10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003

OR

[    ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-18805

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, including zip code)

(650) 357 - 3500
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X]   No [  ]

The number of shares of Common Stock outstanding as of November 4 was 53,973,462.

An Exhibit Index can be found on Page 38.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION
	ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
		Condensed Consolidated Balance Sheets
		Condensed Consolidated Statements of Income
		Condensed Consolidated Statements of Cash Flows
		Notes to Condensed Consolidated Financial Statements
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4: CONTROLS AND PROCEDURES
PART II OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT INDEX
EXHIBIT 10.1
EXHIBIT 10.2
EXHIBIT 10.3
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

ELECTRONICS FOR IMAGING, INC.

INDEX

			Page No.
PART I – Financial Information
Item 1.	Condensed Consolidated Financial Statements
		Condensed Consolidated Balance Sheets September 30, 2003 and December 31, 2002		3
		Condensed Consolidated Statements of Income Three and Nine Months Ended September 30, 2003 and 2002		4
		Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, 2003 and 2002		5
		Notes to Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk			35
Item 4.	Controls and Procedures			36
PART II – Other Information
Item 1.	Legal Proceedings			36
Item 2.	Changes in Securities and Use of Proceeds			36
Item 3.	Defaults Upon Senior Securities			36
Item 4.	Submission of Matters to a Vote of Security Holders			36
Item 5.	Other Information			36
Item 6.	Exhibits and Reports on Form 8-K			37
Signatures				37

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PART I FINANCIAL INFORMATION
     ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Electronics for Imaging, Inc.
Condensed Consolidated Balance Sheets

		September 30,			December 31,
(in thousands, except per share amounts)		2003			2002
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	172,812		$	153,905
Short-term investments			479,602			344,465
Restricted cash and short-term investments			69,486			—
Accounts receivable, net			42,848			42,267
Inventories			4,232			4,125
Other current assets			28,540			18,053
Total current assets			797,520			562,815
Property and equipment, net			49,829			53,187
Restricted investments			43,080			43,080
Goodwill			49,140			43,552
Intangible assets, net			18,853			17,386
Other assets			13,034			7,086
	Total assets	$	971,456		$	727,106
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		$	17,440		$	13,067
Accrued and other liabilities			45,729			47,353
Income taxes payable			35,512			32,341
Total current liabilities			98,681			92,761
Long-term obligations			240,249			278
Commitments and contingencies (Note 10)
	Total liabilities		338,930			93,039
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; 53,311 and 54,569 shares issued and outstanding, respectively			609			590
Additional paid-in capital			303,507			272,456
Treasury stock, at cost, 7,613 and 4,478 shares, respectively			(158,150	)		(99,959	)
Accumulated other comprehensive income			1,238			1,991
Retained earnings			485,322			458,989
Total stockholders’ equity			632,526			634,067
	Total liabilities and stockholders’ equity	$	971,456		$	727,106

See accompanying notes to condensed consolidated financial statements.

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Electronics for Imaging, Inc.
Condensed Consolidated Statements of Income
(unaudited)

			Three Months Ended						Nine Months Ended
			September 30,						September 30,
(In thousands, except per share amounts)			2003			2002			2003			2002
Revenue			$	97,330		$	92,652		$	271,734		$	259,476
	Cost of revenue			37,652			43,444			109,139			126,871
Gross profit				59,678			49,208			162,595			132,605
	Operating expenses:
		Research and development		23,725			22,998			69,807			68,422
		Sales and marketing		14,746			12,833			44,659			37,583
		General and administrative		5,518			5,424			15,510			16,358
		Amortization of identified intangibles and other acquisition-related expense		1,330			1,144			5,208			3,246
	Total operating expenses			45,319			42,399			135,184			125,609
Income from operations				14,359			6,809			27,411			6,996
	Interest and other income, net			1,854			2,760			7,094			8,984
	Litigation settlement income (charges)			1,568			(4,409	)		1,568			(4,409	)
Income before income taxes				17,781			5,160			36,073			11,571
	Provision for income taxes			(4,801	)		(1,548	)		(9,740	)		(3,471	)
Net income			$	12,980		$	3,612		$	26,333		$	8,100
Net income per basic common share			$	0.25		$	0.07		$	0.49		$	0.15
Shares used in per-share calculation				52,467			54,308			53,734			54,173
Net income per diluted common share			$	0.24		$	0.07		$	0.48		$	0.15
Shares used in per-share calculation				53,594			54,659			54,569			54,794

See accompanying notes to condensed consolidated financial statements.

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Electronics for Imaging, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)

				Nine Months Ended
				September 30,
(In thousands)				2003			2002
Cash flows from operating activities:
Net income				$	26,333		$	8,100
Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			11,911			11,270
		In-process research and development expense			1,220			—
		Bad debt reserve			(170	)		(124	)
		Deferred income taxes			(3,157	)		376
	Changes in operating assets and liabilities:
		Accounts receivable			681			(4,650	)
		Inventories			37			4,271
		Receivable from subcontract manufacturers			(3,134	)		(1,140	)
		Other current assets			(6,274	)		1,431
		Accounts payable and accrued liabilities			656			(837	)
		Income taxes payable			3,195			3,991
			Net cash provided by operating activities		31,298			22,688
Cash flows from investing activities:
	Purchases and sales/maturities of short-term investments, net				(136,654	)		(25,051	)
	Net purchases of restricted cash and investments				(167	)		(2,945	)
	Reclassification of cash & short-term investments to restricted cash & short-term investments				(69,320	)		—
	Investment in property and equipment, net				(3,889	)		(7,874	)
	Acquisition of subsidiary				(8,936	)		(1,870	)
	Change in other assets				189			433
			Net cash used for investing activities		(218,777	)		(37,307	)
Cash flows from financing activities:
	Repayment of long-term obligation				(29	)		(24	)
	Issuance of long-term debt, net				233,500			—
	Issuance of common stock				31,071			7,037
	Repurchase of common stock				(58,191	)		—
			Net cash provided by financing activities		206,351			7,013
Effect of exchange rate changes on cash and cash equivalents					35			—
Increase (decrease) in cash and cash equivalents					18,907			(7,606	)
Cash and cash equivalents at beginning of year					153,905			190,816
Cash and cash equivalents at end of period				$	172,812		$	183,210

See accompanying notes to condensed consolidated financial statements.

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Electronics for Imaging, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)

1. Basis of Presentation

The unaudited interim condensed consolidated financial statements of Electronics for Imaging, Inc., a Delaware corporation (the “Company”), as of and for the interim periods ended September 30, 2003, have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2002, contained in the Company’s Annual Report to Stockholders on Form 10-K, as amended. In the opinion of management, the unaudited interim condensed consolidated financial statements of the Company include all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Company and the results of its operations and cash flows, in accordance with accounting principles generally accepted in the United States of America. The interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements referred to above and the notes thereto. Certain prior year balances have been reclassified to conform with the current year presentation.

The preparation of the interim condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the interim condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates.

The interim results of the Company are subject to fluctuation. As a result, the Company believes the results of operations for the interim periods ended September 30, 2003 are not necessarily indicative of the results to be expected for any other interim period or the full year.

2. Recent Accounting Pronouncements

SFAS 148

In December 2002, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 148, Accounting for Stock-Based Compensation – Transition and Disclosure. This Statement amends SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The disclosure provisions of this Standard are effective for fiscal years and interim periods beginning after December 15, 2002.

		Three months ended						Nine months ended
		September 30,						September 30,
(in thousands, except per share amounts)		2003			2002			2003			2002
Net income	As reported	$	12,980		$	3,612		$	26,333		$	8,100
Total stock-based employee compensation expense determined under the fair value based method for all awards, net of related tax effects			(3,431	)		(6,661	)		(10,941	)		(20,555	)
Net income (loss)	Pro forma	$	9,549		$	(3,049	)	$	15,392		$	(12,455	)
Earnings (loss) per basic common share	As reported	$	0.25		$	0.07		$	0.49		$	0.15
	Pro forma	$	0.18		$	(0.06	)	$	0.29		$	(0.23	)
Earnings (loss) per diluted common share	As reported	$	0.24		$	0.07		$	0.48		$	0.15
	Pro forma	$	0.18		$	(0.06	)	$	0.28		$	(0.23	)

SFAS 149

In December 2002, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities. This Statement amends SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,

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to provide clarification on the financial accounting and reporting of derivative instruments and hedging activities. We do not anticipate that SFAS No. 149 will have a material impact on our financial condition or results of operation.

SFAS 150

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes standards on the classification and measurement of financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, or otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The implementation of the pronouncement has not had a material impact on our financial condition or results of operations.

FASB Interpretation No. 46

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities (“FIN 46”). The primary objectives of FIN 46 are to provide guidance on the identification of entities for which control is achieved through means other than through voting rights (“variable interest entities” or “VIEs”) and how to determine when and which business enterprise should consolidate the VIE (the “primary beneficiary”). This new model for consolidation applies to an entity in which either (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is sufficient to finance that entity’s activities without receiving additional subordinated financial support from other parties. In addition, FIN 46 requires that both the primary beneficiary and all other enterprises with a significant variable interest in a VIE make additional disclosures regarding the nature, purpose, size and activities of the VIE and the enterprise’s maximum exposure to loss as a result of its involvement with the VIE. The interpretation is effective immediately for any VIEs created after January 31, 2003 and for VIEs in which an enterprise obtains an interest after that date. The interpretation is effective for interim or annual periods commencing after December 15, 2003 for pre-existing VIEs. Based upon our analysis, the implementation of the interpretation will not have any material impact on our financial statements.

3. Accounting for Derivative Instruments and Hedging

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133, and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment of SFAS No. 133 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. The Company had no such derivative or hedging instruments outstanding as of September 30, 2003.

4. Comprehensive Income

The Company’s comprehensive income, which encompasses net income, market valuation adjustments and currency translation adjustments, is as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands, unaudited)	2003			2002			2003			2002
Net income	$	12,980		$	3,612		$	26,333		$	8,100
Market valuation of investments, net of tax		(512	)		304			(1,517	)		617
Currency translation adjustment		(228	)		(4	)		764			16
Comprehensive Income	$	12,240		$	3,912		$	25,580		$	8,733

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5. Earnings Per Share

The following table represents unaudited disclosures of basic and diluted earnings per share for the periods presented below:

		Three Months Ended				Nine Months Ended
		September 30,				September 30,
(in thousands, except per share amounts, unaudited)		2003		2002		2003		2002
Net income available to common shareholders		$	12,980	$	3,612	$	26,333	$	8,100
Shares
	Basic shares		52,467		54,308		53,734		54,173
	Effect of dilutive securities		1,127		351		835		621
Diluted Shares			53,594		54,659		54,569		54,794
Earnings per common share
	Basic EPS	$	0.25	$	0.07	$	0.49	$	0.15
	Diluted EPS	$	0.24	$	0.07	$	0.48	$	0.15

Anti-dilutive weighted average shares of common stock of 4,881,344 and 5,093,311 as of September 30, 2003 and 2002, respectively, have been excluded from the effect of dilutive securities because the options’ exercise prices were greater than the average market price of the common stock for the periods then ended. The convertible debentures issued June 4, 2003 are considered contingently convertible securities and were excluded from the earnings per share calculations for all periods presented. The debentures represent 9,084,192 potential shares of common stock issuable upon conversion.

6.

Acquisitions

In January 2003 the Company acquired Best GmbH, a German-based software company that provides proofing products for worldwide print and publishing markets for approximately $9.3 million in cash. The acquisition was accounted for as a purchase business combination and accordingly, the purchase price has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their fair values on the date of acquisition. The following table summarizes the allocation of the purchase price to assets acquired and liabilities assumed:

(in thousands)
Fair value of assets acquired and liabilities assumed	$	36
In-process research and development		1,220
Developed technology		2,080
Trademarks and trade names, license and distributor relationships		2,860
Deferred tax liability related to assets acquired		(1,952	)
Goodwill		5,034
	$	9,278

The intangible assets consist of developed technology, trademarks and trade names, licenses and distributor relationships. The amount allocated to the purchased in-process research and development (“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 this 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 at rates ranging from 25% to 30%. The excess of the purchase price over tangible and identifiable intangible assets acquired and liabilities assumed has been recorded as goodwill. The intangible assets are being amortized over estimated useful lives of 5 to 10 years.

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On October 21, 2003, the shareholders of Printcafe approved the merger between Printcafe and the Company. The purchase price was approximately $33.5 million, paid in cash and common stock of the Company. Approximately 12.8 million shares of Printcafe common stock were issued and outstanding on that date. Approximately 8.8 million shares of Printcafe common stock will be redeemed for $2.60 per share, and approximately 1.9 million shares will be exchanged for approximately 0.2 million shares of the Company common stock. The remaining 2.1 million shares of stock, acquired by the Company for $5.5 million earlier in 2003, will be cancelled. We anticipate that the valuation of the acquired technology of Printcafe will be completed during the fourth quarter of 2003. See Note 10, Commitments and Contingencies, for a discussion of the lawsuits filed by Creo, Inc. related to the merger.

On November 3, 2003, the Company acquired T/R Systems, Inc. for approximately $20.7 million in cash. We anticipate that the valuation of the acquired technology of T/R Systems, Inc. will be completed during the fourth quarter of 2003.

7. Balance Sheet Components

(in thousands)		September 30, 2003			December 31, 2002
Accounts receivable:
	Accounts receivable	$	44,074		$	43,505
	Less reserves and allowances		(1,226	)		(1,238	)
		$	42,848		$	42,267
Inventories:
	Raw materials	$	2,348		$	2,295
	Finished goods		1,884			1,830
		$	4,232		$	4,125
Other current assets:
	Deferred income taxes, current portion	$	14,301		$	13,260
	Receivable from subcontract manufacturers		4,693			1,559
	Investment in Printcafe		5,737			—
	Other		3,809			3,234
		$	28,540		$	18,053
Property and equipment:
	Land, building and improvements	$	41,457		$	41,349
	Equipment and purchased software		43,503			41,121
	Furniture and leasehold improvements		12,922			12,544
			97,882			95,014
	Less accumulated depreciation and amortization		(48,053	)		(41,827	)
		$	49,829		$	53,187
Other assets:
	Debt issuance costs, net	$	6,046		$	—
	Deferred income taxes, non-current, net of valuation		6,297			6,238
	Other		691			848
		$	13,034		$	7,086

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		September 30, 2003		December 31, 2002
Accrued and other liabilities:
	Accrued compensation and benefits	$	13,522	$	15,585
	Deferred revenue		2,412		3,501
	Accrued warranty provision		2,079		2,515
	Accrued royalty payments		7,435		7,933
	Other accrued liabilities		20,281		17,819
		$	45,729	$	47,353

8. Goodwill and Other Identified Intangible Assets

	September 30, 2003					December 31, 2002
	Gross					Gross
	Carrying		Accumulated			Carrying		Accumulated
(in thousands)	Amount		Amortization			Amount		Amortization
Goodwill	$	59,419	$	(10,279	)	$	53,831	$	(10,279	)
Acquired technology	$	23,109	$	(8,926	)	$	20,800	$	(6,253	)
Trademarks and trade names		6,266		(4,287	)		6,000		(3,161	)
Other intangible assets		2,909		(218	)		—		—
Amortizable intangible assets	$	32,284	$	(13,431	)	$	26,800	$	(9,414	)

As required under SFAS 142, the Company has performed an annual review and has determined that no impairments need to be recorded against the goodwill account at this time.

Aggregate amortization expense was $1.3 million and $4.0 million for the three and nine months ended September 30, 2003, respectively and $1.1 million and $3.2 million for the three and nine months ended September 30, 2002, respectively. As of September 30, 2003 future estimated amortization expense related to intangible assets is estimated to be:

	(in thousands)
2003	$	1,296
2004		4,841
2005		3,809
2006		3,809
2007 and thereafter		4,049

9. Long-term Debt

On June 4, 2003 the Company issued $240.0 million convertible senior debentures due in 2023 (the “Debentures”). The Debentures were offered only to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A. The Debentures are unsecured senior obligations of the Company, paying interest semi-annually in arrears at an annual rate of 1.50%. Additional interest at a rate of 0.35% per annum will be paid under certain conditions, beginning in the sixth year after issuance. The Debentures are convertible before maturity into shares of EFI common stock at a conversion price of approximately $26.42 per share of common stock but only upon the stock trading at or above $31.70 per share for 20 consecutive trading days during the last 30 consecutive trading days of the preceding fiscal quarter, or upon the occurrence of certain other specified events. The Company may redeem the Debentures at its option, on or after

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June 1, 2008 at a redemption price equal to par plus accrued interest, if any. In addition, holders of the Debentures may require the Company to repurchase all or some of the Debentures on June 1, 2008, 2013 and 2018 at a price equal to 100% of the principal amount plus accrued interest, including contingent interest, if any. The Company will pay the repurchase price for any debentures repurchased on June 1, 2008 in cash, but may choose to pay the repurchase price in cash, common stock of the Company, or any combination thereof in 2013 and 2018. Additionally, a holder may require us to repurchase all or a portion of that holder’s debentures if a fundamental change, as defined in the indenture, occurs prior to June 1, 2008 at 100% of their principal amount, plus any accrued and unpaid interest, including contingent interest, if any. We may choose to pay the repurchase price in cash, common stock of the Company, or any combination thereof. A registration statement on Form S-3 was filed with respect to the resale of the Debentures and the shares of common stock issuable upon conversion of the Debentures with the Securities and Exchange Commission on August 29, 2003. As of the filing of this document the registration statement was not deemed effective.

(in thousands)	September 30, 2003		December 31, 2002
1.50% convertible debentures due June 1, 2023, with interest payable semi-annually on June 1 and December 1	$	240,000	$	—
Bonds due to City of Foster City, variable interest rate, interest and principal payments due semi-annually		249		278
	$	240,249	$	278

Maturities of long-term debt are approximately $58 thousand per year for the next five years.

10. Commitments and Contingencies

Off-Balance Sheet Financing - Synthetic Lease Arrangement

In 1997, the Company purchased a 35-acre parcel of land in Foster City, California and began development of a corporate campus. In July 1999 the Company completed construction of a ten-story, 295,000 square foot building funded under a lease agreement entered into in 1997 (the “1997 Lease”) and began making rent payments. Also in conjunction with the 1997 Lease, the Company has entered into a separate ground lease with the lessor of the building for approximately 35 years at a nominal rate. If the Company does not renew the 1997 Lease, the ground lease converts to a market rate.

In December 1999 the Company entered into a second lease agreement (the “1999 Lease” and together with the 1997 Lease, the “Leases”) to lease additional buildings, to be constructed adjacent to the first building discussed above. A 165,000 square foot building was completed in December 2001 at a cost of approximately $43.1 million. Rent obligations for the 1999 Lease began in January 2002 and bear a direct relationship to the funded amount, as described below. In connection with the 1999 Lease, the Company entered into a separate ground lease of the related parcels of land in Foster City with the lessor of the buildings at a nominal rate and for a term of 30 years. If the Company does not renew the 1999 Lease, the ground lease converts to a market rate.

Each Lease has an initial term of seven years, with an option to renew subject to certain conditions. The Company may, at its option, purchase the facilities during or at the end of the term of the lease for the amount expended by the respective lessor to construct the facilities ($56.8 million for the 1997 Lease and $43.1 million for the 1999 Lease). The Company has guaranteed to the lessors a residual value associated with the buildings equal to approximately 82% of their funding. The Company may be liable to the lessor for the amount of the residual guarantee if it either fails to renew the lease or does not purchase or locate a purchaser for the leased building at the end of the lease term. During the term of each of the Leases, the Company must meet certain financial covenant requirements related to cash to debt, fixed charge coverage ratio, leverage ratio and consolidated tangible net worth as defined by the underlying agreements. If the Company maintains pledged collateral, then a limited subset of these covenants must be met. The tangible net worth financial covenant requires that the Company maintain a minimum tangible net worth as of the end of each quarter. There are other covenants regarding mergers, liens and judgments, and lines of business. The Company was in compliance with all of the

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covenants, either directly, or through the existence of the pledged collateral as of September 30, 2003. The pledged collateral under the 1997 Lease ($69.5 million at September 30, 2003) has been classified as restricted cash and short-term investments. The Company is liable to the lessor for the full purchase amount of the buildings if it defaults on its covenants ($56.8 million for the 1997 Lease and $43.1 million for the 1999 Lease). The Company could be required to purchase the building if (1) it defaulted on any indebtedness in excess of $10.0 million, (2) it failed to appeal a judgment in excess of $10.0 million, or (3) a creditor has commenced enforcement proceedings on an order for payment of money in excess of $10.0 million. In addition, the Company has pledged certain marketable securities, which are in proportion to the amount drawn under each lease. The funds pledged under the 1999 Lease (approximately $43.1 million at September 30, 2003) are in a LIBOR-based interest bearing account and are restricted as to withdrawal at all times. The Company is considered a Tranche A lender of $35.3 million of the $43.1 million, while the lessor is considered a Tranche B lender for the remaining $7.8 million.

The Company is treated as the owner of these buildings for federal income tax purposes.

Under each Lease, the Company has first loss guarantees to the lessors, which make the Company liable for declines in the value of the buildings up to approximately 82% of the cost of the construction of the buildings. The first loss guarantee requires payment upon the end of the lease. The Company has assessed its exposure in relation to the first loss guarantees for both of the buildings under the Leases and has determined there is no deficiency to the guaranteed value at the current time. The Company will continue to assess the real estate market conditions to evaluate whether it needs to record any reserves under its first loss guarantee obligations.

Purchase Commitments

The Company sub-contracts with other companies to manufacture most of its products. During the normal course of business the sub-contractors procure components based upon orders placed by the Company. If the Company cancels all or part of the order, it may still be liable to the sub-contractors for the cost of the components purchased by the sub-contractors for placement in its products. The Company periodically reviews the potential liability and the adequacy of the related reserve. The Company’s consolidated financial position and results of operations could be negatively impacted if the Company were required to compensate the sub-contract manufacturers in an amount significantly in excess of the accrued liability.

Product Warranties

The Company adopted FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantors, Including Direct Guarantees of Indebtedness of Others (“FIN 45”) during the fourth quarter of 2002. FIN 45 requires specific disclosures concerning the Company’s obligations under certain guarantees. The Company’s products are generally accompanied by a 12-month warranty, which covers both parts and labor. The warranty provision is based upon historical experience, by product, configuration and geographic region.

Changes in the warranty reserves for the three months ended September 30, 2003 were as follows:

(in thousands)
Balance at December 31, 2002	$	2,515
Provision for warranty during the period		486
Settlements		(486	)
Balance at March 31, 2003	$	2,515
Provision for warranty during the period		589
Settlements		(615	)
Balance at June 30, 2003	$	2,489
Provision for warranty during the period		182
Settlements		(592	)
Balance at September 30, 2003	$	2,079

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Legal Proceedings

Over the past five years, Mr. Jan R. Coyle, an individual living in Nevada, has repeatedly demanded that the Company buy technology allegedly invented by his company, Kolbet Labs. In December 2001, Mr. Coyle threatened to sue the Company and its customers for allegedly infringing his soon to be issued patent and for misappropriating his alleged trade secrets. The Company believes Mr. Coyle’s claims are baseless and without merit. On December 11, 2001, the Company filed a declaratory relief action in the United States District Court for the Northern District of California, asking the Court to declare that the Company and its customers have not breached any nondisclosure agreement with Mr. Coyle or Kolbet Labs, nor has it infringed any alleged patent claims or misappropriated any alleged trade secrets belonging to Mr. Coyle or Kolbet Labs through its sale of Fiery, Splash or EDOX print controllers. The Company also sought an injunction enjoining both Mr. Coyle and Kolbet Labs from bringing or threatening to bring a lawsuit against the Company, its suppliers, vendors, customers and users of its products for breach of contract and misappropriation of trade secrets. On March 26, 2002, the Northern District of California court dismissed the Company’s complaint for lack of jurisdiction over Mr. Coyle. The Company appealed the Court’s dismissal and on August 18, 2003, the Court of Appeals for the Federal Circuit reversed the dismissal of the Company’s case and remanded it to the Northern District of California. The Company is now vigorously pursuing its case against Mr. Coyle and Kolbet Labs.

