Definitive Proxy Statement Pertaining to a Merger
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United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.    )

(Rule 14a-101)

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

Electronics For Imaging, Inc.

(Name of Registrant as Specified in Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

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  (4)  

Date Filed:

 

     

 

 

 


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LOGO

Electronics For Imaging, Inc.

6750 Dumbarton Circle

Fremont, CA 94555

Telephone: (650) 357-3500

June 11, 2019

Dear Stockholder,

You are cordially invited to attend a special meeting of stockholders of Electronics For Imaging, Inc., a Delaware corporation (which we refer to as “EFI”, “we” or “us” and which special meeting of the stockholders of EFI we refer to as the “special meeting”), to be held on July 15, 2019 at 9:00 a.m., local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, CA 94025. Only holders of record of EFI common stock at the close of business on June 10, 2019, will be entitled to vote at the special meeting or any adjournment or postponement of the special meeting.

At the special meeting, you will be asked to consider and vote upon (i) a proposal to adopt the Agreement and Plan of Merger, dated April 14, 2019 (which, as may be amended from time to time, we refer to as the “merger agreement”), among East Private Holdings II, LLC (which we refer to as “Parent”), East Merger Sub, Inc. (which we refer to as “Merger Sub”), which is a wholly owned subsidiary of Parent, and EFI, pursuant to which Merger Sub will be merged with and into EFI (which we refer to as the “merger”), with EFI continuing as the surviving corporation in the merger and a wholly owned subsidiary of Parent, (ii) a non-binding, advisory proposal to approve specified compensation that will or may become payable to EFI’s named executive officers in connection with the merger, and (iii) a proposal to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement. Parent and Merger Sub are each affiliated with Siris Capital Group, LLC (which we refer to as “Siris”). Siris is a private equity firm headquartered in New York, New York.

If the merger is completed, you will be entitled to receive $37.00 in cash, without interest and less applicable withholding taxes (which we refer to as the “merger consideration”), for each share of EFI common stock you own (unless you have properly exercised your appraisal rights with respect to such common stock) and you will have no ongoing ownership interest in the continuing business of EFI. The merger consideration represents a premium of approximately 25.85% over the closing price of EFI’s common stock on April 12, 2019, the last trading day prior to the public announcement of the execution of the merger agreement, and a premium of approximately 32.43% over the volume-weighted average closing price of a share of our common stock during the thirty days ended April 12, 2019. The board of directors of EFI (which we refer to as the “Board”) reviewed and considered the terms and conditions of the merger agreement and has duly and unanimously approved the merger agreement and the transactions contemplated thereby. The Board has unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, is advisable and fair to, and in the best interests of, EFI and its stockholders, (ii) directed that the merger agreement be submitted to a vote for adoption at the special meeting and (iii) resolved to recommend that the stockholders vote “FOR” the proposal to adopt the merger agreement. The Board also unanimously recommends that the stockholders vote “FOR” the non-binding, advisory proposal to approve specified compensation that will or may become payable to EFI’s named executive officers in connection with the merger; and “FOR” the adjournment of the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.


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The accompanying proxy statement provides detailed information about the special meeting, the merger agreement and the merger. A copy of the merger agreement is attached as Annex A to the proxy statement. The proxy statement also describes the actions and determinations of the board of directors in connection with its evaluation of the merger agreement and the merger. We encourage you to read the proxy statement and its annexes, including the merger agreement, carefully and in their entirety.

Whether or not you plan to attend the special meeting in person, please complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid envelope or grant your proxy electronically over the Internet or by telephone. If you hold your shares in street name, you should instruct your broker, bank or other nominee how to vote in accordance with the voting instruction form you will receive from your broker, bank or other nominee. Your broker, bank or other nominee cannot vote on any of the proposals at the special meeting, including the proposal to adopt the merger agreement, without your instructions.

Your vote is very important. The merger cannot be completed unless the proposal to adopt the merger agreement is approved by the affirmative vote of holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Therefore, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person, if you abstain from voting or if you hold your shares in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the proposal to adopt the merger agreement, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement. Therefore, please submit your proxy or voting instruction form as soon as possible to ensure your shares are represented and voted at the special meeting.

