or PMIS, are essential to
improving their business practices and profitability and we are continuing to focus on making our PMIS solutions
the global industry standard. To further strengthen our APPS business, we acquired Pace Systems Group, Inc.
(“Pace”) on July 28, 2008. Pace is a print management software company which provides practical PMIS and
e-commerce solutions that make printing and graphic art companies more efficient and profitable. This product is
scalable and caters to many types of commercial print shops.

Our software offerings currently include:

Product Name

Description

User

Proofing software: ColorProof XF and
Fiery XF

Digital color proofing and Inkjet
production print solutions offering
fast, flexible workflow, power,
and expandability

Print management information
systems: EFI Monarch (previously
Hagen), EFI Logic, EFI PSI, EFI
PrintSmith, Prograph and PrintFlow

Collect, organize, and present
critical information to improve
process control and profit
potential

Digital, commercial and hybrid
printers, prepress providers,
publishers, creative agencies and
photographers, and super wide &
wide format print providers

Commercial, publishing, digital,
in-plant, print for pay, large
format and specialty printers

Web-based order entry and order
management systems: Digital
StoreFront and PrinterSite

Web interface to manage print
transactions between customer and
printer

Commercial, publishing, digital,
in-plant, print for pay, large
format and specialty printers

Web-based print management system:
EFI Pace

Software modules for: estimating,
scheduling, print production,
accounting, and e-commerce

Commercial, publishing

Growth and Expansion Strategies

Our overall objective is to continue to introduce new generations of digital print controllers as well as expand and
improve our offerings in inkjet, professional printing software applications, and in other new product lines
related to digital printing, workflow and print management. With respect to our current products, our primary
goal is to offer best of breed solutions that are interoperable and conform to open standards, which will allow
customers to configure the most efficient solution for their business. Our strategy to accomplish these goals
consists of four key elements: proliferate and expand product lines; develop and expand relationships with key
industry participants; establish enterprise coherence and leverage industry standardization; and leverage
technology and industry expertise to expand the scope of products, channels and markets. Each of these items is
discussed below.

Proliferate and Expand Product Lines

We intend to continue to develop new digital print controllers that are “scalable,” meaning products that continue
to meet the changing needs of the user as their business grows. Our products offer a broad range of features and
functionality when connected to, or integrated with, digital color and black-and-white copiers, as well as desktop
color laser printers.

We intend to continue our development of platform enhancements that advance the performance and usability of
our software applications in order to provide cohesive, integrated solutions for our customers.

In 2007, we introduced the next generation of our Fiery hardware along with a number of new enhanced
workflow and production management applications. These new products are designed to provide customers with
optimal print engine performance, more efficient workflow, more accurate color and greater control over and
visibility into their businesses. In 2008, we expanded our application software on our Fiery products to include
Fiery Central, a new, modular production workflow solution designed to further optimize engine performance
and ensure total color quality control in the color printing workflow for graphic arts professionals.

Our expansion of product lines includes those from our Jetrion business unit, a leading innovator of inkjet
printers, inks and custom printing systems for the label and packaging industries. In 2008, we launched our
Jetrion 4000 digital label printing system. This new printer produces full color, variable image labels up to
5.5 inches wide across a broad array of substrates.

In 2007, we introduced a new VUTEk super-wide UV curing printer. The new 3.2 meter QS3200r provides the
production speed, quality and extended flexible media capabilities necessary to better enable our customers to
meet and profit from the growing needs of their customers. The QS3200r caters to sign shops, screen printers,
and print providers looking to complement or replace existing solvent or UV output. In 2008, we continued to
widen EFI’s offering in the market with the introduction of the new Vutek DS8300 inkjet printer at the 2008
DRUPA trade show in Germany, and is expected to be launched in 2009. We also continue to explore acquisition
possibilities as a way to expand our product lineup and customer base. Although there can be no assurance that
acquisitions will be successful, acquisitions have allowed us to broaden our product lines.

Develop and Expand Relationships with Key Industry Participants

Our customer relationships are one of our most important assets. We have established relationships with leading
printer and copier industry companies, including Canon, Fuji Xerox, Konica Minolta, OKI Data, Ricoh, Sharp,
Toshiba and Xerox, which we collectively refer to as our OEM customers.

Our relationships with our OEM customers are based upon business relationships we have established over time.
However, our agreements with such OEM customers generally do not require them to make any future purchases
from us, and our OEM customers are generally free to purchase products from our competitors or build their own
and cease purchasing our products at any time, for any reason or no reason.

Our Inkjet products and our Advanced Professional Print Software are sold both direct and via distribution
arrangements to all sizes of print providers.

Additionally, we have established relationships with many leading distribution companies in the office, graphic
arts and commercial print industries such as IKON, Fujifilm Graphic Systems, Pitman, Nazdar and 3M. We seek
to establish new relationships in pursuit of the goal of offering our controller line of products as well as our
software technology for optimizing the management and creation of documents in a variety of print
environments.

We also have established relationships with many of the leading print providers globally, such as
R.R. Donnelley, Fedex Kinkos, Quebecor, and Staples. These direct sales relationships, along with dealer
arrangements, are important for our understanding of the end markets for our products and serve as a source of
future product development ideas. In many cases our products are customized for the needs of large customers
yet maintain the common intuitive interfaces that EFI is known for around the world.

K
-
0
1
m
r
o
F

Establish Enterprise Coherence and Leverage Industry Standardization

In our development of new products and platforms, we seek to establish coherence across our entire product line
by designing products that provide a consistent “look and feel” to the end-user. We believe cross-product
coherence can create higher productivity levels as a result of shortened learning curves. Additionally, we believe
the integrated coherence that end-users can achieve using EFI products for all of their digital printing and
imaging needs leads to a lower total cost of ownership. We also advocate open architecture utilizing industry-
established standards to provide inter-operability across a range of digital printing devices and software
applications, ultimately providing end-users more choice and flexibility in their selection of products. For
example in 2007, we introduced integration between our web-based Digital StoreFront application, our Monarch
OA (formerly Hagen) print MIS application, and our Fiery XF Production Color RIP including integration to
either our Fiery or our VUTEk product line, leveraging the industry standard Job Definition Format (“JDF”). In
2008, we introduced a similar integration between Pace and our APPS products.

Leverage Technology and Industry Expertise to Expand the Scope of Products, Channels and Markets

We have assembled, organically and through acquisitions, an experienced team of technical support and sales and
marketing personnel with backgrounds in color reproduction, digital pre-press, image processing, management

information systems, networking and software and hardware engineering as well as market knowledge of
enterprise printing, graphic arts and commercial printing. By applying our expertise in these areas, we expect to
continue to expand the scope and sophistication of our products and gain access to new markets and channels of
distribution.

Significant Relationships

We have established and continue to build and expand relationships with our OEMs and distributors of digital
printing technology in order to benefit from their products, distribution channels and marketing resources. Our
customers include domestic and international manufacturers, distributors and sellers of color and black-and-white
digital copiers, wide-format printers and desktop color printers. We work closely with our OEM customers with
the aim of developing solutions that incorporate leading technology, and that work optimally in conjunction with
such companies’ products. The top revenue-generating OEMs or distributors, in alphabetical order, that we sold
products to in 2008 were Canon, Fuji Xerox, IKON Office Solutions, Konica Minolta, OKI Data, Ricoh,
Toshiba, and Xerox. Together, sales to Canon and Xerox accounted for approximately 29% of our 2008 revenue,
with sales to each of these two customers accounting for more than 10% of our revenue. Because sales of our
printer and copier-related products constitute a significant portion of our controller revenues and there are a
limited number of OEMs producing copiers and printers in sufficient volume to be attractive customers for us,
we expect that we will continue to depend on a relatively small number of OEM customers for a significant
portion of our revenues in future periods. Accordingly, if we lose or experience reduced sales to an important
OEM, we will have difficulty replacing the revenue traditionally generated from such OEM with sales to new or
existing OEMs and our revenues may decline.

We customarily enter into development and distribution agreements with our OEM customers. These agreements
can be terminated under a range of circumstances and often upon relatively short notice. The circumstances
under which an agreement can be terminated vary from agreement to agreement and there can be no assurance
that our OEM customers will continue to purchase products from us in the future, despite such agreements.
Furthermore, our agreements with our OEM customers generally do not commit such customers to make future
purchases from us and they could decline to purchase products from us in the future and could purchase products
from our competitors, or build the products themselves. We recognize the importance of, and work hard to
maintain, our relationships with our customers. However, our relationships with our customers are affected by a
number of factors including, among others: competition from other suppliers, competition from internal
development efforts by the OEMs themselves and changes in general economic, competitive or market
conditions such as changes in demand for our or the OEM’s products, or fluctuations in currency exchange rates.
There can be no assurance that we will continue to maintain or build the relationships we have developed to date.
See Item 1A—We face competition from other suppliers as well as our own OEM customers and if we are not
able to compete successfully our business may be harmed.

We have a continuing relationship pursuant to a license agreement with Adobe Systems, Inc. (“Adobe”) and
license PostScript® software from Adobe for use in many of our controller solutions. This relationship is
important because each of our controller solutions requires page description language software such as that
provided by Adobe in order to operate. Adobe’s PostScript® software is widely used to manage the geometry,
shape and typography of hard copy documents and Adobe is a leader in providing page description software.
Although to date we have successfully obtained licenses to use Adobe’s PostScript® software when required,
Adobe is not required to, and we cannot be certain that Adobe will, grant future licenses to Adobe PostScript®
software on reasonable terms, in a timely manner, or at all. In addition, in order to obtain licenses from Adobe,
Adobe requires that we obtain from them quality assurance approvals for our products that use Adobe software.
If Adobe does not grant us such licenses or approvals, if the Adobe licenses are terminated, or if our relationship
with Adobe is otherwise materially impaired, we would likely be unable to sell products that incorporate Adobe
PostScript® software. If that occurred, we would have to license, acquire, develop or reestablish our own
competing software as a viable alternative for Adobe Postscript® and our financial condition and results of
operations could be significantly harmed for a period of time.

Our inkjet printers are constructed with inkjet print heads which are manufactured by a limited number of
suppliers. If we were to experience difficulty obtaining print heads, our production of inkjet printers would be
limited and our revenues would be harmed. We manufacture inks for use in our printers and rely upon a limited
number of suppliers for certain pigments used in our inks. Our ink sales would decline significantly if we were
unable to obtain the pigments as needed. See Item 1A—We depend upon a limited group of suppliers for key
components in our products. The loss of any of these suppliers, the inability of any of these suppliers to meet our
requirements, or the delays or shortages of supply of these components could adversely affect our business.

Human Resources

As of December 31, 2008, we employed 2,021 full time employees. Approximately 515 were in sales and
marketing, 242 were in general and administrative, 370 were in manufacturing and 894 were in research and
development. Of the total number of employees, we had approximately 1,453 employees located in the Americas
(primarily the United States) and 568 employees located in offices outside of the Americas.

Distribution and Marketing

Our primary distribution method for our controller line of products is to sell them to our OEMs. Our OEMs in
turn sell these products to OEM-affiliated and independent distributors/dealers/resellers and end-users for use
with the OEM’s copiers or printers as part of an integrated printing system. See Item 1A—We rely on sales to a
relatively small number of OEM customers and the loss of any of these OEM customers could substantially
decrease our revenues.

Our print management information systems are primarily sold directly to the end-user by our own sales force. To
distribute our VUTEk printers and ink, we utilize a direct sales force in North America and Europe and
principally distributors for the rest of our global distribution. Any interruption of the distribution methods could
negatively impact us in the future.

Our primary distribution method for our MicroPress controllers, our EFI proofing systems and our EFI workflow
software products is to utilize a mix of distributors and our own sales force. We sell directly to our authorized
distributors, dealers, and resellers who in turn sell the solutions to end-users either in a stand alone form or
bundled with other solutions they offer. Primary customers with whom we have established distribution
agreements include Enovation, Fujifilm Graphic Systems, Pitman and other sales companies. There can be no
assurance that we will continue to successfully distribute our products through these channels.

We promote all of our products through public relations, direct mail, advertising, promotional material, trade
shows and ongoing customer communication programs. The majority of the sales leads for inkjet printer sales are
generated from tradeshows and any interruption in our tradeshow participation could materially impact our
revenue and profitability.

Research and Development

Research and development costs for 2008 were $140.4 million. As of December 31, 2008, 894 of our 2,021 full-
time employees were involved in research and development. We believe that development of new products and
enhancement of existing products are essential to our continued success, and management intends to continue to
devote substantial resources to research and new product development. We expect to make significant
expenditures to support our research and development programs for the foreseeable future.

We are developing products to support additional color and black-and-white printing devices including desktop
printers, high-end color copiers, digital black-and-white copiers and multifunctional devices. We are also
developing new software applications designed to maximize workflow efficiencies and to meet the needs of the
graphic arts and commercial print professional, including proofing solutions and print management information
systems solutions. We also expect to continue to develop new platforms of inkjet print technologies in order to
meet the needs of existing and future markets. We have research and development sites in nine U.S. locations, as

K
-
0
1
m
r
o
F

well as in Israel, India, Japan and Europe. See “Growth and Expansion Strategies—Proliferate and Expand
Product Lines” above. Substantial additional expense is required to complete and bring to market each of the
products currently being developed by us.

Manufacturing

We utilize sub-contractors to manufacture our controller line of products. These sub-contractors work closely
with us to promote low costs and high quality in the manufacture of our products. Sub-contractors purchase
components needed for our products from third parties. We are completely dependent on the ability of our
sub-contractors to produce products sold by us and although we supervise our sub-contractors, there can be no
assurance that such sub-contractors will perform efficiently or effectively. In 2008, a significant amount of our
controller line of products was manufactured at a single sub-contractor, Celestica Inc. We are transferring to a
new sub-conductor in 2009: Bell Microproducts. Should Celestica or Bell Microproducts experience any inability
or unwillingness to manufacture or deliver product from this location, our business, financial condition and
operations could be harmed. Since we do not maintain long-term agreements with our sub-contractors, any of our
sub-contractors could enter into agreements with our competitors that might restrict or prohibit such
sub-contractors from manufacturing our products or could otherwise lead to an inability of such sub-contractor
from filling our orders in a timely manner. See Item 1A—We are dependent on a limited number of
subcontractors, with whom we do not have long-term contracts, to manufacture and deliver products to our
customers and the loss of any of these subcontractors could adversely affect our business.

Our VUTEk printers and ink are manufactured at our Meredith, New Hampshire facility. Meredith is not located
in a major metropolitan area, and we have encountered difficulties in hiring and retaining adequate skilled labor
and management. Most of the components used in the manufacturing of the printers and the inks are available
from multiple suppliers, except for the inkjet print heads and the pigments for our inks. Although typically in low
volumes, many key components are sourced from single vendors. If we were unable to obtain the print heads
currently used, we would be required to redesign our printers to use different print heads. If we were to change
pigments, we would be required to reformulate and test the inks. In two of our locations, we use hazardous
materials to formulate solvent-based inks. The storage, use and disposal of those materials must meet the
requirements of various environmental regulations. See Item 1A—If we are not able to hire and retain skilled
employees, we may not be able to develop products or meet demand for our products in a timely fashion; and We
depend upon a limited group of suppliers for key components in our product. The loss of any of these suppliers,
the inability of any of these suppliers to meet our requirements, or the delays or shortages of supply of these
components could adversely affect our business.

A significant number of the components necessary for the manufacture of our controller line of products are
obtained from a sole supplier or a limited group of suppliers. These include processors from Intel and other
related semiconductor components. We depend largely on the following sole and limited source suppliers for our
components and manufacturing services:

Supplier

Components

Intel
Toshiba
Altera
LSI Logic
Texas Instruments
Celestica
Bell Microproducts
Seiko
Fuji
Imaging Technology International Corp Contract manufacturing
Xaar
Tundra

Central processing units, or CPUs; chip sets
Application-specific integrated circuits (“ASIC”)
ASIC
ASIC
Digital signal processors, (“DSP”)
Contract manufacturing
Contract manufacturing
Inkjet print heads
Inkjet print heads

Inkjet print heads
Chip sets

We do not maintain long-term agreements with any of our suppliers of components and primarily conduct our
business with such suppliers solely on a purchase order basis. If any of our sole or limited source suppliers were
unwilling or unable to supply us with the components for which we rely on them, we may be unable to continue
manufacturing our products utilizing such components.

The absence of agreements with most of our suppliers also subjects us to fluctuations in pricing, a factor we
believe is partially offset by the fact that our suppliers benefit from selling as many components to us as possible.
Many of our components are similar to those used in personal computers, and the demand and price fluctuations
of personal computer components could affect our component costs. Because the purchase of key components
involves long lead times, in the event of unanticipated volatility in demand for our products, we may be unable to
manufacture certain products in a quantity sufficient to meet end user demand, or we may hold excess quantities
of inventory. We maintain an inventory of components for which we are dependent upon sole or limited source
suppliers and of components with prices that fluctuate significantly. We cannot ensure that at any given time we
will have sufficient inventory to enable us to meet demand for our products, which would harm our financial
results. As a result of our acquisition of the Inkjet businesses, our inventory has increased; however, our total
inventory still represents less than 7.5% of our total assets as of December 31, 2008. See Item 1A—We depend
upon a limited group of suppliers for key components in our products. The loss of any of these suppliers, the
inability of any of these suppliers to meet our requirements, or the delays or shortages of supply of these
components could adversely affect our business.

Competition

Competition in our markets is intense and involves rapidly changing technologies and frequent new product
introductions. To maintain and improve our competitive position, we must continue to develop and introduce on
a timely and cost-effective basis new products and features that keep pace with the evolving needs of our
customers. The principal competitive factors affecting the markets for our controller solutions include, among
others, customer service and support, product reputation, quality, performance, price and product features such as
functionality, scalability, ability to interface with OEM products and ease of use. We believe we have generally
been able to compete effectively in the past against product offerings of our competitors on the basis of such
factors. However, there can be no assurance that we will continue to be able to compete effectively in the future
based on these or any other competitive factors.

K
-
0
1
m
r
o
F

Our primary competitors for third-party stand-alone color controllers are our OEM customers. Our OEM
customers are also the principal competitors for the embedded and design-licensed solutions. Our market position
vis-à-vis internally-developed controllers is small; however, we are the largest third party controller vendor. We
believe that our advantages include our continuously advancing technology, time-to-market, brand recognition,
end-user loyalty, sizable installed base, number of products supported, price driven by lower developmental costs
and market knowledge. We intend to continue to develop new digital print controllers with capabilities that
continue to meet the changing needs of our OEM customers’ product development roadmaps. A significant
disadvantage is our lack of control of the distribution channels and direct connections with our end-users. We do,
however, provide a variety of features as well as a unique “look and feel” to our OEMs’ products to differentiate
our customers’ products from those of their competitors.

The VUTEk line of super-wide inkjet printers competes with printers produced by Durst, Gandinnovation,
Hewlett-Packard and Inca throughout most of the world. There are Chinese and Korean printer manufacturers in
the marketplace, but their products are typically sold in their domestic markets and are not perceived as
alternatives in most other markets. Although we recommend that our inks be used in the VUTEk printers, users
can purchase solvent-based inks from other ink manufacturers. The third-party inks are typically priced at a
lower price than our proprietary inks. However, these third-party inks may not provide the same quality. In
addition, the use of third-party inks with our printer products may void the ink delivery system warranty on the
printer. We believe that our broad product line and leading technology provide a competitive advantage.

Our APPS category, which includes our workflow, proofing, print management information systems and
web-based order entry and order management systems, faces competition from software application vendors that
specifically target the printing industry. These vendors are typically small, privately-owned companies. We also
face competition from larger vendors that currently offer or are seeking to develop printer-focused enterprise
resource planning products. We believe the principal competitive factor affecting our markets is the market rates
for new printing technology.

There can be no assurance that we will be able to continue to advance our technology and products or to compete
effectively against other companies’ product offerings and any failure to do so could have a material adverse
effect upon our business, operating results and financial condition.

Sale of Land and Building

On January 29, 2009, we sold a portion of our Foster City campus to Gilead Sciences, Inc. (“Gilead”) for a total
price of $137.5 million, subject to an escrow holdback of $15.5 million. The property sold included
approximately thirty acres of land, which is entitled for development, the office building at 301 Velocity Way,
Foster City, California, consisting of approximately 163,000 square feet and certain other assets related to the
property. We retain ownership of the remaining approximately five acres of land and remain obligated under the
synthetic lease with respect to the office building at 303 Velocity Way, Foster City, California, at which the
Company’s headquarters is located. As more fully disclosed in Note 8—Commitments and Contingencies, both
buildings were subject to synthetic lease agreements as of December 31, 2008.

As a result of the sale to Gilead, the carrying value of assets held for sale of $55.4 million as of December 31,
2008 included land, building, other improvements, and restricted cash related to the 301 Velocity Way facility,
subject to an escrow holdback of $15.5 million. The escrow period expires January 2010.

Goodwill and Long-Lived Asset Impairment

We perform our annual impairment analysis of goodwill in the third quarter of each year according to the
provisions of SFAS 142, Goodwill and Other Intangible Assets (“SFAS 142”). The provision requires that we
perform a two-step impairment test on goodwill. In the first step, we compare the fair value of each reporting unit
to its carrying value. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to
the reporting unit, goodwill is not impaired and we are not required to perform further testing. If the carrying
value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must
perform the second step of the impairment testing to determine the implied fair value of the reporting unit’s
goodwill. The implied fair value of goodwill is calculated by deducting the fair value of all tangible and
intangible assets of the reporting unit, excluding goodwill, from the fair value of the reporting unit as determined
in the first step. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then we record
an impairment loss equal to the difference.

We performed our annual valuation analysis of goodwill on September 30, 2008 in accordance with SFAS142 as
stated above. The goodwill valuation analysis was performed based on our respective reporting units—
Controller, Inkjet, and Advanced Professional Print Software. Our reporting units are consistent with our product
categories identified in Note 15—Information Concerning Business Segments and Major Customers of Notes to
the Consolidated Financial Statements. Our product categories meet the definition of a reporting unit one level
below an operating segment in accordance with SFAS 142 as each product category constitutes a business for
which discrete financial information is available and reviewed by segment management.

We determined the fair value of the Inkjet reporting unit based on a weighting of the market and income
approaches. The fair value of the Controller and APPS reporting units was determined based on the market
approach. Under the market approach, we estimated the fair value based on market multiples of revenues or
earnings. Under the income approach, we measured fair value of the reporting units based on a projected cash
flow method using a discount rate determined by our management which is commensurate with the risk inherent

in our current business model. Based on our valuation results, we had determined that the fair values of our
reporting units continued to exceed their carrying values. Therefore, management determined that no goodwill
impairment charge was required as of September 30, 2008.

We assess the impairment of identifiable intangibles and long-lived assets whenever events or changes in
circumstances indicate that the carrying value may not be recoverable or that the life of the asset may need to be
revised. Factors we consider important which could trigger an impairment review include the following:

•

significant negative industry or economic trends;

significant decline in our stock price for a sustained period;

our market capitalization relative to net book value; and

significant changes in the manner of our use of the acquired assets or the strategy for our overall
business.

During the fourth quarter of 2008, our market capitalization declined significantly as a result of declining
worldwide economic conditions caused by the tightening of global credit markets. Based on a combination of
factors including the recent economic environment, the resulting erosion in our market capitalization, and the
lowering of our 2009 revenue outlook subsequent to the third quarter of 2008, we performed an interim
impairment analysis during the fourth quarter of 2008.

Based on the internal market-based valuation that we performed, the fair value of the Controller and APPS product
categories significantly exceeded their carrying value as of December 31, 2008. Consequently, it was not considered
necessary to obtain a third party valuation of these reporting units. A third party interim valuation was obtained with
respect to the Inkjet product category, which was equally weighted between the income and market approach.

Based on the outcome of the interim impairment analysis, we concluded that an impairment had occurred relating
to the Inkjet product category resulting in a non-cash impairment charge of $111.9 million during the fourth
quarter of 2008 related to both goodwill and other long-lived assets. There were no impairments of goodwill,
intangible assets, or other long-lived assets in 2007 and 2006.

Solely for purposes of establishing inputs for the fair value calculations described above related to goodwill
impairment testing, we made the following assumptions:

•

the current economic downturn will continue through fiscal year 2010,

the economic downturn is partially mitigated by new product introductions in 2010,

followed by a recovery period between 2011 and 2013, and

long-term industry growth past 2013.

K
-
0
1
m
r
o
F

units was reconciled to our current market capitalization (based on our stock price) plus an estimated control
premium. The significant assumptions used in determining fair values of the reporting units using comparable
company market values include the determination of appropriate market comparables, the estimated multiples of
revenue, EBIT, and EBITDA that a willing buyer is likely to pay, and the estimated control premium a willing
buyer is likely to pay.

Given the current economic environment and the uncertainties regarding the impact on our business, there can be
no assurance that our estimates and assumptions regarding the duration of the ongoing economic downturn, or
the period or strength of recovery, made for purposes of our goodwill impairment testing during the three months
ended December 31, 2008 will prove to be accurate predictions of the future. If our assumptions regarding
forecasted revenue or gross margin rates are not achieved, we may be required to record additional goodwill
impairment charges in future periods relating to any of our reporting units, whether in connection with the next
annual impairment testing in the third quarter of 2009 or prior to that, if any such change constitutes a triggering
event outside of the quarter from when the annual goodwill impairment test is performed. It is not possible at this
time to determine if any such future impairment charge would result or, if it does, whether such charge would be
material.

Intellectual Property Rights

We rely on a combination of patent, copyright, trademark and trade secret laws, non-disclosure agreements and
other contractual provisions to establish, maintain and protect our intellectual property rights. Although we
believe that our intellectual property rights are important to our business, no single patent, copyright, trademark,
or trade secret is solely responsible for the development and manufacturing of our products.

We are currently pursuing patent applications in the United States and in foreign jurisdictions to protect various
inventions. Over time, we have accumulated a portfolio of issued patents in the U.S. and worldwide. We also
own or have rights to the copyrights to the software code in our products, as well as rights to the trademarks
under which our products are marketed. We have also registered certain trademarks in the United States and in
foreign jurisdictions, and will continue to evaluate the registration of additional trademarks as appropriate.

In addition, certain of our products include intellectual property that we license from our partners. We also have
granted and may continue to grant licenses under our intellectual property, when and as we may deem
appropriate.

For a discussion of risks relating to our intellectual property, see Item 1A—We may be unable to adequately
protect our proprietary information and may incur expenses to defend our proprietary information.

Financial Information about Foreign and Domestic Operations and Export Sales

See Note 15—Information Concerning Business Segments and Major Customers of the Notes to Consolidated
Financial Statements. See also Item 1A—We face risks from our international operations and We face risks from
currency fluctuations.

Item 1A: Risk Factors

We rely on sales to a relatively small number of OEM customers and the loss of any of these OEM
customers could substantially decrease our revenues.

A significant portion of our revenues are and have been generated by sales of our printer and copier related
products to a relatively small number of OEMs. For example, Canon and Xerox each contributed over 10% of
our revenues for the year ended December 31, 2008 and together accounted for approximately 29% of those
revenues during the same period. During the fiscal year ended December 31, 2007, Canon and Xerox each
contributed over 10% of our revenues for the year ended December 31, 2007 and together accounted for
approximately 31% of those revenues for the year. Because sales of our printer and copier-related products

constitute a significant portion of our revenues and there is a limited number of OEMs producing copiers and
printers in sufficient volume to be attractive customers for us, we expect that we will continue to depend on a
relatively small number of OEM customers for a significant portion of our controller revenues in future periods.

In addition, our OEM customers have developed, and may continue to develop, their own controller products,
which may compete directly with our products, which may adversely affect our revenues. Accordingly, if we lose
or experience reduced sales to an important OEM customer, we will have difficulty replacing the revenue
previously generated from such customers with sales to new or existing OEM customers and our controller
revenue will likely decline significantly.

The market for our super-wide-format printers is very competitive.

The printing equipment industry is extremely competitive. Our VUTEk products compete against several
companies that market digital printing systems based on electrostatic, drop-on-demand and continuous
drop-on-demand inkjet, airbrush and other technologies and printers utilizing solvent and UV curable ink. Two
large competitors, NUR and Scitex Vision, were acquired by Hewlett Packard (“HP”) and another large
competitor, Inca, was acquired by Dai Nippon Screen (“Screen”). Both HP and Screen have greater resources to
develop new products and technologies and market those products, as well as acquire or develop critical
components at lower costs, which would provide a competitive advantage. They could also exert downward
pressure on product pricing to gain market share.

We have also witnessed the recent growth of local Chinese and Korean markets where local competitors are
developing, manufacturing and selling inexpensive printers, mainly to the local Chinese and Korean markets.
These Chinese and Korean manufacturers have also begun penetrating the international market and have
partnered with other super-wide format printer manufacturers. Our ability to compete depends on factors both
within and outside of our control, including the price, performance and acceptance of our current printers and any
products we develop in the future.

We also face competition from existing conventional wide format and super-wide format printing methods,
including screen printing and offset printing. Our competitors could develop new products, with existing or new
technology, that could be more competitive in our market than our printers. We cannot assure you that we can
compete effectively with any such products.

K
-
0
1
m
r
o
F

We face strong competition in the market for printing supplies such as ink.

We compete with independent manufacturers in the ink market. We cannot guarantee that we will be able to
remain the exclusive or even principal ink supplier for our printers. The loss of ink sales to our installed base of
printers could adversely impact our revenues and gross margins.

We could also experience an overall reduction in price within the ink markets, which would also adversely affect
our gross margins. Solvent inks are relatively easy to replicate and additional manufacturers could increase
pricing competition or divert customers away from us.

We do not typically have long term purchase contracts with our OEM customers and our OEM customers
have in the past and could at any time in the future, reduce or cease purchasing products from us,
harming our operating results and business.

With the exception of certain minimum purchase obligations, we typically do not have long-term volume
purchase contracts with our OEM customers, including Canon, Xerox and Konica Minolta, and they are not
obligated to purchase products from us. Accordingly, our customers could at any time reduce their purchases
from us or cease purchasing our products altogether. In the past, some of our OEM customers have elected to
develop products on their own, rather than rely, solely or partially, on our products and we expect that customers
will continue to make such elections in the future.

In addition, because our OEM customers incorporate our products into products they manufacture and sell, any
decline in demand for copiers or laser printers and any other negative developments affecting our major
customers or the computer industry in general, including reduced demand for the products sold by our OEM
customers, would likely harm our results of operations. For example, certain customers have in the past
experienced serious financial difficulties which led to a decline in sales of our products to these customers. If any
significant customers should face such difficulties in the future, our operating results could be harmed through,
among other things, decreased sales volumes and write-offs of accounts receivables and inventory related to
products we have manufactured for these customers’ products.

In addition, a significant portion of our operating expenses are fixed in advance based on projected sales levels
and margins, sales forecasts from our OEM customers and product development programs. A substantial portion
of our backlog is scheduled for delivery within 90 days or less and our customers may cancel orders and change
volume levels or delivery times for product they have ordered from us without penalty. Accordingly, if sales to
our OEM customers are below expectations in any given quarter, the adverse impact of the shortfall in revenues
on operating results may be, and has been in the past, increased by our inability to adjust spending in the short
term to compensate for this shortfall.

We rely on our OEM customers to develop and sell products incorporating our controller technologies and
if they fail to successfully develop and sell these products, or curtail or cease the use of our technologies in
their products, our business will be harmed.

We rely upon our OEM customers to develop new products, applications and product enhancements utilizing our
controller technologies in a timely and cost-effective manner. Our continued success in the controller industry
depends upon the ability of these OEM customers to utilize our technologies while meeting changing end-user
customer needs and responding to emerging industry standards and other technological changes. However, we
cannot provide assurance that our OEM customers will effectively meet these challenges. These OEM customers
are generally not obligated to purchase products from us and we cannot provide assurance that they will continue
to carry our products. For example, our OEM customers have incorporated into their products the technologies of
other companies or internally developed technologies in addition to, or instead of, our technologies and will
likely continue to do so in the future. If our OEM customers do not effectively and successfully market products
containing our technologies, our revenue will likely be materially and adversely affected.

Our OEM customers work closely with us to develop products that are specific to each OEM customer’s copiers
and printers. Many of the products and technologies we are developing require that we coordinate development,
quality testing, marketing and other tasks with our OEM customers. We cannot control our OEM customers’
development efforts or the timing of these efforts and coordinating with our OEM customers may cause delays in
our own product development efforts that are outside of our control. If our OEM customers delay the release of
their products, our revenue and results of operations may be adversely affected. In addition, our revenue and
results of operations may be adversely affected if we cannot meet our OEM customers’ product needs for their
specific copiers and printers, as well as successfully manage the additional engineering and support effort and
other risks associated with such a wide range of products.

Ongoing economic uncertainty has had and may continue to have a negative effect on our business.

The revenue and profitability of our business depends significantly on the overall demand for information
technology products that enable printing of digital data, which in turn depends on a variety of macro- and micro-
economic conditions. In addition, our revenue growth and profitability in our Inkjet business depends on demand
and spending for advertising and marketing products and programs, which also depends on a variety of macro-
and micro-economic conditions.

Uncertainty about current global economic conditions poses a risk as our customers may delay purchases of our
products in response to tighter credit, negative financial news and/or declines in income or asset values. The
current financial turmoil affecting the banking system and financial markets and the possibility that financial

institutions may consolidate or go out of business have resulted in a tightening in the credit markets, a low level
of liquidity in many financial markets, and extreme volatility in fixed income, credit, currency and equity
markets. There could be a number of follow-on effects from the credit crisis on our business, including
insolvency of key suppliers resulting in product delays; inability of customers and distributors to obtain credit to
finance purchases of our products and/or customer and distributor insolvencies; and other financial institutions
negatively impacting the Company’s treasury operations. Our financial performance could also vary materially
from expectations depending on gains or losses realized on the sale or exchange of financial instruments or cash
equivalents; impairment charges on our assets; related to equity and other investments and; interest rates. The
current volatility in the financial markets and overall economic uncertainty increases the risk that the actual
amounts realized in the future on our financial instruments could differ significantly from the fair values
currently assigned to them.

Uncertainty about current global economic conditions together with delays or reductions in information
technology spending could cause a decline in demand for our products and services and consequently harm our
business, operating results, financial condition, prospects and continue to increase the volatility of our stock price.

Our operating results may fluctuate based upon many factors, which could adversely affect our stock price.

Stock prices of high technology companies such as ours tend to be volatile as a result of various factors,
including variations in operating results and, consequently, fluctuations in our operating results could adversely
affect our stock price. Factors that have caused our operating results and stock price to fluctuate in the past and
that may cause future fluctuations include:

•

varying demand for our products, due to seasonality, OEM customer product development and
marketing efforts, OEM customer financial and operational condition, OEM inventory management
practices and general economic conditions;

shifts in customer demand to lower cost products;

success and timing of new product introductions by us and our OEM customers and the performance of
our products generally;

K
-
0
1
m
r
o
F

success and timing of new inkjet product introductions;

volatility in foreign exchange rates, changes in interest rates and or financing credit to consumers of
digital copiers and printers;

price reductions by us and our competitors, which may be exacerbated by competitive pressures caused
by economic conditions generally;

substitution of third-party inks for our own ink products by users of our super-wide format inkjet
printers;

delay, cancellation or rescheduling of orders or projects;

delays or shortages of supply of our key components, including without limitation inkjet print heads,
and inability of our suppliers to meet our requirements;

availability of key components and licenses, including possible delays in deliveries from suppliers, the
performance of third-party manufacturers and the status of our relationships with our key suppliers;

potential excess or shortage of employees and location of research and development centers;

changes in our product mix such as shifts from higher revenue or gross margin products to lower
revenue or gross margin products such as our inkjet products;

costs associated with complying with any applicable governmental regulations;

cost associated with possible SEC and regulatory actions regarding our historical stock option granting
practices and remedial measures with respect to our historical stock option granting practices;

acquisitions and integration of new businesses;

•

costs related to our entry into new markets, such as commercial printing and office equipment service
automation;

general economic conditions, such as the current economic uncertainty;

commencement of litigation or adverse results in pending litigation; and

other risks described herein.

We face competition from other suppliers as well as our own OEM customers and if we are not able to
compete successfully our business may be harmed.

The digital printing marketplace is highly competitive and is characterized by rapid technological changes. We
compete against a number of other suppliers of imaging products and technologies, including our OEM
customers themselves. Although we attempt to develop and support innovative products that end-users demand,
products or technologies developed by competing suppliers, including our own OEM customers, could render our
products or technologies obsolete or noncompetitive.

While many of our OEM customers incorporate our technologies into their end products on an exclusive basis,
we do not have any formal agreements that prevent these OEM customers from offering alternative products that
do not incorporate our technologies. If, as has occurred in the past, an OEM customer offers products
incorporating technology from alternative suppliers instead of, or in addition to, products incorporating our
technologies, our market share could decrease, which would likely reduce our revenue and adversely affect our
financial results.

In addition, many OEMs in the printer and copier industry, including most of our OEM customers, internally
develop and sell products that compete directly with our current products. These OEMs have significant
investments in their existing solutions and have substantial resources that may enable them to develop or
improve, more quickly than us, technologies similar to ours that are compatible with their own products. Our
OEM customers have in the past marketed, and likely will continue in the future to market, their own internal
technologies and solutions in addition to ours, even when their technologies and solutions are less advanced,
have lower performance or cost more than our products. Given the significant financial, marketing and other
resources of our larger OEM customers and other significant OEMs in the imaging industry who are not our
customers, we may not be able to successfully compete against these OEMs selling similar products that they
develop internally. If we cannot compete successfully against the OEMs’ internally developed products, we will
lose sales and market share in those areas where the OEMs choose to compete and our business will be harmed.

Price reductions for all of our products may affect our revenues in the future.

We have made and may in the future make price reductions for our products in order to drive demand and remain
competitive. Depending upon the price-elasticity of demand for our products, the pricing and quality of
competitive products and other economic and competitive conditions, such price reductions may have an adverse
impact on our revenues and profits. If we are not able to compensate for lower gross margins that may result
from price reductions with an increased volume of sales, our results of operations could be adversely affected.

Entry into new markets or distribution channels could result in higher operating expenses that may not be
offset by increased revenue.

We continue to explore opportunities to develop or acquire product lines different from our current controllers,
such as print management software, document scanning solutions and inkjet printers. We expect to continue to
invest funds to develop new distribution and marketing channels for these and additional new products and
services, which will increase our operating expenses.

We do not know if we will be successful in developing these channels or whether the market will accept any of
our new products or services or if we will generate sufficient revenues from these activities to offset the

additional operating expenses we incur. In addition, even if we are able to introduce new products or services, if
customers do not accept these new products or services or if we are not able to price such products or services
competitively, our operating results will likely suffer.

We license software used in most of our products from Adobe Systems Incorporated and the loss of this
license would prevent us from shipping these products.

Many of our current products include software that we must license from Adobe. Specifically, we are required to
obtain separate licenses from Adobe for the right to use Adobe PostScript® software in each type of copier or
printer used with a Fiery Controller. Although to date we have successfully obtained licenses to use Adobe’s
PostScript® software when required, Adobe is not required to, and we cannot be certain that Adobe will, grant
future licenses to Adobe PostScript® software on reasonable terms, in a timely manner, or at all. In addition, in
order to obtain licenses from Adobe, Adobe requires that we obtain from them quality assurance approvals for
our products that use Adobe software. Although to date we have successfully obtained such quality assurances
from Adobe, we cannot be certain Adobe will grant us such approvals in the future. If Adobe does not grant us
such licenses or approvals, if the Adobe licenses are terminated, or if our relationship with Adobe is otherwise
materially impaired, we would likely be unable to sell products that incorporate Adobe PostScript® software and
our financial condition and results of operations would be significantly harmed.

We depend upon a limited group of suppliers for key components in our products. The loss of any of these
suppliers, the inability of any of these suppliers to meet our requirements, or the delays or shortages of
supply of these components could adversely affect our business.

Certain components necessary for the manufacture of our products are obtained from a sole supplier or a limited
group of suppliers. These include processors from Intel and other related semiconductor components and inkjet
print heads for our super-wide format printers. We do not maintain long-term agreements with any of our
component suppliers and conduct our business with such suppliers solely on a purchase order basis. If we are unable
to continue to procure these sole-sourced components from our current suppliers in the required quantities, we will
have to qualify other sources, if possible, or design our products so that they no longer require these components.

In addition, these suppliers may be concentrated within similar industries or geographic locations, which could
potentially exacerbate these risks. We cannot provide assurance that other sources of these components exist or
will be willing to supply us on reasonable terms or at all, or that we will be able to design around these
components. Therefore any unavailability, delays or shortages of supply of these components or any inability of
our suppliers to meet our requirements could harm our business. Because the purchase of certain key components
involves long lead times, in the event of unanticipated volatility in demand for our products, we have been in the
past and may in the future be unable to manufacture certain products in a quantity sufficient to meet demand.
Further, as has occurred in the past, in the event that anticipated demand does not materialize, we may hold
excess quantities of inventory that could become obsolete. In order to meet projected demand, we maintain an
inventory of components for which we are dependent upon sole or limited source suppliers and components with
prices that fluctuate significantly. As a result, we are subject to a risk of inventory obsolescence, which could
adversely affect our operating results and financial condition.

