10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2013

or

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

For the transition period from              to             

Commission File Number: 000-18805

ELECTRONICS FOR IMAGING, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-3086355
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

303 Velocity Way, Foster City, CA 94404

(Address of principal executive offices) (Zip code)

(650) 357-3500

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

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

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

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

The number of shares of Common Stock outstanding as of July 17, 2013 was 46,416,330.

Electronics For Imaging, Inc.

INDEX

		Page No.
PART I – Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets at June 30, 2013 and December 31, 2012		3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2013 and 2012		4
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June  30, 2013 and 2012		5
	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2013 and 2012		6
	Notes to Condensed Consolidated Financial Statements		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		48
Item 4.	Controls and Procedures		50
PART II – Other Information
Item 1.	Legal Proceedings		50
Item 1A.	Risk Factors		52
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		53
Item 3.	Defaults Upon Senior Securities		53
Item 4.	Mine Safety Disclosure		53
Item 5.	Other Information		53
Item 6.	Exhibits		54
Signatures			55
Exhibit 3.1
Exhibit 3.2
Exhibit 10.1
Exhibit 10.2
Exhibit 12.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 101

PART I – FINANCIAL INFORMATION

Item 1: Condensed Consolidated Financial Statements

Electronics For Imaging, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

(in thousands)	June 30, 2013			December 31, 2012
Assets
Current assets:
Cash and cash equivalents	$	290,010		$	283,996
Short-term investments, available for sale		63,550			80,966
Accounts receivable, net of allowances of $11.4 and $12.9 million, respectively		129,262			135,110
Inventories		63,099			58,343
Income taxes receivable and deferred tax assets		60,409			54,034
Other current assets		27,550			20,843
Total current assets		633,880			633,292
Property and equipment, net		119,360			86,582
Goodwill		222,398			219,383
Intangible assets, net		72,333			80,244
Deferred tax assets		56,820			52,587
Other assets		3,948			2,810
Total assets	$	1,108,739		$	1,074,898
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	70,973		$	63,446
Deferred proceeds from property transaction		181,981			180,216
Accrued and other liabilities		80,664			78,945
Deferred revenue		40,007			40,229
Income taxes payable and deferred tax liabilities		4,616			7,562
Total current liabilities		378,241			370,398
Imputed financing obligation		11,000			—
Noncurrent contingent and other liabilities		9,284			17,742
Noncurrent deferred tax liabilities		6,629			6,210
Noncurrent income taxes payable		33,807			29,755
Total liabilities		438,961			424,105
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding		—			—
Common stock, $0.01 par value; 150,000 shares authorized; 80,269 and 79,193 shares issued, respectively		803			792
Additional paid-in capital		787,681			764,870
Treasury stock, at cost; 33,823 and 33,045 shares, respectively		(587,413	)		(569,576	)
Accumulated other comprehensive income (loss)		(3,517	)		269
Retained earnings		472,224			454,438
Total stockholders’ equity		669,778			650,793
Total liabilities and stockholders’ equity	$	1,108,739		$	1,074,898

See accompanying notes to condensed consolidated financial statements.

3

Electronics For Imaging, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

	Three months ended June 30,						Six months ended June 30,
(in thousands, except per share amounts)	2013			2012			2013			2012
Revenue	$	180,298		$	163,901		$	351,657		$	323,957
Cost of revenue (1)		82,315			74,109			159,814			146,498
Gross Profit		97,983			89,792			191,843			177,459
Operating expenses:
Research and development (1)		32,092			30,227			63,159			61,126
Sales and marketing (1)		34,512			32,234			67,248			63,151
General and administrative (1)		13,343			11,154			27,041			24,056
Restructuring and other (Note 11)		1,235			1,167			3,137			2,250
Amortization of identified intangibles		4,946			4,631			9,873			8,815
Total operating expenses		86,128			79,413			170,458			159,398
Income from operations		11,855			10,379			21,385			18,061
Interest and other expense, net		(422	)		(1,325	)		(3,346	)		(755	)
Income before income taxes		11,433			9,054			18,039			17,306
Provision for income taxes		(2,009	)		(2,049	)		(253	)		(4,067	)
Net income	$	9,424		$	7,005		$	17,786		$	13,239
Net income per basic common share	$	0.20		$	0.15		$	0.38		$	0.29
Net income per diluted common share	$	0.20		$	0.15		$	0.37		$	0.28
Shares used in basic per-share calculation		46,427			46,460			46,376			46,247
Shares used in diluted per-share calculation		48,254			47,814			48,149			47,599

(1) Includes stock-based compensation expense as follows:

	2013		2012		2013		2012
Cost of revenue	$	382	$	235		851		533
Research and development		1,671		1,260		3,538		2,824
Sales and marketing		947		858		1,835		1,614
General and administrative		2,798		2,413		6,218		4,462

See accompanying notes to condensed consolidated financial statements.

4

Electronics For Imaging, Inc.

Condensed Consolidated Statements of Comprehensive Income

(unaudited)

	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Net income	$	9,424		$	7,005		$	17,786		$	13,239
Net unrealized investment gains (losses):
Unrealized holding gains (losses), net of tax benefits of $0.1 million for the three and six months ended June 30, 2013, and net of tax benefit of less than $0.1 million and tax provision of $0.1 million for the three and six months ended June 30, 2012, respectively		(169	)		(25	)		(134	)		150
Reclassification adjustments for (gains) losses included in net income, net of tax provisions of less than $0.1 million for the three and six months ended June 30, 2013, and net of tax provision of less than $0.1 million and tax benefit of less than $0.1 million for the three and six months ended June 30, 2012, respectively		(5	)		6			(18	)		(42	)
Net unrealized investment gains (losses)		(174	)		(19	)		(152	)		108
Currency translation adjustments, net of tax provisions of $0.2 and tax benefit of $0.3 million for the three and six months ended June 30, 2013, respectively, and $0.5 million and less than $0.1 million for the three and six months ended June 30, 2012, respectively		(1,929	)		(2,763	)		(3,572	)		(1,563	)
Other		(74	)		18			(62	)		33
Other comprehensive income	$	7,247		$	4,241		$	14,000		$	11,817

See accompanying notes to condensed consolidated financial statements.

5

Electronics For Imaging, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Six months ended June 30,
(in thousands)	2013			2012
Cash flows from operating activities:
Net income	$	17,786		$	13,239
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		14,343			13,110
Deferred taxes		(7,714	)		1,281
Provisions for bad debt and sales-related allowances		2,169			199
Tax benefit (release) from employee stock plans		2,474			(367	)
Excess tax benefit from stock-based compensation		(2,637	)		(495	)
Provisions for inventory obsolescence		2,361			2,122
Stock-based compensation		12,442			9,433
Contingent consideration payment related to business acquired		(618	)		—
Non-cash acquisition-related compensation costs		465			456
Other non-cash charges and credits		162			1,038
Changes in operating assets and liabilities		444			(21,636	)
Net cash provided by operating activities		41,677			18,380
Cash flows from investing activities:
Purchases of short-term investments		(17,781	)		(28,542	)
Proceeds from sales and maturities of short-term investments		34,513			36,193
Purchases, net of proceeds from sales, of property and equipment		(27,324	)		(3,801	)
Businesses purchased, net of cash acquired, and post-acquisition non-competition agreements		(4,533	)		(44,533	)
Proceeds from notes receivable of acquired businesses		—			5,216
Net cash used for investing activities		(15,125	)		(35,467	)
Cash flows from financing activities:
Proceeds from issuance of common stock		7,906			15,041
Purchases of treasury stock and net settlement of restricted stock		(17,837	)		(9,456	)
Repayment of acquired business debt		(1,621	)		(6,666	)
Contingent consideration payments related to businesses acquired		(9,998	)		(252	)
Excess tax benefit from stock-based compensation		2,637			495
Net cash used for financing activities		(18,913	)		(838	)
Effect of foreign exchange rate changes on cash and cash equivalents		(1,625	)		(308	)
Increase (decrease) in cash and cash equivalents		6,014			(18,233	)
Cash and cash equivalents at beginning of period		283,996			120,058
Cash and cash equivalents at end of period	$	290,010		$	101,825

See accompanying notes to condensed consolidated financial statements.

6

Electronics For Imaging, Inc.

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements (“condensed consolidated financial statements”) include the accounts of Electronics For Imaging, Inc. and its subsidiaries (“EFI” or “Company”). Intercompany accounts and transactions have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP” or “GAAP”) for interim financial information, rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements, and accounting policies consistent in all material respects with those applied in preparing our audited annual consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. These condensed consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and the notes thereto for the year ended December 31, 2012, included in our Annual Report on Form 10-K. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments, management considers necessary for the fair presentation of our financial position, operating results, comprehensive income, and cash flows for the interim periods presented. The results for the interim periods are not necessarily indicative of results for the entire year.

In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, we revised previously issued post-acquisition financial information to reflect adjustments to the preliminary accounting for business acquisitions as if the adjustments occurred on the acquisition date. Accordingly, we have increased goodwill and accrued and other liabilities by $1.1 million at December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of Creta Print S.L. (“Cretaprint”), Online Print Marketing Ltd. and DataCreation Pty Ltd. together doing business as Online Print Solutions (“OPS”), and Technique, Inc. and Technique Business Systems Limited (collectively, “Technique”). The purchase price allocations for the OPS and Technique acquisitions are preliminary and subject to change within the respective measurement periods as valuations are finalized. We expect to continue to obtain information to assist us in finalizing the fair value of the net assets acquired at the respective acquisition dates during the respective measurement periods.

Restricted Cash

We are required to maintain restricted cash of $0.3 million as of June 30, 2013 related to customer agreements that were obtained through the alphagraph team GmbH (“Alphagraph”) acquisition, which is classified as a current asset because the restriction will be released within twelve months.

Recent Accounting Pronouncements

Fair Value Measurements. As a basis for considering market participant assumptions in fair value measurements, ASC 820, Fair Value Measurement, establishes a three-tier fair value hierarchy as more fully defined in Note 5, Investments and Fair Value Measurements. In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). Effective in the first quarter of 2012, the primary provisions of ASU 2011-04 impacting us are the adoption of uniform terminology within U.S. GAAP and IFRS to reference fair value concepts, measuring the fair value of an equity instrument used as consideration in a business combination, and the following additional disclosures concerning fair value measurements classified as Level 3 within the fair value hierarchy:

• quantitative information about the unobservable inputs used in the determination of Level 3 fair value measurements,

• the valuation processes used in Level 3 fair value measurements, and

• the sensitivity of Level 3 fair value measurements to changes in unobservable inputs and the interrelationships between those unobservable inputs.

Accordingly, the appropriate disclosures have been included in the accompanying condensed consolidated financial statements.

7

Other Comprehensive Income. In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. Effective in the first quarter of 2012, we have opted to present total comprehensive income, the components of net income, and the components of other comprehensive income in two separate, but consecutive, statements. Under ASU 2011-05, we also have the option to present this information in a single continuous statement of comprehensive income. We previously presented the components of accumulated other comprehensive income (loss) (“OCI”) in the footnotes to our interim and annual financial statements and as a component of our statement of stockholders’ equity in our annual financial statements.

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires additional disclosures about amounts reclassified out of OCI by component. Effective in the first quarter of 2013, we are required to present, either on the face of the condensed consolidated statement of operations or in the notes to our condensed consolidated financial statements, significant amounts reclassified out of OCI by the respective line items of net income, but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, we are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. We have provided the required disclosure in Note 4, Balance Sheet Details, of the notes to condensed consolidated financial statements.

Goodwill and Other Indefinite-Lived Intangible Asset Impairment Assessment. In September 2011 and July 2012, the FASB issued new accounting guidance that simplifies the analysis of goodwill and other indefinite-lived intangible asset impairment. The new guidance allows a qualitative assessment to be performed to determine whether further impairment testing is necessary. These accounting standards are effective for the year ended December 31, 2012 with respect to the assessment of goodwill and for the year ended December 31, 2013 with respect to the assessment of other indefinite-lived intangible assets. These standards provide an alternative method for determining whether our goodwill and other indefinite-lived intangible assets have been impaired, which would not differ materially from the result of the detailed impairment testing methodology required by ASC 350-20-35, Goodwill – Subsequent Measurement.

Joint and Several Liability. In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date, which requires accrual of obligations resulting from joint and several liability arrangements when the total amount of the obligation is fixed at the reporting date, as the sum of the following:

• the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and

• any additional amount the reporting entity expects to pay on behalf of its co-obligors.

If the amount of the obligation is not fixed at the reporting date, then the related liability should be accrued in accordance with ASC 450-20, Loss Contingencies. Examples of obligations subject to ASU 2013-04 include debt arrangements, legal settlements, and contractual obligations.

ASU 2013-04 will be effective in the first quarter of 2014. We are currently evaluating its impact on our financial condition and results of operations.

Balance Sheet Presentation of Unrecognized Tax Benefits. In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. We currently present our liability for estimated unrecognized tax benefits as noncurrent income taxes payable in our condensed consolidated balance sheets of $33.8 and $29.8 million as of June 30, 2013 and December 31, 2012, respectively. Effective in the first quarter of 2014, we will be required to reclassify unrecognized tax benefits as an offset to deferred tax assets to the extent of any net operating loss carryforwards, similar tax loss carryforwards, or tax credit carryforwards that are available at the reporting date under the tax law of the applicable tax jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. An exception would apply if the tax law of the tax jurisdiction does not require us to use, and we do not intend to use, the deferred tax asset for such purpose. We have not yet determined the amount of the required reclassification between noncurrent income taxes payable and deferred tax assets.

8

Supplemental Cash Flow Information

	Six months ended June 30,
(in thousands)	2013			2012
Net cash paid for income taxes	$	7,800		$	1,695
Cash paid for interest expense	$	62		$	32
Acquisition-related activities:
Cash paid for acquisitions, excluding contingent consideration	$	4,596		$	47,520
Cash acquired in acquisitions, excluding restricted cash		(63	)		(2,987	)
Net cash paid for acquisitions	$	4,533		$	44,533
Non-cash investing and financing activities:
Non-cash acquisition of property under a build-to-suit lease	$	11,000		$	—
Property and equipment received and accrued in accounts payable		347			172
	$	11,347		$	172

Net cash paid for income taxes of $7.8 million includes $5.5 million related to the deferred proceeds from property transaction during the six months ended June 30, 2013.

2. Earnings Per Share

Net income per basic common share is computed using the weighted average number of common shares outstanding during the period, excluding non-vested restricted stock. Net income per diluted common share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares result from the assumed exercise of outstanding common stock options having a dilutive effect using the treasury stock method, non-vested shares of restricted stock having a dilutive effect, shares to be purchased under our Employee Stock Purchase Plan (“ESPP”) having a dilutive effect, and non-vested restricted stock for which the performance criteria have been met. Any potential shares that are anti-dilutive as defined in ASC 260, Earnings Per Share, are excluded from the effect of dilutive securities.

ASC 260-10-45-48 requires that performance-based and market-based restricted stock and stock options that would be issuable if the end of the reporting period were the end of the vesting period, if the result would be dilutive, are assumed to be outstanding for purposes of determining net income per diluted common share as of the later of the beginning of the period or the grant date. Accordingly, performance-based restricted stock units (“RSUs”), which vested or were issuable on February 22, 2013, May 11, 2013, June 30, 2013, February 9, 2012, February 13, 2012, and May 23, 2012, based on achievement of specified performance criteria related to revenue and non-GAAP operating income targets, and market-based RSUs and stock options, which vested on January 14, February 7, February 11, February 13, March 25, and April 1, 2013, based on achievement of specified stock prices for defined periods, are included in the determination of net income per diluted common share as of the beginning of the period. Performance-based and market-based targets were not met with respect to any other RSUs or stock options as of June 30, 2013.

Basic and diluted earnings per share for the three and six months ended June 30, 2013 and 2012 are reconciled as follows (in thousands, except per share amounts):

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Basic net income per share:
Net income available to common shareholders	$	9,424	$	7,005	$	17,786	$	13,239
Weighted average common shares outstanding		46,427		46,460		46,376		46,247
Basic net income per share	$	0.20	$	0.15	$	0.38	$	0.29
Dilutive net income per share:
Net income available to common shareholders	$	9,424	$	7,005	$	17,786	$	13,239
Weighted average common shares outstanding		46,427		46,460		46,376		46,247
Dilutive stock options and non-vested restricted stock		1,827		1,354		1,773		1,352
Weighted average common shares outstanding for purposes of computing diluted net income per share		48,254		47,814		48,149		47,599
Dilutive net income per share	$	0.20	$	0.15	$	0.37	$	0.28

9

Potential shares of common stock that are not included in the determination of diluted net income per share because they are anti-dilutive for the periods presented consist of weighted stock options, non-vested restricted stock, and shares to be purchased under our ESPP having an anti-dilutive effect, excluding any performance-based or market-based stock options and RSUs for which the performance criteria were not met, of less than 0.1 million for the three and six months ended June 30, 2013 and 0.4 and 0.7 million for the three and six months ended June 30, 2012, respectively.

Note 3: Acquisitions

We acquired privately-held J.J.F Enterprises, Inc., doing business as PrintLeader Software (“PrintLeader”), and privately-held GamSys Software SPRL (“GamSys”) during the second quarter of 2013, which have been integrated into our Productivity Software operating segment, for cash consideration of approximately $3.6 million, net of cash acquired, plus additional future cash earnouts contingent on achieving certain performance targets and accounts receivable payments dependent on collections.

The fair value of the earnouts are currently estimated to be $3.0 million by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include discount rates of 4.5% and 6.0% and probability-adjusted levels of revenue. Probability-adjusted revenue is a significant input that is not observable in the market, which ASC 820-10-35 refers to as a Level 3 input. These contingent liabilities are reflected in the Condensed Consolidated Balance Sheet as of June 30, 2013, as current and noncurrent liabilities of $1.4 and $1.6 million, respectively. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date will be recognized in general and administrative expenses.

PrintLeader, headquartered in Palm City, Florida, provides business process automation software to small commercial and in-plant printing operations in North America. Support and operations of PrintLeader were integrated into the Productivity Software operating segment, which will also provide PrintSmith products to the PrintLeader customer base, while continuing to support existing PrintLeader customers.

GamSys, headquartered in LaReid, Belgium, provides business process automation software to the printing and packaging industries in the French-speaking regions of Europe and Africa. Support and operations of GamSys were integrated into the Productivity Software operating segment, which provides PrintSmith, Pace, Monarch, and Radius products to the GamSys customer base, while continuing to support existing GamSys customers.

These acquisitions were accounted for as purchase business combinations. In accordance with ASC 805, the purchase price has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values on the acquisition date based on the valuation performed by management with the assistance of a third party. Excess purchase consideration was recorded as goodwill. Factors contributing to a purchase price that results in goodwill include, but are not limited to, the retention of research and development personnel with skills to develop future technology, support personnel to provide maintenance services related to the products, a trained sales force capable of selling current and future products, the opportunity to cross-sell products of the acquired businesses to existing customers, the opportunity to sell PrintSmith, Pace, Monarch, and Radius products to customers of the acquired businesses, and the positive reputation of each of these companies in the market.

We engaged a third party valuation firm to aid management in its analysis of the fair value of GamSys. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party valuation firm, the fair value analyses and related valuations represent the conclusions of management and not the conclusions or statements of any third party. The analysis of the fair value of PrintLeader was determined internally.

The purchase price allocations are preliminary and subject to change within the respective measurement periods as valuations are finalized. We expect to continue to obtain information to assist us in finalizing the fair value of the net assets acquired at the respective acquisition dates during the respective measurement periods. Measurement period adjustments determined to be material will be applied retrospectively to the appropriate acquisition date in our condensed consolidated financial statements and, depending on the nature of the adjustments, our operating results subsequent to the respective acquisition date could be affected.

Valuation Methodologies

Intangible assets acquired consist of customer relationships, existing technology, trade names, and in-process research & development (“IPR&D”). Each intangible asset valuation methodology assumes a discount rate between 16.5% and 24.0%.

Customer Relationships. Customer relationships were valued using the excess earnings method, which is an income approach. The value of customer relationships lies in the generation of a consistent and predictable revenue source without incurring the costs normally required to develop the relationships. Customer relationships were valued by estimating the revenue attributable to existing customer relationships and probability-weighted in each forecast year to reflect the uncertainty of maintaining existing relationships based on historical attrition rates.

Trade Names were valued using the relief from royalty method with royalty rates based on various factors including an analysis of market data, comparable trade name agreements, and consideration of historical advertising dollars spent supporting the trade names. In particular, the GamSys trade name and the Partner and PartnerWeb product names are recognizable in the French speaking areas of Europe and Africa with strong industry recognition.

10

Existing Technology and IPR&D. Existing technology and IPR&D were valued using the relief from royalty method based on royalty rates for similar technologies. The value of existing technology is derived from consistent and predictable revenue, including the opportunity to cross-sell products of the acquired businesses to existing customers, and the avoidance of the costs associated with developing the technology. Revenue related to existing technology was adjusted in each forecast year to reflect the evolution of the technology and the cost of sustaining research and development required to maintain the technology.

Using each of these methodologies, the value of IPR&D was determined by estimating the cost to develop purchased IPR&D into commercially viable products, estimating the net cash flows resulting from the sale of those products, and discounting the net cash flows back to their present value using a discount rate of 17%. Project schedules were between 50% and 53% complete based on management’s estimate of tasks completed and tasks to be completed to achieve technical and commercial feasibility depending on the measure of completion that is utilized.

IPR&D is subject to amortization after product launch over the product life or otherwise subject to impairment in accordance with acquisition accounting guidance.

The preliminary allocation of the purchase price to the assets acquired and liabilities assumed (in thousands) with respect to these acquisitions at their respective acquisition dates is summarized as follows:

	Weighted average useful life		Purchase Price Allocation
Customer relationships		5 years	$	2,130
Existing technology		3 years		650
Trade name		3 years		280
IPR&D		3 years		150
Goodwill		—		6,245
				9,455
Net tangible liabilities				(1,230	)
Total purchase price			$	8,225

Pro forma results of operations for these acquisitions have not been presented because they are not material to our consolidated results of operations. Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is not deductible for tax purposes.

GamSys generates revenue and incurs operating expenses in Euros. Upon consideration of the salient economic indicators discussed in ASC 830-10-55-5, Foreign Currency Matters, we consider the Euro to be the functional currency for GamSys.

4. Balance Sheet Details

Inventories

Inventories, net of allowances, as of June 30, 2013 and December 31, 2012 consisted of the following (in thousands):

	June 30,		December 31,
	2013		2012
Raw materials	$	34,071	$	30,519
Work in process		3,318		5,847
Finished goods		25,710		21,977
	$	63,099	$	58,343

Deferred Cost of Revenue

Deferred cost of revenue related to unrecognized revenue on shipments to customers of $3.1 and $2.2 million at June 30, 2013 and December 31, 2012, respectively, is included in other current assets in our condensed consolidated balance sheets.

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Product Warranty Reserves

Product warranty reserve activities are summarized as follows (in thousands):

Balance at January 1, 2012	$	8,877
Accrued warranty assumed upon acquisition of Cretaprint		1,386
Provisions, net of releases		10,122
Settlements		(10,227	)
Balance at December 31, 2012	$	10,158
Provisions, net of releases		5,352
Settlements		(5,313	)
Balance at June 30, 2013	$	10,197

Other Comprehensive Income

The components of OCI as of June 30, 2013 and December 31, 2012 consisted of the following (in thousands):

	June 30,			December 31,
	2013			2012
Net unrealized investment gains	$	32		$	184
Currency translation gains (losses)		(3,440	)		132
Other		(109	)		(47	)
Accumulated other comprehensive income (loss)	$	(3,517	)	$	269

Amounts reclassified out of OCI were less than $0.1 million, net of tax, for the three and six months ended June 30, 2013 and 2012, and consisted of unrealized gains from investments in debt securities and are reported within interest and other expense, net, in our condensed consolidated statements of operations.

5. Investments and Fair Value Measurements

We invest our excess cash on deposit with major banks in money market, U.S. Treasury and government-sponsored entity, corporate debt, municipal, asset-backed, and mortgage-backed residential securities. By policy, we invest primarily in high-grade marketable securities. We are exposed to credit risk in the event of default by the financial institutions or issuers of these investments to the extent of amounts recorded in the condensed consolidated balance sheets.

We consider all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Typically, the cost of these investments has approximated fair value. Marketable investments with a maturity greater than three months are classified as available-for-sale short-term investments. Available-for-sale securities are stated at fair market value with unrealized gains and losses reported as a separate component of OCI, adjusted for deferred income taxes. The credit portion of any other-than-temporary impairment is included in net income. Realized gains and losses on sales of financial instruments are recognized upon sale of the investments using the specific identification method.

Our available-for-sale short-term investments as of June 30, 2013 and December 31, 2012 are as follows (in thousands):

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
June 30, 2013
U.S. Government and sponsored entities	$	5,033	$	2	$	(1	)	$	5,034
Corporate debt securities		38,302		114		(87	)		38,329
Municipal securities		1,709		1		(4	)		1,706
Asset-backed securities		11,702		61		(21	)		11,742
Mortgage-backed securities – residential		6,751		22		(34	)		6,739
Total short-term investments	$	63,497	$	200	$	(147	)	$	63,550
December 31, 2012
U.S. Government and sponsored entities	$	17,371	$	7	$	—		$	17,378
Corporate debt securities		40,218		194		(17	)		40,395
Municipal securities		1,710		3		—			1,713
Asset-backed securities		12,128		66		(2	)		12,192
Mortgage-backed securities – residential		9,237		63		(12	)		9,288
Total short-term investments	$	80,664	$	333	$	(31	)	$	80,966

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The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss position as of June 30, 2013 and December 31, 2012 are as follows (in thousands):

	Less than 12 Months					More than 12 Months						TOTAL
	Fair Value		Unrealized Losses			Fair Value			Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2013
U.S. Government and sponsored entities	$	1,439	$	(1	)	$	—		$	—		$	1,439	$	(1	)
Corporate debt securities		18,228		(87	)		—			—			18,228		(87	)
Municipal securities		831		(4	)		—			—			831		(4	)
Asset-backed securities		6,935		(21	)		—			—			6,935		(21	)
Mortgage-backed securities – residential		3,782		(28	)		(233	)		(6	)		3,549		(34	)
Total	$	31,215	$	(141	)	$	(233	)	$	(6	)	$	30,982	$	(147	)
December 31, 2012
U.S. Government and sponsored entities	$	15,791	$	(1	)	$	—		$	—		$	15,791	$	(1	)
Corporate debt securities		11,288		(17	)		—			—			11,288		(17	)
Asset-backed securities		1,959		(2	)		—			—			1,959		(2	)
Mortgage-backed securities – residential		1,263		(7	)		(300	)		(4	)		963		(11	)
Total	$	30,301	$	(27	)	$	(300	)	$	(4	)	$	30,001	$	(31	)

For fixed income securities that have unrealized losses as of June 30, 2013, we have determined that we do not have the intent to sell any of these investments and it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. We have evaluated these fixed income securities and determined that no credit losses exist. Accordingly, management has determined that the unrealized losses on our fixed income securities as of June 30, 2013 were temporary in nature.

Amortized cost and estimated fair value of investments at June 30, 2013 is summarized by maturity date as follows (in thousands):

	Amortized cost		Fair value
Mature in less than one year	$	11,829	$	11,855
Mature in one to three years		51,668		51,695
Total short-term investments	$	63,497	$	63,550

For the three months ended June 30, 2013 and 2012, net realized losses of less than $0.1 and $0.1 million, respectively, from sales of investments were recognized in interest and other expense, net. For the six months ended June 30, 2013 and 2012, net realized losses of $0.1 million from sales of investments were recognized in interest and other expense, net. As of June 30, 2013 and December 31, 2012, net unrealized gains of $0.1 and $0.3 million were included in OCI in the accompanying condensed consolidated balance sheets.

Fair Value Measurements

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy as follows:

Level 1: Inputs that are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

Level 2: Inputs that are other than quoted prices included within Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date for the duration of the instrument’s anticipated life or by comparison to similar instruments; and

Level 3: Inputs that are unobservable or that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. These include management’s own judgments about market participant assumptions developed based on the best information available in the circumstances.

We utilize the market approach to measure the fair value of our fixed income securities. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The fair value of our fixed income securities is obtained using readily-available market prices from a variety of industry standard data providers, large financial institutions, and other third-party sources for the identical underlying securities. The fair value of our investments in certain money market funds is expected to maintain a Net Asset Value of $1 per share and, as such, is priced at the expected market price.

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We obtain the fair value of our Level 2 financial instruments from several third party asset managers, custodian banks, and the accounting service providers. Independently, these service providers use professional pricing services to gather pricing data, which may include quoted market prices for identical or comparable instruments or inputs other than quoted prices that are observable either directly or indirectly. The service providers then analyze their gathered pricing inputs and apply proprietary valuation techniques, including consensus pricing, weighted average pricing, distribution curve-based algorithms, or pricing models such as discounted cash flow techniques to provide a fair value for each security.

As part of this process, we engaged a pricing service to assist management in its pricing analysis and assessment of other-than-temporary impairment. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party pricing service, the impairment analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party.

Our investments and liabilities measured at fair value have been presented in accordance with the fair value hierarchy specified in ASC 820 as of June 30, 2013 and December 31, 2012 in order of liquidity as follows (in thousands):

			Fair Value Measurements at Reporting Date using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
June 30, 2013
Assets:
Money market funds	$	123,502	$	123,502	$	—	$	—
U.S. Government and sponsored entities		5,034		—		5,034		—
Corporate debt securities		41,691		—		41,691		—
Municipal securities		1,706		—		1,706		—
Asset-backed securities		11,742		—		11,672		70
Mortgage-backed securities – residential		6,739		—		6,739		—
	$	190,414	$	123,502	$	66,842	$	70
Liabilities:
Contingent consideration, current and noncurrent	$	29,627	$	—	$	—	$	29,627
Self-insurance		1,558		—		—		1,558
	$	31,185	$	—	$	—	$	31,185
December 31, 2012
Assets:
Money market funds	$	112,714	$	112,714	$	—	$	—
U.S. Government and sponsored entities		20,177		15,214		4,963		—
Corporate debt securities		42,069		—		42,069		—
Municipal securities		1,713		—		1,713		—
Asset-backed securities		12,192		—		12,139		53
Mortgage-backed securities – residential		9,288		—		9,288		—
	$	198,153	$	127,928	$	70,172	$	53
Liabilities:
Contingent consideration, current and noncurrent	$	38,050	$	—	$	—	$	38,050
Self-insurance		1,375		—		—		1,375
	$	39,425	$	—	$	—	$	39,425

Money market funds consisted of $123.5 and $112.7 million, which have been classified as cash equivalents at June 30, 2013 and December 31, 2012, respectively. U.S. government and sponsored entities securities include $2.8 million, which have been classified as cash equivalents at December 31, 2012. Corporate debt securities include $3.4 and $1.7 million, which have been classified as cash equivalents at June 30, 2013 and December 31, 2012, respectively.

Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. Investments in U.S. Treasury obligations and overnight money market mutual funds have been classified as Level 1 because these securities are valued based on quoted prices in active markets or they are actively traded at $1.00 Net Asset Value. There have been no transfers between Level 1 and 2 during the six months ended June 30, 2013 and 2012.

Government agency investments and corporate debt instruments, including investments in asset-backed and mortgage-backed securities, have generally been classified as Level 2 because markets for these securities are less active or valuations for such securities utilize significant inputs, which are directly or indirectly observable. We hold asset-backed securities with income payments derived from and collateralized by a specified pool of underlying assets. Predominanty, asset-backed securities in the portfolio are collateralized by credit cards and auto loans. We also hold two asset-backed securities collateralized by mortgage loans.

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At June 30, 2013 and December 31, 2012, one corporate debt instrument has been classified as Level 3 due to its significantly low level of trading activity. The rollforward of Level 3 investments is not provided due to immateriality. Changes in unobservable inputs to the fair value measurement of Level 3 investments on a recurring basis will not result in a significantly higher or lower fair value measurement.

We review investments in debt securities for other-than-temporary impairment whenever the fair value is less than the amortized cost and evidence indicates the investment’s carrying amount is not recoverable within a reasonable period of time. We assess the fair value of individual securities as part of our ongoing portfolio management. Our other-than-temporary assessment includes reviewing the length of time and extent to which fair value has been less than amortized cost, the seniority and durations of the securities, adverse conditions related to a security, industry, or sector, historical and projected issuer financial performance, credit ratings, issuer specific news, and other available relevant information. To determine whether an impairment is other-than-temporary, we consider whether we have the intent to sell the impaired security or if it will be more likely than not that we will be required to sell the impaired security before a market price recovery and whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary.

In determining whether a credit loss existed, we used our best estimate of the present value of cash flows expected to be collected from each debt security. For asset-backed and mortgage-backed securities, cash flow estimates, including prepayment assumptions, we rely on data from widely accepted third party data sources or internal estimates. In addition to prepayment assumptions, cash flow estimates vary based on assumptions regarding the underlying collateral including default rates, recoveries, and changes in value. Expected cash flows were discounted using the effective interest rate implicit in the securities.

Based on this analysis, there were no other-than-temporary impairments, including credit-related impairments, during the six months ended June 30, 2013 and 2012. Accumulated other-than-temporary credit-related impairments charged to retained earnings and interest and other expense, net, consists of the following (in thousands):

	Impairments Charged to Retained Earnings		Impairments Recognized in Other Income (Expense), Net		Total
Accumulated impairments, net, attributable to assets still held at June 30, 2013	$	58	$	824	$	882

Liabilities for Contingent Consideration

Acquisition-related liabilities for contingent consideration (i.e., earnouts) are related to the purchase business combinations of GamSys and PrintLeader in 2013; Technique, OPS, Metrics Sistemas de Informação, Serviços e Comércio Ltda. and Metrics Sistemas de Informação e Serviço Ltda. (collectively, “Metrics”), FXcolors (“FX Colors”), and Cretaprint in 2012; Alphagraph, Entrac Technologies, Inc. (“Entrac”); and Streamline Development, LLC (“Streamline”) in 2011; and Radius Solutions Incorporated (“Radius”) in 2010. The fair value of these earnouts is estimated to be $29.6 and $38.1 million at June 30, 2013 and December 31, 2012, respectively, by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include discount rates between 4.2% and 6.4%, executive retention relative to acquisition-related executive deferred compensation cost, and probability-adjusted revenue and gross profit levels. Probability-adjusted revenue and gross profit are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. Acquisition-related executive deferred compensation cost of $0.5 million, which is dependent on the continuing employment of a former shareholder of an acquired company, has been applied against the earnout as of June 30, 2013. These contingent liabilities have been reflected in the condensed consolidated balance sheet as of June 30, 2013, as a current and noncurrent liability of $21.2 and $8.4 million, respectively.

The probability of achieving the 2013 Entrac, Cretaprint, Streamline, and Alphagraph earnout performance targets has been reduced, partially offset by an increase in the probability of achieving the 2013 Metrics earnout performance target. The 2012 Entrac earnout performance target was not achieved due to the delayed launch of the M500 product, which is Entrac’s next generation device. The 2012 Alphagraph earnout performance target was partially achieved. Consequently, the fair value of contingent consideration decreased by $1.6 and $2.1 million as of June 30, 2013 and December 31, 2012, respectively, partially offset by $0.8 and $1.7 million of earnout interest accretion related to all acquisitions, respectively. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date have been recognized in general and administrative expense.

Earnout payments during the six months ended June 30, 2013 of $8.9, $0.7, and $1.0 million, respectively, related to previously accrued Cretaprint, Alphagraph, and Radius contingent consideration liabilities. Earnout payments during the year ended December 31, 2012 of $0.6, $0.3, and $0.1 million, respectively, related to previously accrued Streamline, Radius, and FX Colors contingent consideration liabilities. The difference between the $2.1 million accrued Radius earnout liability and the amount paid represents a disputed indemnification.

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Changes in the fair value of contingent consideration are summarized as follows:

Fair value of contingent consideration at January 1, 2012	$	8,704
Fair value of Cretaprint contingent consideration at January 10, 2012		16,445
Fair value of FX Colors contingent consideration at April 5, 2012		190
Fair value of Metrics contingent consideration at April 10, 2012		5,582
Fair value of OPS contingent consideration at October 1, 2012		2,600
Fair value of Technique contingent consideration at November 16, 2012		4,410
Deferred compensation expense dependent on future employment		907
Changes in valuation		(432	)
Payments		(968	)
Foreign currency adjustment		612
Fair value of contingent consideration at December 31, 2012	$	38,050
Fair value of PrintLeader contingent consideration at May 8, 2013		389
Fair value of GamSys contingent consideration at May 31, 2013		2,640
Deferred compensation expense dependent on future employment		465
Changes in valuation		(828	)
Payments		(10,616	)
Foreign currency adjustment		(473	)
Fair value of contingent consideration at June 30, 2013	$	29,627

ASU 2011-04 requires a narrative description of the sensitivity of recurring fair value measurements to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. Since the primary inputs to the fair value measurement of the contingent consideration liability are the discount rate and probability-adjusted revenue, we reviewed the sensitivity of the fair value measurement to changes in these inputs. Probability-adjusted gross profit was not considered in the sensitivity analysis as its impact on the fair value measurement is conditional on achievement of the revenue performance targets and has significantly less impact on the overall potential earnout payment.

We assessed the probability of achieving the revenue performance targets for the contingent consideration associated with each acquisition at percentage levels between 70% and 100% as of each respective acquisition date based on an assessment of the historical performance of each acquired entity, our current expectations of future performance, and other relevant factors. A change in probability-adjusted revenue of 5% from the level assumed in the respective valuations would result in an increase (decrease) in the earnout liability of approximately $1.0 or $(1.4) million, respectively, resulting in a corresponding adjustment to general and administrative expense. Likewise, a change in the discount rate of one percentage point results in either an increase of or decrease of $0.3 million in the fair value of contingent consideration.

Liability for Self-Insurance

We are partially self-insured for certain losses related to employee medical and dental coverage, excluding employees covered by health maintenance organizations. We generally have an individual stop loss deductible of $125 thousand per enrollee unless specific exposures are separately insured. We have accrued a contingent liability of $1.6 and $1.4 million as of June 30, 2013 and December 31, 2012, respectively, which are not discounted, based upon examination of historical trends, our claims experience, industry claims experience, actuarial analysis, and estimates. The primary estimates used in the development of our accrual as of June 30, 2013 and December 31, 2012, include total enrollment (including employee contributions), population demographics, and historical claims costs incurred, which are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs.

Changes in the contingent liability for self-insurance are summarized as follows:

Fair value of self-insurance liability at January 1, 2012	$	1,640
Additions to reserve		12,440
Employee contributions		2,340
Less: insurance claims, stop loss premium, and administrative fees paid		(15,045	)
Fair value of self-insurance liability at December 31, 2012	$	1,375
Additions to reserve		5,920
Employee contributions		1,154
Less: insurance claims, stop loss premium, and administrative fees paid		(6,891	)
Fair value of self-insurance liability at June 30, 2013	$	1,558

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While we believe these estimates are reasonable based on the information currently available, if actual trends, including the severity of claims and medical cost inflation, differ from our estimates, our consolidated financial position, results of operations, or cash flows could be impacted. ASU 2011-04 requires a narrative description of the sensitivity of recurring fair value measurements to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. Since the primary inputs to the fair value measurement of the self-insurance liability are the historical claims costs incurred, we reviewed the sensitivity of the fair value measurement to changes in medical cost assumptions and the severity of claims experienced by employees. A change in the severity of claims experienced or medical cost inflation of 10% results in either an increase or decrease in the fair value of the self-insurance liability of approximately $0.1 million.

Fair Value of Derivative Instruments

We utilize the income approach to measure the fair value of our derivative assets and liabilities under ASC 820. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices, and are therefore classified as Level 2 measurements. The notional amount of our derivative assets and liabilities was $20.9 and $3.2 million as of June 30, 2013 and December 31, 2012, respectively. The fair value of our derivative assets and liabilities that were designated for cash flow hedge accounting treatment having notional amounts of $2.7 million as of June 30, 2013 and December 31, 2012 was not material.

6. Indebtedness

Short-term borrowings of $6.9 million, which were assumed in the acquisition of Cretaprint on January 10, 2012, were repaid prior to June 30, 2013. Cretaprint indebtedness consisted primarily of notes payable to banks and lines of credit with weighted average interest rates of 5.0% and 4.5%, respectively.

Long-term indebtedness at December 31, 2012, excluding the noncurrent portion of contingent consideration, consisted of the remaining balance of $0.3 million, net of current portion, on a 6.75% building loan assumed upon the acquisition of Technique and $0.1 million of Alphagraph and Cretaprint capital lease liabilities. The Technique building mortgage, which was a ten-year loan, was fully paid during the six months ended June 30, 2013. Long-term indebtedness at June 30, 2013 consists of approximately $0.2 million of capital lease obligations.

7. Income taxes

We recognized a tax provision of $2.0 million on pretax net income of $11.4 and $9.1 million during the three months ended June 30, 2013 and 2012, respectively. We recognized a tax provision of $0.3 and $4.1 million on pretax net income of $18.0 and $17.3 million during the six months ended June 30, 2013 and 2012, respectively. The provision for income taxes before discrete items reflected in the table below was $2.4 and $2.6 million during the three months ended June 30, 2013 and 2012, respectively, and $4.3 and $5.2 million during the six months ended June 30, 2013 and 2012, respectively. The decrease in the provision for income taxes before discrete items for the three and six months ended June 30, 2013, compared with the same periods in the prior year, is due primarily to the tax benefit related to the U.S. federal research and development credit recognized only in 2013.

Primary differences between our recorded tax provision rate and the U.S. statutory rate of 35% include tax benefits related to credits for research and development costs in 2013, lower taxes on permanently reinvested foreign earnings, and the tax effects of stock-based compensation expense pursuant to ASC 718-740, Stock Compensation – Income Taxes, which are non-deductible for tax purposes. Pursuant to the American Taxpayer Relief Act of 2012, on January 2, 2013, we recognized a tax benefit of $3.2 million resulting from the renewal of the U.S. federal research and development tax credit retroactive to 2012. ASC 740-10-45-15, Income Taxes, requires that the effects of a change in tax law or rates be recognized in the period that includes the enactment date.

Our tax provision before discrete items is reconciled to our recorded provision for income taxes for the three and six months ended June 30, 2013 and 2012 as follows (in millions):

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Provision for income taxes before discrete items	$	2.4		$	2.6		$	4.3		$	5.2
Interest related to unrecognized tax benefits		0.1			0.1			0.2			0.2
Provision related to reassessment of taxes resulting from the filing of prior year foreign tax returns		—			—			0.3			—
Benefit related to restructuring and other expenses		(0.1	)		(0.3	)		(0.7	)		(0.6	)
Benefit related to the 2012 U.S. federal research and development tax credit		—			—			(3.2	)		—
Tax deductions related to ESPP dispositions		(0.1	)		(0.1	)		(0.3	)		(0.4	)
Benefit related to reversals of uncertain tax positions due to statute of limitation expirations		(0.3	)		(0.3	)		(0.3	)		(0.3	)
Provision for income taxes	$	2.0		$	2.0		$	0.3		$	4.1

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As of June 30, 2013 and December 31, 2012, the gross unrecognized tax benefits were $33.8 and $29.8 million, respectively, which would affect the effective tax rate, if recognized. Over the next twelve months, our existing tax positions will continue to generate an increase in liabilities for unrecognized tax benefits. It is reasonably possible that our gross unrecognized tax benefits will decrease up to $4.0 million in the next twelve months. These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits in our condensed consolidated statement of operations.

We recognize potential accrued interest and penalties related to unrecognized tax benefits as a component of the income tax provision. As of June 30, 2013 and December 31, 2012, we accrued $1.5 and $1.2 million, respectively, for potential payments of interest and penalties.

As of June 30, 2013, we were subject to examination by the Internal Revenue Service for the 2009-2012 tax years, state tax jurisdictions for the 2008-2012 tax years, and the Netherlands tax authority for the 2010-2012 tax years.

8. Commitments and Contingencies

Contingent Consideration

We are required to make payments to acquired company stockholders based on the achievement of specified performance targets. The fair value of these earnouts is estimated to be $29.6 and $38.1 million at June 30, 2013 and December 31, 2012, respectively, by applying the income approach in accordance with ASC 805-30-25-5. These contingent liabilities have been reflected in the condensed consolidated balance sheet as of June 30, 2013, as a current and noncurrent liability of $21.2 and $8.4 million, respectively. The potential undiscounted amount of all future contingent consideration cash payments that we could be required to make, beyond amounts currently accrued, is $5.4 million as of June 30, 2013.

The probability of achieving the 2013 Entrac, Cretaprint, Streamline, and Alphagraph earnout performance targets has been reduced, partially offset by an increase in the probability of achieving the 2013 Metrics earnout performance target. The 2012 Entrac earnout performance target was not achieved due to the delayed launch of the M500 product, which is Entrac’s next generation device. The 2012 Alphagraph earnout performance target was partially achieved. Consequently, the fair value of contingent consideration decreased by $1.6 and $2.1 million as of June 30, 2013 and December 31, 2012, respectively, partially offset by $0.8 and $1.7 million of earnout interest accretion related to all acquisitions, respectively. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date have been recognized in general and administrative expense.

Self-Insurance

We are partially self-insured for certain losses related to employee medical and dental coverage, excluding employees covered by health maintenance organizations. We generally have an individual stop loss deductible of $125 thousand per enrollee unless specific exposures are separately insured. We recognize our self-insurance expense for interim reporting purposes on a pro rata basis over the year in accordance with ASC 720-20-35-3, Insurance Costs. This approach treats usual recurring self-insurance losses as integral to annual reporting. Therefore, any expected changes in the incurred but not reported liability and related insurance recoverables that are not related to specific events are spread over the entire year.

We have accrued a contingent liability of $1.6 and $1.4 million as of June 30, 2013 and December 31, 2012, respectively, which represents an allocation of the ultimate claims cost that will be incurred through year end. The estimated liability is not discounted and is established based upon analysis of historical data supplied by our insurance carrier and an internal update of the actuarial analysis that we obtained at December 31, 2012. We will further refine our accrual at December 31, 2013 based upon appropriate actuarial analysis and estimates. The primary estimates used in the development of our accrual at June 30, 2013 include total enrollment (including employee contributions), population demographics, and historical claims costs incurred. While we believe these estimates are reasonable based on the information currently available, if actual trends, including the severity of claims and medical cost inflation, differ from our estimates, our consolidated financial position, results of operations, or cash flows could be impacted.

Lease Commitments and Contractual Obligations

As of June 30, 2013, we have leased certain of our current facilities under noncancellable operating lease agreements. We are required to pay property taxes, insurance, and nominal maintenance costs for certain of these facilities and any increases over the base year of these expenses on the remainder of our facilities.

On April 26, 2013, we purchased an approximately 119,000 square feet cold shell building located at 6750 Dumbarton Circle, Fremont, California, the related land, and certain other property improvements from John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee (the “Trusts”), for a total purchase price of $21.5 million. We expect to incur additional build-out and construction costs and expenses related to this facility of approximately $15 million.

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We also entered into a 15-year lease agreement with the Trusts, pursuant to which we leased approximately 58,000 square feet of an adjacent building located at 6700 Dumbarton Circle, Fremont, California. The lease is scheduled to commence on September 1, 2013. Future minimum lease payments are $18.4 million, net of a full abatement of rent for the first three years of the lease term. During the initial lease term, we also have certain rights of first refusal to (i) lease the remaining portion of the leased facility and/or (ii) purchase the facility. This location will serve as our new worldwide corporate headquarters, as well as engineering, marketing, and administrative operations for our Fiery operating segment. We plan to relocate our current headquarters no later than November 1, 2013.

The leased facility is a cold shell requiring additional build-out and tenant improvements. The Trusts will pay the costs of the build-out up to $4.5 million, including all structural improvements, and we will pay the costs of any tenant improvements beyond that amount. We have incurred $0.2 million during the six months ended June 30, 2013. The Trusts are responsible for any costs related to force majeure events that result in any damage to the facility. We are responsible for cost over-runs, if any, related to force majeure events including strikes, war, and material availability. Since we are responsible for cost overruns related to certain force majeure events, we are in substance offering an indemnification to the Trusts for events outside of our control. As such, we are deemed to be the accounting owner during the construction period. As of June 30, 2013, we capitalized $11.0 million in property and equipment based on the estimated replacement cost of the unfinished space along with the corresponding financing obligation.

Monthly lease payments are allocated between the land element of the lease, accounted for as an operating lease upon lease execution, and the imputed financing obligation. The imputed financing obligation will be amortized upon lease commencement in accordance with the effective interest method using the interest rate determined in accordance with the requirements of sale leaseback accounting. The imputed interest cost incurred during the construction period will be capitalized as a component of the construction cost upon lease commencement. As of June 30, 2013, the imputed financing obligation in connection with the facility was $11.0 million, which was classified as a long-term imputed financing obligation in our condensed consolidated balance sheet. If the requirements of sale leaseback accounting are satisfied, or at the end of the initial lease term, we will reverse the net book value of the building and the corresponding imputed financing obligation.

Legal Proceedings

We may be involved, from time to time, in a variety of claims, lawsuits, investigations, or proceedings relating to contractual disputes, securities laws, intellectual property rights, employment, or other matters that may arise in the normal course of business. We assess our potential liability in each of these matters by using the information available to us. We develop our views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and various combinations of appropriate litigation and settlement strategies. We accrue estimated losses from contingencies if a loss is deemed probable and can be reasonably estimated.

As of June 30, 2013, we are subject to the various claims, lawsuits, investigations, or proceedings discussed below.

Componex Corporation (“Componex”) vs. EFI

Componex Corporation is a manufacturer of rolls used in machines handling continuous sheets of product and was, and continues to be, a supplier for certain products in our Vutek product line. On May 30, 2013, Componex filed an action in the United States District Court for the Western District of Wisconsin alleging that rolls supplied to EFI by another vendor infringe two patents held by Componex. Because this proceeding is still is its preliminary stages, we have not had an opportunity to complete our evaluation of the allegations, determine whether the loss is probable or reasonably possible or, if it is probable or reasonably possible, estimate the amount or range of loss that may be incurred.

Digitech Image Technologies, LLC (“Digitech”) Patent Litigation

On August 16, 2012, Digitech initiated litigation against EFI; Konica Minolta Holdings, Inc., Konica Minolta Holdings, U.S.A., Inc., and Konica Minolta Business Solutions, U.S.A., Inc. (collectively, “Konica Minolta”); and Xerox Corporation (“Xerox”) for infringement of a patent related to the creation of device profiles in digital image reproduction systems in the United States District Court for the Central District of California.

In addition to its own defenses, EFI has contractual obligations to indemnify certain of its customers to varying degrees subject to various circumstances, including Konica Minolta, Xerox, and others. We do not believe that our products infringe any valid claim of Digitech’s patent. We have filed our response to the action, denying infringement and arguing that the patent at issue is not valid. We have also moved to strike Digitech’s infringement contentions as lacking a proper basis.

Although we do not believe that Digitech’s infringement claims are valid and we do not believe it is probable that we will incur a material loss in this matter, it is reasonably possible that our financial statements could be materially affected by an assessment of damages. We are currently assessing whether we can provide a reasonable estimate of the range of loss. Such an evaluation includes, among other things, a determination of the total sales of the implicated systems in the United States and what a reasonable royalty, if any, might be under the circumstances.

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Durst Fototechnik Technology GmbH (“Durst”) v. Electronics for Imaging GmbH (“EFI GmbH”) and EFI, et al.

On or about June 14, 2011, Durst filed an action against EFI GmbH and EFI in the Regional Court of Dusseldorf, Germany (“Regional Court”), alleging infringement of a German patent. The Regional Court preliminarily determined that the white base coat printing method in our GS and QS super-wide format printer product lines infringes the Durst patent. We have appealed this preliminary decision to the Higher Regional Court of Dusseldorf. A hearing has been scheduled by the Higher Regional Court for March 20, 2014.

In a separate action, we have challenged the validity of the Durst patent in the German Federal Patent Court. We believe that the Durst patent is invalid in light of prior art. German courts in Mannheim and Karlsruhe reached a similar conclusion in litigation involving a Durst utility model right on related technology. We expect that the Federal Patent Court will issue a preliminary opinion on the validity of the patent after July 2013. The Federal Patent Court has set the matter for hearing on October 23, 2013.

Although we do not believe that Durst’s infringement claims are valid and we do not believe it is probable that we will incur a material loss in this matter, it is reasonably possible that our financial statements could be materially affected by an assessment of damages or potential issuance of an injunction by the Regional Court. We are currently assessing whether we can provide a reasonable estimate of the range of loss. Such an evaluation includes, among other things, a determination of the number of printers in Germany with the relevant feature at the time the court makes its final determination of infringement, and an assessment of the cost related to an injunction, if an injunction is ultimately issued.

N.V. Perfectproof Europe (“Perfectproof”) v. EFI GmbH

On December 31, 2001, Perfectproof filed a complaint against BEST GmbH, currently EFI GmbH in the Tribunal de Commerce of Brussels, in Belgium (the “Commercial Court”), alleging unlawful unilateral termination of an alleged “exclusive” distribution agreement and claiming damages of approximately EU 0.6 million for such termination and additional damages of EU 0.3 million, or a total of approximately $1.2 million. In a judgment issued by the Commercial Court on June 24, 2002, the court declared that the distribution agreement was not “exclusive” and questioned its jurisdiction over the claim. Perfectproof appealed, and by decision dated November 30, 2004, the Court d’Appel of Brussels (the “Court of Appeal”) rejected the appeal and remanded the case to the Commercial Court. Subsequently, by judgment dated November 17, 2009, the Commercial Court dismissed the action for lack of jurisdiction of Belgian courts over the claim. On March 25, 2009, Perfectproof again appealed to the Court of Appeal. On November 16, 2010, the Court of Appeal declared, among other things, that the Commercial Court was competent to hear the case; that the “exclusive” agreement required reasonable notice prior to termination; and that Perfectproof is entitled to damages. The court appointed an expert to review the parties’ records and address certain questions relevant in assessing Perfectproof’s damages claim. On October 19, 2011, the expert issued its final report itemizing damages that are, in the aggregate, significantly less than the amount claimed by Perfectproof. The final determination of damages will not be binding until it is approved or adopted by the court. The Court of Appeal has scheduled the hearing for October 21, 2013.

Although we do not believe that Perfectproof’s claims are founded and we do not believe it is probable that we will incur a material loss in this matter, it is reasonably possible that our financial statements could be materially affected by the court’s decision regarding the assessment of damages. The court may approve the expert’s final report and pronounce the final amount of damages to be paid by us, or require additional analysis, or consider further challenges to the final determination of damages. Accordingly, it is reasonably possible that we could incur a material loss in this matter. We estimate the range of loss to be between one dollar and $1.2 million.

KERAjet S.A (“Kerajet”) vs. Cretaprint

In May 2011, Jose Vicente Tomas Claramonte, the President of Kerajet, filed an action against Cretaprint in the Commercial Court in Valencia, Spain, alleging, among other things, that certain Cretaprint products infringe a patent held by Mr. Claramonte. In conjunction with our acquisition of Cretaprint, which closed on January 10, 2012, we assumed potential liability in this lawsuit.

A trial was held on October 4, 2012. On January 2, 2013, the court ruled in favor of Cretaprint concluding that the Cretaprint products do not infringe the Claramonte patent. Mr. Claramonte appealed the ruling on January 30, 2013. On July 15, 2013, the Spanish Court of Appeal affirmed the trial court’s conclusion that the Cretaprint products do not infringe the Claramonte patent. Mr. Claramonte may appeal the ruling of the Spanish Court of Appeal.

In conjunction with our defense of the claims by Mr. Claramonte, EFI filed affirmative actions against Mr. Claramonte in the United Kingdom (“U.K.”), Italy, and Germany alleging, among other things, that the Claramonte patent is not valid and/or that Cretaprint’s products do not infringe the patent. The court in the U.K. has issued a default judgment of non-infringement by Cretaprint. The actions in Italy and Germany remain pending.

Because the former owners of Cretaprint agreed to indemnify EFI against any potential liability in the event that Mr. Claramonte were to prevail in his action against Cretaprint, we accrued a contingent liability based on a reasonable estimate of the legal obligation that

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was probable as of the acquisition date and we accrued a contingent asset based on the portion of any liability for which the former Cretaprint owners would indemnify EFI. The net obligation accrued in the opening balance sheet on the acquisition date is EU 2.5 million (or approximately $3.3 million).

Other Matters

As of June 30, 2013, we were also subject to various other claims, lawsuits, investigations, and proceedings in addition to those discussed above. There is at least a reasonable possibility that additional losses may be incurred in excess of the amounts that we have accrued. However, we believe that certain of these claims are not material to our financial statements or the range of reasonably possible losses is not reasonably estimable. Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

9. Segment Information and Geographic Data

ASC 280, Segment Reporting, requires operating segment information to be presented based on the internal reporting used by the chief operating decision making group to allocate resources and evaluate operating segment performance. Our enterprise management processes use financial information that is closely aligned with our three operating segments at the gross profit level. Relevant discrete financial information is prepared at the gross profit level for each of our three operating segments, which is used by the chief operating decision making group to allocate resources and assess the performance of each operating segment.

We classify our revenue, operating segment profit (i.e., gross profit), assets, and liabilities in accordance with our operating segments as follows:

Industrial Inkjet, which consists of our VUTEk super-wide and EFI wide format industrial digital inkjet printers, Jetrion label and packaging digital inkjet printing systems, Cretaprint digital inkjet printers for ceramic tile decoration, and related ink, parts, and services.

We sell VUTEk super-wide format ultra-violet (“UV”), light emitting (“LED”), and textile dye sublimation industrial digital inkjet printers and ink to commercial photo labs, large sign shops, graphic screen printers, specialty commercial printers, and digital and billboard graphics providers serving the out-of-home advertising and industrial specialty print segments by printing point of purchase displays, signage, banners, fleet graphics, building wraps, art exhibits, customized architectural elements, and other large graphic displays. We sell EFI hybrid and flatbed UV wide format graphics printers to the mid-range industrial digital inkjet printer market. We sell Jetrion label and packaging digital inkjet printing systems, custom high-performance integration solutions, and specialty inks to the converting, packaging, and direct mail industries. We sell Cretaprint ceramic tile decoration digital inkjet printers to the ceramic tile industry.

Productivity Software, which consists of (i) our business process automation software, including Monarch, PSI, Logic, PrintSmith, and PrintFlow; (ii) Pace, our business process automation software that is available in a cloud-based environment; (iii) Digital StoreFront, our cloud-based e-commerce solution that allows print service providers to accept, manage, and process printing orders over the internet; (iv) Online Print Solutions, our cloud-based e-commerce software that provides web-to-print, publishing, and cross-media marketing solutions over the internet; (v) Radius, our business process automation software for label and packaging printers; (vi) PrintStream, our business process automation software for mailing and fulfillment services in the printing industry; (vii) Prism, Metrics, Technique, and GamSys, our business process automation solutions for the printing and packaging, publication, commercial, and direct marketing print industries; and (viii) Alphagraph, which includes business process automation solutions for the graphic arts industry.

We sell PrintSmith to small print-for-pay and small commercial print shops; Pace to medium and large commercial print shops, display graphics providers, in-plant printing operations, and government printing operations; Monarch to large commercial, publication, direct mail, and digital print shops; Radius to the label and packaging industry; Digital StoreFront and Online Print Solutions to customers desiring e-commerce, web-to-print, and cross-media marketing solutions; and PrintStream to Pace and Monarch customers that provide fulfillment services to their end customers.

Fiery, which consists of print servers, controllers, and digital front ends (“DFEs”) that transform digital copiers and printers into high performance networked printing devices for the office and commercial printing market. This operating segment is comprised of (i) stand-alone print servers connected to digital copiers and other peripheral devices, (ii) embedded and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our controller solutions such as Fiery Central, Command WorkStation, and MicroPress, (iv) Entrac, our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-alone software-based solutions such as our proofing and scanning solutions.

Our chief operating decision making group evaluates the performance of our operating segments based on net sales and gross profit. Gross profit for each operating segment includes revenue from sales to third parties and related cost of revenue attributable to the operating segment. Cost of revenue for each operating segment excludes certain expenses managed outside the operating segments

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consisting primarily of stock-based compensation expense. Operating income is not reported by operating segment because operating expenses include significant shared expenses and other costs that are managed outside of the operating segments. Such operating expenses include various corporate expenses such as stock-based compensation, corporate sales and marketing, research and development, income taxes, various non-recurring charges, and other separately managed general and administrative expenses.

Gross profit information, excluding stock-based compensation expense, for the three and six months ended June 30, 2013 and 2012 is summarized as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Industrial Inkjet
Revenue	$	88,003		$	79,820		$	168,306		$	154,912
Gross profit		35,165			32,215			67,146			61,701
Gross profit percentages		40.0	%		40.4	%		39.9	%		39.8	%
Productivity Software
Revenue	$	28,509		$	25,722		$	56,238		$	49,791
Gross profit		20,231			18,500			40,156			35,665
Gross profit percentages		71.0	%		71.9	%		71.4	%		71.6	%
Fiery
Revenue	$	63,786		$	58,359		$	127,113		$	119,254
Gross profit		42,969			39,312			85,392			80,626
Gross profit percentages		67.4	%		67.4	%		67.2	%		67.6	%

A reconciliation of our segment gross profit to our condensed consolidated statements of operations for the three and six months ended June 30, 2013 and 2012 is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Segment gross profit	$	98,365		$	90,027		$	192,694		$	177,992
Stock-based compensation expense		(382	)		(235	)		(851	)		(533	)
Gross profit	$	97,983		$	89,792		$	191,843		$	177,459

Tangible and intangible assets, net of liabilities, are summarized by operating segment as follows (in thousands):

June 30, 2013	Industrial Inkjet		Productivity Software			Fiery
Goodwill	$	60,594	$	97,324		$	64,480
Identified intangible assets, net		37,264		32,620			2,449
Tangible assets, net of liabilities		89,119		(17,410	)		30,245
Net tangible and intangible assets	$	186,977	$	112,534		$	97,174
December 31, 2012
Goodwill	$	60,745	$	94,112		$	64,526
Identified intangible assets, net		41,103		36,141			3,000
Tangible assets, net of liabilities		80,569		(14,239	)		26,304
Net tangible and intangible assets		182,417		116,014			93,830

Operating segment assets exclude corporate assets, such as cash, short-term investments, corporate headquarters facility, deferred proceeds from property transaction and related assets, imputed financing obligation, taxes receivable, and taxes payable. In accordance with ASC 805, we revised previously issued post-acquisition financial information to reflect adjustments to the preliminary accounting for business acquisitions as if the adjustments occurred on the acquisition date. Accordingly, we have increased goodwill by $0.8 and $0.3 million at December 31, 2012 to reflect opening balance sheet adjustments in the Industrical Inkjet and Productivity Software operating segments, respectively, related to our acquisitions of Cretaprint, OPS, and Technique, respectively. The purchase price allocations for the OPS and Technique acquisitions are preliminary and subject to change within the respective measurement periods as valuations are finalized. We expect to continue to obtain information to assist us in finalizing the fair value of the net assets acquired at the respective acquisition dates during the respective measurement periods.

Geographic Areas

Our revenue originates in the U.S., the Netherlands, Germany, Japan, the U.K., Spain, Brazil, Australia, and New Zealand. We report revenue by geographic area based on ship-to destination. Shipments to some of our significant printer manufacturer/distributor

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customers are made to centralized purchasing and manufacturing locations, which in turn sell through to other locations. As a result of these factors, we believe that sales to certain geographic locations might be higher or lower, as the ultimate destinations are difficult to ascertain.

Our revenue by ship-to destination for the three and six months ended June 30, 2013 and 2012 was as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Americas	$	100,516	$	82,725	$	194,413	$	164,906
Europe, Middle East and Africa (“EMEA”)		49,984		51,560		100,030		106,686
Asia Pacific (“APAC”)		29,798		29,616		57,214		52,365
Japan		5,815		7,867		13,034		14,819
APAC, ex Japan		23,983		21,749		44,180		37,546
Total revenue	$	180,298	$	163,901	$	351,657	$	323,957

10. Derivatives and Hedging

We are exposed to market risk and foreign currency exchange risk from changes in foreign currency exchange rates, which could affect operating results, financial position, and cash flows. We manage our exposure to these risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are used to hedge monetary assets and liabilities, including intercompany transactions, as well as reduce earnings and cash flow volatility resulting from shifts in market rates. Our objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting fair values of assets and liabilities. We do not have any leveraged derivatives, nor do we use derivative contracts for speculative purposes. ASC 815, Derivatives and Hedging, requires the fair value of all derivative instruments, including those embedded in other contracts, to be recorded as assets or liabilities in our condensed consolidated balance sheet. As permitted, foreign exchange contracts with notional amounts of $2.7 million and net asset/liability fair values that are immaterial have been designated for cash flow hedge accounting treatment at June 30, 2013 and December 31, 2012. The related cash flow impacts of our derivative contracts are reflected as cash flows from operating activities.

Our exposures are related to non-U.S. dollar-denominated revenue in Europe, Japan, the U.K., Latin America, Australia, and New Zealand and are primarily related to non-U.S. dollar-denominated operating expenses in Europe, India, Japan, the U.K., Brazil, and Australia. We hedge our operating expense cash flow exposure in Indian rupees. We hedge remeasurement exposure associated with Euro-denominated intercompany loans and Indian rupe nonmonetary assets. As of June 30, 2013, we had not entered into hedges against any other currency exposures, but we may consider hedging against movements in other currencies in the future.

By their nature, derivative instruments involve, to varying degrees, elements of market and credit risk. The market risk associated with these instruments resulting from currency exchange movement is expected to offset the market risk of the underlying transactions, assets, and liabilities being hedged (e.g., operating expense exposure in Indian rupees) or the settlement of the Euro-denominated intercompany loans. We do not believe there is a significant risk of loss from non-performance by the counterparty associated with these instruments because, by policy, we deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

Foreign currency derivative contracts with notional amounts of $2.7 million and net asset/liability amounts that are immaterial have been designated as cash flow hedges of our Indian rupee operating expense exposure at June 30, 2013 and December 31, 2012. The changes in fair value of these contracts are reported as a component of OCI and reclassified to operating expense in the periods of payment of the hedged operating expenses. The amount of ineffectiveness that was recorded in the condensed consolidated statement of operations for these designated cash flow hedges was immaterial. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

Forward contracts not designated as hedging instruments with notional amounts of $18.2 and $0.5 million are used to hedge foreign currency balance sheet exposures at June 30, 2013 and December 31, 2012, respectively. They are not designated for hedge accounting treatment since there is a natural offset for the remeasurement of the underlying foreign currency denominated asset or liability. We recognize changes in the fair value of non-designated derivative instruments in earnings in the period of change. Gains (losses) on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest and other expense, net, in the same period as the remeasurement gain (loss) of the related foreign currency denominated assets and liabilities. Forward contracts not designated as hedging instruments at June 30, 2013, consist of hedges of Euro-denominated intercompany loans with notional amounts of $16.9 million and Indian rupee net monetary assets with a notional amount of $1.3 million.

11. Restructuring and Other

During the three and six months ended June 30, 2013 and 2012, cost reduction actions were taken to lower our quarterly operating expense run rate as we analyzed our cost structure. We announced restructuring plans to better align our costs with revenue levels and to re-align our cost structure following our business acquisitions. These charges primarily relate to cost reduction actions taken during

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the first quarter of 2013 to lower our quarterly operating expense run rate in the Fiery operating segment, targeted reductions in the Industrial Inkjet operating segment, and the integration of Productivity Software head count with acquired entities. Restructuring and other consists primarily of restructuring, severance, retention, facility downsizing and relocation, and acquisition integration expenses. Our restructuring and other plans are accounted for in accordance with ASC 420, Exit or Disposal Cost Obligations, ASC 712, Compensation – Non-Retirement Postemployment Benefits, and ASC 820.