The accompanying proxy statement is dated June 11, 2019 and, together with the enclosed form of proxy card, is first being mailed to the stockholders of EFI on or about June 12, 2019.

If you have any questions or need assistance voting your shares, please contact our proxy solicitor:

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Banks and Brokers Call: (212) 269-5550

All Others Call Toll-free: (866) 721-1324

Email: EFII@dfking.com

On behalf of the entire board of directors of EFI, thank you for your continued support.

Sincerely,

Gill Cogan

Chairman of the Board of Directors

The accompanying proxy statement is dated June 11, 2019, and is first being mailed to our stockholders of record on or about June 12, 2019.


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LOGO

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held on July 15, 2019

To Our Stockholders:

Notice is hereby given that a special meeting of stockholders of Electronics For Imaging, Inc., a Delaware corporation (which we refer to as “EFI”, “we” or “us” and which special meeting of the stockholders of EFI we refer to as the “special meeting”), will be held on July 15, 2019 at 9:00 a.m., local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, CA 94025, for the following purposes:

 

  1.

To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated April 14, 2019 (which, as may be amended from time to time, we refer to as the “merger agreement”), among East Private Holdings II, LLC (which we refer to as “Parent”), East Merger Sub, Inc. (which we refer to as “Merger Sub”), which is a wholly owned subsidiary of Parent, and EFI, pursuant to which Merger Sub will be merged with and into EFI (which we refer to as the “merger”), with EFI continuing as the surviving corporation in the merger and a wholly owned subsidiary of Parent (which we refer to as the “merger proposal”).

 

  2.

To consider and vote on a non-binding, advisory proposal to approve specified compensation that will or may become payable to EFI’s named executive officers in connection with the merger (which we refer to as the “proposal to approve the merger-related executive compensation”).

 

  3.

To consider and vote on a proposal to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement (which we refer to as the “adjournment proposal”).

The accompanying proxy statement provides detailed information about the special meeting, the merger agreement and the merger. A copy of the merger agreement is attached as Annex A to the proxy statement, and a summary of these provisions can be found under “The Merger Agreement” beginning on page 87 in the attached proxy statement. We encourage you to read the proxy statement and its annexes, including the merger agreement, carefully and in their entirety.

Only stockholders of record as of the close of business on June 10, 2019 are entitled to receive notice of, and to vote at, the special meeting and any adjournments or postponements thereof. You will be entitled to one vote for each share of our common stock that you held on the record date.

YOUR VOTE IS VERY IMPORTANT REGARDLESS OF THE NUMBER OF SHARES THAT YOU OWN. The merger cannot be completed unless the merger proposal is approved by the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Whether or not you plan to attend the special meeting in person, please complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone. If you hold your shares in street name, you should instruct your broker, bank or other nominee how to vote in accordance with the voting instruction form you will receive from your broker, bank or other nominee. Your broker, bank or other nominee cannot vote on any of the proposals at the special meeting, including the merger proposal, without your instructions.

The board of directors of EFI has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and fair to, and in the best interests of, EFI and its stockholders and unanimously resolved to recommend that our stockholders vote “FOR” the merger proposal. The board of directors of EFI also unanimously recommends that its stockholders vote “FOR” the proposal to approve the merger-related executive compensation; and “FOR” the adjournment proposal.


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No person has been authorized to give any information or to make any representations other than those set forth in the proxy statement in connection with the solicitation of proxies made hereby, and, if given or made, such information must not be relied upon as having been authorized by EFI or any other person.

IN ADDITION TO DELIVERING THE PROXY MATERIALS FOR THE SPECIAL MEETING TO BE HELD ON JULY 15, 2019 TO STOCKHOLDERS BY MAIL, THE PROXY STATEMENT FOR THE SPECIAL MEETING IS ALSO AVAILABLE AT http://ir.efi.com/financial-information/proxy-materials.