On February 26, 2002, Coyle’s company, J & L Electronics, filed a complaint against the Company in the United States District Court for the District of Nevada alleging patent infringement, breach of non-disclosure agreements, misappropriation of trade secrets, violations of federal antitrust law, and related causes of action. The Company denies all of these allegations and management believes this lawsuit is without merit and intends to defend the action vigorously. On March 28, 2003, the Federal District Judge dismissed the complaint for lack of jurisdiction over the Company. J & L Electronics appealed the dismissal to the Court of Appeals for the Federal Circuit. The Company is opposing the appeal. However, due to the inherent uncertainties of litigation, the Company cannot predict the ultimate outcome of the appeal. Any unfavorable outcome of the litigation could have an adverse impact on the Company’s financial condition and results of operations.

On September 16, 2002, ArrivalStar, Inc., a Delaware corporation, filed a complaint in the U.S. District Court for the Northern District of Georgia against fourteen defendants, including EFI, alleging that each of the defendants has infringed one or more claims of six identified patents owned by the plaintiff. The named defendants are Delta Air Lines, Inc.; Sabre, Inc.; Travelocity.com, L.L.P.; The City of Atlanta; Worldspan, L.L.P.; Flytecomm Corporation; Centerpost Corporation; Continental Airlines, Inc.; Japan Air Lines Company, Ltd.; American Airlines, Inc.; Roadway Express, Inc.; EFI; American Express Company; and SITA Information Networking Computing USA, Inc. The complaint alleges that the defendants infringe the claims by providing vehicle location communication services, arrival notifications and other related services. EFI believes that the plaintiff’s claims are without merit and intends to vigorously defend itself in this litigation. However, due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the litigation. Any unfavorable outcome of the litigation could have an adverse impact on the Company’s financial condition and results of operations.

On February 13, 2003, the Company entered into agreements with Printcafe to facilitate a merger between the two companies. On February 19, 2003, Creo Inc. (a Printcafe shareholder) commenced litigation in the Delaware Court of Chancery against the Company, Printcafe and certain of Printcafe’s principal officers and directors, challenging those agreements and seeking to restrain the Company and Printcafe from proceeding to enter into any further agreements with respect to a business merger. On February 21, 2003, the Delaware Court of Chancery denied the temporary restraining order sought by Creo. On February 26, 2003 the Company and Printcafe entered into a merger agreement providing for the Company’s acquisition of Printcafe and the Company completed the acquisition on October 21, 2003. This litigation is still pending and, due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of the litigation. Any unfavorable outcome of the litigation could have an adverse impact on the Company’s financial condition and results of operations.

On June 25, 2003, a securities class action complaint was filed against Printcafe Software, Inc., now a wholly-owned subsidiary of the Company, and certain officers in the United States District Court for the Western District of Pennsylvania. The complaint alleges that the defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of

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1933 due to allegedly false and misleading statements in connection with Printcafe’s initial public offering and subsequent press releases. The Company, which acquired Printcafe in October 2003, believes that the lawsuit is completely without merit and intends to defend itself accordingly.

In addition, the Company is involved from time to time in litigation relating to claims arising in the normal course of its business.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto contained elsewhere in this Quarterly Report on Form 10-Q. Except for the historical information contained herein, the discussion in this Quarterly Report on Form 10-Q contains certain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, beliefs, expectations, forecasts and intentions. The cautionary statements made in this document should be read as applicable to all related forward-looking statements wherever they appear in this document. Our actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include those discussed below in “Factors that Could Adversely Affect Performance,” as well as those discussed elsewhere herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update any forward- looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect the amounts reported. Please see the discussion of critical accounting policies in our Amendment No. 2 to the Annual Report on Form 10-K/A for the year ended December 31, 2002.

Recent Events

On October 21, 2003, our merger with Printcafe was approved by the Printcafe shareholders. The purchase price was approximately $33.5 million, $28.5 million paid in cash and the balance paid by issuing approximately 0.2 million shares of common stock. Of the approximately 12.8 million shares of Printcafe common stock outstanding at the time of the merger, 8.8 million shares were redeemed in cash for approximately $23.0 million. The remaining 1.9 million shares were converted into approximately 0.2 million shares of our common stock. The remaining 2.1 million shares, which we acquired for $5.5 million earlier in the year, were cancelled. We intend to buy back approximately the same number of shares issued in the merger from the market during the fourth quarter of 2003, which will require approximately $5.0 to 6.0 million dollars, depending upon the stock price at the time of the buy back. In addition, we paid off $16.8 million of debt owed by Printcafe that was immediately callable upon the completion of the merger. We anticipate that the valuation of the acquired intangibles of Printcafe will be completed during the fourth quarter of 2003.

On November 3, 2003, the Company acquired T/R Systems, Inc. for approximately $19.7 million in cash. We anticipate that the valuation of the acquired intangibles of T/R Systems, Inc. will be completed during the fourth quarter of 2003.

Results of Operations

The following tables set forth items in our consolidated statements of income as a percentage of total revenue for the three and nine-month periods ended September 30, 2003 and 2002 and the percentage change from 2003 over 2002. These operating results are not necessarily indicative of results for any future period.

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			Three Months ended						% change			Nine Months ended						% change
			September 30,						2003			September 30,						2003
									over									over
			2003			2002			2002			2003			2002			2002
Revenue				100	%		100	%		5	%		100	%		100	%		5	%
	Cost of revenue			39	%		47	%		(13	)%		40	%		49	%		(14	)%
Gross profit				61	%		53	%		21	%		60	%		51	%		23	%
	Research and development			24	%		25	%		3	%		26	%		26	%		2	%
	Sales and marketing			15	%		14	%		15	%		16	%		15	%		19	%
	General and administrative			6	%		6	%		2	%		6	%		6	%		(5	)%
		Amortization of identified intangibles and other acquisition-related expense		1	%		1	%		16	%		2	%		1	%		60	%
	Total operating expenses			46	%		46	%		7	%		50	%		48	%		8	%
Income from operations				15	%		7	%		111	%		10	%		3	%		292	%
	Interest and other income, net			2	%		3	%		(33	)%		2	%		3	%		(21	)%
		Litigation settlement income (charges)		1	%		(5	)%		136	%		1	%		(2	)%		136	%
Income before income taxes				18	%		5	%		245	%		13	%		4	%		212	%
	Provision for income taxes			(5	)%		(1	)%		210	%		(3	)%		(1	)%		181	%
Net income				13	%		4	%		259	%		10	%		3	%		225	%

Revenue

Our revenue is derived from sales of products in four major categories. The first category is made up of stand-alone servers, which connect digital color copiers with computer networks. This category includes the Fiery X, Z, and Q series, the Splash G series, and Edox products and has historically accounted for a majority of our revenue. The second category consists of embedded color desktop controllers, design licensed color solutions, and color software RIPs primarily for the office market. The third category consists of servers and controllers for digital black and white products. The fourth category of revenue consists of sales of spares, Best proofing software, Velocity software solutions, DocSend and PrintMe. Most of our sales revenue is derived from sales of products to original equipment manufacturers, or OEMs, who incorporate our products, technologies and solutions into the end product, which they sell to their customers. The remainder of our sales revenue is derived from sales to distribution partners and from direct sales to the end user.

Our revenues increased 5% to $97.3 million in the third quarter of 2003, compared to approximately $92.6 million in the third quarter of 2002, with a 5% increase in unit volume between the two periods. For the nine-month periods ended September 30, revenues in 2003 increased 5%, while volumes increased 1% over 2002. Sales of our embedded and design-licensed color solutions and the Best software products accounted for a significant portion of the increase in revenue for both the three- and nine-month period comparisons.

The following is a break-down of categories of revenue, both in terms of absolute dollars and as a percentage (%) of total revenue. Also shown is volume as a percentage (%) of total units shipped by product.

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		Three months ended September 30,													Nine months ended September 30,
		2003					2002					%			2003					2002					%
Revenue		$		%			$		%			Change			$		%			$		%			Change
Stand-alone Color Servers		$	34.3		35	%	$	44.6		48	%		(23	)%	$	104.4		38	%	$	121.1		47	%		(14	)%
Embedded & Design-licensed Color Solutions			40.8		42	%		25.5		27	%		60	%		99.8		37	%		73.8		28	%		35	%
Digital Black and White Solutions			9.8		10	%		12.6		14	%		(22	)%		26.1		10	%		34.0		13	%		(23	)%
Spares, Licensing & Other Misc. Sources			12.4		13	%		9.9		11	%		25	%		41.4		15	%		30.6		12	%		36	%
	Total Revenue	$	97.3		100	%	$	92.6		100	%		5	%	$	271.7		100	%	$	259.5		100	%		5	%

		Three months ended September 30,									Nine months ended September 30,
Volume		2003			2002			% Change			2003			2002			% Change
Stand-alone Color Servers			10	%		15	%		(35	)%		11	%		16	%		(30	)%
Embedded & Design-licensed Color Solutions			67	%		41	%		72	%		57	%		43	%		35	%
Digital Black and White Solutions			21	%		34	%		(36	)%		26	%		34	%		(24	)%
Spares, Licensing & Other Misc. Sources			2	%		10	%		(74	)%		6	%		7	%		(16	)%
	Total Revenue		100	%		100	%		5	%		100	%		100	%		1	%

The category of stand-alone color servers connecting to digital color copiers made up 35% of total revenue and 10% of total unit volume for the three-month period ended September 30, 2003. For the same period a year ago, it made up 48% of total revenue and approximately 15% of total unit volume. This category made up 38% of total revenue and 11% of total unit volume for the nine-month period ended September 30, 2003. For the same period a year ago, it made up approximately 47% of total revenue and 16% of total unit volume. We believe the decrease in percentages of revenue and unit volume in this category is due to the focus of our OEM customers on selling newly-introduced color engines for the office environment as well as the lack of new color print engines in the high-end professional market during the first three quarters of 2003. However, we expect this category to show an increase in the fourth quarter of 2003 with the introduction of our S300 and S500 products along with releases of new engines from our OEM customers.

The category of embedded and design-licensed color solutions made up 42% of total revenue and 67% of total unit volume in the third quarter of 2003. It made up approximately 27% of total revenue and 41% of total unit volume in the third quarter of 2002. For the nine months ended September 30, 2003 and 2002, the category of embedded and design-licensed color solutions made up 37% and approximately 28% of total revenue and 57% and 43% of total volume, respectively. This category is comprised of embedded controllers, design-licensed solutions, and software RIPs. In some cases, our OEM customers have opted to pay a license fee for our controller designs and software and manufacture the complete boards themselves, rather than purchase boards manufactured by us. The increase in this category was driven by the launch of new color multifunction products from a number of our OEM customers and the corresponding improved sales of color products for the office environment. We expect to see a decline in the embedded color segment in the fourth quarter as our OEM customers focus on sales of the new server platforms they have recently launched.

For the three months ended September 30, 2003 and 2002, the digital black and white solution category made up 10% and 14% of total revenue and 21% and 34% of total volume, respectively. It made up 10% of total revenue and 26% of total

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unit volume in the nine-month period ended September 30, 2003 and 13% of total revenue and approximately 34% of total unit volume in the nine-month period ended September 30, 2002. The decline in this category can be attributed primarily to a weak economy, the migration to color solutions and our OEM customers relying on internally developed products, rather than purchasing products designed by us.

The spares, licensing and other miscellaneous sources category has increased from 11% of total revenue in the three-month period ended September 30, 2002 to 13% of total revenue in the three month period ended September 30, 2003 while volumes in this category decreased from 10% of total volume to 2% of total volume for the same period comparison. The decrease in volume is due to the spin off of the eBeam product line during the third quarter of 2003. In the year over year quarterly periods, revenues from all products in this category, excluding the Best inkjet proofing software, grew 6%. For the nine months ended September 30, 2003 and 2002, the other revenue category made up 15% and 12% of total revenue and 6% and 7% of total volume, respectively. Sales of spares for the nine months ended September 30, 2003, grew approximately 14% in revenues compared to the same period in 2002. For the nine months ended September 30, 2003 eBeam sales accounted for approximately 4% of the revenue in this product category.

To the extent our major product categories 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 new controller products that we introduce during 2003 and 2004 will be qualified by all or any of our OEM customers, or that such products 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 and other products, such as PrintMe and DocSend, cannot be assured.

We also believe that in addition to the factors described above, price reductions for all of our products will affect revenues in the future. We have previously and will likely in the future 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 may have an adverse impact on our revenues and profits. While we have managed to improve gross margins over the last year through the utilization of fewer contract manufacturers and favorable component pricing and an increase in software sales and design license sales, this trend may not continue. If we are not able to compensate for lower gross margins that result from price reductions with an increased volume of sales, our results of operations could be adversely affected. In addition, if our revenue in the future depends more upon sales of products with relatively lower gross margins (such as embedded controllers for printers, embedded controllers for color and black-and-white copiers, and stand-alone controllers for black-and-white copiers), results of operations may be adversely affected.

Revenue and volume by geographic area for the three- and nine-month periods ended September 30, 2003 and September 30, 2002 were as follows:

	Three months ended September 30,
	2003								2002
(in millions)	$		%			% of volume			$		%			% of volume			% of $ change
Americas	$	47.1		49	%		31	%	$	51.7		56	%		50	%		(9	)%
Europe		27.2		28	%		21	%		26.2		28	%		19	%		4	%
Japan		19.8		20	%		40	%		9.6		10	%		19	%		107	%
ROW		3.2		3	%		8	%		5.1		6	%		12	%		(38	)%
Total Revenue	$	97.3		100	%		100	%	$	92.6		100	%		100	%		5	%

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	Nine months ended September 30,
	2003								2002
(in millions)	$		%			% of volume			$		%			% of volume			% of $ change
Americas	$	133.7		49	%		34	%	$	138.1		53	%		47	%		(3	)%
Europe		84.4		31	%		25	%		77.6		30	%		23	%		9	%
Japan		40.6		15	%		26	%		30.7		12	%		20	%		32	%
ROW		13.0		5	%		15	%		13.1		5	%		10	%		(1	)%
Total Revenue	$	271.7		100	%		100	%	$	259.5		100	%		100	%		5	%

The Japan region increased by 32% to $40.6 million in sales during the first nine months of 2003 from $30.7 million in the first nine months of 2002. A significant portion of this increase can be attributed to greater demand for design-licensed color solutions, which are sold to OEM customers in Japan, for incorporation into their products which are then shipped from Japan to other countries. Europe also showed a moderate increase in revenue, due in part to the addition of the Best products, while the Rest-of-World region, which includes the Asia Pacific and the Americas showed a slight decline for the nine months ended September 30, 2003.

Shipments to some of our OEM customers are made to centralized purchasing and manufacturing locations which in turn sell through to other locations, making it 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 export sales will continue to represent a significant portion of our total revenue.

Substantially all of the revenue for the last three years was attributable to sales of products through our OEM customers and independent distributor channels. During 2003, we have continued to work on both increasing the number of OEM customers and expanding the size of existing relationships with OEM customers. For the quarter and nine months ended September 30, 2003, three customers — Canon, Konica-Minolta, and Xerox provided more than 10% of our revenue individually and approximately 78% and 71%, respectively, of our revenue in aggregate. For the same periods ended September 30, 2002 our top two customers were Canon and Xerox each of which accounted for more than 10% of our revenue individually and for 62% and 58% , respectively, of our revenue in aggregate. No assurance can be given that our relationships with these and other significant OEM customers will continue or that we will be successful in increasing the number of our OEM customers or the size of our existing OEM relationships. Several of our OEM customers have reduced or discontinued their purchases from us at various times in the past and any customer could do so in the future. Such reductions or discontinuations have in the past and could in the future have a significant negative impact on our consolidated financial position and results of operations.

We continue to develop the Fiery, Splash, and EDOX product lines as well as other products and intend to continue to introduce new generations of server and controller products and other new product lines with current and new OEM customers and distribution partners in 2003 and beyond. No assurance can be given that the introduction or market acceptance of current or future products will be successful.

Gross Margins

For the quarter ended September 30, 2003 our gross margin was 61% compared to 53% for the same period a year ago. The improvement came from increased sales of embedded color products, particularly design licensed solutions and an increase in software sales which traditionally have higher gross margins. The improvement driven by the embedded color category was in turn related to new products available from a number of our OEM customers, which fueled an increased demand for digital color printing primarily in the office market. Our gross margins were 60% and 51% for the nine-month periods ended September 30, 2003 and September 30, 2002, respectively. The improvement came from an increase in the gross margins for the high-end stand-alone color servers and the increased sales of design-licensed embedded color controllers and software sales. With the acquisition of Printcafe in the fourth quarter of 2003, we expect to continue to improve our gross margin, but we believe that gross margin will continue to be impacted by a variety of factors. These

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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 Postscript interpreter software), third party manufacturing costs, product, channel, and geographic mix, the success of our product transitions and new products, the pace of migration to a design license business model for embedded products, competition with third parties and our OEM customers, and general economic conditions in the United States and abroad. Consequently, we anticipate gross margins will fluctuate from period to period.

Operating Expenses

Operating expenses increased by 7% in the three-month period ended September 30, 2003 compared to the three-month period ended September 30, 2002 and increased by 8% in the nine-month period ended September 30, 2003 compared to the same period in 2002. Operating expenses as a percentage of revenue amounted to approximately 46% for the three-month periods ended September 30, 2003 and 2002 and 50% and 48% for the nine-month periods ended September 30, 2003 and 2002, respectively. On January 9, 2003, we completed our acquisition of Best adding additional operating expenses not incurred during the prior periods. In addition, during the first quarter of 2003, we implemented our first employee salary increase in two years, further increasing operating expenses as compared to prior periods. Employees with the rank of vice-president and higher were excluded from this increase. Along with the additional operating expenses incurred due to the acquisition of Best, the additional payroll costs incurred due to the salary increases accounted for a significant portion of the increase in operating expense during the three and nine-month periods ended September 30, 2003 as compared to the same periods in the prior year. We have recently experienced increased expenses from the translation of costs incurred in currencies such as the euro and the yen because the US dollar weakened relative to those currencies. If the US dollar continues to weaken relative to other currencies in which we transact business, our expenses after translation into the US dollar will continue to increase.

The components of operating expenses are detailed below.

Research and Development

Expenses for research and development consist primarily of personnel expenses and, to a lesser extent, consulting, depreciation, and costs of prototype materials. Research and development expenses were 24% and 25% of revenue for the third quarter of 2003 and 2002, respectively. For the nine months ended September 30, 2003 and 2002, research and development expenses were 26%. In absolute dollars, research and development increased by $0.7 million in the third quarter of 2003 from the third quarter of 2002 and increased by approximately $1.4 million year over year for the nine months ended September 30, due to the acquisition of Best in January 2003 and the salary increase, partially offset by a decrease in facility costs. We believe that the development of new products and the enhancement of existing products are essential to our continued success, and 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 dollars and also as a percentage of revenue in future quarters.

Sales and Marketing

Sales and marketing expenses 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 the three-month period ended September 30, 2003 were $14.7 million or 15% of revenue compared to $12.8 million or 14% of revenue for the three months ended September 30, 2002. For the nine months ended September 30, 2003 sales and marketing expenses were $44.7 million or 16% of revenue and were approximately $37.6 million or approximately 15% of revenue for the same nine-month period in 2002. The increase in absolute dollars of $1.9 million for the quarter and approximately $7.1 million for the nine-month period is due to the acquisition of Best, increased tradeshow costs, and increased payroll expense from salary increases, partially offset by a decrease in facility costs. In addition, sales and marketing expenses, particularly those incurred in Europe, where we have a significant presence, were negatively impacted by the

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weakening US dollar. While the costs in the local currency may have stayed constant, the translated US dollar costs have increased. We expect that our sales and marketing expenses may increase in absolute dollars 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, and as we grow our software solutions and other new product lines which require greater sales and marketing support from us. We also expect that if the US dollar continues to weaken against the euro or other currencies, sales and marketing expenses reported in US dollars will increase.

General and Administrative

General and administrative expenses consist primarily of personnel expenses and, to a lesser extent, depreciation and facility costs, professional fees, and other costs associated with public companies. General and administrative expenses were $5.5 million or 6% of revenue for the quarter ended September 30, 2003, compared to $5.4 million or 6% of revenue for the quarter ended September 30, 2002. General and administrative expenses were $15.5 million or 6% of revenue for the nine-month period ended September 30, 2003, compared to approximately $16.4 million or 6% of revenue for the nine-month period ended September 30, 2002. The decrease in absolute dollars came from reduced legal costs partially offset by salary increases. We expect that general and administrative costs will increase both as a percentage of revenue and in absolute dollars in 2004 due to additional costs that will be incurred for compliance with the Sarbanes-Oxley Act of 2002. We also expect that if the US dollar continues to weaken against the euro or other currencies, general and administrative expenses reported in US dollars will increase.

Amortization of Identified Intangibles and other Acquisition-related Expense

Amortization of identified intangibles and other acquisition-related expense for the quarter ended September 30, 2003 was $1.3 million or 1% of revenue compared to $1.1 million or 1% of revenue for the three months ended September 30, 2002. For the nine months ended September 30, 2003, amortization of identified intangibles and other acquisition-related expense was $5.2 million or 2% of revenue compared to $3.2 million or 1% of revenue for the nine months ended September 30, 2002. The quarter over quarter increase was attributable to the amortization of identified intangibles of approximately $0.2 million related to the Best acquisition while the year over year increase was comprised of the write-off of purchased in-process research and development costs of $1.2 million and amortization of identified intangibles of $0.6 million related to the Best acquisition. The acquisition of Printcafe and T/R Systems will increase our amortization of identified intangibles and other acquisition related expense in future quarters, beginning with the fourth quarter of 2003. We anticipate that the valuation of the acquired technology for both acquisitions will be completed during the fourth quarter of 2003.

Interest and Other Income, net

Interest and other income relates mainly to interest income and expense, debt issuance costs and gains and losses on foreign currency transactions. Interest and other income of $1.9 million for the three-month period ended September 30, 2003 decreased by 33% from $2.8 million for the three-month period ended September 30, 2002. For the nine-month period ended September 30, 2003, interest and other income decreased 21% to $7.1 million from $9.0 million for the nine-month period ended September 30, 2002. The decrease is largely the result of the short-term nature of our investments and the fact that reinvestment rates are much lower than the rates on instruments that have reached maturity, as well as the interest expense and amortization of debt issuance costs related to the convertible debentures issued in June 2003. The decline in interest was offset in part by an increase in the investment balance from the proceeds of our convertible debt, net of $58.2 million used to repurchase our common stock. Interest expense and debt issuance costs related to the convertible debentures were $1.2 million for the three months ended September 30, 2003 and $1.6 million year-to-date.

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Litigation settlement income (charges)

The litigation settlement income of approximately $1.6 million in 2003 consists of settlements received from litigation protecting our intellectual property, net of related legal expenses. The litigation settlement charges in 2002 consist of the settlement of a class-action lawsuit for $4.4 million, including legal fees and other related costs. While there has been no change in our view that the class-action lawsuit had no merit, we determined that settlement of the lawsuit was in the best interest of us and our shareholders.