Additionally, the market prices and availability of certain components, particularly memory and Intel-designed
components, which collectively represent a substantial portion of the total manufactured cost of our products,
have fluctuated significantly in the past. Such fluctuations in the future could have a material adverse effect on
our operating results and financial condition including a reduction in gross margins.

We are dependent on a limited number of subcontractors, with whom we do not have long-term contracts,
to manufacture and deliver products to our customers and the loss of any of these subcontractors could
adversely affect our business.

We subcontract with other companies to manufacture our products and we do not have long-term agreements with
these subcontractors. We rely on the ability of our subcontractors to produce products to be sold to our customers

K
-
0
1
m
r
o
F

and while we closely monitor our subcontractors’ performance we cannot assure you that such subcontractors will
continue to manufacture our products in a timely and effective manner. In the past a weakened economy led to the
dissolution, bankruptcy or consolidation of some of the subcontractors who are able to manufacture our products,
decreasing the available number of subcontractors. If the available number of subcontractors were to again decrease,
it is possible that we would not be able to secure appropriate subcontractors to fulfill our demand in a timely manner
or at all, particularly if demand for our products increases.

The existence of fewer subcontractors may also reduce our negotiating leverage potentially resulting in higher
product costs. Difficulties experienced by our subcontractors, including financial problems and the inability to
make or ship our products or fix quality assurance problems, could harm our business, operating results and
financial condition. If we decide to change subcontractors, we could experience delays in finding, qualifying and
commencing business with new subcontractors which would result in both delay in delivery of our products and
also potentially the cancellation of orders for our products.

In 2008, a high concentration of our Fiery controllers is manufactured at a single subcontractor location,
Celestica in Toronto, Ontario, Canada. We are transferring to a new sub-contractor in 2009: Bell Microproducts.
Should Celestica or Bell Microproducts experience any inability to, or refuse to, manufacture or deliver product
from this location our business, financial condition and operations could be harmed. Since we do not maintain
long-term agreements with our subcontractors, any of our subcontractors could enter into agreements with our
competitors that might restrict or prohibit such subcontractors from manufacturing our products or could
otherwise lead to an inability of such subcontractors from filling our orders in a timely manner. In such event, we
may not be able to find suitable replacement subcontractors and our business, financial condition and operations
would likely be harmed.

We may face increased risk of inventory obsolescence related to our super-wide format inkjet printers and
ink.

We procure raw materials and build our super-wide printers and ink products based on our sales forecasts. If we
do not accurately forecast demand for our products we may end up with excess inventory, or we may lose sales
because we do not have the correct products available for sale. If we have excess printers or other products we
may have to lower prices to stimulate demand. We may also run the risk that our inventory of raw materials may
become obsolete. Our ink products have a defined shelf life. If we do not sell the ink before the end of its shelf
life it will no longer be sellable and will have to be expensed.

If we are not able to hire and retain skilled employees, we may not be able to develop products or meet
demand for our products in a timely fashion.

We depend upon skilled employees, such as software and hardware engineers, quality assurance engineers and
other technical professionals with specialized skills. We are headquartered in the Silicon Valley and additionally
have research and development offices in India. Competition in both locations has historically been intense
amongst companies hiring engineering and technical professionals. In times of professional labor imbalances, it
has in the past and is likely in the future to be difficult for us to locate and hire qualified engineers and technical
professionals and for us to retain these people. There are many technology companies located near our corporate
offices in the Silicon Valley and our operations in India that may try to hire our employees. The movement of our
stock price may also impact our ability to hire and retain employees. If we do not offer competitive
compensation, we may not be able to recruit or retain employees, which may have an adverse effect on our
ability to develop products in a timely fashion, which could harm our business, financial condition and operating
results.

We offer a broad-based equity compensation plan based on granting options and restricted stock from
stockholder-approved plans in order to be competitive in the labor market. If we cannot offer equity awards when
necessary to enable us to offer compensation competitive with those offered by other companies seeking the
same employees, it may be difficult for us to hire and retain skilled employees.

Our acquisitions in the Inkjet and APPS product categories increased the chance that we will experience
additional bad debt expense.

Our OEM customers are typically large profitable customers who present little credit risk to us. Our APPS and
Inkjet businesses sell primarily via a direct sales force to a broader base of customers, many of whom are smaller
and potentially less credit worthy. In addition, as we continue to increase our revenues from our Inkjet customers,
many of whom are located overseas in many countries, it may be hard to enforce our legal rights should
collection issues arise.

Because of our acquisitions we now sell our products to distributors and directly to the end-user. If we are
unable to effectively manage a direct sales force, sales and revenues could decline.

We have traditionally sold our products to our OEM partners, who in turn sold the product to the end-user. Our
marketing focused on manufacturers and distributors of the manufacturers’ equipment, not on the end-user of the
product. We now sell our professional printing applications and our inkjet printers and ink to distributors and
directly to the end-user. If we are unable to effectively manage a direct sales force and develop a marketing
program that can reach the end-users, we are likely to see a decline in revenues from those products.

Acquisitions may result in unanticipated accounting charges or otherwise adversely affect our results of
operations and result in difficulties in assimilating and integrating the operations, personnel, technologies,
products and information systems of acquired companies or businesses.

We seek to develop new technologies and products from both internal and external sources. As part of this effort,
we have in the past made, and will likely continue to make, acquisitions of other companies or other companies’
assets.

Acquisitions involve numerous risks, such as:

•

if we issue equity securities in connection with an acquisition, the issuance may be dilutive to our
existing stockholders; alternatively, acquisitions made entirely or partially for cash (such as our
acquisition of VUTEk) will reduce our cash reserves;

difficulties in integration of operations, employees, technologies, or products and the related diversion
of management time and effort to accomplish successful integration;

risks of entering markets in which we have little or no prior experience, or entering markets where
competitors have stronger market positions;

possible write-downs of impaired assets;

potential loss of key employees of the acquired company;

possible expense overruns;

an adverse reaction by customers, suppliers or partners of the acquired company or EFI;

the risk of changes in ratings by stock analysts;

potential litigation surrounding transactions or the prior actions of the acquired company, such as the
VUTEk patent lawsuit or any administrative proceedings;

the inability to protect or secure technology rights; and

increases in operating costs;

Mergers and acquisitions of companies are inherently risky and we cannot provide assurance that our previous or
future acquisitions will be successful or will not harm our business, operating results, financial condition, or
stock price.

K
-
0
1
m
r
o
F

We may ultimately not receive amounts held in escrow related to disposition of assets.

On January 29, 2009, we sold a portion of our Foster City campus to Gilead Sciences, Inc. for a total price of
$137.5 million, subject to an escrow holdback of $15.5 million. While the escrow holdback is expected to be
released by January 2010, no assurance can be given that we will ultimately receive amounts held in escrow.

We face risks relating to the impairment of our goodwill and long-lived assets.

We complete a review of the carrying value of our assets annually and, based on a combination of factors, we
may be required to perform an interim analysis. During the fourth quarter of 2008, the Company’s market
capitalization declined significantly as a result of declining worldwide economic conditions caused by the
tightening of global credit markets. Based on a combination of factors including the recent economic
environment, the resulting erosion in our market capitalization, and the degradation of our revenue forecast
subsequent to the third quarter of 2008, we performed an interim impairment analysis during the fourth quarter of
2008. Based on the outcome of the interim impairment analysis, we concluded that an impairment had occurred
relating to the Inkjet product category resulting in a non-cash impairment charge of $111.9 million during the
quarter related to both goodwill and other long-lived assets.

Given the current economic environment and the uncertainties regarding the impact on our business, there can be no
assurance that our estimates and assumptions regarding the duration of the ongoing economic downturn, or the
period or strength of recovery, made for purposes of our goodwill impairment testing during the three months ended
December 31, 2008 will prove to be accurate predictions of the future. If our assumptions regarding forecasted
revenue or gross margin rates are not achieved, we may be required to record additional goodwill impairment
charges in future periods relating to any of our reporting units, whether in connection with the next annual
impairment testing in the third quarter of 2009 or prior to that, if any such change constitutes a triggering event
outside of the quarter from when the annual goodwill impairment test is performed. It is not possible at this time to
determine if any such future impairment charge would result or, if it does, whether such charge would be material.

While impairment does not impact reported cash flows, it does result in a non-cash charge in the Consolidated
Statements of Operations and thus no assurance can be given that any future impairments would not affect our
financial performance and valuation of assets and, as a result, harm our business, operating results, financial
condition, or stock price.

We face risks from currency fluctuations.

Approximately $262.5 million and $293.4 million of our revenue from the sale of products for the years ended
December 31, 2008 and 2007, respectively, came from sales outside the Americas, primarily to Europe and Japan.
We expect that sales outside the Americas will continue to represent a significant portion of our total revenue. The
majority of our revenues are invoiced in U.S. dollars.

Given the significance of our non-U.S. sales to our total product revenue, we face a continuing risk from the
fluctuation of the U.S. dollar versus foreign currencies. When we invoice our customers in their respective local
currencies, our cash flows and earnings are exposed to fluctuations in interest rates and foreign currency
exchange rates between the currency of the invoice and the U.S. dollar.

In addition, we have a substantial number of international employees which creates material operating costs
denominated in foreign currencies. We have attempted to limit or hedge these exposures through operational
strategies where we have considered it appropriate in the past, although no hedging activities occurred in 2008.
Our efforts to reduce the risk from our international operations and from fluctuations in foreign currencies or
interest rates may not be successful, which could harm our financial condition and operating results.

We face risks from our international operations.

We are subject to certain risks because of our international operations. Changes to and compliance with a variety
of foreign laws and regulations that may increase our cost of doing business and our inability or failure to obtain

required approvals could harm our international and domestic sales. Trade legislation in either the United States
or other countries, such as a change in the current tariff structures, export compliance laws or other trade policies,
could adversely affect our ability to sell or to manufacture in international markets. Some of our sales to
international customers are made under export licenses that must be obtained from the United States Department
of Commerce (“DOC”) and certain transactions require prior approval of the DOC. Changes in governmental
regulation and our inability or failure to obtain required approvals, permits or registrations could harm our
international and domestic sales and adversely affect our revenues, business and operations. Any violations could
result in fines and penalties, including prohibiting us from exporting our products to one or more countries, and
could materially and adversely affect our business.

Moreover, local laws and customs in many countries differ significantly from those in the United States. We
incur additional legal compliance costs associated with our international operations and could become subject to
legal penalties in foreign countries if we do not comply with local laws and regulations, which may be
substantially different from those in the United States. In many foreign countries, particularly in those with
developing economies, it may be common to engage in business practices that are prohibited by United States
regulations applicable to us such as the Foreign Corrupt Practices Act. Although we implement policies and
procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees,
contractors and agents, as well as those companies to which we outsource certain of our business operations,
including those based in or from countries where practices which violate such United States laws may be
customary, will not take actions in violation of our policies. Any such violation, even if prohibited by our
policies, could have a material adverse effect on our business.

Other risks include natural disasters and political or economic conditions in a specific country or region. In
addition, many countries in which we derive revenues do not currently have comprehensive and highly
developed legal systems, particularly with respect to the protection of intellectual property rights, which, among
other things, can result in the prevalence of infringing products and counterfeit goods in certain countries, which
could harm our business and reputation.

We may be unable to adequately protect our proprietary information and may incur expenses to defend
our proprietary information.

We rely on a combination of copyright, patent, trademark and trade secret protection, nondisclosure agreements
and licensing and cross-licensing arrangements to establish, maintain and protect our intellectual property rights,
all of which afford only limited protection. We have patents and pending patent applications in the United States
and in various foreign countries. There can be no assurance that patents will issue from our pending applications
or from any future applications, or that, if issued, any claims allowed will be sufficiently broad to protect our
technology. Any failure to adequately protect our proprietary information could harm our financial condition and
operating results. We cannot be certain that any patents that have been or may in the future be issued to us, or
which we license from third parties, or any other of our proprietary rights will not be challenged, invalidated or
circumvented. In addition, we cannot be certain that any rights granted to us under any patents, licenses or other
proprietary rights will provide adequate protection of our proprietary information.

In addition, as different areas of our business change or mature, from time to time we evaluate our patent
portfolio and make decisions either to pursue or not to pursue specific patents and patent applications related to
such areas. Choosing not to pursue certain of our patents, patentable applications and failing to file applications
for potentially patentable inventions, may harm our business by, among other things, enabling our competitors to
more effectively compete with us, reducing the potential claims we can bring against third parties for patent
infringement and limiting our potential defenses to intellectual property claims brought by third parties.

Litigation has been and may continue to be necessary to defend and enforce our proprietary rights. Such
litigation, whether or not concluded successfully for us, could involve significant expense and the diversion of
our attention and other resources, which could harm our financial condition and operating results.

K
-
0
1
m
r
o
F

We face risks from third party claims of infringement and potential litigation.

Third parties have claimed in the past and may claim in the future that our products infringe, or may infringe,
their proprietary rights. Such claims have in the past resulted in lengthy and expensive litigation and could do so
in the future. Such claims and any related litigation, whether or not we are successful in the litigation, could
result in substantial costs and diversion of our resources, which could harm our financial condition and operating
results. Although we may seek licenses from third parties covering intellectual property that we are allegedly
infringing, we cannot assure you that any such licenses could be obtained on acceptable terms, if at all.

We may be subject to environmental related liabilities due to our use of hazardous materials and solvents.

We conduct our business operations that involve the use of certain hazardous materials at two separate locations.
At these facilities, we mix ink used in some of our printers with solvents and other hazardous materials. Those
materials are subject to various governmental regulations relating to their transfer, handling, packaging, use and
disposal. We store the ink at warehouses worldwide, including Europe and the United States, and shipping
companies ship it at our direction. We face potential responsibility for problems such as spills that may arise
when we ship the ink to customers. While we customarily obtain insurance coverage typical for this kind of risk,
such insurance may not be sufficient in amount. If we fail to comply with these laws or an accident involving our
ink waste or solvents occurs, or if our insurance coverage is not sufficient, then our business and financial results
could be harmed.

Future sales of our hardware products in European Union (“EU”) member countries could be limited due
to the enactment of the EU Restriction of Hazardous Substances in Electrical and Electronic Equipment
(“ROHS”).

Since July 1, 2006 forward, new electrical and electronic equipment sold in the EU must not contain lead,
mercury, cadmium, hexavalent chromium, polybrominated biphenyls (“PBBs”) or polybrominated diphenyl
ethers (“PBDEs”). These must be replaced by other non- or less than-toxic substances. Manufacturers must
comply with significant, and potentially costly, compliance requirements in order to meet the ROHS deadline.
Some of our products may not have been converted before the deadline. As a result, we may not be allowed to
sell those products in the EU until the products are made fully compliant, which could harm our business and
financial results. We could also incur additional costs and liabilities in connection with non-compliant product
recalls, regulatory fines and exclusion of non-compliant products from certain markets.

Our products may contain defects which are not discovered until after shipping.

Our products consist of hardware and software developed by ourselves and others. Our products may contain
undetected errors and we have in the past discovered software and hardware errors in certain of our products after
their introduction, resulting in warranty expense and other expenses incurred in connection with rectifying such
errors. Errors could be found in new versions of our products after commencement of commercial shipment and
any such errors could result in a loss or delay in market acceptance of such products and thus harm our reputation
and revenues. In addition, errors in our products (including errors in licensed third party software) detected prior
to new product releases could result in delays in the introduction of new products and our incurring additional
expense, which could harm our operating results. We generally provide a twelve month warranty for certain
products, which may cover both parts and labor. In the future, we may incur substantial warranty claim expenses
on our products which may exceed our estimated warranty reserves, which could harm our business, financial
condition and operating results.

Actual or perceived security vulnerabilities in our products could adversely affect our revenues.

Maintaining the security of our software and hardware products is an issue of critical importance to our
customers and for us. There are individuals and groups who develop and deploy viruses, worms and other
malicious software programs that could attack our products. Although we take preventative measures to protect
our products, and we have a response team that is notified of high-risk malicious events, these procedures may

not be sufficient to mitigate damage to our products. Actual or perceived security vulnerabilities in our products
could lead some customers to seek to return products, to reduce or delay future purchases or to purchase
competitive products. Customers may also increase their expenditures on protecting their computer systems from
attack, which could delay or reduce purchases of our products. Any of these actions or responses by customers
could adversely affect our revenues.

System failures or system unavailability could harm our business.

We rely on our network infrastructure, internal technology systems and our internal and external websites for our
development, marketing, operational, support and sales activities. Our hardware and software systems related to
such activities are subject to damage from malicious code released into the public Internet through recently
discovered vulnerabilities in popular software programs. These systems are also subject to acts of vandalism and
to potential disruption by actions or inactions of third parties. Any event that causes failures or interruption in our
hardware or software systems could harm our business, financial condition and operating results.

The location and concentration of our facilities subjects us to the risk of earthquakes, floods or other
natural disasters and public health risks.

Our corporate headquarters, including most of our research and development facilities, are located in the San
Francisco Bay Area, an area known for seismic activity. This area has also experienced flooding in the past. In
addition, many of the components necessary to supply our products are purchased from suppliers based in areas
including the San Francisco Bay Area, Taiwan and Japan and are therefore subject to risk from natural disasters.
A significant natural disaster, such as an earthquake, flood or typhoon, could harm our business, financial
condition and operating results.

Our employees, suppliers and customers are located worldwide. We face the risk that our employees, suppliers,
or customers, either through travel or contact with other individuals, could become exposed to contagious
diseases endemic to particular regions of the world. In addition, governments in those regions have from
time-to-time imposed quarantines and taken other actions in response to contagious diseases that could affect our
operations. If a significant number of employees, suppliers, or customers were unable to fulfill their obligations,
due to contagious diseases, actions taken in response to contagious diseases, or other reasons, our business,
financial condition and operating results could be harmed.

K
-
0
1
m
r
o
F

We are subject to numerous federal and state employment laws and may face claims in the future under
such laws.

We are subject to numerous federal and state employment laws, and from time to time we face claims by our
employees and former employees under such laws. Although there are no pending or threatened claims under
wage and hour laws against us, we cannot assure you that claims under such laws or other employment-related
laws will not be attempted in the future against us, nor can we predict the likely impact of any such claims on us,
or that, if asserted, we would be able to successfully resolve any such claims without incurring significant
expenses.

We may be subject to the risk of loss due to fire because the materials we use in the manufacturing process
of our inks are flammable.

We use flammable materials in the manufacturing processes of our inks and may therefore be subject to the risk
of loss arising from fires. The risk of fire associated with these materials cannot be completely eliminated. We
own certain facilities that manufacture our inks, which increases our exposure to such risk in case these facilities
are destroyed. We maintain insurance policies to reduce losses caused by fire, including business interruption
insurance. If one or more of these facilities is damaged or otherwise ceases operations as a result of a fire, it
would reduce manufacturing capacity and, consequently, may reduce revenues and adversely affect our business.

The value of our investment portfolio is subject to interest rate volatility.

We have an investment portfolio of mainly fixed income securities classified as available-for-sale securities. As a
result, our investment portfolio is subject to volatility if market interest rates fluctuate and counterparty risk. We
attempt to limit this exposure to interest rate risk by investing in securities with maturities of less than three
years; however, we may be unable to successfully limit our risk to interest rate fluctuations and this may cause
volatility in our investment portfolio value.

Our stock price has been volatile historically and may continue to be volatile.

The market price for our common stock has been and may continue to be volatile. During the twelve-month
period ended December 31, 2008, the price of our common stock as reported on The NASDAQ Global Select
Market ranged from a low of $7.56 to a high of $22.44. We expect our stock price to be subject to fluctuations as
a result of a variety of factors, including factors beyond our control. These factors include:

•

actual or anticipated variations in our quarterly or annual operating results;

ability to complete share repurchase programs;

our failure to meet analyst expectations;

announcements of technological innovations or new products or services by us or our competitors;

announcements relating to strategic relationships, acquisitions or investments;

announcements by our customers regarding their businesses or the products in which our products are
included;

changes in financial estimates or other statements by securities analysts;

changes in general economic conditions;

terrorist attacks and the effects of military engagements or natural disasters;

changes in the rating of our securities;

changes in the economic performance and/or market valuations of other software and high-technology
companies; and

commencement of litigation or adverse results in pending litigation.

Because of this volatility, we may fail to meet the expectations of our stockholders or of securities analysts from
time-to-time and the trading prices of our securities could decline as a result. In addition, the stock market has
experienced significant price and volume fluctuations that have particularly affected the trading prices of equity
securities of many high-technology companies, including the economic uncertainty over the past several months.
These fluctuations have often been unrelated or disproportionate to the operating performance of these
companies. Any negative change in the public’s perception of high-technology companies could depress our
stock price regardless of our operating results.

On February 5, 2009, our Board of Directors approved a $100 million share repurchase program, including a $30
million accelerated share repurchase (“ASR”) by utilizing a portion of the proceeds from the recent sale of land
and building to Gilead. On February 18, 2009, we entered into an agreement with UBS AG, London branch
(“UBS”) to repurchase $30 million of our common stock under the ASR program. We expect to complete the
repurchases under the ASR program in the second or third quarter of 2009, with the final completion date subject
to the discretion of UBS.

Our stock repurchase program could affect our stock price and add volatility.

Any repurchases pursuant to our stock repurchase program, including our accelerated share repurchase program,
could affect our stock price and add volatility. There can be no assurance that the repurchases will be made at the
best possible price. Potential risks and uncertainties also include, but are not necessarily limited to, our ability to

complete the share repurchases within the originally expected timing, the amount and timing of future share
repurchases and the original funds used for such repurchases. The existence of a stock repurchase program could
also cause our stock price to be higher than it would be in the absence of such a program and could potentially
reduce the market liquidity for our stock.

Additionally, we are permitted to and could discontinue our stock repurchase program at any time and any such
discontinuation could cause the market price of our stock to decline.

Under regulations required by the Sarbanes-Oxley Act of 2002, our internal controls over financial
reporting may become ineffective, and this could have a negative impact on our stock price.

Section 404 of the Sarbanes-Oxley Act of 2002 requires that we establish and maintain an adequate internal
control structure and procedures for financial reporting and assess on an ongoing basis the design and operating
effectiveness of our internal control structure and procedures for financial reporting. Although no known material
weaknesses are believed to exist at this time, it is possible that material weaknesses could be identified. If we are
unable to remediate the weaknesses, our management would be required to conclude that our internal controls
over financial reporting were not effective. In addition to their inherent limitations, internal controls over
financial reporting may not prevent or detect misstatements, errors, omissions, or fraud.

The matters relating to the shareholder derivative litigation concerning our historical stock option
granting practices could require us to continue incurring additional expenses for accounting, legal and
other professional services, diverted our management’s attention from our business and had and may
continue to have a material adverse effect on our financial performance.

The matters relating to our historical stock option practices and shareholder derivative litigation required us to
expend significant management time and incur significant accounting, legal and other expenses.

During the fiscal year of 2008, the Securities and Exchange Commission (the “SEC”) notified us that it had
terminated the informal inquiry into the Company’s historical stock option practices and that no enforcement
action had been recommended and the Delaware Chancery Court approved the proposed settlement of related
shareholder derivative litigation. The settlement provided for the adoption of certain remedial measures,
including the cancellation and repricing of certain stock options, certain payments to be made to the Company
and the adoption of a number of changes to our corporate governance and procedures. Although we have
substantially implemented the proposed remedial measures and the SEC investigation and related shareholder
derivative litigation are now closed, there can be no guarantee that we will not incur additional expenses in the
future, related to our historical stock option granting practices, the settlement and the remedial measures.

A reduction in our net income as reported on our financial statements could increase the likelihood of
identifying a material weakness in our internal controls over financial reporting.

The threshold for determining whether or not we have a material weakness in our internal controls over financial
reporting and procedures as defined by the Sarbanes-Oxley Act is, in part, based on our generally accepted
accounting principles, or GAAP, net income. Lowered GAAP net income, with an associated lowered materiality
threshold, may increase our risk that internal control weaknesses may result in a material misstatement in the
financial statements. For example, continued acquisitions, and the associated amortization of intangibles, will
increase our amortization expenses and in the future may lower our GAAP earnings which would result in a
lower materiality threshold for internal control testing.

Our synthetic lease arrangements may adversely affect our cash flow.

K
-
0
1
m
r
o
F

offices. Both Leases were scheduled to expire in July 2014. The leases included an option to purchase the
facilities during or at the end of the term of the leases for the amount expended by the lessor to purchase the
facilities. We have exercised our purchase option in January 2009 with respect to the 301 Lease. On January 29,
2009, we completed the sale of land and building to Gilead for a total price of $137.5 million, subject to an
escrow holdback of $15.5 million. The escrow period expires January 2010. The property sold included
approximately thirty acres of land and the office building located on the land at 301 Velocity Way, Foster City,
California, consisting of approximately 163,000 square feet and certain other assets related to the property.

Our remaining synthetic lease arrangement with respect to the 303 Lease could have significant negative
consequences. For example, it could:

•

increase our vulnerability to general adverse economic and industry conditions, as we are required to
maintain compliance with financial covenants regardless of external conditions;

limit our ability to obtain additional financing due to covenants and the existing leverage;

require the dedication of funds to comply with the financial covenants, thereby reducing the
availability of cash flow and/or ability to obtain financing to fund our growth strategy, working capital,
capital expenditures, and other general corporate purposes; and

limit our flexibility in planning for, or reacting to, changes in our business and our industry by
restricting the funds available for use in addressing such changes; and place us at a competitive
disadvantage relative to our competitors.

Item 1B: Unresolved Staff Comments

None.

Item 2: Properties

As of December 31, 2008 we owned or leased a total of approximately 1.0 million square feet of space
worldwide. The following table sets forth the location, size and use of our principal facilities (square footage in
thousands):

Location

Foster City, California
(303 Velocity Way)
Foster City, California
(301 Velocity Way)
Meredith, New Hampshire

Ypsilanti, Michigan

Bangalore, India

Square
footage

Leased or
owned

Principal uses

(thousands)
295

163

160

Leased**

Corporate offices, design and engineering,

Leased*

product testing, customer service
Corporate offices sold in January 2009

Owned

Manufacturing (VUTEk printers and ink), design

Leased

and engineering, sales, customer service
Manufacturing (ink), design and engineering,

sales, customer service

Leased

Design and engineering, sales, administrative

services

Location

Norcross, Georgia
Minneapolis, Minnesota

Scottsdale, Arizona
Ratingen, Germany
Pittsburgh, Pennsylvania
Lebanon, New Hampshire
Brussels, Belgium
Schiphol-Rijk, The Netherlands

Parsippany, New Jersey
Tokyo, Japan

Square
footage

Leased or
owned

Principal uses

(thousands)
52
44

29
27
26
18
17
17

12
6

Leased
Owned

Leased
Leased
Leased
Leased
Leased
Leased

Leased
Leased

Design and engineering
Design and engineering, customer service,

software engineering

Administrative services, customer service
Software engineering, sales, customer service
Software engineering, sales
Software engineering
Sales, customer service
European corporate offices, sales, support

services

Design and engineering
Sales, design and engineering

At December 31, 2008, approximately 83,596 square feet were sub-leased. On January 29, 2009, we sold the
163,000 square feet building and approximately 30 acres of land to Gilead. Please see Note 13—Sale of
Land and Building in the Notes to Consolidated Financial Statements for further disclosure.

** At our option, we could purchase the facilities during or at the end of the leases for the amount expended by
the lessor to purchase the facilities. Please see Note 8—Commitment and Contingencies of the Notes to
Consolidated Financial Statements.

We believe that our facilities, in general, are adequate for our present needs. We do not expect that, if the need
arises, we would experience difficulties in obtaining additional space at fair market rates.

Item 3: Legal Proceedings

Legal Proceedings

We may be involved, from time to time, in a variety of claims, lawsuits, investigations and proceedings relating
to contractual disputes, securities law, intellectual property, employment matters and other claims or litigation
matters relating to various claims that arise in the normal course of our business. We determine whether an
estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be
reasonably estimated. We assess our potential liability by analyzing our specific litigation and regulatory matters
using available information. We develop our views on estimated losses in consultation with inside and outside
counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations
of appropriate litigation and settlement strategies. Because of the uncertainties related to both the amount and
ranges of possible loss on the pending litigation matters, we are unable to predict with certainty the precise
liability that could finally result from a range of possible unfavorable outcomes. However, taking all of the above
factors into account, we reserve an amount that we could reasonably expect to pay for the cases discussed.
However, our estimates could be wrong, and we could pay more or less than our current accrual. Litigation can
be costly, diverting management’s attention and could, upon resolution, have a material adverse effect on our
business, results of operations, financial condition and cash flow.

As of December 31, 2008, the end of the annual period covered by this report, we are subject to the various
claims, lawsuits, investigations or proceedings discussed below, as well as certain other legal proceedings that
have arisen in the ordinary course of business. We also settled certain matters during the fourth quarter of 2008.

Leggett & Platt, Inc. and L&P Property Management Company:

On November 6, 2007, EFI filed a complaint against Leggett & Platt, Inc. and its patent holding subsidiary, L&P
Property Management Company in the U.S. District Court for the Eastern District of Missouri for declaratory and
injunctive relief challenging the validity and enforceability of a patent issued to L&P. The challenged patent is a
continuation of a patent that L&P previously asserted against EFI in a prior court action. The court ultimately

K
-
0
1
m
r
o
F

invalidated the patent in the prior court action on multiple grounds. EFI firmly believes that the court should
summarily invalidate the continuation patent for similar reasons. Further, EFI believes that L&P’s failure to
adequately disclose the previous lawsuit proceedings to the U.S. Patent and Trademark Office amounts to
inequitable conduct that should render the new patent unenforceable. Thus, EFI has filed a motion for summary
judgment on these issues. L&P filed counterclaims against EFI, including claims for alleged infringement of the
continuation patent. While EFI believes that its products do not infringe, due to the inherent uncertainties of
litigation, we cannot accurately predict the ultimate outcome of this litigation.

Durst Fototechnik Technology GmbH v. Electronics for Imaging, GmbH et al.:

On February 23, 2007, Durst brought a patent infringement action against Electronics for Imaging, GmbH (“EFI
GmbH”) in the Mannheim District Court in Germany. On May 10, 2007, EFI GmbH filed its Statement of
Defenses. These defenses include lack of jurisdiction, non-infringement, invalidity and unenforceability based on
Durst’s improper actions before the German patent office. The Company filed its Statement of Defense on
August 29, 2007. EFI’s defenses include those for EFI GmbH, as well as an additional defense for prior use
based on EFI’s own European patent rights. The Mannheim court conducted a trial on November 30, 2007. At
the conclusion of the trial, the court ordered the parties to provide further briefing regarding issues raised by EFI
regarding the validity of Durst’s patent. On February 15, 2008, the Court decided to appoint an expert to assist it
on questions related to the validity of the Durst utility model right. EFI will continue to defend itself vigorously.
While EFI believes that its products do not infringe any valid claim of Durst’s patent, due to the inherent
uncertainties of litigation, we cannot accurately predict the ultimate outcome of this litigation.

Acacia | Screentone Patent Litigation:

On August 8, 2007, Screentone Systems Corporation, a subsidiary of Acacia Technologies Group, initiated
litigation against several defendants, including Konica Minolta Printing Solutions, Canon USA, and Ricoh
Americas, for infringement of a patent related to apparatus and methods of digital halftoning in the U.S. District
Court for the Eastern District of Texas. Konica Minolta, Canon and Ricoh are EFI customers. EFI has contractual
obligations to indemnify its customers to varying degrees and subject to various circumstances. At least one
defendant has written requesting indemnification for any EFI products that allegedly infringe these patents.

In order to protect its products and its customers, on November 13, 2007 EFI filed a declaratory judgment action
(“DJ”) in the U.S. District Court for the Central District of California seeking to invalidate the patent asserted in the
Texas action, as well as an additional patent Acacia identified in previous correspondence. At about the same time,
other defendants from the Texas actions filed DJ actions in Washington and Delaware. A federal multidistrict
litigation panel consolidated all cases with EFI’s case in the U.S. District Court for the Central District of
California, where the consolidated cases are now proceeding. The claims challenging the patent first asserted in the
Texas action remain pending, and the consolidated case is currently set for trial on August 30, 2010.

While EFI does not believe that its products infringed any valid claim of Acacia and Screentone’s patents, due to
the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this litigation.

Bureau of Industry and Security Export Investigation:

In January 2005, prior to EFI’s acquisition of VUTEk, the U.S. Commerce Department’s Bureau of Industry and
Security (“BIS”) initiated an investigation of VUTEk relating to VUTEk’s alleged failure to comply with U.S.
export regulations in connection with several export sales to Syria in 2004. EFI self-initiated an internal
compliance review of historical export practices for both VUTEk and EFI. Potential violations uncovered during
our compliance review were voluntarily disclosed to BIS in November 2006 (for VUTEk) and December 2006
(for EFI). Additionally, we provided BIS with detailed reports of our compliance review findings and
supplemental information in March 2007 (for VUTEk) and May 2007 (for EFI). The areas of possible
non-compliance found in the internal review relate to: (1) deemed exports of controlled encryption source code
and/or technology to foreign nationals of Syria and Iran, (2) exports of printers and other products with
encryption functionality before completion of encryption reviews by BIS and (3) statistical reporting errors on

some export declarations. The Office of Export Enforcement at BIS HQ referred the VUTEk matter to an
attorney in the Office of Chief Counsel for Industry and Security for final determination. In December 2008,
these matters were resolved with administrative penalties of $32,000.

Purported Derivative Shareholder Complaints:

Beginning on August 16, 2006, several purported derivative shareholder complaints were filed in the Superior
Court of the State of California for the County of San Mateo, the United States District Court for the Northern
District of California, and Delaware Chancery Court. The complaints generally alleged that certain of the
Company’s current and former officers and/or directors breached their fiduciary duties by improperly backdating
stock option grants to various officers and directors in violation of the Company’s stock option plans, as well as
in improperly accounting for the allegedly backdated options in violation of Generally Accepted Accounting
Principles. The actions in the Northern District of California also alleged that the individual defendants violated
the Securities Exchange Act of 1934. The Delaware actions also purported to be brought on behalf of a class
consisting of all others similarly situated and alleged a class claim for breach of the fiduciary duty of disclosure.
The actions filed in San Mateo County were dismissed without prejudice. The actions in the Northern District of
California were stayed in deference to the litigation pending in Delaware.

On September 4, 2008, the Delaware Chancery Court approved the previously disclosed proposed settlement of
related shareholder derivative litigation concerning the Company’s historical option granting practices. On
October 6, 2008, the time to file a notice of appeal from the Chancery Court’s order approving the settlement
elapsed, and no notice of appeal was filed.

Pursuant to the settlement, the Company received $5.0 million in insurance proceeds and paid approximately
$3.1 million in plaintiffs’ legal fees and costs in October 2008. The settlement also provided for the adoption of
certain remedial measures, including the cancellation and repricing of certain stock options, certain payments to
be made to the Company and the adoption of a number of changes to EFI’s corporate governance and procedures.

Tesseron Patent Litigation:

On September 26, 2007, Tesseron, Ltd. initiated litigation against Konica Minolta Business Solutions USA,
Konica Minolta Business Technologies and Konica Minolta Holdings for infringement of eight patents related to
variable printing technology in the United States District Court for the Northern District of Ohio, Eastern
Division. Konica Minolta is an EFI customer and the complaint references EFI Fiery variable data enabled
printer controllers. EFI has contractual obligations to indemnify its customers to varying degrees and subject to
various circumstances. Konica Minolta has written requesting indemnification for any EFI products that
allegedly infringe these patents. On December 6, 2007, Tesseron filed an amended complaint in the Ohio action
wherein it added EFI and Ricoh as defendants, but dropped 6 of the 8 original patents in suit.

On October 30, 2007, EFI filed a complaint against Tesseron in the United States District Court for the Northern
District of California, which subsequently transferred the action to the United States District Court for the
Northern District of Ohio. EFI’s complaint sought a declaratory judgment that Tesseron’s patents are invalid and/
or not infringed. EFI also sought to prevent Tesseron and its attorneys from threatening EFI or its OEM
customers with infringement of those patents, or bringing a lawsuit claiming infringement with regard to such
products. After transfer of EFI’s action to Ohio, EFI negotiated for a covenant not to sue on 6 of the 8 patents
that Tesseron had originally threatened against EFI and its customers.

On September 30, 2008, EFI reached a settlement with Tesseron and, on October 17, 2008, the Ohio District
Court dismissed EFI’s and Tesseron’s claims, defenses, and counterclaims against one another. The terms of the
settlement between the parties are confidential and the amount has been paid to Tesseron in full.

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

None.

K
-
0
1
m
r
o
F

PART II

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

Our common stock has traded on the NASDAQ National Market (now The NASDAQ Global Select Market)
under the symbol EFII since October 2, 1992. The table below lists the high and low sales price during each
quarter the stock was traded in 2008 and 2007.

2008

2007

High . . . . . . . . . . .
Low . . . . . . . . . . .

22.44
12.35

16.85
14.00

17.16
13.10

13.96
7.56

27.01
22.11

30.20
23.44

30.11
23.52

27.86
20.56

As of February 20, 2009 there were 290 stockholders of record. Because many of such shares are held by brokers
and other institutions on behalf of stockholders, we are unable to provide the actual number of stockholders
represented by these record holders.

We did not declare or pay cash dividends on our capital stock in either fiscal year 2008 or 2007. We currently
anticipate that we will retain all available funds for the operation of our business and will not pay any cash
dividends in the foreseeable future.

Equity Compensation Plan Information

Information regarding our equity compensation plans may be found in Item 12 of this Annual Report on
Form 10-K and is incorporation herein by reference.

Repurchases of Equity Securities

Purchases of equity securities during the twelve months ended December 31, 2008 were (in thousands except for
per share amounts):

Fiscal month

January 2008 . . . . . . .
February 2008 . . . . . .
March 2008 . . . . . . . .
April 2008 . . . . . . . . .
May 2008 . . . . . . . . . .
June 2008 . . . . . . . . . .
July 2008 . . . . . . . . . .
August 2008 . . . . . . . .
September 2008 . . . . .
October 2008 . . . . . . .
November 2008 . . . . .
December 2008 . . . . .

Total . . . . . . . . . .

Total number of
shares purchased(2)

Average price
paid per share

Total number of
shares purchased
as part of publicly
announced plans

Approximate dollar
value of shares that
may yet be
purchased under
the plans(1)

901
1,096
1
6
838
0
110
729
4
418
617
33

4,753

$13.75
$15.13
$14.00
$14.42
$15.94
$ —
$14.01
$15.39
$13.88
$ 9.26
$ 9.35
$ 9.76

$13.72

901
1090
0
0
837
0
109
729
0
418
614
0

4,698

$85,412
$68,922
$ —
$ —
$55,580
$55,580
$54,049
$42,829
$42,829
$38,950
$33,208
$33,208

(1)

In November 2007, our Board of Directors authorized $100.0 million to be used for the repurchase of
outstanding common stock. For the twelve months ended December 31, 2008, we repurchased a total of

4.7 million shares for an aggregate purchase price of $64.6 million under these publicly announced plans. In
February 2009, the $33.2 million remaining for repurchase under the 2007 board authorization was canceled
by the Board of Directors and replaced with a new authorization to purchase an additional $100.0 million of
outstanding common stock. Our buyback program is limited by SEC regulations and compliance with the
Company’s insider trading policy.
Includes approximately 55 thousand shares purchased from employees to satisfy tax withholding obligations
that arise on the vesting of shares of restricted stock awards and stock units in addition to the 4.7 million
shares repurchased pursuant to our stock repurchase program.

(2)

Comparison of Cumulative Total Return among Electronics For Imaging, Inc., Nasdaq Composite and
Nasdaq Computer Manufacturers Index

The stock price performance graph below includes information required by the SEC and shall not be deemed
incorporated by reference by any general statement incorporating by reference this Annual Report into any filing
under the Securities Act of 1933 as amended or under the Securities Exchange Act of 1934 as amended (the
“Exchange Act”), except to the extent the Company specifically incorporates this information by reference, and
shall not otherwise be deemed soliciting material or filed under such Acts or subject to the liabilities of
Section 18 of the Exchange Act.

K
-
0
1
m
r
o
F

The following graph demonstrates a comparison of cumulative total returns based upon an initial investment of
$100 in the Company’s Common Stock as compared with the NASDAQ Composite and the NASDAQ
Computers and Manufacturers Index. The stock price performance shown on the graph below is not indicative of
future price performance and only reflects the Company’s relative stock price for the five-year period ending on
December 31, 2008. All values assume reinvestment of dividends and are calculated at December 31 of each
year.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Electronics For Imaging, Inc., The NASDAQ Composite Index
And The NASDAQ Computer Manufacturers Index

$160

$140

$120

$100

$80

$60

$40

$20

12/03

12/04

12/05

12/06

12/07

12/08

Electronics For Imaging, Inc.