We recorded restructuring and other charges of $1.2 and $3.1 million for the three and six months ended June 30, 2013, respectively, and $1.2 and $2.3 million for the three and six months ended June 30, 2012, respectively, primarily consisting of restructuring, severance, retention, and charges to downsize or relocate our facilities. Restructuring and severance charges of $0.4 and $1.4 million related to head count reductions of 28 and 62 for the three and six months ended June 30, 2013, respectively, and $0.3 and $1.1 million related to head count reductions of 16 and 44 for the three and six months ended June 30, 2012, respectively. Severance costs include severance payments, related employee benefits, and outplacement or relocation costs. Integration expenses of $0.5 and $1.1 million were incurred during the three and six months ended June 30, 2013, respectively, primarily related to the Metrics, Cretaprint, OPS, and Technique acquisitions, and $0.7 and $0.8 million was incurred during the three and six months ended June 30, 2012, respectively, primarily related to the Metrics, Cretaprint, and Prism Group Holdings Limited (“Prism”) acquisitions.

Retention expenses of $0.2 and $0.5 million were recognized during the three and six months ended June 30, 2013 and 2012, respectively, associated with the Cretaprint acquisition. Facilities restructuring costs of $0.1 and $0.2 million were incurred during the three and six months ended June 30, 2013, respectively, primarily related to the relocation of our corporate headquarters, Japan, Belgium, and certain manufacturing facilities.

Restructuring and other reserve activities for the six months ended June 30, 2013 and 2012 are summarized as follows (in thousands):

	Six months ended June 30,
	2013			2012
Reserve balance at January 1,	$	1,670		$	1,870
Restructuring charges		1,084			785
Other charges		2,053			1,465
Non-cash acquisition-related retention costs		(465	)		(456	)
Cash payments		(3,006	)		(2,152	)
Reserve balance at June 30,	$	1,336		$	1,512

12. Stock-based Compensation

We account for stock-based payment awards in accordance with ASC 718, Stock Compensation, which requires the measurement and recognition of compensation expense for all equity awards granted to our employees and directors, including employee stock options, RSUs, and ESPP purchases related to all stock-based compensation plans based on the fair value of such awards on the date of grant. We amortize stock-based compensation cost on a graded vesting basis over the vesting period, after assessing the probability of achieving the requisite performance criteria with respect to performance-based awards. Stock-based compensation cost is recognized over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards.

Stock-based compensation expense related to stock options, ESPP purchases, and RSUs under ASC 718 for the three and six months ended June 30, 2013 and 2012 is summarized as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Stock -based compensation expense by type of award:
Employee stock options	$	196		$	324		$	634		$	462
Non-vested RSUs		4,858			3,965			10,130			7,896
ESPP		744			477			1,678			1,075
Total stock-based compensation		5,798			4,766			12,442			9,433
Tax effect on stock-based compensation		(1,814	)		(1,329	)		(3,748	)		(2,861	)
Net effect on net income	$	3,984		$	3,437		$	8,694		$	6,572

Valuation Assumptions

We use the Black-Scholes-Merton (“BSM”) option pricing model to value stock-based compensation for all equity awards, except market-based awards. Market-based awards are valued using the Monte Carlo valuation model.

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The BSM model determines the fair value of stock-based payment awards based on the stock price on the date of grant and is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, expected term, interest rates, and actual and projected employee stock option exercise behavior. Expected volatility is based on the historical volatility of our stock over a preceding period commensurate with the expected term of the option. The expected term is based upon management’s consideration of the historical life, vesting period, and contractual period of the options granted. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yield was not considered in the option pricing formula since we do not pay dividends and have no current plans to do so in the future.

No stock options were granted during the three and six months ended June 30, 2013 and 2012. No ESPP purchases occurred during the three months ended June 30, 2013 and 2012. The estimated per share weighted average fair value of ESPP shares issued and the assumptions used to estimate fair value for the six months ended June 30, 2013 and 2012 are as follows:

	Six months ended June 30,
	2013			2012
Weighted average fair value per share	$	6.68		$	5.64
Expected volatility		29% - 38	%		38% - 49	%
Risk-free interest rate		0.1% - 0.3	%		0.1% - 0.2	%
Expected term (in years)		0.5 - 2.0			0.5 - 2.0

Stock options outstanding and exercisable as of June 30, 2013 and activity for the six months ended June 30, 2013 is as follows (in thousands, except weighted average exercise price and remaining contractual term):

	Shares outstanding			Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrinsic  value
Options outstanding at January 1, 2013		1,536		$	14.19
Options granted		—			—
Options forfeited and expired		(41	)		25.63
Options exercised		(372	)		11.49
Options outstanding at June 30, 2013		1,123		$	14.66		3.38		15,304
Options vested and expected to vest at June 30, 2013		1,098		$	14.65		3.33		14,981
Options exercisable at June 30, 2013		841		$	14.59		2.73		11,531

Aggregate intrinsic value for stock options represents the difference between the closing price per share of our common stock on the last trading day of the fiscal period and the option exercise price multiplied by the number of in-the-money stock options outstanding, vested and expected to vest, and exercisable at June 30, 2013.

Non-vested RSUs as of June 30, 2013 and activity during the six months ended June 30, 2013 are summarized below (shares in thousands):

Non-vested shares	Shares			Weighted      average grant     date fair value
Non-vested at January 1, 2013	$	2,345		$	15.26
Restricted stock granted		355			24.21
Restricted stock vested		(408	)		15.08
Restricted stock forfeited		(188	)		16.91
Non-vested at June 30, 2013		2,104		$	16.66

The grant date fair value of RSUs vested during the six months ended June 30, 2013 was $6.2 million. The aggregate intrinsic value at June 30, 2013 for RSUs expected to vest was $51.2 million and the remaining weighted average vesting period was 0.9 years. Aggregate intrinsic value for RSUs expected to vest represents the closing price per share of our common stock on the last trading day of the fiscal period, multiplied by the number of RSUs expected to vest as of June 30, 2013.

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Amended and Restated 2009 Equity Incentive Award Plan

On June 4 2013, our stockholders approved amendments to the Amended and Restated 2009 Equity Incentive Award Plan to increase the number of shares of common stock reserved under the plan for future issuance from 7.0 to 11.6 million shares and authorized the granting of performance-based awards under the plan through the 2018 annual meeting of stockholders.

Amended and Restated 2000 Employee Stock Purchase Plan

On June 4, 2013, our stockholders approved amendments to the Amended and Restated 2000 Employee Stock Purchase Plan that increased the number of shares authorized for issuance pursuant to such plan by 2 million shares. The share increase was intended to ensure that we continue to have a sufficient reserve of common stock available under the ESPP to provide our eligible employees with the opportunity to acquire our common stock through participation in a payroll deduction-based ESPP designed to operate in compliance with Section 423 of the U.S. Internal Revenue Code (“IRC”). The amendment and restatement of the ESPP provides for an automatic increase in the number of shares reserved for issuance under the ESPP.

The ESPP is qualified under Section 423 of the IRC. Eligible employees may contribute from one to ten percent of their base compensation not to exceed ten percent of the employee’s earnings. Employees are not able to purchase more than the number of shares having a value greater than $25,000 in any calendar year, as measured at the beginning of the offering period under the ESPP. The purchase price shall be the lesser of 85% of the fair market value of the stock, either on the offering date or on the purchase date. The offering period shall not exceed 27 months beginning with the offering date. The ESPP provides for offerings of four consecutive, overlapping six-month offering periods, with a new offering period commencing on the first trading day on or after February 1 and August 1 of each year.

Performance-based and Market-based Stock Options and RSUs

RSUs granted during the six months ended June 30, 2013 included 244,112 performance-based RSUs, which vest when specified performance criteria are met based on 2013 revenue and non-GAAP operating income targets; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses. The grant date fair value was estimated to be $5.7 million, which is being amortized over their service periods of 1.0 year. The probability of achieving these awards was determined based on review of the actual results achieved by each business unit during the six months ended June 30, 2013 compared with the 2013 operating plan as well as the overall strength of the business unit within EFI. Stock-based compensation expense was adjusted based on this probability assessment. As actual results are achieved during the year, the probability assessment will be updated and stock-based compensation expense adjusted accordingly. As of June 30, 2013, 240,374 performance-based RSUs remain outstanding.

RSUs granted during the year ended December 31, 2012 included 282,850 performance-based RSUs, which vest when specified performance criteria are met based on 2012 revenue and non-GAAP operating income targets; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses. The grant date fair value was estimated to be $4.9 million, which is being amortized over their service periods of 1.0 year. The performance criteria were achieved with respect to approximately 58% of these RSUs as of December 31, 2012. Accordingly, these RSUs vested on February 22 and May 11, 2013 when the associated service requirements were met and the achievement of the performance criteria was certified by the board of directors.

RSUs granted during the year ended December 31, 2012 included 191,594 performance-based RSUs, which vest when specified performance criteria are met based on revenue and non-GAAP operating income targets during any four consecutive quarters between the first quarter of 2012 and the second quarter of 2015; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses. The grant date fair value was estimated to be $3.0 million, which is being amortized over their average derived service periods of 3.0 years. The probability of achieving these awards was determined based on review of the actual results achieved by each business unit during the six months ended June 30, 2013 compared with the 2013 operating plan as well as the overall strength of the business unit within EFI. Stock-based compensation expense was adjusted based on this probability assessment. As actual results are achieved, the probability assessment will be updated and stock-based compensation expense adjusted accordingly. As of June 30, 2013, 191,594 performance-based RSUs remain outstanding.

RSUs granted during the year ended December 31, 2011 included 90,000 market-based RSUs, which vest when our average closing stock price exceeds defined multiples of the average closing stock price for 20 consecutive trading days preceding January 5, 2011. If these multiples are not achieved by January 5, 2018, the awards are forfeited. The grant date fair value was estimated to be $1.1 million and is being amortized over the average derived service period of 3.93 years. The average derived service period and total fair value were determined using the Monte Carlo valuation model based on our assumptions, which included a risk-free interest rate of 2.9% and an implied volatility of 40%. On April 1, 2013, February 7, 2013, and May 10, 2011, these market-based RSUs vested due to achievement of the threshold multiple of the average closing stock price for 20 consecutive trading days preceding January 5, 2011. As of June 30, 2013, no market-based RSUs remain unvested.

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RSUs granted during the year ended December 31, 2011 included 323,600 performance-based RSUs, which vest when specified performance criteria are met based on 2011 revenue and non-GAAP operating income targets; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses. The grant date fair value was estimated to be $5.0 million, which was being amortized over their service periods of 1.0 year. The performance criteria were achieved with respect to approximately 90% of these RSUs as of December 31, 2011. Accordingly, these RSUs vested on February 9 and 13, 2012 when the associated service requirements were met.

RSUs granted during the year ended December 31, 2011 included 195,156 performance-based RSUs, which vest when specified performance criteria are met based on revenue and non-GAAP operating income targets during any four consecutive quarters between the first quarter of 2011 and the second quarter of 2014; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses. The grant date fair value was estimated to be $3.0 million, which is being amortized over their average derived service periods of 3.0 years. The probability of achieving these awards was determined based on review of the actual results achieved by each business unit during the six months ended June 30, 2013 compared with the 2013 operating plan as well as the overall strength of the business unit within EFI. Stock-based compensation expense was adjusted based on this probability assessment. As actual results are achieved, the probability assessment will be updated and stock-based compensation expense adjusted accordingly. On May 23, 2012, 64,909 performance-based RSUs vested due to achievement of the threshold level of revenue and non-GAAP operating income targets during four consecutive quarters between the second quarter of 2011 and the first quarter of 2012. As of June 30, 2013, 124,390 performance-based RSUs remain outstanding.

RSUs and stock options granted during the year ended December 31, 2009 included 98,000 market-based RSUs and 294,076 market-based stock options. These awards vest when our average closing stock price exceeds defined multiples of the June 18 or August 28, 2009 closing stock prices for 20 consecutive trading days. If these multiples are not achieved by June 18 or August 28, 2016, respectively, the awards are forfeited. The grant date fair value was estimated to be $0.9 million for the RSUs and $1.7 million for the stock options, which are being amortized over their average derived service periods of 4.35 and 4.88 years, respectively. The average derived service period and total fair value were determined using the Monte Carlo valuation model based on our assumptions, which included a risk-free interest rate of 3.5% and 3.1%, respectively, and an implied volatility of 50%. On February 13, 2013, December 17, 2012, and January 10, 2011, an aggregate of 78,000 market-based RSUs vested due to achievement of the threshold multiple of the June 18 and August 28, 2009 closing stock prices, respectively, for 20 consecutive trading days. On March 25, 2013, February 11, 2013, January 14, 2013, and April 27, 2011, an aggregate of 190,716 market-based stock options vested due to achievement of the threshold multiple. As of June 30, 2013, no market-based RSUs and stock options remain unvested.

Stock options granted during the year ended December 31, 2009 included 32,674 performance-based stock options. These performance-based stock options vest when our annual non-GAAP return on equity exceeds defined thresholds of the 2008 non-GAAP return on equity. Non-GAAP return on equity is defined as non-GAAP net income divided by stockholders’ equity. Non-GAAP net income is defined as net income determined in accordance with GAAP adjusted to remove the impact of certain recurring and non-recurring expenses, and the tax effects of these adjustments. If these defined thresholds are not achieved by August 28, 2016, the stock options are forfeited. The grant date fair value was estimated to be $0.1 million, which is being amortized over the average derived service period of 3.71 years. On December 31, 2011, 5,298 of these performance-based stock options vested due to achievement of the initial non-GAAP return on equity growth threshold. As of June 30, 2013, 15,540 performance-based stock options remain unvested.

13. Common Stock Repurchase Programs

On August 31, 2012, the board of directors approved the repurchase of $100 million of outstanding common stock. This authorization expires in February 2014. Under this publicly announced plan, we repurchased 1.3 million shares for an aggregate purchase price of $22.9 million during the year ended December 31, 2012. We repurchased 0.2 and 0.4 million shares for an aggregate purchase price of $5.0 and $10.0 million during the three and six months ended June 30, 2013.

Our employees have the option to surrender shares of common stock to satisfy their tax withholding obligations that arise on the vesting of RSUs. In addition, certain employees can surrender shares to satisfy the exercise price of certain stock options and any tax withholding obligations incurred in connection with such exercises. Employees surrendered 0.1 and 0.3 million shares for an aggregate purchase price of $1.3 and $7.8 million for the three and six months ended June 30, 2013, respectively, and 0.4 and 0.5 million shares for an aggregate purchase price of $7.8 and $9.5 million for the three and six months ended June 30, 2012, respectively.

These repurchased shares are recorded as treasury stock and are accounted for under the cost method thereby reducing shares outstanding. None of these repurchased shares of common stock have been cancelled. Our buyback program is limited by SEC regulations and is subject to compliance with our insider trading policy.

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14. Accounts Receivable

Financing Receivables

We had financing receivables of $2.8 and $2.3 million consisting of $1.7 and $0.9 million of sales-type lease receivables and $1.1 and $1.4 million of trade receivables having a contractual maturity in excess of 360 days at June 30, 2013 and December 31, 2012, respectively. Because we do not have a significant amount of financing receivables, credit quality is evaluated on the same basis as trade receivables. We have not experienced material amounts of past due financing receivables.

Accounts Receivable Sales Arrangements

In accordance with ASC 860-20, Transfers and Servicing, trade receivables are derecognized from our condensed consolidated balance sheet when sold to third parties upon determining that such receivables are presumptively beyond the reach of creditors in a bankruptcy proceeding. The recourse obligation is measured using market data from similar transactions and the servicing liability is determined based on the fair value that a third party would charge to service these receivables.

We have facilities in Spain that enable us to sell to third parties, on an ongoing basis, certain trade receivables without recourse. Trade receivables sold without recourse are generally short-term receivables with payment due dates of less than one year, which are secured by international letters of credit. Trade receivables sold under these facilities were $2.1 and $4.1 million during the three and six months ended June 30, 2013 and $4.3 million during the year ended December 31, 2012, respectively, which approximates the cash received.

We have facilities in the U.S. that enable us to sell to third parties, on an ongoing basis, certain trade receivables with recourse. The trade receivables sold with recourse are generally short-term receivables with payment due dates of less than 30 days from the date of sale, which are subject to a servicing obligation. Trade receivables sold under these facilities were $3.8 and $6.9 million during the three and six months ended June 30, 2013 and $2.1 million during the year ended December 31, 2012, respectively, which approximates the cash received. We report collections from the sale of trade receivables to third parties as operating cash flows in the condensed consolidated statements of cash flows, because such receivables are the result of an operating activity and the associated interest rate risk is de minimis.

15: Deferred Proceeds from Property Transaction

On November 1, 2012, we sold the 294,000 square foot building located at 303 Velocity Way in Foster City, California, which serves as our corporate headquarters, along with approximately four acres of land and certain other assets related to the property, to Gilead Sciences, Inc. (“Gilead”) for $179.7 million. We will continue to use the facility for up to one year for which rent is not required to be paid. We are accounting for this transaction as a financing transaction related to our continued use of the facility and a sublease receivable relative to Gilead’s use of a portion of the facility. Our use of the facility during the rent-free period constitutes a form of continuing involvement that prevents gain recognition. We have recorded interest expense on the financing obligation at our incremental borrowing rate and increased the financing obligation by the same amount, which resulted in total deferred proceeds from property transaction of $182.0 million at June 30, 2013. We have recorded sublease income at an implied market rate from Gilead and recorded a sublease receivable for the same amount. We will vacate the facility during the fourth quarter of 2013. At that date, we will have no continuing involvement with the property and will account for the transaction as a property sale thereby recognizing a gain of approximately $117 million on the sale of the property, which represents the difference between the sales proceeds and the carrying value of the property and related assets as well as any direct incremental costs associated with the sale.

The assets subject to this sale of $63.9 million as of June 30, 2013 include property and equipment, net, of $60.8 million and current assets of $3.1 million. The sold assets include the $56.9 million facility, $2.9 million of related land, and $2.1 million of leasehold and land improvements, net of accumulated depreciation of $1.1 million. The buildings and improvements are subject to depreciation over their normal useful lives until the property is no longer used by us. Current assets include $0.4 million of direct transaction costs, $0.5 million of previously capitalized lease financing and other costs, and an imputed sublease receivable of $2.2 million.

We will incur imputed financing and depreciation expense, net of imputed sublease income, of approximately $1.6 million, which commenced during the fourth quarter of 2012, until we vacate the building during the fourth quarter of 2013 when we will recognize a gain on sale of building and land of approximately $117 million.

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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-looking Statements

This Quarterly Report on Form 10-Q (“Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, contains forward-looking statements regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, and projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company. Words such as “expects,” “anticipates,” “targets,” “goals,” “projects,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words, and similar expressions are intended to identify such forward-looking statements. Such statements reflect the current views of the Company and its management with respect to future events and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company’s actual results, performance, or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in this Report under the section entitled “Risk Factors” in Item 1A of Part II of this report and Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2012 and elsewhere and in other reports the Company files with the SEC. The following discussion should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 and the condensed consolidated financial statements and notes thereto included elsewhere in this Report. The Company assumes no obligation to revise or update these forward-looking statements to reflect actual results, events, or changes in factors or assumptions affecting such forward-looking statements.

Business Overview

We are a world leader in customer-centric digital printing innovation focused on the transformation of the printing, packaging, and decorative industries from the use of traditional analog based presses to digital on-demand printing.

Our products include industrial super-wide and wide format, label and packaging, and ceramic tile decoration digital inkjet printers that utilize our digital ink; print production workflow, web-to-print, cross-media marketing, and business process automation solutions; and color digital print controllers creating an on-demand digital printing ecosystem. Our award-winning business process automation solutions are integrated from creation to print and are vertically integrated with our digital industrial inkjet printers. Our inks include digital UV and LED ink, of which we are the largest world-wide manufacturer, and textile dye sublimation ink. Our product portfolio includes inkjet products (“Industrial Inkjet”) including VUTEk super-wide and EFI wide format industrial digital inkjet printers, Jetrion label and packaging digital inkjet printing systems, ink for each of these printers, and Cretaprint digital inkjet printers for ceramic tile decoration; print production workflow, web-to-print, cross-media marketing, and business process automation software (“Productivity Software”), which provides corporate printing, label and packaging, publishing, and mailing and fulfillment solutions for the printing industry; and Fiery digital controllers, digital print servers, and DFEs (“Fiery”). Our integrated solutions and award-winning technologies are designed to automate print and business processes, streamline workflow, provide profitable value-added services, and produce accurate digital output.

Critical Accounting Policies

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make judgments, assumptions, and estimates that affect the amounts reported. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. Management believes there have been no significant changes during the six months ended June 30, 2013 to the items that we disclosed as our critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2012.

Recent Accounting Pronouncements

See Note 1 of our Notes to Condensed Consolidated Financial Statements for a full description of recent accounting pronouncements including the respective expected dates of adoption.

Overview

Key financial results for the three and six months ended June 30, 2013 were as follows:

• Our results of operations for the three and six months ended June 30, 2013 compared with the three and six months ended June 30, 2012 reflect revenue growth, consistent gross profit percentages, reduced operating expenses as a percentage of revenue and improved profitability. Our revenue growth was driven by increased revenue in all three operating segments. We completed our acquisitions of PrintLeader and GamSys in 2013. We completed our acquisitions of Cretaprint, Metrics, OPS, and Technique in 2012. Their results are included in our results of operations subsequent to their respective acquisition dates.

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• Our consolidated revenue increased by 10% and 9%, or $16.4 and $27.7 million, during the three and six months ended June 30, 2013, respectively, compared with the three and six months ended June 30, 2012. Industrial Inkjet, Productivity Software, and Fiery revenue increased by $8.2, $2.8, and $5.4 million during the three months ended June 30, 2013, respectively, and by $13.4, $6.4, and $7.9 million, during the six months ended June 30, 2013, respectively, as compared with the same periods in the prior year.

^¡   Industrial Inkjet revenue increased by 10% and 9% during the three and six months ended June 30, 2013, respectively, compared with the three and six months ended June 30, 2012. The Industrial Inkjet revenue increase was led by significantly increased UV and LED ink revenue, strong demand for our GS3250LX and GS2000LX UV-curing digital inkjet printers incorporating “cool cure” LED technology, acceptance of our QS2Pro and QS3Pro UV hybrid digital inkjet printers, which were launched in 2012, and our HS 100 digital UV inkjet press incorporating LED technology and representing an alternative to analog presses, which was launched during the second quarter of 2013.

^¡   Productivity Software revenue increased by 11% and 13% during the three and six months ended June 30, 2013, respectively, compared with the three and six months ended June 30, 2012. Our Productivity Software revenue is benefiting from the need for printing companies to improve productivity and efficiency through business process automation, which resulted in increased Pace and Radius revenue, as well as revenue from recently acquired businesses. Metrics, which closed during the second quarter of 2012; and OPS and Technique, which closed during the fourth quarter of 2012 contributed to our revenue growth. The acquisitions of GamSys, OPS, Technique, Prism, Alphagraph, and Radius have increased the international presence of our Productivity Software business. Our acquisitions have significantly increased our recurring maintenance revenue base.

^¡   Fiery revenue increased by 9% and 7% during the three and six months ended June 30, 2013, respectively, compared with the three and six months ended June 30, 2012. Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue relies on printer manufacturers to design, develop, and integrate Fiery technology into their print engines. The Fiery revenue increase is primarily due to new product launches by these printer manufacturers resulting in increased controller and embedded server revenue, as well as the launch of the Fiery FS100 server platform.

• Our gross profit percentage, excluding stock-based compensation, was comparable at 55% during the three and six months ended June 30, 2013 and 2012. Comparable revenue mix and gross profit percentages among our three operating segments resulted in a comparable overall gross profit percentage between the periods.

• Operating expenses were 48% and 49% of revenue during the three and six months ended June 30, 2013, respectively, which was comparable to the three and six months ended June 30, 2012. Operating expenses increased by $6.7 and $11.1 million during the three and six months ended June 30, 2013, respectively, compared with the three and six months ended June 30, 2012, but were comparable as a percentage of revenue due to the 10% and 9% increase in revenue during the three and six months ended June 30, 2013, respectively. The increase in operating expenses was primarily driven by head count increases related to our business acquisitions and geographic expansion in China, variable compensation due to improved profitability, commission payments resulting from increased revenue, trade show expenses, restructuring and other charges, acquisition expenses, legal fees, amortization of intangible assets, changes in fair value of contingent consideration, and stock-based compensation, partially offset by targeted head count reductions undertaken to lower our quarterly operating expense run rate in the Fiery operating segment, targeted head count reductions in the Industrial Inkjet operating segment, and head count reductions in the Productivity Software operating segment driven by the integration of acquired entities.

• Interest and other expense, net, decreased from a loss of $1.3 million during the three months ended June 30, 2012, to a loss of $0.4 million during the three months ended June 30, 2013. This decrease of $0.9 million is primarily due to the foreign exchange loss of $1.7 million during the three months ended June 30, 2012, partially offset by imputed interest expense of $0.6 million (net of $0.3 million of capitalized interest related to our new corporate headquarters) during the three months ended June 30, 2013, related to the deferred proceeds from property transaction.

• Interest and other expense, net, increased from a loss of $0.8 million during the six months ended June 30, 2012, to a loss of $3.3 million during the six months ended June 30, 2013. This increase is primarily due to imputed interest expense of $1.5 million (net of $0.3 million of capitalized interest related to our new corporate headquarters) during the six months ended June 30, 2013, related to the deferred proceeds from property transaction, and an increase of $0.8 million in the foreign exchange loss to $2.2 million during the six months ended June 30, 2013, resulting from the revaluation of our foreign currency denominated net assets (mainly denominated in Euros, British pounds sterling, and Indian rupees), compared with a $1.4 million foreign exchange loss during the six months ended June 30, 2012.

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• We recognized tax provisions of $2.0 and $0.3 million on pre-tax operating income of $11.4 and $18.0 million during the three and six months ended June 30, 2013, respectively, compared to $2.0 and $4.1 million recognized on pre-tax operating income of $9.1 and $17.3 million during the three and six months ended June 30, 2012, respectively. Pursuant to the American Taxpayer Relief Act of 2012, on January 2, 2013, we recognized a tax benefit of $3.2 million resulting from the renewal of the U.S. federal research and development tax credit retroactive to 2012. ASC 740-10-45-15, Income Taxes, requires that the effects of a change in tax law or rates be recognized in the period that includes the enactment date. Accordingly, the portion of the retroactive credit that related to 2012 was entirely recognized on January 2, 2013.

Results of Operations

Our Condensed Consolidated Statements of Operations as a percentage of total revenue for the three and six months ended June 30, 2013 and 2012 is as follows:

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Revenue		100	%		100	%		100	%		100	%
Gross Profit		54			55			55			55
Operating expenses:
Research and development		18			18			18			19
Sales and marketing		19			19			19			19
General and administrative		7			7			8			7
Restructuring and other		1			1			1			1
Amortization of identified intangibles		3			3			3			3
Total operating expenses		48			48			49			49
Income from operations		6			7			6			6
Interest and other expense, net		—			(1	)		(2	)		(1	)
Income before income taxes		6			6			4			5
Provision for income taxes		(1	)		(2	)		—			(1	)
Net income		5	%		4	%		4	%		4	%

These operating results are not necessarily indicative of our results for any future period.

Revenue

We classify our revenue, gross profit, assets, and liabilities in accordance with our three operating segments as follows:

• “Industrial Inkjet,” which consists of our VUTEk super-wide and EFI wide format industrial digital inkjet printers, Jetrion label and packaging digital inkjet printing systems, Cretaprint digital inkjet printers for ceramic tile decoration, and related ink, parts, and services.

We sell VUTEk super-wide format UV, LED, and textile dye sublimation industrial digital inkjet printers and ink to commercial photo labs, large sign shops, graphic screen printers, specialty commercial printers, and digital and billboard graphics providers serving the out-of-home advertising and industrial specialty print segments by printing point of purchase displays, signage, banners, fleet graphics, building wraps, art exhibits, customized architectural elements, and other large graphic displays. We sell EFI hybrid and flatbed UV wide format graphics printers to the mid-range industrial digital inkjet printer market. We sell Jetrion label and packaging digital inkjet printing systems, custom high-performance integration solutions, and specialty inks to the converting, packaging, and direct mail industries. We sell Cretaprint ceramic tile decoration digital inkjet printers to the ceramic tile industry.

• “Productivity Software,” which consists of (i) our business process automation software, including Monarch, PSI, Logic, PrintSmith, and PrintFlow; (ii) Pace, our business process automation software that is available in a cloud-based environment; (iii) Digital StoreFront, our cloud-based e-commerce solution that allows print service providers to accept, manage, and process printing orders over the internet; (iv) Online Print Solutions, our cloud-based e-commerce software that provides web-to-print, publishing, and cross-media marketing solutions over the internet; (v) Radius, our business process automation software for label and packaging printers; (vi) PrintStream, our business process automation software for mailing and fulfillment services in the printing industry; (vii) Prism, Metrics, Technique, and GamSys, our business process automation solutions for the printing and packaging, publication, commercial, and direct marketing print industries; and (viii) Alphagraph, which includes business process automation solutions for the graphic arts industry.

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We sell PrintSmith to small print-for-pay and small commercial print shops; Pace to medium and large commercial print shops, display graphics providers, in-plant printing operations, and government printing operations; Monarch to large commercial, publication, direct mail, and digital print shops; Radius to the label and packaging industry; Digital StoreFront and Online Print Solutions to customers desiring e-commerce, web-to-print, and cross-media marketing solutions; and PrintStream to Pace and Monarch customers that provide fulfillment services to their end customers.

• “Fiery,” which consists of print servers, controllers, and DFEs that transform digital copiers and printers into high performance networked printing devices for the office and commercial printing market. This operating segment is comprised of (i) stand-alone print servers connected to digital copiers and other peripheral devices, (ii) embedded and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our controller solutions such as Fiery Central, Command WorkStation, and MicroPress, (iv) Entrac, our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-alone software-based solutions such as our proofing and scanning solutions.

On a sequential basis, revenue during the second quarter of 2013 increased by $8.9 million, or 5%, compared to first quarter 2013 results, due to increased Industrial Inkjet, Productivity Software, and Fiery revenue of 10%, 3%, and 1%, respectively. The Industrial Inkjet sequential revenue increase of 10% was primarily due to UV and LED ink, super-wide format printers led by the launch of our HS 100 digital UV inkjet press, and Cretaprint parts and services. The Productivity Software sequential revenue increase of 3% was primarily due to increased Pace, Radius, and Technique revenue, as well as the acquisition of GamSys, which closed during the second quarter of 2013. The Fiery revenue increase of 1% was primarily due to increased Entrac and proofing revenue.

Revenue by Operating Segment for the Three Months Ended June 30, 2013 and 2012

Our revenue by operating segment for the three months ended June 30, 2013 and 2012 was as follows (in thousands):

	Three months ended June 30,
			Percent					Percent			Change
	2013		of total			2012		of total			$		%
Industrial Inkjet	$	88,003		49	%	$	79,820		48	%	$	8,183		10	%
Productivity Software		28,509		16			25,722		16			2,787		11
Fiery		63,786		35			58,359		36			5,427		9
Total revenue	$	180,298		100	%	$	163,901		100	%	$	16,397		10	%

Overview

Our consolidated revenue increased by approximately 10%, or $16.4 million, from $163.9 million for the three months ended June 30, 2012 to $180.3 million for the three months ended June 30, 2013 consisting of increased Industrial Inkjet, Productivity Software, and Fiery revenue of $8.2, $2.8, and $5.4 million, respectively. Our revenue growth was primarily driven by the strength of our Industrial Inkjet operating segment in the digital printing markets in which it participates, revenue growth from our Productivity Software operating segment acquisition strategy, and recent product launches in the Fiery operating segment by our printer manufacturer customers.

Industrial Inkjet Revenue

Industrial Inkjet revenue increased by 10% during the three months ended June 30, 2013, compared with the three months ended June 30, 2012. We continue to experience growth resulting from the ongoing analog to digital and solvent to UV migration. The Industrial Inkjet revenue increase was led by significantly increased UV and LED ink revenue, strong demand for our GS3250LX and GS2000LX UV- curing digital inkjet printers incorporating “cool cure” LED technology, acceptance of our QS2Pro and QS3Pro UV hybrid digital inkjet printers, which were launched in 2012, our HS 100 digital UV inkjet press incorporating LED technology and representing an alternative to analog presses, which was launched during the second quarter of 2013, and our next generation Cretaprint ceramic tile decoration digital inkjet printer, which was launched during the fourth quarter of 2012. UV ink revenue increased as a result of the high utilization that our UV printers are experiencing in the field, partially offset by decreased solvent printer installed base demand measured by solvent ink usage. The QS2Pro and QS3Pro printers were re-designed based on GS technology to replace the QS product line, thereby resulting in many operational efficiencies including interchangeability of components and consistent technology between the GS and QS product lines.

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Productivity Software Revenue

Productivity Software revenue increased by 11% during the three months ended June 30, 2013, compared with the three months ended June 30, 2012, primarily due to increased Pace and Radius revenue and revenue from recently acquired businesses. Productivity Software revenue benefited from our acquisition of Metrics, which closed during the second quarter of 2012, our acquisitions of OPS and Technique, which closed during the fourth quarter of 2012, and our acquisitions of GamSys and PrintLeader, which closed during the second quarter of 2013. The acquisitions of GamSys, OPS, Technique, Prism, Alphagraph, and Radius have increased the international presence of our Productivity Software business and, specifically, the acquisitions of Metrics and Prism have increased our Latin American and APAC presence, respectively, and the acquisition of GamSys has increased our presence in the French-speaking regions of Europe and Africa. Our acquisitions have significantly increased our recurring maintenance revenue base. The economic downturn has benefited this operating segment, which focuses on the automation of printing business functions thereby improving productivity and cost reduction by our customers.

Fiery Revenue

Fiery revenue increased by 9% during the three months ended June 30, 2013, compared with the three months ended June 30, 2012. Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue relies on printer manufacturers to design, develop, and integrate Fiery technology into their print engines. The Fiery revenue increase is primarily due to new product launches by these printer manufacturers resulting in increased controller and embedded server revenue, as well as the launch of the Fiery FS100 server platform.

Revenue by Operating Segment for the Six Months Ended June 30, 2013 and 2012

Our revenue by operating segment for the six months ended June 30, 2013 and 2012 was as follows (in thousands):

	Six months ended June 30,
			Percent					Percent			Change
	2013		of total			2012		of total			$		%
Industrial Inkjet	$	168,306		48	%	$	154,912		48	%	$	13,394		9	%
Productivity Software		56,238		16			49,791		15			6,447		13
Fiery		127,113		36			119,254		37			7,859		7
Total revenue	$	351,657		100	%	$	323,957		100	%	$	27,700		9	%

Overview

Our consolidated revenue increased by approximately 9%, or $27.7 million, from $324.0 million for the six months ended June 30, 2012 to $351.7 million for the six months ended June 30, 2013 consisting of increased Industrial Inkjet, Productivity Software, and Fiery revenue of $13.4, $6.4, and $7.9 million, respectively.

Industrial Inkjet Revenue

Industrial Inkjet revenue increased by 9% during the six months ended June 30, 2013, compared with the six months ended June 30, 2012. We continue to experience growth resulting from the ongoing analog to digital and solvent to UV migration. The Industrial Inkjet revenue increase was led by significantly increased UV and LED ink revenue, strong demand for our UV digital inkjet printers incorporating “cool cure” LED technology, acceptance of our hybrid digital inkjet printers, which were launched in 2012, our digital UV inkjet press incorporating LED technology, which was launched during the second quarter of 2013, and our next generation Cretaprint ceramic tile decoration digital inkjet printer, which was launched during the fourth quarter of 2012. UV ink revenue increased as a result of the high utilization that our UV printers are experiencing in the field, partially offset by decreased solvent printer installed base demand measured by solvent ink usage.

Productivity Software Revenue

Productivity Software revenue increased by 13% during the six months ended June 30, 2013, compared with the six months ended June 30, 2012, primarily due to increased Monarch and Radius revenue and revenue from recently acquired businesses. Productivity Software revenue benefited from our acquisition of Metrics, which closed during the second quarter of 2012, and our acquisitions of OPS and Technique, which closed during the fourth quarter of 2012, and our acquisitions of GamSys and PrintLeader, which closed during the second quarter of 2013.

Fiery Revenue

Fiery revenue increased by 7% during the six months ended June 30, 2013, compared with the six months ended June 30, 2012. Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue relies on printer manufacturers to design, develop, and integrate Fiery technology into their print engines. The Fiery revenue increase is primarily due to new product launches by these printer manufacturers resulting in increased controller and embedded server revenue, as well as the launch of the Fiery FS100 server platform.

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Revenue by Geographic Area for the Three Months Ended June 30, 2013 and 2012

Our revenue by geographic area for the three months ended June 30, 2013 and 2012 was as follows (in thousands):

	Three months ended June 30,
			Percent					Percent			Change
	2013		of total			2012		of total			$			%
Americas	$	100,516		56	%	$	82,725		50	%	$	17,791			22	%
EMEA		49,984		28			51,560		32			(1,576	)		(3	)
APAC		29,798		16			29,616		18			182			1
Japan		5,815		3			7,867		5			(2,052	)		(26	)
APAC, ex Japan		23,983		13			21,749		13			2,234			10
Total revenue	$	180,298		100	%	$	163,901		100	%	$	16,397			10	%

For the three months ended June 30, 2013, our revenue growth was primarily driven by results in the Americas. Americas revenue increased by 22% for the three months ended June 30, 2013 compared with the three months ended June 30, 2012, resulting from increased revenue in all three of our operating segments. Revenue growth was particularly strong in the Industrial Inkjet operating segment due to the launch of our HS 100 digital UV inkjet press and sales of our Cretaprint ceramic tile decoration digital inkjet printers in Latin America. The ceramic tile decoration digital inkjet market continues its relocation into emerging markets.

EMEA revenue decreased by 3% for the three months ended June 30, 2013 compared with the three months ended June 30, 2012, primarily due to:

• decreased Industrial Inkjet revenue resulting from the weak European economy and the shift of the ceramic tile industry from southern Europe (e.g., Spain and Italy) to the emerging markets in China, India, Indonesia, and Latin America, partially offset by

• increased Productivity Software revenue primarily due to growth across our portfolio of products in the U.K., our 2012 business acquisitions of OPS and Technique, and our 2013 business acquisition of GamSys, supported by increased Pace, Radius, and Alphagraph revenue, and

• increasing Fiery revenue growth.

Japan revenue decreased by 26% for the three months ended June 30, 2013, compared with the three months ended June 30, 2012, primarily due to decreased Fiery revenue.

APAC revenue, excluding Japan, increased by 10% for the three months ended June 30, 2013, compared with the three months ended June 30, 2012, primarily due to increased Industrial Inkjet revenue consisting of increased super-wide format printer and ceramic tile decoration digital inkjet printer revenue growth related to the ongoing shift of the ceramic tile industry from southern Europe to the emerging markets in China, India, and Indonesia has accelerated revenue growth in APAC and led to our geographic expansion in China.

Revenue by Geographic Area for the Six Months Ended June 30, 2013 and 2012

Our revenue by geographic area for the six months ended June 30, 2013 and 2012 was as follows (in thousands):

	Six months ended June 30,
			Percent					Percent			Change
	2013		of total			2012		of total			$			%
Americas	$	194,413		55	%	$	164,906		51	%	$	29,507			18	%
EMEA		100,030		29			106,686		33			(6,656	)		(6	)
APAC		57,214		16			52,365		16			4,849			9
Japan		13,034		4			14,819		4			(1,785	)		(12	)
APAC, ex Japan		44,180		12			37,546		12			6,634			18
Total revenue	$	351,657		100	%	$	323,957		100	%	$	27,700			9	%

Americas revenue increased by 18% for the six months ended June 30, 2013 compared with the six months ended June 30, 2012, resulting from increased revenue in all three of our operating segments.

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EMEA revenue decreased by 6% for the six months ended June 30, 2013 compared with the six months ended June 30, 2012, primarily due to:

• decreased Industrial Inkjet revenue resulting from the weak European economy and the shift of the ceramic tile industry from southern Europe (e.g., Spain and Italy) to the emerging markets in China, India, Indonesia, and Latin America, partially offset by

• increased Productivity Software revenue primarily due to growth across our portfolio of products in the U.K., our 2012 business acquisitions of OPS and Technique, and our 2013 business acquisition of GamSys, supported by increased Monarch, Radius, and Alphagraph revenue, and

• increasing Fiery revenue growth.

Japan revenue decreased by 12% for the six months ended June 30, 2013, compared with the six months ended June 30, 2012, primarily due to decreased Fiery revenue.

APAC revenue, excluding Japan, increased by 18% for the six months ended June 30, 2013, compared with the six months ended June 30, 2012, primarily due to increased Industrial Inkjet revenue consisting of increased super-wide format printer and ceramic tile decoration digital inkjet printer revenue. The ongoing shift of the ceramic tile industry from southern Europe to the emerging markets in China, India, and Indonesia has accelerated revenue growth in APAC and led to our geographic expansion in China.

Shipments to some of our significant printer manufacturer customers are made to centralized purchasing and manufacturing locations, which in turn ship 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 sales outside of the U.S. will continue to represent a significant portion of our total revenue.

A substantial portion of our revenue over the years has been attributable to sales of products through the leading printer manufacturers and independent distributor channels. We have a direct relationship with several leading printer manufacturers and work closely to design, develop, and integrate Fiery controller and software technology to maximize the capability of each printer manufacturers’ print engine. The printer manufacturers act as distributors and sell Fiery products to end customers through reseller channels. End customer and reseller channel preference for the Fiery controller and software solutions drive demand for Fiery products through the printer manufacturers.

Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue relies on printer manufacturers to design, develop, and integrate Fiery technology into their print engines. A significant portion of our revenue is, and has been, generated by sales of our Fiery printer and copier related products to a relatively small number of leading printer manufacturers. For the three and six months ended June 30, 2013, Xerox provided 13% and 12% of revenue, respectively, in the aggregate. For the three and six months ended June 30, 2012, Xerox provided 12% of our revenue.

No assurance can be given that our relationships with these and other printer manufacturers will continue or that we will successfully increase the number of printer manufacturing customers or the size of our existing relationships. We expect that if we continue to increase our revenue in the Industrial Inkjet and Productivity Software operating segments, the percentage of our revenue from printer manufacturing customers will continue to decrease.

We intend to continue to develop new products and technologies for each of our product lines including new generations of super-wide and wide format printers, tile imaging printers, server and controller products, and other new product lines, and to distribute those new products to or through current and new printer manufacturers, distributors, and end users in 2013 and beyond. No assurance can be given that the introduction or market acceptance of current or future products will be successful.

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Gross Profit

Gross profit by operating segment, excluding stock-based compensation, for the three and six months ended June 30, 2013 and 2012 was as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Industrial Inkjet
Revenue	$	88,003		$	79,820		$	168,306		$	154,912
Gross profit		35,165			32,215			67,146			61,701
Gross profit percentages		40.0	%		40.4	%		39.9	%		39.8	%
Productivity Software
Revenue	$	28,509		$	25,722		$	56,238		$	49,791
Gross profit		20,231			18,500			40,156			35,665
Gross profit percentages		71.0	%		71.9	%		71.4	%		71.6	%
Fiery
Revenue	$	63,786		$	58,359		$	127,113		$	119,254
Gross profit		42,969			39,312			85,392			80,626
Gross profit percentages		67.4	%		67.4	%		67.2	%		67.6	%

A reconciliation of our segment gross profit to our condensed consolidated statements of operations for the three and six months ended June 30, 2013 and 2012 is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Segment gross profit	$	98,365		$	90,027		$	192,694		$	177,992
Stock-based compensation expense		(382	)		(235	)		(851	)		(533	)
Gross profit	$	97,983		$	89,792		$	191,843		$	177,459

Overview

Our gross profit percentage decreased by 0.5 and 0.2 percentage points from 54.8% of revenue during the three and six months ended June 30, 2012 to 54.3% and 54.6% of revenue during the three and six months ended June 30, 2013, respectively, primarily due to reduced Productivity Software gross profit percentages.

Industrial Inkjet Gross Profit

For the three and six months ended June 30, 2013, the Industrial Inkjet gross profit percentage of 40.0% and 39.9% was comparable to 40.4% and 39.8% for the three and six months ended June 30, 2012.

Productivity Software Gross Profit

The Productivity Software gross profit percentage decreased by 0.9 and 0.2 percentage points from 71.9 % and 71.6% during the three and six months ended June 30, 2012 to 71.0% and 71.4% compared for the three and six months ended June 30, 2012. The Productivity Software gross profit percentage decreased compared with the prior year primarily due to a higher mix of subscription and service revenue.

Fiery Gross Profit

For the three and six months ended June 30, 2013, the Fiery gross profit percentage of 67.4% and 67.2% was comparable to 67.4% and 67.6% for the three and six months ended June 30, 2012.

Our Industrial Inkjet, Productivity Software, and Fiery gross profit will fluctuate significantly as a result of product mix changes. Consolidated gross profit can be impacted by a variety of other factors, which are unique to each operating segment. These factors include market prices achieved on our current and future products, availability and pricing of key components (including memory, processors, ink components, and print heads), subcontractor manufacturing costs, product mix, channel, geographic mix, product transition results, new product introductions, competition, and general economic conditions in the U.S. and abroad. Consequently, gross profit may fluctuate significantly from period to period. In addition to the factors affecting revenue described above, if we reduce prices, gross profit for our products could be lower.

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Many of our products and subassemblies are manufactured by subcontract manufacturers that purchase most of the necessary components. If our subcontract manufacturers cannot obtain necessary components at favorable prices, we could experience increased product costs. We purchase certain components directly, including processors, memory, certain ASICs, and software licensed from various sources, including Adobe PostScript^® software.

Operating Expenses

Operating expenses for the three and six months ended June 30, 2013 and 2012 were as follows (in thousands):

	Three months ended June 30,									Six months ended June 30,
					Change									Change
	2013		2012		$		%			2012		2011		$		%
Research and development	$	32,092	$	30,227	$	1,865		6	%	$	63,159	$	61,126	$	2,033		3	%
Sales and marketing		34,512		32,234		2,278		7			67,248		63,151		4,097		6
General and administrative		13,343		11,154		2,189		20			27,041		24,056		2,985		12
Restructuring and other		1,235		1,167		68		6			3,137		2,250		887		39
Amortization of identified intangibles		4,946		4,631		315		7			9,873		8,815		1,058		12
Total operating expenses	$	86,128	$	79,413	$	6,715		8	%	$	170,458	$	159,398	$	11,060		7	%

Operating expenses increased by $6.7 and $11.1 million, or 8% and 7%, during the three and six months ended June 30, 2013 and 2012, respectively, but was comparable as a percentage of revenue at 48% and 49% to the same periods in the prior year. Increased operating expenses primarily resulted from head count increases related to the Metrics, OPS, Technique, and GamSys acquisitions, head count increases due to geographic expansion in China, variable compensation due to improved profitability, commission payments resulting from increased revenue, trade show expenses, restructuring and other charges, acquisition expenses, legal fees, amortization of intangible assets, changes in fair value of contingent consideration, and stock-based compensation, partially offset by targeted head count reductions undertaken to lower our quarterly operating expense run rate in the Fiery operating segment, targeted head count reductions in the Industrial Inkjet operating segment, and head count reductions in the Productivity Software operating segment driven by the integration of acquired entities.

Research and Development

Research and development expenses consist primarily of costs associated with personnel, consulting, travel, research and development equipment and facilities, and prototype materials.

Research and development expenses for the three months ended June 30, 2013 were $32.1 million, or 18% of revenue, compared to $30.2 million, or 18% of revenue, for the three months ended June 30, 2012, an increase of $1.9 million, or 6%. Personnel-related expenses increased by $1.3 million primarily driven by variable compensation due to improved profitability. Stock-based compensation expense increased by $0.4 million primarily resulting from higher estimated achievement against performance-based vesting criteria and our increased stock price.

Research and development expenses for the six months ended June 30, 2013 were $63.2 million, or 18% of revenue, compared to $61.1 million, or 19% of revenue, for the six months ended June 30, 2012, an increase of $2.1 million, or 3%. Personnel-related expenses increased by $1.5 million primarily driven by variable compensation due to improved profitability and decreased vacation utilization. Prototypes and non-recurring engineering, consulting, contractor, and related travel expenses decreased by $0.4 million primarily due to accelerated product development efforts in the prior year in anticipation of Drupa, which is a European trade show that is held once every four years. Stock-based compensation expense increased by $0.7 million primarily resulting from higher estimated achievement against performance-based vesting criteria and our increased stock price.

We expect that if the U.S. dollar remains volatile against the Indian rupee, Euro, British pound sterling, or Brazilian real, research and development expenses reported in U.S. dollars could fluctuate, although we hedge our operating expense exposure to the Indian rupee, which partially mitigates this risk.

Sales and Marketing

Sales and marketing expenses include personnel expenses, trade shows, marketing programs and promotional materials, sales commissions, travel and entertainment, depreciation, and sales offices in the Americas, Europe, and APAC.

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Sales and marketing expenses for the three months ended June 30, 2013 were $34.5 million, or 19% of revenue, compared to $32.2 million, or 19% of revenue, for the three months ended June 30, 2012, an increase of $2.3 million, or 7%. Personnel-related expenses increased by $2.6 million primarily due to head count increases related to the Metrics, OPS, Technique, and GamSys acquisitions and increased commission payments resulting from increased revenue. Trade show and marketing program spending, including travel and freight, has decreased by $0.3 million primarily due to costs incurred related to Drupa in the prior year. Drupa is a European trade show that is held once every four years.

Sales and marketing expenses for the six months ended June 30, 2013 were $67.2 million, or 19% of revenue, compared to $63.2 million, or 19% of revenue, for the six months ended June 30, 2012, an increase of $4.0 million, or 6%. Personnel-related expenses increased by $4.3 million primarily due to head count increases related to the Metrics, OPS, Technique, and GamSys acquisitions and increased commission payments resulting from increased revenue. Trade show and marketing program spending, including travel and freight, has decreased by $0.4 million primarily due to costs incurred related to Drupa in the prior year. Stock-based compensation expense increased by $0.2 million primarily resulting from higher estimated achievement against performance-based vesting criteria and our increased stock price.

Over time, our sales and marketing expenses may increase in absolute terms if revenue increases in future periods as we continue to actively promote our products and introduce new products and services. We expect that if the U.S. dollar remains volatile against the Euro, British pound sterling, Brazilian real, and other currencies, sales and marketing expenses reported in U.S. dollars could fluctuate.

General and Administrative

General and administrative expenses consist primarily of human resources, legal, and finance expenses.

General and administrative expenses for the three months ended June 30, 2013 were $13.3 million, or 7% of revenue, compared to $11.2 million, or 7% of revenue, for the three months ended June 30, 2012, an increase of $2.1 million, or 20%. Personnel-related expenses increased by $0.9 million primarily due to head count increases related to the Metrics, OPS, Technique, and GamSys acquisitions and geographic expansion into China. Stock-based compensation expense increased by $0.4 million primarily resulting from higher estimated achievement against performance-based vesting criteria and our increased stock price, partially offset by market-based vesting that occurred in the first quarter of 2013. Imputed sublease income of $1.0 million, partially offset by imputed depreciation of $0.4 million, has been accrued during the three months ended June 30, 2013 related to the deferred proceeds from property transaction. Acquisition-related expenses increased by $0.3 million primarily related to anticipated transactions. The probability of achieving several earnout performance targets has been reduced by $0.9 million compared with a reduction of $1.4 million in the prior year, resulting in $0.5 million decrease in the credit to general and administrative expense compared with the prior year. Legal expenses increased by $0.5 million due to increased litigation activity and settlements in the current quarter. Legal expenses also increased by $0.3 million compared with the prior year due to the receipt of an insurance settlement in 2012 related to our previously disclosed derivative litigation.

General and administrative expenses for the six months ended June 30, 2013 were $27.0 million, or 8% of revenue, compared to $24.1 million, or 7% revenue, for the six months ended June 30, 2012, an increase of $2.9 million, or 12%. Personnel-related expenses increased by $1.0 million primarily due to head count increases related to the Metrics, OPS, Technique, and GamSys acquisitions and geographic expansion into China. Stock-based compensation expense increased by $1.8 million primarily resulting from higher estimated achievement against performance-based vesting criteria and our increased stock price, partially offset by market-based vesting that occurred in the first quarter of 2013. Imputed sublease income of $1.7 million, partially offset by imputed depreciation of $0.8 million, has been accrued during the six months ended June 30, 2013 related to the deferred proceeds from property transaction. The probability of achieving several earnout performance targets has been reduced by $1.6 million compared with a reduction of $1.4 million in the prior year, resulting in an additional $0.2 million being credited to general and administrative expense compared with the prior year. Legal expenses increased by $0.7 million due to increased litigation activity and settlements in the current year. Legal expenses also increased by $0.3 million compared with the prior year due to the receipt of an insurance settlement in 2012 related to our previously disclosed derivative litigation.

We expect that if the U.S. dollar remains volatile against the Euro, British pound sterling, Indian rupee, Brazilian real, or other currencies, general and administrative expenses reported in U.S. dollars could fluctuate.

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Stock-based Compensation

We account for stock-based payment awards in accordance with ASC 718, which requires stock-based compensation expense to be recognized based on the fair value of such awards on the date of grant. We amortize compensation cost on a graded vesting basis over the vesting period, after assessing the probability of achieving requisite performance criteria with respect to performance-based awards. Stock-based compensation cost is recognized over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. This has the impact of greater stock-based compensation expense during the initial years of the vesting period.

Stock-based compensation expenses were $5.8 and $4.8 million for the three months ended June 30, 2013 and 2012, respectively, an increase of $1.0 million. Stock-based compensation expenses were $12.4 and $9.4 million for the six months ended June 30, 2013 and 2012, respectively, an increase of $3.0 million. The increase in stock-based compensation expense was primarily due to higher estimated achievement of performance-based vesting criteria and our increased stock price, partially offset by market-based vesting that occurred in the first quarter of 2013.

Restructuring and Other

During the three and six months ended June 30, 2013 and 2012, cost reduction actions were taken to lower our quarterly operating expense run rate as we analyzed our cost structure. We announced restructuring plans to better align our costs with revenue levels and to re-align our cost structure following our business acquisitions. These charges primarily relate to cost reduction actions taken during the first quarter of 2013 to lower our quarterly operating expense run rate in the Fiery operating segment, targeted reductions in the Industrial Inkjet operating segment, and the integration of Productivity Software head count with acquired entities. Restructuring and other consists primarily of restructuring, severance, retention, facility downsizing and relocation, and acquisition integration expenses. Our restructuring and other plans are accounted for in accordance with ASC 420, Exit or Disposal Cost Obligations, ASC 712, Compensation – Non-Retirement Postemployment Benefits, and ASC 820.

We recorded restructuring and other charges of $1.2 and $3.1 million for the three and six months ended June 30, 2013, respectively, and $1.2 and $2.3 million for the three and six months ended June 30, 2012, respectively, primarily consisting of restructuring, severance, retention, and charges to downsize or relocate our facilities. Restructuring and severance charges of $0.4 and $1.4 million related to head count reductions of 28 and 62 for the three and six months ended June 30, 2013, respectively, and $0.3 and $1.1 million related to head count reductions of 16 and 44 for the three and six months ended June 30, 2012, respectively. Severance costs include severance payments, related employee benefits, and outplacement or relocation costs. Integration expenses of $0.5 and $1.1 million were incurred during the three and six months ended June 30, 2013, respectively, primarily related to the Metrics, Cretaprint, OPS, and Technique acquisitions, and $0.7 and $0.8 million was incurred during the three and six months ended June 30, 2012, primarily related to the Metrics, Cretaprint, and Prism Group Holdings Limited (“Prism”) acquisitions.

Retention expenses of $0.2 and $0.5 million were recognized during the three and six months ended June 30, 2013 and 2012, respectively, associated with the Cretaprint acquisition. Facilities restructuring costs of $0.1 and $0.2 million were incurred during the three and six months ended June 30, 2013, primarily related to the relocation of our corporate headquarters, Japan, Belgium, and certain manufacturing facilities.

Amortization of Identified Intangibles

Amortization of identified intangibles for the three months ended June 30, 2013 was $4.9 million, or 3% of revenue, compared to $4.6 million, or 3% of revenue, for the three months ended June 30, 2012, an increase of $0.3 million, or 7%. Amortization of identified intangibles for the six months ended June 30, 2013 was $9.9 million, or 3% of revenue, compared to $8.8 million, or 3% of revenue, for the six months ended June 30, 2012, an increase of $1.1 million, or 12%. This increase is primarily due to amortization of intangible assets identified through the Metrics, OPS, Technique, and GamSys acquisitions.

Interest and Other Expense, Net

Interest and other expense, net, includes interest expense, net, imputed interest expense related to the deferred proceeds from property transaction, net of capitalized interest related to our new corporate headquarters, gains and losses from sales of our cash equivalents and short-term investments, and net foreign currency transaction gains and losses.

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Interest and other expense, net, decreased from a loss of $1.3 million during the three months ended June 30, 2012, to a loss of $0.4 million during the three months ended June 30, 2013. This decrease of $0.9 million is primarily due to the foreign exchange loss of $1.7 million during the three months ended June 30, 2012, partially offset by imputed interest expense of $0.6 million (net of $0.3 million of capitalized interest related to our new corporate headquarters) during the three months ended June 30, 2013, related to the deferred proceeds from property transaction.

Interest and other expense, net, increased from a loss of $0.8 million during the six months ended June 30, 2012, to a loss of $3.3 million during the six months ended June 30, 2013. This increase of $2.5 million is primarily due to imputed interest expense of $1.5 million (net of $0.3 million of capitalized interest related to our new corporate headquarters) during the six months ended June 30, 2013, related to the deferred proceeds from property transaction, and an increase of $0.8 million in the foreign exchange loss to $2.2 million during the six months ended June 30, 2013, resulting from the revaluation of our foreign currency denominated net assets (mainly denominated in Euros, British pounds sterling, and Indian rupees), compared with a $1.4 million foreign exchange loss during the six months ended June 30, 2012.

Deferred Proceeds from Property Transaction

On November 1, 2012, we sold the 294,000 square foot building located at 303 Velocity Way in Foster City, California, which serves as our corporate headquarters, along with approximately four acres of land and certain other assets related to the property, to Gilead for $179.7 million. We will continue to use the facility for up to one year for which rent is not required to be paid. We are accounting for this transaction as a financing transaction related to our continued use of the facility and a sublease receivable relative to Gilead’s use of a portion of the facility. Our use of the facility during the rent-free period constitutes a form of continuing involvement that prevents gain recognition. We have recorded interest expense on the financing obligation at our incremental borrowing rate and increased the financing obligation by the same amount, which resulted in total deferred proceeds from property transaction of $182.0 million at June 30, 2013. We have recorded sublease income at an implied market rate from Gilead and recorded a sublease receivable for the same amount. We will vacate the facility during the fourth quarter of 2013. At that date, we will have no continuing involvement with the property and will account for the transaction as a property sale thereby recognizing a gain of approximately $117 million on the sale of the property, which represents the difference between the sales proceeds and the carrying value of the property and related assets as well as any direct incremental costs associated with the sale.

The assets subject to this sale of $63.9 million as of June 30, 2013 include property and equipment, net, of $60.8 million and current assets of $3.1 million. The sold assets include the $56.9 million facility, $2.9 million of related land, and $2.1 million of leasehold and land improvements, net of accumulated depreciation of $1.1 million. The buildings and improvements are subject to depreciation over their normal useful lives until the property is no longer used by us. Current assets include $0.4 million of direct transaction costs, $0.5 million of previously capitalized lease financing and other costs, and an imputed sublease receivable of $2.2 million.

We will incur imputed financing and depreciation expenses, net of imputed sublease income, of approximately $1.6 million, which commenced during the fourth quarter of 2012, until we vacate the building during the fourth quarter of 2013 when we will recognize a gain on sale of building and land of approximately $117 million.

Income Before Income Taxes

For the three months ended June 30, 2013, pretax net income of $11.4 million consisted of U.S. and foreign pretax net income of $1.9 and $9.5 million, respectively. The pretax net income attributable to U.S. operations included amortization of identified intangibles of $2.2 million, stock-based compensation of $5.8 million, restructuring and other of $0.5 million, acquisition-related costs of $0.7 million, and imputed net expenses related to the deferred property transaction of $0.1 million, partially offset by change in fair value of contingent consideration of $1.0 million. The pretax net income attributable to foreign operations included amortization of identified intangibles of $2.8 million, restructuring and other of $0.7 million, and earnout interest accretion of $0.3 million.

For the six months ended June 30, 2013, pretax net income of $18.0 million consisted of U.S. and foreign pretax net income of $0.1 and $17.9 million, respectively. The pretax net income attributable to U.S. operations included amortization of identified intangibles of $4.5 million, stock-based compensation of $12.4 million, restructuring and other of $1.7 million, acquisition-related costs of $0.7 million, and imputed net expenses related to the deferred property transaction of $0.7 million, partially offset by change in fair value of contingent consideration of $1.7 million. The pretax net income attributable to foreign operations included amortization of identified intangibles of $5.4 million, restructuring and other of $1.4 million, and earnout interest accretion of $0.8 million.

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For the three months ended June 30, 2012, pretax net income of $9.1 million consisted of U.S. and foreign pretax net income of $2.3 and $6.8 million, respectively. The pretax net income attributable to U.S. operations included amortization of identified intangibles of $1.8 million, stock-based compensation of $4.8 million, restructuring and other of $0.8 million, and acquisition-related costs of $0.4 million, net of change in fair value of contingent consideration of $1.4 million, and litigation settlement of $0.3 million. The pretax net income attributable to foreign operations included amortization of identified intangibles of $2.8 million and restructuring and other of $0.4 million.

For the six months ended June 30, 2012, pretax net income of $17.3 million consisted of U.S. and foreign pretax net income of $4.9 and $12.4 million, respectively. The pretax net income attributable to U.S. operations included amortization of identified intangibles of $3.5 million, stock-based compensation of $9.4 million, restructuring and other of $1.3 million, and acquisition-related costs of $0.8 million, net of change in fair value of contingent consideration of $1.4 million, and litigation settlement of $0.3 million. The pretax net income attributable to foreign operations included amortization of identified intangibles of $5.3 million and restructuring and other of $1.0 million.

Provision for Income Taxes

We recognized a tax provision of $2.0 million on pretax net income of $11.4 and $9.1 million during the three months ended June 30, 2013 and 2012, respectively. We recognized a tax provision of $0.3 and $4.1 million on pretax net income of $18.0 and $17.3 million during the six months ended June 30, 2013 and 2012, respectively. The provisions for income taxes before discrete items as reflected in the table below were $2.4 and $2.6 million during the three months ended June 30, 2013 and 2012, respectively, and $4.3 and $5.2 million during the six months ended June 30, 2013 and 2012, respectively. The decrease in the provision for income taxes before discrete items for the three and six months ended June 30, 2013, compared with the same period in the prior year, is due primarily to the benefit related to the U.S. federal research and development credit recognized only in 2013.

Primary differences between our recorded tax provision rate and the U.S. statutory rate of 35% include tax benefits related to credits for research and development costs in 2013, lower taxes on permanently reinvested foreign earnings, and the tax effects of stock-based compensation expense pursuant to ASC 718-740, which are non-deductible for tax purposes. Pursuant to the American Taxpayer Relief Act of 2012 on January 2, 2013, we recognized a tax benefit of $3.2 million resulting from the renewal of the U.S. federal research and development tax credit retroactive to 2012. ASC 740-10-45-15 requires that the effects of a change in tax law or rates be recognized in the period that includes the enactment date.

Our tax provision before discrete items is reconciled to our recorded provision for income taxes for the three and six months ended June 30, 2013 and 2012 as follows (in millions):

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Provision for income taxes before discrete items	$	2.4		$	2.6		$	4.3		$	5.2
Interest related to unrecognized tax benefits		0.1			0.1			0.2			0.2
Provision related to reassessment of taxes resulting from the filing of prior year foreign tax returns		—			—			0.3			—
Benefit related to restructuring and other expenses		(0.1	)		(0.3	)		(0.7	)		(0.6	)
Benefit related to the 2012 U.S. federal research and development tax credit		—			—			(3.2	)		—
Tax deductions related to ESPP dispositions		(0.1	)		(0.1	)		(0.3	)		(0.4	)
Benefit related to reversals of uncertain tax positions due to statute of limitation expirations		(0.3	)		(0.3	)		(0.3	)		(0.3	)
Provision for income taxes	$	2.0		$	2.0		$	0.3		$	4.1

We earn a significant amount of our operating income outside the U.S., which is deemed to be permanently reinvested in foreign jurisdictions. Most of this income is earned in the Netherlands, Spain, and the Cayman Islands, which are jurisdictions with tax rates materially lower than the statutory U.S. tax rate of 35%. Subsequent to the acquisition of Cretaprint in January 2012, we realigned the ownership of its intellectual property to parallel EFI’s worldwide intellectual property ownership. Our effective tax rate could fluctuate significantly and be adversely impacted if anticipated earnings in the Netherlands, Spain, and the Cayman Islands are proportionally lower than current projections and earnings in all other jurisdictions are proportionally higher than current projections.

While we currently do not foresee a need to repatriate the earnings of these operations, should we require more capital in the U.S. than is generated by our U.S. operations, we may elect to repatriate funds held in our foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. These alternatives could result in higher effective tax rates, the cash payment of taxes, and/or increased interest expense.

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We assess the likelihood that our deferred tax assets will be recovered from future taxable income by considering both positive and negative evidence relating to their recoverability. If we believe that recovery of these deferred tax assets is not more likely than not, we establish a valuation allowance. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we considered all available evidence, including recent operating results, projections of future taxable income, our ability to utilize loss and credit carryforwards, and the feasibility of tax planning strategies. Other than a valuation allowance on deferred tax assets related to foreign tax credits resulting from the 2003 acquisition of Best GmbH and compensation deductions potentially limited by IRC Section 162(m), we have determined that is more likely than not that we will realize the benefit related to all other deferred tax assets. To the extent we increase a valuation allowance, we will include an expense within the tax provision in the condensed consolidated statement of operations in the period in which such determination is made.

Non-GAAP Financial Information

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial results prepared in accordance with GAAP, we use non-GAAP measures of net income and earnings per diluted share that are GAAP net income and GAAP earnings per diluted share adjusted to exclude certain recurring and non-recurring costs, expenses, and gains.

We believe that the presentation of non-GAAP net income and non-GAAP earnings per diluted share provides important supplemental information regarding non-cash expenses and significant recurring and non-recurring items that we believe are important to understanding financial and business trends relating to our financial condition and results of operations. Non-GAAP net income and non-GAAP earnings per diluted share are among the primary indicators used by management as a basis for planning and forecasting future periods and by management and our Board of Directors to determine whether our operating performance has met specified targets and thresholds. Management uses non-GAAP net income and non-GAAP earnings per diluted share when evaluating operating performance because it believes the exclusion of the items described below, for which the amounts and/or timing may vary significantly depending on the Company’s activities and other factors, facilitates comparability of the Company’s operating performance from period to period. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our business and the valuation of our Company.

Use and Economic Substance of Non-GAAP Financial Measures

We compute non-GAAP net income and non-GAAP earnings per diluted share by adjusting GAAP net income and GAAP earnings per diluted share to remove the impact of recurring amortization of acquisition-related intangibles and stock-based compensation expense, as well as restructuring related and non-recurring charges and gains and the tax effect of these adjustments. Such non-recurring charges and gains include acquisition-related transaction expenses and the costs to integrate such acquisitions into our business, changes in the fair value of contingent consideration, corporate headquarters relocation expenses, and imputed interest expense and depreciation, net of accrued sublease income and capitalized interest, related to the sale of our corporate headquarters facility and related land.

These excluded items are described below:

• Recurring charges and gains, including:

^¡   Amortization of acquisition-related intangibles. Intangible assets acquired to date are being amortized on a straight-line basis. Post-acquisition non-competition agreements are amortized over their term.

^¡   Stock-based compensation expense recognized in accordance with ASC 718.

• Non-recurring charges and gains, including:

^¡   Restructuring and other consists of:

¡ Restructuring charges incurred as we consolidate the number and size of our facilities and, as a result, reduce the size of our workforce.