By Order of the Board of Directors,

Alex Grab

General Counsel, Chief Legal Officer, and Corporate

Secretary

Fremont, California

Dated: June 11, 2019


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TABLE OF CONTENTS

 

SUMMARY

     1  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     12  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     22  

PARTIES TO THE MERGER

     23  

EFI

     23  

Parent

     23  

Merger Sub

     23  

THE SPECIAL MEETING

     24  

Date, Time and Place of the Special Meeting

     24  

Purpose of the Special Meeting

     24  

Record Date and Quorum

     24  

Attendance at the Special Meeting

     25  

Shares Held in Street Name

     25  

Vote Required

     25  

Voting

     26  

Revocation of Proxies

     27  

Voting by EFI’s Directors and Executive Officers

     27  

Solicitation of Proxies; Payment of Solicitation Expenses

     28  

Householding

     28  

Adjournments and Postponements

     28  

Anticipated Date of Completion of the Merger

     28  

Rights of Stockholders Who Seek Appraisal

     29  

Questions and Additional Information

     29  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     30  

THE MERGER

     30  

Effect of the Merger

     30  

Closing and Effective Time of the Merger

     30  

Marketing Period

     30  

Merger Consideration

     30  

Background of the Merger

     31  

Reasons for the Merger; Recommendation of the Board

     52  

Certain Company Forecasts

     56  

Opinion of Financial Advisors

     61  

Interests of Certain Persons in the Merger

     77  

Financing of the Merger

     82  

Limited Guarantee

     83  

Material U.S. Federal Income Tax Consequences of the Merger

     83  

Regulatory Approvals

     85  

THE MERGER AGREEMENT

     87  

Explanatory Note Regarding the Merger Agreement

     87  

The Merger; Closing and Effective Time of the Merger

     87  

Directors and Officers; Certificate of Incorporation; Bylaws

     88  

Treatment of Common Stock, Stock-Based Awards and Performance Awards

     88  

Exchange and Payment Procedures

     89  

 

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Representations and Warranties

     90  

Conduct of Our Business Pending the Merger

     93  

Solicitation of Acquisition Proposals; Board Recommendation Change

     96  

Stockholders Meeting

     102  

Financing; Cooperation with Debt Financing

     102  

Treatment of Company Indebtedness

     104  

Efforts to Close the Merger; Filings; Other Actions

     105  

Employee Benefits Matters

     107  

Other Covenants and Agreements

     108  

Conditions to the Merger

     108  

Termination

     109  

Termination Fees

     111  

Directors’ and Officers’ Indemnification and Insurance

     112  

Expenses

     113  

Sole and Exclusive Limitations of Liability

     113  

Specific Performance

     113  

Amendments

     114  

Governing Law

     114  

PROPOSAL 2: NON-BINDING, ADVISORY VOTE ON MERGER-RELATED COMPENSATION FOR EFI’S NAMED EXECUTIVE OFFICERS

     115  

Golden Parachute Compensation

     115  

Merger-Related Compensation Proposal

     117  

PROPOSAL 3: VOTE ON ADJOURNMENT

     118  

MARKET PRICE OF COMMON STOCK

     119  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     120  

APPRAISAL RIGHTS

     123  

DELISTING AND DEREGISTRATION OF COMMON STOCK

     127  

OTHER MATTERS

     127  

SUBMISSION OF STOCKHOLDER PROPOSALS

     127  

WHERE YOU CAN FIND MORE INFORMATION

     129  

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

     129  

Annex A

   Agreement and Plan of Merger, dated April 14, 2019, by and among East Private Holdings II, LLC, East Merger Sub, Inc., and Electronics For Imaging, Inc.      A-1  

Annex B

  

Opinion of Morgan Stanley  & Co. LLC, dated as of April 14, 2019

     B-1  

Annex C

  

Opinion of Greenhill & Co., LLC, dated as of April  14, 2019

     C-1  

Annex D

  

Section  262 of the General Corporation Law of the State of Delaware

     D-1  

 

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SUMMARY

This summary, together with the following section entitled “Questions and Answers About the Special Meeting and The Merger,” highlights selected information in this proxy statement and does not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes, and the documents referred to or incorporated by reference in this proxy statement for a more complete understanding of the matters being considered at the special meeting. Each item in this summary includes a page reference directing you to a more complete description of that topic. This proxy statement is dated June 11, 2019, and is first being mailed to our stockholders of record on or about June 12, 2019.