Income Taxes

Our effective tax rate was 27% for the three- and nine-month periods ended September 30, 2003 and 30% for the three- and nine-month periods ended September 30, 2002. The rate decreased in 2003 due to increased benefits from foreign sales. In each of these periods, we also benefited from tax-exempt interest income and research and development credits in achieving a consolidated effective tax rate lower than that prescribed by the respective Federal and State taxing authorities. We currently anticipate that the 2003 full year tax rate will increase in the fourth quarter due to the effects of the non-deductible charges related to in-process technology and the minority interest in Printcafe. The amount of these charges will be finalized in the fourth quarter.

Liquidity and Capital Resources

Cash, cash equivalents and short-term investments increased by $154.0 million to $652.4 million as of September 30, 2003, from $498.4 million as of December 31, 2002. Working capital increased by $228.7 million to $698.8 million as of September 30, 2003, up from $470.1 million as of December 31, 2002. These increases are primarily the result of the sale of $240.0 million in convertible debentures in June 2003, net income, changes in balance sheet components, and the exercise of employee stock options; offset by the $58.2 million used to repurchase shares of our common stock, approximately $9.3 million to purchase Best, the exercise of the option to purchase approximately 17.5% of the outstanding shares of Printcafe common stock for $5.5 million and the reclassification of cash pledged on a building lease to restricted cash of $69.3 million. (See Off-Balance Sheet Financing - Synthetic Lease Arrangement below.)

Net cash provided by operating activities was $31.3 million for the nine-month period ended September 30, 2003. We invest cash in excess of our operating needs in short-term investments. Purchases in excess of sales of short-term investments were $136.7 million for the nine-month period ended September 30, 2003. Our capital expenditures generally consist of investments in computers and related peripheral equipment and office furniture for use in our operations. We purchased approximately $3.9 million of equipment and furniture during the nine-month period ended September 30, 2003, net of retirements. In January 2003 we acquired Best for $9.3 million, net of cash received in the acquisition. In June 2003 we purchased shares of Printcafe common stock for $5.5 million pursuant to an option agreement related to the merger agreement between us and Printcafe.

Net cash provided by financing activities of $206.4 million in the nine-month period ended September 30, 2003, was the result of $233.5 million from the issuance of $240.0 million of convertible debentures, net of issuance costs and $31.1 million from the exercises of common stock options and the tax benefits to us associated with those exercises and the issuance of stock under our Employee Stock Purchase Plan, less $58.2 million used for the repurchase of the our common stock.

Off-Balance Sheet Financing - Synthetic Lease Arrangement

In 1997, we purchased a 35-acre parcel of land in Foster City, California and began development of a corporate campus. In July 1999 we completed construction of a ten-story, 295,000 square foot building funded under a lease agreement entered into in 1997 (“1997 Lease”) and began making rent payments. Also in conjunction with the 1997 Lease, we entered into a separate ground lease with the lessor of the building for approximately 35 years. If we do not renew the building lease, the ground lease converts to a market rate.

In December 1999 we entered into a second agreement (“1999 Lease” and together with the 1997 Lease, the “Leases”) to lease additional facilities, to be constructed adjacent to the first building discussed above. A 165,000 square foot building was completed in December 2001 at a cost of approximately $43.1 million. Rent obligations for the additional facilities,

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which began in January 2002, bear a direct relationship to the funded amount, as described below. In connection with the 1999 Lease, we entered into a separate ground lease of the related parcels of land in Foster City with the lessor of the buildings at a nominal rate and for a term of 30 years. If we do not renew the 1999 Lease, the ground lease converts to a market rate.

Each Lease has an initial term of seven years, with an option to renew subject to certain conditions. We may, at our option, purchase the facilities during or at the end of the term of the lease for the amount expended by the respective lessor to construct the facilities ($56.8 million for the 1997 Lease and $43.1 million for the 1999 Lease). We have guaranteed to the lessors a residual value associated with the buildings equal to approximately 82% of their funding. We may be liable to the lessor for the amount of the residual guarantee if we either fail to renew the lease or do not purchase or locate a purchaser for the leased building at the end of the lease term. During the term of each of the Leases we must meet certain financial covenant requirements related to cash to debt, fixed charge coverage ratio, leverage ratio and consolidated tangible net worth as defined by the underlying agreements. If we maintain pledged collateral, then a limited subset of these covenants must be met. The tangible net worth financial covenant requires that we maintain a minimum tangible net worth as of the end of each quarter. There are other covenants regarding mergers, liens and judgements, and lines of business. We were in compliance with all of the covenants, either directly, or through the existence of the pledged collateral, as of September 30, 2003. The pledged collateral under the 1997 Lease ($69.5 million at September 30, 2003) has been classified as restricted cash and short-term investments. We are liable to the lessor for the full purchase amount of the buildings if we default on our covenants ($56.8 million for the 1997 Lease and $43.1 million for the 1999 Lease). We could be required to purchase the building if (1) we defaulted on any indebtedness in excess of $10.0 million, (2) we failed to appeal a judgement in excess of $10.0 million, or (3) a creditor has commenced enforcement proceedings on an order for payment of money in excess of $10.0 million. In addition, we have pledged certain marketable securities, which are in proportion to the amount drawn under each lease. The funds pledged under the 1999 Lease (approximately $43.1 million at September 30, 2003) are in a LIBOR-based interest bearing account and are restricted as to withdrawal at all times. We are considered a Tranche A lender of $35.3 million of the $43.1 million, while the lessor is considered a Tranche B lender for the remaining $7.8 million.

We are treated as the owner of these buildings for federal income tax purposes.

In January 2003 the FASB issued FIN 46. As noted under Note 2 “Recent Accounting Pronouncements” contained in the Notes to the Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q, the primary objectives of FIN 46 are to provide guidance on the identification of entities for which control is achieved through means other than voting rights (“variable interest entities”) and how to determine when and which business enterprise should consolidate the variable interest entity (“primary beneficiary”). Based upon our analysis, we are not required to consolidate either of the synthetic lease arrangements.

Under both leases we have first loss guarantees to the lessors, which make us liable for declines in the value of these buildings up to approximately 82% of the cost of the construction of the buildings. The first loss guarantee requires payment upon the end of the lease. We have assessed our exposure in relation to the first loss guarantees for both of the facilities under the Leases and have determined there is no deficiency to the guaranteed value at the current time. We will continue to assess the real estate market conditions to evaluate whether it needs to record any reserves under our first loss guarantee obligations.

Inventory

Our inventory consists primarily of memory subsystems, processors and ASICs, which are sold to third-party contract manufacturers responsible for manufacturing our products. Should we decide to purchase components and do our own manufacturing, 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 fixed assets would increase significantly, thereby reducing our available cash resources. Further, the inventory we carry could become obsolete thereby negatively impacting our consolidated financial position and results of operations. We also rely on several sole-source suppliers for certain key components and could experience a significant negative impact on our consolidated financial position and results of operations if such supplies were reduced or not available.

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Purchase Commitments

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 reserve. Our financial condition and results of operations could be negatively impacted if we were required to compensate the sub-contract manufacturers in an amount significantly in excess of the accrued liability.

Legal Proceedings

Over the past five years, Mr. Jan R. Coyle, an individual living in Nevada, has repeatedly demanded that we buy technology allegedly invented by his company, Kolbet Labs. In December 2001, Mr. Coyle threatened to sue us and our customers for allegedly infringing his soon to be issued patent and for misappropriating his alleged trade secrets. We believe Mr. Coyle’s claims are baseless and without merit. On December 11, 2001, we filed a declaratory relief action in the United States District Court for the Northern District of California, asking the Court to declare that we and our customers have not breached any nondisclosure agreement with Mr. Coyle or Kolbet Labs, nor have we infringed any alleged patent claims or misappropriated any alleged trade secrets belonging to Mr. Coyle or Kolbet Labs through our sale of Fiery, Splash or EDOX print controllers. We also sought an injunction enjoining both Mr. Coyle and Kolbet Labs from bringing or threatening to bring a lawsuit against us, our suppliers, vendors, customers and users of our products for breach of contract and misappropriation of trade secrets. On March 26, 2002, the Northern District of California court dismissed our complaint for lack of jurisdiction over Mr. Coyle. We have appealed the Court’s dismissal and on August 18, 2003 the U.S. Court of Appeals for the Federal Circuit reversed the dismissal of our case and remanded it to the Northern District of California. We now plan to vigorously pursue our case against Mr. Coyle and Kolbet Labs.

On February 26, 2002, Coyle’s company, J & L Electronics, filed a complaint against us in the United States District Court for the District of Nevada alleging patent infringement, breach of non-disclosure agreements, misappropriation of trade secrets, violations of federal antitrust law, and related causes of action. We deny all of these allegations and our management believes this lawsuit is without merit and intends to defend the action vigorously. On April 22, 2002, we filed a motion to dismiss the Nevada complaint. On March 28, 2003, the Federal District Judge dismissed the complaint for lack of jurisdiction over us. J & L Electronics appealed the dismissal to the U.S. Court of Appeals for the Federal District Court. We are opposing the appeal. However, due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of the litigation. Any unfavorable outcome of the litigation could have an adverse impact on our financial condition and results of operations.

On September 16, 2002, ArrivalStar, Inc., a Delaware corporation, filed a complaint in the U.S. District Court for the Northern District of Georgia against fourteen defendants, including EFI, alleging that each of the defendants has infringed one or more claims of six identified patents owned by the plaintiff. The named defendants are Delta Air Lines, Inc.; Sabre, Inc.; Travelocity.com, L.L.P.; The City of Atlanta; Worldspan, L.L.P.; Flytecomm Corporation; Centerpost Corporation; Continental Airlines, Inc.; Japan Air Lines Company, Ltd.; American Airlines, Inc.; Roadway Express, Inc.; EFI; American Express Company; and SITA Information Networking Computing USA, Inc. The complaint alleges that the defendants infringe the claims by providing vehicle location communication services, arrival notifications and other related services. We believe that the plaintiff’s claims are without merit and intend to vigorously defend ourselves in this litigation. However, due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of the litigation. Any unfavorable outcome of the litigation could have an adverse impact on our financial condition and results of operations.

On February 13, 2003, we entered into agreements with Printcafe to facilitate a merger between the two companies. On February 19, 2003, Creo Inc. (a Printcafe shareholder) commenced litigation in the Delaware Court of Chancery against us, Printcafe and certain of Printcafe’s principal officers and directors, challenging those agreements and seeking to restrain Printcafe and us from proceeding to enter into any further agreements with respect to a business combination. On February 21, 2003, the Delaware Court of Chancery denied the temporary restraining order sought by Creo. On February 26, 2003 we and Printcafe entered into a merger agreement providing for our acquisition of Printcafe. We completed the merger with Printcafe on October 21, 2003. This litigation is still pending and, due to the inherent uncertainties of litigation, we cannot accurately predict the eventual outcome at this time. Any unfavorable outcome of the litigation could have an adverse impact on our financial condition and results of operations.

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On June 25, 2003, a securities class action complaint was filed against Printcafe Software, Inc., now a wholly-owned subsidiary, and certain officers of Printcafe in the United States District Court for the Western District of Pennsylvania. The complaint alleges that the defendants violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 due to allegedly false and misleading statements in connection with Printcafe’s initial public offering and subsequent press releases. We acquired Printcafe in October 2003 and believe that the lawsuit is completely without merit and intends to defend ourselves accordingly.

In addition, we are involved from time to time in litigation relating to claims arising in the normal course of our business.

On October 21, 2003 our merger with Printcafe was approved by the Printcafe shareholders. The purchase price was approximately 33.5 million, $28.5 million paid in cash and the balance paid by issuing approximately 0.2 million shares of common stock. We intend to buy back approximately the same number of shares issued to complete the Printcafe merger during the fourth quarter of 2003, which will require approximately $5.0 to 6.0 million dollars, depending upon the stock price at the time of the buy back. In addition, we paid off $16.8 million of debt owed by Printcafe that was immediately callable upon completion of the merger. In November 2003 we acquired T/R Systems Inc. for $19.7 million.

We believe that our existing capital resources, together with cash generated from continuing operations will be sufficient to fund our operations and meet capital requirements through at least 2004.

DISCLOSURES ON STOCK OPTION PROGRAMS

Option Program Description

Our stock option program is a broad-based, long-term retention program that is intended to attract and retain talented employees and align stockholder and employee interests. We consider our option program critical to our operation and productivity and essentially all of our employees participate. The program consists of a broad-based plan under which options may be granted to all employees, directors, and consultants. Option vesting periods range from 2 - 4 years, with an average vesting period of 3.5 years.

Distribution and Dilutive Effect of Options

Employee and Executive Option Grants

	For the period ended and as of
	September 30,			December 31,
	2003			2002			2001
Grants during the period as % of outstanding shares		5	%		6	%		2	%
Grants to listed officers* during the period as % of total options granted		16	%		9	%		33	%
Grants to listed officers* during the period as % of outstanding shares		1	%		1	%		1	%
Cumulative options held by listed officers* as % of total options outstanding		11	%		10	%		9	%

*See Executive Options for listed officers; these are defined by the Securities and Exchange Commission for the proxy as the Chief Executive Officer and each of the four other most highly compensated executive officers. We have only three executive officers, including the Chief Executive Officer.

We have implemented a stock trading program for our Board of Directors, corporate executive officers and other insiders, under Rule 10b5-1 of the Securities and Exchange Act of 1934. When there is no material non-public information available, Rule 10b5-1 allows corporate insiders to establish plans that permit prearranged future sales of his or her securities. Under our trading plan, corporate insiders prepare a written plan to sell shares on a prearranged basis over a set period of time. An independent broker then executes the pre-planned trades, according to the plan’s instructions, without regard to any subsequent non-public information the individual might receive. Once the insider’s plan is in place, he or she cannot influence the broker’s trading activities of our stock. Additionally, our insiders that participate in the plan are only allowed to sell our stock through the plan. Currently, the following Section 16 officers and directors are participating in our Rule 10b5-1 stock trading program: Dan Maydan, Guy Gecht, Fred Rosenzweig and Joseph Cutts.

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General Option Information

Summary of Option Activity

			As of September 30, 2003
						Options outstanding
			Shares Available
			for Options			Number of Shares			Weighted Average
			(in thousands)			(in thousands)			Exercise Price
		January 1, 2002		4,913			9,376		$	22.96
Grants				(3,172	)		3,172			17.06
Exercises				—			(414	)		11.44
Cancellations				1,006			(1,006	)		25.99
Expirations				(484	)		—			—
	December 31, 2002			2,263			11,128		$	21.25
Additional shares authorized				950
Grants				(2,640	)		2,640			19.22
Exercises				—			(1,577	)		14.32
Cancellations				493			(493	)		24.16
Expirations				(174	)		—			—
	September 30, 2003			892			11,698		$	21.79

In-the-Money and Out-of-the-Money Option Information

	As of September 30, 2003
	Exercisable				Unexercisable				Total
			Weighted Average				Weighted Average				Weighted Average
(Shares in thousands)	Shares		Exercise Price		Shares		Exercise Price		Shares		Exercise Price
In-the-money		4,565	$	17.16		4,602	$	17.87		9,167	$	17.51
Out-of-the-money (1)		2,471	$	37.52		60	$	26.95		2,531	$	37.24
Total Options Outstanding		7,036	$	24.31		4,662	$	17.99		11,698	$	21.79

(1) Out-of-the-money options are those options with an exercise price equal to or above the closing price of $23.33 at the end of the quarter.

Executive Options

The executive officers received stock option grants along with all other employees in the third quarter of 2003. Those grants were made at an exercise price of $19.45. Each executive received the following shares: Joseph Cutts, 87,000 shares; Guy Gecht, 175,000 shares and Fred Rosenzweig, 150,000 shares.

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   Aggregated Option Exercises as of September 30, 2003 and Period End Option Values

									Value of Unexercised
	Shares				Number of				In-the-Money Options
	Acquired				Unexercised Options				at 9/30/03 (2)
	on		Value		at 9/30/03
Name	Exercise		Realized(1)		Exercisable		Unexercisable		Exercisable		Unexercisable
Guy Gecht		131,250	$	1,224,100		243,375		256,875	$	678,937	$	1,415,438
Fred Rosenzweig		—		—		420,610		201,390	$	2,001,220	$	1,071,868
Joseph Cutts		56,250	$	523,894		75,975		119,875	$	224,750	$	641,563

(1)	This amount represents the market value of the underlying securities on the exercise date minus the exercise price of such options.
(2)	This amount represents the market value of $23.70 of the underlying securities relating to “in-the-money” options at September 30, 2003 minus the exercise price of such options.

Factors That Could Adversely Affect Performance

We rely on sales to a relatively small number of OEM customers, and the loss of any of these customers could substantially decrease our revenues.

Our customers primarily consist of a relatively small number of OEMs, including Canon, Xerox and Konica-Minolta which together accounted for approximately 67% of our 2002 revenue and have accounted for approximately 71% of our 2003 revenues through the nine months ended September 30, 2003. 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. If we lose an important OEM customer and are unable to replace the revenue traditionally generated from such customer with sales to new or existing OEM customers, our revenues will likely decline significantly. With the exception of certain minimum purchase obligations, we typically do not have long-term volume purchase contracts with our 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 purchase our products, and we expect that customers will continue to make such elections in the future. In addition, since 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, is likely to harm our results of operations. For example, several of our 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 profitability 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.

Because our printer and copier-related products remain a significant portion of our business and there are a limited number of OEMs producing copiers and printers in sufficient volume to be attractive customers for us, we expect that customer concentration will continue to be a risk for the foreseeable future.

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 increased by our inability to adjust spending in the short term to compensate for this shortfall.

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We rely on our OEM customers to develop and sell products incorporating our 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 technology in a timely and cost-effective manner. Our continued success depends upon the ability of these OEM customers to meet changing end-user customer needs and respond to emerging industry standards and other technological changes. However, we cannot assure you that our OEM customers will effectively meet these technological changes. These OEM customers, who are not within our control, have incorporated into their products the technologies of other companies in addition to, or instead of our products and may continue to do so in the future. These OEM customers may introduce and support products that are not compatible with our products. We rely on these OEM customers to market our products with their products, and if these OEM customers do not effectively market our products our sales revenue may be materially and adversely affected. With the exception of certain minimum purchase obligations, these OEM customers are not obligated to purchase products from us. We cannot assure you that our OEM customers will continue to carry our products.

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 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 and coordinating with our OEM customers may cause delays in our own product development efforts that are outside of our control. In addition, our sales 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.

We face the risk of decreased revenue as a result of ongoing economic uncertainty.

The revenue growth and profitability of our business depends significantly on the overall demand for information technology products such as ours that enable printing of digital data. Delays or reductions in information technology spending, such as occurred during 2001-2002, could lead to a decline in demand for our products and services, and consequently harm our business, operating results, financial condition, prospects and stock price.

Our operating results may fluctuate based upon many factors, which could adversely affect our stock price.

We expect our stock price to vary with our operating results and, consequently, fluctuations in our operating results could adversely affect our stock price. Factors that have caused our operating results to fluctuate in the past and 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 and general economic conditions;

• success and timing of new product introductions by us and our OEM customers, and the performance of our products generally;

• volatility in foreign exchange rates, changes in interest rates and availability of bank 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;

• delay, cancellation or rescheduling of orders or projects;

• availability of key components, including possible delays in deliveries from suppliers, the performance of third-party manufacturers and the status of our relationships with our key suppliers;

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• potential excess or shortage of employees;

• changes in our product mix such as shifts from higher revenue products to lower revenue products dependant on higher sales volumes;

• costs associated with complying with any applicable governmental regulations;

• acquisitions and integration of new businesses;

• general economic conditions; 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.

Our industry is highly competitive and is characterized by rapid technological changes. We compete against a number of other suppliers of imaging products, including our OEM customers themselves. Although we attempt to develop and support innovative products that customers demand, products or technologies developed by competing suppliers could render our products or technologies obsolete or noncompetitive.

While many of our OEM customers sell our products on an exclusive basis, we do not have any formal agreements that prevent these OEM customers from offering alternative products. If an OEM customer offers products from alternative suppliers our market share could decrease, which could reduce our revenue and adversely affect our financial results.

Many OEMs in the printer and copier industry, including many of our OEM customers, internally develop and sell products that compete directly with our current products. These OEMs have resources that may enable them to develop more quickly than us, products 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 products in addition to our products, even when their products are technologically inferior, 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 similar products developed internally by these OEMs, particularly in the black-and-white and embedded color product markets. 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 may be harmed.

If the demand for products that contain our technology that enable color printing of digital data were to decrease, our sales revenue would likely decrease.

Our products are primarily targeted at enabling the printing of digital data. Demand for networked printers and copiers containing our technology decreased in both 2001 and 2002 due to the global economic downturn. If demand for digital printing products and services containing our technology were to again decline, or if the demand for our OEM customers’ specific printers or copiers for which our products are designed were to decline, our sales revenue would likely decrease. Our products are combined with products, such as digital printers and copiers, that are large capital expenditures as well as discretionary purchase items for the end customer. In difficult economic times such as we have recently experienced, spending on information technology typically decreases. As the products in which our products are incorporated are of a more discretionary nature than many other technology products, we may be more adversely impacted by deteriorating general economic conditions than other technology firms outside of our market. The decrease in demand for our products has harmed and could, in the future, continue to harm our results of operations and we do not know whether demand for our products or our customers’ products will increase or improve from current levels.

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.

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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 where competition has historically been intense among companies to hire engineering and technical professionals. In times of professional labor imbalances, it may 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 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. We offer a broad-based equity compensation plan based on granting options from stockholder-approved plans in order to be competitive in the labor market. If stockholders do not approve additional shares for these plans for future grants, it may be difficult for us to hire and retain skilled employees. If we cannot successfully hire and retain employees, we may not be able to develop products or to meet demand for our products in a timely fashion and our results of operations may be harmed.

If we are unable to develop new products, or execute product introductions on a timely basis, our future revenue and operating results may be harmed.

Our operating results depend to a significant extent on our continual improvement of existing technologies and rapid innovation of new products and technologies by us. Our success depends not only on our ability to predict future requirements, but also to develop and introduce new products that successfully address customer needs. Any delays in the launch or availability of new products we are planning could harm our financial results. During transitions from existing products to new products, customers may delay or cancel orders for existing products. Our results of operations may be harmed if we cannot successfully manage product transitions or provide adequate availability of products after they have been introduced.

We must continue to make significant investments in research and development in order to enhance performance and functionality of our products, including product lines different than our Fiery, Splash and EDOX servers and embedded controllers. We cannot assure you that we will successfully identify new product opportunities, develop and introduce new products to market in a timely manner, or achieve market acceptance of our products. Also, when we decide to develop new products, our research and development expenses generally increase in the short term without a corresponding increase in revenue, which can harm our operating results. Finally, we cannot assure you that products and technologies developed by our own customers and others will not render our products or technologies obsolete or noncompetitive.

If we enter new markets or distribution channels this could result in higher operating expenses that may not be offset by increased revenue.

We continue to explore opportunities to develop product lines different from our current servers and embedded controllers, such as the Best software, SendMe and PrintMe Networks, among others. 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, the lack of marketplace acceptability of these new products or services may adversely impact our operating results.

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.