¡ Acquisition-related executive deferred compensation costs, which are dependent on the continuing employment of a former shareholder of an acquired company, are being amortized on a straight-line basis.

¡ Expenses incurred to integrate businesses acquired during the periods reported and anticipated acquisitions.

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^¡   Acquisition-related transaction costs associated with businesses acquired during the periods reported and anticipated transactions.

^¡   Changes in fair value of contingent consideration. Our management determined that we should analyze the total return provided by the investment when evaluating operating results of an acquired entity. The total return consists of operating profit generated from the acquired entity compared to the purchase price paid, including the final amounts paid for contingent consideration without considering any post-acquisition adjustments related to changes in the fair value of the contingent consideration. Because our management believes the final purchase price paid for the acquisition reflects the accounting value assigned to both contingent consideration and to the intangible assets, we exclude the GAAP impact of any adjustments to the fair value of acquisition-related contingent consideration from the operating results of an acquisition in subsequent periods. We believe this approach is useful in understanding the long-term return provided by our acquisitions and that investors benefit from a supplemental non-GAAP financial measure that excludes the impact of this adjustment.

^¡   Imputed net expenses related to sale of building and land. On November 1, 2012, we sold the 294,000 square foot building located at 303 Velocity Way in Foster City, California, which serves as our corporate headquarters, along with approximately four acres of land and certain other assets related to the property, to Gilead for $179.7 million. We will continue to use the facility for up to one year for which rent is not required to be paid. This constitutes a form of continuing involvement that prevents gain recognition. Until we vacate the building, the proceeds from the sale will be recognized as deferred proceeds from property transaction on our condensed consolidated balance sheet, which is currently $182.0 million, including imputed interest costs. Imputed interest expense and depreciation, net of accrued sublease income, of $1.3 million has been accrued at June 30, 2013, related to the deferred property transaction, partially offset by capitalized interest of $0.3 million related to the Fremont facility.

^¡   Expenses incurred during the period related to the upcoming relocation of our corporate headquarters facility.

^¡   Pursuant to a settlement executed in April 2012, we received an additional $0.3 million in insurance proceeds, net of legal fees and costs, related to our previously disclosed settlement of the shareholder derivative litigation concerning our historical option granting practices.

• Tax effect of non-GAAP adjustments

^¡   After excluding the items described above, we apply the principles of ASC 740 to estimate the non-GAAP income tax provision in each jurisdiction in which we operate.

^¡   To facilitate comparability of our operating performance between 2013 and 2012, we have excluded the following from our non-GAAP net income for the three and six months ended June 30, 2013:

¡ Tax charge of $0.3 million resulting from the filing of tax returns by foreign subsidiaries for periods prior to their acquisition by EFI for the six months ended June 30, 2013.

¡ Tax benefit of $3.2 and $0.2 million from the retroactive renewal of both the 2012 U.S. federal research and development tax credit and certain international tax provisions, respectively, on January 2, 2013, for the six months ended June 30, 2013. The tax benefit for these items had been previously recognized in our non-GAAP net income for the year ended December 31, 2012.

¡ Interest expense accrued on prior year tax reserves of $0.1 million for the three months ended June 30, 2013 and 2012, respectively, and $0.2 million for the six months ended June 30, 2013 and 2012, respectively, as well as other tax benefits of $0.3 million for the three and six months ended June 30, 2013.

Usefulness of Non-GAAP Financial Information to Investors

These non-GAAP measures are not in accordance with or an alternative to GAAP and may be materially different from other non-GAAP measures, including similarly titled non-GAAP measures, used by other companies. The presentation of this additional information should not be considered in isolation from, as a substitute for, or superior to, net income or earnings per diluted share prepared in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect certain items that may have a material impact upon our reported financial results. We expect to continue to incur expenses of a nature similar to the non-GAAP adjustments described above, and exclusion of these items from our non-GAAP net income and non-GAAP earnings per diluted share should not be construed as an inference that these costs are unusual, infrequent, or non-recurring.

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Reconciliation of GAAP Net Income to Non-GAAP Net Income

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions, except per share data)	2013			2012			2013			2012
Net income	$	9.4		$	7.0		$	17.8		$	13.2
Amortization of identified intangibles assets and in-process R&D		4.9			4.6			9.9			8.8
Restructuring and other		1.2			1.2			3.1			2.3
Stock-based compensation expense		5.8			4.8			12.4			9.4
General and administrative:
Acquisition-related transaction costs		0.7			0.4			0.7			0.8
Change in fair value of contingent consideration		(0.5	)		(1.4	)		(0.8	)		(1.4	)
Insurance litigation settlement		—			(0.3	)		—			(0.3	)
Sublease income related to our deferred property sale		(1.0	)		—			(1.7	)		—
Depreciation expense related to our deferred property sale		0.4			—			0.8			—
Interest and other expense, net
Interest expense related to deferred property sale		0.6			—			1.5			—
Relocation expenses related to deferred property sale		0.1			—			0.1			—
Tax effect on non-GAAP net income		(3.3	)		(2.1	)		(9.8	)		(4.5	)
Non-GAAP net income	$	18.3		$	14.2		$	34.0		$	28.3
Non-GAAP net income per diluted share	$	0.38		$	0.30		$	0.71		$	0.60
Shares for purposes of computing diluted non-GAAP net income per share		48.3			47.8			48.1			47.6

Liquidity and Capital Resources

Overview

Cash, cash equivalents, and short-term investments decreased by $11.4 million to $353.6 million as of June 30, 2013 from $365.0 million as of December 31, 2012. The decrease was primarily due to cash flows provided by operating activities of $41.7 million, proceeds from ESPP purchases of $3.6 million, proceeds from common stock option exercises of $4.3 million, offset by the acquisitions of PrintLeader and GamSys for $3.6 million, net of cash acquired, additional payments related to the acquisitions of Cretaprint and Technique of $0.9 million, acquisition-related contingent consideration payments of $10.0 million excluding the portion included in operating activities, repayment of acquired business debt of $1.6 million, net settlement of shares for employee common stock related tax liabilities and the stock option exercise price of $7.8 million, treasury stock purchases of $10.0 million, and purchases of property and equipment of $27.3 million, including the purchase of our new corporate headquarters facility in Fremont, California.

(in thousands)	June 30, 2013			December 31, 2012			Change
Cash and cash equivalents	$	290,010		$	283,996		$	6,014
Short term investments		63,550			80,966			(17,416	)
Total cash, cash equivalents, and short-term investments	$	353,560		$	364,962		$	(11,402	)
	Six months ended June 30,
(in thousands)	2013			2012			Change
Net cash provided by operating activities	$	41,677		$	18,380		$	23,297
Net cash used for investing activities		(15,125	)		(35,467	)		20,342
Net cash used for financing activities		(18,913	)		(838	)		(18,075	)
Effect of foreign exchange rate changes on cash and cash equivalents		(1,625	)		(308	)		(1,317	)
Increase (decrease) in cash and cash equivalents	$	6,014		$	(18,233	)	$	24,247

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Based on past performance and current expectations, we believe that our cash, cash equivalents, short-term investments, and cash generated from operating activities will satisfy our working capital needs, capital expenditures, investment requirements, stock repurchases, commitments (see Note 8 of the Notes to Condensed Consolidated Financial Statements), and other liquidity requirements associated with our existing operations through at least the next twelve months. We believe that the most strategic uses of our cash resources include acquisitions, strategic investments to gain access to new technologies, repurchases of shares of our common stock, and working capital. At June 30, 2013, cash, cash equivalents, and short-term investments available were $353.6 million. We believe that our liquidity position and capital resources are sufficient to meet our operating and working capital needs.

Cash, cash equivalents, and short-term investments held outside of the U.S. in various foreign subsidiaries were $93.3 and $83.6 million as of June 30, 2013 and December 31, 2012, respectively. If these funds are needed for our operations in the U.S., we would be required to accrue and pay U.S. federal and state income taxes on some or all of these funds. However, our intent is to indefinitely reinvest these funds outside of the U.S. and our current plans do not demonstrate a need to repatriate them to fund our U.S. operations.

Operating Activities

During the six months ended June 30, 2013, our cash provided by operating activities were approximately $41.7 million.

Net cash provided by operating activities consists primarily of net income of $17.8 million, non-cash charges and credits of $23.5 million, and the net change in operating asset and liabilities of $0.4 million. Non-cash charges and credits of $23.5 million consist primarily of $14.3 million in depreciation and amortization, $12.4 million of stock-based compensation expense, provision for inventory obsolescence of $2.4 million, and provision for allowance for bad debts and sales-related allowances of $2.2 million, partially offset by $7.7 million of deferred tax credits. The net change in operating assets and liabilities of $0.4 million consists primarily of a decrease in accounts receivable of $3.3 million and an increase in accounts payable and accrued liabilities of $11.5 million, partially offset by increased inventories and other current assets of $7.1 and $4.7 million, respectively, and a decrease in net taxes payable of $2.6 million.

We paid $5.5 million of income taxes related to the deferred sale of building and land during the six months ended June 30, 2013, which reduced net cash provided by operating activities.

Accounts Receivable

Our primary source of operating cash flow is the collection of accounts receivable from our customers. One measure of the effectiveness of our collection efforts is average days sales outstanding for accounts receivable (“DSO”). DSOs were 65 and 71 days at June 30, 2013 and December 31, 2012, respectively. We calculate DSO by dividing net accounts receivable at the end of the quarter by revenue recognized during the quarter, multiplied by the total days in the quarter.

DSO decreased during the six months ended June 30, 2013 primarily due to collection results. We expect DSO to vary from period to period because of changes in the mix of business between direct customers and end user demand driven through the leading printer manufacturers, the effectiveness of our collection efforts both domestically and overseas, and variations in the linearity of our sales. As the percentage of Industrial Inkjet and Productivity Software related revenue increases, we expect DSO may trend higher. Our DSO related to the Industrial Inkjet and Productivity Software customer bases are traditionally higher than those related to the significant printer manufacturer customers / distributors in our Fiery operating segment as, historically, they have paid on a more timely basis.

We have facilities in Spain that enable us to sell to third parties, on an ongoing basis, certain trade receivables without recourse. The trade receivables sold without recourse are generally short-term receivables with payment due dates of less than one year, which are secured by international letters of credit. We also have facilities in the U.S. that enable us to sell to third parties, on an ongoing basis, certain trade receivables with recourse. The trade receivables sold with recourse are generally short-term receivables with payment due dates of less than 30 days from the date of sale, which are subject to a servicing obligation.

Trade receivables sold under these facilities during the six months ended June 30, 2013, were $4.1 and $6.9 million on a nonrecourse and recourse basis, respectively, which approximates the cash received during this period. We report collections from the sale of trade receivables to third parties as operating cash flows in the condensed consolidated statements of cash flows because such receivables are the result of an operating activity and the associated interest rate risk is de minimis.

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Inventories

Our inventories are procured primarily in support of the Industrial Inkjet and Fiery operating segments. Our net inventories increased by $4.8 million from $58.3 million at December 31, 2012 to $63.1 million at June 30, 2013 primarily due to Industrial Inkjet inventory to support new product requirements. The majority of our Industrial Inkjet products are manufactured internally, while Fiery production is primarily outsourced. This results in lower inventory turnover for Industrial Inkjet inventories compared with Fiery inventories. Inventory turnover declined from 5.4 turns during the quarter ended December 31, 2012 to 5.2 turns during the quarter ended June 30, 2013. We calculate inventory turnover by dividing annualized current quarter cost of revenue by ending inventories.

Investing Activities

Acquisitions

GamSys and PrintLeader were acquired during the six months ended June 30, 2013 for cash consideration of $3.6 million, net of cash acquired, plus additional future cash earnouts contingent on achieving certain performance targets and accounts receivable payments dependent on collections. Purchase price adjustments of $0.9 million were paid with respect to Cretaprint and Technique.

Cretaprint, Metrics, and FX Colors were acquired during the six months ended June 30, 2012 for cash consideration of $44.1 million, net of cash acquired, plus additional future cash earnouts contingent on achieving certain performance targets and milestones, Cretaprint executive retention, and Metrics post-acquisition non-competition agreements. Streamline purchase price adjustment of $0.4 million was also paid during the six months ended June 30, 2012.

Investments

Proceeds from sales and maturities of marketable securities, net of purchases, were $16.7 and $7.7 million during the six months ended June 30, 2013 and 2012, respectively. We have classified our investment portfolio as available for sale. Our investments are made with a policy of capital preservation and liquidity as primary objectives. We may hold investments in fixed income debt securities to maturity; however, we may sell an investment at any time if the quality rating of the investment declines, the yield on the investment is no longer attractive, or we have better uses for the cash. Since we invest primarily in investment securities that are highly liquid with a ready market, we believe the purchase, maturity, or sale of our investments has no material impact on our overall liquidity.

Restricted Cash and Investments

We are required to maintain restricted cash of $0.3 million as of June 30, 2013 related to customer agreements that were obtained through the Alphagraph acquisition, which is classified as a current asset because the restriction will be released within twelve months.

Prior to the sale discussed below, we were subject to a synthetic lease (“Lease”) covering our Foster City office facility located at 303 Velocity Way, Foster City, California. The Lease included an option to purchase the facility during or at the end of the lease term for the amount expended by the lessor to purchase the facility ($56.9 million). The funds pledged under the Lease were in LIBOR-based interest bearing accounts, which were restricted as to withdrawal at all times. We exercised our purchase option in the fourth quarter of 2012 with respect to the Lease in connection with the sale of the land and building to Gilead. The $56.9 million of pledged funds are included in property and equipment, net, in the condensed consolidated balance sheet as of June 30, 2013 and December 31, 2012. Please refer to Note 15 – Deferred Proceeds from Property Transaction for additional information.

Property and Equipment, Net

Net purchases of property and equipment were $27.3 and $3.8 million during the six months ended June 30, 2013 and 2012, respectively, including the purchase of our corporate headquarters facility in Fremont, California. Our property and equipment additions have historically been funded from operating activities. We anticipate that we will continue to purchase necessary property and equipment in the normal course of our business. The amount and timing of these purchases and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors including the hiring of employees, the rate of change in computer hardware/ software used in our business, and our business outlook.

On November 1, 2012, we sold the 294,000 square foot building located at 303 Velocity Way in Foster City, California, which serves as our corporate headquarters, along with approximately four acres of land and certain other assets related to the property, to Gilead for cash proceeds of $179.3 million, net of direct transaction costs paid in 2012. Direct transaction costs consist primarily of documentary transfer and title costs, legal fees, and other expenses. We will continue to use the facility for up to one year for which rent is not required to be paid. This constitutes a form of continuing involvement that prevents gain recognition. Until we vacate the building, the proceeds from the sale are accounted for as deferred proceeds from property transaction on our Consolidated Balance Sheet, which is currently $182.0 million, including imputed interest costs.

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On April 26, 2013, we purchased an approximately 119,000 square feet cold shell building in Fremont, California, for $21.5 million. We will incur additional build-out and construction costs and expenses related to this facility including $0.2 million paid during the six months ended June 30, 2013. We also entered into a 15-year lease agreement, pursuant to which we will lease approximately 58,000 square feet of an adjacent building located at 6700 Dumbarton Circle, Fremont, California, for an aggregate amount of $18.4 million over the lease term. We will incur additional tenant improvement costs and expenses related to this facility. The first rent payment is not due until September 2016. Please refer to Note 8 – Commitments and Contingencies for additional information.

This location will serve as our new worldwide corporate headquarters, as well as engineering, marketing, and administrative operations for our Fiery operating segment. We plan to relocate our current headquarters no later than November 1, 2013.

Financing Activities

Historically, our recurring cash provided by financing activities have been from the receipt of cash from the issuance of common stock through the exercise of stock options and employee purchases of ESPP shares. We received proceeds from the exercise of stock options of $4.3 and $11.6 million and employee purchases of ESPP shares of $3.6 and $3.4 million during the six months ended June 30, 2013 and 2012, respectively. The recent increase in stock option exercise proceeds primarily relates to the retirement of a senior executive. While we may continue to receive proceeds from these plans in future periods, the timing and amount of such proceeds are difficult to predict and are contingent on a number of factors including the price of our common stock, the number of employees participating in the plans, and general market conditions. We anticipate that cash provided from the exercise of stock options may decline over time as we shift to issuance of RSUs, rather than stock options.

The primary use of funds for financing activities during the six months ended June 30, 2013 and 2012, respectively, was $17.8 and $9.5 million, respectively, of cash used to repurchase outstanding shares of our common stock including cash used for net settlement of the exercise price of certain stock options and any tax withholding obligations incurred in connection with such exercises. On August 31, 2012, our board of directors approved the repurchase of $100 million of outstanding common stock. This authorization expires in February 2014. Under this publicly announced plan, we repurchased a total of 0.4 million shares for an aggregate purchase price of $10.0 million during the six months ended June 30, 2013.

Earnout payments during the six months ended June 30, 2013 of $8.9, $0.7, and $1.0 million, respectively, related to previously accrued Cretaprint, Alphagraph, and Radius contingent consideration liabilities. Earnout payments of $1.0 and $0.3 million during the six months ended June 30, 2013 and 2012, respectively, related to the previously accrued Radius contingent consideration liability of $2.1 million. The difference between the $2.1 million accrued Radius earnout liability and the amount paid represents a disputed indemnification claim. The portion of the Radius earnout representing performance targets achieved in excess of amounts assumed in the opening balance sheet as of the acquisition date of $0.6 million was reflected as cash used for operating activities in the condensed consolidated statement of cash flows during the six months ended June 30, 2013.

Other Commitments

Our Industrial Inkjet inventories consist of raw materials and finished goods, print heads, frames, digital UV ink, and other components in support of our internal manufacturing operations and solvent ink, which is purchased from third party contract manufacturers responsible for manufacturing our solvent ink. Our Fiery inventory consists primarily of raw materials and finished goods, 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 manufacture Fiery controllers internally, or should it become necessary for us to purchase and sell components other than processors, ASICs, or memory subsystems to our contract manufacturers, inventory balances and potentially property and equipment would increase significantly, thereby reducing our available cash resources. Further, the inventories we carry could become obsolete, thereby negatively impacting our financial condition and results of operations. We are also reliant on several sole source suppliers for certain key components and could experience a further significant negative impact on our financial condition and results of operations if such supplies were reduced or not available.

We may be required to compensate our subcontract manufacturers for components purchased for orders subsequently cancelled by us. We periodically review the potential liability and the adequacy of the related allowance. Our financial condition and results of operations could be negatively impacted if we were required to compensate our subcontract manufacturers in amounts in excess of the related allowance.

Indemnification

In the normal course of business and in an effort to facilitate the sales of our products, we sometimes indemnify other parties, including customers, lessors, and parties to other transactions with us. When we indemnify these parties, typically those provisions protect other parties against losses arising from our infringement of third party intellectual property rights or other claims made by third parties arising from the use or distribution of our products. Those provisions also often contain various limitations including limits on the amount of protection provided. Historically, costs related to these indemnification provisions have been insignificant. We are unable to estimate the maximum potential impact of these indemnification provisions on our future results of operations.

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As permitted under Delaware law, pursuant to our bylaws, charter, and indemnification agreements with our current and former executive officers, directors, and general counsel, we are required, subject to certain limited qualifications, to indemnify our executive officers, directors, and general counsel for certain events or occurrences while the executive officer, director, or general counsel is or was serving at our request in such capacity. The indemnification period covers all pertinent events and occurrences during the executive officer’s, director’s, or general counsel’s lifetime. The maximum potential future payments we may be obligated to make under these indemnification agreements is unlimited; however, we have director and officer insurance coverage that limits our exposure and may enable us to recover a portion of any future amounts paid.

Legal Proceedings

Please refer to “Part II – Other Information, Item 1: Legal Proceedings” in this Report for more information regarding our legal proceedings.

Contractual Obligations

Please refer to Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Contractual Obligations” presented in our Annual Report on Form 10-K for the year ended December 31, 2012.

Off-Balance Sheet Financing

Synthetic Lease Arrangements

Prior to the sale discussed above, we were a party to a Lease covering our Foster City facility located at 303 Velocity Way, Foster City, California. The Lease provided a cost effective means of providing adequate office space for our corporate offices and was scheduled to expire by its terms in July 2014. The Lease included an option allowing us to purchase the facility for the amount paid by the lessor for the facility. The $56.9 million pledged under the Lease was in LIBOR-based interest bearing accounts and was restricted from withdrawal at all times.

On November 1, 2012, we sold the 294,000 square foot 303 Velocity Way building, along with approximately four acres of land and certain other assets related to the property, for $179.7 million. We exercised our purchase option with respect to the Lease in connection with the sale of the building and land and terminated the corresponding Lease. We will continue to use the facility for up to one year for which rent is not required to be paid. This constitutes a form of continuing involvement that prevents gain recognition. Until we vacate the building, the proceeds from the sale will be accounted for as deferred proceeds from property transaction on our condensed consolidated balance sheet, which is currently $182.0 million, including imputed interest costs. The $56.9 million of previously pledged funds are classified as property and equipment, net, in the Condensed Consolidated Balance Sheet as of June 30, 2013 and December 31, 2012.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

Market Risk

We are exposed to various market risks. Market risk is the potential loss arising from adverse changes in market rates and prices, general credit, foreign currency exchange rate fluctuation, liquidity, and interest rate risks, which may be exacerbated by the tight global credit market and increase in economic uncertainty that have affected various sectors of the financial market and continue to cause credit and liquidity issues. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We may enter into financial instrument contracts to manage and reduce the impact of changes in foreign currency exchange rates on earnings and cash flows. The counterparties to such contracts are major financial institutions. We hedge our operating expense exposure in Indian rupees. The notional amount of our Indian rupee cash flow hedge was $2.7 million at June 30, 2013. We also hedge certain balance sheet remeasurement exposures using forward contracts not designated as hedging instruments with a notional amount of $18.2 million at June 30, 2013. Forward contracts not designated as hedging instruments at June 30, 2013, consist of hedges of Euro-denominated intercompany loans with notional amounts of $16.9 million and Indian rupee net monetary assets with a notional amount of $1.3 million.

We had not entered into hedges against any other currency exposures as of June 30, 2013, but we may consider hedging against movements in other currencies in the future. See Financial Risk Management below for a discussion of European market risk.

Interest Rate Risk

Marketable Securities

We maintain an investment portfolio of short-term fixed income debt securities of various holdings, types, and maturities. These short-term investments are generally classified as available–for-sale and, consequently, are recorded on our condensed consolidated balance sheets at fair value with unrealized gains and losses reported as a separate component of OCI. We attempt to limit our 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. 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.

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Hypothetical changes in the fair values of financial instruments held by us at June 30, 2013 that are sensitive to changes in interest rates are presented below. The modeling technique measures the change in fair value arising from selected potential changes in interest rates. Market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 100 basis points over a twelve month time horizon (in thousands):

Valuation of securities given an interest rate decrease of 100 basis points		No change in interest rates		Valuation of securities given an interest rate increase of  100 basis points
$	87,712	$	86,998	$	86,096

Foreign Currency Exchange Risk

A large portion of our business is conducted in countries other than the U.S. We are primarily exposed to changes in exchange rates for the Euro, British pound sterling, Indian rupee, Japanese yen, Brazilian real, and Australian dollar. Although the majority of our receivables are invoiced and collected in U.S. dollars, we have exposure from non-U.S. dollar-denominated sales (consisting of the Euro, British pound sterling, Japanese yen, Brazilian real, Australian dollar, and New Zealand dollar) and operating expenses (primarily the Euro, British pound sterling, Japanese yen, Indian rupee, Brazilian real, and Australian dollar) in foreign countries. We can benefit from a weaker dollar and we can be adversely affected from a stronger dollar relative to major currencies world-wide. Accordingly, changes in exchange rates, and in particular a weakening of the U.S. dollar, may adversely affect our consolidated operating expenses and operating income (loss) as expressed in U.S. dollars. We hedge our operating expense exposure in Indian rupees. The notional amount of our Indian rupee cash flow hedge was $2.7 million at June 30, 2013. We also hedge certain balance sheet remeasurement exposures using forward contracts not designated as hedging instruments with a notional amount of $18.2 million at June 30, 2013. Forward contracts not designated as hedging instruments at June 30, 2013, consist of hedges of Euro-denominated intercompany loans with notional amounts of $16.9 million and Indian rupee net monetary assets with a notional amount of $1.3 million. We had not entered into hedges against any other currency exposures as of June 30, 2013, but we may consider hedging against movements in other currencies in the future. See Financial Risk Management below for a discussion of European market risk.

The impact of hypothetical changes in foreign exchanges rates on revenue and income from operations are presented below. The modeling technique measures the change in revenue and income from operations resulting from changes in selected foreign exchange rates with respect to the Euro and British pound sterling of plus or minus one percent during the six months ended June 30, 2013 as follows (in thousands):

	Impact of a foreign exchange rate decrease of one  percent		No change in foreign exchange rates		Impact of a foreign exchange rate increase of one  percent
Revenue	$	352,379	$	351,657	$	350,935
Income from operations	$	21,535	$	21,385	$	21,235

Financial Risk Management

As a global concern, we face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results. Our exposures are related to non-U.S. dollar denominated sales in Europe, Japan, the U.K., Latin America, Australia, and New Zealand and are primarily related to operating expenses in Europe, India, Japan, the U.K., Brazil, and Australia. We hedge our operating expense exposure in Indian rupees. We also hedge certain balance sheet remeasurement exposures using forward contracts not designated as hedging instruments. We had not entered into hedges against any other currency exposures as of June 30, 2013, but we may consider hedging against movements in other currencies as well as adjusting the hedged portion of our Indian rupee exposure in the future.

We maintain investment portfolio holdings of various issuers, types, and maturities. We typically utilize money market, U.S. Treasury and government-sponsored entity, foreign government, corporate debt, municipal, asset-backed, and mortgage-backed residential securities. These short-term investments are classified as available-for-sale and consequently are recorded on the balance sheet at fair value with unrealized gains and losses reported as a separate component of OCI. These securities are not leveraged and are held for purposes other than trading.

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SEC Division of Corporation Finance Disclosure Guidance Topic 4 (“Guidance Topic 4”), European Sovereign Debt, encourages registrants to discuss their exposure to the uncertainty in the European economy. Specifically, registrants are asked to disclose their European debt by counterparty (i.e., sovereign and non-sovereign) and by country. We have no European sovereign debt investments. Our European debt and money market investments consist of non-sovereign corporate debt included within money market funds and corporate debt securities of $47.0 million, which represents 28% of our money market funds and corporate debt securities at June 30, 2013. Our European debt investments are with corporations domiciled in the northern and central European countries of Sweden, Germany, Netherlands, Switzerland, Luxembourg, Norway, France, Belgium, and the U.K. We do not have any investments in the higher risk “southern European” countries (i.e., Greece, Spain, Portugal, and Italy) or in Ireland.

Since Europe represents a significant portion of our revenue and cash flow, Guidance Topic 4 encourages disclosure of our European concentrations of credit risk regarding gross receivables, related reserves, and aging on a region or country basis, and the impact on liquidity with respect to estimated timing of receivable payments. Since Europe is composed of varied countries and regional economies, our European risk profile is somewhat more diversified due to the varying economic conditions among the countries. Approximately 27% of our receivables are with European customers as of June 30, 2013. Of this amount, 30% of our European receivables (8% of consolidated net receivables) are in the higher risk southern European countries (mostly Spain, Italy, and Portugal), which are adequately reserved. The ongoing relocation of the ceramic tile industry from southern Europe to the emerging markets of China, India, Brazil, and Indonesia will reduce our exposure to credit risk in southern Europe.

Item 4: Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the quarter ended June 30, 2013, under the supervision and with the participation of our management, including our chief executive officer and chief financial and accounting officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based on that evaluation, our chief executive officer and chief financial and accounting officer concluded that our disclosure controls and procedures were effective as of June 30, 2013 to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial and accounting officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the second quarter of 2013, there were no changes in our internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1: Legal Proceedings

We may be involved, from time to time, in a variety of claims, lawsuits, investigations, or proceedings relating to contractual disputes, securities laws, intellectual property rights, employment, or other matters that may arise in the normal course of business. We assess our potential liability in each of these matters by using the information available to us. We develop our views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and various combinations of appropriate litigation and settlement strategies. We accrue estimated losses from contingencies if a loss is deemed probable and can be reasonably estimated.

As of June 30, 2013, we are subject to the various claims, lawsuits, investigations, or proceedings discussed below.

Componex vs. EFI

Componex Corporation is a manufacturer of rolls used in machines handling continuous sheets of product and was, and continues to be, a supplier for certain products in our Vutek product line. On May 30, 2013, Componex filed an action in the United States District Court for the Western District of Wisconsin alleging that rolls supplied to EFI by another vendor infringe two patents held by Componex. Because this proceeding is still is its preliminary stages, we have not had an opportunity to complete our evaluation of the allegations, determine whether the loss is probable or reasonably possible or, if it is probable or reasonably possible, estimate the amount or range of loss that may be incurred.

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Digitech Patent Litigation

On August 16, 2012, Digitech initiated litigation against EFI; Konica Minolta Holdings, Inc., Konica Minolta Holdings, U.S.A., Inc., and Konica Minolta Business Solutions, U.S.A., Inc. (collectively, “Konica Minolta”); and Xerox Corporation (“Xerox”) for infringement of a patent related to the creation of device profiles in digital image reproduction systems in the United States District Court for the Central District of California.

In addition to its own defenses, EFI has contractual obligations to indemnify certain of its customers to varying degrees subject to various circumstances, including Konica Minolta, Xerox, and others. We do not believe that our products infringe any valid claim of Digitech’s patent. We have filed our response to the action, denying infringement and arguing that the patent at issue is not valid. We have also moved to strike Digitech’s infringement contentions as lacking proper basis.

Although we do not believe that Digitech’s infringement claims are valid and we do not believe it is probable that we will incur a material loss in this matter, it is reasonably possible that our financial statements could be materially affected by an assessment of damages. We are currently assessing whether we can provide a reasonable estimate of the range of loss. Such an evaluation includes, among other things, a determination of the total sales of the implicated systems in the United States and what a reasonable royalty, if any, might be under the circumstances.

Durst v. EFI GmbH and EFI, et al.

On or about June 14, 2011, Durst filed an action against EFI GmbH and EFI in the Regional Court of Dusseldorf, Germany (“Regional Court”), alleging infringement of a German patent. The Regional Court preliminarily determined that the white base coat printing method in our GS and QS super-wide format printer product lines infringes the Durst patent. We have appealed this preliminary decision to the Higher Regional Court of Dusseldorf. A hearing has been scheduled by the Higher Regional Court for March 20, 2014.

In a separate action, we have challenged the validity of the Durst patent in the German Federal Patent Court. We believe that the Durst patent is invalid in light of prior art. German courts in Mannheim and Karlsruhe reached a similar conclusion in litigation involving a Durst utility model right on related technology. We expect that the Federal Patent Court will issue a preliminary opinion on the validity of the patent after July 2013. The Federal Patent Court has set the matter for hearing on October 23, 2013.

Although we do not believe that Durst’s infringement claims are valid and we do not believe it is probable that we will incur a material loss in this matter, it is reasonably possible that our financial statements could be materially affected by an assessment of damages or potential issuance of an injunction by the Regional Court. We are currently assessing whether we can provide a reasonable estimate of the range of loss. Such an evaluation includes, among other things, a determination of the number of printers in Germany with the relevant feature at the time the court makes its final determination of infringement, and an assessment of the cost related to an injunction, if an injunction is ultimately issued.

Perfectproof v. EFI GmbH

On December 31, 2001, Perfectproof filed a complaint against BEST GmbH, currently EFI GmbH in the Tribunal de Commerce of Brussels, in Belgium (the “Commercial Court”), alleging unlawful unilateral termination of an alleged “exclusive” distribution agreement and claiming damages of approximately EU 0.6 million for such termination and additional damages of EU 0.3 million, or a total of approximately $1.2 million. In a judgment issued by the Commercial Court on June 24, 2002, the court declared that the distribution agreement was not “exclusive” and questioned its jurisdiction over the claim. Perfectproof appealed, and by decision dated November 30, 2004, the Court d’Appel of Brussels (the “Court of Appeal”) rejected the appeal and remanded the case to the Commercial Court. Subsequently, by judgment dated November 17, 2009, the Commercial Court dismissed the action for lack of jurisdiction of Belgian courts over the claim. On March 25, 2009, Perfectproof again appealed to the Court of Appeal. On November 16, 2010, the Court of Appeal declared, among other things, that the Commercial Court was competent to hear the case; that the “exclusive” agreement required reasonable notice prior to termination; and that Perfectproof is entitled to damages. The court appointed an expert to review the parties’ records and address certain questions relevant in assessing Perfectproof’s damages claim. On October 19, 2011, the expert issued its final report itemizing damages that are, in the aggregate, significantly less than the amount claimed by Perfectproof. The final determination of damages will not be binding until it is approved or adopted by the court. The Court of Appeal has scheduled the hearing for October 21, 2013.

Although we do not believe that Perfectproof’s claims are founded and we do not believe it is probable that we will incur a material loss in this matter, it is reasonably possible that our financial statements could be materially affected by the court’s decision regarding the assessment of damages. The court may approve the expert’s final report and pronounce the final amount of damages to be paid by us, or require additional analysis, or consider further challenges to the final determination of damages. Accordingly, it is reasonably possible that we could incur a material loss in this matter. We estimate the range of loss to be between one dollar and $1.2 million.

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Kerajet vs. Cretaprint

In May 2011, Jose Vicente Tomas Claramonte, the President of Kerajet, filed an action against Cretaprint in the Commercial Court in Valencia, Spain, alleging, among other things, that certain Cretaprint products infringe a patent held by Mr. Claramonte. In conjunction with our acquisition of Cretaprint, which closed on January 10, 2012, we assumed potential liability in this lawsuit.

A trial was held on October 4, 2012. On January 2, 2013, the court ruled in favor of Cretaprint concluding that the Cretaprint products do not infringe the Claramonte patent. Mr. Claramonte appealed the ruling on January 30, 2013. On July 15, 2013, the Spanish Court of Appeal affirmed the trial court’s conclusion that the Cretaprint products do not infringe the Claramonte patent. Mr. Claramonte may appeal the ruling of the Spanish Court of Appeal.

In conjunction with our defense of the claims by Mr. Claramonte, EFI filed affirmative actions against Mr. Claramonte in the United Kingdom (“U.K.”), Italy, and Germany alleging, among other things, that the Claramonte patent is not valid and/or that Cretaprint’s products do not infringe the patent. The court in the U.K. has issued a default judgment of non-infringement by Cretaprint. The actions in Italy and Germany remain pending.

Because the former owners of Cretaprint agreed to indemnify EFI against any potential liability in the event that Mr. Claramonte were to prevail in his action against Cretaprint, we accrued a contingent liability based on a reasonable estimate of the legal obligation that was probable as of the acquisition date and we accrued a contingent asset based on the portion of any liability for which the former Cretaprint owners would indemnify EFI. The net obligation accrued in the opening balance sheet on the acquisition date is EU 2.5 million (or approximately $3.3 million).

Other Matters

As of June 30, 2013, we were also subject to various other claims, lawsuits, investigations, and proceedings in addition to those discussed above. There is at least a reasonable possibility that additional losses may be incurred in excess of the amounts that we have accrued. However, we believe that certain of these claims are not material to our financial statements or the range of reasonably possible losses is not reasonably estimable. Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

Item 1A: Risk Factors

In addition to information regarding risk factors that appears in “Management’s Discussion and Analysis – Forward-looking Statements” in Part I, Item 2, of this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, and Part II, Items 7 and 7A, of our Annual Report on Form 10-K for the year ended December 31, 2012 (the “2012 Form 10-K”), which could materially affect our business, financial condition, or future results. The risks described herein and in our 2012 Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.

In addition to the risk factors disclosed herein and in our 2012 Form 10-K, we have identified the following material change to our risk factors:

We expect to relocate our corporate headquarters to Fremont, which may disrupt our operations and result in additional expenses.

On November 1, 2012, we sold the 294,000 square foot building located at 303 Velocity Way in Foster City, California, which serves as our corporate headquarters, along with approximately four acres of land and certain other assets related to the property, to Gilead for $179.7 million. The property is subject to a leaseback of up to one year for which rent is not required to be paid; however, we are required to vacate portions of the building at various times during the leaseback period and consolidate our operations into a smaller portion of the building. We will incur additional expenses and may encounter disruption of operations related to the consolidation of space, which could have an adverse effect on our financial condition and results of operations.

On April 26, 2013, we purchased an approximately 119,000 square feet cold shell building located at 6750 Dumbarton Circle, Fremont, California, for $21.5 million and entered into a 15-year lease agreement, pursuant to which we will lease approximately 58,000 square feet of an adjacent two-story building, for an aggregate amount of $18.4 million over the lease term. We plan to relocate our current headquarters no later than November 1, 2013. We expect to incur additional build-out and construction costs and expenses related to these facilities and will incur rent and/or depreciation expenses, which will increase our ongoing cost structure. There is no assurance that we will be able to relocate our operations when expected and retain our employees at the new location. The uncertainty could be disruptive to our business. We expect to incur additional expenses associated with the relocation, including exit costs, and may encounter disruption of operations related to the expected move, all of which could have an adverse effect on our financial condition and results of operations.

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Item 2: Unregistered Sales of Equity Securities and Use of Proceeds

Our stock repurchases for the quarter ended June 30, 2013 are as follows (in thousands, except for per share amounts):

Issuer Purchases of Equity Securities

Total	Total Number of Shares Purchased (2)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Approximate Dollar Value of Shares that May Yet Be Purchased  Under the Plans (1)
April 2013		217	$	24.86		201	$	67,146
May 2013		34		25.98		—		67,146
June 2013		—		—		—		67,146
Total		251				201

(1) On August 31, 2012, the board of directors approved the repurchase of $100 million of outstanding common stock. This authorization expires in February 2014. Under this publicly announced plan, we repurchased 0.2 million shares for an aggregate purchase price of $5.0 million during the three months ended June 30, 2013.

(2) Includes 0.1 million shares purchased from employees to satisfy the exercise price of certain stock options and any tax withholding obligations incurred in connection with such exercises and minimum tax withholding obligations that arose on the vesting of RSUs.

Item 3: Defaults Upon Senior Securities

None.

Item 4: Mine Safety Disclosure

Not applicable.

Item 5: Other Information

Not applicable.

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Item 6: Exhibits

No.	Description
3.1	Amended and Restated Certificate of Incorporation (1)
3.2	Amended and Restated Bylaws of Electronics For Imaging, Inc. (as amended August 12, 2009) (2)
10.1	Purchase and Sale Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee, dated April 19, 2013
10.2	Lease Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee, dated April 19, 2013
12.1	Computation of Ratio of Earnings to Fixed Charges
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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 and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

(1) Filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 33-57382) and incorporated herein by reference.

(2) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2009 (File No. 000-18805) and incorporated herein by reference.

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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: July 31, 2013	/s/ Guy Gecht
	Guy Gecht
	Chief Executive Officer (Principal Executive Officer)
Date: July 31, 2013	/s/ Vincent Pilette
	Vincent Pilette
	Chief Financial Officer (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

No.	Description
3.1	Amended and Restated Certificate of Incorporation (1)
3.2	Amended and Restated Bylaws of Electronics For Imaging, Inc. (as amended August 12, 2009) (2)
10.1	Purchase and Sale Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee, dated April 19, 2013
10.2	Lease Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee, dated April 19, 2013
12.1	Computation of Ratio of Earnings to Fixed Charges
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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 and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability under those sections.

(1) Filed as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 33-57382) and incorporated herein by reference.

(2) Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2009 (File No. 000-18805) and incorporated herein by reference.

EX-10.1

Exhibit 10.1

PURCHASE AND SALE AGREEMENT

INDEX

SECTION NUMBER & TITLE			PAGE NUMBER
1.	Agreement to Sell			1
2.	Price and Payment; Closing			1
	2.1	Purchase Price.		1
	2.2	Escrow and Payment.		2
	2.3	Closing.		2
	2.4	Purchaser’s Contingency.		2
3.	Title			3
4.	As-Is Purchase; Limited Representations; Release of Seller			3
	4.1	Natural Hazards Disclosure Statements.		3
	4.2	“As Is” Purchase.		4
	4.3	Limited Representations by Seller.		5
	4.4	Release of Seller.		6
	4.5	Independent Investigation by Purchaser.		6
5.	Closing Costs and Prorations; Closing Conditions			7
	5.1	Closing Costs.		7
	5.2	Payment of Other Property Costs and Expenses.		7
	5.3	Closing Conditions.		7
		5.3(A) Purchaser’s Closing Conditions		7
		5.3(B) Seller’s Closing Conditions		9
6.	Notices			10
7.	Possession.			11
8.	Default			11
	8.1	Purchaser Default.		11
	8.2	Seller Default.		11

9.	Conditions to Indemnification		11
10.	Miscellaneous		11
	10.1	Entire Agreement; Amendments.	11
	10.2	Severability.	12
	10.3	Applicable Law.	12
	10.4	Assignment.	12
	10.5	Successors Bound.	12
	10.6	Captions.	12
	10.7	Attorneys’ Fees.	12
	10.8	Brokers.	13
	10.9	Time of Essence.	13
	10.10	Submission of Offer.	13

PURCHASE AND SALE AGREEMENT

THIS PURCHASE AND SALE AGREEMENT (the “Agreement”), dated as of April 19, 2013 (the “Effective Date”), is made by and between JOHN ARRILLAGA, Trustee, or his Successor Trustee, UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR’S TRUST) as amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended (collectively, “Seller”), and ELECTRONICS FOR IMAGING, INC., a Delaware corporation (“Purchaser”).

R  E  C  I  T  A  L  S

A. Seller desires to sell a 118,535+ square foot, two-story cold shell building located at 6750 Dumbarton Circle, Fremont, California (the “Building”) and other substantial improvements, (collectively, the “Improvements”) on certain land owned by Seller located on 6.66+ acres and commonly known as Assessor Parcel Numbers 543-439-175 and 543-439-176 and described more fully in Exhibit A attached hereto (the “Land”) (collectively, the “Property”). Seller owns fee title to the Land, the Building and such other Improvements, subject to all matters of record and such other matters as are referred to or provided for in this Agreement.

B. Seller desires to sell the Property to the Purchaser, and Purchaser desires to purchase the Property from Seller, all upon and subject to the terms and conditions set forth in this Agreement.

A  G  R  E  E  M  E  N  T

NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Seller and Purchaser hereby agree as follows:

1. AGREEMENT TO SELL

Subject to the terms and conditions of this Agreement, and for the consideration herein set forth, Seller agrees to sell and transfer, and Purchaser agrees to purchase and acquire all of Seller’s right, title, and interest in and to the following: (i) the Property; (ii) all other Improvements located thereon; and (iii) any and all easements, rights of access and appurtenances, whether or not of record, relating to the Property, to the extent reasonably required for the lawful use, enjoyment, occupancy or operation of the Building. Seller has provided Purchaser with a copy of the shell plans existing on the Effective Date with the agreement by Purchaser that said shell plans shall not be used by Purchaser for any other project and/or development by Purchaser and/or by any successor in interest of Purchaser.

2. PRICE AND PAYMENT; CLOSING

2.1 Purchase Price. The purchase price for the Property (the “Purchase Price”) is Twenty-One Million Five Hundred Thousand and No/100 Dollars ($21,500,000.00).

1 Initial:     /S/ JA; RP; VP        

2.2 Escrow and Payment. Within three (3) business days following the Effective Date, Seller and Purchaser shall deliver a true and complete copy of this Agreement to Escrow Holder, which shall establish an escrow for the purchase and sale transaction set forth herein. The parties agree to execute and deliver to Chicago Title Company at 675 N. First Street, Suite 900, San Jose, California 95112 (“Escrow Holder”) prior to Closing their respective and appropriate escrow instructions and authority documents as shall be reasonably required to close the purchase and sale transaction contemplated in this Agreement, provided that any such escrow instructions shall be fully consistent with the provisions of this Agreement.

Payment of the Purchase Price is to be made in U.S. Dollars cash or immediately available funds as follows:

(a) Upon the execution of this Agreement, Purchaser shall pay directly to Seller a Two Hundred Fifteen Thousand and No/100 Dollars ($215,000.00) non-refundable deposit (the “Deposit”). Said Deposit is non-refundable to Purchaser except due to a failure of an express condition of closing in favor of Purchaser which is set forth in Section 5.3(A) (Purchaser’s Closing Conditions). If escrow closes, the Deposit will be applied to the Purchase Price at Closing (as defined below). In the event of termination of this Agreement prior to the Closing due to a failure of an express condition of closing in favor of Purchaser which is set forth in Section 5.3(A) (Purchaser’s Closing Conditions) and provided Purchaser is not in default of this Agreement, the Deposit shall be refunded to Purchaser unless Purchaser otherwise fails to complete the Purchase of the Property in accordance with the provisions of this Agreement (a “Purchaser Default”).

(b) The balance of the Purchase Price, after any additional adjustments due to any prorations or debits and credits expressly provided for in this Agreement, will be paid by Purchaser at Closing in U.S. Dollars by wire transfer of immediately available good funds.

2.3 Closing. Payment of the balance of the Purchase Price and the closing of the purchase and sale of the Property hereunder (the “Closing”) will take place on April 26, 2013 or such earlier date as may be mutually agreed upon by Seller and Purchaser (the “Closing Date” and/or “Close of Escrow”). Either Purchaser or Seller shall have the option of extending the Closing Date for a reasonable period of time, in any such instance not exceeding an aggregate of ten (10) days for Purchaser and ten (10) days for Seller, in order to satisfy a condition to Closing. The Closing shall take place at the offices of Escrow Holder on the Closing Date.

2.4 Purchaser’s Contingency. If Purchaser is unable to obtain a satisfactory commitment for title insurance (“Title Commitment”) by 5:00 p.m. PST on April 23, 2013 (the “Contingency Period”), Purchaser may terminate this Agreement provided it notifies Seller in writing of its election to so terminate the Agreement by 5:00 p.m. PST on April 23, 2013. If Purchaser does not notify Seller, in writing, prior to 5:00 p.m. PST on April 23, 2013 of its intent to terminate this Agreement, Purchaser shall be considered to have waived its contingency, and Purchaser shall be obligated to Close Escrow pursuant to this Agreement. If Purchaser so notifies Seller of its intent to terminate this Agreement, this Agreement shall be considered null and void and Purchaser and Seller shall have no further obligation hereunder except Purchaser’s obligations under Sections 4.5 (Independent Investigation by Purchaser) and 10.8 (Brokers) and the non-refundable Deposit shall be retained by Seller as compensation for its agreement to hold said Property off the market since February 27, 2013.

2 Initial:     /S/ JA; RP; VP        

3. TITLE

Purchaser hereby acknowledges that title to the Property will be taken subject to (herein “Permitted Exceptions”) (i) any and all exceptions and other matters, whether or not of record, disclosed in that certain Preliminary Title Report, dated March 14, 2013, issued by Chicago Title Company (Amended Escrow Number 13-98208432-D) attached hereto as Exhibit B (the “Title Report”), (ii) any and all rights, matters, exceptions and qualifications, whether or not of record, that would be disclosed in a current comprehensive ALTA survey of the Property, whether or not Purchaser elects to obtain such a survey, (iii) any and all rights, matters, exceptions and qualifications, whether or not of record, that would be disclosed by a thorough inspection of the Property, or by making inquiry of persons in possession of the Property, whether or not Purchaser elects to make any such inspection or inquiry, (iv) any and all rights, matters, exceptions and qualifications which relate to or arise from any zoning, land use, building, health and safety, or other governmental law, ordinance, regulation or requirement of any type of nature now or hereafter applicable to or affecting the Property, whether or not known to Purchaser, and (v) any other right, matter, exception or qualification which is created by Purchaser or any agent, representative or contractor of Purchaser, which is otherwise consented to or approved by Purchaser prior to the Closing. Buyer shall also obtain a commitment for title insurance including all recorded documents referred to therein, issued by Escrow Holder by April 23, 2013.

4. AS-IS PURCHASE; LIMITED REPRESENTATIONS; RELEASE OF SELLER

4.1 Natural Hazards Disclosure Statements. Seller previously delivered to Purchaser on February 21, 2013, natural hazards disclosure statements for the Property, as required under California law. The natural hazards disclosure statements are based on a report or reports of a third party hired to prepare such report, which report or reports are attached to such natural hazards disclosure statement. Purchaser acknowledges that the natural hazards disclosure statements shall be based solely on the information contained in the report or reports attached thereto, and Seller shall have no liability for any inaccuracy in such reports, except to the extent that Seller has actual knowledge of the inaccuracy at the time the corresponding natural hazards disclosure statement is signed by Seller.

3 Initial:     /S/ JA; RP; VP        

4.2 “As Is” Purchase. PURCHASER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT, SELLER IS SELLING AND PURCHASER IS PURCHASING THE PROPERTY ON AN “AS IS WITH ALL FAULTS” BASIS, AND THAT, EXCEPT AS EXPRESSLY SET FORTH IN SECTION 4.3 (LIMITED REPRESENTATIONS BY SELLER), PURCHASER IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, FROM SELLER OR ITS OFFICERS, DIRECTORS, PARTNERS AND ANY TRUSTS OR TRUSTEES ASSOCIATED THEREWITH, EMPLOYEES AND CONTRACTORS AS TO ANY MATTERS CONCERNING THE PROPERTY, INCLUDING WITHOUT LIMITATION: (i) the quality, nature, adequacy and physical condition of the Property, including seismic conditions, flooding potential, drainage, soils, geology and any groundwater, (ii) the existence, quality, nature, adequacy and physical condition of utilities serving the Property, (iii) the development potential of the Property, and the Property’s use, merchantability, or fitness, suitability, size, dimensions or boundaries of the Property, or value or adequacy of the Property for any particular purpose, (iv) the existence, nature or adequacy of ingress and egress serving the Property, including, without limitation, water, sewer, electric, gas, phone and cable service; (v) the nature, adequacy and quality of drainage on the Property, including the occurrence of any flooding and the presence or adequacy of any sloughs or levees or the presence of wetlands; (vi) the condition, size or adequacy of improvements on the Property; (vii) the present or future zoning or other legal status of the Property or any other public or private restrictions on use of the Property, (viii) the compliance of the Property or its construction, development or operation with any applicable codes, laws, regulations, statutes, ordinances, covenants, conditions and restrictions of any governmental or quasi-governmental entity or of any other person or entity, including without limitation, the Americans with Disabilities Act, as amended, any federal, state or municipal law, ordinance or regulation relating to public accommodations or publicly available services, and the terms and conditions of any operating licenses, permits or approvals required for the lawful operation of the Building or any Improvements, (ix) the presence of hazardous materials on, under or about the Property or the adjoining or neighboring property, (x) any latent or patent defects in the Property, (xi) the terms and conditions of any contracts or other agreements relating to the use, occupancy or operation of the Building or any Improvements, (xii) the amount of income, if any, from the Property, any operating and capital costs associated with the Property, and/or any other financial elements or economics of the development, ownership or operation of the Property, and (xiii) the condition of title to the Property (collectively, all of the foregoing shall be hereinafter referred to as the “Property Conditions”). Purchaser represents that Purchaser, except as otherwise provided in Section 4.3 (Limited Representations by Seller), is relying solely on Purchaser’s own expertise and that of Purchaser’s consultants and advisors and is making and relying upon its own inspections of all aspects of the Property. Purchaser further acknowledges and agrees that no patent or latent physical condition (including, without limitation, any condition or contamination related to any hazardous materials or waste materials) of the Property, whether known or unknown or discovered at a later date, shall affect the Purchase Price paid for the Property hereunder, and if Purchaser waives its contingency and all conditions in Section 5.3(A) (Purchaser’s Closing Conditions) are satisfied, Purchaser shall be obligated to close escrow notwithstanding the condition of the Property. Purchaser hereby waives, releases, acquits and forever discharges Seller, Seller’s officers, directors, employees, agents, partners and any trusts or trustees associated therewith, and any other persons acting on or in behalf of Seller, and the heirs, successors and assigns of each of the foregoing, of and from any and all claims, liabilities, obligations, demands, actions, causes of action, rights, damages, costs, expenses or compensation whatsoever, direct or indirect, known or unknown, foreseen or unforeseen, that it now has, or which may arise in the future, on account of or in any way growing out of or connected with the Property Conditions. Purchaser expressly waives the benefits of California Civil Code Section 1542 (the “Section 1542 Waiver”), which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR EXPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

4 Initial:     /S/ JA; RP; VP        

The provisions of this Section shall survive the Close of Escrow.

Initial:	/S/ VP	Initial:	/S/ RP; JA
	Purchaser	Seller

4.3 Limited Representations by Seller. Notwithstanding anything to the contrary in the foregoing Section 4.2 (“As Is” Purchase), Seller hereby represents and warrants to Purchaser that:

(a) The respective Sellers are revocable trusts, validly existing and in good standing under the laws of the jurisdiction of their formation, are authorized to do business in California and have the authority and power to enter into and perform this Agreement.

(b) There is no action, litigation, condemnation or other proceeding currently pending against Seller or related to the Property that is reasonably likely to adversely affect title to, or the use or operation of, the Property or Seller’s ability to consummate the transactions contemplated hereunder.

(c) Seller holds fee title to the Property and said Property is not subject to any mortgage or deed of trust.

(d) There are no rights of first refusal or other options to purchase or lease the Property issued by Seller to third parties as of the date of this Agreement.

(e) Seller is not a “foreign person” within the meaning of Section 1445(f)(3) of the United States Internal Revenue Code of 1986, as amended (the “Code”) and Seller is exempt from any tax withholding obligations or restrictions under applicable Federal or California laws or regulations with respect to the Purchase Price.

(f) To the best of Seller’s actual knowledge, without a duty to investigate, Seller is in, and shall continue to maintain until the Closing Date, compliance with the requirements of Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) (the “Order”) and other similar requirements contained in the rules and regulations of the Office of Foreign Asset Control, Department of the Treasury (“OFAC”) and in any enabling legislation or other Executive Orders in respect thereof (the Order and such other rules, regulations, legislation, or orders are collectively called the “Orders”). For purposes of this subsection, “Person” shall mean any corporation, partnership, limited liability company, joint venture, individual, trust, real estate investment trust, banking association, federal or state savings and loan institution and any other legal entity, whether or not a party hereto. Seller: (i) is not listed on the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Orders (such lists are collectively referred to as the “Lists”); (ii) has not been arrested for money laundering or for predicate crimes to money laundering, convicted or pled nolo contendere to charges involving money laundering or predicate crimes to money laundering; (iii) has not been determined by competent authority to be subject to the prohibitions contained in the Orders; (iv) is not owned or controlled by, nor acts for or on behalf of, any Person on the Lists or any other Person who has been determined by competent authority to be subject to the prohibitions contained in the Orders; (v) shall not transfer or permit the transfer of any interest in Seller or such parties to any Person who is, or whose beneficial owners are, listed on the Lists; or (vi) shall not assign this Agreement or any interest herein, to any Person who is listed on the Lists or who is engaged in illegal activities.

5 Initial:     /S/ JA; RP; VP        

(g) To the best of Seller’s actual knowledge, during the last three (3) years prior to the Effective Date Seller has not received any code violation notices from governing agencies and has no actual knowledge of any such code violations; however Seller shall have no obligation to further investigate.

(h) To the best of Seller’s actual knowledge, except as noted in the Environmental Reports previously delivered by Seller to Purchaser on February 21, 2013 (see attached Exhibit F), no additional Hazardous Materials contamination exists on the Property; however Seller shall have no obligation to further investigate.

4.4 Release of Seller. Purchaser on behalf of itself and its successors and assigns waives its right to recover from, and forever releases and discharges, Seller, Seller’s affiliates, partners, members, trustees, shareholders, directors, officers, employees and agents of each of them, and their respective heirs, successors, personal representatives and assigns (collectively, the “Seller-Related Parties”), from any and all demands, claims, legal or administrative proceedings, losses, liabilities, damages, penalties, fines, liens, judgments, costs or expenses whatsoever (including, without limitation, attorneys’ fees and costs), whether direct or indirect, known or unknown, foreseen or unforeseen, whether arising prior to or after the Closing, including, without limitation, matters that may arise on account of or in any way be connected with the physical or environmental condition of the Property or any law or regulation applicable thereto, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 6901, et seq.), the Resources Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901, et seq.), the Clean Water Act (33 U.S.C. Section 1251, et seq.), the Safe Drinking Water Act (14 U.S.C. Section 1401, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.), the Toxic Substance Control Act (15 U.S.C. Section 2601, et seq.), the California Hazardous Waste Control Law (California Health and Safety Code Section 25100, et seq.), the Porter-Cologne Water Quality Control Act (California Water Code Section 13000, et seq.), and the Safe Drinking Water and Toxic Enforcement Act of 1986 (California Health and Safety Code Section 25249.5, et seq.).

In connection with the foregoing release, Purchaser expressly waives the benefits of Section 1542 of the California Civil Code, which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN TO HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

The provisions of this Section shall survive the Close of Escrow.

4.5 Independent Investigation by Purchaser. Purchaser and Seller entered into an Access Agreement dated February 20, 2013 attached hereto as Exhibit C. Said Access Agreement states the terms and conditions under which Purchaser has access to the Property to conduct its investigation of the Property and by reference herein is incorporated into this Section 4.5. Seller delivered to Purchaser on February 21, 2013 and on February 28, 2013 all environmental reports in the possession of Seller relating to the environmental or hazardous material conditions of the Property (the “Environmental Reports”); and said documents and any other documents delivered to Purchaser by Seller shall be referenced on Exhibit D (“Documents Delivered to Purchaser”) attached hereto. Purchaser made an informed decision based on its due diligence to purchase the Property. Notwithstanding anything to the contrary herein, Purchaser’s indemnification obligations provided in Sections 4.5 (Independent Investigation by Purchaser) and 10.8 (Brokers) shall survive the Closing or any earlier termination of this Agreement. Purchaser will have no right to terminate this Agreement, except upon a failure of an express condition of Closing in favor of Purchaser which is set forth in Section 5.3(A) (Purchaser’s Closing Conditions).

6 Initial:     /S/ JA; RP; VP        

5. CLOSING COSTS AND PRORATIONS; CLOSING CONDITIONS

5.1 Closing Costs. Purchaser will pay the following costs of closing this transaction: any recording fees; all documentary and stamp taxes levied by the respective county and/or city in connection with the conveyance of the Property to Purchaser; all costs of title insurance purchased by Purchaser at or in connection with the Closing; and all escrow charges and fees. Seller will pay all county real estate transfer taxes levied by Alameda County in connection with the conveyance of the Property to Purchaser. All other costs, if any, associated with closing this transaction shall be allocated to the parties in accordance with the custom of the County in which the Property is located; provided, however, that each party will pay the fees and expenses of any attorneys, consultants, advisors and contractors retained by such party in connection with the negotiation, documentation and/or Closing of this Agreement and the performance of any due diligence reviews, inspections, investigations or examinations of the Property.

5.2 Payment of Other Property Costs and Expenses. General non-delinquent real estate taxes and special assessments, if any, relating to the Property shall be prorated as of the Closing Date. All utility costs and other real estate-related charges applicable to the Property will also be prorated as of the Closing Date pursuant to a calculation prepared by Seller and delivered to Purchaser prior to or at Closing. Seller may update and reconcile such proration calculations within sixty (60) days following Closing upon giving written notice to Purchaser, and any adjustments as are called for by such update and reconciliation shall promptly be made by the parties. Notwithstanding the above, any real property tax and/or bond refund that occur and/or accrue for the period prior to the Closing Date shall be the property of Seller and Purchaser shall not have any interest therein.

5.3 Closing Conditions.

5.3(A) Purchaser’s Closing Conditions. Without limiting any conditions precedent set forth in other express provisions of this Agreement, each of the following shall be a condition precedent to Purchaser’s obligation to close the purchase of the Property from Seller on the Closing Date, and any failure of any such condition shall be waivable only by Purchaser. In the event that any condition of Closing set forth below is not satisfied prior to Closing, and subject to Seller’s right to extend the Closing Date as set forth in Section 2.3 (Closing), Purchaser shall have the right to terminate this Agreement by delivering written notice to Seller not later than 5:00 p.m. PST on the last business day before the Closing Date, in which event this Agreement shall terminate, and neither party shall have any further obligation or liability to the other under this Agreement, except that Purchaser’s indemnification obligations under Sections 4.5 (Independent Investigation by Purchaser) and 10.8 (Brokers) shall survive such termination. In the event that prior to Closing Purchaser discovers that any condition of Closing has not been satisfied, but Purchaser nevertheless proceeds to close escrow, Purchaser shall be deemed to have unconditionally waived such condition of Closing, and following the Closing Seller shall in no event have any liability or obligation to Purchaser with respect to such condition of Closing.

7 Initial:     /S/ JA; RP; VP        

(i) Delivery by Seller to Escrow Holder of an executed Grant Deed substantially in the form attached hereto as Exhibit E, it being agreed that Purchaser shall acquire the Property subject to all Permitted Exceptions whether or not such limitation is expressly set forth in the Grant Deed.

(ii) All representations made by Seller in Section 4.3 (Limited Representations by Seller) shall be true and correct as of the Effective Date and shall remain true and correct as of the Closing Date, and Seller shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by Seller by the Closing Date.

(iii) Delivery by Seller to Escrow Holder of a completed affidavit pursuant to Section 1445(b)(2) of the Code, a completed California Form 593-C or its equivalent, and an Owner’s Affidavit in connection with the Title Company’s issuance of the Title Policy (as defined below) and such evidence of authority as the Title Company may require to eliminate Items 22 and 23 in the Schedule B to the Title Report attached as Exhibit B.

(iv) Title to the Property shall not be subject to any matter or exception which is not a Permitted Exception; provided that the failure or refusal of the Title Company to issue a title policy to Purchaser at Closing shall not be deemed to relieve Purchaser of its obligation to close escrow and purchase the Property unless the sole reason for such failure or refusal is Seller’s failure to make the deliveries under Paragraph 5.3(A)(ii) above or the existence of a matter or exception affecting title (a “New Title Matter”) that (1) first arose after the Effective Date, and (2) was not known to Purchaser at the end of the Contingency Period, and (3) was created by or is otherwise attributable to the act of Seller, and (4) is of a nature that it would reasonably be expected to materially interfere with or impair the current use of the Property or cause a material reduction in the value of the Property; and provided that in no event shall Seller be obligated to cure or remedy any such New Title Matter, or be considered to be in default hereunder on account of any such New Title Matter, except that Seller shall be obligated to pay and remove at Closing any New Title Matter which is a monetary lien against the Property created by Seller.

(v) In the event that, prior to the Close of Escrow, any improvements on the Property (if any), or any material part thereof (if any), are destroyed or materially damaged, Purchaser shall be obligated to close escrow without any adjustment to the Purchase Price, and Seller shall assign to Purchaser Seller’s right to any net insurance proceeds that are received by Seller on account of such damage or destruction.

8 Initial:     /S/ JA; RP; VP        

(vi) In the event that prior to the Close of Escrow condemnation proceedings are commenced against the Property, Purchaser shall be permitted to either terminate this Agreement (provided such condemnation impacts a material part of the Property and/or materially interferes with Purchaser’s intended use of the Property) or proceed with the Close of Escrow without any adjustment to the Purchase Price, in which case Seller shall assign to Purchaser Seller’s right to all condemnation awards payable by reason of such condemnation (which shall be paid or assigned to Purchaser at the Close of Escrow or within five (5) days of receipt by Seller if said proceeds are received after the Close of Escrow). The provisions of this Paragraph 5.3(A)(vi) shall survive the Close of Escrow.

(vii) Seller must have executed and delivered to Escrow Holder (a) the Lease and (b) the Memorandum of Lease (Escrow Holder will release to Seller and Purchaser said Lease at the Close of Escrow and shall provide Seller with a copy of the recorded Memorandum of Lease thereafter).

5.3(B) Seller’s Closing Conditions. Without limiting any conditions precedent set forth in other express provisions of this Agreement, each of the following shall be a condition precedent to Seller’s obligation to close the sale of the Property to Purchaser on the Closing Date, and any failure of any such condition shall be waivable only by Seller. In the event that any condition of Closing set forth below is not satisfied at or prior to Closing, and subject to Purchaser’s right to extend the Closing Date as set forth in Section 2.3 (Closing), Seller shall have the right to terminate this Agreement by giving written notice to Purchaser not later than 10:00 a.m. PST on the Closing Date. If a Closing condition is not satisfied due to Purchaser’s default under this Agreement, upon such termination neither party shall have any further obligation or liability to the other under this Agreement or the Lease, except that Purchaser’s indemnification obligations under Sections 4.5 (Independent Investigation by Purchaser) and 10.8 (Brokers) shall survive such termination and Seller shall have the right to enforce such indemnification obligations against Purchaser, and Seller’s indemnification obligations under Section 10.8 (Brokers) also shall survive such termination.

(i) Purchase shall have paid the non-refundable Deposit directly to Seller as provided in Section 2.2(a) (Escrow and Payment).

(ii) Purchaser shall have deposited with the Escrow Holder the balance of the Purchase Price payable at Closing as provided in Section 2.2 (Escrow and Payment).

(iii) Purchaser shall have delivered to Seller evidence reasonably satisfactory to Seller that Purchaser is in compliance with the requirements of the Orders and other similar requirements contained in the rules and regulations of OFAC and in any enabling legislation or other Executive Orders in respect thereof.

(iv) Purchaser must have executed, acknowledged and delivered to Escrow Holder (a) the Lease and (b) the Memorandum of Lease (Escrow Holder will release to Seller and Purchaser said Lease at the Close of Escrow).

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(v) Purchaser shall have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by Purchaser prior to the Closing Date.

6. NOTICES

Any notice required or permitted to be given hereunder shall be deemed to be given when hand delivered to the respective party by Federal Express, UPS or similar overnight express service, in either case addressed to the parties at their respective addresses referenced below:

If to Seller:	Peery/Arrillaga 2450 Watson Court Palo Alto, CA 94303 Attention: Richard T. Peery Telephone: (650) 618-7000 Facsimile: (650) 618-7800
with a copy to:	Peery/Arrillaga 2450 Watson Court Palo Alto, CA 94303 Attention: Jeannette Schirtzinger Telephone: (650) 618-7000 Facsimile: (650) 618-7044
If to Purchaser:	Electronics for Imaging, Inc. 303 Velocity Way Foster City, CA 94404 Attention: Guy Gecht Telephone: (650) 357-3608 Facsimile: (650) 357-3765

Either party may from time to time change the aforesaid address for notices by giving notice in writing to the other party in the manner provided above.

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7. POSSESSION. Purchaser shall be entitled to possession of the Property upon conclusion of the Closing. Purchaser acknowledges and agrees that Purchaser will be solely responsible for obtaining and maintaining any and all insurance coverage for the Property and any business or other operations thereon from and after the time of Closing including the immediate transfer of all utility accounts, and Seller shall have no responsibility to maintain any insurance coverage for the Property or any business or other operations thereon at any time following the time of Closing.

8. DEFAULT

8.1 Purchaser Default. If the sale of the Property contemplated by this Agreement is not consummated due to a default on the part of Purchaser, which shall be deemed to include, without limitation, any failure of a condition of Closing in favor of Seller set forth in Section 5.3(B) (Seller’s Closing Conditions), Seller shall have the right to terminate this Agreement. Thereafter, neither party shall have any further rights or obligations hereunder, provided, however, that Purchaser’s indemnification obligations provided in Sections 4.5 (Independent Investigation by Purchaser) and 10.8 (Brokers) below shall survive the Closing or any earlier termination of this Agreement and shall be enforceable against Purchaser.

8.2 Seller Default. If the sale of the Property contemplated by this Agreement is not consummated due to a default on the part of Seller, Purchaser shall have the right to elect, as its sole remedy under this Agreement to terminate this Agreement. In no event, however, shall Purchaser be entitled to recover damages of any type or nature from Seller. Following such termination, both parties shall thereafter be relieved of and released from any further liability hereunder, provided, however, that Purchaser’s indemnification obligations provided in Sections 4.5 (Independent Investigation by Purchaser) and 10.8 (Brokers) below shall survive any such termination of this Agreement.