In this proxy statement, the terms “EFI,” the “Company,” “we,” “us” and “our” refer to Electronics For Imaging, Inc. and, where appropriate, its subsidiaries. We refer to East Private Holdings II, LLC as “Parent” and East Merger Sub, Inc. as “Merger Sub.” All references to the “merger” refer to the merger of Merger Sub with and into EFI, with EFI continuing as the surviving corporation and becoming a wholly owned subsidiary of Parent pursuant to the merger agreement, and all references to the “merger agreement” refer to the Agreement and Plan of Merger, dated April 14, 2019, as it may be amended from time to time, by and among EFI, Parent and Merger Sub, a copy of which is included as Annex A to this proxy statement. EFI, following the consummation of the merger, is sometimes referred to as the “surviving corporation.”

Parties to the Merger (Page 23)

Electronics For Imaging, Inc., a Delaware corporation, is a world leader in customer-centric digital printing innovation focusing on the transformation of the printing, packaging, ceramic tile decoration, and textile industries from the use of traditional analog based printing to digital on-demand printing. EFI was incorporated in Delaware in 1988 and commenced operations in 1989. Our initial public offering of common stock was completed in 1992. EFI’s principal executive offices are located at 6750 Dumbarton Circle, Fremont, California 94555.

EFI common stock, par value $0.01 per share, (which we refer to as our “common stock”) is listed on the Nasdaq Global Select Market (which we refer to as “Nasdaq”) under the symbol “EFII.” Additional information about EFI can be found at www.efi.com. The information provided on or accessible through EFI’s website is not part of or incorporated by reference in this proxy statement.

East Private Holdings II, LLC, a Delaware limited liability company, was formed for the sole purpose of consummating the transactions contemplated by the merger agreement. Prior to the effective time of the merger, Parent will have engaged in no other business activities and will have incurred no liabilities or obligations other than those contemplated by or related to the merger agreement. Parent’s executive offices are located at 601 Lexington Avenue, 59th Floor, New York, New York 10022. Its telephone number is (212) 231-0095. Parent is an affiliate of Siris Capital Group, LLC, a private equity firm (which we refer to as “Siris”).

East Merger Sub, Inc., a Delaware corporation, is a direct wholly owned subsidiary of Parent and was incorporated for the sole purpose of consummating the transactions contemplated by the merger agreement. Prior to the effective time of the merger, Merger Sub will have engaged in no other business activities and will have incurred no liabilities or obligations other than those contemplated by or related to the merger agreement. Merger Sub’s executive offices are located at 601 Lexington Avenue, 59th Floor, New York, New York 10022. Merger Sub’s telephone number is (212) 231-0095. Merger Sub is an affiliate of Siris.



 

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The Special Meeting (Page 24)

Time and Place of the Special Meeting (Page 24)

This proxy statement is being furnished to our stockholders of record as part of the solicitation of proxies by the board of directors of EFI (which we refer to as the “Board”) for use at the special meeting to be held on July 15, 2019 at 9:00 a.m., local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, CA 94025, or at any adjournment or postponement thereof.

The Purpose of the Special Meeting (Page 24)

At the special meeting, holders of our common stock who are entitled to vote at such special meeting will be asked to (i) approve the proposal to adopt the merger agreement (which we refer to as the “merger proposal”), (ii) approve a non-binding, advisory proposal to approve specified compensation that will or may become payable to EFI’s named executive officers in connection with the merger (which we refer to as the “proposal to approve the merger-related executive compensation”), and (iii) approve a proposal to adjourn the special meeting, if necessary, to solicit additional proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement (which we refer to as the “adjournment proposal”).

Record Date and Quorum (Page 24)

You are entitled to receive notice of, and to vote at, the special meeting if you held shares of our common stock at the close of business on June 10, 2019, which the Board has set as the record date for the special meeting. As of the close of business on the record date, there were 43,156,485 shares of our common stock outstanding. The presence at the special meeting of the holders of a majority of the common stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at the special meeting. If a quorum is not present at the special meeting, we expect that the special meeting will be adjourned by the chairman of the special meeting to solicit additional proxies as permitted by our Amended and Restated Bylaws (which we refer to as our “bylaws”). Abstentions will count as present and entitled to vote for purposes of determining the existence of a quorum. If you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares at the special meeting, your shares will not be counted for purposes of determining the existence of a quorum.