NASDAQ Composite

NASDAQ Computer Manufacturers

* $100 invested on 12/31/03 in stock or index-including reinvestment of dividends.
Fiscal year ending December 31.

Item 6: Selected Financial Data

The following table summarizes selected consolidated financial data as of and for the five years ended
December 31, 2008. This information should be read in conjunction with Item 7: “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and
related notes thereto. For a more detailed description, see Part II, Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”

For the year ended December 31,

(in thousands, except per share amounts)

2008

2007

2006

2005

2004

Operations(1)
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 560,380

$ 620,586

$ 564,611

$ 467,117

$ 394,604

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . .

317,417

361,147

335,170

288,452

256,113

Income (loss) from operations(2)(3)

. . . . . . . . .

(145,015)

(2,231)

15,561

(13,948)

11,112

Net income (loss)(2)(3)

. . . . . . . . . . . . . . . . . . .

$(113,444) $

26,843

(183) $

(5,180) $

35,565

Earnings per share
Net income (loss) per basic common share . .

Net income (loss) per diluted common

share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2.16) $

0.47

(0.00) $

(0.10) $

0.66

(2.16) $

0.44

(0.00) $

(0.10) $

0.60

Shares used in basic per-share calculation . . .

52,553

56,679

56,559

54,425

53,898

Shares used in diluted per-share

calculation . . . . . . . . . . . . . . . . . . . . . . . . . .

52,553

68,102

56,559

54,425

63,979

Financial Position
Cash, cash equivalents and short-term

investments . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior debentures . . . . . . . . . . . .
Stockholders’ equity . . . . . . . . . . . . . . . . . . . .

$ 189,351
293,830
751,948
—
601,218

$ 499,852
270,677
1,157,739
240,000
743,996

$ 510,171
261,774
1,144,651
240,000
751,578

$ 469,616
459,077
1,088,438
240,000
710,739

$ 659,559
617,076
1,025,323
240,000
674,026

(1)

(2)

(3)

These results include acquired company results of operations beginning on the date of acquisition. See
Note 2—Acquisitions of our Notes to Consolidated Financial Statements for a summary of recent
acquisitions.
Includes stock-based compensation expense under Statement of Financial Accounting Standards No. 123
(revised 2004), “Share-Based Payment” (“SFAS 123(R)”) of $33.4 million, $24.5 million, and $23.7 million
for the years ended December 31, 2008, 2007, and 2006, respectively. Because we implemented
SFAS 123(R) as of January 1, 2006, prior periods do not reflect stock-based compensation expense related
to this new accounting standard. See Note 12 of Notes to consolidated financial statements.
Includes goodwill and long-lived asset impairment charges of $111.9 million for the year ended
December 31, 2008. Includes restructuring and other charges of $11.0 million, $1.5 million, and $1.0
million for the years ended December 31 2008, 2007, and 2006. Includes acquired in-process research and
development costs of $2.7 million $0 million, $8.5 million, $45.3 million and $1.0 million for the years
ended December 31, 2008, 2007, 2006, 2005 and 2004 respectively. See Note 2—Acquisitions of Notes to
consolidated financial statements. Also includes real-estate related charges of $14.4 million for the year
ended December 31, 2004 and restructuring charges of $2.7 million for the year ended December 31, 2005.

K
-
0
1
m
r
o
F

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

The following discussion and analysis should be read in conjunction with the audited consolidated financial
statements and related notes thereto included in this Annual Report on Form 10-K.

All assumptions, anticipations, expectations and forecasts contained herein are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, that involve risks and uncertainties. Forward-looking statements include,
among others, those statements including the words “expects,” “anticipates,” “intends,” “believes” and similar
language. Our actual results could differ materially from those discussed here. For a discussion of the factors
that could impact our results, readers are referred to Item 1A “Risk Factors” in Part I of this Annual Report and
to our other reports filed with the Securities and Exchange Commission. We do not assume any obligation to
update the forward-looking statements provided to reflect events that occur or circumstances that exist after the
date on which they were made.

Overview

Key financial results for 2008 were as follows:

•

Our consolidated revenues decreased by approximately 10%, or $60.2 million, from $620.6 million in
2007 to $560.4 million for the year ended December 31, 2008. This was due primarily to the
Controllers product revenues, which contributed $52.7 million of the decrease in 2008.

Gross margins decreased to 57% in 2008 versus 58% in 2007 due to a greater percentage of Inkjet
products sales which have lower gross margins than our APPS and Controller products.

Operating expenses as a percent of revenues increased from 59% in 2007 to 82% in 2008 primarily due
to impairment charges recorded on goodwill and certain long lived assets as a result of the impairment
analysis conducted during the fourth quarter, in-process research & development write-off charges
related to our acquisition of Pace and Rastek, and increased restructuring and other costs as a result of
headcount reductions and facility closures during the year. Had these costs not be included in operating
expenses, our total operating expenses for 2008 would have been 60% of revenues, which
approximates prior year total operating expenses as a percentage of revenues.

Interest and other income decreased from 4% of revenue in 2007 to 2% of revenue in 2008 driven by
lower interest income on our investments on lower investment balances and interest rates. We sold a
substantial portion of our investment portfolio during the first five months of 2008 in order to generate
cash for the redemption of our 1.50% convertible senior debentures, which occurred on June 2, 2008.

In 2008, we recorded a benefit from income taxes of $19.6 million on pretax loss of $133.1 million
and, in 2007, we recorded a benefit from income taxes of $4.6 million on pretax income of
$22.2 million. The change from 2008 to 2007 primarily related to a pre-tax loss of $133.1 million
incurred in 2008.

Results of Operations

The following table sets forth items in our consolidated statements of operations as a percentage of total revenue
for 2008, 2007 and 2006. These operating results are not necessarily indicative of results for any future period.

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

Years ended December 31,

2008

2007

2006

100% 100% 100%
59%
58%
57%

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of identified intangibles . . . . . . . . . . . . . . . . . . .
In-process research and development . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and asset impairment

23%
23%
25%
18%
19%
21%
8%
8%
11%
2% — % — %
6%
5%
6%
1% — %
2%
20% — % — %

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

82%

59%

57%

Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(25)% (1)%
4%

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit from (provision for) income taxes . . . . . . . . . . . . . . . . . . . .

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(23)%
4%

(19)%

3%
1%

4% — %

2%
5%

7%
(7)%

K
-
0
1
m
r
o
F

Revenue

We currently classify our revenue into three categories. The first category, “Controllers,” includes products and
technology which connect digital copiers with computer networks, and is made up of stand-alone controllers and
embedded desktop controllers, bundled solutions and design-licensed solutions primarily for the office market
and commercial printing. This category includes our Fiery series (external print servers and embedded servers),
Splash and MicroPress, color and black and white server products, software options for Fiery products and parts.
It also includes server-related revenue comprised of scanning solutions. The second category, “Inkjet Products,”
consists of sales of the super-wide and wide format inkjet printers, industrial inkjet printers, inks, and parts and
services revenue from the VUTEk, Jetrion, and Rastek businesses. The third category, “Advanced Professional
Print Software,” or APPS, consists of software technology focused on printing workflow, print management
information systems (PMIS), proofing and e-commerce and job tracking tools. APPS also consists of revenue
from the Pace business in PMIS and e-commerce solutions.

Our revenues by product category for the years ended December 31, 2008, 2007 and 2006 were as follows (in
thousands):

Revenue

2008

2007(1)

2006(1)

Years ended December 31,

% change

2008
over
2007

2007
over
2006

Controllers . . . . . . . . . . . . . . . . . . . . . . .
Inkjet Products . . . . . . . . . . . . . . . . . . . .
Advanced Professional Printing

$278,738
219,959

50% $331,474
39% 229,253

53% $328,443
37% 180,203

58% (16)% 1%
32% (4)% 27%

Software . . . . . . . . . . . . . . . . . . . . . . .

61,683

11%

59,859

10%

55,965

10%

3% 7%

Total revenue . . . . . . . . . . . . . . . . . . . . .

$560,380

100% $620,586

100% $564,611

100% (10)% 10%

(1) Revenues in Controllers and APPS categories for the twelve months ended December 31, 2006 and

December 31, 2007 have been revised to reflect the reclassification of Controller-related software revenue
from the APPS category to the Controllers category. Total revenue from the twelve months ended
December 31, 2006 and December 31, 2007 have not changed.

Overview

Revenue was $560.4 million in 2008, compared to $620.6 million in 2007 and $564.6 million in 2006 resulting in
a 10% decrease in 2008 versus 2007 and a 10% increase in 2007 versus 2006. The $60.2 million decrease in
2008 compared to 2007 was primarily due to a $52.7 million decrease in Controllers revenues and a $9.3 million
decrease in Inkjet product revenues, offset by a slight increase of $1.8 million in APPS revenues.

Controllers Revenues

In our Controllers category, revenue declined by $52.7 million or 16% in 2008 versus 2007, which was primarily
driven by reduced demand from our OEM customers throughout the world due to a slowing global economy. The
tightening of global credit markets also contributed to the decline as it has become relatively more difficult for
some of our customers to obtain financing.

Inkjet Products Revenues

Inkjet product revenues were $220.0 million in 2008 as compared to $229.3 million in 2007. The year-over-year
decline of $9.3 million or 4% was primarily due to substantially lower printer volume in the fourth quarter of
2008, as year-over-year revenues in the fourth quarter of 2008 versus 2007 decreased by $21.5 million or 31% in
total. It has become relatively more difficult for customers to obtain financing to purchase our products due to the
tightening of global credit markets. In addition, the softening of the retail sector and the related demand for signs,
billboards and point of purchase displays has impacted our customers’ businesses and their demand for ink,
which resulted in a lower demand for our ink products in the fourth quarter of 2008.

Inkjet product revenues were $180.2 million in 2006 as compared to $229.3 million in 2007. The increase is due
to the continued sales of VUTEk’s QS series of UV printers, driven by demand in Europe, Middle East and
Africa (“EMEA”) and the Americas.

Advanced Professional Print Software Revenues

Revenue in the Advanced Professional Print Software category increased by $1.8 million or 3% in 2008 over
2007, primarily due to the strong sales of our PMIS products and partially due to the acquisition of Pace during
the third quarter of 2008 which strengthened our PMIS products. The APPS category increased 7% in 2007 over
2006 primarily due to the strength of our suite of products. This category includes our management systems
software, including Hagen, Pace, PSI, Logic, PrintSmith and PrintFlow; our web-based order entry and order
management software, including Digital StoreFront PrinterSite Suite; and our proofing software, including
ColorProof XF and resale of products from third party suppliers such as XmPie software and Manhattan
Associates software among others. The software applications in this category generate higher margins, favorably
impacting our margins. In 2008, we re-organized our PMIS product lines after the acquisition of Pace in order to
better leverage our investment in this segment and concentrate our resources on fewer products. As a result, we
are no longer selling PSI and Logic to new customers and have reduced our investment in the development of
these products. We currently sell PrintSmith to small print-for-pay and small commercial print shops, Pace to
medium and large commercial printers, wide format and digital printers, and Monarch to large commercial
printers, publication printers, and digital printers.

Revenues by geographic area for the years ended December 31, 2008, 2007 and 2006 were as follows (in
thousands):

For the years ended December 31,

2008

2007

2006

% change

2008
over
2007

2007
over
2006

Americas . . . . . . . . . . . . . . . . . . . . . . . . . .
EMEA . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other international locations . . . . . . . . . .

$297,896
194,474
52,048
15,962

53% $327,232
35% 216,308
58,015
9%
19,031
3%

53% $303,931
35% 175,037
63,248
9%
22,395
3%

54% (9)% 8%
31% (10)% 24%
11% (10)% (8)%
4% (16)% (15)%

Total revenue . . . . . . . . . . . . . . . . . . . . . .

$560,380

100% $620,586

100% $564,611

100% (10)% 10%

Revenue declined in 2008 across all regions primarily driven by our Controllers products. In the individual
regions, Controllers product revenues in 2008 represented 46%, 43%, 98%, and 41% of revenue in the Americas,
EMEA, Japan and other international locations, respectively.

In 2008, revenues in the Americas, EMEA, and Japan regions represented 35%, 53% and 9% of revenues,
respectively, with no change from 2007.

Revenue growth in 2007 across all regions was primarily driven by our Inkjet products.

Shipments to some of our U.S. OEM customers are made to centralized purchasing and manufacturing locations,
which in turn ship to other locations, making it more difficult to obtain accurate geographical shipment data.
Accordingly, we believe that export sales of our products into each region may differ from what is reported. We
expect that sales outside of the United States will continue to represent a significant portion of our total revenue.

A substantial portion of our revenue over the years has been attributable to sales of products through our OEM
customers and independent distributor channels. For the year ended December 31, 2008, two customers—Canon
and Xerox—each provided more than 10% of our revenue individually and approximately 29% of revenue in the
aggregate. For the year ended December 31, 2007, two customers—Canon and Xerox—each provided more than
10% of our revenue individually and approximately 31% of revenue in the aggregate. For the year ended
December 31, 2006, Canon and Xerox each provided more than 10% of our revenue individually and
approximately 34% of revenue in the aggregate. We have shown decreasing dependency on the OEM business
although in 2008, 49% of our revenues were from non-OEM sources. In 2007 and 2006, 51% and 52%
respectively of our business was from non-OEM sources. We do not expect a decrease in OEM revenue in 2009
as a percentage of total revenue, but over time we do expect the OEM percentage to decline.

The decreasing reliance on major OEM partners is attributable to the increasing percentage of revenue derived
from the Inkjet Products business and APPS business where most of the revenue is generated from sales to
distributors and direct customers. No assurance can be given that our relationships with distributors and direct
customers will continue or that we will be successful in maintaining or increasing the number of our OEM
customers or the size of our existing OEM relationships. Several of our OEM customers have reduced their
purchases from us at various times in the past and any customer could do so in the future as there are no
contractual obligations by most of our OEMs to purchase our products at all, or in significant amounts. Such
reductions have occurred in the past and could in the future have a significant negative impact on our
consolidated financial position and results of operations. We expect that if we increase our revenues from our
Inkjet Products and our professional printing applications, the percentage of our revenue that comes from
individual OEMs will continue to decrease further.

We intend to continue to develop new products and technologies for each of our product lines including new
generations of controllers and Controller products and other new product lines and to distribute those new

K
-
0
1
m
r
o
F

products to or through current and new OEM customers, distribution partners, and end-users in 2009 and beyond.
No assurance can be given that the introduction or market acceptance of current or future products will be
successful.

To the extent that sales of our products do not grow over time in absolute terms, or if we are not able to meet
demand for higher unit volumes, it could have a material adverse effect on our operating results. There can be no
assurance that any products that we introduce in the future will successfully compete, be accepted by the market,
or otherwise effectively replace the volume of revenue and/or income from our older products. Market
acceptance of our software products, products acquired through acquisitions and other products cannot be
assured.

We also believe that in addition to the factors described above, price reductions for all of our products may affect
revenues in the future. We have previously reduced and in the future will likely reduce prices for our products.
Depending upon the price-elasticity of demand for our products, the pricing and quality of competitive products,
and other economic and competitive conditions, such price reductions have had and may in the future have an
adverse impact on our revenues and profits.

Stock-based Compensation

Stock-based compensation expenses were $33.4 million, $24.5 million, and $23.7 million respectively for the
years ended December 31, 2008, 2007, and 2006. The year-over-year increase of $8.9 million or 36% from 2007
to 2008 was primarily due to the absence of equity award issuances for the first 10 months of 2007 as a result of
the stock options investigation conducted at that time. See Note 12 of our Notes to Consolidated Financial
Statements for more discussion of Stock-based compensation.

Gross Margins

Our gross margins were 57%, 58%, and 59% for 2008, 2007 and 2006, respectively. The decrease in gross
margins in 2008 and 2007 was primarily due to the greater mix of Inkjet sales. Our inkjet printers have a lower
gross margin than our Controllers and APPS product lines. Product mix is a significant driver in our gross
margins and we cannot predict the impact that product mix will have on future gross margin results. Our inkjet
product line is growing as a percentage of revenue which decreases gross margin percentage. For 2008 inkjet
revenues were 39% of total revenue as compared to 37% and 32% of total revenues in 2007 and 2006,
respectively.

Gross margins on our inkjet products are lower than gross margins on our Controllers business. Our ink sales
represent a continuing revenue stream to existing customers that will increase if our inkjet customers’ production
increases. Ink margins are typically higher than overall inkjet margins.

If our product mix changes significantly, our gross margins will fluctuate. In addition, gross margins can be
impacted by a variety of other factors. These factors include the market prices that can be achieved on our current
and future products, the availability and pricing of key components (including DRAM, Processors, and print
heads), third party manufacturing costs, product, channel and geographic mix, the success of our product
transitions and new products, competition and general economic conditions in the United States and abroad.
Consequently, gross margins may fluctuate from period to period. In addition to the factors affecting revenue
described above, if we reduce prices, gross margins for our products could be lower.

Our print controllers are manufactured by third-party manufacturers who purchase most of the necessary
components. If our third-party manufacturers cannot obtain the necessary components at favorable prices, we
could experience an increase in our product costs. We purchase certain parts directly, including processors,
memory, certain ASICs and software licensed from various sources, including PostScript® interpreter software,
which we license from Adobe.

Operating Expenses

Operating expenses increased by 27% in 2008 over 2007 and increased by 14% in 2007 over 2006. Operating
expenses as a percentage of revenue totaled 82%, 59%, and 57% for 2008, 2007, and 2006, respectively. The
increase in operating expenses as a percentage of revenue in 2008 versus 2007 primarily resulted from
impairment charges incurred on goodwill and long-lived assets during the fourth quarter of 2008, in-process
research and development write-off costs related to the acquisition of Pace and Rastek, and an increase in
restructuring and other costs, The increase in operating expenses as a percentage of revenue in 2007 versus 2006
primarily resulted from increases in personnel related costs.

Research and Development

Research and development expenses consist primarily of costs associated with personnel, consulting and
prototype parts. Research and development expenses were $140.4 million or 25% of revenue in 2008 compared
to $140.5 million or 23% of revenue in 2007 and $127.9 million or 23% of revenue in 2006. The slight decrease
of $0.1 million in 2008 was primarily due to a $5.3 million decrease in personnel-related costs, a $1.0 million
decrease in consulting expenses, and a $2.7 million decrease in prototypes and non-recurring engineering
expenses offset by a $3.9 million increase in stock-based compensation expense, a $0.9 million increase in
depreciation of fixed assets, and a $3.5 million increase in allocation of overhead expenses due to a change in
allocation methodology in certain overhead expenses. The increase of $12.6 million in 2007 versus 2006 was
primarily due to a $9.7 million increase in employee costs related to increased headcount as a result of our
investments in our research and development organizations, a $2.0 million increase in consulting fees, a $1.2
million increase in prototype expenses and a $.7 million increase in stock-based compensation expense and other
equity plan related costs.

Research and development headcount was 894 and 914 as of December 31, 2008 and 2007, respectively.

We believe that the development of new products and the enhancement of existing products are essential to our
success and we intend to continue to devote substantial resources to research and new product development
efforts. Accordingly, we expect that our research and development expenses may increase in absolute terms and
also as a percentage of revenue in future periods.

K
-
0
1
m
r
o
F

Sales and Marketing

Sales and marketing include personnel expenses, costs of trade shows, marketing programs and promotional
materials, sales commissions, travel and entertainment expenses, depreciation, and costs associated with sales
offices in the United States, Europe, Asia, and other locations around the world. Sales and marketing expenses
for 2008 were $119.4 million or 21% of revenue compared to $120.4 million or 19% of revenue in 2007 and
$99.2 million or 18% of revenue in 2006.

The $1.0 million decrease in expenses in 2008 versus 2007 was primarily related to a $3.2 million decrease in
marketing and travel-related expenses and a $0.5 million decrease in consulting expenses offset by a $2.1 million
increase in stock-based compensation expense, and a $0.8 million increase in allocation of overhead expenses
due to a change in allocation methodology in certain overhead expenses. The $21.3 million increase in expenses
in 2007 versus 2006 was primarily related to a $10.8 million increase in personnel costs related to increased
headcount and related sales commissions attributable to the increase in Inkjet sales, a $3.4 million increase in
overhead expenses related to the Inkjet expansion in the EMEA region, a $3.2 million increase in travel-related
expenses, and a $1.4 million increase in Inkjet promotional expenses.

Sales and marketing headcount was 515 and 519 as of December 31, 2008 and 2007, respectively.

Over time, our sales and marketing expenses may increase in absolute terms as we continue to actively promote
our products, introduce new products and services, and continue to build our sales and marketing organization,
particularly in Europe and Asia Pacific. Sales and marketing expenses may also increase as we continue to grow

our software solutions, Inkjet products, and other new product lines, which require greater sales and marketing
support from us. We expect that if the U.S. dollar remains volatile against the Euro or other currencies, sales and
marketing expenses reported in U.S. dollars could fluctuate.

General and Administrative

General and administrative expenses consist primarily of costs associated with administrative personnel, legal
and accounting expense and stock option investigation costs. General and administrative expenses were $47.7
million or 8% of revenue in 2008 compared to $67.5 million or 11% of revenue in 2007 and $47.6 million or 8%
of revenue in 2006. The $19.8 million decrease in 2008 versus 2007 consists primarily of a decrease of $18.3
million in legal and accounting expenses related to the stock option investigation completed in 2007 and U.S.
Internal Revenue Code Section 409A tax payments made to the U.S. government on behalf of employees, a
decrease of acquisition costs of $1.5 million, and a decrease of $5.0 million in allocation of overhead expenses as
a result of a change in allocation methodology on certain overhead expenses offset by a $3.8 million increase in
legal expenses, and a $2.3 million increase in stock-based compensation expense.

The $19.9 million increase in 2007 versus 2006 consists primarily of $9.2 million in legal and accounting
expenses related to the stock option investigation, a $3.9 million increase in personnel costs as a result of
headcount growth to support the growth in the VUTEk business, a $3.8 million increase in bad debt expense due
to the prior year reversal of the VUTEk acquisition allowance for doubtful accounts, $1.5 million in costs related
to an acquisition that was not consummated in the first quarter of 2007, and a $1.3 million increase in personnel
costs related to the tax settlement pursuant to Section 409A of the U.S. Internal Revenue Code.

Restructuring and Other

Restructuring and other costs totaled $11.0 million or 2% of revenue in 2008. We announced and implemented
restructuring plans during 2008 that included organizational changes within targeted research and development,
sales and marketing, and general and administration functions to better align spending levels with expected
revenues. These charges primarily include cash severance costs, benefits continuation costs, outplacement costs,
and facility closure costs related to five sites.

Amortization of Identified Intangibles

Amortization of identified intangibles was $29.4 million or 5% of revenue in 2008 versus $33.5 million or 6% of
revenue in 2007 and $35.5 million or 6% of revenue in 2006. The decrease of $4.1 million in 2008 versus 2007 is
due to several intangible assets becoming fully amortized in 2008, offset partially by the increased amortization
from Pace and Rastek intangible assets beginning in 2008. The decrease of $2.0 million in 2007 versus 2006 is
due to several intangible assets becoming fully amortized in 2007.

In-Process Research and Development

In 2008, we incurred in-process research and development expenses of $2.7 million as a result of our acquisitions
of Pace and Rastek during the third and fourth quarters, respectively. No in-process research and development
expenses were incurred in 2007. In 2006, we incurred in-process research and development expenses of $8.5
million as a result of our acquisition of Jetrion.

Interest and Other Income, Net

Interest and other income

Interest and other income was $13.5 million in 2008 compared with $29.5 million in 2007 and $24.0 million in
2006. The decrease of $16.0 million from 2007 to 2008 was driven by lower interest income on our investments
as a result of lower investment balances and interest rates as we sold a substantial portion of our investment
portfolio during the first five months of 2008 in order to generate cash for the redemption of our 1.50%

convertible senior debentures, which occurred on June 2, 2008. Interest and other income was $29.5 million in
2007 compared with $24.0 million in 2006, an increase of $5.5 million. The increase was attributable to higher
interest rates and higher average cash, cash equivalents and investment balances. We had net realized gains on
our marketable securities of $3.9 million in 2008, and net realized losses of $0.3 million and $0.2 million in
2007, and 2006, respectively.

Interest expense

Interest expense consists of interest and debt amortization costs related to our 1.50% convertible senior
debentures. Interest expense for the year ended December 31, 2008 was $1.5 million compared to $5.0 million
for each of the years ended December 31, 2007 and 2006, respectively. The decrease of $3.5 million from 2007
to 2008 was driven by the redemption of the outstanding balance of our 1.50% convertible senior debentures on
June 2, 2008, which totaled $240.0 million.

Gain on Sale of Product Line

During the second quarter of 2006, we sold our inventory and net assets related to our Mobile Workforce
Automation line of products.

Goodwill and Long-Lived Asset Impairment

K
-
0
1
m
r
o
F

We performed our annual valuation analysis of goodwill on September 30, 2008 in accordance with SFAS142 as
stated above. The goodwill valuation analysis was performed based on our respective reporting units—Controller,
Inkjet, and Advanced Professional Print Software. Our reporting units are consistent with our product categories
identified in Note 15 of Notes to the Consolidated Financial Statements. Our product categories meet the definition
of a reporting unit one level below an operating segment in accordance with SFAS 142 as each product category
constitute a business for which discrete financial information is available and reviewed by segment management.

We determined the fair value of the Inkjet reporting unit based on a weighting of market and income approaches.
The fair value of the Controller and APPS reporting units was determined based on the market approach. Under
the market approach, we estimated the fair value based on market multiples of revenues or earnings. Under the
income approach, we measured fair value of the reporting units based on a projected cash flow method using a
discount rate determined by our management which is commensurate with the risk inherent in our current
business model. Based on our valuation results, we had determined that the fair values of our reporting units
continued to exceed their carrying values. Therefore, management determined that no goodwill impairment
charge was required as of September 30, 2008.

•

significant negative industry or economic trends;

•

significant decline in our stock price for a sustained period;

our market capitalization relative to net book value; and

significant changes in the manner of our use of the acquired assets or the strategy for our overall
business.

Based on the outcome of the interim impairment analysis, we concluded that an impairment had occurred relating to
the Inkjet product category resulting in a non-cash goodwill impairment charge of $104 million during the fourth
quarter of 2008. There were no impairments of goodwill, intangible assets, or other long-lived assets in 2007 and
2006.

Solely for purposes of establishing inputs for the fair value calculations described above related to goodwill
impairment testing, we made the following assumptions:

•

the current economic downturn will continue through fiscal year 2010,

the economic downturn is partially mitigated by new product introductions in 2010,

followed by a recovery period between 2011 and 2013, and

long-term industry growth past 2013.

Our discounted cash flow projections for the Inkjet reporting unit were based on five-year financial forecasts. The
five-year forecasts were based on annual financial forecasts developed internally by management for use in
managing our business and through discussions with the independent valuation firm engaged by us. The significant
assumptions of these five-year forecasts included annual revenue growth rates ranging from -11.0% to 12% for the
Inkjet reporting unit. The future cash flows were discounted to present value using a mid-year convention and a
discount rate of 16%. Terminal values were calculated using the Gordon growth methodology with a long-term
growth rate of 4.5%. The sum of the fair values of the Controllers, APPS, and Inkjet reporting units was reconciled
to our current market capitalization (based on our stock price) plus an estimated control premium. The significant
assumptions used in determining fair values of the reporting units using comparable company market values include
the determination of appropriate market comparables, the estimated multiples of revenue, EBIT, and EBITDA that a
willing buyer is likely to pay, and the estimated control premium a willing buyer is likely to pay.

forecasted revenue or gross margin rates are not achieved, we may be required to record additional goodwill
impairment charges in future periods relating to any of our reporting units, whether in connection with the next
annual impairment testing in the third quarter of 2009 or prior to that, if any such change constitutes a triggering
event outside of the quarter from when the annual goodwill impairment test is performed. It is not possible at this
time to determine if any such future impairment charge would result or, if it does, whether such charge would be
material.

If we were to increase the revenue growth factor by 1%, the impairment amount would be decreased by
approximately $2.5 million. If we were to decrease the revenue growth factor by 1%, the impairment amount
would be increased by approximately $2.4 million. If we were to decrease the discount rate by 1%, the
impairment amount would be decreased by approximately $13.8 million. If we were to increase the discount rate
by 1%, the impairment amount would be increased by approximately $8.8 million. We believe that the
assumptions and rates used in our impairment test under SFAS142 are reasonable. However, they are judgmental,
and variations in any of the assumptions or rates could result in materially different calculations of impairment
amounts.

Long-Lived Assets

Other investments, included within Long-Lived Assets, consist of equity and debt investments in privately-held
companies that develop products, markets and services that are strategic to us. Investments in which we exercise
significant influence over operating and financial policies, but do not have a majority voting interest, are
accounted for using the equity method of accounting.

The process of assessing whether a particular equity investment’s fair value is less than its carrying cost requires
a significant amount of judgment due to the lack of a mature and stable public market for these securities. In
making this judgment, we carefully consider the investee’s most recent financial results, cash position, recent
cash flow data, projected cash flows (both short and long-term), financing needs, recent financing rounds, most
recent valuation data, the current investing environment, management or ownership changes, and competition.
This process is based primarily on information that we request and receive from these privately-held companies
and is performed on a quarterly basis. Although we evaluate all of our privately-held equity investments for
impairment based on this criteria, each investment’s fair value is only estimated when events or changes in
circumstances have occurred that may have a significant effect on its fair value (because the fair value of each
investment is not readily determinable). Where these factors indicate that the equity investment’s fair value is
less than its carrying cost, and where we consider such diminution in value to be other than temporary, we record
an impairment charge to reduce such equity investment to its estimated net realizable value.

K
-
0
1
m
r
o
F

During the fourth quarter of 2008, EFI assessed each remaining investment’s R&D technology pipeline and
market conditions for the next several years in the industry and determined that it is no longer probable that they
will generate enough positive future cash flows to recover the full carrying amount of the investment. As such,
we recognized an impairment charge of $7.9 million.

Income Taxes

In 2008, we recorded a tax benefit of $19.6 million on a pre-tax operating loss of $133.1 million, compared to a
tax benefit of $4.6 million recorded in 2007 on pre-tax operating income of $22.2 million and a tax provision of
$41.7 million recorded in 2006 on pre-tax operating income of $41.5 million. In each of these years, we benefited
from research and development credits. Our taxes also decreased due to both lower taxes on foreign income in
2008 and 2007 and the extra-territorial income exclusion in 2006. Our taxes increased due to both non-deductible
stock compensation charges in each of these years, and non-deductible goodwill impairment charges in 2008. As
a result of discrete tax adjustments, our taxes in 2008 increased $0.7 million due to interest accrued on prior year
tax contingency reserves and $2.5 million related to SFAS 123(R) (“Share-Based Payment”) tax shortfalls.
Discrete tax adjustments also reduced our 2008 taxes by $0.5 million due to a reassessment of our taxes resulting

from our filing of our 2007 federal and state income tax returns, $2.5 million due to the completion of our 2002-
2004 IRS audits, $2.2 million due to one-time severance costs and $0.3 million due to a reduction in tax reserves,
established in prior years on income from foreign operations. As a result of discrete tax adjustments, our taxes in
2007 increased $0.3 million due to interest accrued on prior year tax contingency reserves and $0.9 million due
to our reassessment of taxes resulting from our filing of our 2006 federal and state income tax returns. Discrete
tax adjustments also reduced our 2007 taxes by $1.6 million due to a reassessment of our federal tax contingency
reserves, $1.1 million due to a one-time bonus payment to employees related to the temporary suspension of our
ESPP program, $0.4 million related to U.S. Internal Revenue Section 409A payments made on employees’
behalf, and $0.5 million valuation allowance release related to compensation deductions that are no longer
anticipated to be limited by U.S. Internal Revenue Code Section 162(m). As a result of discrete tax adjustments,
our taxes in 2006 were reduced by $0.9 million as a result of the expiration of the statute of limitations for state
income tax purposes and $0.4 million due to a reassessment of tax contingency reserves related to the filing of
foreign income tax returns, and were increased by $34.9 million due to the migration of the non-North American
VUTEk and chipset product lines to our European headquarters and $2.9 million related to sales of the MWA
assets.

Effective January 1, 2007 we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty
in income taxes by requiring a tax position be recognized only when it is more likely than not that the tax
position, based on its technical merits, will be sustained upon ultimate settlement with the applicable tax
authority. The tax benefit to be recognized is the largest amount of tax benefit that is greater than fifty percent
likely of being realized upon ultimate settlement with the applicable tax authority that has full knowledge of all
relevant information. The cumulative effect of adopting FIN 48 has been recorded as an increase of $4.8 million
to retained earnings, and a decrease of $1.1 million and $5.9 million in goodwill and taxes payable respectively.

In the third quarter of 2008, we finalized a closing agreement with the Internal Revenue Service (IRS) to
complete their examination of the 2002 through 2004 tax years. As a result of the IRS audit settlement, we also
reduced our unrecognized tax benefits by $6.6 million, of which $2.5 million was recorded as a discrete tax
benefit. In conjunction with the IRS audit settlement, we also reduced deferred tax assets and equity by $4.1
million and $2.0 million respectively and expect to pay approximately $2.0 million to federal and state tax
authorities as a result of the closure of the audit. These adjustments are primarily related to intercompany cost
allocations and the research and development credits.

Critical Accounting Policies

The preparation of the consolidated financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and
liabilities. We evaluate our estimates, including those related to bad debts, inventories, intangible assets, income
taxes, warranty obligations, purchase commitments, revenue recognition and contingencies on an ongoing basis.
The estimates are based upon historical and current experience, the impact of the current economic environment,
and on various other assumptions that are believed to be reasonable under the circumstances at the time of the
estimate, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.

The following are our critical accounting policies and estimates:

•

revenue recognition;

estimating allowance for doubtful accounts, inventory reserves and litigation accruals;

accounting for stock-based compensation;

accounting for income taxes;

valuation analyses for intangible assets and goodwill;

•

business combinations; and

the determination of functional currencies for the purposes of consolidating our international operations.

Revenue recognition. We derive our revenue primarily from product revenue, which includes hardware
(controllers, design-licensed solutions, and inkjet printers and ink), software and royalties. We also receive
services and support revenue from software license maintenance agreements, customer support and training and
consulting. As described below, significant management judgments and estimates must be made and used in
connection with the revenue recognized in any accounting period. Material differences could result in the amount
and timing of our revenue for any period if our management made different judgments or utilized different
estimates.

We recognize revenue in accordance with the provisions of SEC Staff Accounting Bulletin 104 “Revenue
Recognition” (“SAB104”) and, when applicable, Emerging Issues Task Force 00-21, “Revenue Arrangements
with Multiple Deliverables” (“EITF 00-21”), for the sale of controllers, printers, and ink. As such, revenue is
generally recognized when persuasive evidence of an arrangement exists, the product has been delivered or
services have been rendered, the fee is fixed or determinable and collection of the resulting receivable is
reasonably assured.

We use either a purchase order or signed contract as evidence of an arrangement. Sales through some of our
OEMs are evidenced by a master agreement governing the relationship together with purchase orders on a
transaction-by-transaction basis. Our arrangements do not generally include acceptance clauses. Delivery for
hardware generally is complete when title and risk of loss is transferred at point of shipment from manufacturing
facilities. In some instances, we also sell products and services in which the terms included in sales arrangements
result in different timing for revenue recognition. We assess whether the fee is fixed or determinable based on the
terms of the contract or purchase order. We assess collection based on a number of factors, including past
transaction history with the customer and the credit-worthiness of the customer. We may not request collateral
from our customers. If we determine that collection of a fee is not reasonably assured, we defer the fee and
recognize revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash.

We license our software primarily under perpetual licenses. Revenue from software consists of software
licensing, post-contract customer support and professional consulting. We apply the provisions of Statement of
Position 97-2, “Software Revenue Recognition” (“SOP 97-2”), as amended by Statement of Position 98-9,
“Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions”
(“SOP 98-9”), and if applicable, SAB 104 and EITF 00-21 to all transactions involving the sale of software
products and hardware transactions where the software is not incidental.

When several elements, including software licenses, post-contract customer support and professional services,
are sold to a customer through a single contract, the revenue from such multiple-element arrangements are
allocated to each element using the residual method in accordance with SOP 98-9. Revenue is allocated to the
support elements and professional service elements of an agreement using vendor specific objective evidence of
fair value (“VSOE”) and to the software license portion of the agreements using the residual method. We have
established VSOE of the fair value of our professional services based on the rates charged to our customers in
stand alone orders. We have also established VSOE of fair value for post-contract customer support based on
substantive renewal rates. Accordingly, software license fees are recognized under the residual method for
arrangements in which the software is licensed with maintenance and/or professional services, and where the
maintenance and professional services are not essential to the functionality of the delivered software. Revenue
allocated to software licenses is recognized when the following four basic criteria are met: persuasive evidence of
an arrangement exists, delivery has occurred, the price is fixed or determinable and collectability is probable.
Revenue allocated to post-contract support is recognized ratably over the term of the support contract assuming
the four basic criteria are met. We also have subscription arrangements where the customer pays a fixed fee and
receives services over a period of time. We recognize revenue from the subscriptions ratably over the service
period. Any upfront setup fees associated with our subscription arrangements are recognized ratably, generally
over one year.

K
-
0
1
m
r
o
F

Allowances for doubtful accounts, inventory reserves, warranty reserves, and litigation accruals. To
determine the need for an allowance for doubtful accounts, management must make estimates of the
collectability of our accounts receivables. To do so, management analyzes accounts receivable and historical bad
debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our
customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. Our accounts
receivable balance was $97.3 million, net of allowance for doubtful accounts and sales returns of $8.5 million, as
of December 31, 2008.

Similarly, management must make estimates of potential future inventory obsolescence and purchase
commitments to measure the need for inventory reserves. Management analyzes current economic trends,
changes in customer demand and the acceptance of our products when evaluating the adequacy of such
allowances. Significant management judgments and estimates must be made and used in connection with
establishing the allowances and reserves in any accounting period. Material differences may result in changes in
the amount and timing of our income for any period if management made different judgments or utilized
different estimates. Our inventory balance was $48.8 million, net of inventory reserves of $9.8 million, as of
December 31, 2008.

Management must make estimates of potential inventory return rates and replacement or repair costs to measure
the need for warranty reserves. Significant management judgments and estimates must be made and used in
connection with establishing warranty reserves in any accounting period. Material differences may result in
changes in the amount and timing of our income for any period if management made different judgments or
utilized different estimates. Warranty reserves were $6.8 million as of December 31, 2008.

We accrue for estimated legal expenses, including potential regulatory fines when the likelihood of the
incurrence of the related costs is probable and management has the ability to estimate such costs. Until both of
these conditions are met, the related legal expenses are recorded as incurred. The material assumptions we use to
estimate the amount of legal expenses include:

•

communication between our external attorneys and us on the expected duration of the lawsuit and the
estimated expenses during that time;

our strategy regarding the lawsuit;

the deductible amounts under the insurance policies; and

past experiences with similar lawsuits.

The outcome of any particular lawsuit cannot be predicted, and if the outcome is different than expected, our
income could be materially impacted, either positively or negatively.

We have from time to time set up allowances or accruals for uncertainties related to revenues and for potential
unfavorable outcomes from disputes with customers or vendors. Management bases its estimates for the
allowances or accruals on historical experience and on various other assumptions believed to be applicable and
reasonable under the circumstances.

Accounting for stock-based compensation. We account for stock-based compensation in accordance with
SFAS 123(R), “Share-Based Payment.” We must use our judgment in determining and applying the assumptions
needed for the valuation of stock options, issuances under our Employee Stock Purchase Plan, and stock awards.
We also are required to apply a forfeiture rate to reflect what we believe will be our final expense related to
stock-based compensation. The amounts to be recorded as stock-based compensation expense expected in the
future are subject to change if our assumptions for the variables used in determining the fair value of the
instruments and the forfeiture rates are revised. In adopting SFAS 123(R), we elected to adopt the simplified
method to establish our beginning balance for the additional paid-in capital pool related to the tax effects of
employee stock-based compensation. Tax shortfalls resulting from the tax effects of employee stock-based
compensation in 2008 absorbed the remaining balance of the additional paid-in capital pool.

Accounting for income taxes. In preparing our consolidated financial statements we are required to estimate our
income taxes in each of the jurisdictions in which we operate. We estimate our actual current tax expense and the
temporary differences resulting from differing treatment of items, such as deferred revenue, for tax and book
accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our
consolidated balance sheet. We must then assess the likelihood that our deferred tax assets will be recovered
from future taxable income. If we believe that recovery of these deferred assets is not likely, we must establish a
valuation allowance. To the extent we either establish or increase a valuation allowance in a period, we must
include an expense within the tax provision in the statement of operations.

Significant management judgment is required in determining our provision for income taxes, our deferred tax
assets and liabilities, and any valuation allowance recorded against our net deferred tax assets. We have
maintained a valuation allowance of $4.0 million as of December 31, 2008 for foreign tax credits resulting from
the 2003 acquisition of Best and compensation deductions potentially limited by U.S. Internal Revenue
Code 162(m). If actual results differ from these estimates or we adjust these estimates in future periods, we may
need to establish an additional valuation allowance that could materially impact our financial position and results
of operations.