9. CONDITIONS TO INDEMNIFICATION

Whenever a party (the “Indemnifying Party”) is required under this Agreement to defend, indemnify and hold harmless the other party (the “Indemnified Party”), the following shall apply: (a) the Indemnified Party must give the Indemnifying Party prompt written notice of the claim(s) as to which indemnification is requested; (b) the Indemnified Party must reasonably cooperate with the Indemnifying Party in connection with the defense or settlement of any such claim(s); and (c) the Indemnified Party shall be entitled to control the defense or settlement of any claim(s) as to which it is providing indemnification.

10. MISCELLANEOUS

10.1 Entire Agreement; Amendments. This Agreement, together with Exhibits A, B, C, D, E and F attached hereto, all of which are incorporated by reference, is the entire agreement between the parties with respect to the subject matter hereof, and no oral representations or agreements allegedly made by or on behalf of any party prior to the Effective Date which are not expressly set forth in this Agreement shall be deemed to apply to this Agreement or any interpretation thereof. No alteration, amendment, modification or interpretation hereof shall be binding unless in writing and signed by both parties.

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10.2 Severability. If any provision of this Agreement or the application of such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement or the application of such provision to such person or circumstances, other than those as to which it is so determined invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be valid and shall be enforced to the fullest extent permitted by law.

10.3 Applicable Law. This Agreement shall be construed and enforced in accordance with the laws of the State of California without giving effect to any principles of conflicts of laws that might otherwise cause the application of the laws of any other jurisdiction.

10.4 Assignment. Purchaser may not assign, either voluntarily or by operation of law, all or any portion of this Agreement, any rights or obligations or Purchaser under this Agreement, or any interest of Purchaser under this Agreement, without the express written consent of Seller, which consent shall not be unreasonably withheld provided the original Purchaser and assignee under this Agreement remain liable for all the terms and conditions of this Agreement that occur and/or accrue through the Close of Escrow and thereafter. For purposes of this Section 10.4, any direct or indirect transfer or encumbrance of any ownership interest in Purchaser at any ownership tier (except to the extent that any such ownership interest is publicly held and traded on an established stock exchange), whether voluntary or by operation of law, and any change in control of Purchaser, whether voluntary or by operation of law, shall each be deemed to constitute an assignment by Purchaser. A “change in control” shall be deemed to include any such direct or indirect transfer or encumbrance of any ownership interest in Purchaser referred to in the immediately preceding sentence, as well as the entering into by Purchaser or by the holder of any such ownership interest in Purchaser of any contractual agreement or understanding whereby any person or entity which is not a holder of an ownership interest in Purchaser (at an ownership tier) on the day immediately preceding the Effective Date obtains any legal or functional right to direct the business or financial operations, or business or financial policies or practices, of Purchaser.

10.5 Successors Bound. Subject to the provisions of Section 10.4 (Assignment), this Agreement shall be binding upon and inure to the benefit of Purchaser and Seller and their respective successors and assigns.

10.6 Captions. The captions and headings in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit or describe the scope of this Agreement or the scope or content of any of its provisions.

10.7 Attorneys’ Fees. If either party hereto fails to perform any of its obligations under this Agreement or if any dispute arises between the parties hereto concerning the meaning or interpretation of any provision of this Agreement, then the defaulting party or the party not prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred by the other party on account of such default and/or in enforcing or establishing its rights hereunder, including, without limitation, court costs and reasonable attorneys’ fees and disbursements. Any such attorneys’ fees and other expenses incurred by either party in enforcing a judgment in its favor under this Agreement shall be recoverable separately from and in addition to any other amount included in such judgment, and such attorneys’ fees obligation is intended to be severable from the other provisions of this Agreement and to survive and not be merged into any such judgment.

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10.8 Brokers. Each party represents and warrants to the other that no broker or finder was instrumental in arranging or bringing about this transaction, and that there are no claims or rights for brokerage commissions or finder’s fees in connection with the transactions contemplated by this Agreement, with the exception of Gregg Walker with Jones Lang LaSalle (“Broker”). In the event this transaction does not close for any reason whatsoever, neither Gregg Walker and/or Jones Lang LaSalle nor any of their respective brokers or agents shall have a claim, of any type whatsoever, against either Purchaser or Seller. In the event any broker or finder makes a claim for any commission, fee or other compensation in connection with this Agreement or the purchase and sale of the Property contemplated herein, the party whose act or omission is alleged to have provided the basis for such commission, fee or other compensation shall defend, indemnify and hold harmless the other party from and against any such commission, fee and other compensation, and any and all claims, liabilities, losses, damages, and costs and expenses (including without limitation reasonable attorneys’ fees and disbursements) incurred in connection with or on account of any such claim.

10.9 Time of Essence. Time is of the essence in this Agreement.

10.10 Submission of Offer. In the event this Agreement is executed only by Seller, this Agreement shall be regarded only as an offer to sell, and shall not obligate either Purchaser or Seller until this offer is accepted by execution hereof by the Purchaser, without any change or modification to the provisions of this Agreement as submitted by Seller. If Purchaser has not accepted this offer and delivered an executed copy of this Agreement to Escrow Holder by 5:00 p.m. PST on April 24, 2013, this offer shall be of no further force or effect and Seller shall have no liability or obligation whatsoever to Purchaser arising out of or by reason of this Agreement.

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IN WITNESS WHEREOF, Purchaser and Seller have executed this Agreement on the date set forth below, effective as of the date set forth above.

SELLER:	JOHN ARRILLAGA SURVIVOR’S TRUST
	By:	/S/ John Arrillaga
		John Arrillaga, Trustee
	Date:	4/19/13
	RICHARD T. PEERY SEPARATE PROPERTY TRUST
	By:	/S/ Richard Peery
		Richard T. Peery, Trustee
	Date:	4/19/13
PURCHASER:	ELECTRONICS FOR IMAGING, INC., a Delaware corporation
	By:	/S/ Vincent Pilette
		Vincent Pilette, Chief Financial Officer
	Date:	4/19/13

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EX-10.2

Exhibit 10.2

LEASE AGREEMENT

Ardenwood IV-8

INDEX

PARAGRAPH NUMBER & TITLE			PAGE NUMBER
1.	USE			2
2.	TERM			2
	A.	Scheduled Lease Term		2
	B.	Tender of Possession		2
	C.	Early Entry		3
3.	POSSESSION			3
4.	RENT			4
	A.	Basic Rent		4
	B.	Time for Payment		6
	C.	Late Charge		6
	D.	Additional Rent		6
	E.	Management Fee		8
	F.	Place of Payment of Rent		8
	G.	Security Deposit		9
5.	ACCEPTANCE AND SURRENDER OF PREMISES			10
6.	“AS-IS” BASIS			11
	A.	Leased on “As-Is” Basis		11
	B.	Interior Improvements to be Constructed by Landlord		11
7.	ALTERATIONS AND ADDITIONS			11
8.	RULES AND REGULATIONS AND COMMON AREA			12
9.	PARKING			13
10.	TENANT MAINTENANCE			13
11.	EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF THE PARCEL AND BUILDING IN WHICH THE PREMISES ARE LOCATED			14
	A.	Maintenance of the Common Areas of the Parcel		14
	B.	Maintenance of the Common Areas of the Building		14
	C.	Structural Maintenance		15
	D.	Exclusions From Additional Rent		15
12.	UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED			16

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Ardenwood IV-8

13.	TAXES		18
	A.	Real Property Taxes	18
	B.	Taxes on Tenant’s Property	18
14.	ASSESSMENT CREDITS		19
15.	LIABILITY INSURANCE		19
16.	TENANT’S PERSONAL PROPERTY INSURANCE AND WORKMAN’S COMPENSATION INSURANCE		19
17.	PROPERTY INSURANCE		19
18.	INDEMNIFICATION		20
19.	COMPLIANCE		21
20.	LIENS		21
21.	ASSIGNMENT AND SUBLETTING		22
	A.	Requirements	22
	B.	Grounds to Refuse Proposed Transfer	23
	C.	Voluntary Termination of Lease – Required Sublease Language	23
	D.	State of Incorporation Change; Name Change	24
	E.	Permitted Transfers	24
22.	SUBORDINATION AND MORTGAGES		25
23.	ENTRY BY LANDLORD		25
24.	BANKRUPTCY AND DEFAULT		25
25.	ABANDONMENT		27
26.	DESTRUCTION		28
27.	EMINENT DOMAIN		29
28.	SALE OR CONVEYANCE BY LANDLORD		29
29.	ATTORNMENT TO LENDER OR THIRD PARTY		30
30.	HOLDING OVER		30
31.	CERTIFICATE OF ESTOPPEL		30
32.	CONSTRUCTION CHANGES		30
33.	RIGHT OF LANDLORD TO PERFORM		31
34.	ATTORNEYS’ FEES		31
35.	WAIVER		31
36.	NOTICES		31
37.	EXAMINATION OF LEASE		32

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Ardenwood IV-8

38.	DEFAULT BY LANDLORD		32
39.	CORPORATE AUTHORITY		33
40.	LIMITATION OF LIABILITY		33
41.	SIGNS		34
42.	CONSENT		34
43.	AUTHORITY TO EXECUTE		34
44.	HAZARDOUS MATERIALS		35
45.	BROKERS		37
46.	ASSOCIATION DUES		38
47.	OPTION TO EXTEND LEASE FOR FIVE (5) OR TEN (10) YEARS		38
	A.	Notice; Deadline	38
	B.	Notice and Acceptance of Terms	38
	C.	Personal Nature of Option to Extend	39
	D.	Loss of Option to Extend Right	39
48.	RIGHT OF FIRST REFUSAL TO LEASE		40
49.	RIGHT OF FIRST REFUSAL TO PURCHASE THE LEASED PROPERTY		41
	A.	Notice and Acceptance of Terms	41
	B.	Personal Nature of Right of First Refusal to Purchase	41
	C.	Loss of Right of First Refusal to Purchase	41
50.	PERSONAL PROPERTY OF LANDLORD		41
51.	WALK WAY		42
52.	ROOF TOP USE.		42
53.	FIBER-OPTIC CABLE		43
54.	MISCELLANEOUS AND GENERAL PROVISIONS		44
	A.	Use of Building Name	44
	B.	Premises Address	44
	C.	Choice of Law/Venue; Severability	44
	D.	Definition of Terms	44
	E.	Time Of Essence	44
	F.	Quitclaim	44
	G.	Incorporation of Prior Agreements; Amendments	45
	H.	Conditions to Indemnification	45
	I.	Recording	45
	J.	Amendments for Financing	45
	K.	Clauses, Plats and Riders	45
	L.	Diminution of Light, Air or View	45

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INDEX

PARAGRAPH NUMBER & TITLE			PAGE NUMBER
1.	DEFINITIONS			47
	A.	Cold Shell Improvements		47
	B.	Landlord Interior Improvements		48
	C.	Improvements		48
	D.	Performance Schedule		48
	E.	Architect		48
	F.	Prime Contractor(s)		48
	G.	Substantial Completion		48
	H.	Commencement Date		49
2.	PERFORMANCE SCHEDULE			49
3.	DEVELOPMENT AND PROCESSING OF PLANS FOR THE LANDLORD INTERIOR IMPROVEMENTS AND PERMITS			50
	A.	Development of Landlord Interior Plans		50
	B.	Building Permit		50
	C.	Commencement of Landlord Interior Improvements		50
4.	CONSTRUCTION OF IMPROVEMENTS			51
	A.	Construction of Cold Shell Improvements by Landlord.		51
	B.	Licensed Contractor Requirement		51
	C.	Construction of Landlord Interior Improvements by Landlord		51
	D.	Landlord Interior Improvements Part of the Premises		51
	E.	Liens and Claims		51
	F.	Inspection Following Completion of the Landlord Interior Improvements		52
5.	PAYMENT OF CONSTRUCTION COSTS			52
	A.	Cold Shell Improvements		52
	B.	Landlord Interior Improvement Costs		52
	C.	Exclusions From Interior Improvement Costs Payable by Tenant		52
6.	CHANGES, MODIFICATIONS, OR ADDITIONS TO THE PLANS, SPECIFICATIONS AND/OR PREMISES			53
7.	TENANT DELAYS			53
8.	AUTHORITY TO EXECUTE			54
9.	CHOICE OF LAW/VENUE; SEVERABILITY			54

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LEASE AGREEMENT

THIS “LEASE”, made this 19th day of April, 2013, between JOHN ARRILLAGA, Trustee, or his Successor Trustee, UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR’S TRUST) as amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended, hereinafter called Landlord, and ELECTRONICS FOR IMAGING, INC., a Delaware corporation, hereinafter called Tenant.

WITNESSETH:

For valuable consideration, the receipt and sufficiency of which are conclusively acknowledged, Landlord hereby leases to Tenant and Tenant hereby hires and takes from Landlord those certain premises (the “Premises”) outlined in Red on Exhibit A, attached hereto and incorporated herein by this reference thereto more particularly described as follows:

A portion of that certain 108,166+ square foot, two-story building (“Building”) located at 6700 Dumbarton Circle, Fremont, California 94555, consisting of approximately 58,560+ square feet of space (with 55,737+ square feet on the second floor of the Building and 2,823+ square feet on the first floor of the Building including Tenant’s Proportionate Share of the Common Area of the Building) and the Personal Property of Landlord pursuant to Paragraph 50 (Personal Property of Landlord). Tenant’s leased portion of the Building is more particularly shown within the area outlined in Red on Exhibit A attached hereto. The entire parcel, of which the Premises is a part, is shown within the area outlined in Green on Exhibit A attached hereto (“Parcel”). The Premises shall be improved by Landlord pursuant to the Construction Agreement of even date herewith, a copy of which is attached hereto as Exhibit D (the “Construction Agreement”), and subject thereto and to the provisions of this Lease (including Paragraph 6 (As-Is Basis)), is leased on an “as-is” basis, and in the configuration as shown in Red on Exhibit B-1 attached hereto; Exhibit B-1 which reflects the current shell plan shall be replaced with Exhibit B, which will reflect the interior configuration and shall be attached hereto as Exhibit B once said Exhibit B is completed and approved by Tenant and Landlord in accordance with the terms of the Construction Agreement.

The word “Premises” as used throughout this Lease is hereby defined to include the leased portion of the Building as referenced above, the nonexclusive use of parking, landscaped areas, sidewalks and driveways in front of or adjacent to the Premises, and the nonexclusive use of the area directly over such sidewalks and driveways and the common ingress and egress areas reflected in Yellow on Exhibit A that service the Premises and the adjacent property known as 6750 Dumbarton Circle, Fremont, CA. The gross leasable area of the Building has been measured by Landlord from outside of exterior walls to outside of exterior walls, and shall include any atriums, covered entrances or egresses and covered Building loading areas, and Landlord agrees to be bound by the area measurements of the Building and the Premises as set forth above.

Said letting and hiring is upon and subject to the terms, covenants and conditions hereinafter set forth and each of Landlord and Tenant covenants as a material part of the consideration for this Lease to perform and observe each and all of said terms, covenants and conditions. This Lease is made upon the conditions of such performance and observance.

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1. USE. Tenant shall use the Premises only in conformance with applicable governmental laws, regulations, rules and ordinances for the purpose of general office, research and development and storage uses necessary for Tenant to conduct Tenant’s business, provided that such approved uses shall be in accordance with all current and future applicable governmental laws and ordinances and zoning restrictions, and for no other purpose. Notwithstanding anything to the contrary herein, in no event shall any or all of the Premises be allowed, authorized and/or used for daycare and/or any other child care purpose and] Tenant shall not do or permit to be done in or about the Premises nor bring or keep or permit to be brought or kept in or about the Premises anything which is prohibited by or will in any way increase the existing rate of (or otherwise affect) fire or any insurance covering the Premises or any part thereof, or any of its contents, or will cause a cancellation of any insurance covering the Premises or any part thereof, or any of its contents. Tenant shall not do or permit to be done anything in, on or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. No sale by auction shall be permitted on the Premises. Tenant shall not place any loads upon the floors, walls, or ceiling which endanger the structure, or place any harmful fluids or other materials in the drainage system of the Building, or overload electrical or other mechanical systems. No waste materials or refuse shall be dumped upon or permitted to remain upon any part of the Premises or outside of the Building in which the Premises are a part, except in trash containers placed inside exterior enclosures designated by Landlord for that purpose. No materials, supplies, equipment, finished products or semi-finished products, raw materials or articles of any nature shall be stored upon or permitted to remain outside the Premises. Tenant shall not place anything or allow anything to be placed near the glass of any window, door partition or wall which may appear unsightly from outside the Premises. No loudspeaker or other device, system or apparatus which can be heard outside the Premises shall be used in or at the Premises without the prior written consent of Landlord. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. Tenant shall indemnify, defend and hold Landlord harmless against any loss, expense, damage, reasonable attorneys’ fees, or liability arising out of failure of Tenant to comply with any applicable law for which Tenant is obligated to comply under the terms of this Lease. Tenant shall comply with any covenant, condition, or restriction (“CC&R’s”) affecting the Premises. Landlord has provided a copy of said CC&R’s to Tenant. In the event the CC&R’s are subsequently amended, (i) said CC&R’s shall be applicable to all tenants within the Building and (ii) said CC&R’s shall not reduce Tenant’s rights or increase said rights, in a material respect, Landlord shall provide a copy of the amended CC&R’s to Tenant. The provisions of this Paragraph are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Building.

2. TERM.

A. Scheduled Lease Term. Subject to Paragraph 47 (Option to Extend Lease for Five (5) or Ten (10) Years), the “Term” of this Lease shall be for a period of fifteen (15) years (unless sooner terminated or extended as hereinafter provided) and, subject to Paragraphs 2.B and C and 3, shall commence on the 1st day of September, 2013 (the “Commencement Date”) and end on the 31st day of August, 2028 (the “Termination Date”).

B. Tender of Possession. Notwithstanding the scheduled Commencement Date in Paragraph 2.A, the actual Commencement Date shall occur, and possession of the Premises shall be tendered by Landlord to Tenant when the first of the following occurs:

(a) When the Landlord Interior Improvements have been Substantially Completed (as defined in the Construction Agreement) and Landlord has delivered the Premises to Tenant, in accordance and compliance with Paragraph 6.B (As Is: Interior Improvements to be Constructed by Landlord) and Paragraph 1.B (Landlord Interior Improvements) of the Construction Agreement; or

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(b) Upon the occupancy of the Premises by any of Tenant’s operating personnel for the conduct of any of its business; or

(c) As otherwise agreed in the Lease and/or in writing.

C. Early Entry: Upon receipt of written notice from Landlord (by U.S. Mail, facsimile or electronic mail) that the Premises is available for Tenant’s entry, Tenant and its agents and contractors shall be permitted to enter the Premises prior to the Commencement Date for the purpose of constructing its improvements, if any, in the Premises and/or installing at Tenant’s sole cost and expense, Tenant’s trade fixtures and equipment, telephone equipment, security systems and cabling for computers (“Early Entry Date”). If applicable, Landlord shall notify Tenant of the Early Entry Date not less than ten (10) days prior to the date Landlord anticipates achieving Substantial Completion of the Landlord Interior Improvements. Such entry shall be subject to all of the terms and conditions of this Lease, except that Tenant shall not be required to pay any Rent on account thereof, provided none of Tenant’s operating personnel occupy said Premises; except as necessary to prepare the Premises for the conduct of Tenant’s business therein. Any entry or installation work by Tenant and its agents in the Premises pursuant to this Paragraph 2.C shall (i) be undertaken at Tenant’s sole risk, (ii) not interfere with or delay Landlord’s Interior Improvements, and (iii) not be deemed occupancy or possession of the Premises for purposes of the Lease. Tenant shall indemnify, defend, and hold Landlord harmless from any and all loss, damage, liability, expense (including reasonable attorney’s fees), claim or demand of whatsoever character, direct or consequential, including, but without limiting thereby the generality of the foregoing, injury to or death of persons and damage to or loss of property arising out of the exercise by Tenant of any early entry right granted hereunder. In the event Tenant’s work in said Premises delays the completion of Landlord’s Interior Improvements, Landlord’s Interior Improvements, then for purposes of Paragraph 2.B(a) above, the Landlord’s Interior Improvements shall be deemed to have been Substantially Completed on the date such Substantial Completion would have occurred but for the actual delay caused by Tenant. It is the intent of the parties hereto that the Commencement of the Lease and Tenant’s obligation to pay Rent under the Lease not be delayed by any of such causes or by any other act of Tenant and, in the event it is so delayed, the Lease and Tenant’s obligation to pay Rent under the Lease shall commence as of the date it would otherwise have commenced regardless of the construction status of said interior improvements completed or to be completed by Tenant or Landlord as the case may be.

It is agreed in the event the Commencement Date is a date other than the first day of the month the Term of the Lease will be extended to account for the number of days in the partial month. The Basic Rent during the resulting partial month will be prorated (for the number of days in the partial month) at the Basic Rent rate scheduled for the scheduled Commencement Date as shown in Paragraph 4.A, and such prorated Basic Rent shall be due on the first day following the end of the Basic Rent Abatement Period.

3. POSSESSION. Subject to Paragraph 2.C (Term: Early Entry) above and the terms and conditions stated herein, if Landlord, for any reason whatsoever, cannot deliver possession of said Premises to Tenant at the scheduled Commencement Date, this Lease shall not be void or voidable; no obligation of Tenant shall be affected thereby; nor shall Landlord or Landlord’s agents be liable to Tenant for any loss or damage resulting therefrom; but in that event the commencement and termination dates of the Lease, and all other dates affected thereby shall be revised to conform to the date of Landlord’s delivery of possession, as specified in Paragraph 2.B above. The above is, however, subject to the provision that the period of delay of delivery of the Premises shall not exceed ninety (90) days from the latter of (i) the scheduled Commencement Date or (ii) the date this Lease is executed by all parties hereto (except for those delays caused by Tenant, Acts of God, strikes, war, utilities, governmental bodies, weather, unavailable materials, and delays beyond Landlord’s control (“Force Majeure Delays”) shall be excluded in calculating such period) in which instance Tenant, at its option, may, by written notice to Landlord, terminate this Lease; provided Tenant submits said notice to Landlord prior to the expiration of said ninety (90) day period as may be extended by Force Majeure Delays.

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4. RENT.

A. Basic Rent. Subject to the potential increase and/or decrease of the Aggregate Rent as provided for in the Lease, Tenant agrees to pay to Landlord at such place as Landlord may designate without deduction, offset, prior notice, or demand, and Landlord agrees to accept as Basic Rent for the Premises the total sum of EIGHTEEN MILLION FIVE HUNDRED TWENTY-SIX THOUSAND TWO HUNDRED FORTY-FIVE AND 48/100 DOLLARS ($18,526,245.48) (the “Aggregate Basic Rent”) in lawful money of the United States of America, payable as follows:

Basic Rent Abatement. From the scheduled Commencement Date through August 31, 2016 (the “Basic Rent Abatement Period”), the monthly Basic Rent of (i) $99,552.00 ($1.70 per square foot) for the period September 1, 2013 through August 31, 2014, (ii) $102,538.56 ($1.751 per square foot)for the period September 1, 2014 through August 31, 2015 and (iii) $105,614.72 ($1.804 per square foot) for the period September 1, 2015 through August 31, 2016 shall be abated and no Basic Rent will be due (the “Basic Rent Abatement”) during the Basic Rent Abatement Period; however, Tenant will be responsible for all Additional Rent expenses as outlined in Paragraph 4.D and the fixed monthly Management Fee as outlined in Paragraph 4.E from the Commencement Date of the Lease. The Basic Rent Abatement is conditioned upon Tenant not committing default in the payment of Basic Rent due Landlord throughout the initial Term of the Lease. If Tenant commits an act of monetary default in the payment of the Basic Rent at any time during the initial Term and fails to cure said monetary default within the Special Default Period (as defined below), then (i) Tenant shall immediately pay to Landlord, upon demand, a sum equal to the total amount of Basic Rent Abatement which has been used by Tenant as of the date of the occurrence of such event of monetary default, and (ii) all of the Basic Rent Abatement which has not been used by Tenant as of the date of the occurrence of such event of monetary default shall thereby automatically terminate and become null and void, and Tenant shall thereafter pay all Basic Rent when due under this Lease, without regard to the Basic Rent Abatement provisions of this Lease. For example, if Tenant fails to cure a monetary default under the Lease on September 1, 2016, Tenant shall pay to Landlord, upon demand, the Basic Rent Abatement for the period of September 1, 2013 through August 31, 2016 in the amount of $3,692,463.36 ((i) $1,194,624.00 for the period September 1, 2013 through August 31, 2014 (12 months x $99,552.00), (ii) $1,230,462.72 for the period September 1, 2014 through August 31, 2015 (12 months x $102,538.56) and (iii) $1,267,376.64 for the period September 1, 2015 through August 31, 2016 (12 months x $105,614.72)). As used in this Lease, the “Special Default Period” shall begin on the date Landlord delivers to Tenant written notice of delinquency in the payment of Basic Rent, which notice must include in capital letters with bold face type the following: “THIS NOTICE INVOKES A SPECIAL DEFAULT PERIOD AND WILL RESULT IN TENANT’S FORFEITURE OF THE BASIC RENT ABATEMENT IF THE BASIC RENT SPECIFIED HEREIN AS DELINQUENT IS NOT PAID WITHIN THE SPECIAL DEFAULT PERIOD;” and such Special Default Period shall end five (5) business days after a copy of such notice has been delivered to Tenant’s Chief Executive Officer by the delivery method provided in Paragraph 36 (Notices).

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Basic Rent Schedule.

On September 1, 2016, the sum of ONE HUNDRED EIGHT THOUSAND SEVEN HUNDRED EIGHTY-THREE AND 16/100 DOLLARS ($108,783.16) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2017.

On September 1, 2017, the sum of ONE HUNDRED TWELVE THOUSAND FORTY-SIX AND 65/100 DOLLARS ($112,046.65) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2018.

On September 1, 2018, the sum of ONE HUNDRED FIFTEEN THOUSAND FOUR HUNDRED EIGHT AND 05/100 DOLLARS ($115,408.05) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2019.

On September 1, 2019, the sum of ONE HUNDRED EIGHTEEN THOUSAND EIGHT HUNDRED SEVENTY AND 29/100 DOLLARS ($118,870.29) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2020.

On September 1, 2020, the sum of ONE HUNDRED TWENTY-TWO THOUSAND FOUR HUNDRED THIRTY-SIX AND 40/100 DOLLARS ($122,436.40) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2021.

On September 1, 2021, the sum of ONE HUNDRED TWENTY-SIX THOUSAND ONE HUNDRED NINE AND 50/100 DOLLARS ($126,109.50) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2022.

On September 1, 2022, the sum of ONE HUNDRED TWENTY-NINE THOUSAND EIGHT HUNDRED NINETY-TWO AND 78/100 DOLLARS ($129,892.78) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2023.

On September 1, 2023, the sum of ONE HUNDRED THIRTY-THREE THOUSAND SEVEN HUNDRED EIGHTY-NINE AND 56/100 DOLLARS ($133,789.56) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2024.

On September 1, 2024, the sum of ONE HUNDRED THIRTY-SEVEN THOUSAND EIGHT HUNDRED THREE AND 25/100 DOLLARS ($137,803.25) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2025.

On September 1, 2025, the sum of ONE HUNDRED FORTY-ONE THOUSAND NINE HUNDRED THIRTY-SEVEN AND 35/100 DOLLARS ($141,937.35) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2026.

On September 1, 2026, the sum of ONE HUNDRED FORTY-SIX THOUSAND ONE HUNDRED NINETY-FIVE AND 47/100 DOLLARS ($146,195.47) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2027.

On September 1, 2027, the sum of ONE HUNDRED FIFTY THOUSAND FIVE HUNDRED EIGHTY-ONE AND 33/100 DOLLARS ($150,581.33) shall be due, and a like sum due on the first day of each month thereafter, through and including August 1, 2028; or until the entire aggregate sum of EIGHTEEN MILLION FIVE HUNDRED TWENTY-SIX THOUSAND TWO HUNDRED FORTY-FIVE AND 48/100 DOLLARS ($18,526,245.48) has been paid (as said Aggregate Basic Rent may be increased or decreased by the terms of this Lease).

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Subject to the terms of the Lease, in the event the Lease does not commence on the scheduled Lease Commencement Date, the Basic Rent and Basic Rent Abatement schedules above shall be modified to reflect the actual Commencement Date and the revised Termination Date but in no event will the Lease be for an initial term of less than fifteen (15) years. Furthermore, the Aggregate Basic Rent specified above may be increased or decreased pursuant to provisions elsewhere in this Lease and in no case shall references to the Aggregate Basic Rent be construed to alter or otherwise affect such increase or decrease in the Basic Rent to be paid under this Lease.

B. Time for Payment. Full monthly Rent is due in advance on the first day of each calendar month. In the event that the Term of this Lease commences on a date other than the first day of a calendar month, on the date of commencement of the Term hereof Tenant shall pay to Landlord as Rent for the period from such date of commencement to the first day of the next succeeding calendar month that proportion of the monthly Rent hereunder for the number of days between such date of commencement and the first day of the next succeeding calendar month. In the event that the Term of this Lease for any reason ends on a date other than the last day of a calendar month, on the first day of the last calendar month of the Term hereof Tenant shall pay to Landlord as Rent for the period from said first day of said last calendar month to and including the last day of the Term hereof that proportion of the monthly Rent hereunder for the number of days between said first day of said last calendar month and the last day of the Term hereof.

C. Late Charge. Notwithstanding any other provision of this Lease, if Landlord (or Landlord’s agent if Landlord has instructed Tenant to make any payment of Rent and/or other amounts due under the Lease directly to Landlord’s agent) does not receive payment of Rent as set forth in this Paragraph 4 and/or other amounts due under the Lease within ten (10) days of the due date, or any part thereof, Tenant agrees to pay Landlord, in addition to the delinquent Rent and/or other amounts that may be due, a late charge for each Rent and/or other payment not received by Landlord (or Landlord’s agent if Landlord has instructed Tenant to make any payment of Rent and/or other amounts due under the Lease directly to Landlord’s agent) within ten (10) days of the due date (“Grace Period”). Said late charge shall equal ten percent (10%) of each payment not received by Landlord prior to the expiration of the Grace Period (“Late Charge”). Said Late Charge shall be paid by Tenant within thirty (30) days after presentation of an invoice from Landlord or Landlord’s agent setting forth the amount of said Late Charge. Landlord’s failure to issue a Late Charge invoice in the month of any late payment shall not be considered a waiver of Landlord’s right to collect said Late Charge unless Landlord fails to issues a Late Charge invoice within twelve (12) months after the due date of the delinquent payment. However, no Late Charge shall apply to the first late payment of Rent within any twelve (12) month period of the Term unless Landlord gives Tenant written notice of the delinquency and Tenant fails to pay the delinquent amount within three (3) business days after such notice.

D. Additional Rent. Beginning with the Commencement Date of the Term of this Lease, Tenant shall pay to Landlord or to Landlord’s designated agent in addition to the Basic Rent and as Additional Rent the following:

(a) All Taxes relating to the Premises as set forth in Paragraph 13, and

(b) All insurance premiums for the respective insurance year and deductibles relating to the Premises, as set forth in Paragraph 17, and

(c) Tenant’s Proportionate Share of all prorated costs and expenses related to the Ardenwood Property Owners’ Association as set forth in Paragraph 46 (Association Dues), and

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(d) All charges, costs and expenses, which Tenant is required to pay hereunder, together with all interest and penalties, costs and expenses including reasonable attorneys’ fees and legal expenses, that may accrue thereto in the event of Tenant’s failure to pay such amounts, and all damages, reasonable costs and expenses which Landlord may incur by reason of default of Tenant or failure on Tenant’s part to comply with the terms of this Lease. In the event of nonpayment by Tenant of Additional Rent, Landlord shall have all the rights and remedies with respect thereto as Landlord has for nonpayment of Rent.

References to “Proportionate Share” herein and throughout the Lease shall mean the Proportionate Share allocated to the Premises based on (a) the total square footage of Tenant’s Premises as a percentage of the total square footage of the Building (58,560+ square foot Premises divided by 108,166+ square foot Building equals 54.14%) or (b) if Proportionate Share allocation is inequitable, then such other equitable basis as reasonably calculated by Landlord. Landlord shall include on those invoices to Tenant with allocations of any amounts under clause (b) of the preceding sentence a reasonably detailed explanation as to why such adjustment is needed to achieve an equitable allocation of costs.

The Additional Rent due hereunder shall be paid to Landlord or Landlord’s agent (i) within ten (10) days for taxes and insurance and within thirty (30) days for all other Additional Rent items after presentation of invoice from Landlord or Landlord’s agent setting forth such Additional Rent. At the option of Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant’s Proportionate Share of an amount reasonably estimated by Landlord to be Landlord’s approximate average monthly expenditure for such Additional Rent items, which estimated amount shall be reconciled (i) within one hundred twenty (120) days of the end of each calendar year and (ii) within 120 days of the Termination Date (or as soon thereafter as reasonably possible if, for reasons beyond Landlord’s control, the Landlord cannot complete the reconciliation within said 120 day periods) or more frequently if Landlord elects to do so at Landlord’s sole and absolute discretion as compared to Landlord’s actual expenditure for said Additional Rent items. Notwithstanding anything to the contrary herein, Landlord shall not be required to submit ongoing monthly statements to Tenant reflecting amounts owed as Additional Rent. In the event of any underpayment by Tenant of Additional Rent items, Tenant shall pay to Landlord, within thirty (30) days of invoice, any amount of actual Additional Rent expenses in excess of the estimated amounts paid by Tenant. In the event of any overpayment by Tenant, Landlord shall credit any amount of estimated payments made by Tenant in excess of Landlord’s actual expenditures for said Additional Rent items to Tenant (provided Landlord may withhold any portion thereof and credit Tenant to cure Tenant’s default in the performance of any of the terms, covenants and conditions of this Lease). Notwithstanding anything to the contrary above, any credit due Tenant for a reconciliation of Additional Rent expenses that occurs after the Lease Termination Date shall be refunded to Tenant; provided however, that Landlord may withhold therefrom the amount necessary to cover any amounts due on Tenant’s account. Within thirty (30) days after receipt of Landlord’s reconciliation, Tenant shall have the right, at Tenant’s sole expense, to audit, at a mutually convenient time at Landlord’s office, Landlord’s records specifically limited for the Additional Rent expenses. Such audit must be conducted by Tenant or an independent nationally recognized accounting firm that is not being compensated by Tenant or other third party on a contingency fee basis. Tenant shall submit to Landlord a complete copy of said audit at no expense to Landlord and a written notice stating the results of said audit, and if such notice by Tenant and the respective audit reveals that Landlord has overcharged Tenant, and the audit is not challenged by Landlord, the amount overcharged shall be credited to Tenant’s account within thirty (30) days after completion of Landlord’s review and approval of said audit. The audit rights of Tenant under this Paragraph 4.D are granted for Tenant’s personal benefit and may not be assigned or transferred by Tenant, either voluntarily or by operation of law, in any manner whatsoever, except in the event Tenant assigns this Lease to a Permitted Transfer or obtains Landlord’s written consent to any other assignment; in which event, said audit rights shall continue to be applicable to said assignee(s) only for the applicable period that commences following the date of assignment. Notwithstanding anything to the contrary herein, no subtenant shall have any right to conduct an audit of Landlord’s books and/or records.

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Landlord shall, upon request by Tenant, provide Tenant with copies of individual invoices related to the foregoing actual expenses, either by facsimile or by U.S. mail; however, in no event shall Landlord be obligated to provide duplicate copies of any invoice or other Lease documentation to Tenant and/or Tenant’s representative (if any) for an audit of Tenant’s records outside of Landlord’s office.

E. Management Fee. Beginning with the Commencement Date of the Term of this Lease, Tenant shall pay to Landlord, in addition to the Basic Rent and Additional Rent, a monthly management fee (“Management Fee”) of $2,488.80 for the first thirty-six (36) months of the Lease Term and an amount equal to two and one-half percent (2.5%) of the Basic Rent due for each month during the remainder of the Term. Tenant shall be responsible for calculating the monthly Management Fee based on the Basic Rent schedule shown in Paragraph 4.A above, and for paying said Management Fee by the first day of each month during the Term of this Lease. Tenant’s failure to pay the monthly Management Fee within the Grace Period will result in a Late Charge being assessed pursuant to the terms of Paragraph 4.C above.

The reference to “Rent” in this Paragraph 4 includes Basic Rent, Additional Rent, and Management Fee. The respective obligations of Landlord and Tenant under this Paragraph shall survive the expiration or other termination of the Term of this Lease, and if the Term hereof shall expire or shall otherwise terminate on a day other than the last day of a calendar year, the actual Additional Rent incurred for the calendar year in which the Term hereof expires or otherwise terminates shall be determined and settled on the basis of the statement of actual Additional Rent for such calendar year and shall be prorated in the proportion which the number of days in such calendar year preceding such expiration or termination bears to 365.

F. Place of Payment of Rent. All Rent hereunder shall be paid to Landlord at the office of Landlord in any one of the following ways: (i) for USPS mail: PEERY/ARRILLAGA, P.O. BOX 742092, LOS ANGELES, CA 90074-2092, (ii) for local and national overnight carrier: BANK OF AMERICA LOCKBOX SERVICES #5195, P.O. BOX 742092, CA9-705-01-03, 1000 W. TEMPLE STREET, LOS ANGELES, CA 90012, or to such other person or to such other place as Landlord may from time to time designate in writing, upon not less than five (5) days prior written notice to Tenant. Invoices for Basic Rent, Additional Rent and/or Management Fees shall be mailed to Tenant at the addresses shown below.

Prior to Lease Commencement	After Lease Commencement
Attn: Chief Financial Officer	Attn: Chief Financial Officer
303 Velocity Way	6750 Dumbarton Circle
Foster City, CA 94404	Fremont, CA 94555
(650) 357-3131 (phone)	(510)     -         (phone) (To be supplied post-execution)
(650) 357-3832 (fax)	(510)     -         (fax) (To be supplied post-execution)
Vincent.Pilette@efi.com (email)*	Vincent.Pilette@efi.com (email)*

* The inclusion of an email address does not obligate Landlord to provide a notice by electronic mail.

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Tenant shall have the right, upon ten (10) days written notice to Landlord, to change the billing address as noted herein; however, Landlord shall send Tenant invoices to only one address of Tenant as identified by Tenant.

G. Security Deposit. Concurrently with Tenant’s execution of this Lease, Tenant shall deposit with Landlord the sum of Two Hundred Ninety-Eight Thousand Five Hundred Twenty-Four and 40/100 Dollars ($298,524.40). Said sum shall be held by Landlord as a Security Deposit for the faithful performance by Tenant of all of the terms, covenants, and conditions of this Lease to be kept and performed by Tenant during the Term hereof. If Tenant defaults with respect to any provision of this Lease, including, but not limited to, the provisions relating to the payment of Rent and any of the monetary sums due hereunder, and such default is not cured within any applicable notice and cure period, Landlord may (but shall not be required to) use, apply or retain all or any part of this Security Deposit for the payment of any other amount which Landlord may spend by reason of Tenant’s default or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant’s default. If any portion of said Security Deposit is so used or applied, Tenant shall, within five (5) business days after written demand therefor, deposit cash with Landlord in the amount sufficient to restore the Security Deposit to its original amount. Tenant’s failure to do so shall be a material breach of this Lease. Landlord shall not be required to keep the Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on such Security Deposit. The Security Deposit or any balance thereof shall be returned to Tenant (or at Landlord’s option, to the last assignee of Tenant’s interest hereunder) at the expiration or earlier termination of the Term and after Tenant has vacated the Premises; provided, however, that Landlord may withhold therefrom the amount necessary to cover the cost of restoration of the Premises if Tenant fails to do so as required under Paragraph 5 and to cure any then uncured default by Tenant or other amounts owed by Tenant under this Lease. In the event of termination of Landlord’s interest in this Lease, Landlord shall transfer said Security Deposit to Landlord’s successor in interest whereupon Tenant agrees to release Landlord from liability for the return of such Security Deposit or the accounting therefor. Tenant hereby waives the protection of Section 1950.7 of the California Civil Code.

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5. ACCEPTANCE AND SURRENDER OF PREMISES. Subject to Landlord’s obligations under Paragraph 6.A (AS-IS Basis: Leased on “As-Is” Basis) and completion of its obligations under Paragraph 6.B (AS-IS Basis: Interior Improvements to be Constructed by Landlord) and Landlord’s obligations under the Construction Agreement, by entry hereunder, Tenant accepts the Premises as being in good and sanitary order, condition and repair and accepts the Building and improvements included in the Premises in their present condition and without representation or warranty by Landlord as to the condition of such Building or as to the use or occupancy which may be made thereof. Any exceptions to the foregoing must be by written agreement executed by Landlord and Tenant. Tenant agrees on the last day of the Term, or on the sooner termination of this Lease, to surrender the Premises promptly and peaceably to Landlord in good condition and repair (damage by Acts of God, fire, normal wear and tear excepted), with all interior walls cleaned so that they appear freshly painted, and repaired or replaced, if damaged; all floors cleaned and waxed; all carpets cleaned and shampooed; all broken, marred or nonconforming acoustical ceiling tiles replaced; all windows washed; the air conditioning and heating systems within the non-common areas of the Premises serviced by a reputable and licensed service firm and in good operating condition and repair; the plumbing and electrical systems and lighting within the non-common areas of the Premises in good order and repair, including replacement of any burned out or broken light bulbs or ballasts (all lights and ballasts must be of the same type, color and wattage); together with all alterations, additions, and improvements (collectively “Alterations”) which may have been made, in, to, or on the Premises after the Lease Commencement Date, except as referenced in Paragraph 7 (Alterations and Additions), Tenant shall not be required to remove any Alterations that are not subject to restoration pursuant to Landlord’s written Consent to Alterations agreement executed by Tenant and Landlord. Tenant shall be responsible for repairing any damage caused by the installation and/or the removal of Tenant’s trade fixtures by Tenant or Tenant’s employees, agents or contractors. If requested by Tenant in writing at the time Tenant submits its request for Alterations to Landlord, Landlord shall state in Landlord’s Consent to Alterations whether the requested Alterations can remain in the Premises and/or are subject to restoration by Tenant. Tenant shall not be required to remove the initial Landlord Interior Improvements unless otherwise noted on the final Landlord Interior Improvements plans. For all other such Alterations, Tenant shall ascertain from Landlord within sixty (60) days before the end of the Term of this Lease whether Landlord desires to have the Premises restored to their condition and configuration as when the Premises were delivered to Tenant and if Landlord shall so desire, then Tenant shall restore said Premises or such part or parts thereof before the end of this Lease at Tenant’s sole cost and expense. In the event Tenant is required to complete the restoration and said restoration is not completed prior to the Termination Date, Tenant acknowledges that Tenant shall enter into a Hold Over period pursuant to the terms of Paragraph 30 (Holding Over) and Tenant shall automatically be liable to Landlord for the monthly Hold Over Basic Rent and all other Additional Rent until said restoration is completed by Tenant. Prior to the Termination Date, as part of the surrender of Premises procedures, Landlord will have the non-Common Area Building systems inspected, at Tenant’s sole cost and expense, including, but not limited to the HVAC system and plumbing systems, and Tenant shall be responsible for all repairs noted on said inspection reports. Tenant, on or before the end of the Term or sooner termination of this Lease, shall remove all of Tenant’s personal property and trade fixtures from the Premises, and all property not so removed on or before the end of the Term or sooner termination of this Lease shall be deemed abandoned by Tenant and title to same shall thereupon pass to Landlord without compensation to Tenant. Tenant shall be responsible for repairing any damage caused by the installation and/or the removal of Tenant’s trade fixtures by Tenant or Tenant’s employees, agents or contractors. Landlord may, upon termination of this Lease, remove all moveable furniture and equipment so abandoned by Tenant, at Tenant’s sole cost, and repair any damage caused by such removal at Tenant’s sole cost. Upon surrender of the Premises to Landlord, Tenant shall provide Landlord with keys for all exterior and interior locking doors and Tenant agrees to pay to Landlord the cost of Landlord re-keying all exterior doors (including mechanical rooms) and Tenant agrees to pay to Landlord the cost of Landlord rekeying all interior doors with locks to which Tenant is not able to provide Landlord keys. Tenant may install, and shall maintain, repair and replace as needed, at its sole cost and expense, (a) exterior security cameras (in locations on the Building to be approved by Landlord) with the requirement that Tenant remove said security cameras and related equipment by the Lease Termination Date and repair any and all damage related to the installation and/or removal of the security cameras and (b) a cardkey system located on the exterior of the Building to provide controlled access to its Premises, and if Tenant installs a cardkey system, Tenant shall also be responsible for the costs Landlord incurs in replacing the doors and/or door frames in which such cardkey system was installed and removing any and all equipment and wiring related thereto, unless Landlord notifies Tenant in writing prior to the Lease Termination Date that Landlord wants the cardkey system to remain in the Premises, in which event the cardkey system shall remain on the Premises after the expiration of the Term and Tenant shall provide Landlord with the cardkeys and instructions for such system along with any other equipment that is necessary for the operation of said cardkey system. For example, if software and/or specialized computer systems are required to operate the cardkey system, Tenant shall leave the cardkey pads, the software (hard copies and assignment of the license at no cost to Landlord should Landlord so elect), the computer and the instructions thereto in place in the Premises. If the Premises is not surrendered at the end of the Term or sooner termination of this Lease, Tenant shall indemnify Landlord against loss or liability resulting from the delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any succeeding Tenant founded on such delay. Nothing contained herein shall be construed as an extension of the Term hereof or as a consent of Landlord to any holding over by Tenant. The voluntary or other surrender of this Lease or the Premises by Tenant or a mutual cancellation of this Lease shall not work as a merger and, at the option of Landlord, shall either terminate all or any existing subleases or subtenancies or operate as an assignment to Landlord of all or any such subleases or subtenancies.

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6. “AS-IS” BASIS.

A. Leased on “As-Is” Basis. Except as may be noted in this Paragraph 6 and in Paragraph 11 (Expenses of Operation, Management, and Maintenance of the Common Areas of the Parcel and Building in which the Premises are Located) and Landlord’s obligations in the Construction Agreement to complete Landlord’s Interior Improvements, it is hereby agreed that the Premises leased hereunder is leased strictly on an “as-is” basis. Except as noted herein, it is specifically agreed between the parties that after Landlord makes Landlord’s Interior Improvements, Landlord shall not be required to make, nor be responsible for any cost, in connection with any repair, restoration, and/or improvement to the Premises in order for this Lease to commence, or thereafter, throughout the Term of this Lease. Notwithstanding anything to the contrary within this Lease except as referenced below in Paragraph 6.B (Interior Improvements to be Constructed by Landlord), Landlord makes no warranty or representation of any kind or nature whatsoever as to the condition or repair of the Premises, nor as to the use or occupancy which may be made thereof.

B. Interior Improvements to be Constructed by Landlord. Notwithstanding anything to the contrary in Paragraph 6.A (As-Is Basis: Leased on “As-Is” Basis) above, pursuant to the terms and conditions of the Construction Agreement, Landlord has agreed to construct and install the Landlord Interior Improvements (as defined in the Construction Agreement as shown on Exhibit D attached hereto) and Landlord shall be responsible to pay Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000.00) of said cost and Tenant shall be responsible for paying the balance of the cost to construct the Landlord Interior Improvements as provided for in the Construction Agreement.

7. ALTERATIONS AND ADDITIONS. Tenant shall not make, or suffer to be made, any Alterations to the Premises, or any part thereof, without the written consent of Landlord first had and obtained by Tenant; such consent shall not be unreasonably withheld and such consent to Alterations shall not be valid until such time as said consent is executed by both Landlord and Tenant and a fully executed copy delivered by Landlord to Tenant (“Consent to Alterations”). Provided Tenant requests in writing such predetermination from Landlord, said Consent to Alterations shall specify whether Landlord shall require removal of said Alterations. Any Alteration of the Premises except moveable furniture and trade fixtures, shall at once become a part of the Premises and belong to Landlord. Any such Alterations shall be paid for one hundred percent (100%) by Tenant. Landlord reserves the right to approve all contractors and mechanics proposed by Tenant to make such Alterations. As a pre-condition to Landlord granting its consent to any Alterations, Tenant shall deliver plans and specifications reflecting said Alterations for Landlord’s review and approval; and within five business days of completion of said Alterations, Tenant shall deliver to Landlord an original 1/8” scaled drawing on bond paper or another electronic format as reasonably determined by Landlord. Tenant shall retain title to all moveable furniture and trade fixtures placed in the Premises. All heating, lighting, electrical, air conditioning, security systems, floor to ceiling partitioning, drapery, carpeting, and floor installations made by Tenant, together with all property that has become an integral part of the Premises, shall not be deemed trade fixtures. Tenant agrees that it will not proceed to make such Alterations until five (5) business days from the receipt of a copy of the fully executed Consent to Alterations, in order that Landlord may post appropriate notices to avoid any liability to contractors or material suppliers for payment for Tenant’s Alterations. Tenant will at all times permit such notices to be posted and to remain posted until the completion of work. As a condition of Landlord’s Consent to Alterations to the Premises at the time Landlord provides written Consent to Alterations and prior to any work commencing on the Alterations, Landlord may, at its reasonable discretion, require Tenant to secure and provide to Landlord at Tenant’s own cost and expense, a completion and lien indemnity letters of credit, satisfactory to Landlord in the amount of one hundred fifty percent (150%) of the cost to fund the construction of any Alterations (“Letter of Credit A”) and, if Landlord does not agree in the Consent to Alterations that said Alterations are to remain at the end of the Lease Term, Landlord may, in its reasonable discretion, require an additional letter of credit in the amount of one hundred fifty percent (150%) of the cost to fund the subsequent cost of the removal of said Alterations and the restoration of the Premises at the Termination Date (“Letter of Credit B”). Said performance Letters of Credit shall be kept in place as follows: for Letter of Credit A, for sixty (60) days after the completion of the construction of said Alterations; and for Letter of Credit B, the later of (a) sixty (60) days after the Termination Date or (b) sixty (60) days after the completion of the restoration work and until Tenant has provided Landlord with proof of payment to respective vendors and copies of recorded full unconditional lien release related to the Alterations and/or restoration work. Tenant further covenants and agrees that any mechanic’s lien filed against the Premises for work claimed to have been done for, or materials claimed to have been furnished to Tenant, will be discharged by Tenant, by bond or otherwise, within twenty (20) days after notice of filing thereof, at the cost and expense of Tenant. As a further condition to its Consent to Alterations to the Premises, Landlord shall require Tenant to pay all reasonable out-of-pocket expenses in connection with any and all requests for Alterations and Landlord’s Consent to Alterations related thereto, including but not limited to Landlord’s costs, fees and expenses for the processing and administration of the consent documentation and Landlord’s attorneys’ fees (if any), not to exceed any amount equal to five percent (5%) of the monthly Basic Rent then scheduled. Any exceptions to the foregoing must be made in writing and executed by both Landlord and Tenant.

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8. RULES AND REGULATIONS AND COMMON AREA. Subject to the terms and conditions of this Lease and such Rules and Regulations as Landlord may from time to time prescribe, Tenant and Tenant’s employees, agents, representatives, contractors, visitors, invitees, servants and customers (all such parties, including Tenant, are hereinafter referred to individually and/or collectively, “Tenant Related Parties” or “Tenant Related Party”) shall, in common with other occupants of the Parcel/Building in which the Premises are located, and their respective employees, invitees and customers, and others entitled to the use thereof, have the non-exclusive right to use the access roads, parking areas, and facilities provided and designated by Landlord for the general use and convenience of the occupants of the Parcel/Building in which the Premises are located, which areas and facilities are referred to herein as “Common Area”. The Common Area comprised of respective Common Area hallways shall be used only for applicable (i) access to and from the respective tenant’s suite to the common area restrooms; and (ii) entering into and exiting from the Building by tenants who share said Common Area. Tenant shall not use or allow use of any such Common Area to store supplies, materials, inventory or any other item of any type whatsoever. This non-exclusive right to use the Common Area shall terminate upon the termination of this Lease. Landlord reserves the right from time to time to make changes in the shape, size, location, amount and extent of Common Area, including changing the location of parking spaces allocated to Tenant, provided that such changes neither materially diminish Tenant’s access to the Premises. Landlord further reserves the right to promulgate such reasonable rules and regulations relating to the use of the Common Area, and any part or parts thereof, as Landlord may deem appropriate for the best interests of the occupants of the Parcel/Building (“Rules and Regulations”). Such Rules and Regulations may be amended by Landlord from time to time, with or without advance notice, and all amendments shall be effective upon delivery of a copy to Tenant. Landlord shall not be responsible to Tenant for the non-performance by any other tenant or occupant of the Parcel/Building of any of said Rules and Regulations.

Landlord shall operate, manage and maintain the Common Areas within the Building and/or Parcel in good condition and repair. The manner in which the Common Area shall be maintained and the expenditures for such maintenance shall be at the reasonable discretion of Landlord.

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9. PARKING. Tenant shall have the right to the nonexclusive use of a minimum of two hundred (200) parking spaces and a maximum of two hundred twenty-five (225) parking spaces in the common parking area of the Parcel, which common parking area may be used by Tenant in common with other tenants or occupants of the Building. Tenant agrees that Tenant Related Parties shall not use parking spaces in excess of said two hundred twenty-five (225) parking spaces allocated to Tenant hereunder. Landlord shall have the right, at Landlord’s sole discretion, to specifically designate the location of Tenant’s parking spaces within the common parking area of the Building, in which event Tenant agrees that Tenant Related Parties shall not use any parking spaces other than those parking spaces specifically designated by Landlord for Tenant’s use. Said parking spaces, if specifically designated by Landlord to Tenant, may be reasonably relocated by Landlord at any time, and from time to time if necessary. Landlord shall give Tenant written notice of any change in Tenant’s parking spaces. If Tenant requests, Landlord shall approve Tenant’s right to have reserved parking spaces equivalent in number to those offered to other tenants, if any, of the Building, on a pro rata basis. Tenant shall not, at any time, park, or permit to be parked by Tenant’s employees, vendors and/or visitors, any trucks or vehicles adjacent to the loading area so as to interfere in any way with the use of such areas, nor shall Tenant, at any time, park or permit the parking of Tenant’s trucks and other vehicles or the trucks and vehicles of Tenant’s suppliers or others, in any portion of the common areas not designated by Landlord for such use by Tenant. Tenant shall not park nor permit to be parked, any inoperative vehicles or equipment on any portion of the common parking area or other common areas of the Parcel. Tenant agrees to assume responsibility for compliance by its employees with the parking provision contained herein. If Tenant Related Parties park in other than designated parking areas, then Landlord may charge Tenant, as an additional charge, and Tenant agrees to pay Ten Dollars ($10.00) per day for each day or partial day each such vehicle is parking in any area other than that designated. Tenant hereby authorizes Landlord, at Tenant’s sole expense, to tow away from the Building any vehicle belonging to Tenant Related Parties parked in violation of these provisions, or to attach violation stickers or notices to such vehicles; provided, however, that unless any such vehicle is parked in a dangerous and/or designated no parking zone, Landlord will attach a twenty-four (24) hour violation notice on said vehicle prior to having the vehicle towed from the Property. Tenant shall use the parking area for vehicle parking only and shall not use the parking areas for storage.

10. TENANT MAINTENANCE. Tenant shall, at its sole cost and expense, keep and maintain the non-common areas of the Premises (including appurtenances) and every part thereof in a high standard of maintenance and repair, and in good and sanitary condition. Tenant’s maintenance, repair and replacement responsibilities herein referred to include, but are not limited to, janitorization, plumbing systems within the Premises located in the Building (such as: water and drain lines exclusively serving the Premises and the sinks, toilets and water heater within and exclusively serving the Premises), electrical systems within the Premises located in the Building (such as outlets, lighting fixtures, lamps, bulbs, tubes, ballasts), heating and air-conditioning systems exclusively servicing the Premises and controls within and exclusively serving the Premises (such as mixing boxes, thermostats, time clocks, supply and return grills), non-common elevators (if any), and all interior improvements within the Premises including but not limited to: wall coverings, window coverings, acoustical ceilings, vinyl tile, carpeting, partitioning, doors (both interior and exterior, including closing mechanisms, latches and locks), skylights (if any), automatic fire extinguishing systems, and all other interior improvements of any nature whatsoever. Tenant agrees to have the HVAC system exclusively servicing Tenant’s Premises inspected and serviced by a licensed HVAC contractor reasonable approved by Landlord on a quarterly basis and timely have all recommended repairs and replacements made and Tenant shall provide copies of said inspection and repair reports to Landlord within thirty (30) days of Tenant’s receipt of the same. Tenant agrees to provide carpet shields under all rolling chairs or to otherwise be responsible for wear and tear of the carpet caused by such rolling chairs if such wear and tear exceeds that caused by normal foot traffic in surrounding areas. Areas of excessive wear shall be replaced at Tenant’s sole expense upon Lease termination. Tenant hereby waives all rights hereunder, and benefits of, subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code and under any similar law, statute or ordinance now or hereafter in effect.

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11. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF THE PARCEL AND BUILDING IN WHICH THE PREMISES ARE LOCATED.

A. Maintenance of the Common Areas of the Parcel. Landlord shall operate, manage and maintain the Common Areas of the Parcel. As Additional Rent and in accordance with Paragraph 4.D of this Lease, Tenant shall pay to Landlord Tenant’s Proportionate Share of all expenses of operation, management, maintenance, repair and replacement of the Common Areas of the Parcel including, but not limited to, license, permit, and inspection fees; security; utility charges associated with exterior landscaping and lighting (including water and sewer charges); all charges incurred in the maintenance and replacement of landscaped areas, ponds, fountains, lakes, if any, parking lots, parking lot lights and paved areas (including repairs, replacement, resealing and restriping), sidewalks, driveways, maintenance, repair and replacement of all fixtures and electrical, mechanical and plumbing systems; supplies, materials, equipment and tools and the cost of capital expenditures which have the effect of reducing operating expenses, provided, however, that in the event Landlord makes capital improvements, Landlord will amortize its investment in said improvements (together with interest at the higher of (i) ten percent (10%) per annum, (ii) the prime rate of interest plus one or (iii) Landlord’s borrowing rate on the unamortized balance (“Amortized Cost”) as an operating expense in accordance with standard accounting practices, provided, that such amortization is not at a rate greater than the anticipated savings in the operating expenses.

B. Maintenance of the Common Areas of the Building. Landlord shall operate, manage and maintain the Common Areas of the Building. As Additional Rent and in accordance with Paragraph 4.D of this Lease, Tenant shall pay its Proportionate Share of the cost of operation (including common utilities), management, maintenance, repair and replacement of the Building (including structural and Common Areas such as lobbies, restrooms, janitor’s closets, hallways, elevators, mechanical and telephone rooms, stairwells, entrances, spaces above the ceilings and janitorization of said Common Areas) in which the Premises are located. The maintenance items herein referred to include, but are not limited to, all windows, window frames, plate glass, glazing, truck doors, main plumbing systems of the Building (such as water drain lines, sinks, toilets, faucets, drains, showers and water fountains to the extent located in Common Areas), main electrical systems (such as panels and conduits), heating and air-conditioning systems (such as compressors, fans, air handlers, ducts, boilers, heaters), structural elements and exterior surfaces of the Building; store fronts, roof, downspouts, Building common area interiors (such as wall coverings, window coverings, floor coverings and partitioning), ceilings, Building exterior doors, exterior lighting, skylights (if any), automatic fire extinguishing systems, and elevators (if any); license, permit and inspection fees; security, supplies, materials, equipment and tools; the cost of capital expenditures which have the effect of reducing operating expenses. In the event Landlord makes such capital improvements, Landlord may amortize its investment in said improvements (together with interest at the higher of (i) ten percent (10%) per annum, (ii) the prime rate of interest plus one or (iii) Landlord’s borrowing rate on the unamortized balance if Landlord elects to allocate payment to Tenant monthly over the remaining Term of the Lease, rather than requiring Tenant to pay such amortized costs in one lump sum) (“Amortized Cost”) as an operating expense in accordance with standard accounting practices, provided, that such amortization is not at a rate greater than the anticipated savings in the operating expenses. Tenant hereby waives all rights hereunder, and benefits of, subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code and under any similar law, statute or ordinance now or hereafter in effect.

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C. Structural Maintenance: Notwithstanding anything to the contrary in Paragraph 11.B above, (i) Landlord shall repair, including replacement related to, damage to the structural shell, foundation, and roof structure (but not the interior improvements, roof membrane, or glazing) of the Building leased hereunder that exist as of the Commencement Date at Landlord’s cost, and (ii) Landlord shall repair, including replacement related to, damage to the structural shell, foundation, and roof structure (but not the interior improvements, roof membrane, or glazing) of the Building leased hereunder occurring after the Commencement Date at Landlord’s cost, however, Landlord shall amortize the cost of the repair pursuant to the formula referenced in subclause (ii) hereof over the useful life of said repair, and Tenant shall be responsible for paying to Landlord, within thirty days of written notice from Landlord, one hundred percent (100%) of Tenant’s Proportionate Share of the Amortized Cost over the remaining Term of the Lease, plus Tenant’s Proportionate Share of the insurance deductible (if such damage is the result of an insured peril) which deductible shall be paid by Tenant within thirty (30) of Tenant’s receipt of an invoice from Landlord; provided Tenant has not caused such damage, in which event Tenant shall be responsible for one hundred percent (100%) of the insurance deductible and any such costs and expense not reimbursed to Landlord by insurance proceeds for repair and/or replacement or damage so caused by the Tenant and shall pay such amount in full to Landlord within thirty (30) days of the invoice date. For Example, if cost is to be amortized and paid on the initial Lease Term remaining: In the event (i) the Amortized Cost of a roof structure repair is $10,000 and (ii) said repair has a useful life of twenty years, Tenant’s Proportionate Share would be $22.56 per month as Additional Rent ($10,000 / 20 years / 12 months = $41.67 x 54.14% = $22.56/month), in which case said amount would be payable monthly to Landlord within thirty (30) days of Tenant’s receipt of an invoice from Landlord establishing the initial monthly payment and the monthly payments thereafter which would be due on the first day of each month during the remaining initial Term as Additional Rent. Tenant hereby waives all rights under, and benefits of subsection I of Section 1932 and Sections 1941 and 1942 of the California Civil Code and under any similar law, statute or ordinance now or hereafter in effect. Notwithstanding the foregoing, a crack in the foundation or exterior walls, or any other defect in the Building that does not endanger the structural integrity of the building for which Tenant is or is not responsible, or which is not life-threatening, shall not be considered material, and Landlord may elect, in its sole and absolute discretion, not to repair and/or replace the same; however, Landlord may require Tenant to repair and/or replace the same at Tenant’s sole cost and expense, within thirty days of written notice from Landlord, if Tenant is responsible.

D. Exclusions From Additional Rent: The following items shall be excluded from “Additional Rent”:

(a) Leasing commissions, attorney’s fees, costs, disbursements, and other expenses incurred in connection with negotiations with other tenants, or disputes between Landlord and other third party not related to Tenant (hereinafter referred to as “Third Party”), or in connection with marketing, leasing, renovating, or improving space for other current or prospective tenants or other current or prospective occupants of the Building; notwithstanding anything to the contrary herein, any costs and expenses Landlord is entitled to be reimbursed for as stated under Paragraph 24 (Bankruptcy and Default) are not excluded Additional Rent items as reflected in this Paragraph 4.D.

(b) The cost of any service sold to any other Third Party or other occupant whose leased premises are not part of the Premises leased herein and for which Landlord is entitled to be reimbursed as an additional charge or rental over and above the basic rent and additional rent payable under the lease agreement with said other tenant (including, without limitation, after-hours HVAC costs or over-standard electrical consumption costs incurred by other tenants).

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(c) Any costs for which Landlord is entitled to be reimbursed by any other Third Party or other occupant whose leased premises are not part of the Premises leased herein.

(d) Any costs, fines, or penalties incurred due to violations by Landlord of any governmental rule or authority, provided Tenant is not responsible under the Lease for such costs, fines and/or penalties, and/or provided Tenant’s actions or inactions did not cause, in whole or in part, such costs, fines and/or penalties.

(e) Wages, salaries, or other compensation paid to employees of Landlord.

(f) Repairs or other work occasioned by fire, windstorm, or other insured peril, to the extent that Landlord receives proceeds from the real property insurance policy on said Premises to cover one hundred percent of the costs to repair said perils (“Perils”) and Tenant paid its share of the premium as required under the Lease and any and all insurance deductible(s) which Tenant is responsible for paying. Notwithstanding anything to contrary above, Tenant shall remain responsible for paying to Landlord one hundred percent of the insurance deductible allocated to Tenant in full within thirty (30) days of written notice from Landlord.

(g) Except as otherwise noted in this Lease, any mortgage debt, or ground rents or any other amounts payable under any ground lease for the Property.

(h) Depreciation on Landlord’s Property.

12. UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED. As Additional Rent and in accordance with Paragraph 4.D of this Lease Tenant shall pay its Proportionate Share, (or if the Building in which the Premises is located is not one hundred percent (100%) leased, said Proportionate Share for utilities shall be calculated based on (i) Tenant’s Premises square footage as a percentage of the total square footage leased to Tenant and any other third party tenants in the Building or (ii) other equitable basis as calculated by Landlord) of the cost of all utility charges such as water, gas, electricity, (and telephone, telex and other electronic communications service, if applicable), sewer service, waste pick-up and any other utilities, materials or services furnished directly to the Building in which the Premises are located, including, without limitation, any temporary or permanent utility surcharge or other exactions whether or not hereinafter imposed. Notwithstanding anything to the contrary herein, in the event any utility charges apply only to the Premises leased by Tenant, Tenant shall place such utilities in Tenant’s name and shall pay the related costs directly to the utility company(ies).

Landlord shall not be liable for and Tenant shall not be entitled to any abatement or reduction of rent by reason of any interruption or failure of utility services to the Premises when such interruption or failure is caused by accident, breakage, repair, strikes, lockouts, or other labor disturbances or labor disputes of any nature, or by any other cause, similar or dissimilar, beyond the reasonable control of Landlord.

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Landlord shall furnish to the Premises between the hours of 8:00 am and 6:00 pm, Mondays through Fridays (holidays excepted) and subject to the Rules and Regulations of the Common Area hereinbefore referred to, reasonable quantities of water, gas and electricity suitable for the intended use of the Premises required in Landlord’s judgment for the comfortable use and occupation of the Premises for such purposes. The HVAC units servicing the Premises shall be exclusive to said Premises and Tenant shall control its usage of said non-common area units. Tenant may, from time to time, have its staff and equipment operate on a twenty-four (24) hour-a-day, seven (7) day-a-week schedule, and Tenant shall pay for extra consumption of such utilities attributable to such after-hours occupancy, if any, used by Tenant. Tenant agrees that at all times it will cooperate fully with Landlord and abide by all regulations and requirements that Landlord may prescribe for the proper functioning and protection of the Building heating, ventilating and air-conditioning systems. Whenever heat generating machines, equipment, or any other devices (including exhaust fans) are used in the Premises by Tenant which affect the temperature otherwise maintained by the Building air-conditioning system, Landlord shall have the right to install supplementary air-conditioning units in the Premises and the cost thereof, including the cost of installation and the cost of operation and maintenance thereof, shall be paid by Tenant to Landlord upon demand by Landlord. Tenant will not, without the written consent of Landlord, use any apparatus or device in the Premises (including, without limitation), electronic data processing machines or machines using voltage in excess of 120 Volts which will in any way increase the amount of electricity, gas, water or air-conditioning usually furnished or supplied to premises being used as general office space, or connect with electric current (except through existing electrical outlets in the Premises), or with gas or water pipes any apparatus or device for the purposes of using electric current, gas, or water. Landlord acknowledges that Tenant may use electrical current up to 220 Volts subject to the terms and conditions of this Paragraph. If (i) Tenant shall require water, gas, or electric current in excess of that usually furnished or supplied to Premises being used as general office space, Tenant shall first obtain the written consent of Landlord, which consent shall not be unreasonably withheld, or (ii) if Tenant is found to be using water, gas and/or electrical current in excess of its Proportionate Share (as such excess usage is confirmed by a study conducted by Landlord’s contractor(s), Landlord may (a) adjust the Proportionate Share allocated to Tenant based on Tenant’s actual or estimated use or (b) cause an electric current, gas or water meter to be installed in the Premises in order to measure the amount of electric current, gas or water consumed for any such excess use. In the event Landlord questions Tenant’s usage, Landlord shall employ the services of a licensed electrical or plumbing contractor to determine what Tenant’s actual use is and Tenant shall be responsible for paying the cost related to said investigation by the licensed contractor or any other qualified third party vendor that Landlord may employ to provide such service. The cost of any such meter and of the installation, maintenance and repair thereof, all charges for such excess water, gas and electric current consumed (as shown by such meters and at the rates then charged by the furnishing public utility); and any additional expense incurred by Landlord in keeping account of electric current, gas, or water so consumed shall be paid by Tenant, and Tenant agrees to pay Landlord therefor promptly following demand by Landlord. Landlord shall use commercially reasonable efforts to avoid directly causing any interruption in utilities to the Premises and the Common Areas.