Vote Required (Page 25)

Each holder of our common stock is entitled to one vote for each share of our common stock held on the record date.

Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Abstentions will have the same effect as a vote “AGAINST” the merger proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

Approval of the proposal to approve the merger-related executive compensation and the adjournment proposal each require the affirmative vote of the holders of a majority of the shares of our common stock having voting power present in person or represented by proxy at the special meeting at which a quorum is present. Abstentions with respect to each of the proposal to approve the merger-related executive compensation and the adjournment proposal will have the same effect as a vote “AGAINST” the proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote



 

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your shares on the proposal to approve the merger-related compensation or the adjournment proposal, your shares will not be voted at the special meeting on such matter, as applicable, and will not be counted in determining the outcome of the proposal to approve the merger-related compensation or the adjournment proposal, as applicable.

As of the record date, the directors and executive officers of EFI beneficially owned and were entitled to vote, in the aggregate, 649,345 (1.50%) shares of our common stock (not including any shares of our common stock deliverable upon exercise or conversion of or underlying any options or unvested EFI restricted stock unit awards).

How to Vote Your Shares (Page 26)

If you are a stockholder of record, you may cause your shares to be voted by using one of the following methods:

 

   

in person at the special meeting;

 

   

via the Internet, at the Internet address provided on the proxy card;

 

   

by telephone, by using the toll-free number listed on the proxy card; or

 

   

by mail, by completing, signing and dating the enclosed proxy card and returning it in the accompanying prepaid envelope.

If you hold your shares in street name, you will receive instructions from the broker, bank or other nominee that holds your shares as to how to vote your shares at the special meeting. If you hold your shares in street name, you may not vote your shares in person at the special meeting unless you obtain a “legal proxy” from the broker, bank or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.

The Merger (Page 30)

The merger agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will be merged with and into EFI, at which time the separate corporate existence of Merger Sub will cease. EFI will be the surviving corporation and a wholly owned subsidiary of Parent with all its properties, rights, privileges, immunities, powers and franchises continuing unaffected by the merger, and all debts, liabilities and duties of EFI and Merger Sub shall become the debts, liabilities and duties of the surviving corporation.

Merger Consideration (Page 30)

In the merger, each share of our common stock that is issued and outstanding as of immediately prior to the effective time of the merger will automatically be converted into the right to receive an amount in cash equal to $37.00 (which we refer to as the “merger consideration”), without interest and less any applicable withholding taxes, other than shares of our common stock (i)(x) held by EFI as treasury shares, (y) owned by Parent or Merger Sub, or (z) owned by a direct or indirect subsidiary of EFI, Parent or Merger Sub immediately prior to the effective time (which we refer to together as “excluded shares”), and (ii) held by stockholders of EFI who properly exercised their appraisal rights under Section 262 of the General Corporation Law of the State of Delaware (which we refer to as the “DGCL”) and who do not thereafter withdraw, fail to perfect or otherwise lose their appraisal rights (which we refer to as “dissenting shares”). Dissenting shares will not be converted into a right to receive the merger consideration but instead shall entitle the holder thereof to receive payment of the fair value of such shares as determined by the Delaware Court of Chancery in accordance with Section 262 of the DGCL.



 

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Reasons for the Merger; Recommendation of the Board (Page 52)

After consideration of various factors as described in the section entitled “The Merger—Reasons for the Merger; Recommendation of the Board” beginning on page 52, the Board unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and fair to, and in the best interests of, EFI and its stockholders, (ii) adopted the merger agreement and the transactions contemplated thereby, including the Merger, (iii) directed that the merger agreement be submitted to the stockholders of EFI for their adoption, and (iv) resolved to recommend, subject to Section 5.3 of the merger agreement, that the stockholders of EFI adopt the merger agreement (which we refer to as the “Board recommendation”), all upon the terms and subject to the conditions set forth in the merger agreement. The Board consulted with EFI’s outside financial and legal advisors and senior management and considered a number of factors that the Board believes support its decision.