Net deferred tax assets as of December 31, 2008 were $60.8 million.

Significant management judgment is also required in evaluating our uncertain tax positions. Our gross
unrecognized benefits total $33.8 million as of December 31, 2008. Our evaluation of uncertain tax positions is
based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively
settled issues under audit, and new audit activity. If the actual settlements differ from these estimates or we adjust
these estimates in future periods, we may need to recognize a tax benefit or an additional tax charge that could
materially impact our financial position and results of operations.

Valuation analyses of intangible assets and goodwill. We review goodwill annually in the third quarter of each
year and whenever events or changes in circumstances indicate the carrying value may not be recoverable. The
provisions of SFAS 142 “Goodwill and Other Intangible Assets” (“SFAS 142”) require that we perform a
two-step impairment test on goodwill. In the first step, we compare the fair value of each reporting unit to its
carrying value. Our reporting units are consistent with our product categories identified in Note 15—Information
Concerning Business Segments and Major Customers of Notes to Consolidated Financial Statements. We
determine the fair value of our reporting units based on an appropriate weighting of market and income
approaches. Under the market approach, we estimate the fair value based on market multiples of revenues or
earnings of comparable companies. Under the income approach, we measure any impairment based on a
projected discounted cash flow method using a discount rate determined by our management to be commensurate
with the risk inherent in our current business model. If the fair value of the reporting unit exceeds the carrying
value of the net assets assigned to the reporting unit, goodwill is not impaired and we are not required to perform
further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the
reporting unit, then we must perform the second step of the impairment testing order to determine the implied
fair value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied
fair value then we record an impairment loss equal to the difference.

•

significant negative industry or economic trends;

significant decline in our stock price for a sustained period;

our market capitalization relative to net book value; and

significant changes in the manner of our use of the acquired assets or the strategy for our overall business.

K
-
0
1
m
r
o
F

When we determine that the carrying value of intangibles or long-lived assets may not be recoverable based upon
the existence of one or more of the above indicators of impairment, we measure any impairment based on a
projected discounted cash flow method using a discount rate determined by our management to be commensurate
with the risk inherent in our current business model. Our annual review of goodwill performed in the third
quarter of 2008 indicated that there was no impairment of goodwill. We performed our annual valuation analysis
of goodwill on September 30, 2008 in accordance of SFAS142 as stated above. Valuation analysis of goodwill
was performed on our respective reporting units—Controller, Inkjet, and Advanced Professional Print Software
using an equal weighing between the market and income approach for the Inkjet reporting unit and using the
market approach for the Controller and APPS reporting units. Our reporting units are consistent with our product
categories identified in Note 15—Information Concerning Business Segments and Major Customers of Notes to
the Consolidated Financial Statements. Based on our valuation results, we had determined that the fair values of
our reporting units continued to exceed their carrying values. Therefore, management determined that no
goodwill impairment charge was required as of September 30, 2008.

During the fourth quarter of 2008, our market capitalization declined significantly as a result of declining
worldwide economic conditions caused by the tightening of global credit markets. Based on a combination of
factors including the recent economic environment, resulting erosion in our market capitalization, and the
lowering of our 2009 revenue outlook subsequent to the third quarter of 2008, we performed an interim
impairment analysis during the fourth quarter of 2008.

Based on the internal market-based valuation that we performed, the fair value of the Controller and APPS
product categories significantly exceeded their carrying value as of December 31, 2008. Consequently, it was not
considered necessary to obtain a third party valuation of these reporting units. A third party interim valuation was
obtained with respect to the Inkjet product category, which was equally weighted between the income and market
approach.

Based on the outcome of the interim impairment analysis, we concluded that an impairment had occurred
resulting in a non-cash impairment charge of $111.9 million during fourth the quarter of 2008 related to both
goodwill and other long-lived assets. There were no impairments of goodwill, intangible assets or other long-
lived assets in 2007 and 2006.

Solely for purposes of establishing inputs for the fair value calculations described above related to goodwill
impairment testing, we made the following assumptions:

•

the current economic downturn will continue through fiscal year 2010,

the economic downturn is partially mitigated by new product introductions in 2010,

followed by a recovery period between 2011 and 2013, and

long-term industry growth past 2013.

Our discounted cash flow projections for the Inkjet reporting unit were based on five-year financial forecasts.
The five-year forecasts were based on annual financial forecasts developed internally by management for use in
managing our business and through discussions with the independent valuation firm engaged by us. The
significant assumptions of these five-year forecasts included annual revenue growth rates ranging from (11.0%)
to 12% for the Inkjet reporting unit. The future cash flows were discounted to present value using a mid-year
convention and a discount rate of 16%. Terminal values were calculated using the Gordon growth methodology
with a long-term growth rate of 4.5%. The sum of the fair values of the Controllers, APPS, and Inkjet reporting
units was reconciled to our current market capitalization (based on our stock price) plus an estimated control
premium. The significant assumptions used in determining fair values of the reporting units using comparable
company market values include the determination of appropriate market comparables, the estimated multiples of
revenue, EBIT, and EBITDA that a willing buyer is likely to pay, and the estimated control premium a willing
buyer is likely to pay.

Business combinations We allocate the purchase price of acquired companies to the tangible and intangible
assets acquired, liabilities assumed, as well as in-process research and development based on their estimated fair
values. Such a valuation requires management to make significant estimates and assumptions, especially with
respect to intangible assets.

Management makes estimates of fair value based upon assumptions believed to be reasonable. These estimates
are based on historical experience and information obtained from the management of the acquired companies.
Critical estimates in valuing certain of the intangible assets include but are not limited to: future expected cash
flows; acquired developed technologies and patents; expected costs to develop the in-process research and
development into commercially viable products and estimating cash flows from the projects when completed; the
acquired company’s brand awareness and market position, as well as assumptions about the period of time the
acquired brand will continue to be used in the combined company’s product portfolio; and discount rates. These
estimates are inherently uncertain and unpredictable. Assumptions may be incomplete or inaccurate, and
unanticipated events and circumstances may occur which may affect the accuracy or validity of such
assumptions, estimates or other actual results.

Other estimates associated with the accounting for acquisitions include severance costs and the costs of vacating
duplicate facilities. These costs are based upon estimates made by management and are subject to refinement. We
estimate the future costs to operate and eventually vacate duplicate facilities. Estimated costs may change as
additional information becomes available regarding the assets acquired and liabilities assumed and as
management continues its assessment of the pre-merger operations.

On July 28, 2008, we acquired Pace Systems Group, Inc. (“Pace”) for approximately $20.0 million in cash plus
an additional future cash earn out amount, which is contingent upon achieving certain performance targets. We
acquired Pace to further strengthen our Advanced Professional Print Software reporting unit. On December 2,
2008, we acquired Raster Printers, Inc. (“Rastek”), a mid-market, wide format graphics printer developer and
manufacturer, to further expand our Inkjet line of products. The Pace and Rastek acquisitions are discussed more
fully in Note 2—Acquisitions of Notes to the Consolidated Financial Statements.

We apply the provisions of SFAS 141, Business Combinations, when accounting for our acquisitions. We
allocate the purchase price of acquired companies to the tangible and intangible assets acquired, liabilities
assumed, as well as in-process research and development based on their estimated fair values. All acquisitions
are included in our financial statements from the date of acquisition.

Our financial projections may ultimately prove to be inaccurate and unanticipated events and circumstances may
occur. Therefore, no assurance can be given that the underlying assumptions used to forecast revenues and costs
to develop such projects will transpire as projected.

Determining functional currencies for the purpose of consolidating our international operations. We have a
number of foreign subsidiaries which together account for approximately 46% of our net revenues,
approximately 10% of our total assets and approximately 32% of our total liabilities as of December 31, 2008.
We typically quote and bill our international customers in United States dollars.

K
-
0
1
m
r
o
F

Based on our assessment of the factors discussed below, we consider the United States dollar to be the functional
currency for each of our international subsidiaries except for our Japanese subsidiary, Electronics for Imaging Japan
YK, for which we consider the Japanese Yen to be the subsidiary’s functional currency and our German subsidiary,
Electronics for Imaging GmbH, for which we consider the Euro to be the subsidiary’s functional currency.

In preparing our consolidated financial statements, we are required to translate the financial statements of the
foreign subsidiaries from the currency in which they keep their accounting records, generally the local currency,
into United States dollars. This process results in exchange gains and losses which, when the transactions are not
denominated in the functional currency, are included within the statement of operations or, if the transactions are
denominated in the functional currency, are included as a separate component of stockholders’ equity under the
caption “Accumulated other comprehensive income.”

Recent Accounting Pronouncements

See Note 1 of our Notes to Consolidated Financial Statements for a full description of recent accounting
pronouncements including the respective expected dates of adoption.

Liquidity and Capital Resources

(in thousands)

2008

2007

2006

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 132,152
57,199

$165,636
334,216

$166,996
343,175

Total cash, cash equivalents and short-term investments . . . . . . . . . . . . .

$ 189,351

$499,852

$510,171

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used for investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used for) provided by financing activities . . . . . . . . . . . . . . . . . . . .

$ 27,819
236,689
(297,903)

$ 69,625
(6,561)
(64,347)

$ 66,962
(94,231)
12,381

Overview

Cash and cash equivalents and short term investments decreased $310.5 million to $189.4 million as of
December 31, 2008 from $499.9 million as of December 31, 2007. The decrease is primarily due to the
redemption on June 2, 2008 of our 1.50% convertible senior debentures of $240.0 million, repurchases of our
common stock and net settlement of restricted stock units of $65.2 million, and costs associated with purchases
of Pace and Raster of $25.3 million offset by cash generated by operations of $27.8 million.

Operating Activities

Net cash provided by operating activities in 2008, 2007 and 2006 of $27.8 million, $69.6 million, and
$67.0 million, respectively, was primarily the result of net income (loss) adjusted for non-cash items such as
depreciation and amortization, acquired in-process research and development, deferred income taxes, stock-based
compensation, other non-cash charges and credits, and changes in various assets and liabilities such as accounts
payable, accounts receivable, inventories, and other current assets.

Our historical and primary source of operating cash flow is the collection of accounts receivable from our
customers and the timing of payments to our vendors and service providers. One measure of the effectiveness of
our collection efforts is average days sales outstanding (“DSO”) for accounts receivable. DSOs were 66 days,
62 days, and 58 days at December 31, 2008, 2007 and 2006 respectively. We calculate accounts receivable DSO
by dividing the net accounts receivable balance at the end of the quarter by the amount of revenue recognized for
the quarter multiplied by the total days in the quarter. The increase in DSOs is due to the linearity of revenues in
the second half of 2008. Our DSOs related to direct sales are traditionally higher than those related to OEM
customers. We expect DSOs to vary from period to period because of changes in quarterly mix of business
between our direct and OEM customers, and the effectiveness of our collection efforts. As the percentage of our
APPS and Inkjet related revenue increases, we expect DSOs may trend higher.

Our operating cash flows are impacted by the timing of payments to our vendors for accounts payable and by our
accrual of liabilities. In 2008, the change in accounts payable, accrued liabilities and income taxes payable
decreased our cash flows by approximately $4.4 million compared to a increase in cash flows in 2007 of $1.6
million. Our working capital, defined as current assets minus current liabilities, was $293.8 million and $270.7
million at December 31, 2008 and 2007, respectively.

We expect to meet our obligations as they become due through available cash and internally generated funds. We
expect to generate positive working capital through our operations. However, we cannot predict whether current
trends and conditions will continue, or the effect on our business from the competitive environment in which we
operate. We believe the working capital available to us will be sufficient to meet our cash requirements for at
least the next 12 months.

Investing Activities

A summary of our investing activities at December 31, 2008, 2007 and 2006 follows. The detail of these line
items can be seen in our consolidated statement of cash flows.

Investing Activities

(in thousands)

Purchases of short-term investments . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and maturities of short-term

2008

2007

2006

$(170,732)

$(314,452)

$(323,115)

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

461,929

326,395

271,058

Reclassification of funds from cash to short-term

investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(14,836)

Purchases, net of proceeds from sales, of property and

equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of product line . . . . . . . . . . . . . . . . . . . . . .
Businesses acquired, net of cash received . . . . . . . . . . . . . . . .
Purchases of other investments . . . . . . . . . . . . . . . . . . . . . . . .

(11,607)
—
(25,283)
(2,782)

(13,292)
—
—
(5,212)

(9,318)
10,000
(41,427)
(1,429)

Net cash used for investing activities . . . . . . . . . . . . . . . . . . . .

$ 236,689

(6,561)

$ (94,231)

K
-
0
1
m
r
o
F

Acquisitions

Below is a summary of our acquisitions for the last three fiscal years:

Raster Printers, Inc. (“Rastek”): On December 2, 2008, we acquired the remaining interest of Rastek for
approximately $5.3 million in cash, including direct acquisition costs plus an additional future earn out amount,
which is contingent upon achieving certain performance targets. The maximum additional earn-out is
$1.7 million. Headquartered in San Jose, California, Rastek sells UV wide format printers primarily to mid-range
customers in the display graphics market.

Pace Systems Group, Inc (“Pace”): On July 28, 2008, we purchased Pace for approximately $20.0 million in
cash, including direct acquisition costs, plus an additional cash earn-out amount, which is contingent upon
achieving certain performance targets. Pace is a print management software company that provides print MIS and
e-commerce software solutions.

Jetrion LLC (“Jetrion”): On October 31, 2006, we purchased Jetrion for approximately $41.4 million in cash.
Jetrion sells industrial inkjet printers and inks to label printing companies.

We may buy or invest in companies, products and technologies within the print industry. Our available cash and
equity may be used to acquire or invest in companies or products, possibly resulting in significant acquisition-
related charges to earnings and dilution to our stockholders.

Inventories

Our inventories are procured primarily in support of the Inkjet and Controller product categories. Our inventories
increased from $39.9 million in 2007 to $48.9 million in 2008. This increase consisted primarily of finished
goods driven by the Rastek acquisition, 2008 new product introductions and inventories required for new product
introductions in future periods.

Property and Equipment

Our net property and equipment purchases totaled $11.6 million, $13.3 million, and $9.3 million in 2008, 2007,
and 2006, respectively. Our property and equipment additions have been funded by cash from operations.

We anticipate that we will continue to purchase property and equipment necessary in the normal course of our
business. The amount and timing of these purchases and the related cash outflows in future periods is difficult to
predict and is dependent on a number of factors including our hiring of employees, the rate of change in
computer hardware/software used in our business, our business outlook, and decisions to invest or expand
business sites.

On January 29, 2009, we completed the sale of land and building to Gilead for a total price of $137.5 million,
subject to an escrow holdback of $15.5 million. The escrow period expires January 2010. The property sold
included approximately thirty acres of land and the office building located on the land at 301 Velocity Way,
Foster City, California, consisting of approximately 163,000 square feet and certain other assets related to the
property.

Investments

During 2008, we received net proceeds from the sale and maturities of our marketable securities of
$291.2 million, of which $240.0 million was used to repay the 1.50% convertible senior debenture holders.
During 2007, we received net proceeds from the sale and maturities of our marketable securities of $11.9 million.
We made net purchases of marketable securities in 2006 of $52.1 million. We have classified our investment
portfolio as “available for sale,” and our investments are made with a policy of capital preservation and liquidity
as the primary objectives. We generally hold investments in corporate bonds and U. S. government agency
securities to maturity; however, we may sell an investment at any time if the quality rating of the investment
declines, the yield on the investment is no longer attractive or we are in need of cash. Because we invest
primarily in investment securities that are highly liquid with a ready market, we believe that the purchase,
maturity or sale of our investments has no material impact on our overall liquidity.

Restricted Investments

We have restricted investments classified in connection with the synthetic lease for our Foster City office. We are
required to maintain cash in LIBOR-based interest-bearing accounts which fully collateralize our synthetic
leases. We had $88.6 million in collateral accounted for as restricted investments at December 31, 2008 and
2007. At December 31, 2008, $56.9 million of the $88.6 million was accounted for as a non-current asset as
restricted investments. The remaining $31.7 million was accounted for as a current asset under Assets Held For
Sale related to the sale of a portion of our Foster City offices and accompanying real estate to Gilead. For further
information on these transactions, see the discussion at “Off-Balance Sheet Financing” herein and Note 13—Sale
of Land and Building of the Notes to Consolidated Financial Statements as of December 31, 2008.

Financing Activities

Historically, our recurring cash flows provided by financing activities have been from the receipt of cash from
the issuance of common stock from the exercise of stock options and employee stock purchase plans. We

received cash proceeds from these plans in the amount of $7.3 million, $4.8 million, and $42.3 million in 2008,
2007 and 2006, respectively. While we may continue to receive proceeds from these plans in future periods, the
timing and amount of such proceeds are difficult to predict and are contingent on a number of factors including
the price of our common stock, the number of employees participating in the plans and general market
conditions. We anticipate that cash provided from exercise of stock options may decline over time as we shift to
issuance of restricted stock awards and units rather than stock option awards.

The primary use of funds for financing activities in 2008, 2007, and 2006 was the use of $65.2 million, $70.3
million, and $33.9 million, respectively, of cash to repurchase outstanding shares of our common stock. See
Item 5—Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities for further discussion of our programs to repurchase our common stock.

The synthetic lease agreements for our corporate headquarters existing at December 31, 2008 provided for
residual value guarantees. Under FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” the fair value of a
residual value guarantee in lease agreements entered into after December 31, 2002, must be recognized as a
liability on our consolidated balance sheet. We have determined that the guarantees have no material value as of
December 31, 2008 and therefore have not recorded any liability.

On June 2, 2008, we exercised our option to redeem and paid in cash the outstanding balance of our 1.50%
convertible senior debentures, which totaled $240 million. The redemption price for the securities was 100% of
the principal amount, plus accrued and unpaid interest and additional interest amounts to but not including the
redemption date. Accrued and unpaid interest expense up to June 1, 2008 for the fiscal year ended December 31,
2008 totaled $0.6 million.

Other Commitments

Our inventory for our controller line of products consists primarily of raw and finished goods, memory
subsystems, processors and ASICs which are sold to third-party contract manufacturers responsible for
manufacturing our products. Our inventory for our inkjet line of products consists of raw and finished goods,
printheads, frames and other components. Should we decide to purchase components and do our own
manufacturing of controllers, or should it become necessary for us to purchase and sell components other than
the processors, ASICs or memory subsystems for our contract manufacturers, inventory balances and potentially
property and equipment would increase significantly, thereby reducing our available cash resources. Further, the
inventory we carry could become obsolete, thereby negatively impacting our financial condition and results of
operations. We are also reliant on several sole-source suppliers for certain key components and could experience
a further significant negative impact on our financial condition and results of operations if such supply were
reduced or not available.

We may be required to compensate our sub-contract manufacturers for components purchased for orders
subsequently cancelled by us. We periodically review the potential liability and the adequacy of the related
allowance. Our financial condition and results of operations could be negatively impacted if we were required to
compensate the sub-contract manufacturers in amounts in excess of the related allowance.

Legal Proceedings

In addition to the matters discussed under Item 3, Legal Proceedings, we are involved from time to time in
litigation relating to claims arising in the normal course of our business.

K
-
0
1
m
r
o
F

Contractual Obligations

The following table summarizes our significant contractual obligations at December 31, 2008 and the effect such
obligations are expected to have on our liquidity and cash flows in future periods. This table excludes amounts
already recorded on our balance sheet as current liabilities at December 31, 2008.

(in thousands)

Total

. . . . . . . . . . . . . . . . . . . . . . . .
Operating lease obligations(1)
Purchase obligations(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$33,035
5,668

Payments due by period

Less than
1 year

$ 8,155
5,668

1-3 years

3-5 years

More than
5 years

$11,858

$9,800

$3,222

Total(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$38,703

$13,823

$11,858

$9,800

$3,222

(1)

(2)

Lease obligations related to the principal corporate facilities are estimated and are based on current market
interest rates (LIBOR). See Off-Balance Sheet Financing.
Total does not include contractual obligations recorded on the balance sheet as current liabilities, or certain
purchase orders as discussed below.

In January, 2009, we sold the 163,000 square foot building and approximately 30 acres of land in our Foster City,
California campus to Gilead. As a result, total operating lease obligations for 2009 and beyond will decrease by
approximately $5.8 million. Purchase obligations in the table above include agreements to purchase goods or
services that are enforceable and legally binding on us and that specify all significant terms, including: fixed or
minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of
the transaction. Purchase obligations exclude purchase orders for the purchase of raw materials and other goods
and services that are cancelable without penalty. Our purchase orders are based on our current manufacturing
needs and are generally fulfilled by our vendors within short time horizons. We also enter into contracts for
outsourced services; however the obligations under these contracts were not significant and the contracts
generally contain clauses allowing for cancellation without significant penalty.

The expected timing of payment of the obligations discussed above is estimated based on current information.
Timing of payments and actual amounts paid may be different depending on the time of receipt of goods or
services or changes to agreed-upon amounts for some obligations.

The above table does not reflect unrecognized tax benefits of $33.8 million, the timing of which is uncertain. See
Note 11—Income Taxes of Notes to the Consolidated Financial Statements for additional discussion on
unrecognized tax benefits.

Off-Balance Sheet Financing

Synthetic Lease Arrangements

As of December 31, 2008 we were a party to two synthetic leases (the “301 Lease” and the “303 Lease”, together
“Leases”) covering our Foster City facilities located at 301 and 303 Velocity Way, Foster City, California. These
leases provided a cost effective means of providing adequate office space for our corporate offices. Both Leases
expire in July 2014. The leases included an option to purchase the facilities during or at the end of the term of the
Leases for the amount expended by the lessor to purchase the facilities. The funds pledged under the Leases
($56.9 million for the 303 Lease and $31.7 million for the 301 Lease at December 31, 2008 for a total of $88.6
million) are in LIBOR-based interest bearing accounts and are restricted as to withdrawal at all times. We have
exercised our purchase option in the first quarter of 2009 with respect to the 301 Lease in connection with the
sale of the land and building to Gilead. Accordingly, the $31.7 million of pledged funds have been re-classified
as Assets Held for Sale under current assets in the Consolidated Balance Sheet as of December 31, 2008.

included approximately thirty acres of land and the office building located on the land at 301 Velocity Way,
Foster City, California, consisting of approximately 163,000 square feet and certain other assets related to the
property.

We have guaranteed to the lessor a residual value associated with the buildings equal to 82% of their funding of
the respective Leases. Under the financial covenants, we must maintain a minimum net worth and a minimum
tangible net worth as of the end of each quarter. There is an additional covenant regarding mergers. We were in
compliance with all such financial and merger related covenants as of December 31, 2008. We have assessed our
exposure in relation to the first loss guarantees under the Leases and have determined that there is no deficiency
to the guaranteed value at December 31, 2008. If there is a decline in value, we will record a loss associated with
the residual value guarantee. In conjunction with the Leases, we have entered into separate ground leases with the
lessor for approximately 30 years. As of December 31, 2008, we were treated as the owner of these buildings for
federal income tax purposes. Since we exercised our purchase option with respect to the 301 Lease, our
maximum exposure under our remaining synthetic lease arrangement is $56.9 million as of January 29, 2009.

Effective July 1, 2003, we applied the accounting and disclosure rules set forth in Interpretation No. 46,
“Consolidation of Variable Interest Entities”, as revised (“FIN 46R”) for variable interest entities (“VIEs”). We
have evaluated our synthetic lease agreements to determine if the arrangements qualify as variable interest
entities under FIN 46R. We have determined that the synthetic lease agreements do qualify as VIEs; however,
because we are not the primary beneficiary under FIN 46R we are not required to consolidate the VIEs in our
financial statements.

Item 7A: Quantitative and Qualitative Disclosures about Market Risk

Market Risk

We are exposed to various market risks. Market risk is the potential loss arising from adverse changes in market
rates and prices, general credit, foreign currency exchange rate fluctuation, liquidity, and interest rate risks,
which may be exacerbated by the tightening of global credit markets and increase in economic uncertainty that
have affected various sectors of the financial markets and caused credit and liquidity issues. We do not enter into
derivatives or other financial instruments for trading or speculative purposes. We may enter into financial
instrument contracts to manage and reduce the impact of changes in foreign currency exchange rates. The
counterparties to such contracts are major financial institutions.

K
-
0
1
m
r
o
F

Interest Rate Risk

Marketable Securities

We maintain an investment portfolio of short-term investments of various holdings, types and maturities. These
short-term investments are generally classified as available–for-sale and consequently, are recorded on the
balance sheet at fair value with unrealized gains and losses reported as a separate component of accumulated
other comprehensive income (loss). At any time, a sharp rise in interest rates could have a material adverse
impact on the fair value of our investment portfolio. Conversely, declines in interest rates could have a material
impact on interest earnings for our portfolio. We do not currently hedge these interest rate exposures.

The following table presents the hypothetical change in fair values in the financial instruments held by us at
December 31, 2008 that are sensitive to changes in interest rates. The modeling technique used measures the
change in fair values arising from selected potential changes in interest rates. Market changes reflect immediate
hypothetical parallel shifts in the yield curve of plus or minus 100 basis points over a twelve-month time horizon.

This table estimates the fair value of the portfolio at a twelve-month time horizon (in thousands):

Valuation of
securities given an
interest rate
decrease of 100
basis points

$95,065

No change in
interest rates

$94,603

Valuation of
securities given an
interest rate
increase of 100
basis points

$94,141

Derivatives

We do not use any derivatives for trading or speculative purposes.

Financial Risk Management

The following discussion about our risk management activities includes “forward-looking statements” that
involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking
statements.

As a global concern, we face exposure to adverse movements in foreign currency exchange rates. These
exposures may change over time as business practices evolve and could have a material adverse impact on our
financial results. Our primary exposures are related to non-U.S. dollar-denominated sales in Japan and Europe
and operating expenses in Europe, India and Japan. At the present time, we do not hedge against these currency
exposures, but as these exposures grow we may consider hedging against currency movements.

We maintain investment portfolio holdings of various issuers, types and maturities, typically U.S. Treasury and
Agencies securities, corporate debt instruments, and asset-backed instruments. These short-term investments are
classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized
gains and losses reported as a separate component of accumulated other comprehensive income (loss). These
securities are not leveraged and are held for purposes other than trading.

Item 8: Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2008 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2008, 2007 and 2006 . . . . . . . .
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2008, 2007 and

2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006 . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unaudited Quarterly Consolidated Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

58
59
60

61
62
63
100

K
-
0
1
m
r
o
F

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Electronics For Imaging, Inc.:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present
fairly, in all material respects, the financial position of Electronics For Imaging, Inc. and its subsidiaries at
December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read
in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2008, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these
financial statements and financial statement schedule, for maintaining effective internal control over financial
reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility
is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s
internal control over financial reporting based on our integrated audits. We conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.

As discussed in Note 11 to the consolidated financial statements, the Company changed the manner in which it
accounts for uncertainty in income taxes in 2007.

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

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

/s/ PricewaterhouseCoopers LLP
San Jose, California
March 2, 2009

Electronics For Imaging, Inc.
Consolidated Balance Sheets

December 31,

2008

2007

(in thousands)

Assets
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term investments, available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowances of $8.5 million and $8.2 million,

respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets held for sale (Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 132,152
57,199

$ 165,636
334,216

97,286
48,785
55,367
20,013

410,802
35,225
56,850
122,581
72,992
51,013
2,485

101,955
39,949
—
15,844

657,600
57,604
88,580
211,780
86,554
47,004
8,617

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 751,948

$1,157,739

Liabilities and Stockholders’ Equity
Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 44,634
—
44,958
25,428
1,952

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

116,972

Non-current income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

33,758

42,262
240,000
72,400
24,365
7,896

386,923

26,820

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

150,730

413,743

Commitments and contingencies (Note 8)
Stockholders’ equity:

Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Common stock, $0.01 par value; 150,000 shares authorized; 70,738 and 69,633

shares issued, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock, at cost, 19,381 and 14,629 shares, respectively . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

708
644,482
(384,129)
1,676
338,481

696
606,702
(318,899)
3,572
451,925

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

601,218

743,996

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 751,948

$1,157,739

K
-
0
1
m
r
o
F

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.
Consolidated Statements of Operations

(in thousands, except per share amounts)

For the years ended December 31,

2008

2007

2006

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue(1)

$ 560,380
242,963

$620,586
259,439

$564,611
229,441

Gross Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

317,417

361,147

335,170

Operating expenses:

Research and development(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of identified intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-process research & development . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and other (Note 14)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and asset impairment (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . .

140,437
119,400
47,685
29,367
2,680
11,005
111,858

140,470
120,444
67,461
33,502
—
1,501
—

127,857
99,180
47,576
35,514
8,500
982
—

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

462,432

363,378

319,609

Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(145,015)

(2,231)

15,561

Interest and other income, net:

. . . . . . . . . . . . . . . . . . . . . . . . .
Interest and other income (expense), net
Gain on sale of product line, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,476
—
(1,537)

29,452
—
(5,012)

24,002
6,995
(5,027)

Total interest and other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,939

24,440

25,970

Income (loss) before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit from (provision for) income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(133,076)
19,632

22,209
4,634

41,531
(41,714)

Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(113,444) $ 26,843

Net income (loss) per basic common share . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income (loss) per diluted common share . . . . . . . . . . . . . . . . . . . . . . . . . .

(2.16) $

0.47

0.44

(183)

(0.00)

Shares used in basic per-share calculation . . . . . . . . . . . . . . . . . . . . . . . . . . . .

52,553

56,679

56,559

Shares used in diluted per-share calculation . . . . . . . . . . . . . . . . . . . . . . . . . . .

52,553

68,102

56,559

(1)

Includes stock-based compensation expense as follows:

2008

2007

2006

Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,471
12,923
6,059
11,974

1,909
9,018
3,968
9,635

1,725
8,346
3,248
10,427

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.
Consolidated Statements of Stockholders’ Equity

(in thousands)

Common stock

Shares Amount

Additional
paid-in capital

Deferred
compensation

Treasury stock

Shares Amount

Other
comprehensive
income (loss)

Retained
earnings

Total
stockholders’
equity

Balances as of December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,213

$662

$511,951

$(5,550)

(9,964) $(214,722)

$(2,069)

$ 420,467

$ 710,739

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net of tax:

Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market valuation on short-term investments . . . . . . . . . . . . . . . . . . . . . .

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of common stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elimination of deferred stock-based compensation in connection with the

2,006

adoption of SFAS 123(R) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
415
Stock issued pursuant to ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit related to stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

470

—

36,111

(5,550)
(5)
23,746

6,122
5,622

1,199
2,107

3,306

(183)

3,123
36,131

—
—
23,746
(33,909)
6,126
5,622

5,550

(1,526)

(33,909)

Balances as of December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,104

$691

$577,997

$ —

(11,490) $(248,631)

$ 1,237

$ 420,284

$ 751,578

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net of tax:

Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market valuation on short-term investments . . . . . . . . . . . . . . . . . . . . . .

6
1

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of common stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax expense related to stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment in connection with adoption of FIN 48 . . . . . . . . . . . . . . . . . . . .

318
211

3
2

4,838
(2)
24,326

(457)

666
1,669

2,335

26,843

4,798

29,178
4,841
—
24,326
(70,268)
(457)
4,798

(3,139)

(70,268)

Balances as of December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,633

$696

$606,702

$ —

(14,629) $(318,899)

$ 3,572

$ 451,925

$ 743,996

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income, net of tax:

Currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market valuation on short-term investments . . . . . . . . . . . . . . . . . . . . . .

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of common stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock issued pursuant to ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax expense related to stock plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

162
461

482

2
5

3,403
(5)
33,671

5,864
(5,153)

(113,444)

(295)
(1,601)

(1,896)

(115,340)
3,405
—
33,671
(65,230)
5,869
(5,153)

(4,752)

(65,230)

Balances as of December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,738

$708

$644,482

$ —

(19,381) $(384,129)

$ 1,676

$ 338,481

$ 601,218

See accompanying notes to consolidated financial statements.

Form 10-K

Electronics For Imaging, Inc.
Consolidated Statements of Cash Flows

(in thousands)

Cash flows from operating activities:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income (loss) to net cash provided by

operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired in-process research & development . . . . . . . . . . . . . . . . . . . . . .
Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for allowance for bad debts and sales-related allowances . . . . .
Tax (expense) benefit from employee stock plans . . . . . . . . . . . . . . . . . . .
Excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . .
Gain on sale of product line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for inventory obsolescence . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and asset impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-cash charges and credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in operating assets and liabilities, net of effect of acquired

companies:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Income taxes payable/receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the years ended December 31,

2008

2007

2006

$(113,444) $ 26,843

(183)

41,437
2,680
(33,988)
5,420
(3,170)
(36)
—
2,478
33,427
111,858
(5,258)

5,008
(12,722)
(1,435)
(13,965)
9,529

44,484
—
(17,437)
6,168
(457)
(1,080)
—
677
24,530
—
219

(8,864)
(5,582)
(1,510)
(12,482)
14,116

45,085
8,500
22,666
5,997
5,622
(4,033)
(6,995)
1,563
23,746
—
91

(32,093)
(8,460)
(6,350)
7,928
3,878

Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . .

27,819

69,625

66,962

Cash flows from investing activities:

Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and maturities of short-term investments . . . . . . . . .
Reclassification of funds from cash to short-term investments . . . . . . . . .
Purchases, net of proceeds from sales, of property and equipment . . . . . .
Proceeds from sale of product line . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Businesses acquired, net of cash received . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(170,732)
461,929
(14,836)
(11,607)
—
(25,283)
(2,782)

(314,452)
326,395

(323,115)
271,058

(13,292)
—
—
(5,212)

(9,318)
10,000
(41,427)
(1,429)

Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . .

236,689

(6,561)

(94,231)

Cash flows from financing activities:

Repayment of convertible debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock and net settlement of restricted stock . . . . . .
Excess tax benefit from stock-based compensation . . . . . . . . . . . . . . . . . .

(240,000)
7,291
(65,230)
36

—
4,841
(70,268)
1,080

—
42,257
(33,909)
4,033

Net cash (used for) provided by financing activities . . . . . . . . . . . . . . . . . . .

(297,903)

(64,347)

12,381

Effect of foreign exchange rate changes on cash and cash equivalents . . .

(89)

(77)

(155)

Decrease in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . . .

(33,484)
165,636

(1,360)
166,996

(15,043)
182,039

Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . . . .

$ 132,152

$ 165,636

$ 166,996

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements

Note 1: The Company and Its Significant Accounting Policies

The Company

We are the world leader in color digital print controllers, super-wide format printers and inks and print
management solutions. Our award-winning solutions, integrated from creation to print, deliver increased
performance, cost savings and productivity. Our robust product portfolio includes Fiery digital color print
servers, VUTEk super-wide digital inkjet printers, UV and solvent inks, Jetrion industrial inkjet printing systems,
print production workflow and management information software, and corporate printing solutions. Our
integrated solutions and award-winning technologies are designed to automate print and business processes,
streamline workflow, provide profitable value-added services and produce accurate digital output.

Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of EFI and our subsidiaries. All
significant inter-company accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and
liabilities. We evaluate our estimates, including those related to bad debts, inventories, goodwill and intangible
assets, income taxes, warranty obligations, purchase commitments, revenue recognition and contingencies on an
on-going basis. The estimates are based upon historical experience and on various other assumptions that are
believed to be reasonable under the circumstances at the time of the estimate, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions.

K
-
0
1
m
r
o
F

Cash, Cash Equivalents and Short-term Investments

We invest our excess cash in deposits with major banks; money market securities; and municipal, U.S.
government and corporate debt securities. By policy, we invest primarily in high-grade marketable securities. We
are exposed to credit risk in the event of default by the financial institutions or issuers of these investments to the
extent of amounts recorded on the consolidated balance sheet.

We consider all highly liquid investments with a maturity of three months or less at the time of purchase to be
cash equivalents. Typically, the cost of these investments has approximated fair value. Marketable investments
with a maturity greater than 3 months are classified as available-for-sale short-term investments.
Available-for-sale securities are stated at fair market value with unrealized gains and losses reported as a separate
component of stockholders’ equity, adjusted for deferred income taxes. Realized gains and losses on sales of
investments are recognized upon sale of the investments using the specific identification method.

Allowance for Doubtful Accounts and Sales-related Allowances

We analyze accounts receivable and historical bad debts, customer concentrations, customer credit-worthiness,
current economic trends and changes in our customer payment terms when evaluating the adequacy of our
allowance for doubtful accounts. In addition, we specifically reserve for any accounts receivable for which there
are identified collection issues. Balances are charged off when we deem it probable the receivable will not be
recovered. We also make provisions for sales rebates and revenue adjustments based upon analysis of current
sales programs and revenues.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Concentration of Risk

We are exposed to credit risk in the event of default by any of our customers to the extent of amounts recorded in
the consolidated balance sheet. We perform ongoing evaluations of the collectability of the accounts receivable
balances for our customers and maintain allowances for estimated credit losses; actual losses have not
historically been significant, but have risen over the past several years as our customer base has grown through
acquisitions.

Our controller products, which constitute approximately 50% of our revenues, are primarily sold to a limited
number of OEMs. We expect that we will continue to depend on a relatively small number of OEM customers
for a significant portion of our revenues, although the significance of that revenue is expected to decline in future
periods as our revenues increase from Inkjet products.

We are reliant on certain sole source suppliers for key components of our products. We conduct our business
with our component suppliers solely on a purchase order basis. Any disruption in the supply of the key
components would result in us being unable to manufacture our products.

Many of our current controllers include software that we license from Adobe Systems, Inc. (“Adobe”). In order
to obtain licenses from Adobe, Adobe requires that we obtain from them quality assurance approvals for our
products that use Adobe software. Although to date we have successfully obtained such quality assurances from
Adobe, we cannot be certain Adobe will grant us such approvals in the future. If Adobe does not grant us such
licenses or approvals, if the Adobe licenses are terminated, or if our relationship with Adobe is otherwise
materially impaired, we would likely be unable to produce products that incorporate Adobe PostScript® software.

We subcontract with other companies to manufacture our controllers. We rely on the ability of our
sub-contractors to produce the products sold to our customers. A high concentration of our products is
manufactured at one sub-contractor location. If the sub-contractor was to lose production capabilities at this
facility, we would experience delays in delivering product to our customers. We do not maintain long-term
agreements with our sub-contractors which could lead to an inability of such sub-contractor to fill our orders.

Inventories

Inventories are stated at standard cost, which approximates the lower of actual cost using a first-in, first-out
method, or market. We periodically review our inventories for potential slow-moving or obsolete items and write
down specific items to net realizable value as appropriate. Work-in-process inventories consist of our product at
various levels of assembly and include materials, labor and manufacturing overhead. Finished goods inventory
represents completed products awaiting shipment.

Property and Equipment

Property and equipment is recorded at cost. Depreciation on assets is computed using the straight-line method
over the estimated useful lives of the assets. The estimated life for desktop and laptop computers is 18 to 24
months. Furniture has an estimated life of 5 to 7 years, software is amortized over 3 to 5 years and buildings have
an estimated life of 40 years. All other assets are typically considered to have a 3 to 5 year life. Leasehold
improvements are amortized using the straight-line method over the estimated useful lives of the improvements
or the lease term, if shorter. Land improvements, such as parking lots and sidewalks, are amortized using the
straight-line method over the estimated useful lives of the improvements.

When assets are disposed, we remove the asset and accumulated depreciation from our records and recognize the
related gain or loss in results of operations. The cost and related accumulated depreciation applicable to property
and equipment sold or no longer in service are eliminated from the accounts and any gain or loss is included in
other income and expense.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Depreciation expense was $11.4 million, $9.5 million and $8.0 million for the years ended December 31, 2008,
2007 and 2006, respectively.

Repairs and maintenance expenditures which are not considered improvements and do not extend the useful life
of property and equipment are expensed as incurred.

Internal Use Software

We follow the guidance in Statement of Position 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use. Software development costs, including costs incurred to purchase third
party software, are capitalized beginning when we have determined that certain factors are present, including
among others, that technology exists to achieve the performance requirements. The accumulation of software
costs to be capitalized ceases when the software is substantially developed and is ready for its intended use. It is
amortized over an estimated useful life of three years using the straight-line method.

Restricted Investments

As of December 31, 2008, we were a party to two synthetic leases (the “301 Lease” and the “303 Lease”,
together “Leases”) covering our Foster City facilities located at 301 and 303 Velocity Way, Foster City,
California. The Leases included an option to purchase the facilities during or at the end of the term of the Leases
for the amount expended by the lessor to purchase the facilities ($56.9 million for the 303 Lease and $31.7
million for the 301 Lease). The funds pledged under the Leases ($56.9 million for the 303 Lease and $31.7
million for the 301 Lease at December 31, 2007 for a total of $88.6 million) are in LIBOR-based interest bearing
accounts and are restricted as to withdrawal at all times. We exercised our purchase option in the first quarter of
2009 with respect to the 301 Lease, in connection with the sale of the land and building to Gilead. Accordingly,
the $31.7 million of pledged funds have been re-classified as Assets Held for Sale under current assets in the
Consolidated Balance Sheet as of December 31, 2008.