Tenant understands the area shown in Green cross hatch on Exhibit B attached hereto is a Common Area for the Building where the electrical room is located. Access to the electrical room is only available on the first floor from the exterior door to said electrical room.

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13. TAXES.

A. Real Property Taxes. As Additional Rent and in accordance with Paragraph 4.D of this Lease, Tenant shall pay to Landlord, monthly in advance or as they become due, pursuant to statements submitted by Landlord, Tenant’s Proportionate Share of all Real Property Taxes relating to the Premises accruing with respect to the Premises during the Term of this Lease and the Extended Term (if any). The term “Real Property Taxes” shall also include supplemental taxes related to the period of Tenant’s Term whenever levied, including any such taxes that may be levied after the Term has expired. In the event the Premises leased hereunder consist of only a portion of the entire tax parcel, Tenant shall pay to Landlord monthly in advance or as they become due, pursuant to statements submitted to Tenant by Landlord, Tenant’s Proportionate Share of such real estate taxes allocated to the Premises by square footage or other reasonable basis as calculated and determined by Landlord. If the tax billing pertains 100% to the Premises, and Landlord chooses to have Tenant pay said real estate taxes directly to the Tax Collector, then in such event it shall be the responsibility of Tenant to obtain the tax and assessments bills and pay, no less than ten (10) days prior to delinquency, the applicable real property taxes and assessments pertaining to the Premises, and failure to receive a bill for taxes and/or assessments shall not provide a basis for cancellation of or non-responsibility for payment of penalties for nonpayment or late payment by Tenant. The term “Real Property Taxes”, as used herein, shall mean (i) all taxes, assessments, levies and other charges of any kind or nature whatsoever, general and special, foreseen and unforeseen (including all installments of principal and interest required to pay any general or special assessments for public improvements and any increases resulting from reassessments caused by any change in ownership of the Premises) now or hereafter imposed by any governmental or quasi-governmental authority or special district having the direct or indirect power to tax or levy assessments, which are levied or assessed against, or with respect to the value, occupancy or use of, all or any portion of the Premises (as now constructed or as may at any time hereafter be constructed, altered, or otherwise changed) or Landlord’s interest therein; any improvements located within the Premises (regardless of ownership); the fixtures, equipment and other property of Landlord, real or personal, that are an integral part of and located in the Premises; or parking areas, public utilities, or energy within the Premises; (ii) all charges, levies or fees imposed by reason of environmental regulation or other governmental control of the Premises and (iii) all costs and fees (including reasonable attorneys’ fees) incurred by Landlord in reasonably contesting any Real Property Tax and in negotiating with public authorities as to any Real Property Tax. If at any time during the Term of this Lease the taxation or assessment of the Premises prevailing as of the Commencement Date of this Lease shall be altered so that in lieu of or in addition to any Real Property Tax described above there shall be levied, assessed or imposed (whether by reason of a change in the method of taxation or assessment, creation of a new tax or charge, or any other cause) an alternate or additional tax or charge (i) on the value, use or occupancy of the Premises or Landlord’s interest therein or (ii) on or measured by the gross receipts, income or rentals from the Premises, on Landlord’s business of leasing the Premises, or computed in any manner with respect to the operation of the Premises, then any such tax or charge, however designated, shall be included within the meaning of the term “Real Property Taxes” for purposes of this Lease. If any Real Property Tax is based upon property or rents unrelated to the Premises, then only that part of such Real Property Tax that is fairly allocable to the Premises shall be included within the meaning of the term “Real Property Taxes.” Notwithstanding the foregoing, the term “Real Property Taxes” shall not include estate, inheritance, gift or franchise taxes of Landlord or the federal or state net income tax imposed on Landlord’s income from all sources.

Notwithstanding anything to the contrary above, it is agreed that if any special assessments for capital improvements are assessed, and if Landlord has the option to either pay the entire assessment in cash or go to bond, and if Landlord elects to pay the entire assessment in cash in lieu of going to bond, the entire portion of the assessment assigned to Tenant’s Premises will be prorated over the same period that the assessment would have been prorated had the assessment gone to bond (including interest) and Tenant shall pay its Proportionate Share in monthly installments over the Term remaining in the Lease (including the Extended Lease Term if said Lease Term is extended for any reason whatsoever) as Additional Rent on the first day of the remaining months in the Lease Term (as may be extended).

B. Taxes on Tenant’s Property. Tenant shall be liable for and shall pay ten days before delinquency, taxes levied against any personal property or trade fixtures placed by Tenant in or about the Premises. If any such taxes on Tenant’s personal property or trade fixtures are levied against Landlord or Landlord’s property or if the assessed value of the Premises is increased by the inclusion therein of a value placed upon such personal property or trade fixtures of Tenant and if Landlord, after written notice to Tenant, pays the taxes based on such increased assessment, which Landlord shall have the right to do regardless of the validity thereof, but only under proper protest if requested by Tenant, Tenant shall within five (5) days after demand, as the case may be, repay to Landlord the taxes so levied against Landlord, or the proportion of such taxes resulting from such increase in the assessment; provided that in any such event Tenant shall have the right, in the name of Landlord and with Landlord’s full cooperation, to bring suit in any court of competent jurisdiction to recover the amount of such taxes so paid under protest, and any amount so recovered shall belong to Tenant.

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14. ASSESSMENT CREDITS. [INTENTIONALLY OMITTED].

15. LIABILITY INSURANCE. Tenant, at Tenant’s expense, agrees to keep in force during the Term of this Lease a policy of commercial general liability insurance with combined single limit coverage of not less than Two Million Dollars ($2,000,000.00) per occurrence for bodily injury and property damage occurring in, on or about the Premises, including parking and landscaped areas. Such insurance shall be primary and noncontributory as respects any insurance carried by Landlord. The policy or policies effecting such insurance shall name Landlord, Richard T. Peery, as Trustee of the Richard T. Peery Separate Property Trust dated July 20, 1977, as amended; the Richard T. Peery Separate Property Trust; Richard T. Peery as an individual; John Arrillaga, as Trustee under the John Arrillaga Survivor’s Trust dated July 20, 1977, as amended; the John Arrillaga Survivor’s Trust; John Arrillaga, as an individual; and any beneficiaries, trustees and successor trustees, other partners or co-venturers of Landlord or said trusts as additional insureds (collectively “Landlord Entities”), and shall insure any liability of the Landlord Entities, contingent or otherwise, as respects acts or omissions of Tenant, its agents, employees or invitees or otherwise by any conduct or transactions of any of said persons in or about or concerning the Premises, including any failure of Tenant to observe or perform any of its obligations hereunder; shall be issued by an insurance company admitted to transact business in the State of California; and shall provide that the insurance effected thereby shall not be canceled, except upon thirty (30) days’ prior written notice to Landlord. Tenant’s insurance shall be primary as respects to the Landlord Entities, or if excess, shall stand in an unbroken chain of coverage. In either event, any other insurance maintained by the Landlord Entities shall be in excess of Tenant’s insurance and shall not be called upon to contribute with any insurance required to be provided by Tenant. The required insurance shall be reflected on a certificate of insurance of said policy, which certificate shall be delivered to Landlord concurrently with Tenant’s return of this executed Lease to Landlord. If, during the Term of this Lease, in the reasonable considered opinion of Landlord’s Lender or independent insurance advisor, or counsel, the amount of insurance described in this Paragraph 15 is not adequate, Tenant agrees to increase said coverage to such reasonable amount as Landlord’s Lender, insurance advisor, or counsel shall deem adequate.

16. TENANT’S PERSONAL PROPERTY INSURANCE AND WORKMAN’S COMPENSATION INSURANCE. Tenant shall maintain a policy or policies of fire and property damage insurance in “Special Form” with a sprinkler leakage endorsement insuring the personal property, inventory, trade fixtures (and leasehold improvements paid for by Tenant) within the Premises for the full replacement value thereof. The proceeds from any of such policies shall be used for the repair or replacement of such items so insured.

Tenant shall also maintain a policy or policies of workman’s compensation insurance and any other employee benefit insurance sufficient to comply with all laws.

17. PROPERTY INSURANCE. Throughout the Lease Term, Landlord shall purchase and keep in force, and Tenant shall pay to Landlord (or Landlord’s agent if so directed by Landlord), as Additional Rent and in accordance with Paragraph 4.D of this Lease, Tenant’s Proportionate Share of the deductibles on insurance claims and the cost of, policy or policies of insurance covering loss or damage to and/or destruction of the Building (excluding routine maintenance and repairs and incidental damage or destruction caused by accidents or vandalism for which Tenant is responsible under Paragraph 10) in the amount of the full replacement value thereof, providing protection against those perils included within the classification of “all risks” “special form” insurance and flood and/or earthquake insurance, if available, plus a policy of Rent income insurance in the amount of one hundred (100%) percent of twelve (12) months Basic Rent, plus twelve (12) months Additional Rent. In addition, if such insurance cost is increased due to Tenant’s use of the Premises, Tenant agrees to pay to Landlord, in addition to its Proportionate Share of the deductibles, the full cost of such increase within five (5) days of receipt of the related invoice. Tenant shall have no interest in or any right to the proceeds of any insurance procured by Landlord for the Premises. Insurance premiums for the full insurance year are due from Tenant within ten (10) days of receipt of invoice from Landlord and/or its agent and insurance deductibles are payable to Landlord within thirty (30) days of receipt of invoice from Landlord.

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In the event Richard T. Peery Separate Property Trust or John Arrillaga Survivor’s Trust and/or their affiliates and/or any member of Peery and/or Arrillaga families does not own or have an interest in the Parcel of which the Premises are a part, the percentage of the maximum earthquake deductible per insurance year shall be the percentage deductible that is deemed to be commercially reasonable by major financial institutions that provide financing on similar properties.

In addition and notwithstanding anything to the contrary in this Paragraph 17, each party to this Lease hereby waives all rights of recovery against the other party or its officers, employees, agents and representatives for loss or damage to its property or the property of others under its control, arising from any cause insured against under the fire and extended “special form” property coverage (excluding, however, any loss resulting from Hazardous Material contamination of the Property) required to be maintained by the terms of this Lease to the extent full reimbursement of the loss/claim is received by the insured party. Each party required to carry property insurance hereunder shall cause the policy evidencing such insurance to include a provision permitting such release of liability (“waiver of subrogation endorsement”); provided, however, that if the insurance policy of either releasing party prohibits such waiver, then this waiver shall not take effect until consent to such waiver is obtained. If such waiver is so prohibited, the insured party affected shall promptly notify the other party thereof. In the event the waivers are issued to the parties and are not valid under current policies and/or subsequent insurance policies, the non-complying party will provide, to the other party, thirty (30) days’ advance notification of the cancellation of the subrogation waiver, in which case neither party will provide such subrogation waiver thereafter and this Paragraph will be null and void. Notwithstanding anything to the contrary herein, the foregoing waiver of subrogation shall not include any loss resulting from Hazardous Material contamination of the Property or any insurance coverage relating thereto.

18. INDEMNIFICATION. Landlord shall not be liable to Tenant and Tenant hereby waives all claims against Landlord for any injury to or death of any person or damage to or destruction of property in or about the Premises by or from any cause whatsoever, including, without limitation, gas, fire, oil, electricity or leakage of any character from the roof, walls, basement or other portion of the Premises but excluding, however, the willful misconduct or negligence of Landlord, its agents, servants, employees, invitees or contractors employed by Landlord to do work at the Premises during the Term of the Lease. Except as to injury to persons or damage to property to the extent arising from the willful misconduct or the negligence of Landlord, its agents, servants, employees, invitees, or contractors, Tenant shall hold Landlord harmless from and defend Landlord against any and all expenses, including reasonable attorneys’ fees, in connection therewith, arising out of any injury to or death of any person or damage to or destruction of property occurring in, on or about the Premises, or any part thereof, caused by Tenant, its subtenants and/or assignees and their respective agents, employees, invitees and/or contractors, accruing and/or occurring during the Term of this Lease. The provisions of this Paragraph 18 shall survive the expiration or termination of this Lease. The provisions of this Paragraph 18 shall not be effective until the earlier of (i) the Lease Commencement Date or (ii) entry to the Premises by any of the Tenant Related Parties under Paragraph 2.C (Term: Early Entry).

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19. COMPLIANCE. Tenant, at its sole cost and expense, shall promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements (“Code Requirements”) now or hereafter in effect governing Tenant’s use or occupancy of the Premises including, but not limited to, compliance required by the governing agency(ies) due to any improvements to the Premises made by and/or for Tenant; with the requirements of any board of fire underwriters or other similar body now or hereafter constituted; and with any direction or occupancy certificate issued pursuant to law by any public officer; provided, however, that no such failure shall be deemed a breach of the provisions if Tenant, immediately upon notification, commences to remedy or rectify said failure. The judgment of any court of competent jurisdiction or the admission of Tenant in any action against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any such law, statute, ordinance or governmental rule, regulation, requirement, direction or provision, shall be conclusive of that fact as between Landlord and Tenant. Tenant shall, at its sole cost and expense, comply with any and all requirements pertaining to said Premises, of any insurance organization or company, necessary for the maintenance of reasonable fire and public liability insurance covering requirements pertaining to said Premises. The provisions of this Paragraph 19 shall survive the expiration or termination of this Lease.

Any non-conformance of the Premises and/or the Landlord Interior Improvements installed by Landlord as detailed in Paragraph 1.C (Interior Improvements) of the Construction Agreement, required by the governing agency to be corrected, shall be corrected at the cost and expense of Landlord if such non-conformance exists as of the Commencement Date of this Lease and further provided that such governing agency’s requirement to correct the non-conformance is not initiated as a result of: (i) any other improvements and/or Alterations made by or for Tenant; or (ii) any permit request made to a governing agency by or for Tenant. Notwithstanding anything to the contrary herein, if any Code Requirements are not related to Tenant’s use and/or caused by Tenant, Landlord shall take the action to comply with said Code Requirements and Tenant shall pay its Proportionate Share of said costs monthly over the term remaining in the initial Term.

20. LIENS. Tenant shall keep the Premises free from any liens arising out of any work performed, materials furnished or obligation incurred by Tenant. In the event that Tenant shall not, within ten (10) days following notice of the imposition of such lien, cause the same to be released of record, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but no obligation, to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord for such purpose, and all expenses incurred by it in connection therewith, shall be payable to Landlord by Tenant on demand with interest at the higher of the (i) prime rate of interest as quoted by the Bank of America or (ii) Landlord’s borrowing rate (the “Interest Rate”).

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21. ASSIGNMENT AND SUBLETTING.

A. Requirements. Tenant shall not assign, transfer, or hypothecate the leasehold estate under this Lease, or any interest therein, and shall not sublet the Premises, or any part thereof, or any right or privilege appurtenant thereto, or suffer any other person or entity to occupy or use the Premises, or any portion thereof, without, in each case, the prior written consent of Landlord which consent will not be unreasonably withheld. Notwithstanding the above, in the event Tenant enters into a merger and/or acquisition agreement whereby fifty percent (50%) or more of Tenant’s stock and/or assets are transferred to a third party entity, not including any offering of Tenant’s stock on any nationally recognized public stock market and any subsequent purchases and sales of such stock thereon (“Change in Control”), said Change in Control will require Landlord’s consent pursuant to the terms of this Paragraph 21.A but subject to Paragraph 21.E (Permitted Transfers), and Landlord may, at Landlord’s option, require that said acquiring entity also be named as a Tenant under this Lease; however, a sale of Tenant’s capital stock through any public or over-the-counter exchange shall not be deemed an assignment or a Change in Control. Except with Landlord’s prior written consent, which may be withheld at Landlord’s sole and absolute discretion, and otherwise subject to the terms and conditions of this Paragraph 21, Tenant shall not sublet the Premises, or any part thereof, to more than two (2) subtenants at any one point in time; provided, however in the event Tenant leases one hundred percent (100%) of said Building, it may have a maximum of two (2) subtenants per floor subject to the terms and conditions of this Paragraph 21, without Landlord’s prior written consent, which consent may be withheld at Landlord’s sole and absolute discretion and a maximum of four (4) subleases to Tenant Business Partners as defined in Paragraph 21.E (Permitted Transfers) below. Tenant’s failure to obtain Landlord’s prior written consent before entering into any such assignment, transfer and/or subletting shall be considered a default under this Lease and Landlord shall retain all of its rights under the Lease, including the right to elect, at Landlord’s sole and absolute discretion, to terminate either the Lease and/or the related sublease if Tenant does not rescind the assignment, transfer or subletting within ten (10) days after written notice from Landlord. As a condition for Landlord granting its consent to any subletting, Landlord shall require for each such subletting, that: (i) the sublease be a triple net sublease and that the basic rent due under any such sublease be no less than the then current market rent for subleases with annual increases at the then prevailing market rent for subleases; (ii) the sublease shall require that the security deposit due under the sublease be in the form of a letter of credit drawn upon an institutional lender acceptable and accessible to Landlord in form and content reasonably satisfactory to Landlord, with the letter of credit being assignable to Landlord, at no cost to Landlord, upon notice to said financial institution of a default by Tenant under the Lease; (iii) the sublease shall not provide for subtenant to have an option to extend the term of the sublease or an option to expand the sublet space; and (iv) the Tenant shall pay to Landlord, monthly throughout the term of each approved sublease, fifty percent (50%) of all rents and/or additional consideration due Tenant from the subtenant in excess of the Rent payable by Tenant to Landlord hereunder for each such subleased space (“Excess Rent”) (with said Excess Rent subject to the terms of Lease Paragraph 4.C (Late Charge) and Lease Paragraph 24 (Bankruptcy and Default); provided, however, that before payment to Landlord of such Excess Rent, Tenant shall first be entitled to recover from such Excess Rent the amount of the reasonable leasing commission related to said sublease transaction paid by Tenant to a third party broker not affiliated with Tenant. Notwithstanding anything to the contrary above, in the event Tenant subleases all or any portion of the Premises during the Basic Rent Abatement Period referenced in Paragraph 4.A (Rent: Basic Rent Abatement), one hundred percent (100%) of all Rent and/or additional consideration due Tenant from its subtenants during the Basic Rent Abatement Period shall be payable by Tenant to Landlord and Tenant agrees that during said Basic Rent Abatement Period Tenant shall not enter into any sublease whereby the subtenant receives free and/or reduced Rent during the first thirty-six (36) months of the sublease term. Tenant shall, by thirty (30) days written notice, advise Landlord of its intent to assign or transfer Tenant’s interest in the Lease or sublet the Premises or any portion thereof for any part of the Term hereof. If more than forty-nine percent (49%) of the Premises is to be subleased for all or substantially all of the remaining Term, Landlord may, within thirty (30) days after receipt of said written notice, in its sole discretion, elect to terminate this Lease as to the portion of the Premises described in Tenant’s notice on the projected sublease commencement date specified in Tenant’s notice by giving Tenant written notice of such election to terminate. If no such notice to terminate is received by Tenant within said thirty (30) day period, Tenant may proceed to locate an acceptable sublessee, assignee, or other transferee for presentment to Landlord for Landlord’s approval, all in accordance with the terms, covenants, and conditions of this Paragraph 21. Tenant shall provide Landlord with (a) a copy of the assignment and/or other transfer agreement and a copy of the certification of the change in corporate identity from the Secretary of State in the case of an assignment, or (b) a copy of the sublease in the case of a sublease for Landlord’s review, and upon Landlord’s approval of Tenant’s request to sublease and/or assign, Tenant and the assignee, transferee or subtenant shall execute Landlord’s standard written consent. If Tenant intends to sublet the entire Premises and Landlord elects to terminate this Lease, this Lease shall be terminated on the date specified in Landlord’s notice of its election to so terminate the Lease. If, however, this Lease shall terminate pursuant to the foregoing with respect to less than all the Premises, the Rent, as defined and reserved hereinabove shall be adjusted on a pro rata basis to the number of square feet retained by Tenant, and this Lease as so amended shall continue in full force and effect and Landlord, at its cost and expense, shall separately demise the remaining portion of the Premises leased to Tenant. In the event Tenant is allowed to assign, transfer or sublet the whole or any part of the Premises, with the prior written consent of Landlord, no assignee, transferee or subtenant shall assign or transfer this Lease, either in whole or in part, or sublet the whole or any part of the Premises, without also having obtained the prior written consent of Landlord. Notwithstanding the above, in no event shall Landlord consent to a sub-sublease. A consent of Landlord to one assignment, transfer, hypothecation, subletting, occupation or use by any other person shall not release Tenant from any of Tenant’s obligations hereunder or be deemed to be a consent to any subsequent similar or dissimilar assignment, transfer, hypothecation, subletting, occupation or use by any other person. Any such assignment, transfer, hypothecation, subletting, occupation or use without such consent shall be void and shall constitute a breach of this Lease by Tenant and shall, at the option of Landlord exercised by written notice to Tenant, terminate this Lease. The leasehold estate under this Lease shall not, nor shall any interest therein, be assignable for any purpose by operation of law without the written consent of Landlord. As a condition to its consent, Landlord shall require Tenant to pay all expenses in connection with any and all subleases and/or assignments and/or any amendments related thereto, including but not limited to Landlord’s fees for the processing and administration of the consent documentation and Landlord’s attorneys’ fees (if any), and Landlord shall require Tenant’s subtenant, assignee or transferee (or other assignees or transferees) to assume in writing all of the obligations under this Lease and for Tenant to remain liable to Landlord under the Lease. Notwithstanding anything to the contrary herein, under no event will Landlord consent to an assignment or transfer of less than One Hundred Percent (100%) of the Leased Premises.

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B. Grounds to Refuse Proposed Transfer. Notwithstanding the foregoing, Landlord and Tenant agree that it shall not be unreasonable for Landlord to refuse to consent to a proposed assignment, sublease or other transfer (“Proposed Transfer”) if the Premises or any other portion of the Parcel would become subject to additional or different Government Requirements as a direct or indirect consequence of the Proposed Transfer and/or the Proposed Transferee’s use and occupancy of the Premises and the Property. However, Landlord may, in its sole discretion, consent to such a Proposed Transfer where Landlord is indemnified by Tenant and (i) the subtenant or (ii) the assignee, in form and substance satisfactory to Landlord and/or to Landlord’s counsel, from and against any and all costs, expenses, obligations and liability arising out of the Proposed Transfer and/or the Proposed Transferee’s use and occupancy of the Premises and the Property.

C. Voluntary Termination of Lease – Required Sublease Language. Any and all sublease agreement(s) between Tenant and any and all subtenant(s) (“Subtenant”) (which agreements must be consented to by Landlord, pursuant to the requirements of this Lease) shall contain the following language:

“If Landlord and Tenant jointly and voluntarily elect, for any reason whatsoever, to terminate the Master Lease prior to the scheduled Master Lease termination date, then, if Landlord so elects, this Sublease (if then still in effect) shall terminate concurrently with the termination of the Master Lease. Subtenant expressly acknowledges and agrees that (1) the voluntary termination of the Master Lease by Landlord and Tenant and the resulting termination of this Sublease shall not give Subtenant any right or power to make any legal or equitable claim against Landlord, including without limitation any claim for interference with contract or interference with prospective economic advantage, and (2) Subtenant hereby waives any and all rights it may have under law or at equity against Landlord to challenge such an early termination of the Sublease, and unconditionally releases and relieves Landlord, and its officers, directors, employees and agents, from any and all claims, demands, and/or causes of action whatsoever (collectively, “Claims”), whether such matters are known or unknown, latent or apparent, suspected or unsuspected, foreseeable or unforeseeable, which Subtenant may have arising out of or in connection with any such early termination of this Sublease. Subtenant knowingly and intentionally waives any and all protection which is or may be given by Section 1542 of the California Civil Code which provides as follows: “A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with debtor.

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The term of this Sublease is therefore subject to early voluntary termination under this provision in event Landlord and Tenant both voluntarily agree to such early termination of the Lease. Subtenant’s initials here below evidence (a) Subtenant’s consideration of and agreement to this early termination provision, (b) Subtenant’s acknowledgment that, in determining the net benefits to be derived by Subtenant under the terms of this Sublease, Subtenant has anticipated the potential for early termination, and (c) Subtenant’s agreement to the general waiver and release of Claims above. However, the foregoing does not serve to release Tenant of liability to Subtenant for any termination of the Lease by Tenant in violation of this Sublease or imply that Tenant has any duty to negotiate with Landlord an early termination of the Lease.

Initials:		Initials:	”
	Subtenant		Tenant

D. State of Incorporation Change; Name Change. Notwithstanding anything to the contrary above, Tenant’s re-incorporation in another jurisdiction and/or the act of Tenant changing Tenant’s legal name shall not be considered an assignment; however, (i) Tenant shall provide Landlord with notice of such change in Tenant’s name and/or state of incorporation, which notice shall include a copy of the certification from the Secretary of State and (ii) Tenant and Landlord shall execute Landlord’s standard acknowledgement for any such change in Tenant’s name and/or state of incorporation.

E. Permitted Transfers. Notwithstanding anything to the contrary in Paragraphs 21.A through 21.C above, and provided Tenant is not in default of this Lease beyond the applicable notice and cure period, Landlord hereby agrees that: (1) Landlord shall consent to Tenant’s assigning or subletting said Lease to: (i) any parent or subsidiary corporation, or corporation with which Tenant merges or consolidates provided said entity’s use of the Premises is the same as Tenant’s use and that (a) said affiliate or successor owns all or substantially all of the assets of Tenant and becomes jointly and severally liable with Tenant for the Term of this Lease from the Lease Commencement Date through the scheduled Lease Termination Date (or the extended Lease Termination Date if said date is extended), (b) the net worth of said parent or subsidiary corporation, or said surviving corporation is equal to or greater than Tenant’s net worth (x) at the Commencement Date or (y) at the time of such assignment, merger, or consolidation, whichever is greater (collectively “Permitted Transfers”), and (c) Tenant shall give Landlord written notice at least thirty (30) days prior to the effective date of the proposed purchase, merger, consolidation or reorganization (unless such thirty (30)-day notice would be in violation of contract or applicable law, in which case, said notice will be given immediately following the expiration date of any such legal restriction; a Permitted Transfer includes a sublease to any company with which Tenant is then collaborating on product design, development, production or marketing (“Tenant Business Partners”) if the following criteria are met: (i) the subtenant’s right to possession must be conditioned upon it remaining one of Tenant’s Business Partners; (ii) amounts payable thereunder are for recovery of Tenant’s costs only, with no profit or mark-up; (iii) there are no more than four (4) subleases in effect with Tenant Business Partners at any point in time; (iv) no more than 4,000+ square feet of the Premises is subject to subleases with Tenant Business Partners; and (v) each of Tenant’s Business Partners must assume as to the subleased space all obligations of Tenant under this Lease (other than the obligation to pay Rent) and each such Tenant Business Partner shall be required to execute a consent to sublease agreement between Landlord, Tenant and the respective Tenant Business Partner.

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No such assignment or subletting or sale of stock will release the Tenant from its liability and responsibility under this Lease. Notwithstanding the above, Tenant shall be required to (a) give Landlord written notice prior to such assignment or subletting or sale of stock to any party as described above, (b) execute Landlord’s consent document prepared by Landlord reflecting the assignment or subletting and (c) pay Landlord’s reasonable costs for processing said Consent prior to the effective date of said assignment or sublease. Nothing herein shall be deemed to permit (i) any assignee to further assign this Lease or sublet all or any portion of the Premises or (ii) any subtenant to assign its interest in the sublease or further sublet the Premises to any other party, in each case without Landlord’s prior written consent.

22. SUBORDINATION AND MORTGAGES. In the event Landlord’s title or leasehold interest is now or hereafter encumbered by a deed of trust, upon the interest of Landlord in the Premises and Building in which the demised Premises are located, to secure a loan from a lender (hereinafter referred to as “Lender”) to Landlord, Tenant shall, at the request of Landlord or Lender, execute in writing an agreement (in form reasonably acceptable to Tenant), subordinating its rights under this Lease to the lien of such deed of trust, or, if so requested, agreeing that the lien of Lender’s deed of trust shall be or remain subject and subordinate to the rights of Tenant under this Lease, provided that any automatic subordination to the lien of any deed of trust shall be contingent upon Tenant obtaining commercially reasonable non-disturbance protection which provides that such party agrees to recognize all of Tenant’s rights under the Lease, including but not limited to Tenant’s right to Basic Rent Abatement, if applicable, so long as Tenant is not in default beyond the applicable notice and cure period.

23. ENTRY BY LANDLORD. Landlord reserves, and shall at all reasonable times after at least twenty four (24) hours’ notice (except in emergencies) have the right to enter the Premises to inspect them; to perform any services to be provided by Landlord hereunder; to make repairs or provide any services to a contiguous tenant(s) (if any); to submit the Premises to prospective purchasers, mortgagers or tenants; to post notices of non-responsibility; and to alter, improve or repair the Premises or other parts of the Building, all without abatement of Rent, and may erect scaffolding and other necessary structures in or through the Premises where reasonably required by the character of the work to be performed; provided, however that the business of Tenant shall be interfered with to the least extent that is reasonably practical and Landlord shall comply with Tenant’s reasonable security measures. Any entry to the Premises by Landlord for the purposes provided for herein shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into or a detainer of the Premises or an eviction, actual or constructive, of Tenant from the Premises or any portion thereof.

24. BANKRUPTCY AND DEFAULT. The commencement of a bankruptcy action or liquidation action or reorganization action or insolvency action or an assignment of or by Tenant for the benefit of creditors, or any similar action undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord’s option, constitute a breach of this Lease by Tenant. If the trustee or receiver appointed to serve during a bankruptcy, liquidation, reorganization, insolvency or similar action elects to reject Tenant’s unexpired Lease, the trustee or receiver shall notify Landlord in writing of its election within thirty (30) days after an order for relief in a liquidation action or within thirty (30) days after the commencement of any action.

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Within thirty (30) days after the court approval of the assumption of this Lease, the trustee or receiver shall cure (or provide adequate assurance to the reasonable satisfaction of Landlord that the trustee or receiver shall cure) any and all previous defaults under the unexpired Lease and shall compensate Landlord for all actual pecuniary loss and shall provide adequate assurance of future performance under said Lease to the reasonable satisfaction of Landlord. Adequate assurance of future performance, as used herein, includes, but shall not be limited to: (i) assurance of source and payment of Rent, and other consideration due under this Lease; (ii) assurance that the assumption or assignment of this Lease will not breach substantially any provision, such as radius, location, use, or exclusivity provision, in any agreement relating to the above described Premises.

Nothing contained in this section shall affect the existing right of Landlord to refuse to accept an assignment upon commencement of or in connection with a bankruptcy, liquidation, reorganization or insolvency action or an assignment of Tenant for the benefit of creditors or other similar act. Nothing contained in this Lease shall be construed as giving or granting or creating an equity in the demised Premises to Tenant. In no event shall the leasehold estate under this Lease, or any interest therein, be assigned by voluntary or involuntary bankruptcy proceeding without the prior written consent of Landlord. In no event shall this Lease or any rights or privileges hereunder be an asset of Tenant under any bankruptcy, insolvency or reorganization proceedings.

The failure to perform or honor any covenant, condition or representation made under this Lease shall constitute a default under this Lease by Tenant upon expiration of the appropriate grace period hereinafter provided. Tenant shall have a period of five (5) days from the date of written notice from Landlord within which to cure any default in the payment of Rent or adjustment thereto. Tenant shall have a period of thirty (30) days from the date of written notice from Landlord within which to cure any other non-monetary default under this Lease; provided, however, that with respect to non-monetary defaults not involving Tenant’s failure to pay Basic Rent or Additional Rent, Tenant shall not be in default if (i) more than thirty (30) days is required to cure such non-monetary default and (ii) Tenant commences cure of such default as soon as reasonably practicable after receiving written notice of such default from Landlord and thereafter continuously and with due diligence prosecutes such cure to completion. Upon an uncured default of this Lease by Tenant, Landlord shall have the following rights and remedies in addition to any other rights or remedies available to Landlord at law or in equity:

(a) The rights and remedies provided for by California Civil Code Section 1951.2 including but not limited to, recovery of the worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of rental loss for the same period that Tenant proves could be reasonably avoided, as computed pursuant to subsection (b) of said Section 1951.2. Any proof by Tenant under subparagraphs (2) and (3) of Section 1951.2 of the California Civil Code of the amount of rental loss that could be reasonably avoided shall be made in the following manner: Landlord and Tenant shall each select a licensed real estate broker in the business of renting property of the same type and use as the Premises and in the same geographic vicinity. Such two real estate brokers shall select a third licensed real estate broker, and the three licensed real estate brokers so selected shall determine the amount of the Rent loss that could be reasonably avoided from the balance of the Term of this Lease after the time of award. The decision of the majority of said licensed real estate brokers shall be final and binding upon the parties hereto. As part of such damages, Landlord shall have the right to recover that portion of any leasing commission paid by Landlord in connection with this Lease applicable to the unexpired Term of this Lease.

(b) The rights and remedies provided by California Civil Code Section 1951.4, which allows Landlord to continue the Lease in effect and to enforce all of its rights and remedies under this Lease, including the right to recover Rent as it becomes due, for so long as Landlord does not terminate Tenant’s right to possession; acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver upon Landlord’s initiative to protect its interest under this Lease shall not constitute a termination of Tenant’s right to possession.

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(c) The right to terminate this Lease by giving notice to Tenant in accordance with applicable law.

(d) To the extent permitted by law, the right and power to enter the Premises and remove therefrom all persons and property, to store such property in a public warehouse or elsewhere at the cost of and for the account of Tenant, and to sell such property and apply such proceeds therefrom pursuant to applicable California law. Landlord may from time to time sublet the Premises or any part thereof for such term or terms (which may extend beyond the Term of this Lease) and at such Rent and such other terms as Landlord in its reasonable sole discretion may deem advisable, with the right to make alterations and repairs to the Premises. Upon each subletting, (i) Tenant shall be immediately liable to pay Landlord, in addition to indebtedness other than Rent due hereunder, the reasonable cost of such subletting, including, but not limited to, reasonable attorneys’ fees, and any real estate commissions actually paid, and the cost of such reasonable alterations and repairs incurred by Landlord and the amount, if any, by which the Rent hereunder for the period of such subletting (to the extent such period does not exceed the Term hereof) exceeds the amount to be paid as Rent for the Premises for such period or (ii) at the option of Landlord, rents received from such subletting shall be applied first to payment of indebtedness other than Rent due hereunder from Tenant to Landlord; second, to the payment of any costs of such subletting and of such alterations and repairs; third, to payment of Rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future Rent as the same becomes due hereunder. If Tenant has been credited with any Rent to be received by such subletting under option (i) and such Rent shall not be promptly paid to Landlord by the subtenant(s), or if such rentals received from such subletting under option (ii) during any month be less than that to be paid during the month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant. Notwithstanding any such subletting without termination, Landlord may at any time hereafter elect to terminate this Lease for such previous breach.

(e) The right to have a receiver appointed for Tenant upon application by Landlord, to take possession of the Premises and to apply any rental collected from the Premises and to exercise all other rights and remedies granted to Landlord pursuant to subparagraph (d) above.

25. ABANDONMENT. Tenant shall not vacate or abandon the Premises at any time during the Term of this Lease and if Tenant shall abandon, vacate or surrender said Premises, or be dispossessed by the process of law, or otherwise, any personal property belonging to Tenant and left on the Premises shall be deemed to be abandoned, at the option of Landlord, except such property as may be mortgaged to Landlord. Notwithstanding the above, Tenant shall not be in default under the Lease if it leaves all or any part of Premises vacant so long as (i) Tenant is performing all of its other obligations under the Lease including the obligation to pay Rent, (ii) Tenant provides on-site security during normal business hours for those parts of the Premises left vacant, (iii) such vacancy does not materially and adversely affect the validity or coverage of any policy of insurance carried by Landlord with respect to the Premises, and (iv) the utilities and heating and ventilation systems are operated and maintained to the extent necessary to prevent damage to the Premises or its systems. The provisions of this Paragraph 25 shall not be effective until the earliest of (a) the Lease Commencement Date, (b) entry to the Premises by any of the Tenant Related Parties under Paragraph 2.C (Term: Early Entry) or (c) an uncured Tenant default under the Lease and/or Construction Agreement.

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26. DESTRUCTION. In the event the Premises are destroyed in whole or in part from any cause, Landlord may, at its option:

(a) Rebuild or restore the Premises to the condition prior to the damage or destruction as provided for herein, or

(b) Terminate this Lease if either (i) the Premises is damaged to the extent of fifty percent (50%) or more of the replacement cost, exclusive of footings, foundations and floor slabs or (ii) in the event of an uninsured event or if insurance proceeds are insufficient to cover one hundred percent (100%) of the rebuilding costs. However, in such event of Landlord’s election to terminate for a Shortfall, Tenant shall have the right to elect to pay to Landlord the Shortfall provided it provides Landlord with written notification of its commitment to do so within five (5) business days of receipt of Landlord’s notice to terminate the Lease as provided in this section (ii) and agrees to fund the Shortfall by making payment to Landlord within thirty (30) days of receipt of Landlord’s invoice for said Shortfall.

If Landlord does not give Tenant notice in writing within thirty (30) days from the destruction of the Premises of its election to either rebuild and restore them, or to terminate this Lease, Landlord shall be deemed to have elected to rebuild or restore them, in which event Landlord agrees, at its expense except for any deductible, which is the responsibility of the Tenant, promptly to rebuild or restore the Premises to their condition prior to the damage or destruction. Tenant shall be entitled to a reduction in Rent from the date of such damage or destruction (provided (i) said areas so damaged cannot be used by Tenant and (ii) Tenant is not using any portion of such damaged area, while such repair is being made in the proportion that the area of the Premises rendered untenantable by such damage bears to the total area of the Premises).

If Landlord initially estimates that the rebuilding or restoration will exceed two hundred (200) days following the date of destruction (“Estimated Repair Period”) (such Estimated Repair Period to be extended for delays caused by the fault or neglect of Tenant or because of Acts of God, acts of public agencies, labor disputes, strikes, fires, freight embargos, rainy or stormy weather, inability to obtain materials, supplies or fuels, acts of contractors or subcontractors, or delay of the contractors or subcontractors due to such causes or other contingencies beyond the control of Landlord) (the “Allowed Restoration Period”), and provided that the damage or destruction was not caused from maintenance and/or repairs by Tenant or damage or destruction caused by vandalism and accidents for which any or all of the Tenant Related Parties are responsible, Tenant shall have the right to terminate this Lease by giving written notice to Landlord of its election to terminate within ten (10) business days following receipt of Landlord’s notice to Tenant. In the event Tenant does not timely deliver such notice to Landlord, Tenant shall not have a further right to terminate the Lease. Notwithstanding anything herein to the contrary, Landlord’s obligation to rebuild or restore shall be limited to the Building and Landlord’s Interior Improvements constructed by Landlord as they existed under the Construction Agreement and shall not include restoration of Tenant’s trade fixtures, equipment, merchandise, or any improvements, alterations or additions made by Tenant to the Premises, which Tenant shall forthwith replace or fully repair at Tenant’s sole cost and expense provided this Lease is not canceled according to the provisions above.

Unless this Lease is terminated pursuant to the foregoing provisions, this Lease shall remain in full force and effect. Tenant hereby expressly waives the provision of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of the California Civil Code.

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In any event that the Building in which the Premises are situated is damaged or destroyed to the extent of not less than fifty percent (50%) of the replacement cost thereof, Landlord may elect to terminate this Lease, whether the Premises be injured or not.

If Landlord elects to terminate the Lease early due to destruction as provided herein and Tenant is not responsible in part or in whole for said damage, Tenant shall not be liable for the insurance deductible as it relates to the Premises; however (i) if Landlord does not elect to terminate and/or (ii) if Tenant elects to terminate and/or is responsible in part or in whole for said damage, Tenant shall remain liable for payment of the insurance deductible as it relates to the Premises.

27. EMINENT DOMAIN. If all or any part of the Premises shall be taken by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof, this Lease shall terminate as to any portion of the Premises so taken or conveyed on the date when title vests in the condemnor, and Landlord shall be entitled to any and all payment, income, rent, award, or any interest therein whatsoever which may be paid or made in connection with such taking or conveyance, and Tenant shall have no claim against Landlord or otherwise for the value of any unexpired Term of this Lease. Notwithstanding the foregoing sentence, any compensation specifically awarded Tenant for loss of business, Tenant’s personal property, moving costs or loss of goodwill, shall be and remain the property of Tenant.

If any action or proceeding is commenced for such taking of the Premises or any part thereof, or if Landlord is advised in writing by any entity or body having the right or power of condemnation of its intention to condemn the Premises or any part thereof, then Landlord shall have the right to terminate this Lease by giving Tenant written notice thereof within sixty (60) days of the date of receipt of said written advice, or commencement of said action or proceeding, or taking conveyance, which termination shall take place as of the first to occur of the last day of the calendar month next following the month in which such notice is given or the date on which title to the Premises shall vest in the condemnor.

In the event of such a partial taking or conveyance of the Premises, if the portion of the Premises taken or conveyed is so substantial that the remaining Premises is not reasonably suitable for the conduct of Tenant’s business, in Tenant’s good faith judgment, Tenant shall have the privilege of terminating this Lease within sixty (60) days from the date of such taking or conveyance, upon written notice to the Landlord of its intention so to do, and upon giving of such notice this Lease shall terminate on the last day of the calendar month next following the month in which such notice is given, upon payment by Tenant of the Rent from the date of such taking or conveyance to the date of termination.

If a portion of the Premises be taken by condemnation or conveyance in lieu thereof and neither Landlord nor Tenant shall terminate this Lease as provided herein, this Lease shall continue in full force and effect as to the part of the Premises not so taken or conveyed, and the Rent herein shall be apportioned as of the date of such taking or conveyance so that thereafter the Rent to be paid by Tenant shall be in the ratio that the area of the portion of the Premises not so taken or conveyed bears to the total area of the Premises prior to such taking.

28. SALE OR CONVEYANCE BY LANDLORD. In the event of a sale or conveyance of the Premises or any interest therein, by any owner of the reversion then constituting Landlord, and subject to compliance by Landlord with Paragraph 47 below, the transferor shall thereby be released from any further liability upon any of the terms, covenants or conditions (express or implied) herein contained in favor of Tenant, and in such event, insofar as such transfer is concerned, Tenant agrees to look solely to the responsibility of the successor in interest of such transferor in and to the Premises and this Lease for any obligations of Landlord first accruing after the date of such transfer, unless the successor in interest has also agreed in writing to assume any prior obligations of Landlord, in which event Tenant shall look to the successor in interest for any obligations of Landlord that may have accrued prior to as well as after said sale or conveyance by Landlord. This Lease shall not be affected by any such sale or conveyance, and Tenant agrees to attorn to the successor in interest of such transferor.

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29. ATTORNMENT TO LENDER OR THIRD PARTY. In the event the interest of Landlord in the land and Building in which the Premises are located (whether such interest of Landlord is a fee title interest or a leasehold interest) is encumbered by deed of trust, and such interest is acquired by the lender or any third party through judicial foreclosure or by exercise of a power of sale at private trustee’s foreclosure sale, Tenant hereby agrees to attorn to the purchaser at any such judicial foreclosure or foreclosure sale and to recognize such purchaser as the Landlord under this Lease. In the event the lien of the deed of trust securing the loan from a Lender to Landlord is prior and paramount to the Lease, this Lease shall nonetheless continue in full force and effect for the remainder of the unexpired Term hereof, at the same rental herein reserved and upon all the other terms, conditions and covenants herein contained. In addition to and not withstanding anything to the contrary above, this Lease shall bind any successor in interest to Landlord, including any party foreclosing any security interest to which the Premises may be subject, including foreclosure by judicial process and sale under any power provided in any deed of trust, and Tenant shall not be required to waive any right herein provided.

30. HOLDING OVER. Any holding over by Tenant after expiration or other termination of the Term of this Lease shall not constitute a renewal or extension of the Lease or give Tenant any rights in or to the Premises except as expressly provided in this Lease. Any holding over after the expiration or other termination of the Term of this Lease shall be construed to be a tenancy from month to month, on the same terms and conditions herein specified insofar as applicable except that the monthly Basic Rent shall be increased to an amount equal to one hundred fifty (150%) percent of the monthly Basic Rent required during the last month of the Term (“Hold Over Basic Rent”); provided, however, that the monthly Rent shall be prorated based on the actual number of days in the month for any partial month of the holding over. Holding over conduct within the meaning of the Lease and this Paragraph 30 shall also include the failure by Tenant to surrender the Premises on the Termination Date in the physical condition described in Paragraphs 5 (Acceptance and Surrender of Premises), 7 (Alterations and Additions) and 10 (Tenant Maintenance) for which conduct Tenant shall be subject to the Hold Over Basic Rent under this Paragraph until the Premises is restored to the condition required under this Lease.

31. CERTIFICATE OF ESTOPPEL. Tenant shall at any time within ten (10) days of receipt of notice from Landlord execute, acknowledge and deliver to Landlord an estoppel statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which the Basic Rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to Tenant’s knowledge, any uncured defaults on the part of Landlord hereunder, or specifying such defaults, if any, are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises. Tenant’s failure to deliver such statement within such time shall be conclusive upon Tenant that this Lease is in full force and effect, without modification except as may be represented by Landlord; that there are no uncured defaults in Landlord’s performance, and that not more than one month’s Basic Rent has been paid in advance.

32. CONSTRUCTION CHANGES. It is understood that the description of the Premises and the location of ductwork, plumbing and other facilities therein are subject to such minor changes as Landlord or Landlord’s architect determines to be desirable in the course of construction of the Premises, and no such changes shall affect this Lease or entitle Tenant to any reduction of Rent hereunder or result in any liability of Landlord to Tenant. Landlord does not guarantee the accuracy of any drawings supplied to Tenant and verification of the accuracy of such drawings rests with Tenant.

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33. RIGHT OF LANDLORD TO PERFORM. All terms, covenants and conditions of this Lease to be performed or observed by Tenant shall be performed or observed by Tenant at Tenant’s sole cost and expense and without any reduction of rent. If Tenant shall fail to pay any sum of money, or other Rent, required to be paid by it hereunder and such failure shall continue for five (5) days after written notice thereof by Landlord or shall fail to perform any other term or covenant hereunder on its part to be performed, and such failure shall continue for thirty (30) days after written notice thereof by Landlord (or such longer grace period as provided under Paragraph 24), Landlord, without waiving or releasing Tenant from any obligation of Tenant hereunder, may, but shall not be obliged to, make any such payment or perform any such other term or covenant on Tenant’s part to be performed. All sums so paid by Landlord and all necessary costs of such performance by Landlord together with interest thereon at the Interest Rate (as defined in Paragraph 20 (Liens) above) from the date of such payment or performance by Landlord, shall be paid (and Tenant covenants to make such payment) to Landlord within five (5) days after demand by Landlord, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of nonpayment by Tenant as in the case of failure by Tenant in the payment of Rent hereunder.

34. ATTORNEYS’ FEES.

A. In the event that either Landlord or Tenant should bring suit for the possession of the Premises, for the recovery of any sum due under this Lease, or because of the breach of any provision of this Lease, or for any other relief against the other party hereunder, then all costs and expenses, including reasonable attorneys’ fees, incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgment.

B. Should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of Tenant’s occupancy hereunder, Tenant shall pay to Landlord its costs and expenses incurred in such suit, including reasonable attorneys’ fees.

C. Any deposition of Landlord and/or its agents, whether initiated by Landlord or Tenant, shall be administered and taken at Landlord’s place of business.

35. WAIVER. The waiver by either party of the other party’s failure to perform or observe any term, covenant or condition herein contained to be performed or observed by such waiving party shall not be deemed to be a waiver of such term, covenant or condition or of any subsequent failure of the party failing to perform or observe the same or any other such term, covenant or condition therein contained, and no custom or practice which may develop between the parties hereto during the Term hereof shall be deemed a waiver of, or in any way affect, the right of either party to insist upon performance and observance by the other party in strict accordance with the terms hereof.

36. NOTICES. All notices, demands, requests, advices or designations which may be or are required to be given by either party to the other hereunder shall be in writing.

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To Tenant: All notices, demands, requests, advices or designations by Landlord to Tenant shall be sufficiently given, made or delivered if personally served on Tenant by leaving the same at the Premises or if sent by United States certified or registered mail, postage prepaid or by a reputable commercial carrier’s same day or overnight service addressed to Tenant at the following addresses:

Prior to Lease Commencement	After Lease Commencement
Attn: Chief Financial Officer	Attn: Chief Financial Officer
303 Velocity Way	6750 Dumbarton Circle
Foster City, CA 94404	Fremont, CA 94555
(650) 357-3131 (phone)	(510)     -         (phone) (To be supplied post-execution)
(650) 357-3832 (fax)	(510)     -         (fax) (To be supplied post-execution)
Vincent.Pilette@efi.com (email)*	Vincent.Pilette@efi.com (email)*

If notice is for a monetary default, copy to:

Attn: Chief Executive Officer

303 Velocity Way

Foster City, CA 94404

(650) 357-3608 (phone)

(650) 357-3765 (fax)

Guy.Gecht@efi.com (email)

* The inclusion of an email address does not obligate Landlord to provide a notice by electronic mail.

To Landlord: All notices, demands, requests, advices or designations by Tenant to Landlord shall be sent by United States certified or registered mail, postage prepaid, or by a reputable commercial carrier’s same day or overnight service addressed to Landlord at its offices at: PEERY/ARRILLAGA, 2450 WATSON COURT, PALO ALTO, CA 94303, Attention: Company Manager.

Each notice, request, demand, advice or designation referred to in this Paragraph shall be deemed received on the date of the personal service or receipt or refusal to accept receipt of the mailing thereof in the manner herein provided, as the case may be. Either party shall have the right, upon ten (10) days written notice to the other, to change the address as noted herein; however, Landlord shall send Tenant notices to only one address of Tenant.

37. EXAMINATION OF LEASE. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for a lease, and this instrument is not effective as a lease or otherwise until its execution and delivery by both Landlord and Tenant.

38. DEFAULT BY LANDLORD. Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event later than (30) days after receipt of written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have heretofore been furnished to Tenant in writing, specifying wherein Landlord has failed to perform such obligations; provided, however, that if the nature of Landlord’s obligations is such that more than thirty (30) days are required for performance, then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion. Landlord shall, however, make a reasonable effort to take immediate action on an emergency situation that impairs (i) the safety of the Building and/or (ii) the occupancy of the Building.

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In the event during the Term of the Lease, Richard T. Peery Separate Property Trust or John Arrillaga Survivor’s Trust and/or their affiliates and/or members of their respective families do not have an interest in the Premises lease herein, then if Landlord fails to perform any of its material obligations under this Lease, and provided the work to be performed by Landlord was not caused by Tenant and/or Landlord’s delay was not caused and/or contributed to by Tenant, and such failure materially affects Tenant’s ability to reasonably use and occupy the Premises for the purposes permitted herein, Tenant shall have the right, but not the obligation, to perform such obligations of Landlord if such failure continues for more than thirty (30) days after written notice from Tenant; provided, however, that if the nature of the Landlord’s obligations is such that more than thirty (30) days are required to complete the same, Landlord shall have such additional time as is reasonably necessary to complete such obligations so long as Landlord takes appropriate action to commence the performance of the same within such thirty (30) day period and thereafter diligently pursues such obligations to completion. In such event, Landlord shall reimburse Tenant for the reasonable out of pocket costs incurred and paid by Tenant to third parties to complete such Landlord’s obligations within thirty (30) days after receipt of Tenant’s written demand therefor. If Landlord objects to the work performed or the expenses incurred by Tenant in performing such work, Landlord shall deliver a written notice of Landlord’s objection to Tenant evidencing the expenses incurred by Tenant. Landlord’s notice shall set forth in reasonable detail Landlord’s reasons for its claim that such work was not required or was not Landlord’s obligation under the terms of this Lease and/or the reasons for Landlord’s dispute of the expenses incurred by Tenant in performing such work.

39. CORPORATE AUTHORITY. If Tenant is a corporation (or a partnership), each individual executing this Lease on behalf of said corporation (or partnership) represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation (or partnership) in accordance with the by-laws of said corporation (or partnership in accordance with the partnership agreement) and that this Lease is binding upon said corporation (or partnership) in accordance with its terms. If Tenant is a corporation, Tenant shall, within thirty (30) days after execution of this Lease, deliver to Landlord a certified copy of the resolution of the Board of Directors of said corporation authorizing or ratifying the specific execution of this Lease by the individual executing this Lease. In lieu of said corporate resolution, Tenant may provide Landlord with an outside legal opinion stating that the party executing this Lease on behalf of Tenant is authorized to do so by the Board of Directors.

40. LIMITATION OF LIABILITY. In consideration of the benefits accruing hereunder, Tenant and all successors and assigns covenant and agree that, in the event of any actual or alleged failure, breach or default hereunder by Landlord:

(a) the sole and exclusive remedy shall be against Landlord’s interest in the Premises leased herein;

(b) no partner of Landlord shall be sued or named as a party in any suit or action (except as may be necessary to secure jurisdiction of the partnership);

(c) no service of process shall be made against any partner of Landlord (except as may be necessary to secure jurisdiction of the partnership);

(d) no partner of Landlord shall be required to answer or otherwise plead to any service of process;

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(e) no judgment will be taken against any partner of Landlord;

(f) any judgment taken against any partner of Landlord may be vacated and set aside at any time without hearing;

(g) no writ of execution will ever be levied against the assets of any partner of Landlord;

(h) these covenants and agreements are enforceable both by Landlord and also by any partner of Landlord.

Tenant agrees that each of the foregoing covenants and agreements shall be applicable to any covenant or agreement either expressly contained in this Lease or imposed by statute or at common law.

41. SIGNS. No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or printed or affixed on or to any part of the outside of the Building or any exterior windows of the Building without the written consent of Landlord first had and obtained and Landlord shall have the right to remove any such sign, placard, picture, advertisement, name or notice made or installed without such consent without notice to Tenant and at the expense of Tenant. Tenant may print or affix or otherwise place signs in, on, or about the interior of the Premises without Landlord’s consent where the same are not visible from the exterior of the Building. Upon expiration or other sooner termination of this Lease, Tenant at Tenant’s sole cost and expense shall remove all Tenant signs and repair all damage in such a manner as to restore all aspects of the appearance of the Premises and the monument sign to the condition prior to the placement of said signs.

All approved signs and/or lettering on sign monuments and/or interior Common Area sign directories, if any, shall be printed, painted, affixed or inscribed at the sole cost and expense of Tenant by a licensed contractor approved of by Landlord.

Tenant shall not place anything or allow anything to be placed near the glass of any window, door partition or wall which may appear unsightly from outside the Premises.

Notwithstanding anything to the contrary in this Paragraph 41 and subject to (i) Tenant complying with the Design Guidelines of the Ardenwood Corporate Commons, a copy of which has been provided to Tenant and (ii) Landlord’s approval of Tenant’s signage, Tenant shall be entitled to install, at Tenant’s sole cost and expense, Tenant’s name on (i) Tenant’s Proportionate Share of the monument sign for the Building (the exact placement and size of Tenant’s signage is to be approved by Landlord) and (ii) on the entrance door to Tenant’s Leased Premises, with the understanding that Tenant shall be liable for repairing any damage to said monument and door resulting from the installation and or removal of said signs upon Lease Termination. Notwithstanding anything to the contrary in this Paragraph 41 and subject to Landlord’s approval of Tenant’s signage, Tenant shall be entitled to use the upper approximate fifty percent (50%) of the Building monument sign.

42. CONSENT. Whenever the consent of one party to the other is required hereunder, such consent shall not be unreasonably withheld.

43. AUTHORITY TO EXECUTE. The parties executing this Lease hereby warrant and represent that they are properly authorized to execute this Lease and bind the parties on behalf of whom they execute this Lease and to all of the terms, covenants and conditions of this Lease as they relate to the respective parties hereto.

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44. HAZARDOUS MATERIALS. The provisions of this Paragraph 44 shall not be effective until the earlier of (a) the Lease Commencement Date or (b) entry to the Premises by any of the Tenant Related Parties under Paragraph 2.C (Term: Early Entry). Landlord and Tenant agree as follows with respect to the existence or use of “Hazardous Materials” (as defined herein) on, in, under or about the Premises and real property located beneath said Premises and the Common Areas of the Parcel, which includes the entire parcel of land on which the Premises are located as shown in Green on Exhibit A attached hereto (hereinafter collectively referred to as the “Property”):

A. As used herein, the term “Hazardous Materials” shall mean any material, waste, chemical, mixture or byproduct which is or hereafter is defined, listed or designated under Environmental Laws (defined below) as a pollutant, or as a contaminant, or as a toxic or hazardous substance, waste or material, or any other unwholesome, hazardous, toxic, biohazardous, or radioactive material, waste, chemical, mixture or byproduct, or which is listed, regulated or restricted by any Environmental Law (including, without limitation, petroleum hydrocarbons or any distillates or derivatives or fractions thereof, polychlorinated biphenyls, or asbestos). As used herein, the term “Environmental Laws” shall mean any applicable Federal, State of California or local government law (including common law), statute, regulation, rule, ordinance, permit, license, order, requirement, agreement, or approval, or any determination, judgment, directive, or order of any executive or judicial authority at any level of Federal, State of California or local government (whether now existing or subsequently adopted or promulgated) relating to pollution or the protection of the environment, ecology, natural resources, or public health and safety.

B. Tenant shall obtain Landlord’s written consent, which may reasonably be withheld in Landlord’s reasonable discretion, prior to the occurrence of any Tenant’s Hazardous Materials Activities (defined below) (and Tenant shall first provide Landlord with a list of said materials used and specify the location in the Premises where said materials are used and stored, the method of storage and disposal of the same, and a copy of the related permits); provided, however, that Landlord’s consent shall not be required for normal use in compliance with applicable Environmental Laws of customary household and office supplies, such as mild cleaners, lubricants and copier toner. As used herein, the term “Tenant’s Hazardous Materials Activities” shall mean any and all use, handling, generation, storage, disposal, treatment, transportation, release, discharge, or emission of any Hazardous Materials on, in, beneath, to, from, at or about the Property, or by Tenant or by any of Tenant’s agents, employees, contractors, vendors, invitees, visitors or its future subtenants or assignees, except as authorized by the preceding sentence. Tenant agrees that any and all Tenant’s Hazardous Materials Activities shall be conducted in compliance with applicable Environmental Laws at Tenant’s expense, and shall not result in any contamination of the Property or the environment. Tenant shall not discharge any Hazardous Materials in the plumbing, sewer and/or storm drains in the Premises and/or Parcel. Tenant agrees to provide Landlord with prompt written notice of any spill or release of Hazardous Materials at the Property during the Term of this Lease of which Tenant becomes aware, and further agrees to provide Landlord with prompt written notice of any violation of Environmental Laws in connection with Tenant’s Hazardous Materials Activities of which Tenant becomes aware. In the event Tenant’s Hazardous Materials Activities includes radioactive materials, Tenant acknowledges and agrees that all such radioactive materials use shall cease in sufficient time prior to the Lease Termination Date to enable Tenant to obtain complete closure and complete decommissioning of the Premises by all applicable governing agencies (local and State) by no later than the Lease Termination Date. Tenant shall provide Landlord with copies of the written confirmation by the governing agencies that closure and decommission have been completed. If Tenant’s Hazardous Materials Activities involve Hazardous Materials other than normal use of customary office supplies, Tenant also agrees that Tenant shall at Tenant’s costs and expense: (i) install such Hazardous Materials monitoring, storage and containment devices as required by applicable Environmental Law and/or the governing agencies (however, in no event shall Tenant discard any Hazardous Materials in the Building plumbing system and/or the Building sewer system) and (ii) deliver to Landlord by April 1, 2015 and on April 1 of each year thereafter during the Term of this Lease and any extended Term thereof, a written report prepared by a licensed, qualified environmental consultant, reasonably acceptable to Landlord, which confirms that Tenant is in compliance with all applicable Environmental Laws with respect to Tenant’s Hazardous Materials Activities at the Premises or if not in compliance, the corrective action required; said report shall also include a list of the Hazardous Materials used, stored and/or disposed at the Premises and the location(s) within the Premises of such Hazardous Materials use, storage and/or disposal. Tenant, at its expense, shall promptly undertake and complete any and all steps necessary to be in full compliance with applicable Environmental Laws and to fully correct any and all problems or deficiencies addressed in said report; and Tenant shall promptly provide Landlord with documentation of all such corrective action taken.

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C. Prior to termination or expiration of the Lease, Tenant, at its expense, shall (i) properly remove from the Property all Hazardous Materials which come to be located at the Property in connection with Tenant’s Hazardous Materials Activities, and (ii) fully comply with and complete all facility closure requirements of applicable Environmental Laws regarding Tenant’s Hazardous Materials Activities, including but not limited to (x) properly restoring and repairing the Property to the extent damaged by such closure activities, and (y) obtaining from the local Fire Department or other appropriate governmental authority with jurisdiction a written concurrence that closure has been completed in compliance with applicable Environmental Laws. Tenant shall promptly provide Landlord with copies of any claims, notices, work plans, data and reports prepared, received or submitted in connection with any such closure activities.

D. If Landlord reasonably believes that the Property has become contaminated as a result of Tenant’s Hazardous Materials Activities, Landlord in addition to any other rights it may have under this Lease or under Environmental Laws or other laws, may enter upon the Property and conduct inspection, sampling and analysis, including but not limited to obtaining and analyzing samples of soil and groundwater, for the purpose of determining the nature and extent of such contamination. Tenant shall promptly reimburse Landlord for the costs of such an investigation, including but not limited to reasonable attorneys’ fees Landlord incurs with respect to such investigation, but only if such investigation discloses Hazardous Materials contamination for which Tenant is liable under this Lease. Notwithstanding the above, Landlord may, at its option and in its sole and absolute discretion, choose to perform remediation and obtain reimbursement for cleanup costs as set forth herein from Tenant. Any cleanup costs incurred by Landlord as the result of Tenant’s Hazardous Materials Activities shall be reimbursed by Tenant within thirty (30) days of presentation of written documentation of the expense to Tenant by Landlord. Such reimbursable costs shall include, but not be limited to, any reasonable consultants’ and attorneys’ fees incurred by Landlord. Tenant shall take all actions necessary to preserve any claims it has against third parties, including, but not limited to, its insurers, for claims related to its operation, management of Hazardous Materials or contamination of the Property. Except as may be required of Tenant by applicable Environmental Laws, Tenant shall not perform any sampling, testing, or drilling to identify the presence of any Hazardous Materials at the Property, without Landlord’s prior written consent. Tenant shall promptly provide Landlord with copies of any claims, notices, work plans, data and reports prepared, received or submitted in connection with any sampling, testing or drilling performed pursuant to the preceding sentence.

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E. Tenant shall indemnify, defend (with legal counsel reasonably acceptable to Landlord) and hold harmless Landlord, its employees, assigns, successors, successors-in-interest, agents and representatives from and against any and all claims (including but not limited to third party claims from a private party or a government authority), liabilities, obligations, losses, causes of action, demands, governmental proceedings or directives, fines, penalties, expenses, costs (including but not limited to reasonable attorneys’, consultants’ and other experts’ fees and costs), and damages, which arise from or relate to: (i) Tenant’s Hazardous Materials Activities; (ii) any Hazardous Materials contamination caused by Tenant prior to the Commencement Date of the Lease; or (iii) the breach of any obligation of Tenant under this Paragraph 44 (collectively, “Tenant’s Environmental Indemnification”). Tenant’s Environmental Indemnification shall include but is not limited to the obligation to promptly and fully reimburse Landlord for losses in or reductions to rental income, and diminution in fair market value of the Property. Tenant’s Environmental Indemnification shall further include but is not limited to the obligation to diligently and properly implement to completion, at Tenant’s expense, any and all environmental investigation, removal, remediation, monitoring, reporting, closure activities, or other environmental response action (collectively, “Response Actions”). Tenant shall promptly provide Landlord with copies of any claims, notices, work plans, data and reports prepared, received or submitted in connection with any Response Actions.

As evidenced by their initials set forth immediately below, Tenant acknowledges that Landlord has provided Tenant with copies of the environmental reports listed on Exhibit E (“Reports”), and Tenant acknowledges that Tenant and Tenant’s experts (if any) have had ample opportunity to review such reports and that Tenant has satisfied itself as to the environmental conditions of the Property and the suitability of such conditions for Tenant’s intended use of the Property. To the best of Landlord’s actual knowledge as of the date of this Lease, except as noted in said Reports, no additional on-site Hazardous Materials contamination exists on the Property; however, Landlord shall have no obligation to further investigate.

Initial:	/S/ VP	Initial:	/S/ JA; RP
	Tenant		Landlord

It is agreed that the Tenant’s responsibilities related to Hazardous Materials will survive the expiration or termination of this Lease and that Landlord may obtain specific performance of Tenant’s responsibilities under this Paragraph 44.

45. BROKERS. Tenant represents and warrants that it has not dealt with any real estate brokers, agents, or finders in connection with the original Term of this Lease, and knows of no real estate broker, agent or finder who is entitled to a commission in connection with this Lease (“Lease Commission”), except as follows: Gregg Walker of Jones Lang LaSalle, whose Lease Commission shall be paid by Landlord in accordance with the schedule agreed to by Landlord and broker. Tenant agrees to defend, protect, indemnify and hold Landlord harmless from and against all claims for Lease Commissions, finder’s fees, and other compensation made by any other broker, agent, or finder as consequence of the Tenant’s actions or dealings with such other broker, agent or finder. The parties hereto acknowledge that Landlord will not pay an additional Lease Commission to Gregg Walker of Jones Lang LaSalle or to any other broker secured by Tenant in the event the original Term of this Lease is extended or the square footage leased hereunder is increased for any reason whatsoever.

In the event this Lease is terminated early due to an uncured default by Tenant and/or a written agreement between Landlord and Tenant to terminate the Lease prior to the scheduled Termination Date, Tenant agrees to reimburse Landlord for one hundred percent (100%) of the balance of the unamortized Lease Commission previously paid by Landlord, that is outstanding as of the early Termination Date. Said amount shall be paid by Tenant to Landlord by the Termination Date, and/or Landlord may, at its option, deduct part or all of said unamortized Lease Commission from Tenant’s Security Deposit.

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46. ASSOCIATION DUES. The Premises is part of the Ardenwood Property Owners’ Association (the “Association”), and is subject to Association Dues to fund the cost of the Association’s obligations and expenses as authorized under the By-Laws of said Association. As of the date of this Lease, Tenant’s current Proportionate Share of the Association Dues is currently estimated at Forty-Three and 34/100 Dollars ($43.34) per month and is subject to adjustment as provided for by said Association. Said Association Dues are payable by Tenant to Landlord as Additional Rent on a monthly basis throughout the Term of this Lease. Tenant understands that it will not be a direct member of the Association by virtue of this Lease.