In considering the recommendation of the Board with respect to the merger proposal, you should be aware that our directors and executive officers may have interests in the merger that may be different from, or in addition to, yours. The Board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement, and in recommending that the merger agreement be adopted by the stockholders of EFI. See “The Merger—Interests of Certain Persons in the Merger” beginning on page 77.

The Board has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and fair to, and in the best interests of, EFI and its stockholders and recommends that you vote “FOR” approval of the merger proposal, “FOR” approval of the proposal to approve the merger-related executive compensation, and “FOR” the adjournment proposal.

Opinions of Financial Advisors (Page 61)

Opinion of Morgan Stanley (Page 61)

In connection with the merger, Morgan Stanley & Co. LLC (which we refer to as “Morgan Stanley”) rendered to the Board its oral opinion, subsequently confirmed in writing, that as of April 14, 2019, and based on and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the consideration to be received by the holders of shares of EFI common stock (other than excluded shares or dissenting shares) pursuant to the merger agreement was fair from a financial point of view to such holders, as set forth in such opinion as more fully described below under “The Merger—Opinions of Financial Advisors—Opinion of Morgan Stanley & Co. LLC” beginning on page 61.

The full text of the written opinion of Morgan Stanley, dated as of April 14, 2019, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this proxy statement as Annex B and is incorporated by reference in this proxy statement in its entirety. The summary of the opinion of Morgan Stanley in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Morgan Stanley’s opinion carefully and in its entirety. Morgan Stanley’s opinion was directed to the Board, in its capacity as such, and addresses only the fairness from a financial point of view of the consideration to be received by the holders of shares of common stock (other than excluded shares or dissenting shares) pursuant to the merger agreement as of the date of the opinion and does not address the relative merits of the Merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. It was not intended to, and does not, constitute an opinion or a recommendation as to how EFI stockholders should vote at the stockholders’ meeting to be held in connection with the Merger.



 

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Opinion of Greenhill (Page 70)

Greenhill & Co., LLC (which we refer to as “Greenhill”) delivered its opinion to the Board, confirmed by delivery of a written opinion dated April 14, 2019, that, as of such date and subject to and based on various assumptions made, procedures followed, matters considered and qualifications and limitations of the review set forth therein, the merger consideration to be received by the holders of EFI common stock (other than, with respect to such shares, the holders of dissenting shares or excluded shares) pursuant to the merger agreement was fair, from a financial point of view, to such holders, as set forth in such opinion as more fully described below under “The Merger—Opinions of Financial Advisors—Opinion of Greenhill & Co. LLC” beginning on page 70.

The full text of the written opinion of Greenhill, dated April 14, 2019, which discusses, among other things, the assumptions made, procedures followed, matters considered, and qualifications and limitations of the review undertaken by Greenhill in rendering its opinion, is attached as Annex C. EFI stockholders are encouraged to read Greenhill’s opinion, and the section entitled “Opinions of Financial Advisors” carefully and in their entirety. The Greenhill opinion is for the information of the Board, in its capacity as such, and addresses only the fairness, from a financial point of view, to the holders of EFI common stock (other than, with respect to such shares, the holders of dissenting shares or excluded shares) of the merger consideration to be received by such holders pursuant to the merger agreement as of the date of the opinion. The Greenhill opinion is not intended to be and does not constitute a recommendation to the members of the Board as to whether they should approve the merger or the merger agreement or take any other action in connection therewith, nor does it constitute a recommendation as to how any stockholder should vote on any matter or otherwise act with respect to the merger. Pursuant to the engagement letter between EFI and Greenhill, EFI agreed to pay Greenhill a fee of $1.5 million, none of which was contingent upon consummation of the merger.

Financing of the Merger (Page 82)

The obligation of Parent and Merger Sub to consummate the merger is not subject to any financing condition.