K
-
0
1
m
r
o
F

Goodwill

We review goodwill annually in the third quarter of each year and whenever events or changes in circumstances
indicate the carrying value may not be recoverable. SFAS No. 142, “Goodwill and Other Intangible Assets”
(“SFAS 142”) prohibits the amortization of goodwill and requires that we perform a two-step impairment test on
goodwill. In the first step, we compare the fair value of each reporting unit to its carrying value. Our reporting
units are consistent with our product categories identified in Note 15 of Notes to Consolidated Financial
Statements. We determine the fair value of our reporting units based on a weighting of market and income
approaches. Under the market approach, we estimate the fair value based on market multiples of revenues or
earnings of comparable companies. Under the income approach, we measure any impairment based on a
projected discounted cash flow method using a discount rate determined by our management to be commensurate
with the risk inherent in our current business model. If the fair value of the reporting unit exceeds the carrying
value of the net assets assigned to the reporting unit, goodwill is not impaired and we are not required to perform
further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the
reporting unit, then we must perform the second step of the impairment testing to determine the implied fair
value of the reporting unit’s goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair
value then we record an impairment loss equal to the difference. There was no impairment of goodwill in 2007
and 2006.

Based on a combination of factors including the current economic environment, the resulting erosion in our
market capitalization, and the lowering of our 2009 revenue outlook subsequent to the end of the third quarter,
we concluded that there were sufficient indicators to require the Company to perform an interim impairment

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

analysis in the fourth quarter of 2008. Based on the outcome of our interim impairment analysis, we concluded
that an impairment had occurred; resulting in a non-cash impairment charge of $104 million during the fourth
quarter of 2008. Please see Note 4—Goodwill and Long-Lived Asset Impairment of the Notes to Consolidated
Financial Statements.

Long-lived Assets, including Intangible Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of these assets may not be recoverable. We evaluate potential impairment with respect to long-
lived assets whenever events or changes in circumstances indicate that its carrying amount may not be
recoverable. Intangible assets are evaluated for impairment based on their estimated future undiscounted cash
flows. Based on this analysis, no impairment of intangible assets, excluding goodwill, was recognized in 2008,
2007, or 2006.

Intangible assets acquired to date are being amortized on a straight-line basis over periods ranging from 1 to 30
years. No changes have been made to the useful lives of amortizable identifiable intangible assets in 2008, 2007
or 2006. Intangible amortization expense was $29.4 million, $33.5 million and $35.5 million for the years ended
December 31, 2008, 2007 and 2006, respectively.

Other investments consist of equity and debt investments in privately-held companies that develop products,
markets and services that are strategic to us. Investments in which we exercise significant influence over
operating and financial policies, but do not have a majority voting interest are accounted for using the equity
method of accounting. Our investments accounted for using the equity method of accounting totaled $0.3 million
and $4.7 million as of December 31, 2008 and 2007, respectively. Our consolidated results of operations include,
as a component of other income, our share of the net income or loss of the equity method investments. Our share
of the results of investees’ results of operations is not significant for any period presented.

On December 2, 2008, we acquired the remaining interest of Raster. As a result, Raster is consolidated in our
financial statements as of December 2, 2008, and is no longer included in Other investments.

The process of assessing whether a particular equity investment’s fair value is less than its carrying cost requires
a significant amount of judgment due to the lack of a mature and stable public market for these securities. In
making this judgment, we carefully consider the investee’s most recent financial results, cash position, recent
cash flow data, projected cash flows (both short and long-term), financing needs, recent financing rounds, most
recent valuation data, the current investing environment, management or ownership changes, and competition.
This process is based primarily on information that we request and receive from these privately-held companies,
and is performed on a quarterly basis. Although we evaluate all of our privately-held equity investments for
impairment based on the criteria established above, each investment’s fair value is only estimated when events or
changes in circumstances have occurred that may have a significant effect on its fair value (because the fair value
of each investment is not readily determinable). Where these factors indicate that the equity investment’s fair
value is less than its carrying cost, and where we consider such diminution in value to be other than temporary,
we record an impairment charge to reduce such equity investment to its estimated net realizable value.

During the fourth quarter of 2008, EFI assessed each remaining investment’s R&D technology pipeline and
market conditions for the next several years in the industry and determined that it is no longer probable that they
will generate enough positive future cash flows to recover the full carrying amount of the investment. Please
refer to the preceding paragraph for a full discussion of the factors considered. As such, we recognized an
impairment charge of $7.9 million.

Please refer to Note 4—Goodwill and Long-Lived Asset Impairment of the Notes to Consolidated Financial
Statements.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Fair Value of Financial Instruments

The carrying amounts of our financial instruments, including cash, cash equivalents, accounts receivable,
restricted investments, accounts payable, and accrued liabilities, approximate their respective fair market values
due to the short maturities of these financial instruments. The fair value of our available-for-sale securities is
disclosed in Note 5—Short-term Investments. On June 2, 2008, we redeemed the outstanding balance of our
1.50% convertible senior debentures, which totaled $240.0 million.

Warranty

Our products are generally accompanied by a 12-month warranty, which covers both parts and labor. In
accordance with Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies”
(“SFAS 5”), an accrual is made when it is estimable and probable based upon historical experience. A provision
for estimated future warranty work is recorded in cost of goods sold upon recognition of revenue and the
resulting accrual is reviewed regularly and periodically adjusted to reflect changes in warranty work estimates.

Research and Development

We expense costs associated with the research and development of new software products as incurred until
technological feasibility is established. Research and development costs include salaries and benefits of
researchers, supplies and other expenses incurred with research and development efforts. To date we have not
capitalized research and development costs associated with software development as products and enhancements
have generally reached technological feasibility and have been released for sale at substantially the same time.

Revenue Recognition

We derive our revenue primarily from product revenue, which includes hardware (controllers, design-licensed
solutions, and inkjet printers), ink, software and royalties. We also receive services and support revenue from
software license maintenance agreements, customer support and training and consulting. As described below,
significant management judgments and estimates must be made and used in connection with the revenue
recognized in any accounting period. Material differences could result in the amount and timing of our revenue
for any period if our management made different judgments or utilized different estimates.

K
-
0
1
m
r
o
F

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

We license our software primarily under perpetual licenses. Revenue from software consists of software
licensing, post-contract customer support and professional consulting. We apply the provisions of Statement of
Position 97-2, “Software Revenue Recognition” (“SOP 97-2”), as amended by Statement of Position 98-9,
“Modification of SOP 97-2, Software Revenue Recognition, With Respect to Certain Transactions”,
(“SOP 98-9”) and if applicable, SAB 104 and EITF 00-21 to all transactions involving the sale of software
products and hardware transactions where the software is not incidental.

Advertising

Advertising costs are expensed as incurred. Total advertising and promotional expenses were $4.9 million for
2008, $6.3 million for 2007 and $4.4 million for 2006.

Income Taxes

We account for income taxes under the provisions of Statement of Financial Accounting Standards No. 109
(SFAS 109), “Accounting for Income Taxes”. Under SFAS 109, deferred tax liabilities and assets are determined
based on the differences between the financial statement and tax bases of assets and liabilities, using enacted tax
rates in effect for the year in which the differences are expected to reverse.

Business Combinations

On July 28, 2008, we acquired Pace Systems Group, Inc. (“Pace”) to strengthen our APPS product category. On
December 2 2008, we acquired Raster Printers, Inc.(“Raster”) a mid-market, wide format graphics printer
developer and manufacturer, to further expand our Inkjet line of products. The Pace and Raster acquisitions are
discussed in Note 2—Acquisitions to the Notes to Consolidated Financial Statements.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Stock-Based Compensation

Effective January 1, 2006, we adopted the fair value recognition provisions of Statement of Financial Accounting
Standards No. 123(R) “Share-Based Payment (Revised 2004)” (“SFAS 123(R)”), using the modified prospective
transition method. Under this transition method, stock-based compensation expense in fiscal 2008, 2007 and
2006 includes compensation expense for all share-based payment awards granted prior to, but not yet vested as
of, January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of
SFAS 123. Stock-based compensation expense for all share-based payment awards granted after January 1, 2006
is based on the grant-date fair value estimated in accordance with the provisions of SFAS 123(R). We recognize
these compensation costs using a graded-vesting method over the requisite service period. SFAS 123(R) requires
forfeitures to be estimated at the time of grant and revised on a cumulative basis, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. We use historical data and future expectations of
employee turnover to estimate forfeitures. Prior to the adoption of SFAS 123(R), we presented the tax benefit
related to stock plans as operating cash flows. Upon the adoption of SFAS 123(R), the tax benefit resulting from
tax deductions in excess of the tax benefit related to compensation cost recognized for those awards are classified
as financing cash flows.

On November 10, 2005, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position No.
SFAS 123(R)-3 “Transition Election Related to Accounting for Tax Effects of Share-Based Payment Awards.”
We have elected to adopt the alternative transition method provided in the FASB Staff Position for calculating
the tax effects of share-based compensation pursuant to SFAS 123(R). The alternative transition method included
a simplified method to establish the beginning balance of the additional paid-in capital pool related to the tax
effects of employee stock-based compensation, which is available to absorb tax deficiencies recognized
subsequent to the adoption of SFAS 123(R). This method resulted in an additional paid-in capital pool of zero as
part of our adoption of SFAS 123(R).

Periods prior to the adoption of SFAS 123(R)

Prior to January 1, 2006 we accounted for equity awards and the Employee Stock Purchase Plan using the
intrinsic value method in accordance with APB 25 and related interpretations. Under the intrinsic value method,
stock-based compensation expense was recognized in our consolidated statement of operations if the exercise
price of our equity awards granted to employees and directors was below the fair market value of the underlying
stock at the date of grant or if shares granted under the Employee Stock Purchase Plan were issued at greater than
a 15% discount.

Foreign Currency Translation

The U.S. dollar is the functional currency for all of our foreign operations, except for our Germany subsidiary,
for which the Euro is the functional currency, and our Japanese subsidiary, for which the Japanese yen is the
functional currency. Where the U.S. dollar is the functional currency, translation adjustments are recorded in
income. Where a currency other than the U.S. dollar is the functional currency, translation adjustments are
recorded as a separate component of stockholders’ equity.

Computation of Net (Loss) Income per Common Share

Net (loss) income per basic common share is computed using the weighted average number of common shares
outstanding during the period excluding unvested restricted stock. Net income (loss) per diluted common share is
computed using the weighted average number of common shares and potential common shares outstanding
during the period. Potential common shares result from the assumed exercise of outstanding common stock
options having a dilutive effect using the treasury stock method, from unvested shares of restricted stock using

K
-
0
1
m
r
o
F

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

the treasury stock method and from the potential conversion of our 1.50% convertible senior debentures. In
addition, in computing the dilutive effect of the convertible securities, the numerator is adjusted to add back the
after-tax amount of interest and amortized debt-issuance costs recognized in the period associated with our
convertible senior debentures. Any potential shares that are anti-dilutive, as defined in SFAS 128, are excluded
from the effect of dilutive securities.

The following table presents a reconciliation of basic and diluted earnings per share for the three years ended
December 31, 2008:

(in thousands except per share data)

For the years ended December 31,

2008

2007

2006

Basic net (loss) income per share:
Net (loss) income available to common shareholders . . . . . . . . . .

$(113,444)

$26,843

$ (183)

Weighted average common shares outstanding . . . . . . . . . . . . . . .
Basic net (loss) income per share . . . . . . . . . . . . . . . . . . . . . . . . . .

52,553
(2.16)

56,679
0.47

56,559
$ (0.00)

Dilutive net (loss) income per share:

Net (loss) income available to common shareholders . . . . . . . .
After-tax equivalent of expense related to 1.50% convertible

$(113,444)

$26,843

$ (183)

senior debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

3,000

—

(Loss) Income for purposes of computing diluted net income per

share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(113,444)

$29,843

$ (183)

Weighted average common shares outstanding . . . . . . . . . . . . . . .
Dilutive stock options and awards . . . . . . . . . . . . . . . . . . . . . . .
Weighted average assumed conversion of 1.50% convertible

52,553
—

56,679
2,339

56,559
—

senior debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

9,084

—

Weighted average common shares outstanding for purposes of

computing diluted net income per share . . . . . . . . . . . . . . . . . . .

52,553

68,102

56,559

Dilutive net (loss) income per share . . . . . . . . . . . . . . . . . . . . . . . .

(2.16)

0.44

$ (0.00)

The following table sets forth potential shares of common stock that are not included in the diluted net income
(loss) per share calculation above because to do so would be anti-dilutive for the periods presented.

(in thousands)

Weighted average stock options and awards

For the years ended December 31,

2008

2007

2006

outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible senior debentures . . . . . . . . . . . . . . . . . . . . . .

7,801
3,783

2,951
—

10,246
9,084

Total potential shares of common stock excluded from the
computation of diluted earnings per share . . . . . . . . . . .

11,584

2,951

19,330

Accounting for Derivative Instruments and Risk Management

SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended, requires
companies to reflect the fair value of all derivative instruments, including those embedded in other contracts, as
assets or liabilities in an entity’s balance sheet. We have no derivative or hedging instruments as of December 31,
2008.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Variable Interest Entities

FASB Interpretation No. 46, “Consolidation of Variable Interest Entities”, as amended (“FIN 46R”) requires that
we consolidate any variable interest entities, or VIE, in which we are the primary beneficiary. The primary
beneficiary is generally defined as having the majority of the risks and rewards arising from the VIE. We have
evaluated and will continue to assess our synthetic lease arrangements and other entities that we have a
relationship with that may be deemed a VIE. See Note 8 for discussion of our synthetic lease arrangements.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standards (“SFAS”) No. 141 (revised 2007) Business Combinations (“SFAS No. 141R”) which
replaces SFAS No. 141 Business Combinations (“SFAS No. 141”). SFAS No. 141R retains the fundamental
requirement of SFAS No. 141 that the acquisition method of accounting be used for all business combinations.
However, SFAS No. 141R provides for the following changes from SFAS No. 141: an acquirer will record 100%
of assets and liabilities of acquired business, including goodwill, at fair value, regardless of the level of interest
acquired; certain contingent assets and liabilities will be recognized at fair value at the acquisition date;
contingent consideration will be recognized at fair value on the acquisition date with changes in fair value to be
recognized in earnings upon settlement; acquisition-related transaction and restructuring costs will be expensed
as incurred; reversals of valuation allowances related to acquired deferred tax assets and changes to acquired
income tax uncertainties will be recognized in earnings; and when making adjustments to finalize preliminary
accounting, acquirers will revise any previously issued post-acquisition financial information in future financial
statements to reflect any adjustments as if they occurred on the acquisition date. SFAS No. 141R applies
prospectively to business combinations for which the acquisition date is on or after January 1, 2009. SFAS
No. 141R may have an impact on the Company’s consolidated financial statements when effective in the event a
business combination occurs. The nature and magnitude of the specific effects will depend upon the nature,
terms, and size of the acquisitions consummated after the effective date.

In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial
Statements—an amendment of ARB No. 51 (“SFAS No. 160”), which establishes accounting and reporting
standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS
No. 160 provides that accounting and reporting for minority interests be recharacterized as non-controlling
interests and classified as a component of equity. This statement also establishes reporting requirements that
provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the
interests of the non-controlling owners. SFAS No. 160 applies to all entities that prepare consolidated financial
statements but will affect only those entities that have an outstanding non-controlling interest in one or more
subsidiaries or that deconsolidate a subsidiary. This statement is effective as of the beginning of an entity’s first
fiscal year beginning after December 15, 2008. Currently, we do not have any non-controlling interests
(ownership interests in a subsidiary that are held by owners other than us) recorded in our financial statements,
and do not expect the adoption of SFAS No. 160 to have a material effect on our consolidated financial
statements.

In April 2008, the FASB issued Staff Position (“FSP”) 142-3, Determination of the Useful Life of Intangible
Assets (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142,
“Goodwill and Other Intangible Assets.” FSP 142-3 applies to intangible assets that are acquired, individually or
with a group of other assets, after the effective date in either a business combination or asset acquisition.
FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. Early adoption is prohibited. We are currently evaluating the effect FSP
142-3 will have on our consolidated financial statements.

K
-
0
1
m
r
o
F

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

In October 2008, the FASB issued “FSP 157-3”, “Determining the Fair Value of a Financial Asset When the
Market for That Asset Is Not Active”. In this FSP, the FASB clarified the application of FASB Statement
No. 157, Fair Value Measurements, in a market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the market for that financial asset is not
active such as including appropriate risk adjustments that market participants would make for nonperformance
and liquidity risks. FSP 157-3 is effective upon its issuance on October 10, 2008, including prior periods for
which financial statements have not been issued. We have adopted FSP 157-3 accordingly for the fiscal year
ended December 31, 2008.

Supplemental Cash Flow Information

(in thousands)

Years ended December 31,

2008

2007

2006

Supplemental disclosure of cash flow information:
Cash paid for interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (1,837) $(3,614) $ (3,629)

Cash (paid for) refunded for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (8,303) $ 3,017

$(10,056)

Acquisition related activities:
Cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash acquired in acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(25,405) $ — $(41,427)
—

122

—

Net cash paid for acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(25,283) $ — $(41,427)

Note 2: Acquisitions

During 2008, we acquired Raster and Pace. We acquired Jetrion LLC (“Jetrion”) during 2006. The purchase
method of accounting has been used for these acquisitions. Under this method of accounting, the purchase
consideration is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed
according to their respective fair values on the date of acquisition. The excess purchase consideration is recorded
as goodwill. Factors that contribute to a purchase price that results in goodwill include, but are not limited to, the
retention of research and development personnel with the skills to develop future technology, support personnel
to provide maintenance services related to the products, a trained sales force capable of selling current and future
products, the opportunity to cross-sell Rastek, Pace, Jetrion, and EFI products to existing customers and the
positive reputation that each of these companies have in the market.

Valuation Methodology

Intangible assets acquired consist of developed technology, in-process research & development (IPR&D),
patents, trademarks and trade names and customer relationships. The amount allocated to IPR&D was
determined using established valuation techniques and was expensed upon acquisition because technological
feasibility had not been established and no future alternative uses existed. The value of IPR&D was determined
by estimating the costs to develop the purchased IPR&D into a commercially viable product, estimating the
resulting net cash flows from the sale of the products resulting from the completion of the IPR&D and
discounting the net cash flows back to their present value. Project completion schedules were based on
management’s estimate of tasks completed and the tasks to be completed to bring the project to technical and

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

commercial feasibility. IPR&D was included in operating expenses as part of other acquisition-related charges.
We expensed IPR&D of $0.7 million related to our acquisition of Raster and $2.0 million related to our
acquisition of Pace during 2008. We expensed IPR&D of $8.5 million related to our acquisition of Jetrion during
2006.

Discount rate for IPR&D . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percentage of completion for in-process projects

Raster

Pace

Jetrion

17 – 18%

24% 22 – 25%

acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

64 – 81% 23 – 83% 25 – 75%

Raster Printers, Inc.

On December 2, 2008, we acquired the remaining interest in Rastek for approximately $5.3 million, including
direct acquisition costs, plus an additional earn out amount which is contingent upon achieving certain
performance targets. The maximum additional earn-out is $1.7 million. Headquartered in San Jose, California,
Raster sells UV wide format printers primarily to mid-range customers in the display graphics market.
Adjustments to the purchase price allocation may be made during 2009.

Pace Systems Group, Inc

On July 28, 2008, we acquired 100% interest of Pace for approximately $20.1 million in cash including direct
acquisition costs plus an additional future cash earn out amount which is contingent upon achieving certain
performance targets. The maximum additional earn-outs is $9.0 million. Headquartered in Jacksonville, Florida,
Pace is a print management software company that provides MIS and e-commerce software solutions.
Adjustments to the purchase price allocation may be made during 2009.

Jetrion LLC

On October 31, 2006 we acquired Jetrion for approximately $41.4 million in cash. No adjustments were made to
the purchase price allocation during 2007 and 2008.

The following table summarizes the allocation of the purchase price to assets acquired and liabilities assumed (in
thousands) with respect to each of these acquisitions:

K
-
0
1
m
r
o
F

In-process research and

development . . . . . . . . . . . . . . . . . . .
Existing and core technology . . . . . . .
Customer contracts, relationships and

maintenance agreements . . . . . . . . .
Existing NRE contracts . . . . . . . . . . . .
Trademarks and trade names . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Goodwill

Excess of assets over liabilities

assumed . . . . . . . . . . . . . . . . . . . . . .

Total purchase price . . . . . . . . . . . . . . .

Raster

Pace

Jetrion

Weighted
average
useful life

Allocation at
December 31,
2008

Weighted
average
useful life

Allocation at
December 31,
2008

Weighted
average
useful life

Allocation at
December 31,
2008

3 years

$ 680
1,340

5 years

$ 2,000
8,100

5 years

980

9 years

4,600

4 years

6 years

300
12,959

27,959

(7,893)

$20,066

650
1,980

5,630

392

$6,022

3 years

7 years
1 year
3 years

$ 8,500
1,500

1,200
600
300
25,491

37,591

3,836

$41,427

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 3: Balance Sheet Components

Selected balance sheet components are as follows (in thousands):

December 31,

2008

2007

Inventories, net of allowances:

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 17,115
2,901
28,769

$ 21,362
3,497
15,090

$ 48,785

$ 39,949

Property and equipment, net:

Land, building and improvements . . . . . . . . . . . . . . . . . . . . . . .
Equipment and purchased software . . . . . . . . . . . . . . . . . . . . . .
Furniture and leasehold improvements . . . . . . . . . . . . . . . . . . .

$ 19,179
57,914
20,382

$ 43,574
51,528
19,439

Less accumulated depreciation and amortization . . . . . . . . . . .

97,475
(62,250)

114,541
(56,937)

$ 35,225

$ 57,604

Accrued and other liabilities:

Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . .
Warranty provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued royalty payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Current deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 21,163
6,791
3,961
—
13,043

$ 23,190
7,918
4,272
19,456
17,564

$ 44,958

$ 72,400

Note 4: Goodwill and Long-Lived Asset Impairment

(in thousands)
Goodwill . . . . . . . . . . . . . . . . . . .

Acquired technology . . . . . . . . .
Patents, trademarks and trade

names . . . . . . . . . . . . . . . . . . .
Other intangible assets . . . . . . . .

December 31, 2008

December 31, 2007

Weighted
average
useful life

Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount

Gross
carrying
amount

Accumulated
amortization

Net
carrying
amount

$122,581 $

— $122,581 $211,780 $

— $211,780

4.5

$108,914 $ (94,354) $ 14,560 $100,878 $ (77,118) $ 23,760

24.0
6.1

49,829
65,765

(15,513)
(41,649)

34,316
24,116

49,537
58,276

(13,091)
(31,928)

36,446
26,348

Amortizable intangible assets . .

9.3

$224,508 $(151,516) $ 72,992 $208,691 $(122,137) $ 86,554

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Acquired technology, patents, trademarks and trade names and other intangible assets are amortized over their
estimated useful lives of 1 to 30 years using the straight-line method which approximates the pattern in which the
economic benefits of the intangible assets are consumed. Aggregate amortization expense was $29.4 million,
$33.5 million, and $35.5 million for the years ended December 31, 2008, 2007 and 2006, respectively. As of
December 31, 2008 future estimated amortization expense related to amortizable intangible assets is estimated to
be (in thousands):

For the periods:

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Future
amortization
expense

$18,168
10,944
7,344
4,242
32,294

$72,992

A reconciliation of the activity in goodwill for 2006 through 2008 is presented below (in thousands).

Ending balance, December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ending balance, December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 212,992
—
(1,212)(1)

$ 211,780
$ 14,939(2)
(103,991)
(147)

Ending Balance, December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 122,581

K
-
0
1
m
r
o
F

(1)

Included in “Other” are translation adjustments of $0.6 million and an adjustment to taxes payable
related to prior acquisitions of $(1.8) million.

(2) Additions to goodwill consist of $13.0 million for Pace and $1.9 million for Raster.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

the definition of a reporting unit one level below an operating segment in accordance with SFAS 142 as each
product category constitute a business for which discrete financial information is available and reviewed by
segment management.

We determined the fair value of the Inkjet reporting unit based on the weighting of market and income
approaches. The fair value of the Controller and APPS reporting units was determined based on the market
approach. Under the market approach, we estimated the fair value based on market multiples of revenues or
earnings. Under the income approach, we measured fair value of the reporting units based on a projected cash
flow method using a discount rate determined by our management which is commensurate with the risk inherent
in our current business model. Based on our valuation results, we had determined that the fair values of our
reporting units continued to exceed their carrying values. Therefore, management determined that no goodwill
impairment charge was required as of September 30, 2008.

•

significant negative industry or economic trends;

significant decline in our stock price for a sustained period;

our market capitalization relative to net book value; and

significant changes in the manner of our use of the acquired assets or the strategy for our overall
business.

Based on the internal market-based valuation that we performed, the fair value of the Controller and APPS
product categories significantly exceeded their carrying value as of December 31, 2008. Consequently, it was not
considered necessary to obtain a third party valuation of these reporting units. A third party interim valuation was
obtained with respect to the Inkjet product category, which was equally weighted between the income and market
approach.

Based on the outcome of the interim impairment analysis, we concluded that an impairment had occurred relating
to the Inkjet product category resulting in a non-cash goodwill impairment charge of $104 million during the
fourth quarter of 2008. There were no impairments of goodwill, intangible assets or long lived assets in 2007 and
2006.

Solely for purposes of establishing inputs for the fair value calculations described above related to goodwill
impairment testing, we made the following assumptions:

•

the current economic downturn will continue through fiscal year 2010,

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

•

the economic downturn is partially mitigated by new product introductions in 2010,

followed by a recovery period between 2011 and 2013, and

long-term industry growth past 2013.

Our discounted cash flow projections for the Inkjet reporting unit were based on five-year financial forecasts. The
five-year forecasts were based on annual financial forecasts developed internally by management for use in
managing our business and through discussions with the independent valuation firm engaged by us. The significant
assumptions of these five-year forecasts included annual revenue growth rates ranging from (11.0%) to 12% for the
Inkjet reporting unit. The future cash flows were discounted to present value using a mid-year convention and a
discount rate of 16%. Terminal values were calculated using the Gordon growth methodology with a long-term
growth rate of 4.5%. The sum of the fair values of the Controllers, APPS, and Inkjet reporting units was reconciled
to our current market capitalization (based on our stock price) plus an estimated control premium. The significant
assumptions used in determining fair values of the reporting units using comparable company market values include
the determination of appropriate market comparables, the estimated multiples of revenue, EBIT, and EBITDA that a
willing buyer is likely to pay, and the estimated control premium a willing buyer is likely to pay.

Given the current economic environment and the uncertainties regarding the impact on our business, there can be no
assurance that our estimates and assumptions regarding the duration of the ongoing economic downturn, or the
period or strength of recovery, made for purposes of our goodwill impairment testing during the three months ended
December 31, 2008 will prove to be accurate predictions of the future. If our assumptions regarding forecasted
revenue or gross margin rates are not achieved, we may be required to record additional goodwill impairment
charges in future periods relating to any of our reporting units, whether in connection with the next annual
impairment testing in the third quarter of 2009 or prior to that, if any such change constitutes a triggering event
outside of the quarter from when the annual goodwill impairment test is performed. It is not possible at this time to
determine if any such future impairment charge would result or, if it does, whether such charge would be material.

K
-
0
1
m
r
o
F

The process of assessing whether a particular equity investment’s fair value is less than its carrying cost requires
a significant amount of judgment due to the lack of a mature and stable public market for these securities. In
making this judgment, we carefully consider the investee’s most recent financial results, cash position, recent
cash flow data, projected cash flows (both short and long-term), financing needs, recent financing rounds, most
recent valuation data, the current investing environment, management or ownership changes, and competition.
This process is based primarily on information that we request and receive from these privately-held companies,
and is performed on a quarterly basis. Although we evaluate all of our privately-held equity investments for
impairment based on the criteria established above, each investment’s fair value is only estimated when events or
changes in circumstances have occurred that may have a significant effect on its fair value (because the fair value
of each investment is not readily determinable). Where these factors indicate that the equity investment’s fair
value is less than its carrying cost, and where we consider such diminution in value to be other than temporary,
we record an impairment charge to reduce such equity investment to its estimated net realizable value.

During the fourth quarter of 2008, we assessed each remaining investment’s R&D technology pipeline and
market conditions for the next several years in the industry and determined that it is no longer probable that they
will generate enough positive future cash flows to recover the full carrying amount of the investment. Please
refer to the preceding paragraph for a full discussion of the factors considered. As such, we recognized an
impairment charge of $7.9 million.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 5: Investments and Fair Value Measurements

Debt and marketable equity securities are classified as available-for-sale and are carried at fair value, which is
determined based on quoted market prices, with net unrealized gains and losses included in Accumulated other
comprehensive income, net of tax. We review investments in debt and equity securities for other-than-temporary
impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that
the investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an
impairment is other-than-temporary, we consider whether we have the ability and intent to hold the investment
until a market price recovery and consider whether evidence indicating the cost of the investment is recoverable
outweighs evidence to the contrary. We have determined that the gross unrealized losses on short-term
investments at December 31, 2008 are temporary in nature because each investment meets our investment policy
credit quality requirements and we have the ability and the intent to hold these investments until they recover
their unrealized losses, which may be until maturity.

The following tables summarize our available-for-sale securities (in thousands):

Gross
unrealized
gains

Gross
unrealized
losses

December 31, 2008

U.S. Government securities . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . .
Municipal securities . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Money market funds(1)

Amortized
cost

$ 14,453
36,871
3,624
2,900

Total short-term investments . . . . . . . . . .

$ 57,848

December 31, 2007
U.S. Government securities . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . .

$151,892
180,288

Total short-term investments . . . . . . . . . .

$332,180

$ 242
33
38
—

$ 313

$1,290
1,083

$2,373

Fair
value

$ 14,694
$ 35,943
3,662
2,900

(1)
(961)
—
—

$(962)

$ 57,199

$ (19)
(318)

$(337)

$153,163
181,053

$334,216

(1) Money market funds of $2.9 million represent funds from The Reserve Primary Fund (“Fund”) reclassified

from cash and cash equivalents as the Fund has adopted a plan of liquidation in 2008. As a result, the Fund’s
shares were not tradable at December 31, 2008. Our interest in the Fund was approximately $14.8 million
prior to their adoption of the liquidation plan. As of December 31, 2008, we received a total of $11.7 million
in partial liquidation of our interest in the Fund, which has been invested in alternative money market funds
all of which are highly liquid and currently tradable at $1 Net Asset Value. On February 20, 2009, we
received a total of $1.0 million in further partial liquidation of our interest in the Fund, which was similarly
invested in alternative money market funds freely tradable at $1 Net Asset Value.

The following table summarizes the contractual maturities of the available-for-sale investment securities as of
December 31, 2008 (in thousands):

Mature in less than one year . . . . . . . . . . . . . . . .
Mature in one to three years . . . . . . . . . . . . . . . .

Amortized
cost

$26,366
31,482

Fair
value

$25,743
31,456

Total short-term investments . . . . . . . . . . . . . . . .

$57,848

$57,199

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

For the twelve months ended December 31, 2008, $3.9 million was recognized in net realized gains, which
comprised $5.3 million in realized gains from sale of investments offset by $1.4 million in realized losses of
which $0.6 million impairment charges related to the Fund, and one corporate debt instrument due to its
significantly low level of trading activity. For the twelve months ended December 31, 2007, $0.3 million was
recognized in net realized losses, which comprised $0.7 million in realized gains from sale of investments offset
by $1.0 million in realized losses of which $0.3 million impairment charges on one corporate debt instrument due
to its significantly low level of trading activity. As of December 31, 2008 and December 31, 2007, net unrealized
losses of $0.6 million and net unrealized gains of $2.0 million, respectively, were included in accumulated other
comprehensive income in the accompanying Consolidated Balance Sheets.

Fair Value Measurements

The company adopted SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), effective January 1, 2008.
SFAS No. 157 identifies fair value as the exchange price, or exit price, representing the amount that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a
basis for considering market participant assumptions in fair value measurements, SFAS No. 157 establishes a
three-tier fair value hierarchy as follows:

Level 1: Inputs that are quoted prices in active markets for identical assets or liabilities that the reporting
entity has the ability to access at the measurement date;

Level 2: Inputs that are other than quoted prices included within Level 1, that are either directly or indirectly
observable for the asset or liability through correlation with market data at the measurement date for the
duration of the instrument’s anticipated life or by comparison to similar instruments; and

Level 3: Inputs that are unobservable inputs that reflect management’s best estimate of what market
participants would use in pricing the asset or liability at the measurement date. These include management’s
own assumptions about market participant assumptions developed based on the best information available in
the circumstances.

K
-
0
1
m
r
o
F

At December 31, 2008 the Company’s investments have been presented in accordance with the fair value
hierarchy specified in SFAS No. 157, Fair Value Measurements as follows:

U.S. Government securities . . . . . . . . . . .
Corporate debt securities . . . . . . . . . . . . .
Municipal securities . . . . . . . . . . . . . . . . .
Money market funds . . . . . . . . . . . . . . . .

Fair Value Measurements at Reporting Date using

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Significant
other
Observable
Inputs
(Level 2)

Unobservable
Inputs
(Level 3)

$ —
—
—
96,927

$96,927

$14,694
35,744
3,663
—

$54,101

$ —

199
—
2,900

$3,099

December 31,
2008

$ 14,694
35,943
3,663
99,827

$154,127

Included in money market funds is $96.9 million which have been classified as Cash Equivalents at
December 31, 2008.

Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued
using quoted market prices, or alternative pricing sources with reasonable levels of price transparency.
Investments in United States Treasury securities and overnight Money Market Mutual Funds have been classified
as Level 1 because these securities are valued based upon quoted prices in active markets or because the
investments are actively traded at $1.00 Net Asset Value.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Government Agency investments and Corporate Debt instruments (including investments in Asset-Backed and
Mortgage-Backed securities) have generally been classified as Level 2 because markets for these securities are
less active or valuations for such securities utilize significant inputs which are directly or indirectly observable.

At December 31, 2008, one Corporate Debt instrument and one Money Market Fund have been classified as Level 3
due to their significantly low trading activity. The portion of Money Market Fund which has been classified as
Level 3 consists of funds placed in The Reserve Primary Fund of $2.9 million at December 31, 2008.

The following table presents a reconciliation of all assets measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) for the twelve months ended December 31, 2008 (in thousands):

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification from Level 2 to Level 3 . . . . . . . . . . . . . . . . . . . . . . .
Included in other income (loss), net
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Included in other comprehensive income . . . . . . . . . . . . . . . . . . . . . . .
Purchases, sales, and maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Impairment charges for the twelve months ended December 31, 2008
in other income (loss), net attributable to assets still held as of
December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 3

Corporate Debt
Securities

Money Market
Funds

$ 687
—
(313)
(96)
(79)

$ 199

$ —
14,836
(251)
—
(11,685)

$ 2,900

(340)

(251)

Note 6: Convertible Debt

On June 4, 2003, we sold $240.0 million of 1.50% convertible senior debentures due 2023 (“Debentures”) in a
private placement, which are unsecured senior obligations, paying interest semi-annually in arrears at an annual
rate of 1.50%.

On June 2, 2008, (the ‘Redemption Date’), we redeemed the outstanding balance of the Debentures at our option,
which totaled $240.0 million and was 100% of the principal amount. Interest paid during the second quarter of
2008 totaled $1.8 million, which consisted of accrued and unpaid interest payments between December 1, 2007
and June 2, 2008.

Note 7: Other Comprehensive Income

The activity in other comprehensive income and related tax effects are as follows (in thousands):

Years ended December 31,

2008

2007

2006

Net unrealized investment (losses)/gains:

Unrealized holding gains, net of tax provision of ($1.0) million in 2008, ($1.1)

million in 2007 and ($1.2) million in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,532

$1,649

$1,759

Reclassification adjustment for gains (losses) included in net income, net of tax
(provision) benefit of $2.1 million in 2008, $0.0 million in 2007 and ($0.2)
million in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net unrealized investment gains (losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,133)

(1,601)
(295)

1,669
666

Other comprehensive income/(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,896)

2,335

348

2,107
1,199

3,306

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The components of accumulated other comprehensive income was (in thousands):

Net unrealized investment (losses) /gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Translation gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (388)
2,064

$1,213
2,359

Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,676

$3,572

December 31,

2008

2007

Note 8: Commitments and Contingencies

Leases

Off-Balance Sheet Financing—Synthetic Lease Arrangement

As of December 31, 2008 we were a party to two synthetic leases (the “301 Lease” and the “303 Lease”, together
“Leases”) covering our Foster City facilities located at 301 and 303 Velocity Way, Foster City, California. These
leases provided a cost effective means of providing adequate office space for our corporate offices. Both Leases
were scheduled to expire in July 2014. The Leases included an option to, purchase the facilities during or at the
end of the term of the Leases for the amount expended by the lessor to purchase the facilities. The funds pledged
under the Leases ($56.9 million for the 303 Lease and $31.7 million for the 301 Lease at December 31, 2008 for
a total of $88.6 million) are in LIBOR-based interest bearing accounts and are restricted to withdrawals at all
times.

We have exercised our purchase option in January 2009 with respect to the 301 Lease. On January 29, 2009, we
completed the sale of land and building to Gilead for a total price of $137.5 million, subject to an escrow
holdback of $15.5 million. The escrow period expires January 2010. The property sold included approximately
thirty acres of land and the office building located on the land at 301 Velocity Way, Foster City, California,
consisting of approximately 163,000 square feet and certain other assets related to the property. Accordingly, the
$31.7 million of pledged funds have been re-classified as Assets Held For Sale in the condensed consolidated
financial statements as of December 31, 2008.

We apply the accounting and disclosure rules set forth in FASB Interpretation No. 46 “Consolidation of Variable
Interest Entities”, as revised (“FIN 46R”) for variable interest entities (“VIEs”). We have evaluated our synthetic
lease agreements to determine if the arrangements qualify as variable interest entities under FIN 46R. We have
determined that the synthetic lease agreements do qualify as VIEs; however, because we are not the primary
beneficiary under FIN 46R we are not required to consolidate the VIEs in our financial statements.

As part of the September 2004 amended financing arrangement for the 301 Lease, we completed a valuation of
the building located at 301 Velocity Way. Under the original financing agreement, we guaranteed the lessor upon

K
-
0
1
m
r
o
F

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

termination of the original lease an 82% residual value in the building which cost $43.1 million to construct. The
valuation provided a value of approximately $31.7 million, and we recorded a one-time loss of $11.4 million
associated with the original lease. In addition, we took a non-cash charge of $0.9 million for capitalized costs
associated with the financial arrangement.

We also lease office facilities in various locations in the United States and overseas. Following is a table for
future minimum lease payments under non-cancellable operating leases and future minimum sublease income
under non-cancellable subleases for each of the next five years and thereafter (in thousands) as of December 31,
2008:

Fiscal Year

Future Minimum
Lease Payments

Future Minimum
Sublease Income

2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,155
6,536
5,322
5,295
4,505
3,222

$33,035

$2,384
2,217
558
—
—
—

$5,159

Lease obligation related to the principal corporate facility is estimated and is based on current market interest
rates (LIBOR) and based on collateralized assumptions.

In January, 2009, we sold the 163,000 square foot building and approximately 30 acres of land in our Foster City,
California campus to Gilead. As a result of the sale, total future minimum operating lease obligations would
decrease by approximately $5.8 million for 2009 and beyond, and total sublease income would decrease by
approximately $5.0 million for 2009 and beyond.

Rent expense was approximately $9.9 million, $11.0 million, and $10.0 million for the years ended
December 31, 2008, 2007 and 2006, respectively. Sublease rental income was approximately $2.5 million,
$2.1 million, and $1.9 million for the years ended December 31, 2008, 2007 and 2006, respectively.

Purchase Commitments

We sub-contract with other companies to manufacture our products. During the normal course of business the
sub-contractors procure components based upon orders placed by us. If we cancel all or part of the order, we may
still be liable to the sub-contractors for the cost of the components purchased by the sub-contractors for
placement in our products. We periodically review the potential liability and the adequacy of the related
allowance. Our consolidated financial position and results of operations could be negatively impacted if we were
required to compensate the sub-contract manufacturers for amounts in excess of the related allowance.

Guarantees and Product Warranties

Under Financial Accounting Standards Board Interpretation No 45, Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (“FIN 45”), we are
required upon issuance of a guarantee to disclose and recognize a liability for the fair value of the obligation we
assume under that guarantee.

Our products are generally accompanied by a 12-month warranty, which covers both parts and labor. We accrue for
warranty costs as part of cost of sales based on associated material product costs and technical support labor costs.
The warranty provision is based upon historical experience, by product, configuration and geographic region.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Changes in the warranty reserves for the years ended December 31, 2007 and 2008 were as follows (in
thousands):

Balance at December 31, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for warranty during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for warranty during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,655
9,136
(7,873)

7,918
5,720
(6,847)

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,791

The lease agreements for our company headquarters provided for residual value guarantees. Under FIN 45, the
fair value of a residual value guarantee in lease agreements entered into after December 31, 2002, must be
recognized as a liability on our consolidated balance sheet. We have determined that the residual value
guarantees do not represent a material liability as of December 31, 2008.