47. OPTION TO EXTEND LEASE FOR FIVE (5) OR TEN (10) YEARS. Landlord hereby grants to Tenant an Option to Extend this Lease Agreement for an additional five (5) or ten (10) year period (as selected by Tenant) (“Extended Term”) upon the following terms and conditions;

A. Notice; Deadline. Tenant shall give Landlord written notice of Tenant’s exercise of this Option to Extend no more than twelve (12) months prior to the scheduled Lease Termination Date and no less than nine (9) months prior to the scheduled Lease Termination Date of the initial Lease Term, in which event the Lease shall be considered extended for an additional five (5) or ten (10) years (as selected by Tenant) subject to the Basic Rent to be determined pursuant to Paragraph 47.B below and the terms and conditions subject to amendment by Landlord (Landlord, in its sole and absolute discretion, may, but is not required to, incorporate its current Lease provisions that are standard in Landlord’s leases as of the date of Tenant’s exercise of its Option to Extend); and this Paragraph 47 shall thereafter be deleted. In the event that Tenant fails to timely exercise Tenant’s option as set forth herein in writing, Tenant shall have no further Option to Extend this Lease, and this Lease shall continue in full force and effect for the full remaining Term hereof, absent this Paragraph 47.

B. Notice and Acceptance of Terms. In the event Tenant timely exercises Tenant’s Option to Extend as set forth herein, Landlord shall, within fifteen (15) days after receipt of Tenant’s exercise of option, advise Tenant of the terms and conditions, Security Deposit and Basic Rent required for the Extended Term of the Lease, with the Basic Rent rate for the Extended Term being the greater of (i) the monthly Basic Rent rate due for the last month of the initial Lease Term (the “Minimum Basic Rent Rate”) or (ii) the then current market Basic Rent Rate, as determined by Landlord, for a comparable Term and for comparable buildings and improvements in Fremont, California (the “Market Basic Rent Rate”). Tenant shall have ten (10) days after receipt from Landlord of said new terms and conditions, Security Deposit and Basic Rent in which to (a) accept said new terms and conditions, Security Deposit and Basic Rent and enter into written documentation confirming same or to (b) challenge Landlord’s Market Basic Rent Rate by giving written notice of said challenge to Landlord (“Tenant’s Challenge”). In the event Tenant fails to (x) execute said written documentation confirming said new terms and conditions, Security Deposit and Basic Rent for the Extended Term of the Lease or (y) challenge Landlord’s Market Basic Rent Rate within said ten (10) day period, Tenant shall have no further Option to Extend this Lease, and this Lease shall continue in full force and effect for the full remaining Term hereof absent this Paragraph 47, with Landlord having no further responsibility or obligation to Tenant with respect to Tenant’s Option to Extend. In the event Tenant timely challenges Landlord’s Market Basic Rent Rate, Landlord and Tenant shall attempt to agree upon the Market Basic Rent Rate using their best good-faith efforts. If Landlord and Tenant fail to reach agreement within ten (10) business days of Tenant’s Challenge notice (the “Outside Agreement Date”), then each party shall make a separate determination of the Market Basic Rent Rate which shall be submitted to each other and to arbitration in accordance with the following items (i) through (vii):

(i) Landlord and Tenant shall each appoint, within ten (10) days of the Outside Agreement Date, one arbitrator who shall by profession be a current real estate appraiser of comparable commercial properties in the immediate vicinity of the Premises, and who has been active in such field over the last ten (10) years. The determination of the arbitrators shall be limited solely to the issue of whether Landlord’s or Tenant’s submitted Market Basic Rent Rate is the closest to the actual Market Basic Rent Rate as determined by the arbitrators; provided, however, the arbitrators may only select Landlord’s or Tenant’s determination of Market Basic Rent Rate and shall not be entitled to make a compromise determination.

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(ii) The two arbitrators so appointed shall within five (5) business days of the date of the appointment of the last appointed arbitrator agree upon and appoint a third arbitrator who shall be qualified under the same criteria set forth hereinabove for qualification of the initial two arbitrators.

(iii) The three arbitrators shall within fifteen (15) days of the appointment of the third arbitrator reach a decision as to whether the parties shall use Landlord’s or Tenant’s submitted Market Basic Rent Rate, and shall notify Landlord and Tenant thereof.

(iv) The decision of the majority of the three arbitrators on the Market Basic Rent Rate shall be binding upon Landlord and Tenant, however in no event will the Basic Rent during the Extended Term be less than the Minimum Basic Rent Rate with an annual increase of no less than three percent (3%). Said Minimum Basic Rent Rate is not subject to arbitration (only the Market Basic Rent Rate is subject to arbitration providing it is greater than the Minimum Basic Rent Rate).

(v) If either Landlord or Tenant fails to appoint an arbitrator within ten (10) days after the applicable Outside Agreement Date, the arbitrator appointed by one of them shall reach a decision, notify Landlord and Tenant thereof, and such arbitrator’s decision shall be binding upon Landlord and Tenant.

(vi) If the two arbitrators fail to agree upon and appoint a third arbitrator, or both parties fail to appoint an arbitrator, then the appointment of the third arbitrator or any arbitrator shall be dismissed and the matter to be decided shall be forthwith submitted to arbitration under the provisions of the American Arbitration Association.

(vii) The cost of arbitration shall be paid by Landlord and Tenant equally.

C. Personal Nature of Option to Extend. The option rights of Tenant under this Paragraph 47, and the Extended Term thereunder, are granted for Tenant’s personal benefit and may not be assigned or transferred by Tenant, either voluntarily or by operation of law, except to a Permitted Transferee provided Tenant and said Permitted Transferee have executed Landlord’s consent to assignment. In the event that Landlord consents to a sublease or assignment of this Lease under Paragraph 21, the option granted herein and any Extended Term thereunder shall be void and of no force and effect (without notice from Landlord), whether or not Tenant shall have purported to exercise such option prior to such assignment or sublease, and this Lease will continue in full force and effect for the full remaining Term hereof, absent of this Paragraph 47. Notwithstanding the foregoing, but subject to Tenant’s compliance with Paragraph 21.A, a sublease to one or more of Tenant’s Business Partners shall not impair Tenant’s Option to Extend this Lease.

D. Loss of Option to Extend Right. It is agreed that if Tenant is at any time prior to exercising its Option to Extend in default of this Lease and has failed to cure the default in the cure period provided for under this Lease, this Option to Extend is automatically forfeited by Tenant (without notice from Landlord). In the event said Option to Extend is forfeited as stated herein, Tenant shall have no further Option to Extend this Lease. It is further agreed that if Tenant has exercised its Option to Extend and is subsequently in default prior to, or at any time prior to the commencement of the Extended Term and has failed to cure the (a) monetary default within five (5) days from the date of written notice from Landlord, or (b) material non-monetary default within the cure period provided for under this Lease, Landlord may at its sole and absolute discretion, cancel and rescind Tenant’s Option to Extend, and, unless said Lease is also terminated due to said uncured default, this Lease will continue in full force and effect for the full remaining Term hereof, absent of this Paragraph 47.

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48. RIGHT OF FIRST REFUSAL TO LEASE. Provided Tenant is not in default (pursuant to Paragraph 24 of the Lease, i.e., Tenant has received notice and any applicable cure period has expired without cure) of any of the terms, covenants, and conditions of this Lease Agreement, Tenant, during the Term of this Lease and subject to the provisions hereinafter contained, shall have a Right of First Refusal to lease all or a portion of the approximately 49,606+ square feet of space as shown in Blue on Exhibit C attached hereto, consisting of the remaining space on the first floor in the Building) in which the Leased Premises are located (hereinafter referred to as “First Right Space”) upon the following terms and conditions:

A. It is understood that said First Right Space, as of the date of this Lease, is vacant and unleased. Landlord agrees that in the event Landlord receives an offer to lease all or any portion of said First Right Space from a third party, at a rental and upon terms and conditions which are satisfactory to Landlord, Landlord shall, prior to executing a lease agreement with said third party for said First Right Space, offer the same portion of said First Right Space to Tenant (“Landlord’s First Right Notice”) and advise Tenant of the per square foot Basic Rental and terms and conditions upon which Landlord is willing to lease to said third party (notwithstanding anything to the contrary, in no event shall Tenant’s Basic Rent on the First Right Space be less than the Basic Rent then scheduled under this Lease).

Tenant shall have five (5) business days after receipt of Landlord’s First Right Notice to elect, by written notice to Landlord, to lease the same portion of said First Right Space upon the rental, terms and conditions set forth in Landlord’s First Right Notice. Subject to the terms and conditions of this Paragraph, in the event Landlord’s First Right Notice is for a portion of said First Right Space, Tenant’s First Right of Refusal shall continue for the remainder of the First Right Space until such time Tenant rejects or fails to accept said rent, terms, and conditions for all of the First Right Space.

In the event Tenant, at any time, rejects or fails to accept said rent, terms, and conditions within the five (5) day period so presented in Landlord’s First Right Notice, Landlord shall be free to execute a lease with a third party with respect to the portion of said First Right Space described in Landlord’s First Right Notice, and this Lease Agreement shall continue in full force and effect for the full remaining Term hereof. Notwithstanding anything to the contrary above, Tenant’s First Right of Refusal, as relates to any portion of the First Right Space in which Tenant rejects or fails to accept, shall, subject to the terms of this Paragraph, be reinstated after the termination (of the original term and any extensions thereof) of Landlord’s third party lease agreement.

In the event Tenant exercises its right to Lease said First Right Space, this Lease shall subsequently be amended to accurately reflect the increased square footage and the resultant increase in the Basic Rent and the Security Deposit and the terms and conditions applicable to the First Right Space.

B. The First Right of Refusal of Tenant under this Paragraph is granted for Tenant’s personal benefit and may not be assigned or transferred by Tenant, either voluntarily or by operation of law, except to a Permitted Transferee provided Tenant and said Permitted Transferee have executed Landlord’s consent to assignment. In the event that Landlord consents to a sublease or assignment of this Lease to any entity or person, the First Right granted herein shall be void and of no force and effect, whether or not Tenant shall have purported to exercise such First Right option prior to such assignment or sublease; notwithstanding the above, Tenant may exercise its First Right of Refusal for its exclusive benefit and use, but not on behalf of or for use by a subtenant or assignee, except to Permitted Transferee as provided for in Paragraph 21.E. Notwithstanding the foregoing but subject to Tenant’s compliance with the provisions of Paragraph 21.A, a sublease to one or more of Tenant’s Business Partners shall not impair Tenant’s First Right of Refusal.

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49. RIGHT OF FIRST REFUSAL TO PURCHASE THE LEASED PROPERTY. Provided that Tenant is not in monetary default of this Lease beyond applicable cure periods and/or the Lease has not terminated, Tenant (or a single Permitted Transferee to whom the Lease has been assigned), during the Term of this Lease, shall have a one-time right of first refusal (the “Right of First Refusal to Purchase”) to purchase the Parcel and the improvements located thereon (the “First Refusal Property”) upon the following terms and conditions:

A. Notice and Acceptance of Terms. Landlord agrees that (i) in the event Landlord receives an offer from a third party to purchase or (ii) if Landlord desires to make an offer to sell said First Refusal Property, at a purchase price and upon terms and conditions which are satisfactory and acceptable to Landlord and providing Landlord is willing to sell said First Refusal Property, Landlord shall offer said First Refusal Property to Tenant and advise Tenant of the purchase price, the deposit, the financing terms, if any, closing cost allocations, projected date of close of escrow (collectively, “Basic Conditions”) for said First Refusal Property (“Landlord’s First Right Notice”). Tenant shall have ten (10) business days after receipt of Landlord’s First Right Notice to accept said Basic Conditions in writing. In the event (i) Tenant rejects or fails to accept said Basic Conditions set forth in the Landlord’s First Right Notice within said ten (10) business day period, or (ii) if Tenant accepts said Basic Conditions but fails to execute a purchase agreement for said First Refusal Property at the Basic Conditions so presented in Landlord’s First Right Notice, within thirty (30) days following Tenant’s acceptance of said Basic Conditions, said Right of First Refusal to Purchase shall thereafter be null and void.

B. Personal Nature of Right of First Refusal to Purchase. The Right of First Refusal to Purchase is granted for Tenant’s personal benefit and may not be assigned or transferred by Tenant, either voluntarily or by operation of law except to a Permitted Transferee provided Tenant and said Permitted Transferee have executed Landlord’s consent to assignment document.

C. Loss of Right of First Refusal to Purchase. It is agreed that (i) if Tenant is, at the time of exercising its Right of First Refusal to Purchase, in monetary default of this Lease and has failed to cure said default within the time period allowed in Paragraph 24 (Bankruptcy and Default), or (ii) if Tenant has (a) subleased forty-nine percent (49%) (excluding subleases to the allowed Tenant Business Partners under Paragraph 21) or more of the Premises leased hereunder and Landlord has terminated the Lease or (b) assigned this Lease, or (iii) if Tenant has either not complied with the terms of Paragraph 49.A and/or if Tenant complied with the terms of Paragraph 49.A and fails to close escrow within the period agreed to in the related purchase contract, this Paragraph 49 will be null and void (without further notice from Landlord) and Tenant will have no further rights under this Paragraph 49.

50. PERSONAL PROPERTY OF LANDLORD. Landlord and Tenant agree Landlord shall pay for and provide to Tenant seventy-five (75) non floor to ceiling cubicles within the Premises, (as detailed on Exhibit F attached hereto) (“Furniture”), which Furniture is the personal property of Landlord and is being leased hereunder by Tenant (hereinafter referred to as “Personal Property of Landlord”). Tenant agrees, at its sole cost and expense, to maintain, repair and replace the Personal Property of Landlord as needed, normal wear and tear excepted. However, Tenant shall not replace, remove, or encumber in any way, any of the Personal Property of Landlord without Landlord’s prior written consent.

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51. WALK WAY. Concurrently with the execution of the Lease, Electronics for Imaging, Inc. (“EFI”) is purchasing from the Richard T. Peery Separate Property Trust and the John Arrillaga Survivor’s Trust (Landlord under this Lease), the building on the adjacent parcel located at 6750 Dumbarton Circle, Fremont (“Purchased Building”) in the area shown in Red on Exhibit A attached hereto. Tenant has requested and Landlord has agreed that EFI can construct a free standing covered walkway (“Walk Way”) between, but not attached, to the Building leased herein and the Purchased Building provided: (i) said construction is completed within six (6) months after the Lease Commencement Date by the Prime Contractor or another general contractor reasonably acceptable to Landlord under a direct contract between EFI and said general contractor, (iii) EFI pays one hundred percent (100%) of said cost of construction of said Walk Way, including, but not limited to, permit fees and the ongoing maintenance, repairs and replacement (if needed) of said Walk Way. EFI, as Tenant under this Lease and as purchaser of the Purchased Building agree that Landlord has the right to require EFI to remove said Walk Way in the event (i) EFI fails to comply with the terms herein and/or (ii) upon the termination of this Lease for Premises located at 6700 Dumbarton Circle. EFI and Landlord also agree that each party and their respective tenants shall have a right to use said Walk Way during the term of this Lease as long as said Walk Way has not been removed and further provided Tenant and EFI comply with the terms herein. Tenant, EFI and Landlord also agree that the property purchased at 6750 Dumbarton Circle and the Property leased herein shall have an unrecorded easement in the area shown in Yellow on Exhibit A attached hereto for the right of said parties to use said Walk Way subject to the terms herein.

52. ROOF TOP USE.

(a) During the construction of Tenant’s Interior Improvements and continuing during the Term, Tenant, at its sole cost and expense, shall have the right to install, operate and maintain on a portion of the roof of the Building, dishes/antennas or other communication devices which are connected to and serve the Premises (collectively, the “Dish/Antenna”).

(b) Tenant’s right to install the Dish/Antenna shall be subject to (i) the reasonable approval rights of Landlord and subject to the CC&R’s and, if required by Landlord, Landlord’s architect and/or engineer’s review and approval of the plans and specifications of the Dish/Antenna, the location and the number of the Dish/Antenna and the manner in which the Dish/Antenna is attached to the roof of the Building and the manner in which any cables are run to and from the Dish/Antenna and (ii) Tenant reimbursing Landlord for costs Landlord incurs for said review of Tenant’s plans and specifications (all such items placed on the roof shall not be visible from the parking lot or the adjacent street and shall be placed behind a roof screen). The precise specifications and a description of the Dish/Antenna and detailed plans along with all documents Landlord reasonably requires to review the installation of the Dish/Antenna shall be submitted to Landlord for Landlord’s review. Upon Landlord’s approval of said installation, the parties hereto shall execute a Consent to Alterations agreement before Tenant commences to install the Dish/Antenna. Tenant shall provide Landlord at the time it requests Landlord’s approval a certification from a licensed engineer confirming that the weight of said items and/or the placement of said items in the location(s) reflected in the plan provided to Landlord do not compromise the integrity of the structure, taking into consideration the items Tenant requests to be installed, the items already existing on the rooftop and future items to be installed on the rooftop and the structure limitations of the Building. Tenant shall be solely responsible for obtaining and complying with all necessary governmental and regulatory approvals, permits and for the cost of installing, operating, maintaining, repairing and replacing the Dish/Antenna (and for removing the Dish/Antenna). Landlord agrees that during the Term of the Lease, Tenant, upon reasonable prior notice to Landlord, shall have access to the roof of the Building for the purpose of installing, maintaining and repairing and replacing, if necessary, pursuant to the terms of the Lease the Dish/Antenna (and for removing the Dish/Antenna) and the appurtenances, if any, all of which shall be performed by Tenant or Tenant’s authorized licensed representative or contractors, which shall be reasonably approved by Landlord.

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(c) To the extent the same are not already available on the roof of the Building, Tenant shall bring utilities to the Dish/Antenna on the rooftop; and if such hook-ups for utilities are not presently available on the rooftops, the cost of such hook-ups shall be paid by Tenant. Tenant shall pay the cost of the installation of such utilities and shall also be responsible for and shall pay one hundred percent (100%) of the cost related to the use of such utilities.

(d) Tenant agrees to maintain all of Tenant’s equipment placed on or about the roof in proper operating condition and maintain same in good condition as to appearance and safety. Tenant shall be responsible for any damage caused to the roof or any other part of the Building by Tenant or any of the Tenant Parties or representatives in connection with the installation, operation and maintenance and/or removal of said items.

(e) Tenant shall not be entitled to license its Dish/Antenna to any third party, nor shall Tenant be permitted to receive any revenues, fees or any other consideration for the use of such Dish/Antenna. Tenant’s right to install such Dish/Antenna shall be non-exclusive unless Tenant leases the entire Building, and Tenant hereby expressly acknowledges Landlord’s right so long as Tenant does not lease the entire Building (i) to itself utilize any rooftop space, and (ii) to re-sell, license or lease of any rooftop space to a third party and/or any tenant in the Building. Said Dish/Antenna shall not interfere with other tenants in the Building and/or other tenants’ use of their premises and/or their equipment as the case may be. Notwithstanding anything to the contrary herein, Landlord shall have the sole and absolute discretion to approve the placement of said Dish/Antenna equipment on the roof of the Building.

(f) The Dish/Antenna and the related appurtenances, if any, shall remain the personal property of Tenant, and shall be removed by Tenant at its own expense at the expiration or sooner termination of this Lease. Tenant shall repair any damage caused by such removal, including the patching of any holes to match the installation and/or color surrounding the area where the equipment and appurtenances were attached. Immediately following the installation and/or removal of said items, Landlord shall have a licensed roof contractor inspect the installation and/or removal to confirm that the proper water tight seals have been applied to prevent roof leaks and Tenant shall reimburse Landlord for its out of pocket costs related thereto.

53. FIBER-OPTIC CABLE. Pursuant to the terms of the Lease, Tenant, at its sole cost and expense, shall have the right to connect the Building and the adjacent property at 6750 Dumbarton Circle by installing, maintaining and operating a below-ground fiber-optic line or lines, data and telecommunications cabling, and conduits or such other similar technology as is then generally recognized as a reasonable supplement to or replacement for fiber-optic lines and data and telecommunications cabling (the “Inter-Building Communication Link”). Tenant, at its sole cost and expense, shall comply with all governmental agencies’ regulations and permit requirements and shall arrange for the installation of the underground conduit, the telephone, data transaction, video and other telecommunication services (“Telecommunication Services”) directly with one or more of Telecommunications Services providers and shall be solely responsible for paying for such Telecommunications Services including, but not limited to, the initial installation, maintenance, repairs and replacement and subsequent removal costs related to the Inter-Building Communication Link. Tenant shall provide Landlord with a complete description and detailed plans reflecting said Inter-Building Communication Link and connections for Telecommunications Services. After Landlord’s review and approval of said plans, Landlord and Tenant shall execute a Consent to Alterations agreement and Tenant can commence the construction of the Inter-Building Communication Link thereafter. All work in connection therewith shall be performed by licensed contractors approved by Landlord. Notwithstanding anything to the contrary herein, all conduit related cabling between the Building and the 6750 Dumbarton Circle property must be underground and no exterior equipment shall be above ground and no cabling can be visible from the exterior and/or interior of the Building and/or the 6750 Dumbarton Circle building. Upon expiration or earlier termination of this Lease Tenant shall remove the Inter-Building Communication Link and restore those elements of the Premises, the Building and other improvements in the Parcel affected by such removal.

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54. MISCELLANEOUS AND GENERAL PROVISIONS.

A. Use of Building Name. Tenant shall not, without the written consent of Landlord, use the name of the Building for any purpose other than as the address of the business conducted by Tenant in the Premises.

B. Premises Address. It is understood that (i) the current address for the Premises is shown on page 1 of this Lease, and that (ii) the address for the Premises is subject to change at any time by the City in which the Premises are located (the “City”). In the event the address assigned to the Premises is changed by the City, this Lease shall thereafter be amended to reflect the assigned address for the Premises leased hereunder and Landlord shall not be liable to Tenant for any costs or expenses incurred by Tenant as a result of said address change.

C. Choice of Law/Venue; Severability. This Lease shall in all respects be governed by and construed in accordance with the laws of the County of Alameda in the State of California and each party specifically stipulates to venue in Alameda County. If any provision of this Lease shall be invalid, unenforceable, or ineffective for any reason whatsoever, all other provisions hereof shall be and remain in full force and effect.

D. Definition of Terms. The term “Premises” includes the space leased hereby and any improvements now or hereafter installed therein or attached thereto. The term “Landlord” or any pronoun used in place thereof includes the plural as well as the singular and the successors and assigns of Landlord. The term “Tenant” or any pronoun used in place thereof includes the plural as well as the singular and individuals, firms, associations, partnerships and corporations, and their and each of their respective heirs, executors, administrators, successors and permitted assigns, according to the context hereof, and the provisions of this Lease shall inure to the benefit of and bind such heirs, executors, administrators, successors and permitted assigns.

The term “person” includes the plural as well as the singular and individuals, firms, associations, partnerships and corporations. Words used in any gender include other genders. If there be more than one Tenant the obligations of Tenant hereunder are joint and several. The paragraph headings of this Lease are for convenience of reference only and shall have no effect upon the construction or interpretation of any provisions hereof.

E. Time Of Essence. Time is of the essence of this Lease and of each and all of its provisions.

F. Quitclaim. At the expiration or earlier termination of this Lease, Tenant shall execute, acknowledge and deliver to Landlord, within ten (10) days after written demand from Landlord to Tenant, any quitclaim deed or other document required by any reputable title company, licensed to operate in the State of California, to remove the cloud or encumbrance created by this Lease from the real property of which Tenant’s Premises are a part.

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G. Incorporation of Prior Agreements; Amendments. This instrument along with any exhibits and attachments hereto constitutes the entire agreement between Landlord and Tenant relative to the Premises and this agreement and the exhibits and attachments may be altered, amended or revoked only by an instrument in writing signed by both Landlord and Tenant. Landlord and Tenant agree hereby that all prior or contemporaneous oral agreements between and among themselves and their agents or representatives relative to the leasing of the Premises are merged in or revoked by this agreement.

H. Conditions to Indemnification. Whenever a party (the “Indemnifying Party”) is required under this Lease to defend, indemnify and hold harmless the other party (the “Indemnified Party”), the following shall apply: (a) the Indemnified Party must give the Indemnifying Party prompt written notice of the claim(s) as to which indemnification is requested; (b) the Indemnified Party must reasonably cooperate with the Indemnifying Party in connection with the defense or settlement of any such claim(s); and (c) the Indemnified Party shall be entitled to control the defense or settlement of any claim(s) as to which it is providing indemnification.

I. Recording. Neither Landlord nor Tenant shall record this Lease, except subject to the terms herein, and Tenant shall have the right to record a Memorandum of Lease including Right of First Refusal to Lease and/or to purchase the Property in the form of Exhibit G attached hereto. Concurrently with the execution of the Lease, Tenant shall execute each of the quitclaim deeds attached hereto as Exhibits H, H-1 and H-2 and Landlord shall hold and not record the respective quitclaim deed until the earlier of the respective (a) termination of this Lease or (b) termination of Tenant’s Right of First Refusal to Lease, or (c) termination of Tenant’s right to purchase the Property pursuant to the terms of the respective Paragraphs 48 (Right of First Refusal to Lease) and 49 (Right of First Refusal to Purchase the Leased Property).

J. Amendments for Financing. Tenant further agrees to execute any reasonable amendments required by a lender to enable Landlord to obtain financing, so long as Tenant’s rights hereunder are not substantially affected and Tenant’s obligations hereunder are not materially altered or impaired. Tenant shall be reimbursed for its reasonable third party attorney fees reasonably incurred, if any, for said third party attorney’s reasonable review of any such amendment.

K. Clauses, Plats and Riders. Clauses, plats and riders, if any, signed by Landlord and Tenant and endorsed on or affixed to this Lease are a part hereof.

L. Diminution of Light, Air or View. Tenant covenants and agrees that no diminution or shutting off of light, air or view by any structure which may be hereafter erected (whether or not by Landlord) shall in any way affect this Lease, entitle Tenant to any reduction of Rent hereunder or result in any liability of Landlord to Tenant.

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IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Lease as of the day and year last written below.

LANDLORD:			TENANT:
JOHN ARRILLAGA SURVIVOR’S TRUST			ELECTRONICS FOR IMAGING, INC.,
			a Delaware corporation
By	/S/ John Arrillaga	By	/S/ Vincent Pilettte
	John Arrillaga, Trustee		Vincent Pilette, Chief Financial Officer
Date:	4/19/13	Date:	4/19/13
RICHARD T. PEERY SEPARATE
PROPERTY TRUST
By	/S/ Richard Peery
	Richard T. Peery, Trustee
Date:	4/19/13

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EXHIBIT D

April 19, 2013

Electronics for Imaging, Inc.

303 Velocity Way

Foster City, CA 94404

Attention: Guy Gecht

RE: CONSTRUCTION AGREEMENT RELATED TO LEASE AGREEMENT DATED APRIL 19, 2013 (“LEASE”), BY AND BETWEEN THE JOHN ARRILLAGA SURVIVOR’S TRUST AND THE RICHARD T. PEERY SEPARATE PROPERTY TRUST, AS LANDLORD, AND ELECTRONICS FOR IMAGING, INC., A DELAWARE CORPORATION, AS TENANT, FOR 58,047+ SQUARE FEET (“PREMISES”) OF THAT CERTAIN 108,166+ SQUARE FOOT BUILDING (“BUILDING”) LOCATED AT 6700 DUMBARTON CIRCLE, FREMONT, CALIFORNIA.

Gentlemen:

This construction agreement (“Agreement”) will confirm the agreement between the parties hereto related to the existing shell of the Building and the interior improvements to be constructed by Landlord for Tenant in the Premises, and shall be considered a part of the Lease.

1. DEFINITIONS: As used in this Agreement, the following terms shall have the following meanings, and terms which are not defined below, but which are defined in the Lease and used in this Agreement, shall have the meanings ascribed to them in the Lease:

A. Cold Shell Improvements: The term “Cold Shell Improvements” shall mean the improvements in the Building of which the Premises are a part and are shown on the Building As-Built Plans delivered by Landlord to Tenant on February 28, 2013 which include the building foundation, first and second story floor slab, building exterior precast concrete panels, building exterior window wall system (including standard ten foot high exterior doors and standard exterior door hardware), load bearing walls, roof system for standard loading, roof membrane including roof drainage and roof screen, steel platforms at roof for future HVAC mechanical units (quantity: 2), fire sprinkler mains and up-heads distributed throughout the space connected to fire service main including the PIV and tamper switch; (ii) site work improvements consisting of offsite sanitary sewer piping from street main to Building, offsite domestic water and fire service from street mains to Building, gas service piping from street main to within 5’ of the Building (no meter), telecom conduits from street mains to Building, 3500 amp 277/480 volt 3 phase electrical service from street mains to Building including transformer, cold shell fire alarm service from main electrical room distributed to core structures, one (1) two stop elevator 3,500+ lb capacity including elevator phone connection and stainless steel finished interior, three (3) framed stairwells including code required handrail, one (1) framed bathroom core (no finishes, no MEPS rough-in, framing only), one (1) framed storage room on the second floor at center stairwell, offsite and onsite storm sewer (for exterior water drainage system), paving and parking areas, site lighting, precast concrete trash enclosure, striping, sidewalks, parking curbs, gutters, irrigation system and landscaping. The Building As-Built Plans for the Cold Shell Improvements are known hereafter as the “Cold Shell Plans.”

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B. Landlord Interior Improvements: The term “Landlord Interior Improvements” shall mean all improvements to be constructed by Landlord and shown on the final interior construction plans (“Final Landlord Interior Plans”), to be attached hereto as Exhibit B in accordance with Paragraph 3 below, and paid for by the parties as hereinafter set forth. The Landlord Interior Improvements do not include any of the existing Cold Shell Improvements set forth in Paragraph 1.A above. By way of example only, the Landlord Interior Improvements shall include and not be limited to, the construction of general offices, conference room(s), a training room and a gym, and installation of the: interior fire protection system down-heads, interior piping connected to sewer main, interior domestic water piping to connect to bathroom cores, wiring and electrical distribution to the Premises electrical system, telephone cabling connected to Premises telephone system, other data cabling interior distribution, gas meter installation, heating and air-conditioning system complete, building interior sanitary system complete, water and gas piping systems complete (including all piping required from any current exterior location to the Building supply to the extent the same has not been brought into the Building), processing piping (if any), complete thermal/acoustical insulation, standard width interior stairways with standard handrails, standard ten foot high suspended ceilings, standard ten foot high interior doors with standard door hardware, elevators, interior walls and movable or non-movable floor to ceiling partitioning, painting, interior carpeting, vinyl floor covering and tile, utility pads (including all construction elements of subject utility pads, including but not limited to enclosures) water and City and/or Utility Company water and sewer “Connection/Facility” fees including cost to hook up to the Alameda County Water District and/or the Union Sanitary District systems, school district fees (if any) and all design fees, plan check/building permit fees, contractor’s fees and Builder’s Risk insurance premiums as related to the Landlord Interior Improvements.

C. Improvements: The term “Improvements” shall mean the Cold Shell Improvements and the Landlord Interior Improvements.

D. Performance Schedule: The term “Performance Schedule” shall mean the estimated times for commencement and performance of construction obligations contained in Paragraph 2 of this Agreement.

E. Architect: The term “Architect” shall mean (i) Hoover Associates as related to the Cold Shell Improvements and Kenneth Rodrigues & Partners, Inc. (“Interior Architect”) with respect to the Landlord Interior Improvements.

F. Prime Contractor(s): The term “Prime Contractor” shall mean Vance Brown, Inc. for the Landlord Interior Improvements.

G. Substantial Completion: The term “Substantial Completion” (and “Substantially Completed”) shall mean the date when all of the following have occurred with respect to the Landlord Interior Improvements: the local authority with jurisdiction for building permits has issued the final permits for the Landlord Interior Improvements along with a temporary certificate of occupancy and the construction of the Landlord Interior Improvements have been substantially completed in accordance with the Final Landlord Interior Plans except for “punch list” items which, for purposes of this Agreement, shall mean minor details of the construction which are incomplete, which do not prevent or materially interfere with Tenant’s reasonable use of the Premises to conduct Tenant’s business operations in the Premises. Notwithstanding anything to the contrary herein, in the event Landlord has substantially completed the Landlord Interior Improvements, but is unable to obtain the final permits and/or temporary certificate of occupancy referenced above because Tenant has not completed its interior improvements (if any), Landlord’s failure to obtain such permit and/or temporary certificate of occupancy shall not defer the Commencement Date (as defined in Paragraph 1.H below).

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H. Commencement Date: The term “Commencement Date” shall mean September 1, 2013, subject to delays caused by any or all of the Tenant Related Parties (as defined in Lease Paragraph 8 (Rules and Regulations and Common Area), strikes, acts of God, governmental restrictions, or other causes beyond Landlord’s control, in which instance the time period for Landlord’s completion of the Premises shall be extended accordingly.

2. PERFORMANCE SCHEDULE: Landlord and Tenant desire to cause the Landlord Interior Improvements to be Substantially Completed by the scheduled Commencement Date of September 1, 2013. The Commencement Date is based upon information gathered and estimates made by Landlord, which are reflected in the Construction Schedule. Achieving Substantial Completion of the Landlord Interior Improvements by the Commencement Date requires that certain objectives be met within certain time periods. Set forth in this Paragraph is a schedule of certain critical dates relating to Landlord’s and Tenant’s respective obligations regarding the construction of the Landlord Interior Improvements (the “Performance Schedule”) that must be adhered to in order to achieve Substantial Completion of all Landlord Interior Improvements by the Commencement Date. Landlord and Tenant shall each be obligated to use reasonable efforts to perform their respective obligations within the time periods set forth in the Performance Schedule and elsewhere in this Agreement. Subject to the provisions of Paragraph 7 (Tenant Delays) hereof, the parties acknowledge that the Performance Schedule is only an estimate of the time needed to complete certain stages of the construction process, and the failure of either party to accomplish any step in the process set forth in the Performance Schedule within the applicable time period shall not constitute a default by either party unless such failure constitutes a breach of the obligation of a party to use reasonable efforts to perform its obligations within the time periods set forth in the Performance Schedule and elsewhere in this Agreement. The Performance Schedule is as follows:

ACTION ITEMS	DUE DATE	RESPONSIBLE       PARTY
A.     Delivery to Tenant of Landlord’s Cold Shell Plans	Delivered to Tenant on February 28, 2013	Landlord
B.     Delivery to Landlord of Tenant’s Preliminary Interior Improvements Plans	Delivered to Landlord on April 16, 2013	Tenant
C.     Delivery to Tenant of Landlord’s Interior Plans prepared by the Interior Architect	Within five (5) business days after Landlord receives the cost to construct the Landlord Interior Improvements	Landlord
D.     Approval of Landlord’s Interior Plans	Within three (3) business days after Tenant receives Landlord’s Interior Plans from Landlord	Tenant
E.     Delivery of Final Landlord Interior Plans to Tenant	Within five (5) business days after the Landlord’s Interior Plans are approved by Tenant	Landlord
F.      Approval of Final Landlord Interior Plans by Tenant	Within three (3) business days after the Final Landlord Interior Plans are received by Tenant	Tenant
G.     Submittal of Final Landlord Interior Plans to City for Plan Check/Permit	Within three (3) business days after the Final Landlord Interior Plans are approved by Tenant and the Lease is executed	Landlord
H.     Obtain Building Permit for Landlord’s Interior Improvements	Within 45 days after submittal of the Landlord Interior Improvements for Permit	Landlord
I.       Commencement of Construction of the Landlord Interior Improvements	As soon as reasonably possible after receipt of Building Permit	Landlord
J.      Substantial Completion of the Landlord Interior Improvements	September 1, 2013 (projected four (4) months after the issuance of the Building Permit)	Landlord

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3. DEVELOPMENT AND PROCESSING OF PLANS FOR THE LANDLORD INTERIOR IMPROVEMENTS AND PERMITS: Final Landlord Interior Plans for the Landlord Interior Improvements shall be developed and processed in accordance with the following:

A. Development of Landlord Interior Plans: On or before the due date specified in the Performance Schedule, Landlord shall cause the Interior Architect to prepare and deliver to Tenant for its review and approval plans for the Landlord Interior Improvements (the “Landlord Interior Plans”). On or before the due date specified in the Performance Schedule, Tenant shall either approve such plans or notify Landlord of its specific objections to the Landlord Interior Plans so delivered to Tenant. If Tenant so objects, Landlord shall revise the Landlord Interior Plans to address such objections in a manner consistent with the parameters for the Landlord Interior Improvements set forth in this Agreement and shall resubmit to Tenant for its approval such revised Landlord Interior Plans on or before the due date specified in the Performance Schedule. It is agreed that Landlord’s Interior Improvement Plans shall not affect the exterior appearance or structural integrity or cost of the Cold Shell Improvements as defined in Paragraph 1.A, and it is further agreed that Landlord will not object to reasonable structural changes (subject to the provisions of Paragraph 7) as long as Tenant agrees to pay for any additional cost for same and the exterior appearance of the Cold Shell Improvements is not altered. When the revised Landlord Interior Plans are resubmitted to Tenant, Tenant shall either approve such plans in writing or notify Landlord of any further objections in writing on or before the due date specified in the Performance Schedule. If Tenant has further objections to the revised Landlord Interior Plans, Landlord and Tenant shall immediately meet and confer and together shall apply the standards set forth in this Agreement to resolve Tenant’s objections and incorporate such resolution into the Landlord Interior Plans, which process Landlord and Tenant shall cause to be completed within five (5) days after the deadline for Tenant’s objections referred to in the immediately preceding sentence. In resolving Tenant’s objections, the parties agree to act reasonably so as to promptly finalize the Landlord Interior Plans. Paragraph 7 hereof shall apply to any failure of Tenant to promptly and reasonably work with Landlord in this regard, but only where Landlord delivers written notice to Tenant specifying the way(s) in which Landlord claims Tenant is not acting reasonably to reach consensus on the Final Landlord Interior Plans and Tenant fails to correct the same within three (3) business days after receipt of Landlord’s notice. The Final Landlord Interior Plans shall be initialed by the parties and shall become Exhibit B to this Agreement.

B. Building Permit: As soon as the Final Landlord Interior Plans have been approved by Landlord and Tenant, Landlord shall apply for a building permit for the Landlord Interior Improvements, and shall diligently prosecute to completion such approval process.

C. Commencement of Landlord Interior Improvements: On or before the due date specified in the Performance Schedule (delays by Tenant Related Parties and/or acts of God and delays beyond Landlord’s control excepted), Landlord shall commence construction of the Landlord Interior Improvements and shall diligently prosecute such construction to completion, using all reasonable efforts to achieve Substantial Completion of the Landlord Interior Improvements by the date specified in the Performance Schedule.

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4. CONSTRUCTION OF IMPROVEMENTS: The Improvements to be constructed as part of the Premises in connection with the Lease shall be paid for by the parties as hereinafter set forth in Paragraph 5 and constructed in the following manner:

A. Construction of Cold Shell Improvements by Landlord: The Cold Shell Improvements reflected on the As-Built Plans have been constructed and paid for by Landlord in accordance with the Cold Shell Plans.

B. Licensed Contractor Requirement: All construction of the Landlord Interior Improvements in the Premises shall be done by Vance Brown, Inc. as Prime Contractor, who shall be retained by Landlord and paid as provided in Paragraph 5 below.

C. Construction of Landlord Interior Improvements by Landlord: The Landlord Interior Improvements shall be constructed by the Prime Contractor in a good and workmanlike manner and in accordance with the approved Final Landlord Interior Plans; it being agreed, however, that if the Premises Cold Shell Improvements and/or Landlord Interior Improvements, as finally constructed, do not conform exactly to the plans and specifications as set forth in the Cold Shell Plans and/or the approved Final Landlord Interior Plans, and the general appearance, structural integrity, and Tenant’s use and occupancy of the Premises and/or the Building and the interior improvements relating thereto are not materially affected by such deviation, then in such case the Commencement Date of the Lease, and Tenant’s obligation to pay Rent thereunder as provided for in said Lease, shall not be affected, and Tenant hereby agrees to accept the Premises and the Landlord Interior Improvements as constructed by Landlord notwithstanding such deviation.

D. Landlord Interior Improvements Part of the Premises: All Landlord Interior Improvements and any interior improvements made by Tenant shall become and remain a part of the Premises upon installation or construction and shall be the property of Landlord and surrendered up by Tenant at the end of the Lease Term. Tenant shall have only a leasehold interest therein, subject to all of the terms and conditions of the Lease. None of the Landlord Interior Improvements and/or any interior improvements made by Tenant shall be encumbered, transferred, removed or materially altered, except as otherwise provided in the Lease.

E. Liens and Claims: During the installation of any interior improvements by Tenant, including, but not limited to, the installation of Tenant’s trade fixtures as provided for in Lease Paragraph 2.C (Early Entry), Tenant shall keep the Premises and the Property free from any liens arising out of any work performed, materials furnished or obligation incurred by Tenant. In the event that Tenant shall not, within fifteen (15) days following notice of the imposition of any such lien, cause the same to be released of record, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but not the obligation, to cause the same to be released by such means as Landlord shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord for such purpose, and all expenses incurred by Landlord in connection therewith, shall be payable to Landlord by Tenant within five (5) business days after demand with interest at the highest interest rate allowable by law or Landlord may at its option, draw or make a demand under the Security Deposit (as defined in Lease Paragraph 4.G (Security Deposit) to pay said Lien and have said Lien removed.

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F. Inspection Following Completion of the Landlord Interior Improvements: As soon as the Landlord Interior Improvements are Substantially Completed, Landlord (or Landlord’s representative) and Tenant shall conduct a joint walk-through of the Premises, and inspect such Landlord Interior Improvements, using their best efforts to discover all incomplete or defective construction. After such inspection has been completed, Landlord or its representative shall prepare and subject to Tenant’s review and reasonable approval, both parties shall sign a list of all “punch list” items which the parties agree are to be corrected by Landlord. It is agreed that the Lease will commence on the Commencement Date provided that the Landlord Interior Improvements are Substantially Completed, subject to delays caused by any of the Tenant Related Parties, regardless of whether or not a “punch list” exists. Landlord shall use reasonable efforts to complete and/or repair such “punch list” items within thirty (30) days after executing such list, it being agreed however, that the existence of any “punch list” items will not result in any delay of the Commencement Date.

5. PAYMENT OF CONSTRUCTION COSTS:

A. Cold Shell Improvements: Subject to the terms of Paragraph 6, Landlord shall furnish the Cold Shell Improvements (as defined in Paragraph 1.A) at its cost.

B. Landlord Interior Improvement Costs: Landlord shall pay the first Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000.00) of expenses billed by the Prime Contractor for the Landlord Interior Improvements which Landlord Interior Improvements include the items referenced in Paragraph 5.C (Exclusions From Interior Improvement Costs Payable by Tenant) below (“Landlord’s Cost Contribution”) and all other Landlord Interior Improvements costs not referenced in Paragraph 5.C (Exclusions From Interior Improvement Cost Payable by Tenant) below, and Tenant shall pay one hundred percent (100%) of the cost of the Landlord Interior Improvements in excess of Landlord’s Cost Contribution. Except as required in Paragraph 5.C below, Tenant shall make payments within twenty (20) days of receipt of Landlord’s statement for the amounts due (with a statement from the Prime Contractor itemizing the Interior Improvement costs said payment is applicable to and the appropriate lien waivers) directly to Landlord not more frequently than once per month.

C. Exclusions From Interior Improvement Costs Payable by Tenant: Prior to the Lease Commencement Date, the parties agree that, notwithstanding any contrary provision in this Agreement or the Lease, Tenant shall not be required to make payment on any cost related to the items covered under the Excluded Costs defined below prior to the earlier of (a) the Lease Commencement Date and/or (b) an event of default by Tenant under the Lease and/or Construction Agreement and/or (c) abandonment of the Lease by Tenant (collectively “Payment Acceleration Event(s)”) at which time Tenant shall be required to pay all excess cost of the Excluded Costs items that exceeds Landlord’s Cost Contribution ($4,500,000.00), and prior to a Payment Acceleration Event, only Landlord’s Cost Contribution shall be used to fund any Landlord Interior Improvements consisting of the following improvements: a gym structure, installation of the interior fire protection system down-heads, interior piping connected to sewer main, interior domestic water piping to connect to bathroom cores, wiring and electrical distribution to the Premises electrical system, telephone cabling connected to Premises telephone system, other data cabling interior distribution, gas meter installation, complete heating and air-conditioning system, complete building interior sanitary system, complete water and gas piping systems (including all piping required from any current exterior location to the Building supply to the extent the same has not been brought into the Building), processing piping (if any), complete thermal/acoustical insulation, standard width interior stairways with standard handrails, elevators, interior walls and movable or non-movable floor to ceiling partitioning, utility pads (including all construction elements of subject utility pads, including but not limited to enclosures), water and City and/or utility company water and sewer “Connection/Facility” fees including cost to hook up to the Alameda County Water District and/or the Union Sanitary District systems, school district fees (if any) and all design fees, plan check/building permit fees, contractor’s fees and Builder’s Risk insurance premiums as related to the Landlord Interior Improvements and other structural related costs (collectively “Excluded Costs”). Notwithstanding anything to the contrary herein, in the event Landlord’s total cost for said Excluded Costs exceeds Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000.00), (i) Tenant shall reimburse Landlord the cost for the Excluded Costs that exceeds Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000.00) on the first Payment Acceleration Event to occur and (ii) Tenant shall pay one hundred percent (100%) of all costs for all other non-Excluded Costs of the Landlord Interior Improvements that constitute non-structural tenant improvements billed during the construction period and (iii) in no event shall Landlord’s total contribution to the cost of the Landlord Interior Improvements exceed Landlord’s Cost Contribution (a total of Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000.00)) for all costs incurred under Paragraphs 1.B (Landlord Interior Improvements), 5.B (Landlord’s Interior Improvement Costs) and this 5.C and Tenant shall be responsible for any and all amounts due in excess of Landlord’s Cost Contribution of Four Million Five Hundred Thousand and No/100 Dollars ($4,500,000.00).

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For example:

Assume the total Landlord Interior Improvements cost are: $8,000,000.00 (of which $5,000,000 .00 are for items of Excluded Costs).

Total Landlord Cost Contribution: $4,500,000.00

Total Excess over Landlord Cost Contribution to be paid by Tenant: $3,500,000.00

In which event Tenant’s payments would be made as follows:

Prior to the Lease Commencement Date, Tenant shall pay, within twenty (20) days of receipt of an invoice from Landlord, one hundred percent (100%) of the cost ($3,000,000.00) for the non-Excluded Costs items; and

After the Lease Commencement Date, Tenant shall pay Landlord, within ten (10) days of receipt of an invoice from Landlord, $500,000.00 of the Excluded Costs items.

6. CHANGES, MODIFICATIONS, OR ADDITIONS TO THE PLANS, SPECIFICATIONS AND/OR PREMISES: Once the Final Landlord Interior Plans have been approved by Landlord and Tenant, Tenant shall not have the right to order extra work or make change orders with respect to the construction of the Landlord Interior Improvements without the prior written consent of Landlord. All extra work or change orders requested by Tenant shall be made in writing and shall become effective and a part of the Final Landlord Interior Plans only once approved in writing by both parties and Tenant shall pay to Landlord the net increase in cost (if any) for the change order within twenty (20) days of receipt of the related invoice(s) from Landlord.

7. TENANT DELAYS: Landlord and Tenant acknowledge that the date on which Tenant’s obligation to pay Rent under the Lease would otherwise commence may be delayed because of a delay in completion of construction of the Landlord Interior Improvements due to (i) Tenant’s failure to approve plans and specifications for the Landlord Interior Improvements by the due date set in the Performance Schedule, (ii) Tenant’s failure to give any necessary approval or consent by the dates set forth herein (unless Tenant has reasonable ground for withholding such consent or approval and has conveyed the same in writing to Landlord), (iii) any act by Tenant which interferes with or delays construction of the Landlord Interior Improvements, including Tenant’s entry to install trade fixtures pursuant to Lease Paragraph 2.C (Early Entry), (iv) any changes, modifications and/or additions in the Cold Shell Improvements and/or Landlord Interior Improvements requested by Tenant and approved by Landlord, or (v) special materials or equipment ordered or specified by Tenant that cannot be obtained by Landlord at normal cost within a reasonable period of time because of limited availability. With respect to clause (v) of the preceding sentence, as a condition to asserting any delay by Tenant thereunder, Landlord must inform Tenant as soon as possible that special materials or equipment are included in the Landlord Interior Improvements and the expected delay associated therewith. It is the intent of the parties hereto that the commencement of Tenant’s obligation to pay Rent under the Lease not be delayed by any of such causes or by any other act of Tenant and, in the event it is so delayed, Tenant’s obligation to pay Rent under the Lease shall commence as of the date it would otherwise have commenced absent delay caused by Tenant, provided that within a reasonable period of time after learning of the occurrence of the cause of any such delay, Landlord notifies Tenant in writing of the fact that such delay has occurred and the known or anticipated extent of any such delay.

Page 53 of 55 Initial:    /S/ JA; RP; VP        

Ardenwood IV-8

8. AUTHORITY TO EXECUTE: The parties executing this Agreement hereby warrant and represent that they are properly authorized to execute this Agreement and that the individuals executing this Agreement are authorized to bind the parties to all of the terms, covenants and conditions of this Agreement.

9. CHOICE OF LAW/VENUE; SEVERABILITY: This Agreement in all respects be governed by and construed in accordance with the laws of the County of Alameda in the State of California and each party specifically stipulates to venue in Alameda County. If any provisions of this Agreement shall be invalid, unenforceable, or ineffective for any reason whatsoever, all other provisions hereof shall be and remain in full force and effect.

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Page 54 of 55 Initial:    /S/ JA; RP; VP        

Ardenwood IV-8

IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Agreement as of the day and year last written below.

LANDLORD:			TENANT:
JOHN ARRILLAGA SURVIVOR’S TRUST			ELECTRONICS FOR IMAGING, INC.,
			a Delaware corporation
By	/S/ John Arrillaga	By	/S/ Vincent Pilettte
	John Arrillaga, Trustee		Vincent Pilette, Chief Financial Officer
Date:	4/19/13	Date:	4/19/13
RICHARD T. PEERY SEPARATE
PROPERTY TRUST
By	/S/ Richard Peery
	Richard T. Peery, Trustee
Date:	4/19/13

Page 55 of 55 Initial:    /S/ JA; RP; VP        

EX-12.1

Exhibit 12.1

Electronics For Imaging, Inc.

Computation of Ratio of Earnings to Fixed Charges

(in thousands, except for ratio of earnings to fixed charges)

	Years Ended December 31,												Six Months  Ended June 30, 2013
	2008			2009		2010			2011		2012
Income (loss) from continuing operations before income taxes	$	(133,076	)	$	16,035	$	(1,630	)	$	30,420	$	35,023	$	18,039
Fixed charges:
Interest expense		1,537			4		43			62		709		1,552
Interest relating to rental expense (1)		5,314			2,438		2,533			2,081		1,912		1,040
Total fixed charges		6,851			2,442		2,576			2,143		2,621		2,592
Earnings available for fixed charges	$	(126,225	)	$	18,477	$	946		$	32,563	$	37,644	$	20,631
Ratio of earnings to fixed charges		N/A	(2)		7.57		0.37			15.20		14.36		7.96

(1) The representative interest portion of rental expense was deemed to be one-third of all rental expense, except for the rental expense related to the off-balance sheet financing lease, as described in the footnotes to the financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012, which was deemed to be all interest. The off-balance sheet financing lease was terminated effective November 1, 2012.

(2) For the year ended December 31, 2008, our earnings were insufficient to cover fixed charges. The amount of additional earnings needed to cover fixed charges for the year was $126.2 million.

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: July 31, 2013

/s/ Guy Gecht

Guy Gecht

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Vincent Pilette, 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 and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: July 31, 2013

/s/ Vincent Pilette

Vincent Pilette

Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Electronics For Imaging, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 31, 2013

/s/ Guy Gecht

Guy Gecht

Chief Executive Officer

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Electronics For Imaging, Inc. (the “Company”) hereby certifies, to such officer’s knowledge, that:

(i) the accompanying Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: July 31, 2013

/s/ Vincent Pilette

Vincent Pilette

Chief Financial Officer

XML

Segment Information and Geographic Data

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Segment Information and Geographic Data

9. Segment Information and Geographic Data

ASC 280, Segment Reporting, requires operating segment information to be presented based on the internal reporting used by the chief operating decision making group to allocate resources and evaluate operating segment performance. Our enterprise management processes use financial information that is closely aligned with our three operating segments at the gross profit level. Relevant discrete financial information is prepared at the gross profit level for each of our three operating segments, which is used by the chief operating decision making group to allocate resources and assess the performance of each operating segment.

We classify our revenue, operating segment profit (i.e., gross profit), assets, and liabilities in accordance with our operating segments as follows:

Industrial Inkjet, which consists of our VUTEk super-wide and EFI wide format industrial digital inkjet printers, Jetrion label and packaging digital inkjet printing systems, Cretaprint digital inkjet printers for ceramic tile decoration, and related ink, parts, and services.

We sell VUTEk super-wide format ultra-violet (“UV”), light emitting (“LED”), and textile dye sublimation industrial digital inkjet printers and ink to commercial photo labs, large sign shops, graphic screen printers, specialty commercial printers, and digital and billboard graphics providers serving the out-of-home advertising and industrial specialty print segments by printing point of purchase displays, signage, banners, fleet graphics, building wraps, art exhibits, customized architectural elements, and other large graphic displays. We sell EFI hybrid and flatbed UV wide format graphics printers to the mid-range industrial digital inkjet printer market. We sell Jetrion label and packaging digital inkjet printing systems, custom high-performance integration solutions, and specialty inks to the converting, packaging, and direct mail industries. We sell Cretaprint ceramic tile decoration digital inkjet printers to the ceramic tile industry.

Productivity Software, which consists of (i) our business process automation software, including Monarch, PSI, Logic, PrintSmith, and PrintFlow; (ii) Pace, our business process automation software that is available in a cloud-based environment; (iii) Digital StoreFront, our cloud-based e-commerce solution that allows print service providers to accept, manage, and process printing orders over the internet; (iv) Online Print Solutions, our cloud-based e-commerce software that provides web-to-print, publishing, and cross-media marketing solutions over the internet; (v) Radius, our business process automation software for label and packaging printers; (vi) PrintStream, our business process automation software for mailing and fulfillment services in the printing industry; (vii) Prism, Metrics, Technique, and GamSys, our business process automation solutions for the printing and packaging, publication, commercial, and direct marketing print industries; and (viii) Alphagraph, which includes business process automation solutions for the graphic arts industry.

We sell PrintSmith to small print-for-pay and small commercial print shops; Pace to medium and large commercial print shops, display graphics providers, in-plant printing operations, and government printing operations; Monarch to large commercial, publication, direct mail, and digital print shops; Radius to the label and packaging industry; Digital StoreFront and Online Print Solutions to customers desiring e-commerce, web-to-print, and cross-media marketing solutions; and PrintStream to Pace and Monarch customers that provide fulfillment services to their end customers.

Fiery, which consists of print servers, controllers, and digital front ends (“DFEs”) that transform digital copiers and printers into high performance networked printing devices for the office and commercial printing market. This operating segment is comprised of (i) stand-alone print servers connected to digital copiers and other peripheral devices, (ii) embedded and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our controller solutions such as Fiery Central, Command WorkStation, and MicroPress, (iv) Entrac, our self-service and payment solution, (v) PrintMe, our mobile printing application, and (vi) stand-alone software-based solutions such as our proofing and scanning solutions.

Our chief operating decision making group evaluates the performance of our operating segments based on net sales and gross profit. Gross profit for each operating segment includes revenue from sales to third parties and related cost of revenue attributable to the operating segment. Cost of revenue for each operating segment excludes certain expenses managed outside the operating segments consisting primarily of stock-based compensation expense. Operating income is not reported by operating segment because operating expenses include significant shared expenses and other costs that are managed outside of the operating segments. Such operating expenses include various corporate expenses such as stock-based compensation, corporate sales and marketing, research and development, income taxes, various non-recurring charges, and other separately managed general and administrative expenses.

Gross profit information, excluding stock-based compensation expense, for the three and six months ended June 30, 2013 and 2012 is summarized as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Industrial Inkjet
Revenue	$	88,003		$	79,820		$	168,306		$	154,912
Gross profit		35,165			32,215			67,146			61,701
Gross profit percentages		40.0	%		40.4	%		39.9	%		39.8	%
Productivity Software
Revenue	$	28,509		$	25,722		$	56,238		$	49,791
Gross profit		20,231			18,500			40,156			35,665
Gross profit percentages		71.0	%		71.9	%		71.4	%		71.6	%
Fiery
Revenue	$	63,786		$	58,359		$	127,113		$	119,254
Gross profit		42,969			39,312			85,392			80,626
Gross profit percentages		67.4	%		67.4	%		67.2	%		67.6	%

A reconciliation of our segment gross profit to our condensed consolidated statements of operations for the three and six months ended June 30, 2013 and 2012 is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Segment gross profit	$	98,365		$	90,027		$	192,694		$	177,992
Stock-based compensation expense		(382	)		(235	)		(851	)		(533	)
Gross profit	$	97,983		$	89,792		$	191,843		$	177,459

Tangible and intangible assets, net of liabilities, are summarized by operating segment as follows (in thousands):

June 30, 2013	Industrial Inkjet		Productivity Software			Fiery
Goodwill	$	60,594	$	97,324		$	64,480
Identified intangible assets, net		37,264		32,620			2,449
Tangible assets, net of liabilities		89,119		(17,410	)		30,245
Net tangible and intangible assets	$	186,977	$	112,534		$	97,174
December 31, 2012
Goodwill	$	60,745	$	94,112		$	64,526
Identified intangible assets, net		41,103		36,141			3,000
Tangible assets, net of liabilities		80,569		(14,239	)		26,304
Net tangible and intangible assets		182,417		116,014			93,830

Operating segment assets exclude corporate assets, such as cash, short-term investments, corporate headquarters facility, deferred proceeds from property transaction and related assets, imputed financing obligation, taxes receivable, and taxes payable. In accordance with ASC 805, we revised previously issued post-acquisition financial information to reflect adjustments to the preliminary accounting for business acquisitions as if the adjustments occurred on the acquisition date. Accordingly, we have increased goodwill by $0.8 and $0.3 million at December 31, 2012 to reflect opening balance sheet adjustments in the Industrical Inkjet and Productivity Software operating segments, respectively, related to our acquisitions of Cretaprint, OPS, and Technique, respectively. The purchase price allocations for the OPS and Technique acquisitions are preliminary and subject to change within the respective measurement periods as valuations are finalized. We expect to continue to obtain information to assist us in finalizing the fair value of the net assets acquired at the respective acquisition dates during the respective measurement periods.

Geographic Areas

Our revenue originates in the U.S., the Netherlands, Germany, Japan, the U.K., Spain, Brazil, Australia, and New Zealand. We report revenue by geographic area based on ship-to destination. Shipments to some of our significant printer manufacturer/distributor customers are made to centralized purchasing and manufacturing locations, which in turn sell through to other locations. As a result of these factors, we believe that sales to certain geographic locations might be higher or lower, as the ultimate destinations are difficult to ascertain.

Our revenue by ship-to destination for the three and six months ended June 30, 2013 and 2012 was as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Americas	$	100,516	$	82,725	$	194,413	$	164,906
Europe, Middle East and Africa (“EMEA”)		49,984		51,560		100,030		106,686
Asia Pacific (“APAC”)		29,798		29,616		57,214		52,365
Japan		5,815		7,867		13,034		14,819
APAC, ex Japan		23,983		21,749		44,180		37,546
Total revenue	$	180,298	$	163,901	$	351,657	$	323,957

XML

Income taxes - Tax Provision before Discrete Items Reconciled to Recorded Provision for Income Taxes (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Income Tax Disclosure [Abstract]
Provision for income taxes before discrete items	$ 2,400,000	$ 2,600,000	$ 4,300,000	$ 5,200,000
Interest related to unrecognized tax benefits	100,000	100,000	200,000	200,000
Provision related to reassessment of taxes resulting from the filing of prior year foreign tax returns			300,000
Benefit related to restructuring and other expenses	(100,000)	(300,000)	(700,000)	(600,000)
Benefit related to the 2012 U.S. federal research and development tax credit			(3.2)
Tax deductions related to ESPP dispositions	(100,000)	(100,000)	(300,000)	(400,000)
Benefit related to reversals of uncertain tax positions due to statute of limitation expirations	(300,000)	(300,000)	(300,000)	(300,000)
Provision for income taxes	$ 2,009,000	$ 2,049,000	$ 253,000	$ 4,067,000

XML

Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Income Statement [Abstract]
Revenue	$ 180,298		$ 163,901		$ 351,657		$ 323,957
Cost of revenue	82,315	[1]	74,109	[1]	159,814	[1]	146,498	[1]
Gross Profit	97,983		89,792		191,843		177,459
Operating expenses:
Research and development	32,092	[1]	30,227	[1]	63,159	[1]	61,126	[1]
Sales and marketing	34,512	[1]	32,234	[1]	67,248	[1]	63,151	[1]
General and administrative	13,343	[1]	11,154	[1]	27,041	[1]	24,056	[1]
Restructuring and other (Note 11)	1,235		1,167		3,137		2,250
Amortization of identified intangibles	4,946		4,631		9,873		8,815
Total operating expenses	86,128		79,413		170,458		159,398
Income from operations	11,855		10,379		21,385		18,061
Interest and other expense, net	(422)		(1,325)		(3,346)		(755)
Income before income taxes	11,433		9,054		18,039		17,306
Provision for income taxes	(2,009)		(2,049)		(253)		(4,067)
Net income	$ 9,424		$ 7,005		$ 17,786		$ 13,239
Net income per basic common share	$ 0.20		$ 0.15		$ 0.38		$ 0.29
Net income per diluted common share	$ 0.20		$ 0.15		$ 0.37		$ 0.28
Shares used in basic per-share calculation	46,427		46,460		46,376		46,247
Shares used in diluted per-share calculation	48,254		47,814		48,149		47,599

[1] Includes stock-based compensation expense as follows:

XML

Earnings Per Share

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share

2. Earnings Per Share

Net income per basic common share is computed using the weighted average number of common shares outstanding during the period, excluding non-vested restricted stock. Net income per diluted common share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares result from the assumed exercise of outstanding common stock options having a dilutive effect using the treasury stock method, non-vested shares of restricted stock having a dilutive effect, shares to be purchased under our Employee Stock Purchase Plan (“ESPP”) having a dilutive effect, and non-vested restricted stock for which the performance criteria have been met. Any potential shares that are anti-dilutive as defined in ASC 260, Earnings Per Share, are excluded from the effect of dilutive securities.

ASC 260-10-45-48 requires that performance-based and market-based restricted stock and stock options that would be issuable if the end of the reporting period were the end of the vesting period, if the result would be dilutive, are assumed to be outstanding for purposes of determining net income per diluted common share as of the later of the beginning of the period or the grant date. Accordingly, performance-based restricted stock units (“RSUs”), which vested or were issuable on February 22, 2013, May 11, 2013, June 30, 2013, February 9, 2012, February 13, 2012, and May 23, 2012, based on achievement of specified performance criteria related to revenue and non-GAAP operating income targets, and market-based RSUs and stock options, which vested on January 14, February 7, February 11, February 13, March 25, and April 1, 2013, based on achievement of specified stock prices for defined periods, are included in the determination of net income per diluted common share as of the beginning of the period. Performance-based and market-based targets were not met with respect to any other RSUs or stock options as of June 30, 2013.

Basic and diluted earnings per share for the three and six months ended June 30, 2013 and 2012 are reconciled as follows (in thousands, except per share amounts):

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Basic net income per share:
Net income available to common shareholders	$	9,424	$	7,005	$	17,786	$	13,239
Weighted average common shares outstanding		46,427		46,460		46,376		46,247
Basic net income per share	$	0.20	$	0.15	$	0.38	$	0.29
Dilutive net income per share:
Net income available to common shareholders	$	9,424	$	7,005	$	17,786	$	13,239
Weighted average common shares outstanding		46,427		46,460		46,376		46,247
Dilutive stock options and non-vested restricted stock		1,827		1,354		1,773		1,352
Weighted average common shares outstanding for purposes of computing diluted net income per share		48,254		47,814		48,149		47,599
Dilutive net income per share	$	0.20	$	0.15	$	0.37	$	0.28

Potential shares of common stock that are not included in the determination of diluted net income per share because they are anti-dilutive for the periods presented consist of weighted stock options, non-vested restricted stock, and shares to be purchased under our ESPP having an anti-dilutive effect, excluding any performance-based or market-based stock options and RSUs for which the performance criteria were not met, of less than 0.1 million for the three and six months ended June 30, 2013 and 0.4 and 0.7 million for the three and six months ended June 30, 2012, respectively.

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Basis of Presentation and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2013

Basis of Presentation

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements (“condensed consolidated financial statements”) include the accounts of Electronics For Imaging, Inc. and its subsidiaries (“EFI” or “Company”). Intercompany accounts and transactions have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP” or “GAAP”) for interim financial information, rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements, and accounting policies consistent in all material respects with those applied in preparing our audited annual consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. These condensed consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and the notes thereto for the year ended December 31, 2012, included in our Annual Report on Form 10-K. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments, management considers necessary for the fair presentation of our financial position, operating results, comprehensive income, and cash flows for the interim periods presented. The results for the interim periods are not necessarily indicative of results for the entire year.

In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, we revised previously issued post-acquisition financial information to reflect adjustments to the preliminary accounting for business acquisitions as if the adjustments occurred on the acquisition date. Accordingly, we have increased goodwill and accrued and other liabilities by $1.1 million at December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of Creta Print S.L. (“Cretaprint”), Online Print Marketing Ltd. and DataCreation Pty Ltd. together doing business as Online Print Solutions (“OPS”), and Technique, Inc. and Technique Business Systems Limited (collectively, “Technique”). The purchase price allocations for the OPS and Technique acquisitions are preliminary and subject to change within the respective measurement periods as valuations are finalized. We expect to continue to obtain information to assist us in finalizing the fair value of the net assets acquired at the respective acquisition dates during the respective measurement periods.

Restricted Cash

Restricted Cash

We are required to maintain restricted cash of $0.3 million as of June 30, 2013 related to customer agreements that were obtained through the alphagraph team GmbH (“Alphagraph”) acquisition, which is classified as a current asset because the restriction will be released within twelve months.

Fair Value Measurements

Fair Value Measurements. As a basis for considering market participant assumptions in fair value measurements, ASC 820, Fair Value Measurement, establishes a three-tier fair value hierarchy as more fully defined in Note 5, Investments and Fair Value Measurements. In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). Effective in the first quarter of 2012, the primary provisions of ASU 2011-04 impacting us are the adoption of uniform terminology within U.S. GAAP and IFRS to reference fair value concepts, measuring the fair value of an equity instrument used as consideration in a business combination, and the following additional disclosures concerning fair value measurements classified as Level 3 within the fair value hierarchy:

• quantitative information about the unobservable inputs used in the determination of Level 3 fair value measurements,

• the valuation processes used in Level 3 fair value measurements, and

• the sensitivity of Level 3 fair value measurements to changes in unobservable inputs and the interrelationships between those unobservable inputs.

Accordingly, the appropriate disclosures have been included in the accompanying condensed consolidated financial statements.

Other Comprehensive Income

Other Comprehensive Income. In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. Effective in the first quarter of 2012, we have opted to present total comprehensive income, the components of net income, and the components of other comprehensive income in two separate, but consecutive, statements. Under ASU 2011-05, we also have the option to present this information in a single continuous statement of comprehensive income. We previously presented the components of accumulated other comprehensive income (loss) (“OCI”) in the footnotes to our interim and annual financial statements and as a component of our statement of stockholders’ equity in our annual financial statements.

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires additional disclosures about amounts reclassified out of OCI by component. Effective in the first quarter of 2013, we are required to present, either on the face of the condensed consolidated statement of operations or in the notes to our condensed consolidated financial statements, significant amounts reclassified out of OCI by the respective line items of net income, but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, we are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. We have provided the required disclosure in Note 4, Balance Sheet Details, of the notes to condensed consolidated financial statements.