Most of our current products include software that we must license from Adobe. Specifically, under our license agreements, we are required to obtain a separate license from Adobe for the right to use Adobe Postscript ™ software in each type of copier or printer used with a Fiery Server or Controller. Although to date we have successfully obtained licenses to use Adobe’s PostScript™ software for our products, where required, we cannot be certain that Adobe will continue to 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 using Adobe software. Although to date we have successfully obtained such quality assurances from Adobe,

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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 license agreements 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. In some products we have introduced substitute software developed internally that does not require any license from Adobe. The costs to continue to develop software internally could increase our research and development expenditures and we may not be able to recapture those costs through increased sales. While we plan on expanding the number of products using internally developed software, there can be no assurance that these products will be accepted in the market.

We depend upon a limited group of suppliers for key components in our products.

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. 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. 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 end user demand. Similarly, 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 subcontractors to manufacture and deliver products to our customers.

We subcontract with other companies to manufacture our products. We rely on the ability of our subcontractors to produce products to be sold to our customers, 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. The weakened economy has led to the dissolution, bankruptcies and consolidations of some of the subcontractors who are able to manufacture our products, decreasing the available number of subcontractors. If the available number of subcontractors continues to decrease, it is possible that we will 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, or if we lose one or more of our current subcontractors. Fewer subcontractors may reduce our negotiating leverage regarding 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 setting up new subcontractors which would result in delay in delivery of our products. We have a high concentration of our products manufactured at a single subcontractor location, Sanmina-SCI in Colorado. Should Sanmina-SCI experience any inability to manufacture or deliver product from this location our business, financial condition and operations could be harmed. We do not maintain long-term agreements with our subcontractors.

Seasonal purchasing patterns of our OEM customers have historically caused lower fourth quarter revenue, which may negatively impact our results of operations.

Our results of operations have typically followed a seasonal pattern reflecting the buying patterns of our large OEM customers. In the past, our fiscal fourth quarter (the quarter ending December 31) results have been adversely affected because some or all of our OEM customers decrease, or otherwise delay, fourth quarter orders. This impact has been increasingly mitigated, as our OEM customers have lowered channel inventories throughout the year pushing this effect into the first quarter when our OEM customers typically have lower sales. In addition, the first fiscal quarter traditionally has been a weaker quarter because our OEM customers focus on training their sales forces and have reduced sales to their customers. The primary reasons for these seasonal patterns are:

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• our OEM customers have historically sought to minimize year-end inventory investment (including the reduction in demand following introductory “channel fill” purchases);

• the timing of new product releases and training by our OEM customers in the first and fourth quarters; and

• certain of our OEM customers typically achieve their yearly sales targets before year end and consequently delay further purchases into the next fiscal year (we do not know when our customers reach these sales targets as they generally do not disclose them to us).

As a result of these factors, we believe that period to period comparisons of our operating results are not meaningful, and you should not rely on such comparisons to predict our future performance. We anticipate that future operating results may fluctuate significantly due to the continuation or changes in this seasonal demand pattern.

Acquisitions we may make involve numerous risks.

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:

• 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;

• the inability to protect or secure technology rights; and

• an increase in operating costs.

Mergers and acquisitions of companies are inherently risky, and we cannot assure you that our previous or future acquisitions will be successful or will not harm our business, operating results, financial condition, or stock price.

On February 26, 2003, we entered into an agreement to acquire Printcafe. On October 21, 2003 the Printcafe shareholders approved the merger. There can be no assurance that the Printcafe acquisition will prove to be successful. The cost to acquire Printcafe was approximately $33.5 million in cash and approximately 0.2 million in shares of our common stock.

On September 2, 2003, we entered into an agreement to acquire T/R Systems, Inc, which closed on November 3, 2003. There can be no assurance that the T/R Systems acquisition will prove to be successful. The cost to acquire T/R Systems was approximately $20.7 million.

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We face risks from our international operations and from currency fluctuations.

Approximately 51% and 47% of our revenue from the sale of products for the nine-month periods ended September 30, 2003 and 2002, respectively, came from sales outside North America, primarily to Europe and Japan. We expect that sales outside North America will continue to represent a significant portion of our total revenue. We are subject to certain risks because of our international operations. These risks include the regulatory requirements of foreign governments which may apply to our products, as well as requirements for export licenses which may be required for the export of certain technologies. The necessary export licenses may be delayed or difficult to obtain, which could cause a delay in our international sales and hurt our product revenue. Other risks include trade protection measures, natural disasters, and political or economic conditions in a specific country or region.

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 the Japanese yen, the Euro and other major European currencies, and numerous Southeast Asian currencies. We typically invoice our customers in U.S. dollars and this may result in our products becoming more expensive in the local currency of our customers, thereby reducing our ability to sell our products. When we do invoice our customers in 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 January 2003, we acquired Best GmbH, whose sales are principally denominated in the Euro. Sales from this subsidiary increase our exposure to currency fluctuations. In the past we have attempted to limit or hedge these exposures through operational strategies and financial market instruments where we consider it appropriate. We generally used forward contracts to reduce our risk from interest rate and currency fluctuations. We currently do not have a hedging program in place. 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 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 patent applications pending in the United States and in various foreign countries. There can be no assurance that patents will issue from these 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 may 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.

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.

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.

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.

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There can be no assurance that errors would not be found in new versions of our products after commencement of commercial shipments, or that any such errors would not result in a loss or delay in market acceptance 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.

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 and manufacturing operations, 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 or a flood, could harm our business, financial condition, and operating results.

We have employees, suppliers and customers 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 such as severe acute respiratory syndrome, or SARS. 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.

The value of our investment portfolio will decrease if interest rates increase.

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 interest rate risk and will fall in value if market interest rates increase. 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 our investment portfolio to decrease in 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. For example, during the 52-week period ended September 30, 2003, the closing prices of our common stock as reported on the Nasdaq National Market ranged from a high of $25.15 to a low of $13.50. 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 operating results;

• announcements of technological innovations or new products or services by us or our competitors;

• announcements relating to strategic relationships, acquisitions or investments;

• changes in financial estimates or other statements by securities analysts;

• changes in general economic conditions;

• terrorist attacks, and the effects of military engagements;

• changes in the rating of our debentures or other securities; and

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• changes in the economic performance and/or market valuations of other software and high-technology companies.

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. 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.

Our debt service obligations may adversely affect our cash flow.

In June 2003, we issued $240.0 million in 1.5% convertible senior debentures due in 2023. During the period the debentures are outstanding, we will have debt service obligations on the debentures of approximately $3.6 million per year in interest payments, payable semi-annually. In addition, beginning June 1, 2008, we could be required to pay contingent interest of 0.35% if during any six-month period from June 1 to November 30 and December 1 to May 31, the average market price of the debentures for the five trading days ending on the third trading day immediately preceding the first day of the relevant six-month period equals 120% or more of the principal amount of the debentures.

Our debt service obligations related to the debentures include the following redemption and repurchase terms that could also affect our cash position:

• On or after June 1, 2008, we may redeem the debentures for cash at any time as a whole, or from time to time in part, at a price equal to 100% of the principal amount of the debenture to be redeemed plus any accrued and unpaid interest, including contingent interest, if any;

• On June 1, 2008 a holder may require us to repurchase all or a portion of that holder’s debentures at a repurchase price equal to 100% of the principal amount of those debentures plus accrued and unpaid interest, including contingent interest, if any, to, but not including, the date of repurchase in cash; and

• A holder may require us to repurchase all or a portion of that holder’s debentures if a fundamental change, as defined in the indenture, occurs prior to June 1, 2008 at 100% of their principal amount, plus any accrued and unpaid interest, including contingent interest, if any to, but not including, the repurchase date. We may choose to pay the repurchase price in cash.

If we issue other debt securities in the future, our debt service obligations will increase. We intend to fulfill our debt service obligations from cash generated by our operations, if any, and from our existing cash and investments. If we are unable to generate sufficient cash to meet these obligations and must instead use our existing cash or investments, we may have to reduce, curtail or terminate other activities of our business. We may add lines of credit and obtain other long-term debt and mortgage financing to finance capital expenditures in the future.

Our indebtedness could have significant negative consequences. For example, it could: increase our vulnerability to general adverse economic and industry conditions; limit our ability to obtain additional financing; require the dedication of a substantial portion of any cash flow from operations to the payment of principal of, and interest on, our indebtedness, thereby reducing the availability of such cash flow to fund our growth strategy, working capital, capital expenditures and other general corporate purposes; limit our flexibility in planning for, or reacting to, changes in our business and our industry; and place us at a competitive disadvantage relative to our competitors with less debt.

We have issued debt convertible into common stock. If either we or the debt holders convert the debentures into common stock or are required to calculate earnings per share on an “as converted basis,” our earnings per share could decrease.

In June 2003, we issued $240.0 million in senior convertible debentures due in 2023. The debentures are convertible into our shares of common stock at an initial conversion rate of 37.8508 shares per $1,000 principal amount of debentures (which represents a conversion price of approximately $26.42 per share) under certain conditions and subject to certain adjustments. Holders may convert their debentures into shares of our common stock prior to 2023 under the following circumstances:

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• during any fiscal quarter (beginning with the quarter ending September 30, 2003) if the sale price of our common stock for at least 20 consecutive trading days in the 30 consecutive trading-day period ending on the last trading day of the immediately preceding fiscal quarter exceeds 120% of the conversion price on that 30^th trading day;

• during any five consecutive trading day period immediately following any five consecutive trading day period (the “Debenture Measurement Period”) in which the average trading price for the debentures during that Debenture Measurement Period was less than 97% of the average conversion value for the debentures during such period; however, the debentures may not be converted after June 1, 2018 if on any trading day during such Debenture Measurement Period the closing sale price of shares of our common stock was between the then current conversion price on the debentures and 120% of the then conversion price of the debentures;

• upon the occurrence of specified corporate transactions, as defined in the indenture; or

• if we have called the debentures for redemption.

On June 1, 2013 and 2018, a holder may require us to repurchase all or a portion of that holder’s debentures at a repurchase price equal to 100% of the principal amount of those debentures plus accrued and unpaid interest, including contingent interest, if any. We may choose to pay the repurchase price on those dates in cash, in shares of our common stock or a combination of cash and shares of our common stock.

A holder may require us to repurchase all or a portion of that holder’s debentures if a fundamental change, as defined in the indenture, occurs prior to June 1, 2008 at 100% of their principal amount, plus any accrued and unpaid interest, including contingent interest, if any. We may choose to pay the repurchase price in cash, shares of our common stock, or if we have been acquired by another company and we are not the surviving corporation, shares of common stock, ordinary shares or American Depositary Shares of the surviving corporation, or a combination of cash and stock.

The debentures are convertible into a maximum of 9,084,192 shares of common stock. The issuance of additional shares of common stock would be dilutive to our earnings per share.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to various market risks, including changes in foreign currency exchange rates. Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange and interest rates. 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. We had no forward foreign exchange contracts outstanding as of September 30, 2003.

Interest Rate Risk

We maintain an investment portfolio of various holdings, types, and maturities. These securities 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 we held at September 30, 2003 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 (BPS) over a twelve-month time horizon.

This table estimates the fair value of the portfolio at a twelve month time horizon:

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	Valuation of securities given				Valuation of securities
	an interest rate decrease of		No change in		given an interest rate
(in thousands)	100 basis points		interest rates		increase of 100 basis points
Total Fair
Market Value	$	540,666	$	538,644	$	536,346

The fair value of our long-term debt, including current maturities, was estimated to be $240.2 million as of September 30, 2003, and equaled the carrying value.

ITEM 4: CONTROLS AND PROCEDURES

As of the end of the quarter ended September 30, 2003, our management, including our chief executive officer and chief financial officer, has evaluated the effectiveness of our disclosure controls and procedures, as such term is defined in Rule 13a-15(c) or Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of September 30, 2003 to ensure that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

PART II OTHER INFORMATION

     ITEM 1. LEGAL PROCEEDINGS

The information set forth under Note 10 in the notes to the Condensed Consolidated Financial Statements of this Quarterly Report on Form 10-Q is incorporated herein by reference.

     ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS

Not applicable.

     ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

     ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

     ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits*

No.	Description
10.1	Employment Agreement dated August 1, 2003 by and between Guy Gecht and the Company.
10.2	Employment Agreement dated August 1, 2003 by and between Fred Rosenzweig and the Company.
10.3	Employment Agreement dated August 1, 2003 by and between Joseph Cutts and the Company.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32.1	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.
32.2	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.

* Exhibits to the Company’s Annual Report on Form 10-K and 10-K/A for the year ended December 31, 2002 and the Company’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2003 and June 30, 2003 are incorporated herein by reference.

(b)  Reports on Form 8-K

A report on Form 8-K filed July 22, 2003, reporting under Item 9 and Item 12 the announcement that on July 22, 2003, Electronics for Imaging, Inc. issued a press release regarding its financial results for its second quarter of fiscal year 2003 ended June 30, 2003.

On July 24, 2003, a Form 8-K was filed reporting under Item 9 and Item 12 the announcement that on July 23, 2003, Electronics for Imaging, Inc. issued a press release correcting the table allocating revenue by product classification for the Three Months Ended June 30, 2003 and Six Months Ended June 30, 2003 for Digital Black-and-White Solutions and Other Sources in a press release issued July 22, 2003, regarding its financial results for its second quarter of fiscal year 2003 ended June 30, 2003.      .

SIGNATURES

          Pursuant to the requirements 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.

	ELECTRONICS FOR IMAGING, INC.
Date: November 14, 2003		/s/ Guy Gecht
		Guy Gecht
		Chief Executive Officer
		(Principal Executive Officer)
		/s/ Joseph Cutts
		Joseph Cutts
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EXHIBIT INDEX*

No.	Description
10.1	Employment Agreement dated August 1, 2003 by and between Guy Gecht and the Company.
10.2	Employment Agreement dated August 1, 2003 by and between Fred Rosenzweig and the Company.
10.3	Employment Agreement dated August 1, 2003 by and between Joseph Cutts and the Company.
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a).
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a).
32.1	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.
32.2	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.

* Exhibits to the Company’s Annual Report on Form 10-K and 10-K/A for the year ended December 31, 2002 and the Company’s Quarterly Report on Form 10-Q for the quarters ended March 31, 2003 and June 30, 2003 are incorporated herein by reference.