In the normal course of business and in an effort to facilitate the sales of our products, we sometimes indemnify
other parties, including customers, lessors and parties to other transactions with us. Typically our indemnity
provisions provide that we agree to hold the other party harmless against losses arising from a breach of
representations and warranties or covenants and intellectual property infringement. Our indemnity provisions
often limit the time within which an indemnification claim can be made as well as the amount of the claim which
can be made. In addition, we have entered into indemnification agreements with our current and former officers
and directors; our bylaws also contain similar indemnification obligations for our agents.

Legal Proceedings

We may be involved, from time to time, in a variety of claims, lawsuits, investigations and proceedings relating
to contractual disputes, securities law, intellectual property, employment matters and other claims or litigation
matters relating to various claims that arise in the normal course of our business. We determine whether an
estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be
reasonably estimated. We assess our potential liability by analyzing our specific litigation and regulatory matters
using available information. We develop our views on estimated losses in consultation with inside and outside
counsel, which involves a subjective analysis of potential results and outcomes, assuming various combinations
of appropriate litigation and settlement strategies. Because of the uncertainties related to both the amount and
ranges of possible loss on the pending litigation matters, we are unable to predict with certainty the precise
liability that could finally result from a range of possible unfavorable outcomes. However, taking all of the above
factors into account, we reserve an amount that we could reasonably expect to pay. However, our estimates could
be wrong, and we could pay more or less than our current accrual. Litigation can be costly, diverting
management’s attention and could, upon resolution, have a material adverse effect on our business, results of
operations, financial condition and cash flow.

Leggett & Platt, Inc. and L&P Property Management Company:

On November 6, 2007, EFI filed a complaint against Leggett & Platt, Inc. and its patent holding subsidiary, L&P
Property Management Company, in the U.S. District Court for the Eastern District of Missouri for declaratory

K
-
0
1
m
r
o
F

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

and injunctive relief challenging the validity and enforceability of a patent issued to L&P. The challenged patent
is a continuation of a patent that L&P previously asserted against EFI in a prior court action. The court ultimately
invalidated the patent in the prior court action on multiple grounds. EFI firmly believes that the court should
summarily invalidate the continuation patent for similar reasons. Further, EFI believes that L&P’s failure to
adequately disclose the previous lawsuit proceedings to the U.S. Patent and Trademark Office amounts to
inequitable conduct that should render the new patent unenforceable. Thus, EFI has filed a motion for summary
judgment on these issues. L&P filed counterclaims against EFI, including claims for alleged infringement of the
continuation patent. While EFI believes that its products do not infringe, due to the inherent uncertainties of
litigation, we cannot accurately predict the ultimate outcome of this litigation.

Durst Fototechnik Technology GmbH v. Electronics for Imaging, GmbH et al.:

Acacia | Screentone Patent Litigation:

In order to protect its products and its customers, on November 13, 2007 EFI filed a declaratory judgment action
(“DJ”) in the U.S. District Court for the Central District of California seeking to invalidate the patent asserted in
the Texas action, as well as an additional patent Acacia identified in previous correspondence. At about the same
time, other defendants from the Texas actions filed DJ actions in Washington and Delaware. A federal
multidistrict litigation panel consolidated all cases with EFI’s case in the U.S. District Court for the Central
District of California, where the consolidated cases are now proceeding. The claims challenging the patent first
asserted in the Texas action remain pending, and the consolidated case is currently set for trial on August 30,
2010.

Bureau of Industry and Security Export Investigation:

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

compliance review of historical export practices for both VUTEk and EFI. Potential violations uncovered during
our compliance review were voluntarily disclosed to BIS in November 2006 (for VUTEk) and December 2006
(for EFI). Additionally, we provided BIS with detailed reports of our compliance review findings and
supplemental information in March 2007 (for VUTEk) and May 2007 (for EFI). The areas of possible
non-compliance found in the internal review relate to: (1) deemed exports of controlled encryption source code
and/or technology to foreign nationals of Syria and Iran, (2) exports of printers and other products with
encryption functionality before completion of encryption reviews by BIS and (3) statistical reporting errors on
some export declarations. The Office of Export Enforcement at BIS HQ referred the VUTEk matter to an
attorney in the Office of Chief Counsel for Industry and Security for final determination. In December 2008,
these matters were resolved solely with administrative penalties of $32,000.

Purported Derivative Shareholder Complaints:

Tesseron Patent Litigation:

K
-
0
1
m
r
o
F

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

or not infringed. EFI also sought to prevent Tesseron and its attorneys from threatening EFI or its OEM
customers with infringement of those patents, or bringing a lawsuit claiming infringement with regard to such
products. After transfer of EFI’s action to Ohio, EFI negotiated for a covenant not to sue on 6 of the 8 patents
that Tesseron had originally threatened against EFI and its customers.

Note 9: Common Stock Repurchase Programs

In November 2007, our Board of Directors authorized $100.0 million to be used for the repurchase of our
outstanding common stock. Under this publicly announced plan, we repurchased a total of 3.0 million shares for
an aggregate purchase price of $67.3 million in 2007, and we repurchased a total of 4.7 million shares for an
aggregate purchase price of $64.6 million in 2008. In February 2009, the remaining $33.2 million was canceled
by the Board of Directors and replaced with a new authorization to purchase an additional $100.0 million of
outstanding common stock. In 2008, we purchased an additional 55 thousand shares for an aggregate purchase
price of $0.6 million from employees to satisfy tax withholding obligations that arise on the vesting of shares of
restricted stock and stock units. These repurchased shares are recorded as treasury stock and are accounted for
under the cost method. None of the shares of common stock we have repurchased have been retired. Our buyback
program is limited by SEC regulations and by compliance with the Company’s insider trading policy.

Note 10: Disposition of Product Line

In June 2006 we sold our inventory and intangible assets related to the Mobile Workforce Automation product
line for $10.0 million. Other elements of this product line are still reported under continued operations.

Note 11: Income Taxes

The components of income from operations before income taxes are as follows (in thousands):

U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(153,597)
20,521

$(34,110)
56,319

$ 90,939
(49,408)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(133,076)

$ 22,209

$ 41,531

For the years ended December 31,

2008

2007

2006

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

The provision (benefit) for income taxes is summarized as follows (in thousands)

For the years ended December 31,

2008

2007

2006

Current:

U.S. Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,256
825
5,099

$ 4,470
3,099
5,234

$16,662
283
2,103

Total current

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14,180

12,803

19,048

Deferred:

(27,235)
(6,465)
(112)

(10,230)
(6,919)
(288)

19,237
3,592
(163)

Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(33,812)

(17,437)

22,666

Total provision (benefit) for income taxes . . . . . . . . . . . . . . . . .

$(19,632)

$ (4,634)

$41,714

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) are as follows (in
thousands):

Inventory reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other reserves and accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carry forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax credit carry forwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2008

2007

$ 1,068
6,246
2,397
15,243
30,140
2,760
18,892
5,563

$ 1,812
6,672
2,719
21,832
40,626
2,694
19,356
3,888

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

82,309

99,599

Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8,850)
(4,203)
—
(4,448)

(4,105)
(24,039)
(33,389)
(5,179)

Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(17,501)

(66,712)

Deferred tax valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3,981)

(5,339)

Total deferred tax assets, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 60,827

$ 27,548

K
-
0
1
m
r
o
F

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Reconciliation between the income tax provision (benefit) computed at the federal statutory rate and the actual
tax provision (benefit) is as follows (in thousands):

Tax expense (benefit) at federal statutory rate . . . . . . . .
State income taxes, net of federal benefit . . . . . . . . . . . .
Research and development credits . . . . . . . . . . . . . . . . .
Foreign tax rate differential . . . . . . . . . . . . . . . . . . . . . . .
Reduction in accrual for estimated potential tax

assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Extra-territorial income exclusion . . . . . . . . . . . . . . . . . .
Non-deductible travel & entertainment . . . . . . . . . . . . . .
Non-deductible stock compensation charge . . . . . . . . . .
Goodwill impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance changes affecting provision for

For the years ended December 31,

2008

2007

2006

$(46,577)
(2,059)
(5,413)
(1,636)

35.0% $ 7,775
(2,430)
1.6
(2,981)
4.1
(7,031)
1.2

35.0% $14,536
2,446
(10.9)
(2,555)
(13.4)
26,197
(31.7)

35.0%
5.9
(6.2)
63.2

(422)
—
363
7,015
29,663

0.3
—
(0.3)
(5.3)
(22.3)

(1,293)
—
395
1,447
—

(5.8)
—
1.8
6.5
—

(395)
(998)
348
1,214
—

1,129
(208)

(1.0)
(2.4)
0.8
2.9
—

2.7
(0.5)

income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,122)
556

0.9
(0.4)

(619)
103

(2.8)
0.4

$(19,632)

14.8% $(4,634)

(20.9)% $41,714

100.4%

We have $38.4 million ($37.7 million for state tax purposes) and $13.9 million ($16.1 million for state tax
purposes) of loss and credit carry-forwards at December 31, 2008 for US federal tax purposes. These losses and
credits will expire between 2010 and 2021. A significant portion of these net operating loss and credit carry-
forwards relate to recent acquisitions and utilization of these loss and credit carry-forwards will be subject to an
annual limitation under the U.S. Internal Revenue Code (IRC). We also have a valuation allowance related to
foreign tax credits resulting from the 2003 acquisition of Best and compensation limitations potentially limited
by IRC 162(m). If these foreign tax credits and the compensation deductions are ultimately utilized, the resulting
benefit would reduce tax expense.

Effective January 1, 2007 we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty
in income taxes by requiring a tax position be recognized only when it is more likely than not that the tax
position, based on its technical merits, will be sustained upon ultimate settlement with the applicable tax
authority. The tax benefit to be recognized is the largest amount of tax benefit that is greater than fifty percent
likely of being realized upon ultimate settlement with the applicable tax authority that has full knowledge of all
relevant information. The cumulative effect of adopting FIN 48 has been recorded in 2007 as an increase of $4.8
million to retained earnings, and a decrease of $1.1 million and $5.9 million in goodwill and taxes payable
respectively.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

As of December 31 2008 and December 31, 2007, the total amount of gross unrecognized benefits was
$33.8 million and $33.4 million which, after December 31, 2008, would affect the effective tax rate if
recognized. Over the next twelve months, our existing tax positions will continue to generate an increase in
liabilities for unrecognized tax benefits. A reconciliation of the change in the gross unrecognized tax benefits
from January 1, 2007 to December 31, 2008 is as follows:

Federal, State
and Foreign
Tax

Accrued
Interest and
Penalties

Gross
Unrecognized
Income Tax
Benefits

Balance at January 1, 2007 . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . .
Additions for tax positions related to 2007 . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of applicable statute of

limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2007 . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . .
Additions for tax positions related to 2008 . . . . . . . . . . . . .
Reductions for tax positions of prior years . . . . . . . . . . . . .
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions due to lapse of applicable statute of

limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at December 31, 2008 . . . . . . . . . . . . . . . . . . . . . .

$25.0
—
9.8
(1.6)
—

(0.7)

$32.5
0.2
7.4
(0.2)
(6.9)

(0.8)

$32.2

$ 0.6
0.3
—
—
—

—

$ 0.9
0.7
—
—
—

—

$ 1.6

$25.6
0.3
9.8
(1.6)
—

(0.7)

$33.4
0.9
7.4
(0.2)
(6.9)

(0.8)

$33.8

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
At December 31, 2008 and December 31, 2007, we have accrued $2.6 million and $1.5 million for potential
payments of interest and penalties.

As of December 31, 2008 and December 31, 2007, the amount of net unrecognized benefits that, after
December 31, 2008, would impact our effective tax rate if recognized was $33.8 million and $33.4 million
respectively, offset by a deferred tax charge of $2.3 million and $2.9 million related to the federal tax effect of
state taxes for the same periods. We were subject to examination by both the US federal and state tax
jurisdictions for the 2004-2007 tax years and the Netherlands for 2006-2007 tax years. In the third quarter of
2008, we finalized a closing agreement with the Internal Revenue Service (“IRS”) to complete their examination
of the 2002 through 2004 tax years. As a result of the IRS audit settlement, we reduced our unrecognized tax
benefits by $6.6 million, of which $2.5 million was recorded as a tax benefit in 2008. The reduction in
unrecognized tax benefits related primarily to intercompany cost allocations and the research and development
credits. Since the timing of the resolution of audits is uncertain, we are unable to estimate any potential
adjustments in the next 12 months to the balance of unrecognized tax benefits.

Note 12: Employee Benefit Plans

Equity Incentive Plans

As of December 31, 2008, we have 12 equity incentive plans. Since the approval by the Stockholders, on
December 14, 2007, of our new 2007 Equity Incentive Award Plan, no awards may be granted under our 11
previously adopted equity incentive plans. As of December 31, 2008, 10 of these plans adopted prior to the 2007
Equity Incentive Award Plan continue to have outstanding awards.

K
-
0
1
m
r
o
F

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Our primary equity incentive plans are summarized as follows:

2007 Stock Plan

In December 2007, our stockholders approved the 2007 Equity Incentive Award Plan (the “2007 Plan”) and the
reservation of an aggregate of 3,300,000 shares of the Company’s common stock for issuance pursuant to the
2007 Plan. The 2007 Plan provides for grants of stock options (both incentive stock options and nonqualified
stock options), restricted stock, stock appreciation rights, performance shares, performance stock units, dividend
equivalents, stock payments, deferred stock, restricted stock units and performance-based awards. Options and
awards generally vest over a period of three to four years from the date of grant and generally expire seven to ten
years from the date of the grant. The terms of the 2007 Plan provide that an option price shall not be less than
100% of fair market value on the date of the grant. Our Board of Directors (the “Board of Directors”) may grant
a stock bonus or stock unit award under the 2007 Plan in lieu of all or a portion of any cash bonus that a
participant would have otherwise received for the related performance period.

The shares of common stock covered by the 2007 Plan may be treasury shares, authorized but unissued shares, or
shares purchased in the open market. If an award under the 2007 Plan is forfeited (including a reimbursement of
an unvested award upon a participant’s termination of employment at a price equal to the par value of the
common stock subject to the award) or expired, any shares of common stock subject to the award may be used
again for new grants under the 2007 Plan.

The 2007 Plan is administered by a committee, which may be the Board of Directors or a committee appointed
by the Board of Directors (the “Committee”). The Committee has the exclusive authority to administer the 2007
Plan, including the power to (i) designate participants under the 2007 Plan, (ii) determine the types of awards
granted to participants under the 2007 Plan, the number of such awards, and the number of shares of common
stock of the Company subject to such awards, (iii) determine and interpret the terms and conditions of any
awards under the 2007 Plan, including the vesting schedule, exercise price, whether to settle, or accept the
payment of any exercise price, in cash, common stock, other awards or other property, and whether an award
may be cancelled, forfeited or surrendered, (iv) prescribe the form of each award agreement, and (v) adopt rules
for the administration, interpretation and application of the 2007 Plan. The Committee does not have the
authority to accelerate the vesting or waive the forfeiture of any qualified performance-based awards.

Persons eligible to participate in the 2007 Plan include all employees, directors and consultants of the Company
and its subsidiaries, as determined by the Committee. As of December 31, 2008, approximately 2,000 employees
and 5 non-employee directors were eligible to participate in the 2007 Plan.

As of December 31, 2008, there were 2.4 million shares outstanding and 0.6 million shares available for grant
under the 2007 Plan. As of December 31, 2007, there were 1.1 million shares outstanding and 2.2 million shares
available for grant under the 2007 Plan.

Since the adoption by the Company of the 2007 Plan, no awards may be granted under our previously adopted
plans, described below.

2004 Stock Plan

With the adoption of the 2007 Plan, no additional awards may be granted under the 2004 Stock Plan (the “2004
Plan”). Under the 2004 Plan, 8.4 million shares of common stock were authorized for issuance. This amount
includes 0.1 million shares that were consolidated from the acquired Splash Plan, T/R Plan and Printcafe Plans
on June 7, 2006. The terms of the 2004 Plan provide that an option price shall not be less than 100% of fair
market value on the date of the grant. The vesting period for restricted stock must be at least (a) one (1) year in

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

the case of a restricted stock award subject to a vesting schedule based upon the achievement of specified
performance goals by the participant or (b) three (3) years in the case of a restricted stock award absent such
performance-based vesting. Under this plan, restricted stock and restricted stock unit awards could be granted
that did not comply with the preceding minimum vesting requirement as long as the aggregate number of shares
of common stock issued with respect to such non-conforming awards granted under this plan did not exceed 10%
of the reserve. The 2004 Plan provides for accelerated vesting if there is a change in control (as defined in the
2004 Plan). The options and restricted stock awards generally vest over a 42 to 48 month period and expire from
seven to ten years from the date of the grant. As of December 31, 2008, 2007 and 2006, there were 2.2 million,
3.4 million and 3.9 million shares, respectively, outstanding under the 2004 Plan.

1999 Stock Plan

With the adoption of the 2007 Plan, no additional awards may be granted under the 1999 Stock Plan (the “1999
Plan”). The 1999 Plan authorized 10.6 million shares of common stock for issuance. The terms of the 1999 Plan
provide that an option price may not be less than 100% of fair market value and the purchase price under
restricted stock purchase agreement may not be less than 50% of fair market value on the date of the grant. The
Board of Directors or a committee designated by the Board of Directors had the authority to determine to whom
options would be granted, the number of shares, the vesting period, the expiration date and the exercise price.
The 1999 Plan provides for accelerated vesting if there is a change in control (as defined in the 1999 Plan). The
options and restricted stock awards generally vest from two to four years and expire from seven to ten years from
the date of the grant. As of December 31, 2008, 2007 and 2006, there were 2.4 million, 3.3 million and
3.7 million shares respectively, outstanding under the 1999 Plan.

1990 Stock Plan

The 1990 Stock Option Plan (the “1990 Plan”) by its terms expired in June 2000 and no additional awards may
be granted under this plan. In June 1990, the Company adopted the 1990 Plan, which, as amended, provided for
the issuance of incentive and nonqualified stock options to our employees, directors and non-employees. The
Company reserved 13.2 million shares of common stock for issuance under the 1990 Plan. The terms of the 1990
Plan required that incentive stock options be granted with an exercise price of no less than the fair market value
on the date of the grant. The original terms of the 1990 Plan provided that the exercise price of nonqualified
stock options could not be less than 85% of the fair market value on the date of the grant. On May 4, 1995, the
1990 Plan was amended to provide that the Company would not grant options at less than 100% of the fair
market value of the Company’s common stock on the date of the grant. Generally, the options vested over a four
year period. The 1990 Plan allows the Company to buy out an option grant for a payment in cash or shares, an
option previously granted based on terms and conditions as established by the Company at the time such offer is
made. The 1990 Plan provides for accelerated vesting if there is a change in control (as defined in the 1990 Plan).
The options are exercisable at times and increments as specified by the Board of Directors, and expire not more
than 10 years from date of grant. All options available under the 1990 Plan have been issued. Any shares (plus
any shares that might in the future be returned to the 1990 Plan as a result of cancellations) that remained
available for future grants under the 1990 Plan have been cancelled. As of December 31, 2008, 2007 and 2006,
there were approximately 0.7 million, 1.3 million, and 1.8 million shares, respectively, outstanding under the
1990 Plan.

Acquired Stock Plans

In connection with our acquisition of Splash Technology Holdings, Inc., T/R Systems, Inc, Print Café and
Management Graphics, Inc, we assumed their stock incentive plans. As of December 31, 2008, there were
0.2 million options outstanding under these acquired stock plans.

K
-
0
1
m
r
o
F

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

2000 Employee Stock Purchase Plan

In May 2000, our Board of Directors adopted the 2000 Employee Stock Purchase Plan (the “ESPP”), which
became effective on August 1, 2000 and reserved 0.4 million shares of common stock for issuance under the
ESPP. The ESPP, as amended, has an automatic share increase feature pursuant to which the shares reserved
under the ESPP will automatically increase on the first trading day in January of each year, beginning with
calendar year 2006 and continuing through calendar year 2012. The amount of increase is equal to three quarters
of one percent (0.75%) of the total number of shares of common stock outstanding on the last trading day of
December in the immediately preceding calendar year but in no event shall any such increase exceed 2.5 million
shares annually. As of December 31, 2008, 0.8 million shares of the Company’s stock have been reserved for
issuance under the ESPP.

The ESPP is qualified under Section 423 of the Internal Revenue Code. Eligible employees may contribute from
one percent to ten percent of their base compensation not to exceed ten percent of the employee’s earnings.
Employees are not able to purchase more than the number of shares having a value greater than $25,000 in any
calendar year, as measured at the beginning of the offering period under the ESPP. The purchase price shall be
the lesser of 85% of the fair market value of the stock, either on the offering date or on the purchase date. The
offering period shall not exceed 27 months beginning with the offering date. The ESPP provided for offerings of
4 consecutive, overlapping 6-month offering periods, with a new offering period commencing on the first trading
day on or after February 1 and August 1 of each year.

The ESPP was suspended effective November 9, 2006 as a result of the Company not being able to timely file its
Quarterly Report on Form 10-Q for the quarter ended September 30, 2006 and remained suspended through the
fourth quarter of 2007, when we became current in our filings with the SEC. For all participants that did not
withdraw from the plan, contributions made through that date were being held to be applied towards the first
purchase date subsequent to the reinstatement of the plan. We returned all amounts for participants with an
offering period that exceeded 22 months from the beginning of the offering date. We resumed this plan in the
fourth quarter of 2007. No shares were issued under the ESPP in 2007. In 2008 and 2006, 0.5 million and
0.4 million shares were issued under the ESPP at an average purchase price of $12.18 and $14.75, respectively.
As of December 31, 2008, there was $2.8 million of total unrecognized compensation cost related to share-based
compensation arrangements granted under the ESPP. That cost is expected to be recognized over a period of 1.8
years. At December 31, 2008, 2007 and 2006, there were 0.3 million, 0.4 million and 0.1 million shares,
respectively, available for issuance under the ESPP.

Valuation and Expense Information under SFAS 123(R)

Effective January 1, 2006, we adopted SFAS 123(R), which requires the measurement and recognition of
compensation expense for all equity awards made to our employees and directors, including employee stock
options, restricted stock and employee stock purchases related to all stock-based compensation plans based on
estimated fair values.

We use the Black-Scholes-Merton (“BSM”) model to value stock-based compensation for all equity awards
except market based awards. Market based awards are valued using a Monte Carlo valuation model. The BSM
model is the same model which was previously used in preparing our pro forma disclosure required under
SFAS 123.

The BSM model determines the fair value of share-based payment awards based on the stock price on the date of
grant and is affected by assumptions regarding a number of highly complex and subjective variables. These
variables include, but are not limited to, EFI’s expected stock price volatility over the term of the awards and
actual and projected employee stock option exercise behaviors. Option-pricing models were developed for use in

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

estimating the value of traded options that have no vesting or hedging restrictions and are fully transferable.
Because our employee stock options and awards have certain characteristics that are significantly different from
traded options, and because changes in the subjective assumptions can materially affect the estimated value, in
management’s opinion, the existing valuation models may not provide an accurate measure of the fair value of
EFI’s employee stock options. Although the fair value of employee stock options is determined in accordance
with SFAS 123(R) and SEC Staff Accounting Bulletin No. 107 (“SAB 107”) using an option-pricing model, the
value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction.

The following table summarizes stock-based compensation expense based on the aforementioned valuation
models related to employee stock options, employee stock purchases and restricted stock under SFAS 123(R) for
the years ended December 31, 2008, 2007, and 2006:

(in thousands)

2008

2007

2006

Stock-based compensation expense by type of award:

Employee stock options . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock units and nonvested shares . . . . . . .
Employee stock purchase plan . . . . . . . . . . . . . . . . . .

$ 5,759
23,187
4,481

$ 8,270
14,834
1,426

$10,727
12,271
748

Total stock-based compensation . . . . . . . . . . . . . . . . . . . .
Tax effect on stock-based compensation . . . . . . . . . . . . . .

33,427
(6,694)

24,530
(8,891)

23,746
(7,064)

Net effect on net income/loss . . . . . . . . . . . . . . . . . . . . . . .

$26,733

$15,639

$16,682

Stock Options and ESPP Shares

Our determination of fair value of share-based payment awards on the date of grant using an option-pricing
model is affected by various assumptions including volatility, expected term and interest rates. Expected
volatility is based on the historical volatility of our stock over a preceding period commensurate with the
expected term of the option. Subsequent to the adoption of SFAS 123(R), we utilize the “simplified” method
described in SAB 107 to determine the expected term of our options. Using this method, the expected term is
estimated by taking the weighted average of the vesting term and the contractual term of the option. The risk-free
interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of
grant. Expected dividend yield was not considered in the option pricing formula since we do not pay dividends
and have no current plans to do so in the future.

The estimated per share weighted average fair value of options and ESPP shares granted and the assumptions
used to determine fair value are shown below for the periods indicated:

Black Scholes assumptions and fair value

2008

2007

2006

2008

2007(1)

2006

Stock option plans for the
years ended December 31,

Employee Stock Purchase Plan
for the years ended December 31,

K
-
0
1
m
r
o
F

Weighted average fair value per share . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . .
Expected term (in years) . . . . . . . . . . . . . . . . .

$5.51

$9.11

40%
2.8%
4.0

35%
4.5%
4.6

(1) No shares were issued under the ESPP in 2007.

$10.30

5.50 N/A
39%
32% – 74% N/A
4.8% 1.9% – 2.5% N/A
0.5 – 2.0 N/A
4.6

6.13

28% – 38%
4.7% – 5.2%
0.5 – 2.0

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Restricted Stock Units and Nonvested Shares of Restricted Stock

The restricted stock units and nonvested shares of restricted stock generally vest over a service period of two to
four years. The compensation expense incurred for these service awards is based on the closing market price of
EFI’s stock on the date of grant and is amortized on an accelerated basis over the requisite service period. The
weighted average fair value of restricted stock units granted during the years ended December 31, 2008, 2007,
and 2006 were $13.53, $22.16 and $22.13, respectively. No nonvested shares of restricted stock were granted
during 2007 and 2008. The weighted average fair value of nonvested shares of restricted stock granted during the
year ended December 31, 2006 was $27.41.

In February 2008, the remaining 138,750 shares of market-based nonvested restricted stock units were modified
to seven-year service-based. No incremental stock-based compensation expense was incurred as a result of the
modification.

Tender Offer

Based on the independent investigation of our historical stock option granting practices conducted by the Special
Committee of our Board of Directors in 2007, we determined that certain compensatory stock options were
granted with an exercise price lower than the fair market value of our common stock on the date of grant. Any
such stock options which had not vested prior to January 1, 2005, absent amendment, would be subject to
substantial additional taxes under Section 409A of the Internal Revenue Code and analogous state laws. On
October 23, 2007, we filed a Tender Offer Statement on Schedule TO with the SEC with respect to stock options
which were determined to have been granted with a below fair market value exercise price. The terms of the
tender offer provided that each eligible stock option tendered would be amended to increase the exercise price to
the fair market value of our common stock on the grant date determined in the independent investigation in
exchange for a cash bonus in an amount equal to the aggregate exercise price increase for such stock option
payable in January 2008, less applicable tax withholding. The tender offer expired on November 30, 2007. We
accepted for amendment eligible options to purchase 482,380 shares of our common stock and made cash
payments, in January 2008, to employees that held eligible options accepted for amendment in the aggregate
amount of $283,514, less applicable tax withholding, to compensate them for the increased exercise prices per
share of their amended eligible options, in each case, in accordance with the terms of the tender offer.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Stock Option Activity

The following table summarizes option activity under our stock plans (shares and aggregate intrinsic value in
thousands):

Weighted
average
remaining
contractual
term
(years)

Aggregate
intrinsic
value

Options outstanding at December 31, 2005 . . . . . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2006 . . . . . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2007 . . . . . . . . . . . . . . . . . . . .

Weighted
average
exercise
price

10,117
965

$23.60
$25.61
(1,994) $18.00
(707) $26.52

8,381

$24.90

$24.62
423
(335) $17.30
(956) $33.19

7,513

$24.19

Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options outstanding at December 31, 2008 . . . . . . . . . . . . . . . . . . . .

980
$15.80
(146) $15.27
(2,286) $27.34

6,061

$22.73

Options vested and expected to vest at December 31, 2008 . . . . . . .

5,938

$22.84

Options exercisable at December 31, 2008 . . . . . . . . . . . . . . . . . . . .

4,769

$24.04

3.1

2.4

$ —

K
-
0
1
m
r
o
F

Aggregate intrinsic value was calculated as the difference between the closing price of our common stock on the last
trading day of the fiscal period and the exercise price of the underlying awards for the options that were in the
money at December 31, 2008. The total intrinsic value of options exercised, determined as of the date of option
exercise, was $0.3 million, $1.7 million and $16.6 million for the years ended December 31, 2008, 2007, and 2006,
respectively. There was $3.5 million of total unrecognized compensation cost related to stock options expected to
vest as of December 31, 2008. That cost is expected to be recognized over a weighted average period of one year.

The following table summarizes information about stock options outstanding and exercisable as of December 31,
2008 (shares in thousands):

Range of exercise prices

$11.26 to $16.17 . . . . . . . . . . . . . . . . . . . . . . . .
$16.20 to $17.15 . . . . . . . . . . . . . . . . . . . . . . . .
$17.17 to $21.38 . . . . . . . . . . . . . . . . . . . . . . . .
$21.45 to $25.28 . . . . . . . . . . . . . . . . . . . . . . . .
$25.37 to $48.38 . . . . . . . . . . . . . . . . . . . . . . . .
$48.50 and over . . . . . . . . . . . . . . . . . . . . . . . . .

Options outstanding

Options exercisable

Weighted
average
remaining
contractual
term
(years)

4.3
4.5
2.1
2.5
1.8
1.1

3.1

Weighted
average
exercise
price

$ 15.47
16.83
19.45
23.09
31.93
131.47

$ 22.73

912
863
1,003
953
930
108

4,769

Weighted
average
exercise
price

$ 15.32
16.96
19.44
23.12
32.65
131.47

$ 24.04

1,674
1,081
1,011
1,125
1,063
107

6,061

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Restricted Stock Units and Nonvested Shares of Restricted Stock

Restricted stock units and nonvested shares of restricted stock were awarded to employees under our equity
incentive plans. Nonvested shares of restricted stock have the same voting rights as other common stock and are
considered to be currently issued and outstanding. Restricted stock units do not have the voting rights of common
stock, and the shares underlying the restricted stock units are not considered issued and outstanding. A summary
of the status of restricted stock units and nonvested shares of restricted stock as of December 31, 2008, and
changes during the year ended December 31, 2008, is presented below:

Restricted Stock Units

Nonvested Shares of Restricted
Stock

Shares
(in thousands)

Weighted
average grant
date fair value

Shares
(in thousands)

Weighted
average grant
date fair value

Nonvested at January 1, 2008 . . . . . . . .
Awarded . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . .

Nonvested at December 31, 2008 . . . . .

1,880
926
(543)
(397)

1,866

$22.07
$13.78
$11.62
$21.07

$18.22

336
—
(174)
(44)

118

$24.21
$ —
$21.61
$26.31

$27.21

Restricted Stock Units

The fair value of restricted stock units that vested during 2008 and 2007, determined as of the vesting date, were
$6.4 million and $7.4 million, respectively. No restricted stock units vested during 2006. The aggregate intrinsic
value of restricted stock units vested and expected to vest at December 31, 2008 was $15.4 million, calculated as
the closing price per share of our common stock on the last trading day of the fiscal period multiplied by
1.6 million of restricted stock units vested and expected to vest at December 31, 2008. There was approximately
$16.4 million of unrecognized compensation costs related to restricted stock units expected to vest as of
December 31, 2008. That cost is expected to be recognized over a weighted average period of 1.4 years.

Nonvested Shares of Restricted Stock

The fair value of restricted stock vested, determined as of the vesting date, was $2.3 million, $7.1 million and
$3.9 million during the years ended December 31, 2008, 2007 and 2006, respectively. There was $0.7 million of
unrecognized compensation cost related to nonvested shares of restricted stock expected to vest as of
December 31, 2008. That cost is expected to be recognized over a weighted average period of 0.7 years.

Employee 401(k) Plan

We sponsor a 401(k) Savings Plan (the “401(k) Plan”) to provide retirement and incidental benefits for our
employees. Employees may contribute from 1% to 40% of their annual compensation to the 401(k) Plan, limited
to a maximum annual amount as set periodically by the Internal Revenue Service (“IRS”). We currently match
50% of the employee contributions, up to a maximum of the first 4% of the employee’s compensation
contributed to the plan, subject to IRS limitations. All matching contributions vest over four years starting with
the hire date of the individual employee. Our matching contributions to the 401(k) Plan totaled $1.9 million in
2008, $2.0 million in 2007 and $1.8 million in 2006. The employees and our contributions are cash contributions
invested in mutual funds managed by an independent fund manager, or in self-directed retirement plans. The
fund manager or the employee may invest in our common stock at their discretion.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Note 13: Sale of Land and Building

On October 23, 2008, we entered into a Purchase and Sale agreement with Gilead Sciences, Inc. (“Gilead”),
under which certain real property and improvements, and other related assets were sold to Gilead for a total price
of $137.5 million, subject to an escrow holdback of $15.5 million. The escrow period expires January 2010. The
transaction closed on January 29, 2009. The property sold included approximately thirty acres of land and the
office building located at 301 Velocity Way, Foster City, California, consisting of approximately 163,000 square
feet and certain other assets related to the property. We continue to retain ownership of the remaining
approximately five acres of land and remain obligated under the synthetic lease with respect to the office
building located at 303 Velocity Way, Foster City, California, consisting of approximately 295,000 square feet
on which the Company’s headquarters is located. As more fully disclosed in Note 8—Commitments and
Contingencies of the Notes to Consolidated Financial Statements, the buildings are subject to synthetic lease
agreements.

As a result of the sale to Gilead, assets held for sale of $55.4 million under current assets as of December 31,
2008 include $31.7 million of funds pledged with respect to the synthetic lease of the 301 Velocity Way facility,
$2.5 million of related land, $19.8 million of undeveloped land, $1.1 million of leasehold and land
improvements, and $0.3 million of previously capitalized financing costs.

Note 14: Restructuring and Other

The Company recorded pretax restructuring and other charges of $11.0, $1.5 million, and $1.0 million for the
years ended December 31, 2008, 2007, and 2006, respectively. Restructuring and other charges includes
severance costs of $8.0 million related to headcount of 166 for the year ended December 31, 2008. Severance
costs include severance payments, related employee benefits, related legal fees, and outplacement
costs. Restructuring and other charges includes facility costs of $2.4 million related to the closure of three
facilities and the partial closure of two facilities.

K
-
0
1
m
r
o
F

The following table summarizes 2008 activities related to the Company’s restructuring reserve (in thousands):

Reserve balance at December 31, 2007 . . . . . . . . . . . . . . . . . . .
Restructuring reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring reserve related to acquisition of Pace . . . . . . . . .
Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reserve balance at December 31, 2008 . . . . . . . . . . . . . . . . . . .

$ —
9,524
358
(6,658)

$ 3,224

Restructuring Costs

Also included in the Restructuring and other line item in our consolidated statement of operations are costs
related to integrate our Pace and Raster acquisitions and related employees.

Note 15: Information Concerning Business Segments and Major Customers

Information about Products and Services

We operate in a single industry segment, technology for high-quality printing in short production runs. In
accordance with SFAS 131, “Disclosures About Segments of an Enterprise and Related Information,” our
operating decision-makers have been identified as our executive officers, who review the operating results to
make decisions about allocating resources and assessing performance for the entire Company. We do not have
separate operating segments for which discrete financial statements are prepared. Our management makes
operating decisions and assesses performance primarily based on the marketplace acceptance of our products,
which is typically measured by revenues.

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

As our enterprise management processes are becoming further refined, including our 2009 planning process, to
use financial information that is closely aligned with the three product categories, it is expected that it will be
appropriate to present three operating segments beginning in the first quarter of 2009. It is expected that relevant
financial information will be prepared for each of the three operating segments that will be used by the chief
operating decision making group to allocate resources among the segments.

The following is a breakdown of revenues by product category for the years ended December 31, 2008, 2007 and
2006:

(in thousands)

For the years ended December 31,

2008

2007

2006

Controllers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inkjet Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
APPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$278,738
219,959
61,683

$331,474
229,253
59,859

$328,443
180,203
55,965

Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$560,380

$620,586

$564,611

Revenues in Controllers and APPS categories for the twelve months ended December 31, 2007 and
December 31, 2006 have been revised to reflect the reclassification of Controller-related software revenue of
$25.6 million and $21.8 million in 2007 and 2006, respectively from the Advanced Professional Printing
Software category to the Controllers category. Total revenue from the twelve months ended December 31, 2006
and December 31, 2007 have not changed.

Information about Geographic Areas

Our sales originate in the United States, The Netherlands, Germany and Japan. Shipments to some of our OEM
customers are made to centralized purchasing and manufacturing locations, which in turn sell through to other
locations. As a result of these factors, we believe that sales to certain geographic locations might be higher or
lower, as the ultimate destinations are difficult to ascertain.

The following is a breakdown of revenues by sales origin for the years ended December 31, 2008, 2007 and
2006:

(in thousands)

For the years ended December 31,

2008

2007

2006

Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe, Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . . . .
Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other international locations . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$297,896
194,474
52,048
15,962

$327,232
216,308
58,015
19,031

$303,931
175,037
63,248
22,395

Total Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$560,380

$620,586

$564,611

The following table presents our long-lived assets located outside the Americas, all of which are in the Europe,
Middle East and Africa (“EMEA”) region, as of December 31, 2008 and 2007:

(in thousands)

December 31,

2008

2007

Goodwill
Intangible Assets, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,300
1,438

$7,447
2,006

$8,738

$9,453

Electronics For Imaging, Inc.
Notes to Consolidated Financial Statements—(Continued)

Information about Major Customers

For the past three years we have had two major customers, Canon and Xerox, each with total revenues greater
than 10%. These customers, in order of magnitude, accounted for approximately 13% and 16% of revenues in
2008, approximately 16% and 15% of revenue in 2007. One customer, Xerox, had an accounts receivable
balance greater than 10% of our total accounts receivable balance, accounting for 16% and 12% of our total
accounts receivable balance as of December 31, 2008 and 2007, respectively.

Note 16: Subsequent Events

In January 2009, we announced a restructuring plan to better align our costs with revenue levels. We expect to
reduce our worldwide headcount by approximately 100 employees and incur severance costs of approximately
$3.4 million.

On February 5, 2009, our Board of Directors approved a $100 million share repurchase program, including a $30
million accelerated share repurchase (“ASR”) by utilizing a portion of the proceeds from the recent sale of land
and building to Gilead. On February 18, 2009, we also entered into an agreement with UBS AG, London branch
(“UBS”), to repurchase $30 million of our common stock under the ASR program. We expect to complete the
repurchases under the ASR program in the second or third quarter of 2009, with the final completion date subject
to the discretion of UBS. Approximately $33.2 million remaining from prior board authorization were cancelled
by the Board of Directors in February 2009.

K
-
0
1
m
r
o
F

SUPPLEMENTARY DATA

Unaudited Quarterly Consolidated Financial Information

The following table presents our operating results for each of the eight quarters in the two-year period ended
December 31, 2008. The information for each of these quarters is unaudited but has been prepared on the same
basis as the audited consolidated financial statements appearing elsewhere in this Annual Report. In the opinion
of management, all necessary adjustments (consisting only of normal recurring adjustments) have been included
to state fairly the unaudited quarterly results when read in conjunction with our audited consolidated financial
statements and the notes thereto appearing in this Annual Report. These operating results are not necessarily
indicative of the results for any future period (in thousands, except per share amounts).

2008

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) for dilution calculation . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) per basic common share . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) per diluted common share . . . . . . . . . . . . . . . . . . . . . . .
Goodwill and asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . .

$143,846
81,973
(5,892)
(113)
(113)

$136,604
77,232
(14,308)
(5,173)
(5,173)
(0.10) $ — $
(0.10) $ — $

$ 135,264
76,147
(116,196)
(104,514)
(104,514)
(1.99)
$
$
(1.99)
$ — $ — $ — $ 111,858

$144,666
82,065
(8,619)
(3,644)
(3,644)
(0.07) $
(0.07) $

2007

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit
(Loss) income from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (loss) income for dilution calculation . . . . . . . . . . . . . . . . . . .
Net (loss) income per basic common share . . . . . . . . . . . . . . . . . .
Net (loss) income per diluted common share . . . . . . . . . . . . . . . .

$147,831
88,341
(3,926)
2,135
2,135
0.04
0.04

$
$

$162,441
95,729
2,169
9,606
10,356
0.17
0.15

$
$

$158,295
92,206
756
8,107
8,857
0.14
0.13

$
$

$ 152,019
84,610
(1,230)
6,995
7,745
0.13
0.12

$
$

100

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
None.