Goodwill and Other Indefinite-Lived Intangible Asset Impairment Assessment

Goodwill and Other Indefinite-Lived Intangible Asset Impairment Assessment. In September 2011 and July 2012, the FASB issued new accounting guidance that simplifies the analysis of goodwill and other indefinite-lived intangible asset impairment. The new guidance allows a qualitative assessment to be performed to determine whether further impairment testing is necessary. These accounting standards are effective for the year ended December 31, 2012 with respect to the assessment of goodwill and for the year ended December 31, 2013 with respect to the assessment of other indefinite-lived intangible assets. These standards provide an alternative method for determining whether our goodwill and other indefinite-lived intangible assets have been impaired, which would not differ materially from the result of the detailed impairment testing methodology required by ASC 350-20-35, Goodwill – Subsequent Measurement.

Joint and Several Liability

Joint and Several Liability. In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date, which requires accrual of obligations resulting from joint and several liability arrangements when the total amount of the obligation is fixed at the reporting date, as the sum of the following:

• the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and

• any additional amount the reporting entity expects to pay on behalf of its co-obligors.

If the amount of the obligation is not fixed at the reporting date, then the related liability should be accrued in accordance with ASC 450-20, Loss Contingencies. Examples of obligations subject to ASU 2013-04 include debt arrangements, legal settlements, and contractual obligations.

ASU 2013-04 will be effective in the first quarter of 2014. We are currently evaluating its impact on our financial condition and results of operations.

Balance Sheet Presentation of Unrecognized Tax Benefits

Balance Sheet Presentation of Unrecognized Tax Benefits. In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. We currently present our liability for estimated unrecognized tax benefits as noncurrent income taxes payable in our condensed consolidated balance sheets of $33.8 and $29.8 million as of June 30, 2013 and December 31, 2012, respectively. Effective in the first quarter of 2014, we will be required to reclassify unrecognized tax benefits as an offset to deferred tax assets to the extent of any net operating loss carryforwards, similar tax loss carryforwards, or tax credit carryforwards that are available at the reporting date under the tax law of the applicable tax jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. An exception would apply if the tax law of the tax jurisdiction does not require us to use, and we do not intend to use, the deferred tax asset for such purpose. We have not yet determined the amount of the required reclassification between noncurrent income taxes payable and deferred tax assets.

Segment Reporting

ASC 280, Segment Reporting, requires operating segment information to be presented based on the internal reporting used by the chief operating decision making group to allocate resources and evaluate operating segment performance. Our enterprise management processes use financial information that is closely aligned with our three operating segments at the gross profit level. Relevant discrete financial information is prepared at the gross profit level for each of our three operating segments, which is used by the chief operating decision making group to allocate resources and assess the performance of each operating segment.

Derivatives and Hedging

We are exposed to market risk and foreign currency exchange risk from changes in foreign currency exchange rates, which could affect operating results, financial position, and cash flows. We manage our exposure to these risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are used to hedge monetary assets and liabilities, including intercompany transactions, as well as reduce earnings and cash flow volatility resulting from shifts in market rates. Our objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting fair values of assets and liabilities. We do not have any leveraged derivatives, nor do we use derivative contracts for speculative purposes. ASC 815, Derivatives and Hedging, requires the fair value of all derivative instruments, including those embedded in other contracts, to be recorded as assets or liabilities in our condensed consolidated balance sheet. As permitted, foreign exchange contracts with notional amounts of $2.7 million and net asset/liability fair values that are immaterial have been designated for cash flow hedge accounting treatment at June 30, 2013 and December 31, 2012. The related cash flow impacts of our derivative contracts are reflected as cash flows from operating activities.

Our exposures are related to non-U.S. dollar-denominated revenue in Europe, Japan, the U.K., Latin America, Australia, and New Zealand and are primarily related to non-U.S. dollar-denominated operating expenses in Europe, India, Japan, the U.K., Brazil, and Australia. We hedge our operating expense cash flow exposure in Indian rupees. We hedge remeasurement exposure associated with Euro-denominated intercompany loans and Indian rupe nonmonetary assets. As of June 30, 2013, we had not entered into hedges against any other currency exposures, but we may consider hedging against movements in other currencies in the future.

By their nature, derivative instruments involve, to varying degrees, elements of market and credit risk. The market risk associated with these instruments resulting from currency exchange movement is expected to offset the market risk of the underlying transactions, assets, and liabilities being hedged (e.g., operating expense exposure in Indian rupees) or the settlement of the Euro-denominated intercompany loans. We do not believe there is a significant risk of loss from non-performance by the counterparty associated with these instruments because, by policy, we deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

Foreign currency derivative contracts with notional amounts of $2.7 million and net asset/liability amounts that are immaterial have been designated as cash flow hedges of our Indian rupee operating expense exposure at June 30, 2013 and December 31, 2012. The changes in fair value of these contracts are reported as a component of OCI and reclassified to operating expense in the periods of payment of the hedged operating expenses. The amount of ineffectiveness that was recorded in the condensed consolidated statement of operations for these designated cash flow hedges was immaterial. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

Forward contracts not designated as hedging instruments with notional amounts of $18.2 and $0.5 million are used to hedge foreign currency balance sheet exposures at June 30, 2013 and December 31, 2012, respectively. They are not designated for hedge accounting treatment since there is a natural offset for the remeasurement of the underlying foreign currency denominated asset or liability. We recognize changes in the fair value of non-designated derivative instruments in earnings in the period of change. Gains (losses) on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest and other expense, net, in the same period as the remeasurement gain (loss) of the related foreign currency denominated assets and liabilities. Forward contracts not designated as hedging instruments at June 30, 2013, consist of hedges of Euro-denominated intercompany loans with notional amounts of $16.9 million and Indian rupee net monetary assets with a notional amount of $1.3 million.

Performance-based and market-based restricted stock [Member]

Computation of Net Income Per Common Share

ASC 260-10-45-48 requires that performance-based and market-based restricted stock and stock options that would be issuable if the end of the reporting period were the end of the vesting period, if the result would be dilutive, are assumed to be outstanding for purposes of determining net income per diluted common share as of the later of the beginning of the period or the grant date. Accordingly, performance-based restricted stock units (“RSUs”), which vested or were issuable on February 22, 2013, May 11, 2013, June 30, 2013, February 9, 2012, February 13, 2012, and May 23, 2012, based on achievement of specified performance criteria related to revenue and non-GAAP operating income targets, and market-based RSUs and stock options, which vested on January 14, February 7, February 11, February 13, March 25, and April 1, 2013, based on achievement of specified stock prices for defined periods, are included in the determination of net income per diluted common share as of the beginning of the period. Performance-based and market-based targets were not met with respect to any other RSUs or stock options as of June 30, 2013.

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Stock-based Compensation - Schedule of Non-Vested RSUs (Detail) (RSUs [Member], USD $)	6 Months Ended
	Jun. 30, 2013
RSUs [Member]
Nonvested Restricted Stock Units Activity [Line Items]
Shares, Non-vested, beginning balance	2,345,000
Shares, Restricted stock granted	355,000
Shares, Restricted stock vested	(408,000)
Shares, Restricted stock forfeited	(188,000)
Shares, Non-vested, ending balance	2,104,000
Weighted average grant date fair value, Non-vested, beginning balance	$ 15.26
Weighted average grant date fair value, Restricted stock granted	$ 24.21
Weighted average grant date fair value, Restricted stock vested	$ 15.08
Weighted average grant date fair value, Restricted stock forfeited	$ 16.91
Weighted average grant date fair value, Non-vested, ending balance	$ 16.66

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Segment Information and Geographic Data - Summary of Gross Profit Information, Excluding Stock-Based Compensation Expense by Segment (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Segment Reporting Information [Line Items]
Revenue	$ 180,298	$ 163,901	$ 351,657	$ 323,957
Operating Segment [Member]
Segment Reporting Information [Line Items]
Gross profit	98,365	90,027	192,694	177,992
Operating Segment [Member] | Industrial Inkjet [Member]
Segment Reporting Information [Line Items]
Revenue	88,003	79,820	168,306	154,912
Gross profit	35,165	32,215	67,146	61,701
Gross profit percentages	40.00%	40.40%	39.90%	39.80%
Operating Segment [Member] | Productivity Software [Member]
Segment Reporting Information [Line Items]
Revenue	28,509	25,722	56,238	49,791
Gross profit	20,231	18,500	40,156	35,665
Gross profit percentages	71.00%	71.90%	71.40%	71.60%
Operating Segment [Member] | Fiery [Member]
Segment Reporting Information [Line Items]
Revenue	63,786	58,359	127,113	119,254
Gross profit	$ 42,969	$ 39,312	$ 85,392	$ 80,626
Gross profit percentages	67.40%	67.40%	67.20%	67.60%

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Derivatives and Hedging

6 Months Ended

Jun. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivatives and Hedging

10. Derivatives and Hedging

We are exposed to market risk and foreign currency exchange risk from changes in foreign currency exchange rates, which could affect operating results, financial position, and cash flows. We manage our exposure to these risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are used to hedge monetary assets and liabilities, including intercompany transactions, as well as reduce earnings and cash flow volatility resulting from shifts in market rates. Our objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting fair values of assets and liabilities. We do not have any leveraged derivatives, nor do we use derivative contracts for speculative purposes. ASC 815, Derivatives and Hedging, requires the fair value of all derivative instruments, including those embedded in other contracts, to be recorded as assets or liabilities in our condensed consolidated balance sheet. As permitted, foreign exchange contracts with notional amounts of $2.7 million and net asset/liability fair values that are immaterial have been designated for cash flow hedge accounting treatment at June 30, 2013 and December 31, 2012. The related cash flow impacts of our derivative contracts are reflected as cash flows from operating activities.

Our exposures are related to non-U.S. dollar-denominated revenue in Europe, Japan, the U.K., Latin America, Australia, and New Zealand and are primarily related to non-U.S. dollar-denominated operating expenses in Europe, India, Japan, the U.K., Brazil, and Australia. We hedge our operating expense cash flow exposure in Indian rupees. We hedge remeasurement exposure associated with Euro-denominated intercompany loans and Indian rupe nonmonetary assets. As of June 30, 2013, we had not entered into hedges against any other currency exposures, but we may consider hedging against movements in other currencies in the future.

By their nature, derivative instruments involve, to varying degrees, elements of market and credit risk. The market risk associated with these instruments resulting from currency exchange movement is expected to offset the market risk of the underlying transactions, assets, and liabilities being hedged (e.g., operating expense exposure in Indian rupees) or the settlement of the Euro-denominated intercompany loans. We do not believe there is a significant risk of loss from non-performance by the counterparty associated with these instruments because, by policy, we deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

Foreign currency derivative contracts with notional amounts of $2.7 million and net asset/liability amounts that are immaterial have been designated as cash flow hedges of our Indian rupee operating expense exposure at June 30, 2013 and December 31, 2012. The changes in fair value of these contracts are reported as a component of OCI and reclassified to operating expense in the periods of payment of the hedged operating expenses. The amount of ineffectiveness that was recorded in the condensed consolidated statement of operations for these designated cash flow hedges was immaterial. All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

Forward contracts not designated as hedging instruments with notional amounts of $18.2 and $0.5 million are used to hedge foreign currency balance sheet exposures at June 30, 2013 and December 31, 2012, respectively. They are not designated for hedge accounting treatment since there is a natural offset for the remeasurement of the underlying foreign currency denominated asset or liability. We recognize changes in the fair value of non-designated derivative instruments in earnings in the period of change. Gains (losses) on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest and other expense, net, in the same period as the remeasurement gain (loss) of the related foreign currency denominated assets and liabilities. Forward contracts not designated as hedging instruments at June 30, 2013, consist of hedges of Euro-denominated intercompany loans with notional amounts of $16.9 million and Indian rupee net monetary assets with a notional amount of $1.3 million.

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Investments and Fair Value Measurements - Schedule of Accumulated Other-than-Temporary Credit-Related Impairments Charged to Retained Earnings and Interest and Other Expense Net (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013
Other Than Temporary Impairment Losses Investments [Abstract]
Impairments Charged to Retained Earnings	$ 58
Impairments Recognized in Other Income (Expense), Net	824
Total	$ 882

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Segment Information and Geographic Data - Reconciliation of Segment Gross Profit to Condensed Consolidated Statements of Operations (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Segment Information [Line Items]
Gross profit	$ 97,983	$ 89,792	$ 191,843	$ 177,459
Operating Segment [Member]
Segment Information [Line Items]
Segment gross profit	98,365	90,027	192,694	177,992
Segment Reconciling Items [Member]
Segment Information [Line Items]
Stock-based compensation expense	$ (382)	$ (235)	$ (851)	$ (533)

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Acquisitions - Additional Information (Detail) (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Acquired Finite-Lived Intangible Assets [Line Items]
Cash consideration	$ 4,533,000	$ 44,533,000
Contingent consideration, current	21,200,000
Contingent consideration, noncurrent	8,400,000
Minimum [Member] | Earnout [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate	4.20%
Maximum [Member] | Earnout [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate	6.40%
JJF Enterprises and GamSys [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Cash consideration	3,600,000
Fair value of earnouts	3,000,000
Contingent consideration, current	1,400,000
Contingent consideration, noncurrent	$ 1,600,000
JJF Enterprises and GamSys [Member] | In Process Research And Developments [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate	17.00%
JJF Enterprises and GamSys [Member] | Minimum [Member] | Acquired Intangible Assets [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate	16.50%
JJF Enterprises and GamSys [Member] | Minimum [Member] | In Process Research And Developments [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
IPR&D percent complete at acquisition date	50.00%
JJF Enterprises and GamSys [Member] | Minimum [Member] | Earnout [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate	4.50%
JJF Enterprises and GamSys [Member] | Maximum [Member] | Acquired Intangible Assets [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate	24.00%
JJF Enterprises and GamSys [Member] | Maximum [Member] | In Process Research And Developments [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
IPR&D percent complete at acquisition date	53.00%
JJF Enterprises and GamSys [Member] | Maximum [Member] | Earnout [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Fair value discount rate	6.00%

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Acquisitions (Tables)

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed

The preliminary allocation of the purchase price to the assets acquired and liabilities assumed (in thousands) with respect to these acquisitions at their respective acquisition dates is summarized as follows:

	Weighted average useful life		Purchase Price Allocation
Customer relationships		5 years	$	2,130
Existing technology		3 years		650
Trade name		3 years		280
IPR&D		3 years		150
Goodwill		—		6,245
				9,455
Net tangible liabilities				(1,230	)
Total purchase price			$	8,225

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Basic and Diluted Earnings Per Share

Basic and diluted earnings per share for the three and six months ended June 30, 2013 and 2012 are reconciled as follows (in thousands, except per share amounts):

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Basic net income per share:
Net income available to common shareholders	$	9,424	$	7,005	$	17,786	$	13,239
Weighted average common shares outstanding		46,427		46,460		46,376		46,247
Basic net income per share	$	0.20	$	0.15	$	0.38	$	0.29
Dilutive net income per share:
Net income available to common shareholders	$	9,424	$	7,005	$	17,786	$	13,239
Weighted average common shares outstanding		46,427		46,460		46,376		46,247
Dilutive stock options and non-vested restricted stock		1,827		1,354		1,773		1,352
Weighted average common shares outstanding for purposes of computing diluted net income per share		48,254		47,814		48,149		47,599
Dilutive net income per share	$	0.20	$	0.15	$	0.37	$	0.28

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Investments and Fair Value Measurements - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012	Dec. 31, 2011
Investments And Fair Value Measurements [Line Items]
Available-for-sale securities, net realized losses		$ 100,000	$ 100,000	$ 100,000
Net unrealized gains on sale of securities included in other comprehensive income	100,000		100,000		300,000
Cash equivalents and short term investments	190,414,000		190,414,000		198,153,000
Contingent consideration liability	29,627,000		29,627,000		38,050,000	8,704,000
Acquisition-related executive deferred compensation	200,000	200,000	465,000	456,000	907,000
Contingent liability, current	21,200,000		21,200,000
Contingent liability, noncurrent	8,400,000		8,400,000
Earnout interest accretion			800,000		1,700,000
Probability-adjusted revenue			5.00%
Increase in earnout liability	1,000,000		1,000,000
Decrease in earnout liability	1,400,000		1,400,000
Increase or decrease in fair value contingent consideration	300,000		300,000
Percentage of increase or decrease in the fair value of contingent consideration	1.00%		1.00%
Stop loss deductible			125,000
Self-insurance	1,558,000		1,558,000		1,375,000	1,640,000
Severity of claims experienced or medical cost inflation			10.00%
Increase/Decrease in self-insurance liability			100,000
Notional amount of our derivative assets and liabilities	20,900,000		20,900,000		3,200,000
Designated for cash flow hedge [Member]
Investments And Fair Value Measurements [Line Items]
Notional amount of our derivative assets and liabilities	2,700,000		2,700,000		2,700,000
Alphagraph [Member]
Investments And Fair Value Measurements [Line Items]
Earnout payments			700,000
Entrac, Cretaprint, Streamline, Alphagraph, And Metrics [Member]
Investments And Fair Value Measurements [Line Items]
Fair value of contingent consideration decreased			(1,600,000)
Entrac and Alphagraph [Member]
Investments And Fair Value Measurements [Line Items]
Fair value of contingent consideration decreased					(2,100,000)
Streamline [Member]
Investments And Fair Value Measurements [Line Items]
Earnout payments					600,000
Radius [Member]
Investments And Fair Value Measurements [Line Items]
Contingent consideration liability						2,100,000
Earnout payments			1,000,000		300,000
FX Colors [Member]
Investments And Fair Value Measurements [Line Items]
Contingent consideration liability						190,000
Earnout payments					100,000
Cretaprint [Member]
Investments And Fair Value Measurements [Line Items]
Contingent consideration liability						16,445,000
Earnout payments			8,900,000
Money market funds [Member]
Investments And Fair Value Measurements [Line Items]
Cash equivalents and short term investments	123,502,000		123,502,000		112,714,000
Net Asset Value per share	$ 1.00		$ 1.00		$ 1.00
U.S. Government and sponsored entities [Member]
Investments And Fair Value Measurements [Line Items]
Cash equivalents and short term investments	5,034,000		5,034,000		20,177,000
U.S. Government and sponsored entities [Member] | Cash equivalents [Member]
Investments And Fair Value Measurements [Line Items]
Cash equivalents and short term investments					2,800,000
Corporate debt securities [Member]
Investments And Fair Value Measurements [Line Items]
Cash equivalents and short term investments	41,691,000		41,691,000		42,069,000
Corporate debt securities [Member] | Cash equivalents [Member]
Investments And Fair Value Measurements [Line Items]
Cash equivalents and short term investments	$ 3,400,000		$ 3,400,000		$ 1,700,000
Minimum [Member]
Investments And Fair Value Measurements [Line Items]
Probability of achieving revenue	70.00%		70.00%
Minimum [Member] | Earnout [Member]
Investments And Fair Value Measurements [Line Items]
Fair value discount rate			4.20%
Maximum [Member]
Investments And Fair Value Measurements [Line Items]
Probability of achieving revenue	100.00%		100.00%
Maximum [Member] | Earnout [Member]
Investments And Fair Value Measurements [Line Items]
Fair value discount rate			6.40%

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Basis of Presentation and Significant Accounting Policies - Additional Information (Detail) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Post-acquisition adjustments related to business combination			$ 1,100,000
Restricted cash related to customer agreements	300,000
Noncurrent income taxes payable	33,807,000		29,755,000
Net cash paid for income taxes	7,800,000	1,695,000
Deferred proceeds from property transaction [Member]
Basis Of Presentation And Summary Of Significant Accounting Policies [Line Items]
Net cash paid for income taxes	$ 5,500,000

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Balance Sheet Details - Summary of Inventories (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Raw materials	$ 34,071	$ 30,519
Work in process	3,318	5,847
Finished goods	25,710	21,977
Inventory net	$ 63,099	$ 58,343

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Investments and Fair Value Measurements - Summary of Changes in Fair Value of Contingent Consideration (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Business Acquisition, Contingent Consideration [Line Items]
Deferred compensation expense dependent on future employment	$ 200	$ 200	$ 465	$ 456	$ 907
Fair value of contingent consideration			38,050	8,704	8,704
Changes in valuation			(828)		(432)
Payments			(10,616)		(968)
Foreign currency adjustment			(473)		612
Fair value of contingent consideration	29,627		29,627		38,050
Cretaprint [Member]
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration				16,445	16,445
Date of acquisition agreement					Jan. 10, 2012
FX Colors [Member]
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration				190	190
Date of acquisition agreement					Apr. 05, 2012
Metrics [Member]
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration				5,582	5,582
Date of acquisition agreement					Apr. 10, 2012
Online Print Solutions [Member]
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration				2,600	2,600
Date of acquisition agreement					Oct. 01, 2012
Technique [Member]
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration				4,410	4,410
Date of acquisition agreement					Nov. 16, 2012
Print Leader [Member]
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration			389
Date of acquisition agreement			May 08, 2013
Gam Sys [Member]
Business Acquisition, Contingent Consideration [Line Items]
Fair value of contingent consideration			$ 2,640
Date of acquisition agreement			May 31, 2013

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Segment Information and Geographic Data (Tables)

6 Months Ended

Jun. 30, 2013

Segment Reporting [Abstract]

Summary of Gross Profit Information, Excluding Stock-Based Compensation Expense by Segment

Gross profit information, excluding stock-based compensation expense, for the three and six months ended June 30, 2013 and 2012 is summarized as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Industrial Inkjet
Revenue	$	88,003		$	79,820		$	168,306		$	154,912
Gross profit		35,165			32,215			67,146			61,701
Gross profit percentages		40.0	%		40.4	%		39.9	%		39.8	%
Productivity Software
Revenue	$	28,509		$	25,722		$	56,238		$	49,791
Gross profit		20,231			18,500			40,156			35,665
Gross profit percentages		71.0	%		71.9	%		71.4	%		71.6	%
Fiery
Revenue	$	63,786		$	58,359		$	127,113		$	119,254
Gross profit		42,969			39,312			85,392			80,626
Gross profit percentages		67.4	%		67.4	%		67.2	%		67.6	%

Reconciliation of Segment Gross Profit to Condensed Consolidated Statements of Operations

A reconciliation of our segment gross profit to our condensed consolidated statements of operations for the three and six months ended June 30, 2013 and 2012 is as follows (in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
Segment gross profit	$	98,365		$	90,027		$	192,694		$	177,992
Stock-based compensation expense		(382	)		(235	)		(851	)		(533	)
Gross profit	$	97,983		$	89,792		$	191,843		$	177,459

Tangible and Intangible Assets, Net of Liabilities, Summarized by Operating Segment

Tangible and intangible assets, net of liabilities, are summarized by operating segment as follows (in thousands):

June 30, 2013	Industrial Inkjet		Productivity Software			Fiery
Goodwill	$	60,594	$	97,324		$	64,480
Identified intangible assets, net		37,264		32,620			2,449
Tangible assets, net of liabilities		89,119		(17,410	)		30,245
Net tangible and intangible assets	$	186,977	$	112,534		$	97,174
December 31, 2012
Goodwill	$	60,745	$	94,112		$	64,526
Identified intangible assets, net		41,103		36,141			3,000
Tangible assets, net of liabilities		80,569		(14,239	)		26,304
Net tangible and intangible assets		182,417		116,014			93,830

Revenue by Ship-to Destination

Our revenue by ship-to destination for the three and six months ended June 30, 2013 and 2012 was as follows (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Americas	$	100,516	$	82,725	$	194,413	$	164,906
Europe, Middle East and Africa (“EMEA”)		49,984		51,560		100,030		106,686
Asia Pacific (“APAC”)		29,798		29,616		57,214		52,365
Japan		5,815		7,867		13,034		14,819
APAC, ex Japan		23,983		21,749		44,180		37,546
Total revenue	$	180,298	$	163,901	$	351,657	$	323,957

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Stock-based Compensation - Schedule of Stock-Based Compensation Expense (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	$ 5,798	$ 4,766	$ 12,442	$ 9,433
Tax effect on stock-based compensation	(1,814)	(1,329)	(3,748)	(2,861)
Net effect on net income	3,984	3,437	8,694	6,572
Employee stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	196	324	634	462
Non-vested RSUs [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	4,858	3,965	10,130	7,896
ESPP [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation	$ 744	$ 477	$ 1,678	$ 1,075

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Stock-based Compensation - Market-based Stock Options and RSUs - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2011 Market-based RSUs [Member]	Dec. 31, 2009 Market-based RSUs [Member]	Dec. 31, 2009 Market-based stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs granted during the period		90,000	98,000
Estimated grant date fair value of restricted stock		$ 1.1	$ 0.9
Average derived service period, in years		3 years 11 months 5 days	4 years 4 months 6 days	4 years 10 months 17 days
Risk-free interest rate		2.90%	3.50%	3.10%
Implied volatility		40.00%	50.00%	50.00%
RSUs that remain outstanding		0	0	0
Options granted during the period				294,076
Estimated grant date fair value of stock options				$ 1.7
RSUs vested			78,000
Stock options vested				190,716

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Restructuring and Other - Restructuring and Other Reserve Activities (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Restructuring And Related Activities [Abstract]
Reserve balance at January 1,			$ 1,670	$ 1,870	$ 1,870
Restructuring charges			1,084	785
Other charges			2,053	1,465
Non-cash acquisition-related retention costs	(200)	(200)	(465)	(456)	(907)
Cash payments			(3,006)	(2,152)
Reserve balance at June 30,	$ 1,336	$ 1,512	$ 1,336	$ 1,512	$ 1,670

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Balance Sheet Details - Summary of Accumulated Other Comprehensive Income (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Net unrealized investment gains	$ 32	$ 184
Currency translation gains (losses)	(3,440)	132
Other	(109)	(47)
Accumulated other comprehensive income (loss)	$ (3,517)	$ 269

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Stock-based Compensation - Amended and Restated 2009 Equity Incentive Award Plan - Additional Information (Detail) (2009 Equity Incentive Award Plan [Member]) In Millions, unless otherwise specified	Jun. 04, 2013	Mar. 31, 2013
2009 Equity Incentive Award Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock reserved under the plan for future issuance		7.0
Common stock reserved under the plan for future issuance	11.6

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Basis of Presentation and Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Summary of Supplemental Cash Flow Information

Supplemental Cash Flow Information

	Six months ended June 30,
(in thousands)	2013			2012
Net cash paid for income taxes	$	7,800		$	1,695
Cash paid for interest expense	$	62		$	32
Acquisition-related activities:
Cash paid for acquisitions, excluding contingent consideration	$	4,596		$	47,520
Cash acquired in acquisitions, excluding restricted cash		(63	)		(2,987	)
Net cash paid for acquisitions	$	4,533		$	44,533
Non-cash investing and financing activities:
Non-cash acquisition of property under a build-to-suit lease	$	11,000		$	—
Property and equipment received and accrued in accounts payable		347			172
	$	11,347		$	172

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Statement of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement Of Comprehensive Income [Abstract]
Net income	$ 9,424	$ 7,005	$ 17,786	$ 13,239
Net unrealized investment gains (losses):
Unrealized holding gains (losses), net of tax benefits of $0.1 million for the three and six months ended June 30, 2013, and net of tax benefit of less than $0.1 million and tax provision of $0.1 million for the three and six months ended June 30, 2012, respectively	(169)	(25)	(134)	150
Reclassification adjustments for (gains) losses included in net income, net of tax provisions of less than $0.1 million for the three and six months ended June 30, 2013, and net of tax provision of less than $0.1 million and tax benefit of less than $0.1 million for the three and six months ended June 30, 2012, respectively	(5)	6	(18)	(42)
Net unrealized investment gains (losses)	(174)	(19)	(152)	108
Currency translation adjustments, net of tax provisions of $0.2 and tax benefit of $0.3 million for the three and six months ended June 30, 2013, respectively, and $0.5 million and less than $0.1 million for the three and six months ended June 30, 2012, respectively	(1,929)	(2,763)	(3,572)	(1,563)
Other	(74)	18	(62)	33
Other comprehensive income	$ 7,247	$ 4,241	$ 14,000	$ 11,817

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Cash flows from operating activities:
Net income	$ 17,786	$ 13,239
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	14,343	13,110
Deferred taxes	(7,714)	1,281
Provisions for bad debt and sales-related allowances	2,169	199
Tax benefit (release) from employee stock plans	2,474	(367)
Excess tax benefit from stock-based compensation	(2,637)	(495)
Provisions for inventory obsolescence	2,361	2,122
Stock-based compensation	12,442	9,433
Contingent consideration payment related to business acquired	(618)
Non-cash acquisition-related compensation costs	465	456
Other non-cash charges and credits	162	1,038
Changes in operating assets and liabilities	444	(21,636)
Net cash provided by operating activities	41,677	18,380
Cash flows from investing activities:
Purchases of short-term investments	(17,781)	(28,542)
Proceeds from sales and maturities of short-term investments	34,513	36,193
Purchases, net of proceeds from sales, of property and equipment	(27,324)	(3,801)
Businesses purchased, net of cash acquired, and post-acquisition non-competition agreements	(4,533)	(44,533)
Proceeds from notes receivable of acquired businesses		5,216
Net cash used for investing activities	(15,125)	(35,467)
Cash flows from financing activities:
Proceeds from issuance of common stock	7,906	15,041
Purchases of treasury stock and net settlement of restricted stock	(17,837)	(9,456)
Repayment of acquired business debt	(1,621)	(6,666)
Contingent consideration payments related to businesses acquired	(9,998)	(252)
Excess tax benefit from stock-based compensation	2,637	495
Net cash used for financing activities	(18,913)	(838)
Effect of foreign exchange rate changes on cash and cash equivalents	(1,625)	(308)
Increase (decrease) in cash and cash equivalents	6,014	(18,233)
Cash and cash equivalents at beginning of period	283,996	120,058
Cash and cash equivalents at end of period	$ 290,010	$ 101,825

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Acquisitions

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Acquisitions

Note 3: Acquisitions

We acquired privately-held J.J.F Enterprises, Inc., doing business as PrintLeader Software (“PrintLeader”), and privately-held GamSys Software SPRL (“GamSys”) during the second quarter of 2013, which have been integrated into our Productivity Software operating segment, for cash consideration of approximately $3.6 million, net of cash acquired, plus additional future cash earnouts contingent on achieving certain performance targets and accounts receivable payments dependent on collections.

The fair value of the earnouts are currently estimated to be $3.0 million by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include discount rates of 4.5% and 6.0% and probability-adjusted levels of revenue. Probability-adjusted revenue is a significant input that is not observable in the market, which ASC 820-10-35 refers to as a Level 3 input. These contingent liabilities are reflected in the Condensed Consolidated Balance Sheet as of June 30, 2013, as current and noncurrent liabilities of $1.4 and $1.6 million, respectively. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date will be recognized in general and administrative expenses.

PrintLeader, headquartered in Palm City, Florida, provides business process automation software to small commercial and in-plant printing operations in North America. Support and operations of PrintLeader were integrated into the Productivity Software operating segment, which will also provide PrintSmith products to the PrintLeader customer base, while continuing to support existing PrintLeader customers.

GamSys, headquartered in LaReid, Belgium, provides business process automation software to the printing and packaging industries in the French-speaking regions of Europe and Africa. Support and operations of GamSys were integrated into the Productivity Software operating segment, which provides PrintSmith, Pace, Monarch, and Radius products to the GamSys customer base, while continuing to support existing GamSys customers.

These acquisitions were accounted for as purchase business combinations. In accordance with ASC 805, the purchase price has been allocated to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair values on the acquisition date based on the valuation performed by management with the assistance of a third party. Excess purchase consideration was recorded as goodwill. Factors contributing to a purchase price that results in goodwill include, but are not limited to, the retention of research and development personnel with skills to develop future technology, support personnel to provide maintenance services related to the products, a trained sales force capable of selling current and future products, the opportunity to cross-sell products of the acquired businesses to existing customers, the opportunity to sell PrintSmith, Pace, Monarch, and Radius products to customers of the acquired businesses, and the positive reputation of each of these companies in the market.

We engaged a third party valuation firm to aid management in its analysis of the fair value of GamSys. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party valuation firm, the fair value analyses and related valuations represent the conclusions of management and not the conclusions or statements of any third party. The analysis of the fair value of PrintLeader was determined internally.

The purchase price allocations are preliminary and subject to change within the respective measurement periods as valuations are finalized. We expect to continue to obtain information to assist us in finalizing the fair value of the net assets acquired at the respective acquisition dates during the respective measurement periods. Measurement period adjustments determined to be material will be applied retrospectively to the appropriate acquisition date in our condensed consolidated financial statements and, depending on the nature of the adjustments, our operating results subsequent to the respective acquisition date could be affected.

Valuation Methodologies

Intangible assets acquired consist of customer relationships, existing technology, trade names, and in-process research & development (“IPR&D”). Each intangible asset valuation methodology assumes a discount rate between 16.5% and 24.0%.

Customer Relationships. Customer relationships were valued using the excess earnings method, which is an income approach. The value of customer relationships lies in the generation of a consistent and predictable revenue source without incurring the costs normally required to develop the relationships. Customer relationships were valued by estimating the revenue attributable to existing customer relationships and probability-weighted in each forecast year to reflect the uncertainty of maintaining existing relationships based on historical attrition rates.

Trade Names were valued using the relief from royalty method with royalty rates based on various factors including an analysis of market data, comparable trade name agreements, and consideration of historical advertising dollars spent supporting the trade names. In particular, the GamSys trade name and the Partner and PartnerWeb product names are recognizable in the French speaking areas of Europe and Africa with strong industry recognition.

Existing Technology and IPR&D. Existing technology and IPR&D were valued using the relief from royalty method based on royalty rates for similar technologies. The value of existing technology is derived from consistent and predictable revenue, including the opportunity to cross-sell products of the acquired businesses to existing customers, and the avoidance of the costs associated with developing the technology. Revenue related to existing technology was adjusted in each forecast year to reflect the evolution of the technology and the cost of sustaining research and development required to maintain the technology.

Using each of these methodologies, the value of IPR&D was determined by estimating the cost to develop purchased IPR&D into commercially viable products, estimating the net cash flows resulting from the sale of those products, and discounting the net cash flows back to their present value using a discount rate of 17%. Project schedules were between 50% and 53% complete based on management’s estimate of tasks completed and tasks to be completed to achieve technical and commercial feasibility depending on the measure of completion that is utilized.

IPR&D is subject to amortization after product launch over the product life or otherwise subject to impairment in accordance with acquisition accounting guidance.

The preliminary allocation of the purchase price to the assets acquired and liabilities assumed (in thousands) with respect to these acquisitions at their respective acquisition dates is summarized as follows:

	Weighted average useful life		Purchase Price Allocation
Customer relationships		5 years	$	2,130
Existing technology		3 years		650
Trade name		3 years		280
IPR&D		3 years		150
Goodwill		—		6,245
				9,455
Net tangible liabilities				(1,230	)
Total purchase price			$	8,225

Pro forma results of operations for these acquisitions have not been presented because they are not material to our consolidated results of operations. Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is not deductible for tax purposes.

GamSys generates revenue and incurs operating expenses in Euros. Upon consideration of the salient economic indicators discussed in ASC 830-10-55-5, Foreign Currency Matters, we consider the Euro to be the functional currency for GamSys.

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Common Stock Repurchase Programs - Additional Information (Detail) (USD $) Share data in Millions, unless otherwise specified	6 Months Ended		1 Months Ended	3 Months Ended	6 Months Ended	12 Months Ended	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Aug. 31, 2012 Share Repurchase Program Two Thousand And Twelve [Member]	Jun. 30, 2013 Share Repurchase Program Two Thousand And Twelve [Member]	Jun. 30, 2013 Share Repurchase Program Two Thousand And Twelve [Member]	Dec. 31, 2012 Share Repurchase Program Two Thousand And Twelve [Member]	Jun. 30, 2013 Net Share Settlement [Member]	Jun. 30, 2012 Net Share Settlement [Member]	Jun. 30, 2013 Net Share Settlement [Member]	Jun. 30, 2012 Net Share Settlement [Member]
Stock Repurchase Program [Line Items]
Repurchase of common stock, authorized amount			$ 100,000,000
Aggregate shares purchased				0.2	0.4	1.3	0.1	0.4	0.3	0.5
Aggregate purchase price	17,837,000	9,456,000		5,000,000	10,000,000	22,900,000
Value of shares surrendered to satisfy tax withholding obligations							$ 1,300,000	$ 7,800,000	$ 7,800,000	$ 9,500,000

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Basis of Presentation and Significant Accounting Policies

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

1. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements (“condensed consolidated financial statements”) include the accounts of Electronics For Imaging, Inc. and its subsidiaries (“EFI” or “Company”). Intercompany accounts and transactions have been eliminated in consolidation.

These condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“U.S. GAAP” or “GAAP”) for interim financial information, rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements, and accounting policies consistent in all material respects with those applied in preparing our audited annual consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2012. These condensed consolidated financial statements and accompanying notes should be read in conjunction with our annual consolidated financial statements and the notes thereto for the year ended December 31, 2012, included in our Annual Report on Form 10-K. In the opinion of management, these condensed consolidated financial statements reflect all adjustments, including normal recurring adjustments, management considers necessary for the fair presentation of our financial position, operating results, comprehensive income, and cash flows for the interim periods presented. The results for the interim periods are not necessarily indicative of results for the entire year.

In accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, we revised previously issued post-acquisition financial information to reflect adjustments to the preliminary accounting for business acquisitions as if the adjustments occurred on the acquisition date. Accordingly, we have increased goodwill and accrued and other liabilities by $1.1 million at December 31, 2012 to reflect opening balance sheet adjustments related to our acquisitions of Creta Print S.L. (“Cretaprint”), Online Print Marketing Ltd. and DataCreation Pty Ltd. together doing business as Online Print Solutions (“OPS”), and Technique, Inc. and Technique Business Systems Limited (collectively, “Technique”). The purchase price allocations for the OPS and Technique acquisitions are preliminary and subject to change within the respective measurement periods as valuations are finalized. We expect to continue to obtain information to assist us in finalizing the fair value of the net assets acquired at the respective acquisition dates during the respective measurement periods.

Restricted Cash

We are required to maintain restricted cash of $0.3 million as of June 30, 2013 related to customer agreements that were obtained through the alphagraph team GmbH (“Alphagraph”) acquisition, which is classified as a current asset because the restriction will be released within twelve months.

Recent Accounting Pronouncements

Fair Value Measurements. As a basis for considering market participant assumptions in fair value measurements, ASC 820, Fair Value Measurement, establishes a three-tier fair value hierarchy as more fully defined in Note 5, Investments and Fair Value Measurements. In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). Effective in the first quarter of 2012, the primary provisions of ASU 2011-04 impacting us are the adoption of uniform terminology within U.S. GAAP and IFRS to reference fair value concepts, measuring the fair value of an equity instrument used as consideration in a business combination, and the following additional disclosures concerning fair value measurements classified as Level 3 within the fair value hierarchy:

• quantitative information about the unobservable inputs used in the determination of Level 3 fair value measurements,

• the valuation processes used in Level 3 fair value measurements, and

• the sensitivity of Level 3 fair value measurements to changes in unobservable inputs and the interrelationships between those unobservable inputs.

Accordingly, the appropriate disclosures have been included in the accompanying condensed consolidated financial statements.

Other Comprehensive Income. In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income. Effective in the first quarter of 2012, we have opted to present total comprehensive income, the components of net income, and the components of other comprehensive income in two separate, but consecutive, statements. Under ASU 2011-05, we also have the option to present this information in a single continuous statement of comprehensive income. We previously presented the components of accumulated other comprehensive income (loss) (“OCI”) in the footnotes to our interim and annual financial statements and as a component of our statement of stockholders’ equity in our annual financial statements.

In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which requires additional disclosures about amounts reclassified out of OCI by component. Effective in the first quarter of 2013, we are required to present, either on the face of the condensed consolidated statement of operations or in the notes to our condensed consolidated financial statements, significant amounts reclassified out of OCI by the respective line items of net income, but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, we are required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. We have provided the required disclosure in Note 4, Balance Sheet Details, of the notes to condensed consolidated financial statements.

Goodwill and Other Indefinite-Lived Intangible Asset Impairment Assessment. In September 2011 and July 2012, the FASB issued new accounting guidance that simplifies the analysis of goodwill and other indefinite-lived intangible asset impairment. The new guidance allows a qualitative assessment to be performed to determine whether further impairment testing is necessary. These accounting standards are effective for the year ended December 31, 2012 with respect to the assessment of goodwill and for the year ended December 31, 2013 with respect to the assessment of other indefinite-lived intangible assets. These standards provide an alternative method for determining whether our goodwill and other indefinite-lived intangible assets have been impaired, which would not differ materially from the result of the detailed impairment testing methodology required by ASC 350-20-35, Goodwill – Subsequent Measurement.

Joint and Several Liability. In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date, which requires accrual of obligations resulting from joint and several liability arrangements when the total amount of the obligation is fixed at the reporting date, as the sum of the following:

• the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and

• any additional amount the reporting entity expects to pay on behalf of its co-obligors.

If the amount of the obligation is not fixed at the reporting date, then the related liability should be accrued in accordance with ASC 450-20, Loss Contingencies. Examples of obligations subject to ASU 2013-04 include debt arrangements, legal settlements, and contractual obligations.

ASU 2013-04 will be effective in the first quarter of 2014. We are currently evaluating its impact on our financial condition and results of operations.

Balance Sheet Presentation of Unrecognized Tax Benefits. In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. We currently present our liability for estimated unrecognized tax benefits as noncurrent income taxes payable in our condensed consolidated balance sheets of $33.8 and $29.8 million as of June 30, 2013 and December 31, 2012, respectively. Effective in the first quarter of 2014, we will be required to reclassify unrecognized tax benefits as an offset to deferred tax assets to the extent of any net operating loss carryforwards, similar tax loss carryforwards, or tax credit carryforwards that are available at the reporting date under the tax law of the applicable tax jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position. An exception would apply if the tax law of the tax jurisdiction does not require us to use, and we do not intend to use, the deferred tax asset for such purpose. We have not yet determined the amount of the required reclassification between noncurrent income taxes payable and deferred tax assets.

Supplemental Cash Flow Information

	Six months ended June 30,
(in thousands)	2013			2012
Net cash paid for income taxes	$	7,800		$	1,695
Cash paid for interest expense	$	62		$	32
Acquisition-related activities:
Cash paid for acquisitions, excluding contingent consideration	$	4,596		$	47,520
Cash acquired in acquisitions, excluding restricted cash		(63	)		(2,987	)
Net cash paid for acquisitions	$	4,533		$	44,533
Non-cash investing and financing activities:
Non-cash acquisition of property under a build-to-suit lease	$	11,000		$	—
Property and equipment received and accrued in accounts payable		347			172
	$	11,347		$	172

Net cash paid for income taxes of $7.8 million includes $5.5 million related to the deferred proceeds from property transaction during the six months ended June 30, 2013.

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Balance Sheet Details - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Deferred cost of revenue	$ 3.1		$ 3.1		$ 2.2
Reclassified amounts out of OCI, net of tax

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Balance Sheet Details (Tables)

6 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Summary of Inventories

Inventories, net of allowances, as of June 30, 2013 and December 31, 2012 consisted of the following (in thousands):

	June 30,		December 31,
	2013		2012
Raw materials	$	34,071	$	30,519
Work in process		3,318		5,847
Finished goods		25,710		21,977
	$	63,099	$	58,343

Summary of Product Warranty Reserve Activities

Product warranty reserve activities are summarized as follows (in thousands):

Balance at January 1, 2012	$	8,877
Accrued warranty assumed upon acquisition of Cretaprint		1,386
Provisions, net of releases		10,122
Settlements		(10,227	)
Balance at December 31, 2012	$	10,158
Provisions, net of releases		5,352
Settlements		(5,313	)
Balance at June 30, 2013	$	10,197

Summary of Accumulated Other Comprehensive Income

The components of OCI as of June 30, 2013 and December 31, 2012 consisted of the following (in thousands):

	June 30, 2013			December 31, 2012
Net unrealized investment gains	$	32		$	184
Currency translation gains (losses)		(3,440	)		132
Other		(109	)		(47	)
Accumulated other comprehensive income (loss)	$	(3,517	)	$	269

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Restructuring and Other (Tables)

6 Months Ended

Jun. 30, 2013

Restructuring And Related Activities [Abstract]

Restructuring and Other Reserve Activities

Restructuring and other reserve activities for the six months ended June 30, 2013 and 2012 are summarized as follows (in thousands):

	Six months ended June 30,
	2013			2012
Reserve balance at January 1,	$	1,670		$	1,870
Restructuring charges		1,084			785
Other charges		2,053			1,465
Non-cash acquisition-related retention costs		(465	)		(456	)
Cash payments		(3,006	)		(2,152	)
Reserve balance at June 30,	$	1,336		$	1,512

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Stock-based Compensation - Performance-based Stock Options and RSUs - Additional Information (Detail) (USD $) In Millions, except Share data, unless otherwise specified	6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2013 Performance-based RSU [Member]	Dec. 31, 2012 Performance-based RSU [Member]	Dec. 31, 2011 Performance-based RSU [Member]	Dec. 31, 2012 Performance-Based RSUs Granted In 2012 [Member]	Dec. 31, 2011 Performance-based RSUs [Member]	Dec. 31, 2009 Performance-based stock options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
RSUs granted during the period		244,112	282,850	323,600	191,594	195,156
Estimated grant date fair value of restricted stock		$ 5.7	$ 4.9	$ 5.0	$ 3.0	$ 3.0
Service period, in years		1 year	1 year	1 year
RSUs that remain outstanding		240,374	0	0	191,594	124,390
Approximate percentage of performance criteria achieved			58.00%	90.00%
Average derived service period, in years					3 years	3 years	3 years 8 months 16 days
RSUs vested						64,909
Options granted during the period							32,674
Estimated grant date fair value of stock options							$ 0.1
Stock options vested							5,298
Stock options that remain outstanding							15,540

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Earnings Per Share - Additional Information (Detail) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Earnings Per Share [Abstract]
Antidilutive securities excluded from computation of earnings per share, amount	0.1	0.4	0.1	0.7

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Stock-based Compensation - Amended and Restated 2000 Employee Stock Purchase Plan - Additional Information (Detail) (ESPP [Member], USD $) Share data in Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 04, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Increase in the number of shares available to be sold under the ESPP		2
Maximum value of shares employees can purchase	$ 25,000
Option price as percentage of fair market value	85.00%
Maximum offering period	27 months
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of employee contribution to plan from base salary	1.00%
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of employee contribution to plan from base salary	10.00%

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Commitments and Contingencies - Additional Information (Detail)	6 Months Ended	12 Months Ended			1 Months Ended	6 Months Ended					12 Months Ended
	Jun. 30, 2013 USD ($)	Dec. 31, 2012 USD ($)	Nov. 01, 2012 sqft	Dec. 31, 2011 USD ($)	Apr. 26, 2013 California [Member] USD ($) Y sqft	Jun. 30, 2013 Perfectproof [Member] USD ($)	Jun. 30, 2013 Perfectproof [Member] EUR (€)	Jun. 30, 2013 Kerajet [Member] USD ($)	Jun. 30, 2013 Kerajet [Member] EUR (€)	Jun. 30, 2013 Entrac, Cretaprint, Streamline, Alphagraph, And Metrics [Member] USD ($)	Dec. 31, 2012 Entrac and Alphagraph [Member] USD ($)
Business Acquisition, Contingent Consideration [Line Items]
Fair value of earnouts	$ 29,627,000	$ 38,050,000		$ 8,704,000
Contingent liability, current	21,200,000
Contingent liability, noncurrent	8,400,000
Maximum Potential Earnout Payment Undiscounted	5,400,000
Fair value of contingent consideration decreased										(1,600,000)	(2,100,000)
Earnout interest accretion	800,000	1,700,000
Stop loss deductible	125,000
Contingent liability accrued	1,558,000	1,375,000		1,640,000
Area of real estate property			294,000		119,000
Total cash paid to acquire facility					21,500,000
Additional build-out and construction costs	200,000				15,000,000
Lease term					15
Area of leased property					58,000
Lease base rent plus other charges and expenses					18,400,000
Building and tenant improvement costs					4,500,000
Imputed financing obligation	11,000,000
Damages claimed						1,200,000	600,000	3,300,000	2,500,000
Additional damages claimed							300,000
Estimated loss, minimum						1
Estimated loss, maximum						$ 1,200,000

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Investments and Fair Value Measurements - Summary of Changes in Contingent Liability for Self-Insurance (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Beginning Balance, Fair value of self-insurance liability	$ 1,375	$ 1,640
Additions to reserve	5,920	12,440
Employee contributions	1,154	2,340
Less: insurance claims, stop loss premium, and administrative fees paid	(6,891)	(15,045)
Ending Balance, Fair value of self-insurance liability	$ 1,558	$ 1,375

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Investments and Fair Value Measurements - Amortized Cost and Estimated Fair Value of Investments (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Investments Debt And Equity Securities [Abstract]
Mature in less than one year, Amortized cost	$ 11,829
Mature in one to three years, Amortized cost	51,668
Total short-term investments, Amortized cost	63,497	80,664
Mature in less than one year, Fair value	11,855
Mature in one to three years, Fair value	51,695
Fair value	$ 63,550	$ 80,966

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Accounts receivable, allowances	$ 11.4	$ 12.9
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000	5,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	150,000	150,000
Common stock, shares issued	80,269	79,193
Treasury stock, shares	33,823	33,045

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Indebtedness

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Indebtedness

6. Indebtedness

Short-term borrowings of $6.9 million, which were assumed in the acquisition of Cretaprint on January 10, 2012, were repaid prior to June 30, 2013. Cretaprint indebtedness consisted primarily of notes payable to banks and lines of credit with weighted average interest rates of 5.0% and 4.5%, respectively.

Long-term indebtedness at December 31, 2012, excluding the noncurrent portion of contingent consideration, consisted of the remaining balance of $0.3 million, net of current portion, on a 6.75% building loan assumed upon the acquisition of Technique and $0.1 million of Alphagraph and Cretaprint capital lease liabilities. The Technique building mortgage, which was a ten-year loan, was fully paid during the six months ended June 30, 2013. Long-term indebtedness at June 30, 2013 consists of approximately $0.2 million of capital lease obligations.

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Condensed Consolidated Statements of Operations (Parenthetical) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Cost of revenue [Member]
Recognized share-based compensation expense	$ 382	$ 235	$ 851	$ 533
Research and development [Member]
Recognized share-based compensation expense	1,671	1,260	3,538	2,824
Sales and marketing [Member]
Recognized share-based compensation expense	947	858	1,835	1,614
General and administrative [Member]
Recognized share-based compensation expense	$ 2,798	$ 2,413	$ 6,218	$ 4,462

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Segment Information and Geographic Data - Tangible and Intangible Assets, Net of Liabilities, Summarized by Operating Segment (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Indefinite Lived Intangible Assets And Goodwill By Major Class [Line Items]
Goodwill	$ 222,398	$ 219,383
Identified intangible assets, net	72,333	80,244
Industrial Inkjet [Member] | Operating Segment [Member]
Indefinite Lived Intangible Assets And Goodwill By Major Class [Line Items]
Goodwill	60,594	60,745
Identified intangible assets, net	37,264	41,103
Tangible assets, net of liabilities	89,119	80,569
Net tangible and intangible assets	186,977	182,417
Productivity Software [Member] | Operating Segment [Member]
Indefinite Lived Intangible Assets And Goodwill By Major Class [Line Items]
Goodwill	97,324	94,112
Identified intangible assets, net	32,620	36,141
Tangible assets, net of liabilities	(17,410)	(14,239)
Net tangible and intangible assets	112,534	116,014
Fiery [Member] | Operating Segment [Member]
Indefinite Lived Intangible Assets And Goodwill By Major Class [Line Items]
Goodwill	64,480	64,526
Identified intangible assets, net	2,449	3,000
Tangible assets, net of liabilities	30,245	26,304
Net tangible and intangible assets	$ 97,174	$ 93,830

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 290,010	$ 283,996
Short-term investments, available for sale	63,550	80,966
Accounts receivable, net of allowances of $11.4 and $12.9 million, respectively	129,262	135,110
Inventories	63,099	58,343
Income taxes receivable and deferred tax assets	60,409	54,034
Other current assets	27,550	20,843
Total current assets	633,880	633,292
Property and equipment, net	119,360	86,582
Goodwill	222,398	219,383
Intangible assets, net	72,333	80,244
Deferred tax assets	56,820	52,587
Other assets	3,948	2,810
Total assets	1,108,739	1,074,898
Current liabilities:
Accounts payable	70,973	63,446
Deferred proceeds from property transaction	181,981	180,216
Accrued and other liabilities	80,664	78,945
Deferred revenue	40,007	40,229
Income taxes payable and deferred tax liabilities	4,616	7,562
Total current liabilities	378,241	370,398
Imputed financing obligation	11,000
Noncurrent contingent and other liabilities	9,284	17,742
Noncurrent deferred tax liabilities	6,629	6,210
Noncurrent income taxes payable	33,807	29,755
Total liabilities	438,961	424,105
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding
Common stock, $0.01 par value; 150,000 shares authorized; 80,269 and 79,193 shares issued, respectively	803	792
Additional paid-in capital	787,681	764,870
Treasury stock, at cost; 33,823 and 33,045 shares, respectively	(587,413)	(569,576)
Accumulated other comprehensive income (loss)	(3,517)	269
Retained earnings	472,224	454,438
Total stockholders' equity	669,778	650,793
Total liabilities and stockholders' equity	$ 1,108,739	$ 1,074,898

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Indebtedness - Additional Information (Detail) (USD $) In Millions, unless otherwise specified					12 Months Ended
	Jun. 30, 2013	Jan. 10, 2012	Jun. 30, 2013 Notes payable to banks [Member]	Jun. 30, 2013 Lines of credit [Member]	Dec. 31, 2012 Technique [Member]	Dec. 31, 2012 Cretaprint [Member] Alphagraph [Member]
Short-term Debt [Line Items]
Amount outstanding	$ 0	$ 6.9
Weighted average interest rate			5.00%	4.50%
Long-term indebtedness, excluding noncurrent portion of contingent consideration remaining balance					0.3
Building loan percentage					6.75%
Capital lease liabilities						0.1
Building mortgage, maturity term					10 years
Long-term indebtedness consisting of capital lease obligations	$ 0.2

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Deferred Proceeds from Property Transaction - Additional Information (Detail) (USD $)	1 Months Ended											3 Months Ended
	Nov. 01, 2012 sqft acre	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 Land, building and improvements [Member]	Jun. 30, 2013 Land, building and improvements [Member] Property previously subject to a synthetic lease [Member]	Jun. 30, 2013 Land, building and improvements [Member] Land [Member]	Jun. 30, 2013 Land, building and improvements [Member] Leasehold and land improvements [Member]	Jun. 30, 2013 Current assets [Member]	Jun. 30, 2013 Current assets [Member] Direct transaction costs [Member]	Jun. 30, 2013 Current assets [Member] Synthetic lease capitalized financing cost [Member]	Jun. 30, 2013 Current assets [Member] Imputed receivable [Member]	Dec. 31, 2013 Scenario Forecast [Member]
Long Lived Assets Subject To Sales Agreement [Line Items]
Selling price of property and other related assets	$ 179,700,000
Area of real estate property	294,000
Acres of land sold	4
Total deferred proceeds from property transaction		181,981,000	180,216,000
Property subject to a sales agreement		63,900,000		60,800,000	56,900,000	2,900,000	2,100,000	3,100,000	400,000	500,000	2,200,000
Net of accumulated depreciation				1,100,000
Imputed financing and depreciation expenses, net of imputed sublease income												1,600,000
Gain on sale of building and land												$ 117,000,000

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Investments and Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Available-for-Sale Short-Term Investments

Our available-for-sale short-term investments as of June 30, 2013 and December 31, 2012 are as follows (in thousands):

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
June 30, 2013
U.S. Government and sponsored entities	$	5,033	$	2	$	(1	)	$	5,034
Corporate debt securities		38,302		114		(87	)		38,329
Municipal securities		1,709		1		(4	)		1,706
Asset-backed securities		11,702		61		(21	)		11,742
Mortgage-backed securities – residential		6,751		22		(34	)		6,739
Total short-term investments	$	63,497	$	200	$	(147	)	$	63,550
December 31, 2012
U.S. Government and sponsored entities	$	17,371	$	7	$	—		$	17,378
Corporate debt securities		40,218		194		(17	)		40,395
Municipal securities		1,710		3		—			1,713
Asset-backed securities		12,128		66		(2	)		12,192
Mortgage-backed securities – residential		9,237		63		(12	)		9,288
Total short-term investments	$	80,664	$	333	$	(31	)	$	80,966

Summary of Fair Value and Duration of Investments, Including Cash Equivalents, that have been Classified in Gross Unrealized Loss Position

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss position as of June 30, 2013 and December 31, 2012 are as follows (in thousands):

	Less than 12 Months					More than 12 Months						TOTAL
	Fair Value		Unrealized Losses			Fair Value			Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2013
U.S. Government and sponsored entities	$	1,439	$	(1	)	$	—		$	—		$	1,439	$	(1	)
Corporate debt securities		18,228		(87	)		—			—			18,228		(87	)
Municipal securities		831		(4	)		—			—			831		(4	)
Asset-backed securities		6,935		(21	)		—			—			6,935		(21	)
Mortgage-backed securities – residential		3,782		(28	)		(233	)		(6	)		3,549		(34	)
Total	$	31,215	$	(141	)	$	(233	)	$	(6	)	$	30,982	$	(147	)
December 31, 2012
U.S. Government and sponsored entities	$	15,791	$	(1	)	$	—		$	—		$	15,791	$	(1	)
Corporate debt securities		11,288		(17	)		—			—			11,288		(17	)
Asset-backed securities		1,959		(2	)		—			—			1,959		(2	)
Mortgage-backed securities – residential		1,263		(7	)		(300	)		(4	)		963		(11	)
Total	$	30,301	$	(27	)	$	(300	)	$	(4	)	$	30,001	$	(31	)

Amortized Cost and Estimated Fair Value of Investments

Amortized cost and estimated fair value of investments at June 30, 2013 is summarized by maturity date as follows (in thousands):

	Amortized cost		Fair value
Mature in less than one year	$	11,829	$	11,855
Mature in one to three years		51,668		51,695
Total short-term investments	$	63,497	$	63,550

Investments in Accordance with Fair Value Hierarchy

Our investments and liabilities measured at fair value have been presented in accordance with the fair value hierarchy specified in ASC 820 as of June 30, 2013 and December 31, 2012 in order of liquidity as follows (in thousands):

			Fair Value Measurements at Reporting Date using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
June 30, 2013
Assets:
Money market funds	$	123,502	$	123,502	$	—	$	—
U.S. Government and sponsored entities		5,034		—		5,034		—
Corporate debt securities		41,691		—		41,691		—
Municipal securities		1,706		—		1,706		—
Asset-backed securities		11,742		—		11,672		70
Mortgage-backed securities – residential		6,739		—		6,739		—
	$	190,414	$	123,502	$	66,842	$	70
Liabilities:
Contingent consideration, current and noncurrent	$	29,627	$	—	$	—	$	29,627
Self-insurance		1,558		—		—		1,558
	$	31,185	$	—	$	—	$	31,185
December 31, 2012
Assets:
Money market funds	$	112,714	$	112,714	$	—	$	—
U.S. Government and sponsored entities		20,177		15,214		4,963		—
Corporate debt securities		42,069		—		42,069		—
Municipal securities		1,713		—		1,713		—
Asset-backed securities		12,192		—		12,139		53
Mortgage-backed securities – residential		9,288		—		9,288		—
	$	198,153	$	127,928	$	70,172	$	53
Liabilities:
Contingent consideration, current and noncurrent	$	38,050	$	—	$	—	$	38,050
Self-insurance		1,375		—		—		1,375
	$	39,425	$	—	$	—	$	39,425

Schedule of Accumulated Other-than-Temporary Credit-Related Impairments Charged to Retained Earnings and Interest and Other Expense Net

Accumulated other-than-temporary credit-related impairments charged to retained earnings and interest and other expense, net, consists of the following (in thousands):

	Impairments Charged to Retained Earnings		Impairments Recognized in Other Income (Expense), Net		Total
Accumulated impairments, net, attributable to assets still held at June 30, 2013	$	58	$	824	$	882

Summary of Changes in Fair Value of Contingent Consideration

Changes in the fair value of contingent consideration are summarized as follows:

Fair value of contingent consideration at January 1, 2012	$	8,704
Fair value of Cretaprint contingent consideration at January 10, 2012		16,445
Fair value of FX Colors contingent consideration at April 5, 2012		190
Fair value of Metrics contingent consideration at April 10, 2012		5,582
Fair value of OPS contingent consideration at October 1, 2012		2,600
Fair value of Technique contingent consideration at November 16, 2012		4,410
Deferred compensation expense dependent on future employment		907
Changes in valuation		(432	)
Payments		(968	)
Foreign currency adjustment		612
Fair value of contingent consideration at December 31, 2012	$	38,050
Fair value of PrintLeader contingent consideration at May 8, 2013		389
Fair value of GamSys contingent consideration at May 31, 2013		2,640
Deferred compensation expense dependent on future employment		465
Changes in valuation		(828	)
Payments		(10,616	)
Foreign currency adjustment		(473	)
Fair value of contingent consideration at June 30, 2013	$	29,627

Summary of Changes in Contingent Liability for Self-Insurance

Changes in the contingent liability for self-insurance are summarized as follows:

Fair value of self-insurance liability at January 1, 2012	$	1,640
Additions to reserve		12,440
Employee contributions		2,340
Less: insurance claims, stop loss premium, and administrative fees paid		(15,045	)
Fair value of self-insurance liability at December 31, 2012	$	1,375
Additions to reserve		5,920
Employee contributions		1,154
Less: insurance claims, stop loss premium, and administrative fees paid		(6,891	)
Fair value of self-insurance liability at June 30, 2013	$	1,558

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Deferred Proceeds from Property Transaction

6 Months Ended

Jun. 30, 2013

Real Estate [Abstract]

Deferred Proceeds from Property Transaction

15: Deferred Proceeds from Property Transaction

On November 1, 2012, we sold the 294,000 square foot building located at 303 Velocity Way in Foster City, California, which serves as our corporate headquarters, along with approximately four acres of land and certain other assets related to the property, to Gilead Sciences, Inc. (“Gilead”) for $179.7 million. We will continue to use the facility for up to one year for which rent is not required to be paid. We are accounting for this transaction as a financing transaction related to our continued use of the facility and a sublease receivable relative to Gilead’s use of a portion of the facility. Our use of the facility during the rent-free period constitutes a form of continuing involvement that prevents gain recognition. We have recorded interest expense on the financing obligation at our incremental borrowing rate and increased the financing obligation by the same amount, which resulted in total deferred proceeds from property transaction of $182.0 million at June 30, 2013. We have recorded sublease income at an implied market rate from Gilead and recorded a sublease receivable for the same amount. We will vacate the facility during the fourth quarter of 2013. At that date, we will have no continuing involvement with the property and will account for the transaction as a property sale thereby recognizing a gain of approximately $117 million on the sale of the property, which represents the difference between the sales proceeds and the carrying value of the property and related assets as well as any direct incremental costs associated with the sale.

The assets subject to this sale of $63.9 million as of June 30, 2013 include property and equipment, net, of $60.8 million and current assets of $3.1 million. The sold assets include the $56.9 million facility, $2.9 million of related land, and $2.1 million of leasehold and land improvements, net of accumulated depreciation of $1.1 million. The buildings and improvements are subject to depreciation over their normal useful lives until the property is no longer used by us. Current assets include $0.4 million of direct transaction costs, $0.5 million of previously capitalized lease financing and other costs, and an imputed sublease receivable of $2.2 million.

We will incur imputed financing and depreciation expense, net of imputed sublease income, of approximately $1.6 million, which commenced during the fourth quarter of 2012, until we vacate the building during the fourth quarter of 2013 when we will recognize a gain on sale of building and land of approximately $117 million.

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Investments and Fair Value Measurements - Summary of Fair Value and Duration of Investments, Including Cash Equivalents, that have been Classified in Gross Unrealized Loss Position (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 63,497	$ 80,664
Gross unrealized gains	200	333
Gross unrealized losses	(147)	(31)
Fair value	63,550	80,966
Less than 12 Months, Fair Value	31,215	30,301
Less than 12 Months, Unrealized Losses	(141)	(27)
More than 12 Months, Fair Value	(233)	(300)
More than 12 Months, Unrealized Losses	(6)	(4)
TOTAL, Fair Value	30,982	30,001
TOTAL, Unrealized Losses	(147)	(31)
U.S. Government and sponsored entities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	5,033	17,371
Gross unrealized gains	2	7
Gross unrealized losses	(1)
Fair value	5,034	17,378
Less than 12 Months, Fair Value	1,439	15,791
Less than 12 Months, Unrealized Losses	(1)	(1)
More than 12 Months, Fair Value
More than 12 Months, Unrealized Losses
TOTAL, Fair Value	1,439	15,791
TOTAL, Unrealized Losses	(1)	(1)
Corporate debt securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	38,302	40,218
Gross unrealized gains	114	194
Gross unrealized losses	(87)	(17)
Fair value	38,329	40,395
Less than 12 Months, Fair Value	18,228	11,288
Less than 12 Months, Unrealized Losses	(87)	(17)
More than 12 Months, Fair Value
More than 12 Months, Unrealized Losses
TOTAL, Fair Value	18,228	11,288
TOTAL, Unrealized Losses	(87)	(17)
Municipal securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	1,709	1,710
Gross unrealized gains	1	3
Gross unrealized losses	(4)
Fair value	1,706	1,713
Less than 12 Months, Fair Value	831
Less than 12 Months, Unrealized Losses	(4)
More than 12 Months, Fair Value
More than 12 Months, Unrealized Losses
TOTAL, Fair Value	831
TOTAL, Unrealized Losses	(4)
Asset-backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	11,702	12,128
Gross unrealized gains	61	66
Gross unrealized losses	(21)	(2)
Fair value	11,742	12,192
Less than 12 Months, Fair Value	6,935	1,959
Less than 12 Months, Unrealized Losses	(21)	(2)
More than 12 Months, Fair Value
More than 12 Months, Unrealized Losses
TOTAL, Fair Value	6,935	1,959
TOTAL, Unrealized Losses	(21)	(2)
Mortgage-backed securities - residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	6,751	9,237
Gross unrealized gains	22	63
Gross unrealized losses	(34)	(12)
Fair value	6,739	9,288
Less than 12 Months, Fair Value	3,782	1,263
Less than 12 Months, Unrealized Losses	(28)	(7)
More than 12 Months, Fair Value	(233)	(300)
More than 12 Months, Unrealized Losses	(6)	(4)
TOTAL, Fair Value	3,549	963
TOTAL, Unrealized Losses	$ (34)	$ (11)

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Income taxes - Open Tax Years - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2013
Period Start [Member] | Internal Revenue Service [Member]
Income Tax Examination [Line Items]
Open tax year	2009
Period Start [Member] | State tax jurisdictions [Member]
Income Tax Examination [Line Items]
Open tax year	2008
Period Start [Member] | Netherlands tax authority [Member]
Income Tax Examination [Line Items]
Open tax year	2010
Period End [Member] | Internal Revenue Service [Member]
Income Tax Examination [Line Items]
Open tax year	2012
Period End [Member] | State tax jurisdictions [Member]
Income Tax Examination [Line Items]
Open tax year	2012
Period End [Member] | Netherlands tax authority [Member]
Income Tax Examination [Line Items]
Open tax year	2012

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Stock-based Compensation - Schedule of Estimated Per Share Weighted Average Fair Value and Assumptions Used to Estimate Fair Value (Detail) (ESPP [Member], USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Employee Stock Purchase Plan [Line Items]
Weighted average fair value per share	$ 6.68	$ 5.64
Minimum [Member]
Employee Stock Purchase Plan [Line Items]
Expected volatility	29.00%	38.00%
Risk-free interest rate	0.10%	0.10%
Expected term (in years)	6 months	6 months
Maximum [Member]
Employee Stock Purchase Plan [Line Items]
Expected volatility	38.00%	49.00%
Risk-free interest rate	0.30%	0.20%
Expected term (in years)	2 years	2 years

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Acquisitions - Preliminary Allocation of Purchase Price to Assets Acquired and Liabilities Assumed (Detail) (USD $) In Thousands, unless otherwise specified				6 Months Ended
	Jun. 30, 2013	Dec. 31, 2012	Jun. 30, 2013 JJF Enterprises and GamSys [Member]	Jun. 30, 2013 Customer relationships [Member]	Jun. 30, 2013 Existing technology [Member]	Jun. 30, 2013 Trade name [Member]	Jun. 30, 2013 IPR&D [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Weighted average useful life				5 years	3 years	3 years	3 years
Purchase Price Allocation, intangible assets	$ 72,333	$ 80,244		$ 2,130	$ 650	$ 280	$ 150
Purchase Price Allocation, Goodwill	222,398	219,383	6,245
Purchase Price Allocation	9,455
Net tangible liabilities	(1,230)
Total purchase price	$ 8,225

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Basis of Presentation and Significant Accounting Policies - Summary of Supplemental Cash Flow Information (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
Supplemental Cash Flow Elements [Abstract]
Net cash paid for income taxes	$ 7,800	$ 1,695
Cash paid for interest expense	62	32
Acquisition-related activities:
Cash paid for acquisitions, excluding contingent consideration	4,596	47,520
Cash acquired in acquisitions, excluding restricted cash	(63)	(2,987)
Net cash paid for acquisitions	4,533	44,533
Non-cash investing and financing activities:
Non-cash acquisition of property under a build-to-suit lease	11,000
Property and equipment received and accrued in accounts payable	347	172
Total non-cash investing and financing activities	$ 11,347	$ 172

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Earnings Per Share - Basic and Diluted Earnings Per Share (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Basic net income per share:
Net income available to common shareholders	$ 9,424	$ 7,005	$ 17,786	$ 13,239
Weighted average common shares outstanding	46,427	46,460	46,376	46,247
Basic net income per share	$ 0.20	$ 0.15	$ 0.38	$ 0.29
Dilutive net income per share:
Net income available to common shareholders	$ 9,424	$ 7,005	$ 17,786	$ 13,239
Weighted average common shares outstanding	46,427	46,460	46,376	46,247
Dilutive stock options and non-vested restricted stock	1,827	1,354	1,773	1,352
Weighted average common shares outstanding for purposes of computing diluted net income per share	48,254	47,814	48,149	47,599
Dilutive net income per share	$ 0.20	$ 0.15	$ 0.37	$ 0.28

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Investments and Fair Value Measurements

6 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Investments and Fair Value Measurements

5. Investments and Fair Value Measurements

We invest our excess cash on deposit with major banks in money market, U.S. Treasury and government-sponsored entity, corporate debt, municipal, asset-backed, and mortgage-backed residential securities. By policy, we invest primarily in high-grade marketable securities. We are exposed to credit risk in the event of default by the financial institutions or issuers of these investments to the extent of amounts recorded in the condensed consolidated balance sheets.