38 EX-10.1 3 f93195exv10w1.txt EXHIBIT 10.1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made and entered into effective as of August 1, 2003, by and between Guy Gecht (the "Executive") and Electronics for Imaging, Inc., a Delaware corporation (the "Company"). RECITALS A. It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the "Board") recognizes that such consideration can be a distraction to the Executive and can cause the Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. B. The Board believes that it is in the best interests of the Company and its stockholders to provide the Executive with an incentive to continue his employment and to motivate the Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders. C. The Board believes that it is imperative to provide the Executive with certain benefits upon a Change of Control and, under certain circumstances, upon termination of the Executive's full-time employment in connection with a Change of Control, which benefits are intended to provide the Executive with financial security and provide sufficient incentive and encouragement to the Executive to remain with the Company notwithstanding the possibility of a Change of Control. D. Further, the Board believes that it is in the best interest of the Company and its stockholders to provide additional benefits to the Executive in the event the Executive's employment terminates for any reason other than a Change in Control. Such benefits are intended to provide the Executive with financial security and provide sufficient incentive and encouragement to the Executive to remain with the Company notwithstanding the possible termination of employment. E. To accomplish the foregoing objectives, the Board of Directors has directed the Company, upon execution of this Agreement by the Executive, to agree to the terms provided herein. F. Certain capitalized terms used in the Agreement are defined in Section 6 below. In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of the Executive by the Company, the parties agree as follows: 1. Term of Agreement. This Agreement shall commence on the date of this Agreement and shall have a term of three (3) years ("Initial Term") and will automatically be renewed for one (1) year periods unless terminated by either party upon sixty (60) days written notice prior to the expiration of the Agreement and unless otherwise terminated earlier in accordance with the terms hereof. 2. Duties and Scope of Employment. The Company shall employ the Executive in the position of Chief Executive Officer, as such position is defined in terms of responsibilities and compensation as of the effective date of this Agreement; provided, however, that the Board of Directors by mutual agreement with the Executive shall have the right, at any time prior to the occurrence of a Change of Control, to revise such responsibilities and compensation. The Executive shall continue to devote his full business efforts and time to the Company and its subsidiaries. The Executive shall comply with and be bound by the Company's operating policies, procedures and practices from time to time in effect during his employment. During the term of the Executive's employment with the Company, the Executive shall devote his full-time, skill and attention to his duties and responsibilities, and shall perform them faithfully, diligently and competently, and the Executive shall use his best efforts to further the business of the Company and its affiliated entities. Subject to the Executive's fiduciary duties to the Company, this Agreement shall not prohibit the Executive from serving on the board of directors or any advisory board of other companies. 3. Base Compensation. (a) Annual Salary. The Company shall pay the Executive as compensation for his services a base salary at an annualized rate that is not less than his base salary as of the effective date of this Agreement (the "Annual Salary"). The Annual Salary may be subject to annual increases as the Board may authorize from time to time in connection with Executive's annual review. The Annual Salary shall be paid periodically in accordance with normal Company payroll procedures. The Annual Salary and Bonus, as well as any increases in such compensation that the Board of Directors may grant from time to time, is referred to in this Agreement as "Base Compensation." (b) Bonus. In addition to the Annual Salary, the Executive will be eligible to receive an annual bonus under the Company's Executive Bonus Plan as determined by the Board in its discretion. 4. Executive Benefits. The Executive shall be eligible to participate in the employee benefit plans and executive compensation programs maintained by the Company applicable to other key executives of the Company, including (without limitation) retirement plans, savings or profit-sharing plans, stock option, incentive or other bonus plans, life, disability, health, accident and other insurance programs, paid vacations, and similar plans or programs, subject in each case to the generally applicable terms and conditions of the applicable plan or program in question and to the determination of any committee administering such plan or program. In addition, the Executive shall continue to be entitled to receive any other benefits currently received by the Executive such as automobile allowance benefits. 5. At-Will Employment. The Company and the Executive acknowledge that the Executive's employment is and shall continue to be at-will, as defined under applicable law. If the Executive's employment terminates for any reason, including, without limitation, any termination prior to and not in connection with a Change of Control, the Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be available in accordance with the Company's established employee plans and policies at the time of termination. 6. Severance Benefits. (a) Termination in Connection with a Change of Control. Subject to Section 7 if the Company terminates the Executive's employment at any time during the period beginning upon (i) the execution of a binding letter of intent regarding a Change of Control, and (ii) ninety (90) days before a Change of Control, and ending twenty four (24) months after a Change of Control, and the Executive Page 2 signs and does not revoke a standard release of claims with the Company attached hereto as Exhibit A, then the Executive shall be entitled to receive severance benefits as follows: (i) Involuntary or Constructive Termination. If the Executive's employment terminates as a result of Involuntary or Constructive Termination (defined in section 7(c)) other than for Cause (defined in section 7(a)), then the Executive shall be entitled to receive (i) the Executive's Annual Salary for twenty-four (24) months plus an amount equal to the bonus the Executive would have earned had he been employed by the Company at the end of the calendar year multiplied by a fraction (x) the numerator of which is the number of completed months in that year, and (y) the denominator of which is twelve (12) (the "Current Bonus") and (ii) in addition to the Executive's stock options that were exercisable immediately prior to such termination, the vesting of additional options shall accelerate in full and become exercisable by the Executive or the Executive's representative, as the case may be for one year from the Executive's termination date and (iii) COBRA coverage (Medical, Dental and Vision) paid for the Company for eighteen (18) months from the Executive's termination date if the Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), within the time period prescribed pursuant to COBRA. (ii) Voluntary Resignation; Termination For Cause. If the Executive voluntarily resigns from the Company (other than as an Involuntary or Constructive Termination described in subsection 6(a)(i)), or if the Company terminates the Executive's employment for Cause, then the Executive shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing benefit plans at the time of such termination. (b) Termination Apart from Change of Control. Subject to Section 7, if the Company terminates the Executive's employment at any time, either before the earlier to occur of (i) the execution of a binding letter of intent regarding a Change of Control, and (ii) ninety (90) days before a Change of Control, or after the twenty-four (24) month period following a Change of Control, and the Executive signs and does not revoke a standard release of claims with the Company attached hereto as Exhibit A, then the Executive shall be entitled to receive severance benefits as follows: (i) Involuntary or Constructive Termination. If the Executive's employment terminates as a result of Involuntary or Constructive Termination (defined in section 7(c)) other than for Cause (defined in section 7(a)), then the Executive shall be entitled to receive (i) the Executive's Annual Salary for twelve (12) months plus an amount equal to the bonus the Executive would have earned had he been employed by the Company at the end of the calendar year multiplied by a fraction (x) the numerator of which is the number of completed months in that year, and (y) the denominator of which is twelve (12) (the "Current Bonus") and (ii) in addition to Executive's stock options that were exercisable immediately prior to such termination, the vesting of additional options shall accelerate and become exercisable by the Executive or the Executive's estate, as the case may be, as if the Executive had remained continuously employed for a period of six (6) months following such termination (and if any of such options vest on an annual basis, the appropriate credit shall be given as if the vesting accrued monthly), and such options shall remain exercisable for the period prescribed in Executive's stock option agreements, and (iii) COBRA coverage (Medical, Dental and Vision) paid for the Company for twelve (12) months from the Executive's termination date if the Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), within the time period prescribed pursuant to COBRA. Page 3 (ii) Voluntary Resignation; Termination for Cause. If the Executive voluntarily resigns from the Company (other than as an Involuntary or Constructive Termination as described in subsection 6(b)(i)), or if the Company terminates the Executive's employment for Cause, then the Executive shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing benefit plans at the time of such termination. (c) Disability; Death. If the Company terminates the Executive's employment as a result of the Executive's Disability (defined in section 7(d)), or such Executive's employment is terminated due to the death of the Executive, then the Executive or the Executive's estate, as the case may be, shall be entitled to receive (i) the Executive's Annual Salary for twelve (12) months plus his Current Bonus he would have been eligible for on a prorated period from the Executive's termination date, (ii) in addition to Executive's stock options that were exercisable immediately prior to such termination, the vesting of additional options shall accelerate and become exercisable by the Executive or the Executive's estate, as the case may be, as if the Executive had remained continuously employed for a period of six (6) months following such termination (and if any of such options vest on an annual basis, the appropriate credit shall be given as if the vesting accrued monthly), and such options shall remain exercisable for the period prescribed in Executive's stock option agreements, and (iii) such other benefits (if any) as may then be established under the Company's then existing benefit plans at the time of such Disability or death. (d) Severance Payment. Any severance payments except for the Current Bonus to which the Executive is entitled pursuant to this Section shall be paid in a lump sum within thirty (30) days of the Executive's termination. The Current Bonus to which the Executive is entitled pursuant to this Section shall be paid in a lump sum within thirty (30) days of the date that the Company's audit is complete for such year. 7. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings: (a) Cause. "Cause" shall mean (i) any act of personal dishonesty taken by the Executive in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Executive, (ii) committing a felony or an act of fraud against the Company or its affiliates, and (iii) acts by the Executive which constitute gross misconduct, are injurious to the Company, and which are demonstrably willful and deliberate on the Executive's part after there has been delivered to the Executive a written demand of cessation of such acts from the Company which describes the basis for the Company's belief that the Executive has engaged or committed such acts. (b) Change of Control. "Change of Control" shall mean the occurrence of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Page 4 Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) A merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation. (c) Involuntary or Constructive Termination. "Involuntary or Constructive Termination" shall mean (i) without the Executive's express written consent, the significant reduction of the Executive's duties, either of which is inconsistent with the Executive's position with the Company and responsibilities in effect immediately prior to such assignment, or the removal of the Executive from such position and responsibilities; (ii) without the Executive's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Executive immediately prior to such reduction; (iii) a reduction by the Company in the Base Compensation of the Executive as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Executive is entitled immediately prior to such reduction with the result that the Executive's overall benefits package is significantly reduced; (v) the relocation of the Executive to a facility or a location more than 30 miles from the Executive's then present location, without the Executive's express written consent; (vi) any purported termination of the Executive by the Company which is not effected for Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this agreement by any successors contemplated in Section 8 below. (d) Disability. "Disability" shall mean that the Executive has been unable to perform his duties under this Agreement as the result of his incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, and is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least 30 days' written notice by the Company of its intention to terminate the Executive's employment. In the event that the Executive resumes the performance of substantially all of his duties hereunder before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked. 8. Restrictive Covenants. Executive agrees that he shall not do any of the following without the prior written consent of the Board. (a) Non-Solicitation. For a period of one year from the Executive's date of termination of his employment with the Company for any reason whatsoever, the Executive shall not, on his own behalf or on behalf of any other person, partnership, association, corporation or other entity, hire or solicit or in any manner attempt to influence or induce any employee of the Company or its affiliates to leave the employment of the Company or its affiliates, nor shall the Executive use or disclose to any Page 5 person, partnership, association, corporation or other entity any information obtained while an Executive of the Company concerning the names and addresses of the Company's employees. (b) Non-Compete. For a period of one year from the Executive's date of termination for any reason, the Executive agrees that he will not, directly or indirectly, engage in or own or control any interest in (except as a passive investor in publicly held companies and except for investments held at the date hereof) or act as an officer, director, or employee of or consultant or advisor to any firm, corporation, or institution directly or indirectly in competition with or engaged in a business substantially similar to that of the Company, including the manufacture or sale of products or the provision of services that the Company was engaged in, or was developing, at the time the Executive's employment terminates. 9. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Executive (i) constitute "parachute payments" within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then Executive's benefits under this Agreement shall be either: (a) delivered in full, or (b) delivered as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. Unless the Company and the Executive otherwise agree in writing, any determination required under this Section shall be made in writing in good faith by the accounting firm serving as the Company's independent public accountants immediately prior to the Change of Control (the "Accountants"). In the event of a reduction in benefits hereunder, the Executive shall be given the choice of which benefits to reduce. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code. The Company and the Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section. 10. Successors. (a) Company's Successors. Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Agreement by operation of law. Page 6 (b) Executive's Successors. The terms of this Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successors, heirs, devisees and legatees. 11. Notice. (a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Executive, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and ail notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company shall be communicated by a notice of termination to the other party hereto given in accordance with this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than 15 days after the giving of such notice). The failure by the Executive to include in the notice any fact or circumstance which contributes to a showing of Involuntary or Constructive Termination shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder. 12. Arbitration. (a) Any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held in California, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. (b) The arbitrator(s) shall apply California law to the merits of any dispute or claim, without reference to conflicts of law rules. The arbitration proceedings shall be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Executive hereby consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants. (c) Executive understands that nothing in this Section modifies Executive's at-will employment status. Either Executive or the Company can terminate the employment relationship at any time, with or without Cause. (d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF Page 7 EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS: (i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION; (ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq; (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION. 13. Miscellaneous Provisions. (a) No Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement (whether by seeking new employment or in any other manner), nor shall any such payment be reduced by any earnings that the Executive may receive from any other source. (b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (c) Whole Agreement. No agreements, representations or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. (d) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. (e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (f) No Assignment of Benefits. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or Page 8 involuntary assignment or by operation of taw, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (f) shall be void. (g) Employment Taxes. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes. (h) Assignment by Company. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a Section of this Agreement shall mean the corporation that actually employs the Executive. (i) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written. ELECTRONICS FOR IMAGING, INC. EXECUTIVE: /s/ David Peterschmidt /s/ Guy Gecht - ------------------------------- ----------------------- Compensation Committee Member Guy Gecht Board of Directors /s/ Jean-Louis Gassee - ------------------------------- Compensation Committee Member Board of Directors Page 9 EX-10.2 4 f93195exv10w2.txt EXHIBIT 10.2 EXHIBIT 10.2 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made and entered into effective as of August 1, 2003, by and between Fred Rosenzweig (the "Executive") and Electronics for Imaging, Inc., a Delaware corporation (the "Company"). RECITALS A. It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the "Board") recognizes that such consideration can be a distraction to the Executive and can cause the Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. B. The Board believes that it is in the best interests of the Company and its stockholders to provide the Executive with an incentive to continue his employment and to motivate the Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders. C. The Board believes that it is imperative to provide the Executive with certain benefits upon a Change of Control and, under certain circumstances, upon termination of the Executive's full-time employment in connection with a Change of Control, which benefits are intended to provide the Executive with financial security and provide sufficient incentive and encouragement to the Executive to remain with the Company notwithstanding the possibility of a Change of Control. D. Further, the Board believes that it is in the best interest of the Company and its stockholders to provide additional benefits to the Executive in the event the Executive's employment terminates for any reason other than a Change in Control. Such benefits are intended to provide the Executive with financial security and provide sufficient incentive and encouragement to the Executive to remain with the Company notwithstanding the possible termination of employment. E. To accomplish the foregoing objectives, the Board of Directors has directed the Company, upon execution of this Agreement by the Executive, to agree to the terms provided herein. F. Certain capitalized terms used in the Agreement are defined in Section 6 below. In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of the Executive by the Company, the parties agree as follows: 1. Term of Agreement. This Agreement shall commence on the date of this Agreement and shall have a term of three (3) years ("Initial Term") and will automatically be renewed for one (1) year periods unless terminated by either party upon sixty (60) days written notice prior to the expiration of the Agreement and unless otherwise terminated earlier in accordance with the terms hereof. 2. Duties and Scope of Employment. The Company shall employ the Executive in the position of President and Chief Operating Officer, as such position is defined in terms of responsibilities and compensation as of the effective date of this Agreement; provided, however, that the Board of Directors by mutual agreement with the Executive shall have the right, at any time prior to the occurrence of a Change of Control, to revise such responsibilities and compensation. The Executive shall continue to devote his full business efforts and time to the Company and its subsidiaries. The Executive shall comply with and be bound by the Company's operating policies, procedures and practices from time to time in effect during his employment. During the term of the Executive's employment with the Company, the Executive shall devote his full-time, skill and attention to his duties and responsibilities, and shall perform them faithfully, diligently and competently, and the Executive shall use his best efforts to further the business of the Company and its affiliated entities. Subject to the Executive's fiduciary duties to the Company, this Agreement shall not prohibit the Executive from serving on the board of directors or any advisory board of other companies. 3. Base Compensation. (a) Annual Salary. The Company shall pay the Executive as compensation for his services a base salary at an annualized rate that is not less than his base salary as of the effective date of this Agreement (the "Annual Salary"). The Annual Salary may be subject to annual increases as the Board may authorize from time to time in connection with Executive's annual review. The Annual Salary shall be paid periodically in accordance with normal Company payroll procedures. The Annual Salary and Bonus, as well as any increases in such compensation that the Board of Directors may grant from time to time, is referred to in this Agreement as "Base Compensation." (b) Bonus. In addition to the Annual Salary, the Executive will be eligible to receive an annual bonus under the Company's Executive Bonus Plan as determined by the Board in its discretion. 4. Executive Benefits. The Executive shall be eligible to participate in the employee benefit plans and executive compensation programs maintained by the Company applicable to other key executives of the Company, including (without limitation) retirement plans, savings or profit-sharing plans, stock option, incentive or other bonus plans, life, disability, health, accident and other insurance programs, paid vacations, and similar plans or programs, subject in each case to the generally applicable terms and conditions of the applicable plan or program in question and to the determination of any committee administering such plan or program. In addition, the Executive shall continue to be entitled to receive any other benefits currently received by the Executive such as automobile allowance benefits. 5. At-Will Employment. The Company and the Executive acknowledge that the Executive's employment is and shall continue to be at-will, as defined under applicable law. If the Executive's employment terminates for any reason, including, without limitation, any termination prior to and not in connection with a Change of Control, the Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be available in accordance with the Company's established employee plans and policies at the time of termination. 6. Severance Benefits. (a) Termination in Connection with a Change of Control. Subject to Section 7 if the Company terminates the Executive's employment at any time during the period beginning upon (i) the execution of a binding letter of intent regarding a Change of Control, and (ii) ninety (90) days before a Change of Control, and ending twenty four (24) months after a Change of Control, and the Executive Page 2 signs and does not revoke a standard release of claims with the Company attached hereto as Exhibit A, then the Executive shall be entitled to receive severance benefits as follows: (i) Involuntary or Constructive Termination. If the Executive's employment terminates as a result of Involuntary or Constructive Termination (defined in section 7(c)) other than for Cause (defined in section 7(a)), then the Executive shall be entitled to receive (i) the Executive's Annual Salary for twenty-four (24) months plus an amount equal to the bonus the Executive would have earned had he been employed by the Company at the end of the calendar year multiplied by a fraction (x) the numerator of which is the number of completed months in that year, and (y) the denominator of which is twelve (12) (the "Current Bonus") and (ii) in addition to the Executive's stock options that were exercisable immediately prior to such termination, the vesting of additional options shall accelerate in full and become exercisable by the Executive or the Executive's representative, as the case may be for one year from the Executive's termination date and (iii) COBRA coverage (Medical, Dental and Vision) paid for the Company for eighteen (18) months from the Executive's termination date if the Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), within the time period prescribed pursuant to COBRA. (ii) Voluntary Resignation; Termination For Cause. If the Executive voluntarily resigns from the Company (other than as an Involuntary or Constructive Termination described in subsection 6(a)(i)), or if the Company terminates the Executive's employment for Cause, then the Executive shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing benefit plans at the time of such termination. (b) Termination Apart from Change of Control. Subject to Section 7, if the Company terminates the Executive's employment at any time, either before the earlier to occur of (i) the execution of a binding letter of intent regarding a Change of Control, and (ii) ninety (90) days before a Change of Control, or after the twenty-four (24) month period following a Change of Control, and the Executive signs and does not revoke a standard release of claims with the Company attached hereto as Exhibit A, then the Executive shall be entitled to receive severance benefits as follows: (i) Involuntary or Constructive Termination. If the Executive's employment terminates as a result of Involuntary or Constructive Termination (defined in section 7(c)) other than for Cause (defined in section 7(a)), then the Executive shall be entitled to receive (i) the Executive's Annual Salary for twelve (12) months plus an amount equal to the bonus the Executive would have earned had he been employed by the Company at the end of the calendar year multiplied by a fraction (x) the numerator of which is the number of completed months in that year, and (y) the denominator of which is twelve (12) (the "Current Bonus") and (ii) in addition to Executive's stock options that were exercisable immediately prior to such termination, the vesting of additional options shall accelerate and become exercisable by the Executive or the Executive's estate, as the case may be, as if the Executive had remained continuously employed for a period of six (6) months following such termination (and if any of such options vest on an annual basis, the appropriate credit shall be given as if the vesting accrued monthly), and such options shall remain exercisable for the period prescribed in Executive's stock option agreements, and (iii) COBRA coverage (Medical, Dental and Vision) paid for the Company for twelve (12) months from the Executive's termination date if the Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), within the time period prescribed pursuant to COBRA. Page 3 (ii) Voluntary Resignation; Termination for Cause. If the Executive voluntarily resigns from the Company (other than as an Involuntary or Constructive Termination as described in subsection 6(b)(i)), or if the Company terminates the Executive's employment for Cause, then the Executive shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing benefit plans at the time of such termination. (c) Disability; Death. If the Company terminates the Executive's employment as a result of the Executive's Disability (defined in section 7(d)), or such Executive's employment is terminated due to the death of the Executive, then the Executive or the Executive's estate, as the case may be, shall be entitled to receive (i) the Executive's Annual Salary for twelve (12) months plus his Current Bonus he would have been eligible for on a prorated period from the Executive's termination date, (ii) in addition to Executive's stock options that were exercisable immediately prior to such termination, the vesting of additional options shall accelerate and become exercisable by the Executive or the Executive's estate, as the case may be, as if the Executive had remained continuously employed for a period of six (6) months following such termination (and if any of such options vest on an annual basis, the appropriate credit shall be given as if the vesting accrued monthly), and such options shall remain exercisable for the period prescribed in Executive's stock option agreements, and (iii) such other benefits (if any) as may then be established under the Company's then existing benefit plans at the time of such Disability or death. (d) Severance Payment. Any severance payments except for the Current Bonus to which the Executive is entitled pursuant to this Section shall be paid in a lump sum within thirty (30) days of the Executive's termination. The Current Bonus to which the Executive is entitled pursuant to this Section shall be paid in a lump sum within thirty (30) days of the date that the Company's audit is complete for such year. 7. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings: (a) Cause. "Cause" shall mean (i) any act of personal dishonesty taken by the Executive in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Executive, (ii) committing a felony or an act of fraud against the Company or its affiliates, and (iii) acts by the Executive which constitute gross misconduct, are injurious to the Company, and which are demonstrably willful and deliberate on the Executive's part after there has been delivered to the Executive a written demand of cessation of such acts from the Company which describes the basis for the Company's belief that the Executive has engaged or committed such acts. (b) Change of Control. "Change of Control" shall mean the occurrence of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Page 4 Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) A merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation. (c) Involuntary or Constructive Termination. "Involuntary or Constructive Termination" shall mean (i) without the Executive's express written consent, the significant reduction of the Executive's duties, either of which is inconsistent with the Executive's position with the Company and responsibilities in effect immediately prior to such assignment, or the removal of the Executive from such position and responsibilities; (ii) without the Executive's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Executive immediately prior to such reduction; (iii) a reduction by the Company in the Base Compensation of the Executive as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Executive is entitled immediately prior to such reduction with the result that the Executive's overall benefits package is significantly reduced; (v) the relocation of the Executive to a facility or a location more than 30 miles from the Executive's then present location, without the Executive's express written consent; (vi) any purported termination of the Executive by the Company which is not effected for Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this agreement by any successors contemplated in Section 8 below. (d) Disability. "Disability" shall mean that the Executive has been unable to perform his duties under this Agreement as the result of his incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, and is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least 30 days' written notice by the Company of its intention to terminate the Executive's employment. In the event that the Executive resumes the performance of substantially all of his duties hereunder before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked. 8. Restrictive Covenants. Executive agrees that he shall not do any of the following without the prior written consent of the Board. (a) Non-Solicitation. For a period of one year from the Executive's date of termination of his employment with the Company for any reason whatsoever, the Executive shall not, on his own behalf or on behalf of any other person, partnership, association, corporation or other entity, hire or solicit or in any manner attempt to influence or induce any employee of the Company or its affiliates to leave the employment of the Company or its affiliates, nor shall the Executive use or disclose to any Page 5 person, partnership, association, corporation or other entity any information obtained while an Executive of the Company concerning the names and addresses of the Company's employees. (b) Non-Compete. For a period of one year from the Executive's date of termination for any reason, the Executive agrees that he will not, directly or indirectly, engage in or own or control any interest in (except as a passive investor in publicly held companies and except for investments held at the date hereof) or act as an officer, director, or employee of or consultant or advisor to any firm, corporation, or institution directly or indirectly in competition with or engaged in a business substantially similar to that of the Company, including the manufacture or sale of products or the provision of services that the Company was engaged in, or was developing, at the time the Executive's employment terminates. 9. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Executive (i) constitute "parachute payments" within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then Executive's benefits under this Agreement shall be either: (a) delivered in full, or (b) delivered as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. Unless the Company and the Executive otherwise agree in writing, any determination required under this Section shall be made in writing in good faith by the accounting firm serving as the Company's independent public accountants immediately prior to the Change of Control (the "Accountants"). In the event of a reduction in benefits hereunder, the Executive shall be given the choice of which benefits to reduce. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code. The Company and the Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section. 10. Successors. (a) Company's Successors. Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Agreement by operation of law. Page 6 (b) Executive's Successors. The terms of this Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successors, heirs, devisees and legatees. 11. Notice. (a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Executive, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and ail notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company shall be communicated by a notice of termination to the other party hereto given in accordance with this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than 15 days after the giving of such notice). The failure by the Executive to include in the notice any fact or circumstance which contributes to a showing of Involuntary or Constructive Termination shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder. 12. Arbitration. (a) Any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held in California, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. (b) The arbitrator(s) shall apply California law to the merits of any dispute or claim, without reference to conflicts of law rules. The arbitration proceedings shall be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Executive hereby consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants. (c) Executive understands that nothing in this Section modifies Executive's at-will employment status. Either Executive or the Company can terminate the employment relationship at any time, with or without Cause. (d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF Page 7 EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS: (i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION; (ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq; (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION. 13. Miscellaneous Provisions. (a) No Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement (whether by seeking new employment or in any other manner), nor shall any such payment be reduced by any earnings that the Executive may receive from any other source. (b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (c) Whole Agreement. No agreements, representations or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. (d) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. (e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (f) No Assignment of Benefits. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or Page 8 involuntary assignment or by operation of taw, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (f) shall be void. (g) Employment Taxes. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes. (h) Assignment by Company. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a Section of this Agreement shall mean the corporation that actually employs the Executive. (i) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written. ELECTRONICS FOR IMAGING, INC. EXECUTIVE: /s/ David Peterschmidt /s/ Fred Rosenzweig - ----------------------------- ------------------------------ Compensation Committee Member Fred Rosenzweig Board of Directors /s/ Jean-Louis Gassee - ----------------------------- Compensation Committee Member Board of Directors Page 9 EX-10.3 5 f93195exv10w3.txt EXHIBIT 10.3 EXHIBIT 10.3 EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is made and entered into effective as of August 1, 2003, by and between Joseph Cutts (the "Executive") and Electronics for Imaging, Inc., a Delaware corporation (the "Company"). RECITALS A. It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the "Board") recognizes that such consideration can be a distraction to the Executive and can cause the Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. B. The Board believes that it is in the best interests of the Company and its stockholders to provide the Executive with an incentive to continue his employment and to motivate the Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders. C. The Board believes that it is imperative to provide the Executive with certain benefits upon a Change of Control and, under certain circumstances, upon termination of the Executive's full-time employment in connection with a Change of Control, which benefits are intended to provide the Executive with financial security and provide sufficient incentive and encouragement to the Executive to remain with the Company notwithstanding the possibility of a Change of Control. D. Further, the Board believes that it is in the best interest of the Company and its stockholders to provide additional benefits to the Executive in the event the Executive's employment terminates for any reason other than a Change in Control. Such benefits are intended to provide the Executive with financial security and provide sufficient incentive and encouragement to the Executive to remain with the Company notwithstanding the possible termination of employment. E. To accomplish the foregoing objectives, the Board of Directors has directed the Company, upon execution of this Agreement by the Executive, to agree to the terms provided herein. F. Certain capitalized terms used in the Agreement are defined in Section 6 below. In consideration of the mutual covenants herein contained, and in consideration of the continuing employment of the Executive by the Company, the parties agree as follows: 1. Term of Agreement. This Agreement shall commence on the date of this Agreement and shall have a term of three (3) years ("Initial Term") and will automatically be renewed for one (1) year periods unless terminated by either party upon sixty (60) days written notice prior to the expiration of the Agreement and unless otherwise terminated earlier in accordance with the terms hereof. 2. Duties and Scope of Employment. The Company shall employ the Executive in the position of Chief Financial Officer, as such position is defined in terms of responsibilities and compensation as of the effective date of this Agreement; provided, however, that the Board of Directors by mutual agreement with the Executive shall have the right, at any time prior to the occurrence of a Change of Control, to revise such responsibilities and compensation. The Executive shall continue to devote his full business efforts and time to the Company and its subsidiaries. The Executive shall comply with and be bound by the Company's operating policies, procedures and practices from time to time in effect during his employment. During the term of the Executive's employment with the Company, the Executive shall devote his full-time, skill and attention to his duties and responsibilities, and shall perform them faithfully, diligently and competently, and the Executive shall use his best efforts to further the business of the Company and its affiliated entities. Subject to the Executive's fiduciary duties to the Company, this Agreement shall not prohibit the Executive from serving on the board of directors or any advisory board of other companies. 3. Base Compensation. (a) Annual Salary. The Company shall pay the Executive as compensation for his services a base salary at an annualized rate that is not less than his base salary as of the effective date of this Agreement (the "Annual Salary"). The Annual Salary may be subject to annual increases as the Board may authorize from time to time in connection with Executive's annual review. The Annual Salary shall be paid periodically in accordance with normal Company payroll procedures. The Annual Salary and Bonus, as well as any increases in such compensation that the Board of Directors may grant from time to time, is referred to in this Agreement as "Base Compensation." (b) Bonus. In addition to the Annual Salary, the Executive will be eligible to receive an annual bonus under the Company's Executive Bonus Plan as determined by the Board in its discretion. 4. Executive Benefits. The Executive shall be eligible to participate in the employee benefit plans and executive compensation programs maintained by the Company applicable to other key executives of the Company, including (without limitation) retirement plans, savings or profit-sharing plans, stock option, incentive or other bonus plans, life, disability, health, accident and other insurance programs, paid vacations, and similar plans or programs, subject in each case to the generally applicable terms and conditions of the applicable plan or program in question and to the determination of any committee administering such plan or program. In addition, the Executive shall continue to be entitled to receive any other benefits currently received by the Executive such as automobile allowance benefits. 5. At-Will Employment. The Company and the Executive acknowledge that the Executive's employment is and shall continue to be at-will, as defined under applicable law. If the Executive's employment terminates for any reason, including, without limitation, any termination prior to and not in connection with a Change of Control, the Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement, or as may otherwise be available in accordance with the Company's established employee plans and policies at the time of termination. 6. Severance Benefits. (a) Termination in Connection with a Change of Control. Subject to Section 7 if the Company terminates the Executive's employment at any time during the period beginning upon (i) the execution of a binding letter of intent regarding a Change of Control, and (ii) ninety (90) days before a Change of Control, and ending twenty four (24) months after a Change of Control, and the Executive Page 2 signs and does not revoke a standard release of claims with the Company attached hereto as Exhibit A, then the Executive shall be entitled to receive severance benefits as follows: (i) Involuntary or Constructive Termination. If the Executive's employment terminates as a result of Involuntary or Constructive Termination (defined in section 7(c)) other than for Cause (defined in section 7(a)), then the Executive shall be entitled to receive (i) the Executive's Annual Salary for twenty-four (24) months plus an amount equal to the bonus the Executive would have earned had he been employed by the Company at the end of the calendar year multiplied by a fraction (x) the numerator of which is the number of completed months in that year, and (y) the denominator of which is twelve (12) (the "Current Bonus") and (ii) in addition to the Executive's stock options that were exercisable immediately prior to such termination, the vesting of additional options shall accelerate in full and become exercisable by the Executive or the Executive's representative, as the case may be for one year from the Executive's termination date and (iii) COBRA coverage (Medical, Dental and Vision) paid for the Company for eighteen (18) months from the Executive's termination date if the Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), within the time period prescribed pursuant to COBRA. (ii) Voluntary Resignation; Termination For Cause. If the Executive voluntarily resigns from the Company (other than as an Involuntary or Constructive Termination described in subsection 6(a)(i)), or if the Company terminates the Executive's employment for Cause, then the Executive shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing benefit plans at the time of such termination. (b) Termination Apart from Change of Control. Subject to Section 7, if the Company terminates the Executive's employment at any time, either before the earlier to occur of (i) the execution of a binding letter of intent regarding a Change of Control, and (ii) ninety (90) days before a Change of Control, or after the twenty-four (24) month period following a Change of Control, and the Executive signs and does not revoke a standard release of claims with the Company attached hereto as Exhibit A, then the Executive shall be entitled to receive severance benefits as follows: (i) Involuntary or Constructive Termination. If the Executive's employment terminates as a result of Involuntary or Constructive Termination (defined in section 7(c)) other than for Cause (defined in section 7(a)), then the Executive shall be entitled to receive (i) the Executive's Annual Salary for twelve (12) months plus an amount equal to the bonus the Executive would have earned had he been employed by the Company at the end of the calendar year multiplied by a fraction (x) the numerator of which is the number of completed months in that year, and (y) the denominator of which is twelve (12) (the "Current Bonus") and (ii) in addition to Executive's stock options that were exercisable immediately prior to such termination, the vesting of additional options shall accelerate and become exercisable by the Executive or the Executive's estate, as the case may be, as if the Executive had remained continuously employed for a period of six (6) months following such termination (and if any of such options vest on an annual basis, the appropriate credit shall be given as if the vesting accrued monthly), and such options shall remain exercisable for the period prescribed in Executive's stock option agreements, and (iii) COBRA coverage (Medical, Dental and Vision) paid for the Company for twelve (12) months from the Executive's termination date if the Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), within the time period prescribed pursuant to COBRA. Page 3 (ii) Voluntary Resignation; Termination for Cause. If the Executive voluntarily resigns from the Company (other than as an Involuntary or Constructive Termination as described in subsection 6(b)(i)), or if the Company terminates the Executive's employment for Cause, then the Executive shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing benefit plans at the time of such termination. (c) Disability; Death. If the Company terminates the Executive's employment as a result of the Executive's Disability (defined in section 7(d)), or such Executive's employment is terminated due to the death of the Executive, then the Executive or the Executive's estate, as the case may be, shall be entitled to receive (i) the Executive's Annual Salary for twelve (12) months plus his Current Bonus he would have been eligible for on a prorated period from the Executive's termination date, (ii) in addition to Executive's stock options that were exercisable immediately prior to such termination, the vesting of additional options shall accelerate and become exercisable by the Executive or the Executive's estate, as the case may be, as if the Executive had remained continuously employed for a period of six (6) months following such termination (and if any of such options vest on an annual basis, the appropriate credit shall be given as if the vesting accrued monthly), and such options shall remain exercisable for the period prescribed in Executive's stock option agreements, and (iii) such other benefits (if any) as may then be established under the Company's then existing benefit plans at the time of such Disability or death. (d) Severance Payment. Any severance payments except for the Current Bonus to which the Executive is entitled pursuant to this Section shall be paid in a lump sum within thirty (30) days of the Executive's termination. The Current Bonus to which the Executive is entitled pursuant to this Section shall be paid in a lump sum within thirty (30) days of the date that the Company's audit is complete for such year. 7. Definition of Terms. The following terms referred to in this Agreement shall have the following meanings: (a) Cause. "Cause" shall mean (i) any act of personal dishonesty taken by the Executive in connection with his responsibilities as an employee and intended to result in substantial personal enrichment of the Executive, (ii) committing a felony or an act of fraud against the Company or its affiliates, and (iii) acts by the Executive which constitute gross misconduct, are injurious to the Company, and which are demonstrably willful and deliberate on the Executive's part after there has been delivered to the Executive a written demand of cessation of such acts from the Company which describes the basis for the Company's belief that the Executive has engaged or committed such acts. (b) Change of Control. "Change of Control" shall mean the occurrence of any of the following events: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board of Directors of the Company occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Page 4 Company as of the date hereof, or (B) are elected, or nominated for election, to the Board of Directors of the Company with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) A merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least sixty percent (60%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation. (c) Involuntary or Constructive Termination. "Involuntary or Constructive Termination" shall mean (i) without the Executive's express written consent, the significant reduction of the Executive's duties, either of which is inconsistent with the Executive's position with the Company and responsibilities in effect immediately prior to such assignment, or the removal of the Executive from such position and responsibilities; (ii) without the Executive's express written consent, a substantial reduction, without good business reasons, of the facilities and perquisites (including office space and location) available to the Executive immediately prior to such reduction; (iii) a reduction by the Company in the Base Compensation of the Executive as in effect immediately prior to such reduction; (iv) a material reduction by the Company in the kind or level of employee benefits to which the Executive is entitled immediately prior to such reduction with the result that the Executive's overall benefits package is significantly reduced; (v) the relocation of the Executive to a facility or a location more than 30 miles from the Executive's then present location, without the Executive's express written consent; (vi) any purported termination of the Executive by the Company which is not effected for Disability or for Cause, or any purported termination for which the grounds relied upon are not valid; or (vii) the failure of the Company to obtain the assumption of this agreement by any successors contemplated in Section 8 below. (d) Disability. "Disability" shall mean that the Executive has been unable to perform his duties under this Agreement as the result of his incapacity due to physical or mental illness, and such inability, at least 26 weeks after its commencement, and is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least 30 days' written notice by the Company of its intention to terminate the Executive's employment. In the event that the Executive resumes the performance of substantially all of his duties hereunder before the termination of his employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked. 8. Restrictive Covenants. Executive agrees that he shall not do any of the following without the prior written consent of the Board. (a) Non-Solicitation. For a period of one year from the Executive's date of termination of his employment with the Company for any reason whatsoever, the Executive shall not, on his own behalf or on behalf of any other person, partnership, association, corporation or other entity, hire or solicit or in any manner attempt to influence or induce any employee of the Company or its affiliates to leave the employment of the Company or its affiliates, nor shall the Executive use or disclose to any Page 5 person, partnership, association, corporation or other entity any information obtained while an Executive of the Company concerning the names and addresses of the Company's employees. (b) Non-Compete. For a period of one year from the Executive's date of termination for any reason, the Executive agrees that he will not, directly or indirectly, engage in or own or control any interest in (except as a passive investor in publicly held companies and except for investments held at the date hereof) or act as an officer, director, or employee of or consultant or advisor to any firm, corporation, or institution directly or indirectly in competition with or engaged in a business substantially similar to that of the Company, including the manufacture or sale of products or the provision of services that the Company was engaged in, or was developing, at the time the Executive's employment terminates. 9. Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Executive (i) constitute "parachute payments" within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the "Excise Tax"), then Executive's benefits under this Agreement shall be either: (a) delivered in full, or (b) delivered as to such lesser extent which would result in no portion of such benefits being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code. Unless the Company and the Executive otherwise agree in writing, any determination required under this Section shall be made in writing in good faith by the accounting firm serving as the Company's independent public accountants immediately prior to the Change of Control (the "Accountants"). In the event of a reduction in benefits hereunder, the Executive shall be given the choice of which benefits to reduce. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of the Code. The Company and the Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section. 10. Successors. (a) Company's Successors. Any successor to the Company (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company's business and assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" shall include any successor to the Company's business and assets which executes and delivers the assumption agreement described in this subsection (a) or which becomes bound by the terms of this Agreement by operation of law. Page 6 (b) Executive's Successors. The terms of this Agreement and all rights of the Executive hereunder shall inure to the benefit of, and be enforceable by, the Executive's personal or legal representatives, executors, administrators, successors, heirs, devisees and legatees. 11. Notice. (a) General. Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of the Executive, mailed notices shall be addressed to him at the home address which he most recently communicated to the Company in writing. In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and ail notices shall be directed to the attention of its Secretary. (b) Notice of Termination. Any termination by the Company shall be communicated by a notice of termination to the other party hereto given in accordance with this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than 15 days after the giving of such notice). The failure by the Executive to include in the notice any fact or circumstance which contributes to a showing of Involuntary or Constructive Termination shall not waive any right of the Executive hereunder or preclude the Executive from asserting such fact or circumstance in enforcing his rights hereunder. 12. Arbitration. (a) Any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held in California, in accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator shall be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction. (b) The arbitrator(s) shall apply California law to the merits of any dispute or claim, without reference to conflicts of law rules. The arbitration proceedings shall be governed by federal arbitration law and by the Rules, without reference to state arbitration law. Executive hereby consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants. (c) Executive understands that nothing in this Section modifies Executive's at-will employment status. Either Executive or the Company can terminate the employment relationship at any time, with or without Cause. (d) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF Page 7 EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, THE FOLLOWING CLAIMS: (i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION; (ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq; (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION. 13. Miscellaneous Provisions. (a) No Duty to Mitigate. The Executive shall not be required to mitigate the amount of any payment contemplated by this Agreement (whether by seeking new employment or in any other manner), nor shall any such payment be reduced by any earnings that the Executive may receive from any other source. (b) Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Executive and by an authorized officer of the Company (other than the Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time. (c) Whole Agreement. No agreements, representations or understandings (whether oral or written and whether express or implied) which are not expressly set forth in this Agreement have been made or entered into by either party with respect to the subject matter hereof. (d) Choice of Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. (e) Severability. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect. (f) No Assignment of Benefits. The rights of any person to payments or benefits under this Agreement shall not be made subject to option or assignment, either by voluntary or Page 8 involuntary assignment or by operation of taw, including (without limitation) bankruptcy, garnishment, attachment or other creditor's process, and any action in violation of this subsection (f) shall be void. (g) Employment Taxes. All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes. (h) Assignment by Company. The Company may assign its rights under this Agreement to an affiliate, and an affiliate may assign its rights under this Agreement to another affiliate of the Company or to the Company; provided, however, that no assignment shall be made if the net worth of the assignee is less than the net worth of the Company at the time of assignment. In the case of any such assignment, the term "Company" when used in a Section of this Agreement shall mean the corporation that actually employs the Executive. (i) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument. IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year first above written. ELECTRONICS FOR IMAGING, INC. EXECUTIVE: /s/ David Peterschmidt /s/ Joseph Cutts - ----------------------------- ------------------------ Compensation Committee Member Joseph Cutts Board of Directors /s/ Jean-Louis Gassee - ----------------------------- Compensation Committee Member Board of Directors Page 9 EX-31.1 6 f93195exv31w1.txt EXHIBIT 31.1 EXHIBIT 31.1 CERTIFICATION I, Guy Gecht, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Electronics for Imaging, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-1415(c) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [intentionally omitted] c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 14, 2003 /s/ Guy Gecht ------------------------ Guy Gecht Chief Executive Officer 39 EX-31.2 7 f93195exv31w2.txt EXHIBIT 31.2 EXHIBIT 31.2 CERTIFICATION I, Joseph Cutts, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Electronics for Imaging, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(c) and 15d-1415(c) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [intentionally omitted] c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 14, 2003 /s/ Joseph Cutts ---------------------------- Joseph Cutts Chief Financial Officer 40 EX-32.1 8 f93195exv32w1.txt EXHIBIT 32.1 Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Quarterly Report of Electronics for Imaging, Inc. (the "Company"), on Form 10-Q for the quarter ended September 30, 2003 (the "Report"), I, Guy Gecht, Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 11/14/03 /s/ Guy Gecht -------------------------- Date Guy Gecht Chief Executive Officer 41 EX-32.2 9 f93195exv32w2.txt EXHIBIT 32.2 Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the accompanying Quarterly Report of Electronics for Imaging, Inc. (the "Company"), on Form 10-Q for the quarter ended September 30, 2003 (the "Report"), I, Joseph Cutts, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that: (1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 11/14/03 /s/ Joseph Cutts ------------------------- Date Joseph Cutts Chief Financial Officer 42 -----END PRIVACY-ENHANCED MESSAGE-----