Item 9A: Controls and Procedures
Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange
Act of 1934 (the “Exchange Act”), that are designed to provide reasonable assurance that information required to be
disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported
within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is
accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosure. Our management, including the Chief Executive Officer
and Chief Financial Officer, is engaged in a comprehensive effort to review, evaluate and improve our controls; however,
management does not expect that our disclosure controls will prevent all errors and all fraud. A control system, no matter
how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives are
met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any
disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective to
provide reasonable assurance as of December 31, 2008.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as
defined in Rule 13a-15(f) of the Securities Exchange Act of 1934. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.

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

K
-
0
1
m
r
o
F

Based on our assessment using those criteria, we concluded that our internal control over financial reporting was
effective as of December 31, 2008.

We have excluded Pace and Raster from our assessment of internal control over financial reporting as of December 31,
2008 because they were acquired by us during fiscal year 2008. Pace and Raster are wholly owned subsidiaries whose
total assets and total revenue represent 5.1% and 1.3%, respectively, of the related consolidated financial statement
amounts as of and for the year ended December 31, 2008.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, has audited the effectiveness of our
internal control over financial reporting as of December 31, 2008, as stated in their report included in this Annual
Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended December 31,
2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B: Other Information
None.

101

PART III

Item 10: Directors, Executive Officers and Corporate Governance

Information regarding our directors is incorporated by reference from the information contained under the
caption “Election of Directors” in our Proxy Statement for our 2009 Annual Meeting of Stockholders (the “2009
Proxy Statement”). Information regarding our current executive officers is incorporated by reference from
information contained under the caption “Executive Officers” in our 2009 Proxy Statement. Information
regarding Section 16 reporting compliance is incorporated by reference from information contained under the
caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2009 Proxy Statement. Information
regarding the audit committee of our board of directors and information regarding an audit committee financial
expert is incorporated by reference from information contained under the caption “Meetings and Committees of
the Board of Directors” in our 2009 Proxy Statement. Information regarding our code of ethics is incorporated by
reference from information contained under the caption “Meetings and Committees of the Board of Directors” in
our 2009 Proxy Statement. Information regarding our implementation of procedures for stockholder nominations
to our board of is incorporated by reference from information contained under the caption “Meetings and
Committees of the Board of Directors” in our 2009 Proxy Statement.

Item 11: Executive Compensation

The information required by this item is incorporated by reference from the information contained under the
captions “Compensation Discussion and Analysis” and “Executive Compensation” in our 2009 Proxy Statement.

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

Other than information regarding securities authorized for issuance under equity compensation plans, which is
set forth below, the information required by this item is incorporated by reference from the information contained
under the caption “Security Ownership” in our 2009 Proxy Statement.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2008 concerning securities that are authorized
under equity compensation plans.

Plan category

Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights

Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column 1)

Equity compensation plans approved by

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,927,271(1)

Equity compensation plans not approved by

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,927,271

$21.67

—

$21.67

903,760(2)

—

903,760

(1)

(2)

Includes options outstanding as of December 31, 2008, representing 78,840 shares with an average exercise
price of $156.39 per share, that were assumed in connection with business combinations.
Includes 566,130 shares available under our 2007 Equity Incentive Award Plan and 337,630 shares
available under our 2000 Employee Stock Purchase Plan.

102

Item 13: Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference from the information contained under the
caption “Certain Relationships and Related Transactions, and Director Independence” in our 2009 Proxy
Statement.

Item 14: Principal Accountant Fees and Services

The information required by this item is incorporated by reference from the information contained under the
caption “Principal Accountant Fees and Services” in our 2009 Proxy Statement.

K
-
0
1
m
r
o
F

103

PART IV

Item 15: Exhibits, Financial Statement Schedules and Reports on Form 10-K

(a) Documents Filed as Part of this Report

(1)

Index to Financial Statements

The Financial Statements required by this item are submitted in Item 8 of this report as follows:

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2008 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations for the Years Ended December 31, 2008, 2007 and

2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2008,

2007 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and

2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

58
59

62
63

(2) Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

108

(All other schedules are omitted because of the absence of conditions under which they are required or because
the necessary information is provided in the consolidated financial statements or notes thereto in Item 8 of this
report.)

(3) Exhibits

Exhibit
No.

Description

2.1

2.2

2.3

2.4

2.5

2.6+

3.1

3.2

3.3

Agreement and Plan of Merger, dated as of August 30, 2000, by and among the Company,
Vancouver Acquisition Corp. and Splash Technology Holdings, Inc. (1)

Amendment No. 1, dated as of October 19, 2000, to the Agreement and Plan of Merger, dated as of
August 30, 2000, by and among the Company, Vancouver Acquisition Corp. and Splash Technology
Holdings, Inc. (2)

Agreement and Plan of Merger and Reorganization, dated as of July 14, 1999, among the Company,
Redwood Acquisition Corp. and Management Graphics, Inc. (3)

Agreement and Plan of Merger, dated as of February 26, 2003 by and among the Company, Strategic
Value Engineering, Inc. and Printcafe Software, Inc. (4)

Merger Agreement, dated as of April 14, 2005 by and among the Company, VUTEk, Inc. and EFI
Merger Sub, Inc. (5)

Amended and Restated Equity Purchase Agreement dated October 31, 2006 among Electronics for
Imaging, Inc., Electronics for Imaging, International, Jetrion, LLC and Flint Group North America
Corporation (6)

Amended and Restated Certificate of Incorporation (7)

By-laws as amended (8)

Certificate of Amendment of By-laws (9)

104

Exhibit
No.

3.4

4.2

10.1+

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20+

10.21+

10.22

10.23

10.24

Description

Certificate of Amendment of By-laws (10)

Specimen Common Stock certificate of the Company (8)

Agreement dated December 6, 2000, by and between Adobe Systems Incorporated and the
Company (11)

1990 Stock Plan of the Company (8)

Management Graphics, Inc. 1985 Nonqualified Stock Option Plan (12)

The 1999 Equity Incentive Plan as amended (13)

2000 Employee Stock Purchase Plan as amended (13)

Splash Technology Holdings, Inc. 1996 Stock Option Plan as amended to date (14)

Prographics, Inc. 1999 Stock Option Plan (15)

Printcafe Software, Inc. 2000 Stock Incentive Plan (15)

Printcafe Software, Inc. 2002 Key Executive Stock Incentive Plan (15)

Printcafe Software, Inc. 2002 Employee Stock Incentive Plan (15)

T/R Systems, Inc. 1999 Stock Option Plan (16)

Electronics for Imaging, Inc. 2004 Equity Incentive Plan (17)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan (18)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Stock Option Grant Notice and
Stock Option Agreement (19)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Restricted Stock Award Grant
Notice and Restricted Stock Award Agreement (19)

Electronics For Imaging, Inc. 2007 Equity Incentive Award Plan Restricted Stock Unit Award Grant
Notice and Restricted Stock Unit Award Agreement (19)

K
-
0
1
m
r
o
F

Form of Indemnification Agreement (8)

Form of Indemnity Agreement (20)

Lease Financing of Properties Located in Foster City, California, dated as of July 16, 2004, among
the Company, Société Générale Financial Corporation and Société Générale (21)

OEM Distribution and License Agreement dated September 19, 2005 by and among Adobe Systems
Incorporated, Adobe Systems Software Ireland Limited and the Company, as amended by
Amendment No. 1 dated as of October 1, 2005 (22)

Amendment No. 2 to OEM Distribution and License Agreement by and among Adobe Systems
Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of
October 1, 2005 (23)

Employment Agreement effective August 1, 2006, by and between Guy Gecht and the
Company (24)

Employment Agreement effective August 1, 2006, by and between Fred Rosenzweig and the
Company (24)

Employment Agreement effective August 1, 2006, by and between John Ritchie and the
Company (24)

105

Exhibit
No.

10.25+

10.26

10.27

10.28

10.29

10.30

10.31

10.32

12.1

23.1

24.1

31.1

31.2

32.1

Description

Amendment No. 4 to OEM Distribution and License Agreement by and among Adobe Systems
Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of January 1,
2006 (25)

Amendment of Stock Option Agreement and Stock Option Repayment Agreement, dated as of
August 29, 2008, by and between the Company and Guy Gecht (26)

Amendment of Stock Option Agreement and Stock Option Repayment Agreement, dated as of
August 29, 2008, by and between the Company and Fred S. Rosenzweig (26)

Amendment of Stock Option Agreement and Stock Option Repayment Agreement, dated as of
August 29, 2008, by and between the Company and John Ritchie (26)

Amendment of Stock Option Agreement and Stock Option Repayment Agreement, dated as of
August 29, 2008, by and between the Company and James S. Greene (26)

Amendment of Stock Option Agreement and Stock Option Repayment Agreement, dated as of
August 29, 2008, by and between the Company and Dan Maydan (26)

Amendment of Stock Option Agreement, dated as of August 29, 2008, by and between the Company
and Gill Cogan (26)

Purchase and Sale Agreement and Joint Escrow Instructions dated as of October 23, 2008 by and
between the Company and Gilead Sciences, Inc., as amended, if material

Computation of Ratios of Earnings to Fixed Charges

List of Subsidiaries

Consent of Independent Registered Public Accounting Firm

Power of Attorney (see signature page)

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 and Chief Financial Officer Certification pursuant to
18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

The Company has received confidential treatment with respect to portions of these documents

+
(1) Filed as exhibit (d) (1) to the Company’s Schedule TO-T on September 14, 2000 and incorporated herein by

reference.

(2) Filed as exhibit (d) (5) to the Company’s Schedule TO/A No. 3 on October 20, 2000 and incorporated herein

by reference.

(3) Filed as an exhibit to the Company’s Report of Unscheduled Events on Form 8-K on September 8, 1999

(File No. 000-18805) and incorporated herein by reference.

(4) Filed as exhibit 10 to Amendment No. 2 to the Schedule 13D filed on February 26, 2003 and incorporated

herein by reference.

(5) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on April 18, 2005 (File

No. 000-18805) and incorporated herein by reference.

(6) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on November 3, 2006 (File

No. 000-18805) and incorporated herein by reference.

(7) Filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 33-57382) and

incorporated herein by reference.

(8) Filed as an exhibit to the Company’s Registration Statement on Form S-1 (No. 33-50966) and incorporated

herein by reference.

106

(9) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 29, 2007 (File

No. 000-18805) and incorporated herein by reference.

(10) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on November 15, 2007 (File

No. 000-18805) and incorporated herein by reference.

(11) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000

(File No. 000-18805) and incorporated herein by reference.

(12) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 1999

(File No. 000-18805) and incorporated herein by reference.

(13) Filed as an exhibit to the Company’s Registration Statement on Form S-8 on June 24, 2003 and incorporated

herein by reference.

(14) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004

(File No. 000-18805) and incorporated herein by reference.

(15) Filed as an exhibit to Printcafe Software, Inc.’s Registration Statement on Form S-1 (File No. 333-82646)

and incorporated herein by reference.

(16) Filed as an exhibit to T/R Systems, Inc.’s Registration Statement on Form S-1 (File No. 333-82646) and

incorporated herein by reference.

(17) Filed as an exhibit to the Company’s Registration Statement on Form S-8 on June 16, 2004 and incorporated

herein by reference.

(18) Filed as Appendix B to the Company’s Proxy Statement filed on November 14, 2007 (File No. 000-18805)

and incorporated herein by reference.

(19) Filed as an exhibit to the Company’s Registration Statement on Form S-8 on December 20, 2007 and

incorporated herein by reference.

(20) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on February 15, 2008 (File

No. 000-18805) and incorporated herein by reference.

(21) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2004

(File No. 000-18805) and incorporated herein by reference.

(22) Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005

(File No. 000-18805) and incorporated herein by reference

(23) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006

(File No. 18805) and incorporated herein by reference.

(24) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 7, 2006 (File

No. 000-18805) and incorporated herein by reference.

(25) Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006

(File No. 18805) and incorporated herein by reference.

(26) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 5, 2008 (File

No. 000-18805) and incorporated herein by reference.

K
-
0
1
m
r
o
F

(b) List of Exhibits

See Item 15 (a).

107

ELECTRONICS FOR IMAGING, INC.
Schedule II
Valuation and Qualifying Accounts (in thousands)

Description

Year Ended December 31, 2008
Allowance for doubtful accounts and sales-related

Balance at
beginning
of period

Charged to
revenue
and
expenses

Charged
to/(from)
other

accounts Deductions

Balance at
end of
period

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$8,153

$5,420

88(2) $(5,209)

$8,452

Year Ended December 31, 2007
Allowance for doubtful accounts and sales-related

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7,852

$6,168

$ — $(5,867)

$8,153

Year Ended December 31, 2006
Allowance for doubtful accounts and sales-related

allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,306

$5,997

489(1) $(2,940)

$7,852

(1) Adjustment due to acquired bad debt allowance: Jetrion—$489
(2) Adjustment due to acquired bad debt allowance: Pace—$88

108

Pursuant to the requirements of Sections 13 or 16(d) of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

March 2, 2009

ELECTRONICS FOR IMAGING, INC.

By:

/S/ GUY GECHT

Guy Gecht
Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes and
appoints Guy Gecht and John Ritchie jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to the Form 10-K Annual Report and to
file the same, with exhibits thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue thereof.

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

Signature

Title

Date

/S/ GUY GECHT

Guy Gecht

Chief Executive Officer, Director
(Principal Executive Officer)

March 2, 2009

/S/ FRED ROSENZWEIG

President, Director

March 2, 2009

K
-
0
1
m
r
o
F

Fred Rosenzweig

/S/

JOHN RITCHIE
John Ritchie

Chief Financial Officer (Principal
Financial and Accounting Officer)

March 2, 2009

/S/ THOMAS GEORGENS

Director

March 2, 2009

Thomas Georgens

/S/ GILL COGAN

Gill Cogan

/S/ DAN MAYDAN

Dan Maydan

/S/

JAMES S. GREENE
James S. Greene

Director

March 2, 2009

/S/ RICHARD A. KASHNOV

Director

March 2, 2009

Richard A. Kashnov

109

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-K/A
Amendment No. 1

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

For the fiscal year ended December 31, 2008

EXCHANGE ACT OF 1934

Commission File Number: 000-18805

ELECTRONICS FOR IMAGING, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other Jurisdiction of
incorporation or organization)

94-3086355
(I.R.S. Employer
Identification No.)

303 Velocity Way, Foster City, CA 94404
(Address of principal executive offices) (Zip Code)

(650) 357-3500
(Registrant’s telephone number, including area code)

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

Title of Each Class

Common Stock, $.01 Par Value

Name of Exchange on which Registered

The NASDAQ Stock Market LLC

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

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports) and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ‘ 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 the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ‘
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act).

Large accelerated filer È
Non-accelerated filer ‘

‘
Accelerated filer
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 È
The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant computed by
reference to the price at which the common stock was last sold on June 30, 2008 was $501,165,265.** The number of shares
outstanding of the registrant’s common stock, $.01 par value per share, as of March 31, 2009 was 49,217,723.
** Based upon the last trade price of the Common Stock reported on the NASDAQ Global Select Market on June 30, 2008, the last
business day of the registrant’s second quarter of the 2008 fiscal year. Excludes approximately 18,179,704 shares of common stock
held by directors, executive officers and holders known to the registrant to hold 10% or more of the registrant’s outstanding
Common Stock, as of that date, in that such persons may be deemed to be affiliates. This determination of executive officer or
affiliate status is not necessarily a conclusive determination for other purposes. Exclusion of shares held by any person should not
be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management
or policies of the registrant, or that such person is controlled by or under common control with the registrant.

A
K
-
0
1
m
r
o
F

TABLE OF CONTENTS

PART III

Explanatory Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 10 Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 11 Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 13 Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . .
ITEM 14 Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV
ITEM 15 Exhibits, Financial Statement Schedules and Reports on Form 10-K . . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBIT INDEX
EXHIBIT 31.1
EXHIBIT 31.2

1
2
5

23
25
26

27
31

EXPLANATORY NOTE

Electronics For Imaging, Inc. hereby amends its Annual Report on Form 10-K for the fiscal year ended
December 31, 2008 (the “Original Annual Report”) filed with the Securities and Exchange Commission (the
“SEC”) on March 2, 2009, to add disclosure required under Part III of Form 10-K. Except as described above, no
attempt has been made in this Amendment on Form 10-K/A (this “Amendment” or “Form 10-K/A”) to modify or
update other disclosures presented in the Original Annual Report. This Amendment does not reflect events
occurring after the filing of the Original Annual Report, or modify or update those disclosures, including the
exhibits to the Original Annual Report, affected by subsequent events. Accordingly, this Amendment should be
read in conjunction with our filings with the SEC subsequent to the filing of the Original Annual Report,
including any amendments to those filings.

A
K
-
0
1
m
r
o
F

PART III

Item 10: Directors, Executive Officers and Corporate Governance
DIRECTORS

Set forth below are the names of each member of the Board of Directors (the “Board of Directors” or “Board”) of
Electronics For Imaging, Inc. (together with its subsidiaries, the “Company”) and certain information about them
as of April 1, 2009.

Name of Nominee and Principal Occupation

Age

Director Since

Gill Cogan(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Founding Partner, Opus Capital Ventures LLC

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chief Executive Officer of the Company

Thomas Georgens(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

President and Chief Operating Officer, NetApp, Inc.

James S. Greene(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Vice President, Cisco Systems, Inc.

Richard A. Kashnow(2)(3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consultant, Self-Employed

Dan Maydan(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Member, Board of Trustees, Palo Alto Medical Foundation

Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

President of the Company

1992

2000

2008

2000

2008

1996

2000

(1) Member of the Compensation Committee.
(2) Member of the Nominating and Governance Committee.
(3) Member of the Audit Committee.

Mr. Cogan has served as interim Chairman of the Board of the Company since June 28, 2007. Mr. Cogan is a
founding Partner of Opus Capital Ventures LLC, a venture capital firm established in 2005. Previously, he was
the Managing Partner of Lightspeed Venture Partners, a venture capital firm, from 2000 to 2005. From 1991 until
2000, Mr. Cogan was Managing General Partner of Weiss, Peck & Greer Venture Partners, L.P., a venture
capital firm. From 1986 to 1990, Mr. Cogan was a partner of Adler & Company, a venture capital group handling
technology-related investments. From 1983 to 1985, he was Chairman and Chief Executive Officer of Formtek,
Inc., an imaging and data management computer company, whose products were based upon technology
developed at Carnegie-Mellon University. Mr. Cogan is currently a director of several privately held companies.
Mr. Cogan holds an M.B.A. from the University of California at Los Angeles.

Mr. Georgens has served as a director of the Company since April 2008. Mr. Georgens is currently President and
Chief Operating Officer of NetApp, Inc., a provider of data management solutions. From January 2007 to

January 2008, Mr. Georgens was Executive Vice President, Product Operations and from October 2005 to January
2007, he was Executive Vice President and General Manager of Enterprise Storage Systems for NetApp. From 1996
to 2005, Mr. Georgens served LSI Logic and its subsidiaries, including Engenio, in various capacities, including as
President, Chief Executive Officer, Vice President and General Manager, and Director. Prior to working with LSI
Logic and its subsidiaries, Mr. Georgens spent 11 years at EMC Corporation in a variety of engineering and
marketing positions. Mr. Georgens graduated from Rensselaer Polytechnic Institute with a B.S. and M.Eng degrees
in computer and systems engineering, and also holds an M.B.A. from Babson College.

Mr. Greene is currently a Vice President of Cisco Systems, Inc., a communications and information technology
company, where he is responsible for the Global Financial Services business. From January 2004 until
February 2005, Mr. Greene was the President and General Manager for the Global Financial Services business of
TeleTech Holdings, Inc., a customer management services company. From September 2001 until February 2004,
Mr. Greene was a Senior Vice President with Cap Gemini Ernst & Young, a consulting services firm, where he
served clients in the global financial services industries. Prior to that he was Chief Executive Officer and
President of Abilizer Solutions Inc., a global Enterprise Information Portal software business. Prior to Abilizer,
Mr. Greene was a Senior Partner with Accenture, a consulting firm. Mr. Greene joined Accenture in 1979 and
left in 2000 as the Managing Partner of their Western Region. Mr. Greene received his B.A. in Economics from
the University of California at Davis and his M.B.A. from Santa Clara University.

Mr. Kashnow has served as a director of the Company since April 2008. Since 2003, Mr. Kashnow has been self-
employed as a consultant. From 1999 until 2003, Mr. Kashnow served as President of Tyco Ventures, the venture
capital unit he established for Tyco International, Inc., a diversified manufacturing and services company. From
1995 to 1999, he served as Chairman, Chief Executive Officer, and President of Raychem Corporation, a global
technology materials company. He started his career as a physicist at General Electric’s Corporate Research and
Development Center in 1970. During his seventeen years with GE, he progressed through a series of technical
and general management assignments. Mr. Kashnow received a Ph.D. in physics from Tufts University in 1968
and a B.S. in physics from Worcester Polytechnic Institute in 1963. He served in the U.S. Army between 1968
and 1970 and completed his active duty tour as a Captain. He also serves on the board of Ariba, Inc., a public
company providing on-demand spend management solutions. Until March 2008, he served as Chairman of
ActivIdentity, a public software security company. Until September 2007, he also served as Chairman of Komag,
Inc., a public data storage media company which was acquired at that time by Western Digital.

Dr. Maydan was President of Applied Materials Inc., a semiconductor manufacturing equipment company, from
January 1994 to April 2003 and a member of that company’s board of directors from June 1992 to October 2005.
From March 1990 to January 1994, Dr. Maydan served as Applied Materials’ Executive Vice President, with
responsibility for all product lines and new product development. Before joining Applied Materials in September
1980, Dr. Maydan spent thirteen years managing new technology development at Bell Laboratories during which
time he pioneered laser recording of data on thin-metal films and made significant advances in photolithography
and vapor deposition technology for semiconductor manufacturing. In 1998, Dr. Maydan was elected to the
National Academy of Engineering. He serves on the board of directors of Infinera Corporation, a digital optical
communications company and the board of directors of a privately held company. Dr. Maydan is a member of
the Board of Trustees of the Palo Alto Medical Foundation (P.A.M.F.). Dr. Maydan received his B.S. and
M.S. degrees in electrical engineering from Technion, the Israel Institute of Technology, and his Ph.D. in Physics
from Edinburgh University in Scotland.

Mr. Rosenzweig was appointed President of the Company as of January 1, 2000. From July 1999 to January 2004
he served as Chief Operating Officer of the Company. From August 1998 to July 1999, Mr. Rosenzweig served
as Executive Vice President. From January 1995 to August 1998, Mr. Rosenzweig served as Vice President,
Manufacturing and Support of the Company. From May 1993 to January 1995, Mr. Rosenzweig served as
Director of Manufacturing of the Company. Prior to joining the Company, from July 1992 to May 1993, he was a
plant general manager at Tandem Computers Corporation, a computer company. From October 1989 to July
1992, Mr. Rosenzweig served as a systems and peripheral test manager at Tandem Computers Corporation.

A
K
-
0
1
m
r
o
F

Mr. Rosenzweig holds a B.S. in Metallurgical Engineering from The Pennsylvania State University and an
M.B.A. from the University of California at Berkeley.

EXECUTIVE OFFICERS

The following table lists certain information regarding the Company’s executive officers as of April 1, 2009.

Name

Age

Position

43 Chief Executive Officer
53
43 Chief Financial Officer

President

Mr. Gecht was appointed Chief Executive Officer of the Company on January 1, 2000. From July 1999 to
January 2000, he served as President of the Company. From January 1999 to July 1999, he was Vice President
and General Manager of Controllers Products of the Company. From October 1995 through January 1999, he
served as Director of Software Engineering. Prior to joining the Company, Mr. Gecht was Director of
Engineering at Interro Systems, a technology company, from 1993 to 1995. From 1991 to 1993, he served as
Software Manager of ASP Computer Products, a networking company and from 1990 to 1991 he served as
Manager of Networking Systems for Apple Israel, a technology company. From 1985 to 1990, he served as an
officer in the Israeli Defense Forces, managing an engineering development team, and later was an acting
manager of one of the IDF high-tech departments. Mr. Gecht currently serves as a member of the board of
directors, audit committee and compensation committee of Check Point Software Technologies Ltd., a global
information technology security company. Mr. Gecht holds a B.S. in Computer Science and Mathematics from
Ben Gurion University in Israel.

Mr. Ritchie was appointed Chief Financial Officer on April 1, 2006. From January 2001 to April 1, 2006,
Mr. Ritchie served as the Company’s Vice President of Finance. From March 1996 to January 2001, Mr. Ritchie
served in a variety of capacities at Splash Technology Holdings, Inc., a server company, most recently as Chief
Financial Officer. Prior to Splash, Mr. Ritchie held various accounting and finance positions at Western Waste
Industries, Inc., a waste services company, Oce-Bruning, Inc., a printer and copier company, and Mariani
Packing Company, an agricultural company. Mr. Ritchie holds a B.A. in Business Administration from San Jose
State University.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires the Company’s officers, directors and persons who beneficially own
more than ten percent of a registered class of the Company’s equity securities to file reports of security
ownership and changes in such ownership with the SEC. Officers, directors and greater than ten percent
beneficial owners also are required by rules promulgated by the SEC to furnish the Company with copies of all
Section 16(a) forms they file.

Based solely upon a review of the copies of such forms furnished to the Company, or written representations that
no Form 5 filings were required, the Company believes that during the period from January 1, 2008 to
December 31, 2008, all Section 16(a) filing requirements were timely met.

Audit Committee and Code of Ethics

The Audit Committee currently consists of Directors Georgens, Greene and Kashnow. The Audit Committee
conducted ten (10) meetings in 2008. The Audit Committee approves the engagement of and the services to be
performed by the Company’s independent auditors and reviews the Company’s accounting principles and its
system of internal accounting controls. The Board has determined that all members of the Audit Committee are
“independent” as that term is defined in Rule 5605(a)(2) of the NASDAQ rules and also meet the additional
criteria for independence of Audit Committee members set forth in Rule 10A-3(b)(1) under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). In addition, our Board of Directors has determined
that Mr. Kashnow is an “audit committee financial expert” as defined by the SEC.

The Audit Committee oversees the Company’s Ethics Program, which presently includes, among other things,
the Company’s Code of Business Conduct and Ethics, the Company’s Code of Ethics for the Management Team,
the Company’s Code of Ethics for the Accounting and Finance Team, the Company’s Code of Ethics for the
Sales Team (collectively, the “Codes”), an Internal Audit Committee responsible for receiving and investigating
complaints, a 24-hour global toll-free hotline and an internal website whereby employees can anonymously
submit complaints via email. The Company’s Codes can be found on the Company’s website at www.efi.com.

Item 11: Executive Compensation

COMPENSATION DISCUSSION AND ANALYSIS

Compensation Objectives and Philosophy

The Company’s compensation objectives and philosophy provide the guiding principles for decisions made by
the Compensation Committee of the Board of Directors (the “Committee”) for compensation to be paid to the
Company’s named executive officers, which, during fiscal year 2008, included Guy Gecht, Chief Executive
Officer; Fred Rosenzweig, President; and John Ritchie, Chief Financial Officer.

The Committee believes that compensation paid to executive officers should be closely aligned with the
performance of the Company on both a short-term and long-term basis, and linked to specific, measurable results
intended to create value for stockholders. In establishing compensation programs for the named executive
officers for fiscal year 2008, the Committee considered the following principles and objectives:

•

Attract and retain individuals of superior ability and managerial talent;

Ensure compensation is closely aligned with the Company’s corporate strategies, business and financial
objectives and the long-term interests of the Company’s stockholders;

Create incentives to achieve key strategic and financial performance goals of the Company by linking
executive incentive award opportunities to the achievement of these goals; and

Ensure that the total compensation is fair, reasonable and competitive.

The Compensation Committee of the Board of Directors

The Committee, serving under a charter adopted by the Board of Directors, is composed entirely of outside
directors who have never served as officers of the Company. Under the charter, the Committee has overall
responsibility for approving and evaluating the executive officer compensation plans, policies and programs of
the Company. This includes base salaries, incentive awards, stock option grants, employment agreements,
severance arrangements, change in control provisions, as well as any other benefits or compensation
arrangements for the named executive officers. In certain circumstances, the Committee may solicit input from
the full Board of Directors before making final decisions relating to executive compensation. Messrs. Cogan and
Maydan serve on the Committee as of the date of this Form 10-K/A.

A
K
-
0
1
m
r
o
F

Role of Management in Assisting Compensation Decisions

Members of the executive management team of the Company, such as the named executive officers and the Vice
President of Human Resources (“Executive Management”), may assist and support the Committee in determining
compensation for the named executive officers. Members of Executive Management may provide
recommendations and information to the Committee to consider, analyze and review in connection with any
compensation proposal for the named executive officers. Members of Executive Management do not have any
final decision-making authority in regards to named executive officer compensation. The Committee reviews any
recommendations and information provided by Executive Management, and approves the final executive
compensation package for the named executive officers. During fiscal year 2008, members of Executive
Management provided the Committee with recommendations and proposals relating to each element of executive
compensation described below. These recommendations and proposals were based on competitive factors,
individual compensation histories, prior equity awards, and anticipated and projected operating results of the
Company for fiscal year 2008.

Use of Independent Third Party Consultants

The Committee may use consultants to assist in the evaluation of compensation for the named executive officers.
The Committee has the sole authority to retain and terminate any compensation consultant engaged to perform
these services. The Committee also has authority to obtain advice and assistance from internal or external legal,
accounting, or other advisers.

The Committee has retained Mercer (US) Inc.(“Mercer”) to provide information, analyses, and advice regarding
executive and director compensation, as described below. The Company also retains Mercer and its related
entities to perform other services. Mercer was selected as the consultant to the Committee in 2007 after an
interview process with several compensation consulting firms. The Committee evaluates Mercer on an annual
basis and has found its performance to be satisfactory. In 2008, the Compensation Committee requested Mercer
to advise it on a variety of compensation-related issues, including:

•

Compensation strategy development

Officer pay levels

Officer short-term incentive pay

Officer long-term incentive pay

Peer group review and refinement

Board compensation

The Committee agenda and annual calendar

In the course of conducting its activities, Mercer attended meetings of the Committee and presented its findings
and recommendations for discussion. During the course of the year, Mercer met with management to obtain and
validate data, and review materials.

In addition to providing consulting advice to the Committee, Mercer has been engaged by the Company to
perform a review of its employment practices under applicable state law and international compensation
consulting. Mercer received approximately $417,000 from the Company in connection with the performance of
these services during fiscal year 2008. In addition, Mercer is a subsidiary of Marsh & McLennan Companies, Inc.
(“Marsh”), a diversified conglomerate of insurance, security and human resources consulting services. The
Company uses the brokerage services of Marsh for the casualty insurance portion of the Company’s risk
management and insurance program. During fiscal year 2008, Marsh received approximately $168,000 for the
brokerage services provided to the Company. The Committee has reviewed Mercer’s employment practice
review services as well as the Marsh brokerage services and has determined that these services do not constitute a

conflict of interest or prevent Mercer from being objective in its work for the Committee. Other than providing
the services described above and the work performed in its role as consultant to the Committee, Mercer provided
no other services to either the Company or the Committee in fiscal year 2008.

Benchmarking

The Committee does not apply a formulaic approach to setting of individual elements of the named executive
officers’ compensation or their total compensation amounts. However, the Committee reviews, at least annually,
market compensation levels to determine whether the total compensation opportunity for the Company’s named
executive officers is appropriate in light of the compensation arrangements at the Company’s peers and makes
adjustments when the Committee determines they are needed. For 2008, this assessment included evaluation of
base salary, annual incentives and long-term incentives against a peer group of high-technology companies
provided by Mercer, which is described below. The Committee also considers business performance as compared
to its peers as part of its assessment of appropriate payout levels for performance. Because total compensation for
the named executive officers is determined in part based on market compensation levels, differences in
compensation among the chief executive officer and other named executive officers are due in part to differences
of compensation among similarly situated executive officers in the market.

The basis for selection of companies in the peer group included the following:

•

Status—Peer companies should be publicly traded on a U.S. stock exchange.

Revenue—Peer companies should be similarly sized to EFI for appropriate compensation
benchmarking.

Industry—Peer companies should be within similar industry sectors that have similar business
characteristics.

Competitive Landscape—Peer companies should be competing with EFI for executive talent.

For 2008, the peer group included:

Palm Inc.
3Com Corp.

Arris Group Inc.
Zebra Technologies
Hutchinson Technology, Inc.
QLogic Corp.
Zoran Corp.
Ariba Inc.

ADC Telecommunications Inc.
Moduslink Global Solutions
(formerly CMGI, Inc.)
Komag Inc.
Savvis Inc.
Avocent Corp.
Emulex Corp.
MRV Communications, Inc.
Openwave Systems Inc.

Executive Compensation Elements

For the fiscal year 2008, the principal elements or components of compensation for the named executive officers
were: (1) base salary; (2) performance-based incentive compensation; and (3) long-term equity compensation.

During 2008, for each element of executive compensation, the Committee considered a number of factors, such
as the executive’s employment experience, performance of the executive during the period, performance of the
Company during the period, achievement of Company performance targets set by the Board of Directors,
demonstrated leadership, potential to enhance long-term stockholder value, information relating to marketplace
competitiveness, current compensation levels, compensation history and prior equity awards. Since there are no
static or fixed policies regarding the amount and allocation for each component or element of executive
compensation, the determination and composition of total compensation is up to the discretion of the Committee
and is decided on a year by year basis.

A
K
-
0
1
m
r
o
F

The measurement or assessment of performance of the individual named executive officer, and his demonstrated
leadership and potential to enhance long-term stockholder value during 2008 was qualitative in nature, and was
determined using the judgment and discretion of the Committee. During 2008, the measurement or assessment of
the Company’s performance and the achievement of Company performance targets were primarily quantitative
with respect to the elements of incentive based compensation, and are addressed in greater detail below. The
factors relating to current compensation levels, compensation history and prior equity awards for each of the
executive officers were primarily used to assist in evaluating the appropriate levels of compensation for each
element of compensation for the 2008 fiscal year, and any potential increase or decrease from the prior year
levels.

The disparity in the levels of compensation for each element of compensation between the named executive
officers reflects consideration of the executive’s roles and responsibilities, the executive’s tenure with the
Company as well as the other factors mentioned above. The Committee evaluates these factors in establishing
compensation for each named executive officer, individually.

The Committee considers the value of the entire compensation package when establishing the appropriate levels
of compensation for each element. As such, amounts paid under one element of compensation may affect the
amounts paid under another element of compensation. For example, the Company may reserve a significant
portion of executive compensation for performance-based incentive programs, while allocating a comparatively
lesser amount for fixed compensation elements. As noted above, however, the Company does not apply a
formulaic approach to the allocation of specific elements within the total compensation package available to the
named executive officers. The Committee exercises its judgment and discretion when approving the amount and
allocation of each element of the total compensation package.

Base Salary

The Company provides the named executive officers with a base salary, which is comprised of a fixed amount of
annual cash compensation. Base salary is a principal and common component of compensation for all employees
of the Company. In setting base salaries for the named executive officers, the Committee considers a number of
factors, including the executive’s prior salary history, current compensation levels, individual performance, and
marketplace competitiveness for executive officers.

The Committee considers changes to base salaries for the named executive officers on an annual basis. There are
no formulaic increases, and for 2008, Mr. Ritchie did not receive an increase in base salary as the Committee
determined that with the increase provided to Mr. Ritchie in 2007 his base salary remained competitive. The
Committee approved increases in the base salaries effective April 1, 2008 for Mr. Gecht and Mr. Rosenzweig to
$620,000 and $530,000, respectively. The adjustments reflected percentage increases of 8.8% and 3.9%,
respectively and were approved following the Committee’s consultation with Mercer and its assessment of each
of Messrs. Gecht’s and Rosenzweig’s target total cash compensation for fiscal year 2008 relative to the
Company’s peer group and in light of the absence of any adjustments to Mr. Gecht’s or Mr. Rosenzweig’s base
salaries in 2005, 2006 or 2007.

On April 3, 2009, the Committee approved and accepted the voluntary reduction of the annual base salaries of
each of Messrs. Gecht, Rosenzweig and Ritchie by fifteen percent (15%) for Messrs. Gecht and Rosenzweig, to
equal $527,000 and $450,500, respectively, and by ten percent (10%) for Mr. Ritchie, to equal $279,000. This
reduction was volunteered by the named executive officers in support of the Company’s cost reduction activities
due to deteriorating global economic and industry conditions provided that such voluntarily reduced base annual
salaries would not be used in the calculation of any other benefits set forth in each named executive officer’s
current employment agreement. The temporarily reduced base annual salaries of each of the named executive
officers became effective as of April 16, 2009.

Performance-Based Incentive Compensation

Executive Incentive Plan

The executive incentive plan allows named executive officers to receive bonus compensation in the event certain
specified corporate and individual performance measures are achieved. For fiscal year 2008, bonuses awarded
under the executive bonus plan were weighted 80% based on Company performance and 20% based on
individual performance. The total potential bonus for each of the named executive officers is calculated as a
percentage of his base salary.

The Committee sets the percentage of base salary for each named executive officer’s target bonus based on its
review of total compensation and the bonus programs at the Company’s peer group and its assessment of the past
and expected future contributions of the named executive officers. The target bonus opportunity for the 2008
fiscal year for Mr. Gecht, Mr. Ritchie and Mr. Rosenzweig was 105%, 55% and 95% of annual base salary,
respectively. In addition to correlating with similar positions at the Company’s peer group, the differentiation in
percentages between Mr. Gecht, Mr. Ritchie and Mr. Rosenzweig correlate with their level of responsibility
within the Company.

The Company performance measures for determining bonuses for 2008 were equally weighted between the
Company’s total annual revenue and operating income and were approved by the Committee based on
information provided by Executive Management. For fiscal year 2008, the Company’s total annual revenue and
operating income targets were $630,000,000 and $74,762,000, respectively. In determining the bonus
compensation awarded to each executive officer, the executive incentive plan requires threshold performance of
both 94% of the total annual revenue target and 79% of the operating income target. If the Company does not
satisfy the thresholds, the named executive officers are not eligible to receive any bonus compensation with
respect to Company performance. In the event threshold performance levels are exceeded, the named executive
officers earn proportional awards linked to the Company’s performance. The proportional awards for the cash
portion of bonus compensation tied to Company performance were subject to formulaic accelerators and
decelerators, so that overachievement and underachievement of the target levels have a multiplier affect. For
example, if the applicable target levels are exceeded, the executive officers earn bonuses that exceed their target
cash bonuses by a factor of the percentage exceeding the target levels, up to a maximum of 200%. On the other
hand, if the applicable target levels are not met, the actual cash bonuses are reduced by a factor of the percentage
difference between the target levels and the actual levels of total annual revenue and net income.

For fiscal year 2008, the Committee assessed the performance of the Company by comparing the actual total
fiscal year revenue and operating income results to the pre-determined target levels for each objective. During
the first quarter of 2009, the Committee determined that the total fiscal year revenue and net income targets
established by the Board of Directors were achieved at 88.9% and 55.6% of the respective total annual revenue
and operating income target amounts, such that the executive incentive plan payout with respect to Company
performance was at 0%.

Twenty percent of the target bonus under the executive incentive plan was payable based on the individual
performance of the named executive officers. For 2008, the Committee set individual performance objectives for
each named executive officer in line with the named executive officer’s roles and responsibilities for the
Company. For Mr. Gecht, these objectives were subjective and related to the vision and strategy of the Company,
the Company’s innovation and product leadership and Mr. Gecht’s leadership of the Company. Mr. Ritchie’s
individual objectives were also subjective and related to financial performance and management, personnel

A
K
-
0
1
m
r
o
F

development and compliance efforts. Mr. Rosenzweig’s individual objectives for 2008 related to product
innovation, strategy execution, mentoring executives and evaluation of staffing. While the achievement of many
of the individual performance objectives is subjective, each of the individual performance objectives were set by
the Committee in a manner to require significant effort on the part of the named executive officers to achieve,
and these objectives have not been set to be achieved with average performance. For fiscal year 2008, the
Committee determined that no bonuses would currently be payable as a result of the Company’s performance.
The Committee also determined that given current economic conditions it did not currently intend to pay bonuses
to the named executive officers based on the attainment of individual performance goals. The Committee noted,
however, that it retained discretion to pay bonuses or adjust salaries at any time in the future based on, without
limitation, individual performance or improved financial performance of the Company.

Incentive amounts to be paid under the performance-based programs may be adjusted by the Committee to
account for unusual events such as extraordinary transactions, asset dispositions and purchases, and mergers and
acquisitions if, and to the extent, the Committee does not consider the effect of such events indicative of
Company performance. Payments under the executive incentive plan are contingent upon continued employment,
and are at the discretion of the Committee. The Committee believes that the payment of bonuses under the
executive incentive plan provides incentives necessary to retain the named executive officers and reward them
for short-term Company performance.