We consider all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents. Typically, the cost of these investments has approximated fair value. Marketable investments with a maturity greater than three months are classified as available-for-sale short-term investments. Available-for-sale securities are stated at fair market value with unrealized gains and losses reported as a separate component of OCI, adjusted for deferred income taxes. The credit portion of any other-than-temporary impairment is included in net income. Realized gains and losses on sales of financial instruments are recognized upon sale of the investments using the specific identification method.

Our available-for-sale short-term investments as of June 30, 2013 and December 31, 2012 are as follows (in thousands):

	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
June 30, 2013
U.S. Government and sponsored entities	$	5,033	$	2	$	(1	)	$	5,034
Corporate debt securities		38,302		114		(87	)		38,329
Municipal securities		1,709		1		(4	)		1,706
Asset-backed securities		11,702		61		(21	)		11,742
Mortgage-backed securities – residential		6,751		22		(34	)		6,739
Total short-term investments	$	63,497	$	200	$	(147	)	$	63,550
December 31, 2012
U.S. Government and sponsored entities	$	17,371	$	7	$	—		$	17,378
Corporate debt securities		40,218		194		(17	)		40,395
Municipal securities		1,710		3		—			1,713
Asset-backed securities		12,128		66		(2	)		12,192
Mortgage-backed securities – residential		9,237		63		(12	)		9,288
Total short-term investments	$	80,664	$	333	$	(31	)	$	80,966

The fair value and duration that investments, including cash equivalents, have been in a gross unrealized loss position as of June 30, 2013 and December 31, 2012 are as follows (in thousands):

	Less than 12 Months					More than 12 Months						TOTAL
	Fair Value		Unrealized Losses			Fair Value			Unrealized Losses			Fair Value		Unrealized Losses
June 30, 2013
U.S. Government and sponsored entities	$	1,439	$	(1	)	$	—		$	—		$	1,439	$	(1	)
Corporate debt securities		18,228		(87	)		—			—			18,228		(87	)
Municipal securities		831		(4	)		—			—			831		(4	)
Asset-backed securities		6,935		(21	)		—			—			6,935		(21	)
Mortgage-backed securities – residential		3,782		(28	)		(233	)		(6	)		3,549		(34	)
Total	$	31,215	$	(141	)	$	(233	)	$	(6	)	$	30,982	$	(147	)
December 31, 2012
U.S. Government and sponsored entities	$	15,791	$	(1	)	$	—		$	—		$	15,791	$	(1	)
Corporate debt securities		11,288		(17	)		—			—			11,288		(17	)
Asset-backed securities		1,959		(2	)		—			—			1,959		(2	)
Mortgage-backed securities – residential		1,263		(7	)		(300	)		(4	)		963		(11	)
Total	$	30,301	$	(27	)	$	(300	)	$	(4	)	$	30,001	$	(31	)

For fixed income securities that have unrealized losses as of June 30, 2013, we have determined that we do not have the intent to sell any of these investments and it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. We have evaluated these fixed income securities and determined that no credit losses exist. Accordingly, management has determined that the unrealized losses on our fixed income securities as of June 30, 2013 were temporary in nature.

Amortized cost and estimated fair value of investments at June 30, 2013 is summarized by maturity date as follows (in thousands):

	Amortized cost		Fair value
Mature in less than one year	$	11,829	$	11,855
Mature in one to three years		51,668		51,695
Total short-term investments	$	63,497	$	63,550

For the three months ended June 30, 2013 and 2012, net realized losses of less than $0.1 and $0.1 million, respectively, from sales of investments were recognized in interest and other expense, net. For the six months ended June 30, 2013 and 2012, net realized losses of $0.1 million from sales of investments were recognized in interest and other expense, net. As of June 30, 2013 and December 31, 2012, net unrealized gains of $0.1 and $0.3 million were included in OCI in the accompanying condensed consolidated balance sheets.

Fair Value Measurements

ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy as follows:

Level 1: Inputs that are quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date;

Level 2: Inputs that are other than quoted prices included within Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date for the duration of the instrument’s anticipated life or by comparison to similar instruments; and

Level 3: Inputs that are unobservable or that reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. These include management’s own judgments about market participant assumptions developed based on the best information available in the circumstances.

We utilize the market approach to measure the fair value of our fixed income securities. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The fair value of our fixed income securities is obtained using readily-available market prices from a variety of industry standard data providers, large financial institutions, and other third-party sources for the identical underlying securities. The fair value of our investments in certain money market funds is expected to maintain a Net Asset Value of $1 per share and, as such, is priced at the expected market price.

We obtain the fair value of our Level 2 financial instruments from several third party asset managers, custodian banks, and the accounting service providers. Independently, these service providers use professional pricing services to gather pricing data, which may include quoted market prices for identical or comparable instruments or inputs other than quoted prices that are observable either directly or indirectly. The service providers then analyze their gathered pricing inputs and apply proprietary valuation techniques, including consensus pricing, weighted average pricing, distribution curve-based algorithms, or pricing models such as discounted cash flow techniques to provide a fair value for each security.

As part of this process, we engaged a pricing service to assist management in its pricing analysis and assessment of other-than-temporary impairment. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party pricing service, the impairment analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party.

Our investments and liabilities measured at fair value have been presented in accordance with the fair value hierarchy specified in ASC 820 as of June 30, 2013 and December 31, 2012 in order of liquidity as follows (in thousands):

			Fair Value Measurements at Reporting Date using
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
June 30, 2013
Assets:
Money market funds	$	123,502	$	123,502	$	—	$	—
U.S. Government and sponsored entities		5,034		—		5,034		—
Corporate debt securities		41,691		—		41,691		—
Municipal securities		1,706		—		1,706		—
Asset-backed securities		11,742		—		11,672		70
Mortgage-backed securities – residential		6,739		—		6,739		—
	$	190,414	$	123,502	$	66,842	$	70
Liabilities:
Contingent consideration, current and noncurrent	$	29,627	$	—	$	—	$	29,627
Self-insurance		1,558		—		—		1,558
	$	31,185	$	—	$	—	$	31,185
December 31, 2012
Assets:
Money market funds	$	112,714	$	112,714	$	—	$	—
U.S. Government and sponsored entities		20,177		15,214		4,963		—
Corporate debt securities		42,069		—		42,069		—
Municipal securities		1,713		—		1,713		—
Asset-backed securities		12,192		—		12,139		53
Mortgage-backed securities – residential		9,288		—		9,288		—
	$	198,153	$	127,928	$	70,172	$	53
Liabilities:
Contingent consideration, current and noncurrent	$	38,050	$	—	$	—	$	38,050
Self-insurance		1,375		—		—		1,375
	$	39,425	$	—	$	—	$	39,425

Money market funds consisted of $123.5 and $112.7 million, which have been classified as cash equivalents at June 30, 2013 and December 31, 2012, respectively. U.S. government and sponsored entities securities include $2.8 million, which have been classified as cash equivalents at December 31, 2012. Corporate debt securities include $3.4 and $1.7 million, which have been classified as cash equivalents at June 30, 2013 and December 31, 2012, respectively.

Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. Investments in U.S. Treasury obligations and overnight money market mutual funds have been classified as Level 1 because these securities are valued based on quoted prices in active markets or they are actively traded at $1.00 Net Asset Value. There have been no transfers between Level 1 and 2 during the six months ended June 30, 2013 and 2012.

Government agency investments and corporate debt instruments, including investments in asset-backed and mortgage-backed securities, have generally been classified as Level 2 because markets for these securities are less active or valuations for such securities utilize significant inputs, which are directly or indirectly observable. We hold asset-backed securities with income payments derived from and collateralized by a specified pool of underlying assets. Predominanty, asset-backed securities in the portfolio are collateralized by credit cards and auto loans. We also hold two asset-backed securities collateralized by mortgage loans.

At June 30, 2013 and December 31, 2012, one corporate debt instrument has been classified as Level 3 due to its significantly low level of trading activity. The rollforward of Level 3 investments is not provided due to immateriality. Changes in unobservable inputs to the fair value measurement of Level 3 investments on a recurring basis will not result in a significantly higher or lower fair value measurement.

We review investments in debt securities for other-than-temporary impairment whenever the fair value is less than the amortized cost and evidence indicates the investment’s carrying amount is not recoverable within a reasonable period of time. We assess the fair value of individual securities as part of our ongoing portfolio management. Our other-than-temporary assessment includes reviewing the length of time and extent to which fair value has been less than amortized cost, the seniority and durations of the securities, adverse conditions related to a security, industry, or sector, historical and projected issuer financial performance, credit ratings, issuer specific news, and other available relevant information. To determine whether an impairment is other-than-temporary, we consider whether we have the intent to sell the impaired security or if it will be more likely than not that we will be required to sell the impaired security before a market price recovery and whether evidence indicating the cost of the investment is recoverable outweighs evidence to the contrary.

In determining whether a credit loss existed, we used our best estimate of the present value of cash flows expected to be collected from each debt security. For asset-backed and mortgage-backed securities, cash flow estimates, including prepayment assumptions, we rely on data from widely accepted third party data sources or internal estimates. In addition to prepayment assumptions, cash flow estimates vary based on assumptions regarding the underlying collateral including default rates, recoveries, and changes in value. Expected cash flows were discounted using the effective interest rate implicit in the securities.

Based on this analysis, there were no other-than-temporary impairments, including credit-related impairments, during the six months ended June 30, 2013 and 2012. Accumulated other-than-temporary credit-related impairments charged to retained earnings and interest and other expense, net, consists of the following (in thousands):

	Impairments Charged to Retained Earnings		Impairments Recognized in Other Income (Expense), Net		Total
Accumulated impairments, net, attributable to assets still held at June 30, 2013	$	58	$	824	$	882

Liabilities for Contingent Consideration

Acquisition-related liabilities for contingent consideration (i.e., earnouts) are related to the purchase business combinations of GamSys and PrintLeader in 2013; Technique, OPS, Metrics Sistemas de Informação, Serviços e Comércio Ltda. and Metrics Sistemas de Informação e Serviço Ltda. (collectively, “Metrics”), FXcolors (“FX Colors”), and Cretaprint in 2012; Alphagraph, Entrac Technologies, Inc. (“Entrac”); and Streamline Development, LLC (“Streamline”) in 2011; and Radius Solutions Incorporated (“Radius”) in 2010. The fair value of these earnouts is estimated to be $29.6 and $38.1 million at June 30, 2013 and December 31, 2012, respectively, by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include discount rates between 4.2% and 6.4%, executive retention relative to acquisition-related executive deferred compensation cost, and probability-adjusted revenue and gross profit levels. Probability-adjusted revenue and gross profit are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs. Acquisition-related executive deferred compensation cost of $0.5 million, which is dependent on the continuing employment of a former shareholder of an acquired company, has been applied against the earnout as of June 30, 2013. These contingent liabilities have been reflected in the condensed consolidated balance sheet as of June 30, 2013, as a current and noncurrent liability of $21.2 and $8.4 million, respectively.

The probability of achieving the 2013 Entrac, Cretaprint, Streamline, and Alphagraph earnout performance targets has been reduced, partially offset by an increase in the probability of achieving the 2013 Metrics earnout performance target. The 2012 Entrac earnout performance target was not achieved due to the delayed launch of the M500 product, which is Entrac’s next generation device. The 2012 Alphagraph earnout performance target was partially achieved. Consequently, the fair value of contingent consideration decreased by $1.6 and $2.1 million as of June 30, 2013 and December 31, 2012, respectively, partially offset by $0.8 and $1.7 million of earnout interest accretion related to all acquisitions, respectively. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date have been recognized in general and administrative expense.

Earnout payments during the six months ended June 30, 2013 of $8.9, $0.7, and $1.0 million, respectively, related to previously accrued Cretaprint, Alphagraph, and Radius contingent consideration liabilities. Earnout payments during the year ended December 31, 2012 of $0.6, $0.3, and $0.1 million, respectively, related to previously accrued Streamline, Radius, and FX Colors contingent consideration liabilities. The difference between the $2.1 million accrued Radius earnout liability and the amount paid represents a disputed indemnification.

Changes in the fair value of contingent consideration are summarized as follows:

Fair value of contingent consideration at January 1, 2012	$	8,704
Fair value of Cretaprint contingent consideration at January 10, 2012		16,445
Fair value of FX Colors contingent consideration at April 5, 2012		190
Fair value of Metrics contingent consideration at April 10, 2012		5,582
Fair value of OPS contingent consideration at October 1, 2012		2,600
Fair value of Technique contingent consideration at November 16, 2012		4,410
Deferred compensation expense dependent on future employment		907
Changes in valuation		(432	)
Payments		(968	)
Foreign currency adjustment		612
Fair value of contingent consideration at December 31, 2012	$	38,050
Fair value of PrintLeader contingent consideration at May 8, 2013		389
Fair value of GamSys contingent consideration at May 31, 2013		2,640
Deferred compensation expense dependent on future employment		465
Changes in valuation		(828	)
Payments		(10,616	)
Foreign currency adjustment		(473	)
Fair value of contingent consideration at June 30, 2013	$	29,627

ASU 2011-04 requires a narrative description of the sensitivity of recurring fair value measurements to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. Since the primary inputs to the fair value measurement of the contingent consideration liability are the discount rate and probability-adjusted revenue, we reviewed the sensitivity of the fair value measurement to changes in these inputs. Probability-adjusted gross profit was not considered in the sensitivity analysis as its impact on the fair value measurement is conditional on achievement of the revenue performance targets and has significantly less impact on the overall potential earnout payment.

We assessed the probability of achieving the revenue performance targets for the contingent consideration associated with each acquisition at percentage levels between 70% and 100% as of each respective acquisition date based on an assessment of the historical performance of each acquired entity, our current expectations of future performance, and other relevant factors. A change in probability-adjusted revenue of 5% from the level assumed in the respective valuations would result in an increase (decrease) in the earnout liability of approximately $1.0 or $(1.4) million, respectively, resulting in a corresponding adjustment to general and administrative expense. Likewise, a change in the discount rate of one percentage point results in either an increase of or decrease of $0.3 million in the fair value of contingent consideration.

Liability for Self-Insurance

We are partially self-insured for certain losses related to employee medical and dental coverage, excluding employees covered by health maintenance organizations. We generally have an individual stop loss deductible of $125 thousand per enrollee unless specific exposures are separately insured. We have accrued a contingent liability of $1.6 and $1.4 million as of June 30, 2013 and December 31, 2012, respectively, which are not discounted, based upon examination of historical trends, our claims experience, industry claims experience, actuarial analysis, and estimates. The primary estimates used in the development of our accrual as of June 30, 2013 and December 31, 2012, include total enrollment (including employee contributions), population demographics, and historical claims costs incurred, which are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs.

Changes in the contingent liability for self-insurance are summarized as follows:

Fair value of self-insurance liability at January 1, 2012	$	1,640
Additions to reserve		12,440
Employee contributions		2,340
Less: insurance claims, stop loss premium, and administrative fees paid		(15,045	)
Fair value of self-insurance liability at December 31, 2012	$	1,375
Additions to reserve		5,920
Employee contributions		1,154
Less: insurance claims, stop loss premium, and administrative fees paid		(6,891	)
Fair value of self-insurance liability at June 30, 2013	$	1,558

While we believe these estimates are reasonable based on the information currently available, if actual trends, including the severity of claims and medical cost inflation, differ from our estimates, our consolidated financial position, results of operations, or cash flows could be impacted. ASU 2011-04 requires a narrative description of the sensitivity of recurring fair value measurements to changes in unobservable inputs if a change in those inputs might result in a significantly higher or lower fair value measurement. Since the primary inputs to the fair value measurement of the self-insurance liability are the historical claims costs incurred, we reviewed the sensitivity of the fair value measurement to changes in medical cost assumptions and the severity of claims experienced by employees. A change in the severity of claims experienced or medical cost inflation of 10% results in either an increase or decrease in the fair value of the self-insurance liability of approximately $0.1 million.

Fair Value of Derivative Instruments

We utilize the income approach to measure the fair value of our derivative assets and liabilities under ASC 820. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices, and are therefore classified as Level 2 measurements. The notional amount of our derivative assets and liabilities was $20.9 and $3.2 million as of June 30, 2013 and December 31, 2012, respectively. The fair value of our derivative assets and liabilities that were designated for cash flow hedge accounting treatment having notional amounts of $2.7 million as of June 30, 2013 and December 31, 2012 was not material.

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Restructuring and Other - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013 Employees	Jun. 30, 2012 Employees	Jun. 30, 2013 Employees	Jun. 30, 2012 Employees	Dec. 31, 2012
Restructuring and other charges	$ 1,235,000	$ 1,167,000	$ 3,137,000	$ 2,250,000
Restructuring and severance charges	400,000	300,000	1,400,000	1,100,000
Reductions in number of head count	28	16	62	44
Retention expense	200,000	200,000	465,000	456,000	907,000
Facilities relocation expenses	100,000		200,000
Metrics, Cretaprint, and Prism acquisitions [Member]
Integration expense		700,000		800,000
Metrics, Cretarpint, OPS, and Technique [Member]
Integration expense	$ 500,000		$ 1,100,000

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Income taxes (Tables)

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Tax Provision before Discrete Items Reconciled to Recorded Provision for Income Taxes

Our tax provision before discrete items is reconciled to our recorded provision for income taxes for the three and six months ended June 30, 2013 and 2012 as follows (in millions):

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Provision for income taxes before discrete items	$	2.4		$	2.6		$	4.3		$	5.2
Interest related to unrecognized tax benefits		0.1			0.1			0.2			0.2
Provision related to reassessment of taxes resulting from the filing of prior year foreign tax returns		—			—			0.3			—
Benefit related to restructuring and other expenses		(0.1	)		(0.3	)		(0.7	)		(0.6	)
Benefit related to the 2012 U.S. federal research and development tax credit		—			—			(3.2	)		—
Tax deductions related to ESPP dispositions		(0.1	)		(0.1	)		(0.3	)		(0.4	)
Benefit related to reversals of uncertain tax positions due to statute of limitation expirations		(0.3	)		(0.3	)		(0.3	)		(0.3	)
Provision for income taxes	$	2.0		$	2.0		$	0.3		$	4.1

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Balance Sheet Details - Summary of Product Warranty Reserve Activities (Detail) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Beginning Balance	$ 10,158	$ 8,877
Accrued warranty assumed upon acquisition of Cretaprint		1,386
Provisions, net of releases	5,352	10,122
Settlements	(5,313)	(10,227)
Ending Balance	$ 10,197	$ 10,158

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitments and Contingencies

Contingent Consideration

We are required to make payments to acquired company stockholders based on the achievement of specified performance targets. The fair value of these earnouts is estimated to be $29.6 and $38.1 million at June 30, 2013 and December 31, 2012, respectively, by applying the income approach in accordance with ASC 805-30-25-5. These contingent liabilities have been reflected in the condensed consolidated balance sheet as of June 30, 2013, as a current and noncurrent liability of $21.2 and $8.4 million, respectively. The potential undiscounted amount of all future contingent consideration cash payments that we could be required to make, beyond amounts currently accrued, is $5.4 million as of June 30, 2013.

The probability of achieving the 2013 Entrac, Cretaprint, Streamline, and Alphagraph earnout performance targets has been reduced, partially offset by an increase in the probability of achieving the 2013 Metrics earnout performance target. The 2012 Entrac earnout performance target was not achieved due to the delayed launch of the M500 product, which is Entrac’s next generation device. The 2012 Alphagraph earnout performance target was partially achieved. Consequently, the fair value of contingent consideration decreased by $1.6 and $2.1 million as of June 30, 2013 and December 31, 2012, respectively, partially offset by $0.8 and $1.7 million of earnout interest accretion related to all acquisitions, respectively. In accordance with ASC 805-30-35-1, changes in the fair value of contingent consideration subsequent to the acquisition date have been recognized in general and administrative expense.

Self-Insurance

We are partially self-insured for certain losses related to employee medical and dental coverage, excluding employees covered by health maintenance organizations. We generally have an individual stop loss deductible of $125 thousand per enrollee unless specific exposures are separately insured. We recognize our self-insurance expense for interim reporting purposes on a pro rata basis over the year in accordance with ASC 720-20-35-3, Insurance Costs. This approach treats usual recurring self-insurance losses as integral to annual reporting. Therefore, any expected changes in the incurred but not reported liability and related insurance recoverables that are not related to specific events are spread over the entire year.

We have accrued a contingent liability of $1.6 and $1.4 million as of June 30, 2013 and December 31, 2012, respectively, which represents an allocation of the ultimate claims cost that will be incurred through year end. The estimated liability is not discounted and is established based upon analysis of historical data supplied by our insurance carrier and an internal update of the actuarial analysis that we obtained at December 31, 2012. We will further refine our accrual at December 31, 2013 based upon appropriate actuarial analysis and estimates. The primary estimates used in the development of our accrual at June 30, 2013 include total enrollment (including employee contributions), population demographics, and historical claims costs incurred. While we believe these estimates are reasonable based on the information currently available, if actual trends, including the severity of claims and medical cost inflation, differ from our estimates, our consolidated financial position, results of operations, or cash flows could be impacted.

Lease Commitments and Contractual Obligations

As of June 30, 2013, we have leased certain of our current facilities under noncancellable operating lease agreements. We are required to pay property taxes, insurance, and nominal maintenance costs for certain of these facilities and any increases over the base year of these expenses on the remainder of our facilities.

On April 26, 2013, we purchased an approximately 119,000 square feet cold shell building located at 6750 Dumbarton Circle, Fremont, California, the related land, and certain other property improvements from John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee (the “Trusts”), for a total purchase price of $21.5 million. We expect to incur additional build-out and construction costs and expenses related to this facility of approximately $15 million.

We also entered into a 15-year lease agreement with the Trusts, pursuant to which we leased approximately 58,000 square feet of an adjacent building located at 6700 Dumbarton Circle, Fremont, California. The lease is scheduled to commence on September 1, 2013. Future minimum lease payments are $18.4 million, net of a full abatement of rent for the first three years of the lease term. During the initial lease term, we also have certain rights of first refusal to (i) lease the remaining portion of the leased facility and/or (ii) purchase the facility. This location will serve as our new worldwide corporate headquarters, as well as engineering, marketing, and administrative operations for our Fiery operating segment. We plan to relocate our current headquarters no later than November 1, 2013.

The leased facility is a cold shell requiring additional build-out and tenant improvements. The Trusts will pay the costs of the build-out up to $4.5 million, including all structural improvements, and we will pay the costs of any tenant improvements beyond that amount. We have incurred $0.2 million during the six months ended June 30, 2013. The Trusts are responsible for any costs related to force majeure events that result in any damage to the facility. We are responsible for cost over-runs, if any, related to force majeure events including strikes, war, and material availability. Since we are responsible for cost overruns related to certain force majeure events, we are in substance offering an indemnification to the Trusts for events outside of our control. As such, we are deemed to be the accounting owner during the construction period. As of June 30, 2013, we capitalized $11.0 million in property and equipment based on the estimated replacement cost of the unfinished space along with the corresponding financing obligation.

Monthly lease payments are allocated between the land element of the lease, accounted for as an operating lease upon lease execution, and the imputed financing obligation. The imputed financing obligation will be amortized upon lease commencement in accordance with the effective interest method using the interest rate determined in accordance with the requirements of sale leaseback accounting. The imputed interest cost incurred during the construction period will be capitalized as a component of the construction cost upon lease commencement. As of June 30, 2013, the imputed financing obligation in connection with the facility was $11.0 million, which was classified as a long-term imputed financing obligation in our condensed consolidated balance sheet. If the requirements of sale leaseback accounting are satisfied, or at the end of the initial lease term, we will reverse the net book value of the building and the corresponding imputed financing obligation.

Legal Proceedings

We may be involved, from time to time, in a variety of claims, lawsuits, investigations, or proceedings relating to contractual disputes, securities laws, intellectual property rights, employment, or other matters that may arise in the normal course of business. We assess our potential liability in each of these matters by using the information available to us. We develop our views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and various combinations of appropriate litigation and settlement strategies. We accrue estimated losses from contingencies if a loss is deemed probable and can be reasonably estimated.

As of June 30, 2013, we are subject to the various claims, lawsuits, investigations, or proceedings discussed below.

Componex Corporation (“Componex”) vs. EFI

Componex Corporation is a manufacturer of rolls used in machines handling continuous sheets of product and was, and continues to be, a supplier for certain products in our Vutek product line. On May 30, 2013, Componex filed an action in the United States District Court for the Western District of Wisconsin alleging that rolls supplied to EFI by another vendor infringe two patents held by Componex. Because this proceeding is still is its preliminary stages, we have not had an opportunity to complete our evaluation of the allegations, determine whether the loss is probable or reasonably possible or, if it is probable or reasonably possible, estimate the amount or range of loss that may be incurred.

Digitech Image Technologies, LLC (“Digitech”) Patent Litigation

On August 16, 2012, Digitech initiated litigation against EFI; Konica Minolta Holdings, Inc., Konica Minolta Holdings, U.S.A., Inc., and Konica Minolta Business Solutions, U.S.A., Inc. (collectively, “Konica Minolta”); and Xerox Corporation (“Xerox”) for infringement of a patent related to the creation of device profiles in digital image reproduction systems in the United States District Court for the Central District of California.

In addition to its own defenses, EFI has contractual obligations to indemnify certain of its customers to varying degrees subject to various circumstances, including Konica Minolta, Xerox, and others. We do not believe that our products infringe any valid claim of Digitech’s patent. We have filed our response to the action, denying infringement and arguing that the patent at issue is not valid. We have also moved to strike Digitech’s infringement contentions as lacking a proper basis.

Although we do not believe that Digitech’s infringement claims are valid and we do not believe it is probable that we will incur a material loss in this matter, it is reasonably possible that our financial statements could be materially affected by an assessment of damages. We are currently assessing whether we can provide a reasonable estimate of the range of loss. Such an evaluation includes, among other things, a determination of the total sales of the implicated systems in the United States and what a reasonable royalty, if any, might be under the circumstances.

Durst Fototechnik Technology GmbH (“Durst”) v. Electronics for Imaging GmbH (“EFI GmbH”) and EFI, et al.

On or about June 14, 2011, Durst filed an action against EFI GmbH and EFI in the Regional Court of Dusseldorf, Germany (“Regional Court”), alleging infringement of a German patent. The Regional Court preliminarily determined that the white base coat printing method in our GS and QS super-wide format printer product lines infringes the Durst patent. We have appealed this preliminary decision to the Higher Regional Court of Dusseldorf. A hearing has been scheduled by the Higher Regional Court for March 20, 2014.

In a separate action, we have challenged the validity of the Durst patent in the German Federal Patent Court. We believe that the Durst patent is invalid in light of prior art. German courts in Mannheim and Karlsruhe reached a similar conclusion in litigation involving a Durst utility model right on related technology. We expect that the Federal Patent Court will issue a preliminary opinion on the validity of the patent after July 2013. The Federal Patent Court has set the matter for hearing on October 23, 2013.

Although we do not believe that Durst’s infringement claims are valid and we do not believe it is probable that we will incur a material loss in this matter, it is reasonably possible that our financial statements could be materially affected by an assessment of damages or potential issuance of an injunction by the Regional Court. We are currently assessing whether we can provide a reasonable estimate of the range of loss. Such an evaluation includes, among other things, a determination of the number of printers in Germany with the relevant feature at the time the court makes its final determination of infringement, and an assessment of the cost related to an injunction, if an injunction is ultimately issued.

N.V. Perfectproof Europe (“Perfectproof”) v. EFI GmbH

On December 31, 2001, Perfectproof filed a complaint against BEST GmbH, currently EFI GmbH in the Tribunal de Commerce of Brussels, in Belgium (the “Commercial Court”), alleging unlawful unilateral termination of an alleged “exclusive” distribution agreement and claiming damages of approximately EU 0.6 million for such termination and additional damages of EU 0.3 million, or a total of approximately $1.2 million. In a judgment issued by the Commercial Court on June 24, 2002, the court declared that the distribution agreement was not “exclusive” and questioned its jurisdiction over the claim. Perfectproof appealed, and by decision dated November 30, 2004, the Court d’Appel of Brussels (the “Court of Appeal”) rejected the appeal and remanded the case to the Commercial Court. Subsequently, by judgment dated November 17, 2009, the Commercial Court dismissed the action for lack of jurisdiction of Belgian courts over the claim. On March 25, 2009, Perfectproof again appealed to the Court of Appeal. On November 16, 2010, the Court of Appeal declared, among other things, that the Commercial Court was competent to hear the case; that the “exclusive” agreement required reasonable notice prior to termination; and that Perfectproof is entitled to damages. The court appointed an expert to review the parties’ records and address certain questions relevant in assessing Perfectproof’s damages claim. On October 19, 2011, the expert issued its final report itemizing damages that are, in the aggregate, significantly less than the amount claimed by Perfectproof. The final determination of damages will not be binding until it is approved or adopted by the court. The Court of Appeal has scheduled the hearing for October 21, 2013.

Although we do not believe that Perfectproof’s claims are founded and we do not believe it is probable that we will incur a material loss in this matter, it is reasonably possible that our financial statements could be materially affected by the court’s decision regarding the assessment of damages. The court may approve the expert’s final report and pronounce the final amount of damages to be paid by us, or require additional analysis, or consider further challenges to the final determination of damages. Accordingly, it is reasonably possible that we could incur a material loss in this matter. We estimate the range of loss to be between one dollar and $1.2 million.

KERAjet S.A (“Kerajet”) vs. Cretaprint

In May 2011, Jose Vicente Tomas Claramonte, the President of Kerajet, filed an action against Cretaprint in the Commercial Court in Valencia, Spain, alleging, among other things, that certain Cretaprint products infringe a patent held by Mr. Claramonte. In conjunction with our acquisition of Cretaprint, which closed on January 10, 2012, we assumed potential liability in this lawsuit.

A trial was held on October 4, 2012. On January 2, 2013, the court ruled in favor of Cretaprint concluding that the Cretaprint products do not infringe the Claramonte patent. Mr. Claramonte appealed the ruling on January 30, 2013. On July 15, 2013, the Spanish Court of Appeal affirmed the trial court’s conclusion that the Cretaprint products do not infringe the Claramonte patent. Mr. Claramonte may appeal the ruling of the Spanish Court of Appeal.

In conjunction with our defense of the claims by Mr. Claramonte, EFI filed affirmative actions against Mr. Claramonte in the United Kingdom (“U.K.”), Italy, and Germany alleging, among other things, that the Claramonte patent is not valid and/or that Cretaprint’s products do not infringe the patent. The court in the U.K. has issued a default judgment of non-infringement by Cretaprint. The actions in Italy and Germany remain pending.

Because the former owners of Cretaprint agreed to indemnify EFI against any potential liability in the event that Mr. Claramonte were to prevail in his action against Cretaprint, we accrued a contingent liability based on a reasonable estimate of the legal obligation that was probable as of the acquisition date and we accrued a contingent asset based on the portion of any liability for which the former Cretaprint owners would indemnify EFI. The net obligation accrued in the opening balance sheet on the acquisition date is EU 2.5 million (or approximately $3.3 million).

Other Matters

As of June 30, 2013, we were also subject to various other claims, lawsuits, investigations, and proceedings in addition to those discussed above. There is at least a reasonable possibility that additional losses may be incurred in excess of the amounts that we have accrued. However, we believe that certain of these claims are not material to our financial statements or the range of reasonably possible losses is not reasonably estimable. Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

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Accounts Receivable - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2013	Dec. 31, 2012
Financing Receivables And Accounts Receivable Sales Arrangements [Line Items]
Sales-type lease and trade receivables	$ 2.8	$ 2.8	$ 2.3
Spain [Member]
Financing Receivables And Accounts Receivable Sales Arrangements [Line Items]
Trade receivables sold without recourse	2.1	4.1	4.3
United States [Member]
Financing Receivables And Accounts Receivable Sales Arrangements [Line Items]
Trade receivable sold with recourse	3.8	6.9	2.1
Sales-type lease [Member]
Financing Receivables And Accounts Receivable Sales Arrangements [Line Items]
Sales-type lease receivables	1.7	1.7	0.9
Trade Receivables with Original Maturities in excess of One Year [Member]
Financing Receivables And Accounts Receivable Sales Arrangements [Line Items]
Trade receivables with original maturities in excess of one year	$ 1.1	$ 1.1	$ 1.4

XML

Balance Sheet Details

6 Months Ended

Jun. 30, 2013

Text Block [Abstract]

Balance Sheet Details

4. Balance Sheet Details

Inventories

Inventories, net of allowances, as of June 30, 2013 and December 31, 2012 consisted of the following (in thousands):

	June 30,		December 31,
	2013		2012
Raw materials	$	34,071	$	30,519
Work in process		3,318		5,847
Finished goods		25,710		21,977
	$	63,099	$	58,343

Deferred Cost of Revenue

Deferred cost of revenue related to unrecognized revenue on shipments to customers of $3.1 and $2.2 million at June 30, 2013 and December 31, 2012, respectively, is included in other current assets in our condensed consolidated balance sheets.

Product Warranty Reserves

Product warranty reserve activities are summarized as follows (in thousands):

Balance at January 1, 2012	$	8,877
Accrued warranty assumed upon acquisition of Cretaprint		1,386
Provisions, net of releases		10,122
Settlements		(10,227	)
Balance at December 31, 2012	$	10,158
Provisions, net of releases		5,352
Settlements		(5,313	)
Balance at June 30, 2013	$	10,197

Other Comprehensive Income

The components of OCI as of June 30, 2013 and December 31, 2012 consisted of the following (in thousands):

	June 30,			December 31,
	2013			2012
Net unrealized investment gains	$	32		$	184
Currency translation gains (losses)		(3,440	)		132
Other		(109	)		(47	)
Accumulated other comprehensive income (loss)	$	(3,517	)	$	269

Amounts reclassified out of OCI were less than $0.1 million, net of tax, for the three and six months ended June 30, 2013 and 2012, and consisted of unrealized gains from investments in debt securities and are reported within interest and other expense, net, in our condensed consolidated statements of operations.

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Statement of Comprehensive Income (Parenthetical) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Statement Of Comprehensive Income [Abstract]
Unrealized holding gains (loses), tax benefits (provisions)	$ 0.1		$ 0.1	$ (0.1)
Reclassification adjustments for (gains) losses included in net income, tax benefits (provisions)
Currency translation adjustments, tax benefits(provisions)	$ (0.2)	$ 0.5	$ 0.3

XML

Income taxes - Additional Information (Detail) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Recognized tax provision	$ 2,009,000	$ 2,049,000	$ 253,000	$ 4,067,000
Pretax net income on tax provision	11,433,000	9,054,000	18,039,000	17,306,000
Provisions for income taxes before discrete items	2,400,000	2,600,000	4,300,000	5,200,000
U.S. statutory income tax rate			35.00%
Benefit related to retroactive renewal of the U.S. federal research and development tax credit and certain international tax provisions on January 2, 2013			3.2
Gross unrecognized tax benefits	33,807,000		33,807,000		29,755,000
Gross unrecognized tax benefits decrease in next 12 months	4,000,000		4,000,000
Accrued interest and penalties related to unrecognized tax benefits	$ 1,500,000		$ 1,500,000		$ 1,200,000

XML

Investments and Fair Value Measurements - Investments in Accordance with Fair Value Hierarchy (Detail) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012	Dec. 31, 2011
Investments And Fair Value Measurements [Line Items]
Total Investments	$ 190,414	$ 198,153
Contingent consideration, current and noncurrent	29,627	38,050	8,704
Self-insurance	1,558	1,375	1,640
Liabilities	31,185	39,425
Money market funds [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	123,502	112,714
U.S. Government and sponsored entities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	5,034	20,177
Corporate debt securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	41,691	42,069
Municipal securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	1,706	1,713
Asset-backed securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	11,742	12,192
Mortgage-backed securities - residential [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	6,739	9,288
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	123,502	127,928
Contingent consideration, current and noncurrent
Self-insurance
Liabilities
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Money market funds [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	123,502	112,714
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | U.S. Government and sponsored entities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments		15,214
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Corporate debt securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Municipal securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Asset-backed securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments
Quoted Prices in Active Markets for Identical Assets (Level 1) [Member] | Mortgage-backed securities - residential [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments
Significant other Observable Inputs (Level 2) [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	66,842	70,172
Contingent consideration, current and noncurrent
Self-insurance
Liabilities
Significant other Observable Inputs (Level 2) [Member] | Money market funds [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments
Significant other Observable Inputs (Level 2) [Member] | U.S. Government and sponsored entities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	5,034	4,963
Significant other Observable Inputs (Level 2) [Member] | Corporate debt securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	41,691	42,069
Significant other Observable Inputs (Level 2) [Member] | Municipal securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	1,706	1,713
Significant other Observable Inputs (Level 2) [Member] | Asset-backed securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	11,672	12,139
Significant other Observable Inputs (Level 2) [Member] | Mortgage-backed securities - residential [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	6,739	9,288
Unobservable Inputs (Level 3) [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	70	53
Contingent consideration, current and noncurrent	29,627	38,050
Self-insurance	1,558	1,375
Liabilities	31,185	39,425
Unobservable Inputs (Level 3) [Member] | Money market funds [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments
Unobservable Inputs (Level 3) [Member] | U.S. Government and sponsored entities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments
Unobservable Inputs (Level 3) [Member] | Corporate debt securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments
Unobservable Inputs (Level 3) [Member] | Municipal securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments
Unobservable Inputs (Level 3) [Member] | Asset-backed securities [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments	70	53
Unobservable Inputs (Level 3) [Member] | Mortgage-backed securities - residential [Member]
Investments And Fair Value Measurements [Line Items]
Total Investments

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Stock-based Compensation (Tables)

6 Months Ended

Jun. 30, 2013

Schedule of Stock-Based Compensation Expense

Stock-based compensation expense related to stock options, ESPP purchases, and RSUs under ASC 718 for the three and six months ended June 30, 2013 and 2012 is summarized as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Stock -based compensation expense by type of award:
Employee stock options	$	196		$	324		$	634		$	462
Non-vested RSUs		4,858			3,965			10,130			7,896
ESPP		744			477			1,678			1,075
Total stock-based compensation		5,798			4,766			12,442			9,433
Tax effect on stock-based compensation		(1,814	)		(1,329	)		(3,748	)		(2,861	)
Net effect on net income	$	3,984		$	3,437		$	8,694		$	6,572

Schedule of Stock Options Outstanding and Exercisable

Stock options outstanding and exercisable as of June 30, 2013 and activity for the six months ended June 30, 2013 is as follows (in thousands, except weighted average exercise price and remaining contractual term):

	Shares outstanding			Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrinsic  value
Options outstanding at January 1, 2013		1,536		$	14.19
Options granted		—			—
Options forfeited and expired		(41	)		25.63
Options exercised		(372	)		11.49
Options outstanding at June 30, 2013		1,123		$	14.66		3.38		15,304
Options vested and expected to vest at June 30, 2013		1,098		$	14.65		3.33		14,981
Options exercisable at June 30, 2013		841		$	14.59		2.73		11,531

Schedule of Non-Vested RSUs

Non-vested RSUs as of June 30, 2013 and activity during the six months ended June 30, 2013 are summarized below (shares in thousands):

Non-vested shares	Shares			Weighted      average grant     date fair value
Non-vested at January 1, 2013	$	2,345		$	15.26
Restricted stock granted		355			24.21
Restricted stock vested		(408	)		15.08
Restricted stock forfeited		(188	)		16.91
Non-vested at June 30, 2013		2,104		$	16.66

ESPP [Member]

Schedule of Estimated Per Share Weighted Average Fair Value and Assumptions Used to Estimate Fair Value

The estimated per share weighted average fair value of ESPP shares issued and the assumptions used to estimate fair value for the six months ended June 30, 2013 and 2012 are as follows:

	Six months ended June 30,
	2013			2012
Weighted average fair value per share	$	6.68		$	5.64
Expected volatility		29% - 38	%		38% - 49	%
Risk-free interest rate		0.1% - 0.3	%		0.1% - 0.2	%
Expected term (in years)		0.5 - 2.0			0.5 - 2.0

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Stock-based Compensation - Schedule of Stock Options Outstanding and Exercisable (Detail) (USD $) In Thousands, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Shares, Options outstanding, beginning balance	1,536
Shares, Options granted
Shares, Options forfeited and expired	(41)
Shares, Options exercised	(372)
Shares, Options outstanding, ending balance	1,123
Shares, Options vested and expected to vest, ending balance	1,098
Shares, Options exercisable, ending balance	841
Weighted average exercise price, Options outstanding, beginning balance	$ 14.19
Weighted average exercise price, Options granted
Weighted average exercise price, Options forfeited and expired	$ 25.63
Weighted average exercise price, Options exercised	$ 11.49
Weighted average exercise price, Options outstanding, ending balance	$ 14.66
Weighted average exercise price, Options vested and expected to vest, ending balance	$ 14.65
Weighted average exercise price, Options exercisable, ending balance	$ 14.59
Weighted average remaining contractual term (years), Options outstanding	3 years 4 months 17 days
Weighted average remaining contractual term (years), Options vested and expected to vest	3 years 3 months 29 days
Weighted average remaining contractual term (years), Options exercisable	2 years 8 months 23 days
Aggregate intrinsic value, Options outstanding	$ 15,304
Aggregate intrinsic value, Options vested and expected to vest	14,981
Aggregate intrinsic value, Options exercisable	$ 11,531

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Segment Information and Geographic Data - Additional Information (Detail) (Operating Segment [Member], USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012
Industrial Inkjet [Member]
Segment Reporting Information [Line Items]
Increase in goodwill	$ 0.8
Productivity Software [Member]
Segment Reporting Information [Line Items]
Increase in goodwill	$ 0.3

XML

Restructuring and Other

6 Months Ended

Jun. 30, 2013

Restructuring And Related Activities [Abstract]

Restructuring and Other

11. Restructuring and Other

During the three and six months ended June 30, 2013 and 2012, cost reduction actions were taken to lower our quarterly operating expense run rate as we analyzed our cost structure. We announced restructuring plans to better align our costs with revenue levels and to re-align our cost structure following our business acquisitions. These charges primarily relate to cost reduction actions taken during the first quarter of 2013 to lower our quarterly operating expense run rate in the Fiery operating segment, targeted reductions in the Industrial Inkjet operating segment, and the integration of Productivity Software head count with acquired entities. Restructuring and other consists primarily of restructuring, severance, retention, facility downsizing and relocation, and acquisition integration expenses. Our restructuring and other plans are accounted for in accordance with ASC 420, Exit or Disposal Cost Obligations, ASC 712, Compensation – Non-Retirement Postemployment Benefits, and ASC 820.

We recorded restructuring and other charges of $1.2 and $3.1 million for the three and six months ended June 30, 2013, respectively, and $1.2 and $2.3 million for the three and six months ended June 30, 2012, respectively, primarily consisting of restructuring, severance, retention, and charges to downsize or relocate our facilities. Restructuring and severance charges of $0.4 and $1.4 million related to head count reductions of 28 and 62 for the three and six months ended June 30, 2013, respectively, and $0.3 and $1.1 million related to head count reductions of 16 and 44 for the three and six months ended June 30, 2012, respectively. Severance costs include severance payments, related employee benefits, and outplacement or relocation costs. Integration expenses of $0.5 and $1.1 million were incurred during the three and six months ended June 30, 2013, respectively, primarily related to the Metrics, Cretaprint, OPS, and Technique acquisitions, and $0.7 and $0.8 million was incurred during the three and six months ended June 30, 2012, respectively, primarily related to the Metrics, Cretaprint, and Prism Group Holdings Limited (“Prism”) acquisitions.

Retention expenses of $0.2 and $0.5 million were recognized during the three and six months ended June 30, 2013 and 2012, respectively, associated with the Cretaprint acquisition. Facilities restructuring costs of $0.1 and $0.2 million were incurred during the three and six months ended June 30, 2013, respectively, primarily related to the relocation of our corporate headquarters, Japan, Belgium, and certain manufacturing facilities.

Restructuring and other reserve activities for the six months ended June 30, 2013 and 2012 are summarized as follows (in thousands):

	Six months ended June 30,
	2013			2012
Reserve balance at January 1,	$	1,670		$	1,870
Restructuring charges		1,084			785
Other charges		2,053			1,465
Non-cash acquisition-related retention costs		(465	)		(456	)
Cash payments		(3,006	)		(2,152	)
Reserve balance at June 30,	$	1,336		$	1,512

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Income taxes

6 Months Ended

Jun. 30, 2013

Income Tax Disclosure [Abstract]

Income taxes

7. Income taxes

We recognized a tax provision of $2.0 million on pretax net income of $11.4 and $9.1 million during the three months ended June 30, 2013 and 2012, respectively. We recognized a tax provision of $0.3 and $4.1 million on pretax net income of $18.0 and $17.3 million during the six months ended June 30, 2013 and 2012, respectively. The provision for income taxes before discrete items reflected in the table below was $2.4 and $2.6 million during the three months ended June 30, 2013 and 2012, respectively, and $4.3 and $5.2 million during the six months ended June 30, 2013 and 2012, respectively. The decrease in the provision for income taxes before discrete items for the three and six months ended June 30, 2013, compared with the same periods in the prior year, is due primarily to the tax benefit related to the U.S. federal research and development credit recognized only in 2013.

Primary differences between our recorded tax provision rate and the U.S. statutory rate of 35% include tax benefits related to credits for research and development costs in 2013, lower taxes on permanently reinvested foreign earnings, and the tax effects of stock-based compensation expense pursuant to ASC 718-740, Stock Compensation – Income Taxes, which are non-deductible for tax purposes. Pursuant to the American Taxpayer Relief Act of 2012, on January 2, 2013, we recognized a tax benefit of $3.2 million resulting from the renewal of the U.S. federal research and development tax credit retroactive to 2012. ASC 740-10-45-15, Income Taxes, requires that the effects of a change in tax law or rates be recognized in the period that includes the enactment date.

Our tax provision before discrete items is reconciled to our recorded provision for income taxes for the three and six months ended June 30, 2013 and 2012 as follows (in millions):

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Provision for income taxes before discrete items	$	2.4		$	2.6		$	4.3		$	5.2
Interest related to unrecognized tax benefits		0.1			0.1			0.2			0.2
Provision related to reassessment of taxes resulting from the filing of prior year foreign tax returns		—			—			0.3			—
Benefit related to restructuring and other expenses		(0.1	)		(0.3	)		(0.7	)		(0.6	)
Benefit related to the 2012 U.S. federal research and development tax credit		—			—			(3.2	)		—
Tax deductions related to ESPP dispositions		(0.1	)		(0.1	)		(0.3	)		(0.4	)
Benefit related to reversals of uncertain tax positions due to statute of limitation expirations		(0.3	)		(0.3	)		(0.3	)		(0.3	)
Provision for income taxes	$	2.0		$	2.0		$	0.3		$	4.1

As of June 30, 2013 and December 31, 2012, the gross unrecognized tax benefits were $33.8 and $29.8 million, respectively, which would affect the effective tax rate, if recognized. Over the next twelve months, our existing tax positions will continue to generate an increase in liabilities for unrecognized tax benefits. It is reasonably possible that our gross unrecognized tax benefits will decrease up to $4.0 million in the next twelve months. These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits in our condensed consolidated statement of operations.

We recognize potential accrued interest and penalties related to unrecognized tax benefits as a component of the income tax provision. As of June 30, 2013 and December 31, 2012, we accrued $1.5 and $1.2 million, respectively, for potential payments of interest and penalties.

As of June 30, 2013, we were subject to examination by the Internal Revenue Service for the 2009-2012 tax years, state tax jurisdictions for the 2008-2012 tax years, and the Netherlands tax authority for the 2010-2012 tax years.

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Stock-based Compensation - Valuation Assumptions - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2013
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Grant date fair value of RSUs vested	$ 6.2
Aggregate intrinsic value of Restricted Stock Units expected to vest	$ 51.2
Remaining weighted average vesting period, in years	10 months 24 days

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Accounts Receivable

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Accounts Receivable

14. Accounts Receivable

Financing Receivables

We had financing receivables of $2.8 and $2.3 million consisting of $1.7 and $0.9 million of sales-type lease receivables and $1.1 and $1.4 million of trade receivables having a contractual maturity in excess of 360 days at June 30, 2013 and December 31, 2012, respectively. Because we do not have a significant amount of financing receivables, credit quality is evaluated on the same basis as trade receivables. We have not experienced material amounts of past due financing receivables.

Accounts Receivable Sales Arrangements

In accordance with ASC 860-20, Transfers and Servicing, trade receivables are derecognized from our condensed consolidated balance sheet when sold to third parties upon determining that such receivables are presumptively beyond the reach of creditors in a bankruptcy proceeding. The recourse obligation is measured using market data from similar transactions and the servicing liability is determined based on the fair value that a third party would charge to service these receivables.

We have facilities in Spain that enable us to sell to third parties, on an ongoing basis, certain trade receivables without recourse. Trade receivables sold without recourse are generally short-term receivables with payment due dates of less than one year, which are secured by international letters of credit. Trade receivables sold under these facilities were $2.1 and $4.1 million during the three and six months ended June 30, 2013 and $4.3 million during the year ended December 31, 2012, respectively, which approximates the cash received.

We have facilities in the U.S. that enable us to sell to third parties, on an ongoing basis, certain trade receivables with recourse. The trade receivables sold with recourse are generally short-term receivables with payment due dates of less than 30 days from the date of sale, which are subject to a servicing obligation. Trade receivables sold under these facilities were $3.8 and $6.9 million during the three and six months ended June 30, 2013 and $2.1 million during the year ended December 31, 2012, respectively, which approximates the cash received. We report collections from the sale of trade receivables to third parties as operating cash flows in the condensed consolidated statements of cash flows, because such receivables are the result of an operating activity and the associated interest rate risk is de minimis.

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Stock-based Compensation

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-based Compensation

12. Stock-based Compensation

We account for stock-based payment awards in accordance with ASC 718, Stock Compensation, which requires the measurement and recognition of compensation expense for all equity awards granted to our employees and directors, including employee stock options, RSUs, and ESPP purchases related to all stock-based compensation plans based on the fair value of such awards on the date of grant. We amortize stock-based compensation cost on a graded vesting basis over the vesting period, after assessing the probability of achieving the requisite performance criteria with respect to performance-based awards. Stock-based compensation cost is recognized over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards.

Stock-based compensation expense related to stock options, ESPP purchases, and RSUs under ASC 718 for the three and six months ended June 30, 2013 and 2012 is summarized as follows (in thousands):

	Three months ended June 30,						Six months ended June 30,
	2013			2012			2013			2012
Stock -based compensation expense by type of award:
Employee stock options	$	196		$	324		$	634		$	462
Non-vested RSUs		4,858			3,965			10,130			7,896
ESPP		744			477			1,678			1,075
Total stock-based compensation		5,798			4,766			12,442			9,433
Tax effect on stock-based compensation		(1,814	)		(1,329	)		(3,748	)		(2,861	)
Net effect on net income	$	3,984		$	3,437		$	8,694		$	6,572

Valuation Assumptions

We use the Black-Scholes-Merton (“BSM”) option pricing model to value stock-based compensation for all equity awards, except market-based awards. Market-based awards are valued using the Monte Carlo valuation model.

The BSM model determines the fair value of stock-based payment awards based on the stock price on the date of grant and is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, our expected stock price volatility over the term of the awards, expected term, interest rates, and actual and projected employee stock option exercise behavior. Expected volatility is based on the historical volatility of our stock over a preceding period commensurate with the expected term of the option. The expected term is based upon management’s consideration of the historical life, vesting period, and contractual period of the options granted. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yield was not considered in the option pricing formula since we do not pay dividends and have no current plans to do so in the future.

No stock options were granted during the three and six months ended June 30, 2013 and 2012. No ESPP purchases occurred during the three months ended June 30, 2013 and 2012. The estimated per share weighted average fair value of ESPP shares issued and the assumptions used to estimate fair value for the six months ended June 30, 2013 and 2012 are as follows:

	Six months ended June 30,
	2013			2012
Weighted average fair value per share	$	6.68		$	5.64
Expected volatility		29% - 38	%		38% - 49	%
Risk-free interest rate		0.1% - 0.3	%		0.1% - 0.2	%
Expected term (in years)		0.5 - 2.0			0.5 - 2.0

Stock options outstanding and exercisable as of June 30, 2013 and activity for the six months ended June 30, 2013 is as follows (in thousands, except weighted average exercise price and remaining contractual term):

	Shares outstanding			Weighted average exercise price		Weighted average remaining contractual term (years)		Aggregate intrinsic  value
Options outstanding at January 1, 2013		1,536		$	14.19
Options granted		—			—
Options forfeited and expired		(41	)		25.63
Options exercised		(372	)		11.49
Options outstanding at June 30, 2013		1,123		$	14.66		3.38		15,304
Options vested and expected to vest at June 30, 2013		1,098		$	14.65		3.33		14,981
Options exercisable at June 30, 2013		841		$	14.59		2.73		11,531

Aggregate intrinsic value for stock options represents the difference between the closing price per share of our common stock on the last trading day of the fiscal period and the option exercise price multiplied by the number of in-the-money stock options outstanding, vested and expected to vest, and exercisable at June 30, 2013.

Non-vested RSUs as of June 30, 2013 and activity during the six months ended June 30, 2013 are summarized below (shares in thousands):

Non-vested shares	Shares			Weighted      average grant     date fair value
Non-vested at January 1, 2013	$	2,345		$	15.26
Restricted stock granted		355			24.21
Restricted stock vested		(408	)		15.08
Restricted stock forfeited		(188	)		16.91
Non-vested at June 30, 2013		2,104		$	16.66

The grant date fair value of RSUs vested during the six months ended June 30, 2013 was $6.2 million. The aggregate intrinsic value at June 30, 2013 for RSUs expected to vest was $51.2 million and the remaining weighted average vesting period was 0.9 years. Aggregate intrinsic value for RSUs expected to vest represents the closing price per share of our common stock on the last trading day of the fiscal period, multiplied by the number of RSUs expected to vest as of June 30, 2013.

Amended and Restated 2009 Equity Incentive Award Plan

On June 4 2013, our stockholders approved amendments to the Amended and Restated 2009 Equity Incentive Award Plan to increase the number of shares of common stock reserved under the plan for future issuance from 7.0 to 11.6 million shares and authorized the granting of performance-based awards under the plan through the 2018 annual meeting of stockholders.

Amended and Restated 2000 Employee Stock Purchase Plan

On June 4, 2013, our stockholders approved amendments to the Amended and Restated 2000 Employee Stock Purchase Plan that increased the number of shares authorized for issuance pursuant to such plan by 2 million shares. The share increase was intended to ensure that we continue to have a sufficient reserve of common stock available under the ESPP to provide our eligible employees with the opportunity to acquire our common stock through participation in a payroll deduction-based ESPP designed to operate in compliance with Section 423 of the U.S. Internal Revenue Code (“IRC”). The amendment and restatement of the ESPP provides for an automatic increase in the number of shares reserved for issuance under the ESPP.

The ESPP is qualified under Section 423 of the IRC. Eligible employees may contribute from one to ten percent of their base compensation not to exceed ten percent of the employee’s earnings. Employees are not able to purchase more than the number of shares having a value greater than $25,000 in any calendar year, as measured at the beginning of the offering period under the ESPP. The purchase price shall be the lesser of 85% of the fair market value of the stock, either on the offering date or on the purchase date. The offering period shall not exceed 27 months beginning with the offering date. The ESPP provides for offerings of four consecutive, overlapping six-month offering periods, with a new offering period commencing on the first trading day on or after February 1 and August 1 of each year.

Performance-based and Market-based Stock Options and RSUs

RSUs granted during the six months ended June 30, 2013 included 244,112 performance-based RSUs, which vest when specified performance criteria are met based on 2013 revenue and non-GAAP operating income targets; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses. The grant date fair value was estimated to be $5.7 million, which is being amortized over their service periods of 1.0 year. The probability of achieving these awards was determined based on review of the actual results achieved by each business unit during the six months ended June 30, 2013 compared with the 2013 operating plan as well as the overall strength of the business unit within EFI. Stock-based compensation expense was adjusted based on this probability assessment. As actual results are achieved during the year, the probability assessment will be updated and stock-based compensation expense adjusted accordingly. As of June 30, 2013, 240,374 performance-based RSUs remain outstanding.

RSUs granted during the year ended December 31, 2012 included 282,850 performance-based RSUs, which vest when specified performance criteria are met based on 2012 revenue and non-GAAP operating income targets; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses. The grant date fair value was estimated to be $4.9 million, which is being amortized over their service periods of 1.0 year. The performance criteria were achieved with respect to approximately 58% of these RSUs as of December 31, 2012. Accordingly, these RSUs vested on February 22 and May 11, 2013 when the associated service requirements were met and the achievement of the performance criteria was certified by the board of directors.

RSUs granted during the year ended December 31, 2012 included 191,594 performance-based RSUs, which vest when specified performance criteria are met based on revenue and non-GAAP operating income targets during any four consecutive quarters between the first quarter of 2012 and the second quarter of 2015; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses. The grant date fair value was estimated to be $3.0 million, which is being amortized over their average derived service periods of 3.0 years. The probability of achieving these awards was determined based on review of the actual results achieved by each business unit during the six months ended June 30, 2013 compared with the 2013 operating plan as well as the overall strength of the business unit within EFI. Stock-based compensation expense was adjusted based on this probability assessment. As actual results are achieved, the probability assessment will be updated and stock-based compensation expense adjusted accordingly. As of June 30, 2013, 191,594 performance-based RSUs remain outstanding.

RSUs granted during the year ended December 31, 2011 included 90,000 market-based RSUs, which vest when our average closing stock price exceeds defined multiples of the average closing stock price for 20 consecutive trading days preceding January 5, 2011. If these multiples are not achieved by January 5, 2018, the awards are forfeited. The grant date fair value was estimated to be $1.1 million and is being amortized over the average derived service period of 3.93 years. The average derived service period and total fair value were determined using the Monte Carlo valuation model based on our assumptions, which included a risk-free interest rate of 2.9% and an implied volatility of 40%. On April 1, 2013, February 7, 2013, and May 10, 2011, these market-based RSUs vested due to achievement of the threshold multiple of the average closing stock price for 20 consecutive trading days preceding January 5, 2011. As of June 30, 2013, no market-based RSUs remain unvested.

RSUs granted during the year ended December 31, 2011 included 323,600 performance-based RSUs, which vest when specified performance criteria are met based on 2011 revenue and non-GAAP operating income targets; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses. The grant date fair value was estimated to be $5.0 million, which was being amortized over their service periods of 1.0 year. The performance criteria were achieved with respect to approximately 90% of these RSUs as of December 31, 2011. Accordingly, these RSUs vested on February 9 and 13, 2012 when the associated service requirements were met.

RSUs granted during the year ended December 31, 2011 included 195,156 performance-based RSUs, which vest when specified performance criteria are met based on revenue and non-GAAP operating income targets during any four consecutive quarters between the first quarter of 2011 and the second quarter of 2014; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses. The grant date fair value was estimated to be $3.0 million, which is being amortized over their average derived service periods of 3.0 years. The probability of achieving these awards was determined based on review of the actual results achieved by each business unit during the six months ended June 30, 2013 compared with the 2013 operating plan as well as the overall strength of the business unit within EFI. Stock-based compensation expense was adjusted based on this probability assessment. As actual results are achieved, the probability assessment will be updated and stock-based compensation expense adjusted accordingly. On May 23, 2012, 64,909 performance-based RSUs vested due to achievement of the threshold level of revenue and non-GAAP operating income targets during four consecutive quarters between the second quarter of 2011 and the first quarter of 2012. As of June 30, 2013, 124,390 performance-based RSUs remain outstanding.

RSUs and stock options granted during the year ended December 31, 2009 included 98,000 market-based RSUs and 294,076 market-based stock options. These awards vest when our average closing stock price exceeds defined multiples of the June 18 or August 28, 2009 closing stock prices for 20 consecutive trading days. If these multiples are not achieved by June 18 or August 28, 2016, respectively, the awards are forfeited. The grant date fair value was estimated to be $0.9 million for the RSUs and $1.7 million for the stock options, which are being amortized over their average derived service periods of 4.35 and 4.88 years, respectively. The average derived service period and total fair value were determined using the Monte Carlo valuation model based on our assumptions, which included a risk-free interest rate of 3.5% and 3.1%, respectively, and an implied volatility of 50%. On February 13, 2013, December 17, 2012, and January 10, 2011, an aggregate of 78,000 market-based RSUs vested due to achievement of the threshold multiple of the June 18 and August 28, 2009 closing stock prices, respectively, for 20 consecutive trading days. On March 25, 2013, February 11, 2013, January 14, 2013, and April 27, 2011, an aggregate of 190,716 market-based stock options vested due to achievement of the threshold multiple. As of June 30, 2013, no market-based RSUs and stock options remain unvested.

Stock options granted during the year ended December 31, 2009 included 32,674 performance-based stock options. These performance-based stock options vest when our annual non-GAAP return on equity exceeds defined thresholds of the 2008 non-GAAP return on equity. Non-GAAP return on equity is defined as non-GAAP net income divided by stockholders’ equity. Non-GAAP net income is defined as net income determined in accordance with GAAP adjusted to remove the impact of certain recurring and non-recurring expenses, and the tax effects of these adjustments. If these defined thresholds are not achieved by August 28, 2016, the stock options are forfeited. The grant date fair value was estimated to be $0.1 million, which is being amortized over the average derived service period of 3.71 years. On December 31, 2011, 5,298 of these performance-based stock options vested due to achievement of the initial non-GAAP return on equity growth threshold. As of June 30, 2013, 15,540 performance-based stock options remain unvested.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2013	Jul. 17, 2013
Document Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2
Trading Symbol	EFII
Entity Registrant Name	ELECTRONICS FOR IMAGING INC
Entity Central Index Key	0000867374
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		46,416,330

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Common Stock Repurchase Programs

6 Months Ended

Jun. 30, 2013

Equity [Abstract]

Common Stock Repurchase Programs

13. Common Stock Repurchase Programs

On August 31, 2012, the board of directors approved the repurchase of $100 million of outstanding common stock. This authorization expires in February 2014. Under this publicly announced plan, we repurchased 1.3 million shares for an aggregate purchase price of $22.9 million during the year ended December 31, 2012. We repurchased 0.2 and 0.4 million shares for an aggregate purchase price of $5.0 and $10.0 million during the three and six months ended June 30, 2013.

Our employees have the option to surrender shares of common stock to satisfy their tax withholding obligations that arise on the vesting of RSUs. In addition, certain employees can surrender shares to satisfy the exercise price of certain stock options and any tax withholding obligations incurred in connection with such exercises. Employees surrendered 0.1 and 0.3 million shares for an aggregate purchase price of $1.3 and $7.8 million for the three and six months ended June 30, 2013, respectively, and 0.4 and 0.5 million shares for an aggregate purchase price of $7.8 and $9.5 million for the three and six months ended June 30, 2012, respectively.

These repurchased shares are recorded as treasury stock and are accounted for under the cost method thereby reducing shares outstanding. None of these repurchased shares of common stock have been cancelled. Our buyback program is limited by SEC regulations and is subject to compliance with our insider trading policy.

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Derivatives and Hedging - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	Jun. 30, 2013	Dec. 31, 2012
Schedule Of Notional Amount Of Derivatives [Line Items]
Notional amount of our derivative assets and liabilities	$ 20.9	$ 3.2
Foreign exchange contract [Member]
Schedule Of Notional Amount Of Derivatives [Line Items]
Notional amount of our derivative assets and liabilities	2.7	2.7
Not designated as hedging instrument [Member]
Schedule Of Notional Amount Of Derivatives [Line Items]
Notional amount of our derivative assets and liabilities	18.2	0.5
Euro-denominated intercompany loans [Member]
Schedule Of Notional Amount Of Derivatives [Line Items]
Notional amount of our derivative assets and liabilities	16.9
Indian rupee [Member]
Schedule Of Notional Amount Of Derivatives [Line Items]
Notional amount of our derivative assets and liabilities	$ 1.3

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Segment Information and Geographic Data - Revenue by Ship-to Destination (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenues For Geographical Areas In Which Company Operates [Line Items]
Total revenue	$ 180,298	$ 163,901	$ 351,657	$ 323,957
Reportable Geographical Components [Member]
Revenues For Geographical Areas In Which Company Operates [Line Items]
Total revenue	180,298	163,901	351,657	323,957
Reportable Geographical Components [Member] | Americas [Member]
Revenues For Geographical Areas In Which Company Operates [Line Items]
Total revenue	100,516	82,725	194,413	164,906
Reportable Geographical Components [Member] | Europe, Middle East and Africa ('EMEA") [Member]
Revenues For Geographical Areas In Which Company Operates [Line Items]
Total revenue	49,984	51,560	100,030	106,686
Reportable Geographical Components [Member] | Asia Pacific ("APAC") [Member]
Revenues For Geographical Areas In Which Company Operates [Line Items]
Total revenue	29,798	29,616	57,214	52,365
Reportable Geographical Components [Member] | Japan [Member]
Revenues For Geographical Areas In Which Company Operates [Line Items]
Total revenue	5,815	7,867	13,034	14,819
Reportable Geographical Components [Member] | APAC, ex Japan [Member]
Revenues For Geographical Areas In Which Company Operates [Line Items]
Total revenue	$ 23,983	$ 21,749	$ 44,180	$ 37,546