EX-10.1

                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement") is made and entered into
effective as of August 1, 2003, by and between Guy Gecht (the "Executive") and
Electronics for Imaging, Inc., a Delaware corporation (the "Company").

                                    RECITALS

         A.       It is expected that the Company from time to time will
consider the possibility of an acquisition by another company or other change of
control. The Board of Directors of the Company (the "Board") recognizes that
such consideration can be a distraction to the Executive and can cause the
Executive to consider alternative employment opportunities. The Board has
determined that it is in the best interests of the Company and its stockholders
to assure that the Company will have the continued dedication and objectivity of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined below) of the Company.

         B.       The Board believes that it is in the best interests of the
Company and its stockholders to provide the Executive with an incentive to
continue his employment and to motivate the Executive to maximize the value of
the Company upon a Change of Control for the benefit of its stockholders.

         C.       The Board believes that it is imperative to provide the
Executive with certain benefits upon a Change of Control and, under certain
circumstances, upon termination of the Executive's full-time employment in
connection with a Change of Control, which benefits are intended to provide the
Executive with financial security and provide sufficient incentive and
encouragement to the Executive to remain with the Company notwithstanding the
possibility of a Change of Control.

         D.       Further, the Board believes that it is in the best interest of
the Company and its stockholders to provide additional benefits to the Executive
in the event the Executive's employment terminates for any reason other than a
Change in Control. Such benefits are intended to provide the Executive with
financial security and provide sufficient incentive and encouragement to the
Executive to remain with the Company notwithstanding the possible termination of
employment.

         E.       To accomplish the foregoing objectives, the Board of Directors
has directed the Company, upon execution of this Agreement by the Executive, to
agree to the terms provided herein.

         F.       Certain capitalized terms used in the Agreement are defined in
Section 6 below.

In consideration of the mutual covenants herein contained, and in consideration
of the continuing employment of the Executive by the Company, the parties agree
as follows:

         1.       Term of Agreement. This Agreement shall commence on the date
of this Agreement and shall have a term of three (3) years ("Initial Term") and
will automatically be renewed for one (1) year periods unless terminated by
either party upon sixty (60) days written notice prior to the expiration of the
Agreement and unless otherwise terminated earlier in accordance with the terms
hereof.

         2.       Duties and Scope of Employment. The Company shall employ the
Executive in the position of Chief Executive Officer, as such position is
defined in terms of responsibilities and compensation as of the effective date
of this Agreement; provided, however, that the Board of Directors



by mutual agreement with the Executive shall have the right, at any time prior
to the occurrence of a Change of Control, to revise such responsibilities and
compensation. The Executive shall continue to devote his full business efforts
and time to the Company and its subsidiaries. The Executive shall comply with
and be bound by the Company's operating policies, procedures and practices from
time to time in effect during his employment. During the term of the Executive's
employment with the Company, the Executive shall devote his full-time, skill and
attention to his duties and responsibilities, and shall perform them faithfully,
diligently and competently, and the Executive shall use his best efforts to
further the business of the Company and its affiliated entities. Subject to the
Executive's fiduciary duties to the Company, this Agreement shall not prohibit
the Executive from serving on the board of directors or any advisory board of
other companies.

         3.       Base Compensation.

                  (a)      Annual Salary. The Company shall pay the Executive as
compensation for his services a base salary at an annualized rate that is not
less than his base salary as of the effective date of this Agreement (the
"Annual Salary"). The Annual Salary may be subject to annual increases as the
Board may authorize from time to time in connection with Executive's annual
review. The Annual Salary shall be paid periodically in accordance with normal
Company payroll procedures. The Annual Salary and Bonus, as well as any
increases in such compensation that the Board of Directors may grant from time
to time, is referred to in this Agreement as "Base Compensation."

                  (b)      Bonus. In addition to the Annual Salary, the
Executive will be eligible to receive an annual bonus under the Company's
Executive Bonus Plan as determined by the Board in its discretion.

         4.       Executive Benefits. The Executive shall be eligible to
participate in the employee benefit plans and executive compensation programs
maintained by the Company applicable to other key executives of the Company,
including (without limitation) retirement plans, savings or profit-sharing
plans, stock option, incentive or other bonus plans, life, disability, health,
accident and other insurance programs, paid vacations, and similar plans or
programs, subject in each case to the generally applicable terms and conditions
of the applicable plan or program in question and to the determination of any
committee administering such plan or program. In addition, the Executive shall
continue to be entitled to receive any other benefits currently received by the
Executive such as automobile allowance benefits.

         5.       At-Will Employment. The Company and the Executive acknowledge
that the Executive's employment is and shall continue to be at-will, as defined
under applicable law. If the Executive's employment terminates for any reason,
including, without limitation, any termination prior to and not in connection
with a Change of Control, the Executive shall not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by this
Agreement, or as may otherwise be available in accordance with the Company's
established employee plans and policies at the time of termination.

         6.       Severance Benefits.

                  (a)      Termination in Connection with a Change of Control.
Subject to Section 7 if the Company terminates the Executive's employment at any
time during the period beginning upon (i) the execution of a binding letter of
intent regarding a Change of Control, and (ii) ninety (90) days before a Change
of Control, and ending twenty four (24) months after a Change of Control, and
the Executive

                                     Page 2



signs and does not revoke a standard release of claims with the Company attached
hereto as Exhibit A, then the Executive shall be entitled to receive severance
benefits as follows:

                           (i)      Involuntary or Constructive Termination. If
the Executive's employment terminates as a result of Involuntary or Constructive
Termination (defined in section 7(c)) other than for Cause (defined in section
7(a)), then the Executive shall be entitled to receive (i) the Executive's
Annual Salary for twenty-four (24) months plus an amount equal to the bonus the
Executive would have earned had he been employed by the Company at the end of
the calendar year multiplied by a fraction (x) the numerator of which is the
number of completed months in that year, and (y) the denominator of which is
twelve (12) (the "Current Bonus") and (ii) in addition to the Executive's stock
options that were exercisable immediately prior to such termination, the vesting
of additional options shall accelerate in full and become exercisable by the
Executive or the Executive's representative, as the case may be for one year
from the Executive's termination date and (iii) COBRA coverage (Medical, Dental
and Vision) paid for the Company for eighteen (18) months from the Executive's
termination date if the Executive elects continuation coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
within the time period prescribed pursuant to COBRA.

                           (ii)     Voluntary Resignation; Termination For
Cause. If the Executive voluntarily resigns from the Company (other than as an
Involuntary or Constructive Termination described in subsection 6(a)(i)), or if
the Company terminates the Executive's employment for Cause, then the Executive
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company's then existing benefit
plans at the time of such termination.

                  (b)      Termination Apart from Change of Control. Subject to
Section 7, if the Company terminates the Executive's employment at any time,
either before the earlier to occur of (i) the execution of a binding letter of
intent regarding a Change of Control, and (ii) ninety (90) days before a Change
of Control, or after the twenty-four (24) month period following a Change of
Control, and the Executive signs and does not revoke a standard release of
claims with the Company attached hereto as Exhibit A, then the Executive shall
be entitled to receive severance benefits as follows:

                           (i)      Involuntary or Constructive Termination. If
the Executive's employment terminates as a result of Involuntary or Constructive
Termination (defined in section 7(c)) other than for Cause (defined in section
7(a)), then the Executive shall be entitled to receive (i) the Executive's
Annual Salary for twelve (12) months plus an amount equal to the bonus the
Executive would have earned had he been employed by the Company at the end of
the calendar year multiplied by a fraction (x) the numerator of which is the
number of completed months in that year, and (y) the denominator of which is
twelve (12) (the "Current Bonus") and (ii) in addition to Executive's stock
options that were exercisable immediately prior to such termination, the vesting
of additional options shall accelerate and become exercisable by the Executive
or the Executive's estate, as the case may be, as if the Executive had remained
continuously employed for a period of six (6) months following such termination
(and if any of such options vest on an annual basis, the appropriate credit
shall be given as if the vesting accrued monthly), and such options shall remain
exercisable for the period prescribed in Executive's stock option agreements,
and (iii) COBRA coverage (Medical, Dental and Vision) paid for the Company for
twelve (12) months from the Executive's termination date if the Executive elects
continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"), within the time period prescribed pursuant to
COBRA.

                                     Page 3



                           (ii)     Voluntary Resignation; Termination for
Cause. If the Executive voluntarily resigns from the Company (other than as an
Involuntary or Constructive Termination as described in subsection 6(b)(i)), or
if the Company terminates the Executive's employment for Cause, then the
Executive shall not be entitled to receive severance or other benefits except
for those (if any) as may then be established under the Company's then existing
benefit plans at the time of such termination.

                  (c)      Disability; Death. If the Company terminates the
Executive's employment as a result of the Executive's Disability (defined in
section 7(d)), or such Executive's employment is terminated due to the death of
the Executive, then the Executive or the Executive's estate, as the case may be,
shall be entitled to receive (i) the Executive's Annual Salary for twelve (12)
months plus his Current Bonus he would have been eligible for on a prorated
period from the Executive's termination date, (ii) in addition to Executive's
stock options that were exercisable immediately prior to such termination, the
vesting of additional options shall accelerate and become exercisable by the
Executive or the Executive's estate, as the case may be, as if the Executive had
remained continuously employed for a period of six (6) months following such
termination (and if any of such options vest on an annual basis, the appropriate
credit shall be given as if the vesting accrued monthly), and such options shall
remain exercisable for the period prescribed in Executive's stock option
agreements, and (iii) such other benefits (if any) as may then be established
under the Company's then existing benefit plans at the time of such Disability
or death.

                  (d)      Severance Payment. Any severance payments except for
the Current Bonus to which the Executive is entitled pursuant to this Section
shall be paid in a lump sum within thirty (30) days of the Executive's
termination. The Current Bonus to which the Executive is entitled pursuant to
this Section shall be paid in a lump sum within thirty (30) days of the date
that the Company's audit is complete for such year.

         7.       Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:

                  (a)      Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Executive in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Executive, (ii) committing a felony or an act of fraud against the Company or
its affiliates, and (iii) acts by the Executive which constitute gross
misconduct, are injurious to the Company, and which are demonstrably willful and
deliberate on the Executive's part after there has been delivered to the
Executive a written demand of cessation of such acts from the Company which
describes the basis for the Company's belief that the Executive has engaged or
committed such acts.

                  (b)      Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:

                           (i)      Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the Company's then
outstanding voting securities; or

                           (ii)     A change in the composition of the Board of
Directors of the Company occurring within a two-year period, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are directors of the

                                     Page 4



Company as of the date hereof, or (B) are elected, or nominated for election, to
the Board of Directors of the Company with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or

                           (iii)    A merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least sixty percent
(60%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation.

                  (c)      Involuntary or Constructive Termination. "Involuntary
or Constructive Termination" shall mean (i) without the Executive's express
written consent, the significant reduction of the Executive's duties, either of
which is inconsistent with the Executive's position with the Company and
responsibilities in effect immediately prior to such assignment, or the removal
of the Executive from such position and responsibilities; (ii) without the
Executive's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Executive immediately prior to such reduction; (iii)
a reduction by the Company in the Base Compensation of the Executive as in
effect immediately prior to such reduction; (iv) a material reduction by the
Company in the kind or level of employee benefits to which the Executive is
entitled immediately prior to such reduction with the result that the
Executive's overall benefits package is significantly reduced; (v) the
relocation of the Executive to a facility or a location more than 30 miles from
the Executive's then present location, without the Executive's express written
consent; (vi) any purported termination of the Executive by the Company which is
not effected for Disability or for Cause, or any purported termination for which
the grounds relied upon are not valid; or (vii) the failure of the Company to
obtain the assumption of this agreement by any successors contemplated in
Section 8 below.

                  (d)      Disability. "Disability" shall mean that the
Executive has been unable to perform his duties under this Agreement as the
result of his incapacity due to physical or mental illness, and such inability,
at least 26 weeks after its commencement, and is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative (such agreement as to
acceptability not to be unreasonably withheld). Termination resulting from
Disability may only be effected after at least 30 days' written notice by the
Company of its intention to terminate the Executive's employment. In the event
that the Executive resumes the performance of substantially all of his duties
hereunder before the termination of his employment becomes effective, the notice
of intent to terminate shall automatically be deemed to have been revoked.