Long-Term Performance-Based Equity Incentive Program

As indicated by its performance-based approach to compensation, the Company believes that equity ownership in
the Company is important to closely align the interests of executive officers with those of Company stockholders,
and thereby promote incentives to achieve sustained, long-term revenue growth and profitability. To meet these
objectives, the Company’s named executive officers have received restricted stock that vests based upon
achieving the Company performance criteria described above.

Restricted stock that has been granted under this component is subject to forfeiture restrictions which lapse if the
Company meets pre-determined, threshold performance levels and specific performance target levels each tied to
total annual revenue and operating income, as determined by the Board each year, as mentioned above. If the
Company does not achieve the financial targets specified by the Board, then the restrictions on vesting will
remain in place until the threshold financial targets or plans have been met. To the extent vesting has been
deferred because the Company had not yet met the financial targets for such fiscal year, upon the achievement of
such financial targets or if the named executive officers continue to provide services to the Company for three
years after the final date the restricted stock awards would have vested had the targets been met, the shares will
vest.

Please see the Option Exercises and Stock Vested in 2008 Table on page 17 of this Form 10-K/A for restricted
stock awards held by the named executive officers that vested during 2008.

Discretionary Long-Term Equity Incentive Awards

The Company’s executive officers may receive an annual award of stock options, restricted stock and/or
restricted stock units, at the discretion of the Committee. Guidelines for the number of stock options, restricted
stock and/or restricted stock unit awards granted to each executive officer are determined and approved by the
Committee, based upon several factors, including the individual’s performance, the Company’s performance and
the value of the stock option at the time of grant. As a result, additional grants other than the annual award may
be made in the event there are significant changes in the performance of the Company or the individual executive
during the evaluation period. The Committee considers the same factors as described throughout this discussion
when evaluating these long-term discretionary equity awards.

Restricted stock units granted to executive officers typically have a three-year annual vesting schedule, and stock
options granted to executive officers typically have a three and a half year vesting schedule in order to provide an
incentive for continued employment and generally expire seven years from the date of the grant. This term
provides a reasonable time frame in which to align the executive officer with the price appreciation of the
Company’s stock, while managing the potential dilution to stockholders more effectively, as compared to a more
typical ten-year option term. The Company sets the exercise price of options granted under the Company’s stock
plans equal to 100% of the fair market value of the underlying stock on the date of grant.

On February 15, 2008, the Committee approved awards of 116,677, 66,677 and 50,000 restricted stock units to
Mr. Gecht, Mr. Rosenzweig and Mr. Ritchie, respectively, and options to purchase 350,000, 200,000 and 100,000
shares of the Company’s common stock, respectively, each with a grant date of February 26, 2008. The restricted
stock units vest annually over three years and the stock options vest with respect to 33% of the shares subject to
the options on February 26, 2009 and then in equal monthly installments over the subsequent two and a half
years. The Committee determined the size of these equity grants, as well as the differentiation in size of grant,
after reviewing the roles and responsibilities of each named executive officer, each executive’s total
compensation, compensation information from the Company’s peer group and recommendations from Executive
Management.

On January 29, 2009, the Committee approved an award to Mr. Ritchie of 20,000 restricted stock units with a
grant date of January 30, 2009. The restricted stock units vest in equal installments on each of the first two
anniversaries of the date of grant. The Committee granted the restricted stock units to Mr. Ritchie in recognition
of his efforts and performance in the completion of a material real estate transaction. The Committee determined
the number of Mr. Ritchie’s restricted stock unit based on its subjective evaluation of the benefit to the Company
of the real estate transaction and Mr. Ritchie’s efforts in completing the transaction.

Severance Arrangements

Each named executive officer has entered into a three (3) year employment agreement with the Company, subject
to automatic one-year renewals if not terminated by either party, which provide for severance benefits under
certain events, such as a termination without cause or the executive resigning for good reason. The employment
agreements are designed to promote stability and continuity of senior management.

A
K
-
0
1
m
r
o
F

In addition, the Company recognizes that the possibility of a change of control may exist from time to time, and
that this possibility, and the uncertainty and questions it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company and its stockholders.
Accordingly, the Board has determined that appropriate steps should be taken to encourage the continued
attention and dedication of members of the Company’s management to their assigned duties without the
distraction that may arise from the possibility of a change of control. As a result, the employment agreements
include provisions relating to the payment of severance benefits under certain circumstances in the event of a
change of control. Under the change of control provisions, in order for severance benefits to be triggered, an
executive must be involuntarily terminated without cause or the executive must leave for good reason within 24
months after a change of control. The Committee approved the employment agreements during 2006, which
contain the severance benefits described below. The Committee considered information provided by Executive
Management in concert with data from Mercer, and used its discretion when approving each element and amount
of the potential severance benefits payable to the named executive officers.

Information regarding applicable payments under such agreements for the named executive officers is provided
under the headings “Employment Agreements” and “Potential Payments upon Termination or Change of
Control” on page 18 of this Form 10-K/A.

Other Elements of Compensation and Perquisites

There are no other material elements of compensation that the named executive officers receive. The named
executive officers may not defer any component of any annual incentive bonus earned at this time and do not
participate in another deferred compensation plan. Likewise, the Company does not maintain any defined benefit
pension plans for its employees. However, named executive officers are eligible to participate in the Company’s
401(k) savings plan on the same terms and conditions as other Company employees. In addition, the named
executive officers are eligible to participate in the Company’s group health and welfare plans on the same terms
and conditions as other Company employees.

The Company also provides the Chief Executive Officer and the President with an automobile allowance during
the term of their employment with the Company, as the Company in its sole discretion may from time to time
make available.

Tax Considerations

Deductibility of Executive Compensation

As part of its performance-based compensation program, the Company aims to compensate the named executive
officers in a manner that is tax effective for the Company. In practice, some of the annual compensation
delivered by the Company is tax-qualified under Section 162(m) of the Internal Revenue Code. Section 162(m)
of the Internal Revenue Code generally disallows a tax deduction to public corporations for compensation over
$1 million paid for any fiscal year to each of the corporation’s named executive officers, other than the chief
financial officer, as of the end of the fiscal year. However, Section 162(m) exempts qualifying performance-
based compensation from the deduction limit if certain requirements are met. Although the Committee considers
the impact of Section 162(m) when developing and implementing executive compensation programs, the
Committee believes that it is important and in the best interests of stockholders to preserve flexibility in
designing compensation programs. Accordingly, the Committee has not adopted a policy that all compensation
must qualify as deductible under Section 162(m). The Committee has from time to time approved, and may in the
future approve, compensation arrangements for certain officers that are not fully deductible. Further, because of
ambiguities and uncertainties as to the application and interpretation of Section 162(m) and the regulations issued
thereunder, no assurance can be given, notwithstanding the Committee’s efforts, that compensation intended to
satisfy the requirements for deductibility under Section 162(m) does in fact do so.

Compensation Recovery Policy

Compensation Committee Interlocks and Insider Participation

COMPENSATION COMMITTEE REPORT

The information contained in this report shall not be deemed to be “soliciting material” or “filed” or
incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended, except to the extent that the Company specifically requests that it be treated
as soliciting material or incorporates it by reference into a document filed under the Securities Act of 1933, as
amended, or Securities Exchange Act of 1934, as amended.

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and
Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and
discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and
Analysis be included in this Form 10-K/A.

COMPENSATION COMMITTEE

Gill Cogan

Dan Maydan

A
K
-
0
1
m
r
o
F

Compensation of Executive Officers

Summary Compensation Table for 2008

The following table includes information concerning the compensation for the fiscal years ended December 31,
2008, December 31, 2007 and December 31, 2006 of our executive officers (the “named executive officers”).

Name and principal position
(a)

Year
(b)

Salary
(c)(1)

Bonus
(d)(1)(4)

Stock
awards
(e)(2)

Option
awards
(f)(2)(3)

Guy Gecht, Chief Executive Officer . . . . . 2008 $607,500 $ — $1,481,993 $1,366,071
668,863
1,247,393

889,943
1,291,485

570,000
570,000

478,800
256,979

2007
2006

Fred Rosenzweig, President

. . . . . . . . . . . 2008
2007
2006

John Ritchie, Chief Financial Officer . . . . 2008
2007
2006

525,000
510,000
510,000

310,000
310,000
258,750

—
385,560
206,936

—
143,220
62,126

949,580
686,850
983,746

528,084
197,319
277,935

845,214
516,983
984,327

305,321
28,052
76,787

Change in
pension value
and
nonqualified
deferred
compensation
earnings
(h)

Non-equity
incentive
plan
compensation
(g)(1)(4)

All other
compensation
(i)(1)(5)

$—
—
—

—
—

$—
—
—

—
—

$ 8,300
21,914
8,131

9,400
9,300
8,138

4,600
17,223
4,400

Total
(j)

3,463,864
2,629,520
3,373,988

2,329,194
2,108,693
2,693,147

1,148,005
695,814
679,998

(1) All cash compensation earned by each executive officer for fiscal years 2008, 2007 and 2006 is found in either the

Salary, Bonus or All other compensation columns of this table. There were no deferred salaries or other compensation in
2008, 2007, or 2006.

(2) Amounts included in the “Stock Awards” and “Option Awards” columns represent the compensation cost, except

disregarding estimated forfeitures, that was recognized by us in the year ended December 31, 2008, 2007 and 2006 on
all previously granted awards and options in accordance with Statement of Financial Accounting Standards (“SFAS”)
No. 123R, “Share-based Payments,” or “SFAS 123R.” See Note 12 of the consolidated financial statements in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008 regarding assumptions underlying
valuation of equity awards.
In August 2008, certain options held by Messrs. Gecht, Rosenzweig and Ritchie were repriced in connection with the
settlement of the derivative litigation, as set forth in the table below:

(3)

Name

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . .

Fred Rosenzweig . . . . . . . . . . . . . . . . . . . .

John Ritchie . . . . . . . . . . . . . . . . . . . . . . .

Grant Date
(corrected as
required)

Number of Options
Subject to
Amendment

Original Exercise
Price Per Share

Amended Exercise
Price Per Share

06/08/99
02/12/01
09/05/03
06/08/99
02/12/01
09/05/03
08/21/03

110,000
16,250
61,250
110,000
7,000
52,500
20,500

$33.81
13.75
19.45
33.81
13.75
19.45
19.45

$48.38
22.06
23.89
48.38
22.06
23.89
19.98

Name

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . .

Grant Date
(corrected as
required)

Number of
Surrendered
Options

Hull-White
Value

06/08/99
03/15/06
09/05/03
02/12/01
04/25/02
04/11/05

06/08/99
03/15/06
03/13/01
09/05/03
02/12/01
04/25/02
04/25/02

55,228
108,333
61,250
8,159
30,250
19,028

58,502
83,333
10,000
52,500
3,723
31,467
16,667

$0.23
3.04
1.92
2.40
4.04
4.03

$0.23
3.04
2.27
1.92
2.40
4.04
4.04

Total Value of
Surrendered
Options

$ 12,702.44
329,332.32
117,600.00
19,581.60
122,210.00
76,682.84

$678,109.20

$ 13,455.46
253,332.32
22,700.00
100,800.00
8,935.20
127,126.68
67,334.68

$593,684.34

John Ritchie . . . . . . . . . . . . . . . . . . . . . . . . .

08/21/03

7,128

$2.44

$ 17,392.32

(4) As a result of Company and individual performance during fiscal year 2008 and current economic

conditions, no bonuses were payable to the named executive officers under the executive incentive plan.
Amounts listed for fiscal year 2007 represent cash bonuses accrued in 2007 under the executive incentive
plan and paid in February 2008 under bonus targets of 100% of base salary for Mr. Gecht, 90% of base
salary for Mr. Rosenzweig, and 55% of base salary for Mr. Ritchie. Amounts listed for fiscal year 2006
represent cash bonuses accrued in 2006 under the executive incentive plan and paid in March 2007 under
bonus targets of 100% of base salary for Mr. Gecht, 90% of base salary for Mr. Rosenzweig and 40% of
base salary for Mr. Ritchie. Each executive received performance-based restricted common stock awards in
lieu of portions of the cash component of their respective bonuses for the 2006 plan year. The compensation
cost recognized by the Company for these awards are included in the Stock Awards Column.
For fiscal year 2008, includes auto allowances and 401(k) employer matching contributions, as indicated
below. Includes $4,800 and $3,500 in auto allowance and 401(k) employer matching contributions,
respectively, for Mr. Gecht. Includes $4,600 in 401(k) employer matching contributions for Mr. Ritchie.
Includes $4,800 and $4,600 in auto allowance and 401(k) employer matching contributions, respectively, for
Mr. Rosenzweig. For fiscal years 2007 and 2006, includes auto allowances, 401(k) employer matching
contributions, and employee stock plan matching bonuses.

(5)

A
K
-
0
1
m
r
o
F

2008 Grants of Plan-Based Awards Table

The following options, restricted stock awards, restricted stock units, and non-equity incentive plan-based awards were
granted during the fiscal year ended December 31, 2008 to each of our named executive officers.

Name
(a)

Grant Type
(b)

Grant Date
(c)

Board of
Directors or
Compensation
Committee
Approval
Date (d)

Guy Gecht

. . . . . . . .

Restricted Stock Units 2/26/2008
Stock Options(3) 2/26/2008

2/15/2008
2/15/2008

Fred Rosenzweig . . .

John Ritchie . . . . . . .

Annual Target Bonus
Repriced Stock Options(5)
6/8/1999
Repriced Stock Options(5) 2/12/2001
9/5/2003
Repriced Stock Options(5)
Restricted Stock Units 2/26/2008
Stock Options(3) 2/26/2008

Annual Target Bonus

8/28/2008
8/28/2008
8/28/2008
2/15/2008
2/15/2008

Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1)

Target ($)
(f)

Maximum ($)
(g)

$651,000

$1,302,000

$503,500

$1,007,000

$170,500

$ 341,000

All Other
Stock
Awards:
Number of
Shares of
Stock
or Units (#)
(h)(2)

All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
(i)

116,667

350,000

110,000
16,250
61,250

200,000

110,000
7,000
52,500

100,000

66,667

50,000

Exercise
or Base
Price of
Option
Awards
($/Sh)
(j)

Grant
Date Fair
Value of
Stock and
Option
Awards
($) (k)(4)

$1,852,672
$15.88 $1,952,956

$48.38 $
$22.06 $
$23.89 $

0
0
0
$1,058,672
$15.88 $1,115,541

$48.38 $
$22.06 $
$23.89 $

0
0
0
$ 794,000
$15.88 $ 557,771

Repriced Stock Options(5) 8/21/2003

8/28/2008

20,500

$19.98 $

(2)

(1) Amounts reported as “Target” and “Maximum” in the “Estimated Future Payouts Under Non-Equity Incentive Plan
Awards” columns represent amounts payable under the Company’s annual target bonus program. The maximum
payable under the annual target bonus program is 200% of a participant’s target bonus. No bonuses were payable for
fiscal year 2008.
Each restricted stock unit award vests with respect to one-third of the shares on the first, second, and third anniversaries
of the date of grant.
Each option vests with respect to 33% of the shares subject thereto on the first anniversary of the date of grant and
thereafter with respect to an additional 2.23% of the shares each month, with full vesting in 42 months from the date of
grant.

(3)

(4) Amounts included in the “Grant Date Fair Value of Stock or Option Awards” column represent the grant date fair value

(5)

of the applicable award calculated in accordance with SFAS 123R or, with respect to repriced stock options, the
incremental fair value of the applicable award as of the date of modification. See Note 12 of the consolidated financial
statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008 regarding
assumptions underlying valuation of equity awards.
Each repriced stock option is fully vested. Each stock option was repriced in connection with the previously completed
review of historical stock option granting practices by the special committee of the Company’s Board of Directors and the
settlement of related shareholder derivative litigation, each named executive officer entered into an Amendment of Stock
Option Agreement and Stock Option Repayment Agreement with the Company as further described on page 11 of this Form
10-K/A under the heading “Long-Term Performance-Based Equity Incentive Program”. The original exercise price of each
repriced stock option is set forth in the footnote 3 of the Summary Compensation Table on page 14 of this Form 10-K/A.

Outstanding Equity Awards at 2008 Fiscal Year-End Table

The following table includes certain information with respect to the value of all unexercised options previously
awarded to the named executive officers at the fiscal year end December 31, 2008.

Option Awards

Stock Awards

Number of
shares or
units of stock
that have not
vested
(#) (g)

Market
value of
shares or
units of
stock that
have not
vested
(#) (h)

Option
exercise price
per share
($) (e)

Option
expiration
date
(f)

$17.00

4/11/2012

Equity
incentive plan
awards:
number of
unearned
shares, units or
other rights
that have not
vested
(#) (i)

Equity
incentive plan
awards:
market or
payout value
of unearned
shares, units or
other rights
that have not
vested
(j)

36,110

$345,212

Number of
securities
underlying
unexercised
options
exercisable
(#) (c)

Number of
securities
underlying
unexercised
options
unexercisable
(#) (d)

Vesting
Commence-
ment Date
(b)

Name
(a)

Guy Gecht

. . . . . . . . 4/11/2005(1) 197,639
3/15/2006(2)
2/26/2008(3)
2/26/2008(4)

Fred Rosenzweig . . . 4/25/2002(1)

51,866
4/11/2005(1) 166,667
3/15/2006(2)
2/26/2008(3)
2/26/2008(4)

350,000

$15.88

2/26/2015

116,667

$1,115,337

$17.50
$17.00

4/24/2012
4/25/2012

200,000

$15.88

2/26/2015

66,667

$ 637,337

John Ritchie . . . . . . . 8/21/2003(1)
4/18/2005(1)
3/15/2006(2)
2/26/2008(3)
2/26/2008(4)

13,372
18,125

$19.98
$16.42

8/21/2010
4/18/2012

100,000

$15.88

2/26/2015

50,000

$ 478,000

27,776

$265,539

8,000

$ 76,480

(1) Option vests with respect to 25% of the shares subject thereto on the vesting commencement date and then
at a rate of 2.5% of the total number of shares subject to the option per month over the next thirty months.
(2) Restricted stock award vests at the rate of 25% on each anniversary of the vesting commencement date if

specified performance targets are achieved.

(3) Option vests with respect to 33% of the shares subject thereto on the first anniversary of the date of grant

and thereafter with respect to an additional 2.23% of the shares each month, with full vesting in 42 months
from the date of grant.

(4) Restricted stock unit award vests with respect to one-third of the shares on the first, second, and third

anniversary of the date of grant.

Option Exercises and Stock Vested in 2008 Table

The following table includes certain information with respect to the options exercised and restricted stock awards
vested by the named executive officers during the fiscal year ended December 31, 2008.

Name
(a)

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Ritchie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Option Awards

Stock Awards

Number of
shares acquired
on exercise (#)
(b)

Value realized
on exercise ($)
(c)

Number of
shares acquired
on vesting (#)
(d)

Value realized
on vesting ($)
(e)

39,722
30,555
9,000

$519,597
399,684
117,565

A
K
-
0
1
m
r
o
F

Pension Benefits

The Company does not provide Pension Benefits to its employees.

Nonqualified Deferred Compensation

The Company historically has not provided nonqualified deferred compensation to its employees.

Employment Agreements

We have entered into an employment agreement with each of our named executive officers. The employment
agreements, each effective as of August 1, 2006, have an initial term of three years and will automatically renew
for additional one year periods unless terminated by either party upon sixty days written notice prior to the
expiration of the agreement. Each named executive officer’s employment with the Company is at-will and either
party may terminate the employment relationship at any time for any reason, with or without cause and with or
without notice.

Each employment agreement provides, among other things, that:

•

the named executive officer shall be eligible for bonuses under the annual management bonus plan as
approved by the Committee;

the named executive officer is eligible to receive stock options under the Company’s stock option
program and additional equity awards based on the named executive officer’s performance;

the named executive officer is subject to a non-solicitation covenant during his employment and for
one year following termination of employment.

Potential Payments upon Termination or Change of Control

The section below describes the potential payments that may be made to our named executive officers upon
termination or a change of control, pursuant to their employment agreements or otherwise.

Name

Lump sum
severance
payment
($)(1)

Outplacement
benefits
($)(2)

Guy Gecht . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . .
John Ritchie . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,891,000
1,298,500
635,500

$35,000
35,000
35,000

Continued
health care
coverage
benefits
($)(3)

$24,103
24,411
24,411

Value of
accelerated
vesting of
stock options
and awards
($)(4)

Total
($)

$379,217
216,697
162,520

$2,329,319
1,574,607
857,431

(1)

The amount shown is the lump sum severance payment that consists of 24 months of base salary for
Mr. Gecht and 18 months for each of Messrs. Ritchie and Rosenzweig, plus an amount equal to the bonus
that the named executive officer would have earned in 2008. If the named executive officer is terminated
during the year, the bonus is prorated for the portion of the year that the named executive officer was with
the Company.

coverage under Part 6 of Title I of ERISA (COBRA) for up to 18 months.

(4) Messrs. Gecht, Ritchie and Rosenzweig are entitled to the accelerated vesting of options and restricted stock

Name

Guy Gecht
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Ritchie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Stock
Options
(#)

146,766
83,866
41,933

Restricted Stock
awards/units (#)

39,667
22,667
17,000

Name

Lump sum
severance
payment
($)(1)

Outplacement
benefits
($)(2)

Continued
health care
coverage
benefits
($)(3)

Value of
accelerated
vesting of stock
options and
awards ($)(4)

Total
($)

Guy Gecht
. . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . .
John Ritchie . . . . . . . . . . . . . . . . . . . . . . . . .

$2,511,000
1,563,500
790,500

$35,000
35,000
35,000

$24,103
24,411
24,411

$1,460,548
902,875
554,480

$4,030,651
2,525,786
1,404,391

(1)

The amount shown is the lump sum severance payment that consists of 36 months of base salary for
Mr. Gecht and 24 months for each of Messrs. Ritchie and Rosenzweig, plus an amount equal to the bonus
that the named executive officer would have earned in 2008.

coverage under Part 6 of Title I of ERISA (COBRA) for up to 18 months.

A
K
-
0
1
m
r
o
F

Name

Stock Options
(#)

Restricted Stock
awards/units
(#)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Guy Gecht
Fred Rosenzweig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Ritchie . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

350,000
200,000
100,000

152,777
94,443
58,000

If any of the severance payments set forth in the tables above constitutes a deferral of compensation subject to
tax under Section 409A of the Internal Revenue Code, the Company will pay the named executive officer a
gross-up payment such that after the payment of all taxes on the gross-up payment, the named executive officer
retains an amount equal to the taxes imposed under Section 409A, including interest and penalties, imposed on
the severance pay.

COMPENSATION OF DIRECTORS

The table below summarizes the compensation paid by the Company to non-employee directors for the fiscal
year ended December 31, 2008.

Name(1)
(a)

Fees earned or
paid in cash
($)
(b)

Stock
awards
($)(2)(3)
(c)

Option
awards
($)(2)(3)
(d)

Non-equity
incentive plan
compensation
($)
(e)

Gill Cogan . . . . . . . . . . .

$102,750

$82,223 $ 69,660

Thomas Georgens . . . . .

43,500

—

49,611

James S. Greene . . . . . . .

115,500

82,223

162,308

Richard A. Kashnow . . .

59,750

—

49,611

Dan Maydan . . . . . . . . .

115,000

82,223

90,961

Christopher Paisley . . . .

33,000

30,693

—

Change in
pension value
and
nonqualified
deferred
compensation
earnings ($)
(f)

All other
compensation
($)
(g)

—

Total ($)
(h)

$254,633

93,111

360,031

109,361

288,184

63,693

(1) Guy Gecht, the Company’s Chief Executive Officer, and Fred Rosenzweig, the Company’s President, are

not included in this table as they are employees of the Company and thus receive no compensation for their
services as directors. The compensation received by Messrs. Gecht and Rosenzweig as employees of the
Company is shown in the Summary Compensation Table for 2008 on page 14 of this Form 10-K/A.
Mr. Paisley did not stand for reelection to the Board of Directors at our 2008 Annual Meeting held on
May 20, 2008 and is no longer a director of the Company. Thomas Georgens and Richard Kashnow were
appointed to the Board in April 2008.

(2) At December 31, 2008, the aggregate number of stock awards outstanding for each independent director was
as follows: Gill Cogan 9,000, including 3,000 restricted stock awards and 6,000 restricted stock units;
Thomas Georgens 0; James S. Greene 9,000, including 3,000 restricted stock awards and 6,000 restricted
stock units; Richard Kashnow 0; Dan Maydan 9,000, including 3,000 restricted stock awards and 6,000
restricted stock unit; Christopher Paisley: 0. At December 31, 2008, the aggregate number of option awards
outstanding for each independent director was as follows: Gill Cogan 151,668, of which 121,043 were
vested and 30,625 were unvested; Thomas Georgens 40,000, all unvested; James S. Greene 81,623, of

which 25,534 were unvested and 56,089 were vested; Richard Kashnow 40,000, all unvested; Dan Maydan
25,000, all unvested; Christopher Paisley 0. During 2008, 15,000 shares of common stock subject to option
awards granted to Mr. Cogan in 1998 expired.

In addition, the following option awards to non-employee directors were repriced in connection with the
settlement of the derivative litigation.

Repriced option awards

Name

Dan Maydan . . . . . . . . . . . . . . . .

Gill Cogan . . . . . . . . . . . . . . . . .

James S. Greene . . . . . . . . . . . . .

Grant Date
(corrected as
required)

Number of
Options Subject
to Amendment

Original Exercise
Price Per Share

Amended Exercise
Price Per Share

06/08/99
11/25/03
10/05/98
06/08/99
02/12/01
11/25/03
11/25/03

18,000
2,934
15,000
18,000
20,000
22,000
22,000

$33.81
26.59
13.75
33.81
13.75
26.59
26.59

$48.38
26.85
20.19
48.38
22.06
26.85
26.85

Surrendered option awards

Name

Dan Maydan* . . . . . . . . . . . . . . . . . . . .

Grant Date
(corrected as
required)

Number of
Surrendered
Options

06/08/99
03/15/06
11/25/03
07/22/05

18,000
25,000
2,934
25,000

James S. Greene . . . . . . . . . . . . . . . . . .

03/15/06
11/25/03

22,512
9,533

Hull-White
Value

Total Value of
Surrendered Options

$ 0.23
3.04
1.63
3.41

Total

$ 3.04
$ 1.63

Total

4,140.00
76,000.00
4,782.42
85,250.00

$170,172.42

$ 68,436.48
15,538.79

$ 83,975.27

* Mr. Maydan also repaid to the Company an amount of $19,456.

(3) Amounts included in the “Stock Awards” and “Option Awards” columns represent the compensation cost,
except disregarding estimated forfeitures, that was recognized by us in the year ended December 31, 2008
on all previously-granted awards and options in accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 123R, “Share-based Payments,” or “SFAS 123R.” See Note 12 of the consolidated
financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008
regarding assumptions underlying valuation of equity awards.

The compensation of the non-employee directors serving on the Board is determined by the Compensation
Committee. Non-employee members of the Board currently receive cash and equity compensation in connection
with their service to the Company and do not receive any additional compensation for service on the Board.

A
K
-
0
1
m
r
o
F

Cash Compensation. Non-employee members of the Board of Directors receive cash compensation in the form
of the annual retainers and attendance fees per meeting of the Board of Directors and its committees as set forth
below:

Annual Retainer for Each Non-Employee Director

. . . . . . . . . . . . . . . . .

$25,000

Audit Committee Chairperson Retainer

. . . . . . . . . . . . . . . . . . . . . . . . . .

$10,000

Audit Committee Member Retainer

. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 5,000

Compensation Committee Chairperson Retainer

. . . . . . . . . . . . . . . . . . .

$ 5,000

Compensation Committee Member Retainer

. . . . . . . . . . . . . . . . . . . . . .

$ 2,500

Nominating and Governance Chairperson Retainer . . . . . . . . . . . . . . . . .

$ 5,000

Nominating and Governance Member Retainer . . . . . . . . . . . . . . . . . . . .

$ 2,500

Special Committee Member Compensation . . . . . . . . . . . . . . . . . . . . . . .

$50,000

Board Meeting Attendance (in person) . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 2,000

Board Meeting Attendance (by telephone) . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,000

Audit Committee Meeting Attendance (in person) . . . . . . . . . . . . . . . . . .

Audit Committee Meeting Attendance (by telephone) . . . . . . . . . . . . . . .

Compensation Committee Attendance . . . . . . . . . . . . . . . . . . . . . . . . . . .

Compensation Committee Attendance (by telephone) . . . . . . . . . . . . . . .

Nominating and Governance Committee Attendance . . . . . . . . . . . . . . . .

Nominating and Governance Committee Attendance (by telephone) . . . .

$ 4,000
$ 2,000

$ 2,000
$ 1,000

$ 1,000
500
$

$ 2,000
$ 1,000

$ 1,000
500
$

(Chairperson)
(other directors)

The Company also reimburses each non-employee member of the Board for out-of-pocket expenses incurred in
connection with attendance at meetings.

Equity Compensation. During 2008, each of Messrs. Cogan, Greene and Maydan was granted (i) an option to
purchase 25,000 shares of common stock at an exercise price of $16.32 per share, vesting with respect to 25% of
the shares on August 15, 2009, and thereafter with respect to an additional 2.5% of the shares each month, with
full vesting in 42 months and (ii) 6,000 restricted stock units, vesting with respect to one-fourth of the shares on
the first, second, third and fourth anniversaries of the date of grant. Each restricted stock unit represents a
contingent right to receive one share of Company’s common stock. Each of Messrs. Georgens and Kashnow, the
newly elected directors of the Company, was granted an option to purchase 40,000 shares of common stock at an
exercise price of $16.32 per share, vesting with respect to 25% of the shares on August 15, 2009, and thereafter
with respect to an additional 2.5% of the shares each month, with full vesting in 42 months.

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

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information as of December 31, 2008 concerning securities that are authorized
under equity compensation plans.

Plan category

Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights

Weighted-average
exercise price of
outstanding options,
warrants and rights

Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column 1)

Equity compensation plans approved by

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,927,271(1)

Equity compensation plans not approved by

stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,927,271

$21.67

—

$21.67

903,760(2)

—

903,760

(1)

(2)

Includes options outstanding as of December 31, 2008, representing 78,840 shares with an average exercise
price of $156.39 per share, that were assumed in connection with business combinations.
Includes 566,130 shares available under our 2007 Equity Incentive Award Plan and 337,630 shares
available under our 2000 Employee Stock Purchase Plan

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Except as otherwise indicated below, the following table sets forth certain information regarding beneficial
ownership of Common Stock of the Company as of March 31, 2009 by: (1) each of our current directors; (2) each
of the named executive officers listed in the Summary Compensation Table for 2008 on page 14 of this
Form 10-K/A (collectively, our “named executive officers”); (3) each person known to us to be the beneficial
owner of more than 5% of the outstanding shares of our Common Stock based upon Schedules 13G or 13D filed
with the SEC; and (4) all of our directors and executive officers as a group. As of March 31, 2009, there were
49,217,723 shares of our Common Stock outstanding.

Shares of Common Stock subject to options or other rights that are currently exercisable or exercisable within 60
days of March 31, 2009 are considered outstanding and beneficially owned by the person holding the options or
other rights for the purpose of computing the percentage ownership of that person but are not treated as
outstanding for the purpose of computing the percentage ownership of any other person except with respect to the
percentage ownership of all directors and executive officers as a group. Unless otherwise indicated below, the
address of each beneficial owner listed below is c/o Electronics For Imaging, Inc., 303 Velocity Way, Foster
City, California 94404.

Name of beneficial owner(1)

Common stock

Number of
shares

Percentage
owned

Ameriprise Financial, Inc.(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,962,138

16.18%

145 Ameriprise Financial Center
Minneapolis, MN 55474

Blum Capital Partners(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

5,008,213

10.18%

A
K
-
0
1
m
r
o
F

909 Montgomery Street
Suite 400
San Francisco, California 94133

Name of beneficial owner(1)

Common stock

Number of
shares

Percentage
owned

Barclays Global Investors, NA(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,851,406

5.79%

500 Howard Street
San Francisco, California 94105

Third Avenue Management LLC(5)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4,543,699

9.23%

622 Third Avenue
32nd Floor
New York, New York 10017

Wellington Management Company, LLP(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,603,962

3.26%

75 State Street
Boston, Massachusetts 02109

Guy Gecht(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fred Rosenzweig(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gill Cogan(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
John Ritchie(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
James S. Greene(11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dan Maydan(12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thomas Georgens(13)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Richard A. Kashnow(14)
. . . . . . . . . . . . . . . .
All current executive officers and directors as a group (8 persons)(15)

553,627
428,185
146,168
112,849
68,386
12,060
0
0
1,321,275

1.12%
*
*
*
*
*

—
—
2.68%

*
(1)

Less than one percent.
This table is based upon information supplied by officers, directors and principal stockholders and
Schedules 13D and 13G and Forms 3 and 4 filed with the SEC as of March 31, 2009. Unless otherwise
indicated in the footnotes to this table and subject to community property laws where applicable, each of the
stockholders named in this table has sole voting and investment power with respect to the shares indicated
as beneficially owned. Unless otherwise indicated, applicable percentages are based on 49,217,723 shares
outstanding on March 31, 2009 adjusted as required by rules promulgated by the SEC.

(2) Beneficial ownership information is based on information contained in Schedule 13G filed with the SEC on
February 5, 2009 by Ameriprise Financial, Inc. (“AFI”), RiverSource Investments, LLC (“RvS”) and
Seligman Communications and Information Fund, Inc. (“C&I Fund”). The Schedule 13G indicates that each
of AFI and RvS has shared voting power as to 396,508 shares and shared dispositive power as to 7,962,138
shares. C&I Fund has sole voting and dispositive powers as to 4,680,200 shares. RvS, in its capacity as
investment adviser, may be deemed to beneficially own the shares of Common Stock reported by C&I Fund.
AFI, as the parent company of RvS, may be deemed to beneficially own the shares reported by RvS. AFI,
together with RvS and C&I Fund beneficially own 7,962,138 shares.

(3) Beneficial ownership information is based on information contained in Form 4 filed with the SEC on

October 22, 2008 by Blum Capital Partners, L.P., Richard C. Blum & Associates, Inc., Blum Strategic GP
III, L.L.C., Blum Strategic GP III, L.P., Blum Strategic GP IV, L.L.C. and Saddlepoint Partners GP, L.L.C.
Together, the entities beneficially own 5,008,213 shares of Common Stock. The entities share voting and
investment power as to all 5,008,213 shares of Common Stock.

(4) Beneficial ownership information is based on information contained in Schedule 13G filed with the SEC on

February 5, 2009 by Barclays Global Investors, NA. Barclays Global Investors, NA and its affiliate,
Barclays Global Fund Advisors, together beneficially own 2,851,406 shares and together have sole voting
power and dispositive power as to 2,647,644 and 2,851,406 shares, respectively.

(5) Beneficial ownership information is based on information contained in Schedule 13G filed with the SEC on
February 13, 2009 by Third Avenue Management LLC. Third Avenue Management LLC has sole voting
power as to 4,341,724 shares of Common Stock and sole dispositive power as to 4,543,699 shares of
Common Stock.

(7)

(8)

(6) Beneficial ownership information is based on information contained in Schedule 13G/A filed with the SEC
on February 17, 2009 by Wellington Management Company, LLP (“WMC”). WMC, in its capacity as
investment adviser, may be deemed to beneficially own 1,603,962 shares of Common Stock which are held
of record by clients of WMC. WMC has shared voting power as to 1,158,962 shares of Common Stock and
shared dispositive power as to 1,603,962 shares of Common Stock.
Includes 336,589 shares of Common Stock issuable upon the exercise of options granted to Mr. Gecht under
the 2004 and 2007 equity incentive plans which are exercisable within 60 days of March 31, 2009.
Includes 297,933 shares of Common Stock issuable upon exercise of options granted to Mr. Rosenzweig
under the 1999, 2004 and 2007 equity incentive plans which are exercisable within 60 days of March 31,
2009.
Includes 124,168 shares of Common Stock issuable upon exercise of options granted to Mr. Cogan under
the 1990, 1999 and 2004 equity incentive plans which are exercisable within 60 days of March 31, 2009, of
which 18,000 will expire on May 20, 2009.
Includes 71,197 shares of Common Stock issuable upon the exercise of options granted to Mr. Ritchie under
the 1999, 2004 and 2007 equity incentive plans which are exercisable within 60 days of March 31, 2009.
Includes 78,668 shares of Common Stock issuable upon exercise of options granted to Mr. Greene under the
1999 and 2004 equity incentive plans which are exercisable within 60 days of March 31, 2009.

(11)

(10)

(9)

(12) No options granted to Dr. Maydan under the 2007 equity incentive plan are exercisable within 60 days of

March 31, 2009.

(13) No options granted to Mr. Georgens under the 2007 equity incentive plan are exercisable within 60 days of

March 31, 2009.

(14) No options granted to Mr. Kashnow under the 2007 equity incentive plan are exercisable within 60 days of

(15)

March 31, 2009.
Includes an aggregate of 886,273 shares of Common Stock issuable upon the exercise of options granted to
executive officers and directors collectively under the 1990, 1999, 2004 and 2007 equity incentive plans
which are exercisable within 60 days of March 31, 2009.

Item 13: Certain Relationships and Related Transactions, and Director Independence

Indemnification of Officers and Directors

As permitted under Delaware law, pursuant to our bylaws, charter and indemnification agreements that we have
entered into with our current and former executive officers, directors and general counsel, we are required,
subject to certain limited qualifications, to indemnify our executive officers, directors and general counsel for
certain events or occurrences while the executive officer, director or general counsel is, or was serving, at our
request in such capacity. The indemnification period covers all pertinent events and occurrences during the
executive officer’s, director’s or general counsel’s lifetime. Our indemnification obligations generally extend to
the derivative shareholder suits and NASDAQ Global Select Market delisting proceedings of the Company. In
this regard, we have received, and expect to receive, requests for indemnification by certain current and former
executive officers and directors in connection with the review of our historical stock option granting practices
and the related restatement, related government inquiries and derivative shareholder suits. The maximum
potential amount of future payments we may be obligated to make under these indemnification agreements is
unlimited; however, we have director and officer insurance coverage that limits our exposure and may enable us
to recover a portion of any future amounts paid.

Related Transactions

The Audit Committee of our Board has the responsibility of reviewing and approving in advance any proposed
related party transactions as defined under Item 404 of Regulation S-K during 2008.

The Company has previously entered into employment agreements with its named executive officers. These
agreements are described above under “Employment Agreements.”

There were no other related transactions as defined under Item 404 of Regulation S-K during 2008.

A
K
-
0
1
m
r
o
F

Director Independence

The Board of Directors has determined that each of the non-employee directors is independent and that each
director who serves on each of its committees is independent, as the term is defined by rules of the NASDAQ
Global Select Market and the SEC.

Item 14: Principal Accountant Fees and Services

During the fiscal years ended December 31, 2008 and 2007, PricewaterhouseCoopers LLP provided various
audit, audit related and non-audit services to the Company as follows (in thousands):

Audit fees(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit related fees(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax fees(c)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other fees(d)

$1,461
66
—
33

$4,417
482
—

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,560

$4,901

2008

2007

(a) Audit fees consist of fees billed for professional services rendered for the audit of the Company’s

(b) Audit related fees consist of fees billed for assurance and related services that are reasonably related to the

performance of the audit or review of the Company’s consolidated financial statements and are not reported
under “Audit Fees.” These services include accounting consultations in connection with acquisitions, attest
services that are not required by statute or regulation, and consultations concerning financial accounting and
reporting standards.
Tax fees consist of fees billed for professional services for tax compliance, tax advice and tax planning.
These services include assistance regarding federal, state and international compliance and mergers and
acquisitions.

(c)

(d) All other fees consist of services provided in connection with other services.

The Audit Committee is responsible for pre-approving audit and non-audit services provided to the Company by
the independent auditors (or subsequently approving non-audit services in those circumstances where a
subsequent approval is necessary and permissible); in this regard, the Audit Committee has the sole authority to
approve the employment of the independent auditors, all audit engagement fees and terms and all non-audit
engagements, as may be permissible, with the independent auditors.

The Audit Committee of the Board of Directors has considered whether provision of the services described in
sections (b), (c) and (d) above is compatible with maintaining the independent auditors’ independence and has
determined that such services have not adversely affected PricewaterhouseCoopers LLP’s independence. All of
the services of each of (b), (c) and (d) were pre-approved by the Audit Committee.

PART IV

Item 15: Exhibits, Financial Statement Schedules and Reports on Form 10-K

(a) Documents Filed as Part of this Report

(1)

Index to Financial Statements

The Financial Statements were included in our Annual Report on Form 10-K for the year ended December 31,
2008, as originally filed.

(2) Financial Statement Schedule

Schedule II—Valuation and Qualifying Accounts, was included in our Annual Report on Form 10-K for the year
ended December 31, 2008, as originally filed. All other schedules are omitted because of the absence of
conditions under which they were required or because the necessary information was provided in the
consolidated financial statements or notes thereto.