         8.       Restrictive Covenants. Executive agrees that he shall not do
any of the following without the prior written consent of the Board.

                  (a)      Non-Solicitation. For a period of one year from the
Executive's date of termination of his employment with the Company for any
reason whatsoever, the Executive shall not, on his own behalf or on behalf of
any other person, partnership, association, corporation or other entity, hire or
solicit or in any manner attempt to influence or induce any employee of the
Company or its affiliates to leave the employment of the Company or its
affiliates, nor shall the Executive use or disclose to any

                                     Page 5



person, partnership, association, corporation or other entity any information
obtained while an Executive of the Company concerning the names and addresses of
the Company's employees.

                  (b)      Non-Compete. For a period of one year from the
Executive's date of termination for any reason, the Executive agrees that he
will not, directly or indirectly, engage in or own or control any interest in
(except as a passive investor in publicly held companies and except for
investments held at the date hereof) or act as an officer, director, or employee
of or consultant or advisor to any firm, corporation, or institution directly or
indirectly in competition with or engaged in a business substantially similar to
that of the Company, including the manufacture or sale of products or the
provision of services that the Company was engaged in, or was developing, at the
time the Executive's employment terminates.

         9.       Limitation on Payments. In the event that the severance and
other benefits provided for in this Agreement or otherwise payable to the
Executive (i) constitute "parachute payments" within the meaning of Section 280G
of the Code, and (ii) would be subject to the excise tax imposed by Section 4999
of the Code (the "Excise Tax"), then Executive's benefits under this Agreement
shall be either:

                  (a)      delivered in full, or

                  (b)      delivered as to such lesser extent which would result
in no portion of such benefits being subject to the Excise Tax, whichever of the
foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by Executive on an
after-tax basis, of the greatest amount of benefits, notwithstanding that all or
some portion of such benefits may be taxable under Section 4999 of the Code.

         Unless the Company and the Executive otherwise agree in writing, any
determination required under this Section shall be made in writing in good faith
by the accounting firm serving as the Company's independent public accountants
immediately prior to the Change of Control (the "Accountants"). In the event of
a reduction in benefits hereunder, the Executive shall be given the choice of
which benefits to reduce. For purposes of making the calculations required by
this Section, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of the Code. The Company and the
Executive shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section. The Company shall bear all costs the Accountants may reasonably incur
in connection with any calculations contemplated by this Section.

         10.      Successors.

                  (a)      Company's Successors. Any successor to the Company
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and assets shall assume the obligations under this Agreement
and agree expressly to perform the obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and assets which executes and delivers the assumption agreement
described in this subsection (a) or which becomes bound by the terms of this
Agreement by operation of law.

                                     Page 6



                  (b)      Executive's Successors. The terms of this Agreement
and all rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, devisees and legatees.

         11.      Notice.

                  (a)      General. Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of the
Executive, mailed notices shall be addressed to him at the home address which he
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
ail notices shall be directed to the attention of its Secretary.

                  (b)      Notice of Termination. Any termination by the Company
shall be communicated by a notice of termination to the other party hereto given
in accordance with this Agreement. Such notice shall indicate the specific
termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the termination
date (which shall be not more than 15 days after the giving of such notice). The
failure by the Executive to include in the notice any fact or circumstance which
contributes to a showing of Involuntary or Constructive Termination shall not
waive any right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing his rights hereunder.

         12.      Arbitration.

                  (a)      Any dispute or controversy arising out of, relating
to, or in connection with this Agreement, or the interpretation, validity,
construction, performance, breach, or termination thereof, shall be settled by
binding arbitration to be held in California, in accordance with the National
Rules for the Resolution of Employment Disputes then in effect of the American
Arbitration Association (the "Rules"). The arbitrator may grant injunctions or
other relief in such dispute or controversy. The decision of the arbitrator
shall be final, conclusive and binding on the parties to the arbitration.
Judgment may be entered on the arbitrator's decision in any court having
jurisdiction.

                  (b)      The arbitrator(s) shall apply California law to the
merits of any dispute or claim, without reference to conflicts of law rules. The
arbitration proceedings shall be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. Executive hereby consents to
the personal jurisdiction of the state and federal courts located in California
for any action or proceeding arising from or relating to this Agreement or
relating to any arbitration in which the parties are participants.

                  (c)      Executive understands that nothing in this Section
modifies Executive's at-will employment status. Either Executive or the Company
can terminate the employment relationship at any time, with or without Cause.

                  (d)      EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION,
WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS
ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE
INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION
THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF

                                     Page 7



EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES
RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT
LIMITED TO, THE FOLLOWING CLAIMS:

                           (i)      ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF
EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT
OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR
INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR
PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION;

                           (ii)     ANY AND ALL CLAIMS FOR VIOLATION OF ANY
FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF
THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF
1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING
ACT, AND LABOR CODE SECTION 201, et seq;

                           (iii)    ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER
LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

         13.      Miscellaneous Provisions.

                  (a)      No Duty to Mitigate. The Executive shall not be
required to mitigate the amount of any payment contemplated by this Agreement
(whether by seeking new employment or in any other manner), nor shall any such
payment be reduced by any earnings that the Executive may receive from any other
source.

                  (b)      Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Executive and by an authorized officer of
the Company (other than the Executive). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.

                  (c)      Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.

                  (d)      Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California.

                  (e)      Severability. The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.

                  (f)      No Assignment of Benefits. The rights of any person
to payments or benefits under this Agreement shall not be made subject to option
or assignment, either by voluntary or

                                     Page 8



involuntary assignment or by operation of taw, including (without limitation)
bankruptcy, garnishment, attachment or other creditor's process, and any action
in violation of this subsection (f) shall be void.

                  (g)      Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.

                  (h)      Assignment by Company. The Company may assign its
rights under this Agreement to an affiliate, and an affiliate may assign its
rights under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net worth of
the assignee is less than the net worth of the Company at the time of
assignment. In the case of any such assignment, the term "Company" when used in
a Section of this Agreement shall mean the corporation that actually employs the
Executive.

                  (i)      Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.

                  IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.

ELECTRONICS FOR IMAGING, INC.                EXECUTIVE:

/s/ David Peterschmidt                       /s/ Guy Gecht
- -------------------------------              -----------------------

Compensation Committee Member                Guy Gecht
Board of Directors

/s/ Jean-Louis Gassee
- -------------------------------

Compensation Committee Member
Board of Directors

                                     Page 9

EX-10.2

                                                                    EXHIBIT 10.2

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement") is made and entered into
effective as of August 1, 2003, by and between Fred Rosenzweig (the "Executive")
and Electronics for Imaging, Inc., a Delaware corporation (the "Company").

                                    RECITALS

         A.       It is expected that the Company from time to time will
consider the possibility of an acquisition by another company or other change of
control. The Board of Directors of the Company (the "Board") recognizes that
such consideration can be a distraction to the Executive and can cause the
Executive to consider alternative employment opportunities. The Board has
determined that it is in the best interests of the Company and its stockholders
to assure that the Company will have the continued dedication and objectivity of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined below) of the Company.

         B.       The Board believes that it is in the best interests of the
Company and its stockholders to provide the Executive with an incentive to
continue his employment and to motivate the Executive to maximize the value of
the Company upon a Change of Control for the benefit of its stockholders.

         C.       The Board believes that it is imperative to provide the
Executive with certain benefits upon a Change of Control and, under certain
circumstances, upon termination of the Executive's full-time employment in
connection with a Change of Control, which benefits are intended to provide the
Executive with financial security and provide sufficient incentive and
encouragement to the Executive to remain with the Company notwithstanding the
possibility of a Change of Control.

         D.       Further, the Board believes that it is in the best interest of
the Company and its stockholders to provide additional benefits to the Executive
in the event the Executive's employment terminates for any reason other than a
Change in Control. Such benefits are intended to provide the Executive with
financial security and provide sufficient incentive and encouragement to the
Executive to remain with the Company notwithstanding the possible termination of
employment.

         E.       To accomplish the foregoing objectives, the Board of Directors
has directed the Company, upon execution of this Agreement by the Executive, to
agree to the terms provided herein.

         F.       Certain capitalized terms used in the Agreement are defined in
Section 6 below.

In consideration of the mutual covenants herein contained, and in consideration
of the continuing employment of the Executive by the Company, the parties agree
as follows:

         1.       Term of Agreement. This Agreement shall commence on the date
of this Agreement and shall have a term of three (3) years ("Initial Term") and
will automatically be renewed for one (1) year periods unless terminated by
either party upon sixty (60) days written notice prior to the expiration of the
Agreement and unless otherwise terminated earlier in accordance with the terms
hereof.

         2.       Duties and Scope of Employment. The Company shall employ the
Executive in the position of President and Chief Operating Officer, as such
position is defined in terms of responsibilities and compensation as of the
effective date of this Agreement; provided, however, that the Board of



Directors by mutual agreement with the Executive shall have the right, at any
time prior to the occurrence of a Change of Control, to revise such
responsibilities and compensation. The Executive shall continue to devote his
full business efforts and time to the Company and its subsidiaries. The
Executive shall comply with and be bound by the Company's operating policies,
procedures and practices from time to time in effect during his employment.
During the term of the Executive's employment with the Company, the Executive
shall devote his full-time, skill and attention to his duties and
responsibilities, and shall perform them faithfully, diligently and competently,
and the Executive shall use his best efforts to further the business of the
Company and its affiliated entities. Subject to the Executive's fiduciary duties
to the Company, this Agreement shall not prohibit the Executive from serving on
the board of directors or any advisory board of other companies.

         3.       Base Compensation.

                  (a)      Annual Salary. The Company shall pay the Executive as
compensation for his services a base salary at an annualized rate that is not
less than his base salary as of the effective date of this Agreement (the
"Annual Salary"). The Annual Salary may be subject to annual increases as the
Board may authorize from time to time in connection with Executive's annual
review. The Annual Salary shall be paid periodically in accordance with normal
Company payroll procedures. The Annual Salary and Bonus, as well as any
increases in such compensation that the Board of Directors may grant from time
to time, is referred to in this Agreement as "Base Compensation."

                  (b)      Bonus. In addition to the Annual Salary, the
Executive will be eligible to receive an annual bonus under the Company's
Executive Bonus Plan as determined by the Board in its discretion.

         4.       Executive Benefits. The Executive shall be eligible to
participate in the employee benefit plans and executive compensation programs
maintained by the Company applicable to other key executives of the Company,
including (without limitation) retirement plans, savings or profit-sharing
plans, stock option, incentive or other bonus plans, life, disability, health,
accident and other insurance programs, paid vacations, and similar plans or
programs, subject in each case to the generally applicable terms and conditions
of the applicable plan or program in question and to the determination of any
committee administering such plan or program. In addition, the Executive shall
continue to be entitled to receive any other benefits currently received by the
Executive such as automobile allowance benefits.

         5.       At-Will Employment. The Company and the Executive acknowledge
that the Executive's employment is and shall continue to be at-will, as defined
under applicable law. If the Executive's employment terminates for any reason,
including, without limitation, any termination prior to and not in connection
with a Change of Control, the Executive shall not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by this
Agreement, or as may otherwise be available in accordance with the Company's
established employee plans and policies at the time of termination.

         6.       Severance Benefits.

                  (a)      Termination in Connection with a Change of Control.
Subject to Section 7 if the Company terminates the Executive's employment at any
time during the period beginning upon (i) the execution of a binding letter of
intent regarding a Change of Control, and (ii) ninety (90) days before a Change
of Control, and ending twenty four (24) months after a Change of Control, and
the Executive

                                     Page 2



signs and does not revoke a standard release of claims with the Company attached
hereto as Exhibit A, then the Executive shall be entitled to receive severance
benefits as follows:

                           (i)      Involuntary or Constructive Termination. If
the Executive's employment terminates as a result of Involuntary or Constructive
Termination (defined in section 7(c)) other than for Cause (defined in section
7(a)), then the Executive shall be entitled to receive (i) the Executive's
Annual Salary for twenty-four (24) months plus an amount equal to the bonus the
Executive would have earned had he been employed by the Company at the end of
the calendar year multiplied by a fraction (x) the numerator of which is the
number of completed months in that year, and (y) the denominator of which is
twelve (12) (the "Current Bonus") and (ii) in addition to the Executive's stock
options that were exercisable immediately prior to such termination, the vesting
of additional options shall accelerate in full and become exercisable by the
Executive or the Executive's representative, as the case may be for one year
from the Executive's termination date and (iii) COBRA coverage (Medical, Dental
and Vision) paid for the Company for eighteen (18) months from the Executive's
termination date if the Executive elects continuation coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
within the time period prescribed pursuant to COBRA.

                           (ii)     Voluntary Resignation; Termination For
Cause. If the Executive voluntarily resigns from the Company (other than as an
Involuntary or Constructive Termination described in subsection 6(a)(i)), or if
the Company terminates the Executive's employment for Cause, then the Executive
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company's then existing benefit
plans at the time of such termination.

                  (b)      Termination Apart from Change of Control. Subject to
Section 7, if the Company terminates the Executive's employment at any time,
either before the earlier to occur of (i) the execution of a binding letter of
intent regarding a Change of Control, and (ii) ninety (90) days before a Change
of Control, or after the twenty-four (24) month period following a Change of
Control, and the Executive signs and does not revoke a standard release of
claims with the Company attached hereto as Exhibit A, then the Executive shall
be entitled to receive severance benefits as follows:

                           (i)      Involuntary or Constructive Termination. If
the Executive's employment terminates as a result of Involuntary or Constructive
Termination (defined in section 7(c)) other than for Cause (defined in section
7(a)), then the Executive shall be entitled to receive (i) the Executive's
Annual Salary for twelve (12) months plus an amount equal to the bonus the
Executive would have earned had he been employed by the Company at the end of
the calendar year multiplied by a fraction (x) the numerator of which is the
number of completed months in that year, and (y) the denominator of which is
twelve (12) (the "Current Bonus") and (ii) in addition to Executive's stock
options that were exercisable immediately prior to such termination, the vesting
of additional options shall accelerate and become exercisable by the Executive
or the Executive's estate, as the case may be, as if the Executive had remained
continuously employed for a period of six (6) months following such termination
(and if any of such options vest on an annual basis, the appropriate credit
shall be given as if the vesting accrued monthly), and such options shall remain
exercisable for the period prescribed in Executive's stock option agreements,
and (iii) COBRA coverage (Medical, Dental and Vision) paid for the Company for
twelve (12) months from the Executive's termination date if the Executive elects
continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"), within the time period prescribed pursuant to
COBRA.

                                     Page 3



                           (ii)     Voluntary Resignation; Termination for
Cause. If the Executive voluntarily resigns from the Company (other than as an
Involuntary or Constructive Termination as described in subsection 6(b)(i)), or
if the Company terminates the Executive's employment for Cause, then the
Executive shall not be entitled to receive severance or other benefits except
for those (if any) as may then be established under the Company's then existing
benefit plans at the time of such termination.

                  (c)      Disability; Death. If the Company terminates the
Executive's employment as a result of the Executive's Disability (defined in
section 7(d)), or such Executive's employment is terminated due to the death of
the Executive, then the Executive or the Executive's estate, as the case may be,
shall be entitled to receive (i) the Executive's Annual Salary for twelve (12)
months plus his Current Bonus he would have been eligible for on a prorated
period from the Executive's termination date, (ii) in addition to Executive's
stock options that were exercisable immediately prior to such termination, the
vesting of additional options shall accelerate and become exercisable by the
Executive or the Executive's estate, as the case may be, as if the Executive had
remained continuously employed for a period of six (6) months following such
termination (and if any of such options vest on an annual basis, the appropriate
credit shall be given as if the vesting accrued monthly), and such options shall
remain exercisable for the period prescribed in Executive's stock option
agreements, and (iii) such other benefits (if any) as may then be established
under the Company's then existing benefit plans at the time of such Disability
or death.

                  (d)      Severance Payment. Any severance payments except for
the Current Bonus to which the Executive is entitled pursuant to this Section
shall be paid in a lump sum within thirty (30) days of the Executive's
termination. The Current Bonus to which the Executive is entitled pursuant to
this Section shall be paid in a lump sum within thirty (30) days of the date
that the Company's audit is complete for such year.

         7.       Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:

                  (a)      Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Executive in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Executive, (ii) committing a felony or an act of fraud against the Company or
its affiliates, and (iii) acts by the Executive which constitute gross
misconduct, are injurious to the Company, and which are demonstrably willful and
deliberate on the Executive's part after there has been delivered to the
Executive a written demand of cessation of such acts from the Company which
describes the basis for the Company's belief that the Executive has engaged or
committed such acts.

                  (b)      Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:

                           (i)      Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the Company's then
outstanding voting securities; or

                           (ii)     A change in the composition of the Board of
Directors of the Company occurring within a two-year period, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are directors of the

                                     Page 4



Company as of the date hereof, or (B) are elected, or nominated for election, to
the Board of Directors of the Company with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or

                           (iii)    A merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least sixty percent
(60%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation.

                  (c)      Involuntary or Constructive Termination. "Involuntary
or Constructive Termination" shall mean (i) without the Executive's express
written consent, the significant reduction of the Executive's duties, either of
which is inconsistent with the Executive's position with the Company and
responsibilities in effect immediately prior to such assignment, or the removal
of the Executive from such position and responsibilities; (ii) without the
Executive's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Executive immediately prior to such reduction; (iii)
a reduction by the Company in the Base Compensation of the Executive as in
effect immediately prior to such reduction; (iv) a material reduction by the
Company in the kind or level of employee benefits to which the Executive is
entitled immediately prior to such reduction with the result that the
Executive's overall benefits package is significantly reduced; (v) the
relocation of the Executive to a facility or a location more than 30 miles from
the Executive's then present location, without the Executive's express written
consent; (vi) any purported termination of the Executive by the Company which is
not effected for Disability or for Cause, or any purported termination for which
the grounds relied upon are not valid; or (vii) the failure of the Company to
obtain the assumption of this agreement by any successors contemplated in
Section 8 below.

                  (d)      Disability. "Disability" shall mean that the
Executive has been unable to perform his duties under this Agreement as the
result of his incapacity due to physical or mental illness, and such inability,
at least 26 weeks after its commencement, and is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative (such agreement as to
acceptability not to be unreasonably withheld). Termination resulting from
Disability may only be effected after at least 30 days' written notice by the
Company of its intention to terminate the Executive's employment. In the event
that the Executive resumes the performance of substantially all of his duties
hereunder before the termination of his employment becomes effective, the notice
of intent to terminate shall automatically be deemed to have been revoked.

         8.       Restrictive Covenants. Executive agrees that he shall not do
any of the following without the prior written consent of the Board.

                  (a)      Non-Solicitation. For a period of one year from the
Executive's date of termination of his employment with the Company for any
reason whatsoever, the Executive shall not, on his own behalf or on behalf of
any other person, partnership, association, corporation or other entity, hire or
solicit or in any manner attempt to influence or induce any employee of the
Company or its affiliates to leave the employment of the Company or its
affiliates, nor shall the Executive use or disclose to any

                                     Page 5



person, partnership, association, corporation or other entity any information
obtained while an Executive of the Company concerning the names and addresses of
the Company's employees.

                  (b)      Non-Compete. For a period of one year from the
Executive's date of termination for any reason, the Executive agrees that he
will not, directly or indirectly, engage in or own or control any interest in
(except as a passive investor in publicly held companies and except for
investments held at the date hereof) or act as an officer, director, or employee
of or consultant or advisor to any firm, corporation, or institution directly or
indirectly in competition with or engaged in a business substantially similar to
that of the Company, including the manufacture or sale of products or the
provision of services that the Company was engaged in, or was developing, at the
time the Executive's employment terminates.

         9.       Limitation on Payments. In the event that the severance and
other benefits provided for in this Agreement or otherwise payable to the
Executive (i) constitute "parachute payments" within the meaning of Section 280G
of the Code, and (ii) would be subject to the excise tax imposed by Section 4999
of the Code (the "Excise Tax"), then Executive's benefits under this Agreement
shall be either:

                  (a)      delivered in full, or

                  (b)      delivered as to such lesser extent which would result
in no portion of such benefits being subject to the Excise Tax, whichever of the
foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by Executive on an
after-tax basis, of the greatest amount of benefits, notwithstanding that all or
some portion of such benefits may be taxable under Section 4999 of the Code.

         Unless the Company and the Executive otherwise agree in writing, any
determination required under this Section shall be made in writing in good faith
by the accounting firm serving as the Company's independent public accountants
immediately prior to the Change of Control (the "Accountants"). In the event of
a reduction in benefits hereunder, the Executive shall be given the choice of
which benefits to reduce. For purposes of making the calculations required by
this Section, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of the Code. The Company and the
Executive shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section. The Company shall bear all costs the Accountants may reasonably incur
in connection with any calculations contemplated by this Section.

         10.      Successors.

                  (a)      Company's Successors. Any successor to the Company
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and assets shall assume the obligations under this Agreement
and agree expressly to perform the obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and assets which executes and delivers the assumption agreement
described in this subsection (a) or which becomes bound by the terms of this
Agreement by operation of law.

                                     Page 6



                  (b)      Executive's Successors. The terms of this Agreement
and all rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, devisees and legatees.

         11.      Notice.

                  (a)      General. Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of the
Executive, mailed notices shall be addressed to him at the home address which he
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
ail notices shall be directed to the attention of its Secretary.

                  (b)      Notice of Termination. Any termination by the Company
shall be communicated by a notice of termination to the other party hereto given
in accordance with this Agreement. Such notice shall indicate the specific
termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the termination
date (which shall be not more than 15 days after the giving of such notice). The
failure by the Executive to include in the notice any fact or circumstance which
contributes to a showing of Involuntary or Constructive Termination shall not
waive any right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing his rights hereunder.

         12.      Arbitration.

                  (a)      Any dispute or controversy arising out of, relating
to, or in connection with this Agreement, or the interpretation, validity,
construction, performance, breach, or termination thereof, shall be settled by
binding arbitration to be held in California, in accordance with the National
Rules for the Resolution of Employment Disputes then in effect of the American
Arbitration Association (the "Rules"). The arbitrator may grant injunctions or
other relief in such dispute or controversy. The decision of the arbitrator
shall be final, conclusive and binding on the parties to the arbitration.
Judgment may be entered on the arbitrator's decision in any court having
jurisdiction.

                  (b)      The arbitrator(s) shall apply California law to the
merits of any dispute or claim, without reference to conflicts of law rules. The
arbitration proceedings shall be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. Executive hereby consents to
the personal jurisdiction of the state and federal courts located in California
for any action or proceeding arising from or relating to this Agreement or
relating to any arbitration in which the parties are participants.

                  (c)      Executive understands that nothing in this Section
modifies Executive's at-will employment status. Either Executive or the Company
can terminate the employment relationship at any time, with or without Cause.

                  (d)      EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION,
WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS
ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE
INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION
THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF

                                     Page 7



EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES
RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT
LIMITED TO, THE FOLLOWING CLAIMS:

                           (i)      ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF
EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT
OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR
INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR
PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION;

                           (ii)     ANY AND ALL CLAIMS FOR VIOLATION OF ANY
FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF
THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF
1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING
ACT, AND LABOR CODE SECTION 201, et seq;

                           (iii)    ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER
LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

         13.      Miscellaneous Provisions.

                  (a)      No Duty to Mitigate. The Executive shall not be
required to mitigate the amount of any payment contemplated by this Agreement
(whether by seeking new employment or in any other manner), nor shall any such
payment be reduced by any earnings that the Executive may receive from any other
source.

                  (b)      Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Executive and by an authorized officer of
the Company (other than the Executive). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.

                  (c)      Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.

                  (d)      Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California.

                  (e)      Severability. The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.

                  (f)      No Assignment of Benefits. The rights of any person
to payments or benefits under this Agreement shall not be made subject to option
or assignment, either by voluntary or

                                     Page 8



involuntary assignment or by operation of taw, including (without limitation)
bankruptcy, garnishment, attachment or other creditor's process, and any action
in violation of this subsection (f) shall be void.

                  (g)      Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.

                  (h)      Assignment by Company. The Company may assign its
rights under this Agreement to an affiliate, and an affiliate may assign its
rights under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net worth of
the assignee is less than the net worth of the Company at the time of
assignment. In the case of any such assignment, the term "Company" when used in
a Section of this Agreement shall mean the corporation that actually employs the
Executive.

                  (i)      Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.

                  IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.

ELECTRONICS FOR IMAGING, INC.                     EXECUTIVE:

/s/ David Peterschmidt                            /s/ Fred Rosenzweig
- -----------------------------                     ------------------------------

Compensation Committee Member                     Fred Rosenzweig
Board of Directors

/s/ Jean-Louis Gassee
- -----------------------------

Compensation Committee Member
Board of Directors

                                     Page 9

EX-10.3

                                                                    EXHIBIT 10.3

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement") is made and entered into
effective as of August 1, 2003, by and between Joseph Cutts (the "Executive")
and Electronics for Imaging, Inc., a Delaware corporation (the "Company").

                                    RECITALS

         A.       It is expected that the Company from time to time will
consider the possibility of an acquisition by another company or other change of
control. The Board of Directors of the Company (the "Board") recognizes that
such consideration can be a distraction to the Executive and can cause the
Executive to consider alternative employment opportunities. The Board has
determined that it is in the best interests of the Company and its stockholders
to assure that the Company will have the continued dedication and objectivity of
the Executive, notwithstanding the possibility, threat or occurrence of a Change
of Control (as defined below) of the Company.

         B.       The Board believes that it is in the best interests of the
Company and its stockholders to provide the Executive with an incentive to
continue his employment and to motivate the Executive to maximize the value of
the Company upon a Change of Control for the benefit of its stockholders.

         C.       The Board believes that it is imperative to provide the
Executive with certain benefits upon a Change of Control and, under certain
circumstances, upon termination of the Executive's full-time employment in
connection with a Change of Control, which benefits are intended to provide the
Executive with financial security and provide sufficient incentive and
encouragement to the Executive to remain with the Company notwithstanding the
possibility of a Change of Control.

         D.       Further, the Board believes that it is in the best interest of
the Company and its stockholders to provide additional benefits to the Executive
in the event the Executive's employment terminates for any reason other than a
Change in Control. Such benefits are intended to provide the Executive with
financial security and provide sufficient incentive and encouragement to the
Executive to remain with the Company notwithstanding the possible termination of
employment.

         E.       To accomplish the foregoing objectives, the Board of Directors
has directed the Company, upon execution of this Agreement by the Executive, to
agree to the terms provided herein.

         F.       Certain capitalized terms used in the Agreement are defined in
Section 6 below.

In consideration of the mutual covenants herein contained, and in consideration
of the continuing employment of the Executive by the Company, the parties agree
as follows:

         1.       Term of Agreement. This Agreement shall commence on the date
of this Agreement and shall have a term of three (3) years ("Initial Term") and
will automatically be renewed for one (1) year periods unless terminated by
either party upon sixty (60) days written notice prior to the expiration of the
Agreement and unless otherwise terminated earlier in accordance with the terms
hereof.

         2.       Duties and Scope of Employment. The Company shall employ the
Executive in the position of Chief Financial Officer, as such position is
defined in terms of responsibilities and compensation as of the effective date
of this Agreement; provided, however, that the Board of Directors



by mutual agreement with the Executive shall have the right, at any time prior
to the occurrence of a Change of Control, to revise such responsibilities and
compensation. The Executive shall continue to devote his full business efforts
and time to the Company and its subsidiaries. The Executive shall comply with
and be bound by the Company's operating policies, procedures and practices from
time to time in effect during his employment. During the term of the Executive's
employment with the Company, the Executive shall devote his full-time, skill and
attention to his duties and responsibilities, and shall perform them faithfully,
diligently and competently, and the Executive shall use his best efforts to
further the business of the Company and its affiliated entities. Subject to the
Executive's fiduciary duties to the Company, this Agreement shall not prohibit
the Executive from serving on the board of directors or any advisory board of
other companies.

         3.       Base Compensation.

                  (a)      Annual Salary. The Company shall pay the Executive as
compensation for his services a base salary at an annualized rate that is not
less than his base salary as of the effective date of this Agreement (the
"Annual Salary"). The Annual Salary may be subject to annual increases as the
Board may authorize from time to time in connection with Executive's annual
review. The Annual Salary shall be paid periodically in accordance with normal
Company payroll procedures. The Annual Salary and Bonus, as well as any
increases in such compensation that the Board of Directors may grant from time
to time, is referred to in this Agreement as "Base Compensation."

                  (b)      Bonus. In addition to the Annual Salary, the
Executive will be eligible to receive an annual bonus under the Company's
Executive Bonus Plan as determined by the Board in its discretion.

         4.       Executive Benefits. The Executive shall be eligible to
participate in the employee benefit plans and executive compensation programs
maintained by the Company applicable to other key executives of the Company,
including (without limitation) retirement plans, savings or profit-sharing
plans, stock option, incentive or other bonus plans, life, disability, health,
accident and other insurance programs, paid vacations, and similar plans or
programs, subject in each case to the generally applicable terms and conditions
of the applicable plan or program in question and to the determination of any
committee administering such plan or program. In addition, the Executive shall
continue to be entitled to receive any other benefits currently received by the
Executive such as automobile allowance benefits.

         5.       At-Will Employment. The Company and the Executive acknowledge
that the Executive's employment is and shall continue to be at-will, as defined
under applicable law. If the Executive's employment terminates for any reason,
including, without limitation, any termination prior to and not in connection
with a Change of Control, the Executive shall not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by this
Agreement, or as may otherwise be available in accordance with the Company's
established employee plans and policies at the time of termination.

         6.       Severance Benefits.

                  (a)      Termination in Connection with a Change of Control.
Subject to Section 7 if the Company terminates the Executive's employment at any
time during the period beginning upon (i) the execution of a binding letter of
intent regarding a Change of Control, and (ii) ninety (90) days before a Change
of Control, and ending twenty four (24) months after a Change of Control, and
the Executive

                                     Page 2



signs and does not revoke a standard release of claims with the Company attached
hereto as Exhibit A, then the Executive shall be entitled to receive severance
benefits as follows:

                           (i)      Involuntary or Constructive Termination. If
the Executive's employment terminates as a result of Involuntary or Constructive
Termination (defined in section 7(c)) other than for Cause (defined in section
7(a)), then the Executive shall be entitled to receive (i) the Executive's
Annual Salary for twenty-four (24) months plus an amount equal to the bonus the
Executive would have earned had he been employed by the Company at the end of
the calendar year multiplied by a fraction (x) the numerator of which is the
number of completed months in that year, and (y) the denominator of which is
twelve (12) (the "Current Bonus") and (ii) in addition to the Executive's stock
options that were exercisable immediately prior to such termination, the vesting
of additional options shall accelerate in full and become exercisable by the
Executive or the Executive's representative, as the case may be for one year
from the Executive's termination date and (iii) COBRA coverage (Medical, Dental
and Vision) paid for the Company for eighteen (18) months from the Executive's
termination date if the Executive elects continuation coverage pursuant to the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
within the time period prescribed pursuant to COBRA.

                           (ii)     Voluntary Resignation; Termination For
Cause. If the Executive voluntarily resigns from the Company (other than as an
Involuntary or Constructive Termination described in subsection 6(a)(i)), or if
the Company terminates the Executive's employment for Cause, then the Executive
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company's then existing benefit
plans at the time of such termination.

                  (b)      Termination Apart from Change of Control. Subject to
Section 7, if the Company terminates the Executive's employment at any time,
either before the earlier to occur of (i) the execution of a binding letter of
intent regarding a Change of Control, and (ii) ninety (90) days before a Change
of Control, or after the twenty-four (24) month period following a Change of
Control, and the Executive signs and does not revoke a standard release of
claims with the Company attached hereto as Exhibit A, then the Executive shall
be entitled to receive severance benefits as follows:

                           (i)      Involuntary or Constructive Termination. If
the Executive's employment terminates as a result of Involuntary or Constructive
Termination (defined in section 7(c)) other than for Cause (defined in section
7(a)), then the Executive shall be entitled to receive (i) the Executive's
Annual Salary for twelve (12) months plus an amount equal to the bonus the
Executive would have earned had he been employed by the Company at the end of
the calendar year multiplied by a fraction (x) the numerator of which is the
number of completed months in that year, and (y) the denominator of which is
twelve (12) (the "Current Bonus") and (ii) in addition to Executive's stock
options that were exercisable immediately prior to such termination, the vesting
of additional options shall accelerate and become exercisable by the Executive
or the Executive's estate, as the case may be, as if the Executive had remained
continuously employed for a period of six (6) months following such termination
(and if any of such options vest on an annual basis, the appropriate credit
shall be given as if the vesting accrued monthly), and such options shall remain
exercisable for the period prescribed in Executive's stock option agreements,
and (iii) COBRA coverage (Medical, Dental and Vision) paid for the Company for
twelve (12) months from the Executive's termination date if the Executive elects
continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended ("COBRA"), within the time period prescribed pursuant to
COBRA.

                                     Page 3



                           (ii)     Voluntary Resignation; Termination for
Cause. If the Executive voluntarily resigns from the Company (other than as an
Involuntary or Constructive Termination as described in subsection 6(b)(i)), or
if the Company terminates the Executive's employment for Cause, then the
Executive shall not be entitled to receive severance or other benefits except
for those (if any) as may then be established under the Company's then existing
benefit plans at the time of such termination.

                  (c)      Disability; Death. If the Company terminates the
Executive's employment as a result of the Executive's Disability (defined in
section 7(d)), or such Executive's employment is terminated due to the death of
the Executive, then the Executive or the Executive's estate, as the case may be,
shall be entitled to receive (i) the Executive's Annual Salary for twelve (12)
months plus his Current Bonus he would have been eligible for on a prorated
period from the Executive's termination date, (ii) in addition to Executive's
stock options that were exercisable immediately prior to such termination, the
vesting of additional options shall accelerate and become exercisable by the
Executive or the Executive's estate, as the case may be, as if the Executive had
remained continuously employed for a period of six (6) months following such
termination (and if any of such options vest on an annual basis, the appropriate
credit shall be given as if the vesting accrued monthly), and such options shall
remain exercisable for the period prescribed in Executive's stock option
agreements, and (iii) such other benefits (if any) as may then be established
under the Company's then existing benefit plans at the time of such Disability
or death.

                  (d)      Severance Payment. Any severance payments except for
the Current Bonus to which the Executive is entitled pursuant to this Section
shall be paid in a lump sum within thirty (30) days of the Executive's
termination. The Current Bonus to which the Executive is entitled pursuant to
this Section shall be paid in a lump sum within thirty (30) days of the date
that the Company's audit is complete for such year.

         7.       Definition of Terms. The following terms referred to in this
Agreement shall have the following meanings:

                  (a)      Cause. "Cause" shall mean (i) any act of personal
dishonesty taken by the Executive in connection with his responsibilities as an
employee and intended to result in substantial personal enrichment of the
Executive, (ii) committing a felony or an act of fraud against the Company or
its affiliates, and (iii) acts by the Executive which constitute gross
misconduct, are injurious to the Company, and which are demonstrably willful and
deliberate on the Executive's part after there has been delivered to the
Executive a written demand of cessation of such acts from the Company which
describes the basis for the Company's belief that the Executive has engaged or
committed such acts.

                  (b)      Change of Control. "Change of Control" shall mean the
occurrence of any of the following events:

                           (i)      Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended)
becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty percent
(50%) or more of the total voting power represented by the Company's then
outstanding voting securities; or

                           (ii)     A change in the composition of the Board of
Directors of the Company occurring within a two-year period, as a result of
which fewer than a majority of the directors are Incumbent Directors. "Incumbent
Directors" shall mean directors who either (A) are directors of the

                                     Page 4



Company as of the date hereof, or (B) are elected, or nominated for election, to
the Board of Directors of the Company with the affirmative votes of at least a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Company); or

                           (iii)    A merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least sixty percent
(60%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation.

                  (c)      Involuntary or Constructive Termination. "Involuntary
or Constructive Termination" shall mean (i) without the Executive's express
written consent, the significant reduction of the Executive's duties, either of
which is inconsistent with the Executive's position with the Company and
responsibilities in effect immediately prior to such assignment, or the removal
of the Executive from such position and responsibilities; (ii) without the
Executive's express written consent, a substantial reduction, without good
business reasons, of the facilities and perquisites (including office space and
location) available to the Executive immediately prior to such reduction; (iii)
a reduction by the Company in the Base Compensation of the Executive as in
effect immediately prior to such reduction; (iv) a material reduction by the
Company in the kind or level of employee benefits to which the Executive is
entitled immediately prior to such reduction with the result that the
Executive's overall benefits package is significantly reduced; (v) the
relocation of the Executive to a facility or a location more than 30 miles from
the Executive's then present location, without the Executive's express written
consent; (vi) any purported termination of the Executive by the Company which is
not effected for Disability or for Cause, or any purported termination for which
the grounds relied upon are not valid; or (vii) the failure of the Company to
obtain the assumption of this agreement by any successors contemplated in
Section 8 below.

                  (d)      Disability. "Disability" shall mean that the
Executive has been unable to perform his duties under this Agreement as the
result of his incapacity due to physical or mental illness, and such inability,
at least 26 weeks after its commencement, and is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or the Executive's legal representative (such agreement as to
acceptability not to be unreasonably withheld). Termination resulting from
Disability may only be effected after at least 30 days' written notice by the
Company of its intention to terminate the Executive's employment. In the event
that the Executive resumes the performance of substantially all of his duties
hereunder before the termination of his employment becomes effective, the notice
of intent to terminate shall automatically be deemed to have been revoked.

         8.       Restrictive Covenants. Executive agrees that he shall not do
any of the following without the prior written consent of the Board.

                  (a)      Non-Solicitation. For a period of one year from the
Executive's date of termination of his employment with the Company for any
reason whatsoever, the Executive shall not, on his own behalf or on behalf of
any other person, partnership, association, corporation or other entity, hire or
solicit or in any manner attempt to influence or induce any employee of the
Company or its affiliates to leave the employment of the Company or its
affiliates, nor shall the Executive use or disclose to any

                                     Page 5



person, partnership, association, corporation or other entity any information
obtained while an Executive of the Company concerning the names and addresses of
the Company's employees.

                  (b)      Non-Compete. For a period of one year from the
Executive's date of termination for any reason, the Executive agrees that he
will not, directly or indirectly, engage in or own or control any interest in
(except as a passive investor in publicly held companies and except for
investments held at the date hereof) or act as an officer, director, or employee
of or consultant or advisor to any firm, corporation, or institution directly or
indirectly in competition with or engaged in a business substantially similar to
that of the Company, including the manufacture or sale of products or the
provision of services that the Company was engaged in, or was developing, at the
time the Executive's employment terminates.

         9.       Limitation on Payments. In the event that the severance and
other benefits provided for in this Agreement or otherwise payable to the
Executive (i) constitute "parachute payments" within the meaning of Section 280G
of the Code, and (ii) would be subject to the excise tax imposed by Section 4999
of the Code (the "Excise Tax"), then Executive's benefits under this Agreement
shall be either:

                  (a)      delivered in full, or

                  (b)      delivered as to such lesser extent which would result
in no portion of such benefits being subject to the Excise Tax, whichever of the
foregoing amounts, taking into account the applicable federal, state and local
income taxes and the Excise Tax, results in the receipt by Executive on an
after-tax basis, of the greatest amount of benefits, notwithstanding that all or
some portion of such benefits may be taxable under Section 4999 of the Code.

         Unless the Company and the Executive otherwise agree in writing, any
determination required under this Section shall be made in writing in good faith
by the accounting firm serving as the Company's independent public accountants
immediately prior to the Change of Control (the "Accountants"). In the event of
a reduction in benefits hereunder, the Executive shall be given the choice of
which benefits to reduce. For purposes of making the calculations required by
this Section, the Accountants may make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of the Code. The Company and the
Executive shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
Section. The Company shall bear all costs the Accountants may reasonably incur
in connection with any calculations contemplated by this Section.

         10.      Successors.

                  (a)      Company's Successors. Any successor to the Company
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and assets shall assume the obligations under this Agreement
and agree expressly to perform the obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform such
obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and assets which executes and delivers the assumption agreement
described in this subsection (a) or which becomes bound by the terms of this
Agreement by operation of law.

                                     Page 6



                  (b)      Executive's Successors. The terms of this Agreement
and all rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, devisees and legatees.

         11.      Notice.

                  (a)      General. Notices and all other communications
contemplated by this Agreement shall be in writing and shall be deemed to have
been duly given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of the
Executive, mailed notices shall be addressed to him at the home address which he
most recently communicated to the Company in writing. In the case of the
Company, mailed notices shall be addressed to its corporate headquarters, and
ail notices shall be directed to the attention of its Secretary.

                  (b)      Notice of Termination. Any termination by the Company
shall be communicated by a notice of termination to the other party hereto given
in accordance with this Agreement. Such notice shall indicate the specific
termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the termination
date (which shall be not more than 15 days after the giving of such notice). The
failure by the Executive to include in the notice any fact or circumstance which
contributes to a showing of Involuntary or Constructive Termination shall not
waive any right of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing his rights hereunder.

         12.      Arbitration.

                  (a)      Any dispute or controversy arising out of, relating
to, or in connection with this Agreement, or the interpretation, validity,
construction, performance, breach, or termination thereof, shall be settled by
binding arbitration to be held in California, in accordance with the National
Rules for the Resolution of Employment Disputes then in effect of the American
Arbitration Association (the "Rules"). The arbitrator may grant injunctions or
other relief in such dispute or controversy. The decision of the arbitrator
shall be final, conclusive and binding on the parties to the arbitration.
Judgment may be entered on the arbitrator's decision in any court having
jurisdiction.

                  (b)      The arbitrator(s) shall apply California law to the
merits of any dispute or claim, without reference to conflicts of law rules. The
arbitration proceedings shall be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. Executive hereby consents to
the personal jurisdiction of the state and federal courts located in California
for any action or proceeding arising from or relating to this Agreement or
relating to any arbitration in which the parties are participants.

                  (c)      Executive understands that nothing in this Section
modifies Executive's at-will employment status. Either Executive or the Company
can terminate the employment relationship at any time, with or without Cause.

                  (d)      EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION,
WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT SUBMITTING ANY CLAIMS
ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE
INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION
THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF

                                     Page 7



EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES
RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT
LIMITED TO, THE FOLLOWING CLAIMS:

                           (i)      ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF
EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT
OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR
INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL
MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR
PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION;

                           (ii)     ANY AND ALL CLAIMS FOR VIOLATION OF ANY
FEDERAL STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF
THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE
DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF
1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING
ACT, AND LABOR CODE SECTION 201, et seq;

                           (iii)    ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER
LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

         13.      Miscellaneous Provisions.

                  (a)      No Duty to Mitigate. The Executive shall not be
required to mitigate the amount of any payment contemplated by this Agreement
(whether by seeking new employment or in any other manner), nor shall any such
payment be reduced by any earnings that the Executive may receive from any other
source.

                  (b)      Waiver. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Executive and by an authorized officer of
the Company (other than the Executive). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.

                  (c)      Whole Agreement. No agreements, representations or
understandings (whether oral or written and whether express or implied) which
are not expressly set forth in this Agreement have been made or entered into by
either party with respect to the subject matter hereof.

                  (d)      Choice of Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of California.

                  (e)      Severability. The invalidity or unenforceability of
any provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.

                  (f)      No Assignment of Benefits. The rights of any person
to payments or benefits under this Agreement shall not be made subject to option
or assignment, either by voluntary or

                                     Page 8



involuntary assignment or by operation of taw, including (without limitation)
bankruptcy, garnishment, attachment or other creditor's process, and any action
in violation of this subsection (f) shall be void.

                  (g)      Employment Taxes. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.

                  (h)      Assignment by Company. The Company may assign its
rights under this Agreement to an affiliate, and an affiliate may assign its
rights under this Agreement to another affiliate of the Company or to the
Company; provided, however, that no assignment shall be made if the net worth of
the assignee is less than the net worth of the Company at the time of
assignment. In the case of any such assignment, the term "Company" when used in
a Section of this Agreement shall mean the corporation that actually employs the
Executive.

                  (i)      Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.

                  IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.

ELECTRONICS FOR IMAGING, INC.                EXECUTIVE:

/s/ David Peterschmidt                       /s/ Joseph Cutts
- -----------------------------                ------------------------

Compensation Committee Member                Joseph Cutts
Board of Directors

/s/ Jean-Louis Gassee
- -----------------------------

Compensation Committee Member
Board of Directors

                                     Page 9

EX-31.1

                                                                    EXHIBIT 31.1

                                  CERTIFICATION

I, Guy Gecht, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Electronics for
Imaging, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(c) and 15d-1415(c) for the registrant and have:

         a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         b) [intentionally omitted]

         c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

         d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal controls over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):

         a) All significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

         b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: November 14, 2003                             /s/   Guy Gecht
                                                        ------------------------
                                                    Guy Gecht
                                                    Chief Executive Officer

                                       39

EX-31.2

                                                                    EXHIBIT 31.2

                                  CERTIFICATION

I, Joseph Cutts, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Electronics for
Imaging, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(c) and 15d-1415(c) for the registrant and have:

         a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

         b) [intentionally omitted]

         c) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and

         d) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial reporting;
and

5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal controls over financial reporting, to the
registrant's auditors and the audit committee of registrant's board of directors
(or persons performing the equivalent functions):

         a) All significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

         b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal control
over financial reporting.

Date: November 14, 2003                     /s/  Joseph Cutts
                                               ----------------------------
                                                    Joseph Cutts
                                                    Chief Financial Officer

                                       40

EX-32.1

                                                                    Exhibit 32.1
                                  CERTIFICATION
                       PURSUANT TO 18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of Electronics for Imaging,
Inc. (the "Company"), on Form 10-Q for the quarter ended September 30, 2003 (the
"Report"), I, Guy Gecht, Chief Executive Officer of the Company, hereby certify
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 that: (1) the Report fully complies with the
requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934,
as amended; and (2) the information contained in the Report fairly presents, in
all material respects, the financial condition and results of operations of the
Company.

        11/14/03                                      /s/ Guy Gecht
                                                      --------------------------
        Date                                          Guy Gecht
                                                      Chief Executive Officer

                                       41

EX-32.2

                                                                    Exhibit 32.2
                                  CERTIFICATION
                       PURSUANT TO 18 U.S.C. SECTION 1350
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

         In connection with the accompanying Quarterly Report of Electronics for
Imaging, Inc. (the "Company"), on Form 10-Q for the quarter ended September 30,
2003 (the "Report"), I, Joseph Cutts, Chief Financial Officer of the Company,
hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 that: (1) the Report fully
complies with the requirements of section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended; and (2) the information contained in the
Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.

         11/14/03                                      /s/ Joseph Cutts
                                                       -------------------------
         Date
                                                       Joseph Cutts
                                                       Chief Financial Officer

                                       42