In connection with the financing of the merger, (i) Siris Partners IV, L.P. and Siris Partners IV Parallel, L.P., which are affiliates of Siris, (collectively, which we refer to as the “guarantors”), on the one hand, and Parent, on the other hand, have entered into an equity commitment letter, dated as of April 14, 2019 (which we refer to as the “equity commitment letter”), pursuant to which the guarantors have agreed to provide Parent with up to $690 million in cash subject to the terms and conditions in the equity commitment letter (which we refer to as the “equity financing”) and (ii) Royal Bank of Canada, RBC Capital Markets, KKR Capital Markets LLC, KKR Corporate Lending (CA) LLC, Deutsche Bank AG New York Branch, Deutsche Bank Securities Inc., Barclays Bank PLC, Credit Suisse Loan Funding LLC, Credit Suisse AG, Cayman Islands Branch, Macquarie Capital Funding LLC and Macquarie Capital (USA) Inc. (which we refer to as the “debt commitment parties”) and Merger Sub have entered into a debt commitment letter, dated as of April 14, 2019 (which we refer to as the “debt commitment letter”), pursuant to which the debt commitment parties have committed, subject to the terms and conditions thereof, to provide debt financing in an aggregate principal amount of $1.2 billion, plus, at the borrower’s election, an amount sufficient to fund any upfront fees or original issue discount required to be funded in connection therewith (which we refer to as the “debt financing” and together with the equity financing, the “financings”). Pursuant to the merger agreement, Parent and Merger Sub have agreed to use their respective reasonable best efforts to obtain the financings, satisfy all conditions contained in the debt commitment letter, to cause the debt commitment parties to fund the debt financing at closing and to otherwise enforce their rights under the debt commitment letter subject to the terms of the merger agreement.

Limited Guarantee (Page 83)

Pursuant to a limited guarantee delivered by the guarantors to EFI, dated as of April 14, 2019, each of the guarantors has agreed to guarantee Parent’s obligation to pay any applicable termination fee and certain damages



 

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awards, and to reimburse EFI with respect to certain expenses in connection with the merger, subject to an aggregate cap of $109.94 million and other limitations in the limited guarantee.

Interests of Certain Persons in the Merger (Page 77)

In considering the recommendation of the Board that you vote to adopt the merger agreement, you should be aware that EFI’s directors and executive officers may have interests in the merger that may be different from, or in addition to, those of EFI stockholders generally. Members of the Board were aware of and considered these interests, at the time, among other matters, in evaluating and negotiating the merger agreement and the merger, approving the merger agreement and the merger, and in recommending to EFI stockholders that the merger agreement be adopted. For more information, see the sections entitled “The Merger—Background of the Merger” beginning on page 31 and “The Merger—Reasons for the Merger; Recommendation of the Board” beginning on page 52. These interests are described in more detail below, and certain of them are quantified in the narrative and in the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for EFI’s Named Executive Officers—Golden Parachute Compensation” beginning on page 115.

Material U.S. Federal Income Tax Consequences of the Merger (Page 83)

The exchange of shares of our common stock for cash pursuant to the merger generally will be a taxable transaction to U.S. holders (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” on page 83) for U.S. federal income tax purposes. Stockholders who are U.S. holders will generally recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to their shares of our common stock pursuant to the merger and their adjusted tax basis in such shares. You should read “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 83 for a more detailed discussion of the U.S. federal income tax consequences of the merger. You should also consult your tax advisor for a complete analysis of the effect of the merger on your federal, state and local and/or foreign taxes.

Regulatory Approvals (Page 85)

Under the merger agreement, the merger cannot be completed until the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which we refer to as the “HSR Act”), and under the applicable merger control rules in Germany and Turkey, have expired or been terminated, or the receipt of all requisite consents related thereto.

On April 25, 2019, EFI and Siris Partners IV, L.P. each filed its notification of the proposed merger with the Antitrust Division of the U.S. Department of Justice (“Antitrust Division”) and the Federal Trade Commission (“FTC”) under the HSR Act. The relevant merger control filings were filed with the German competition authority and the Turkish competition authority on April 30, 2019. On May 3, 2019, EFI and Siris Partners IV, L.P. received early termination of the waiting period under the HSR Act. On May 16, 2019, EFI and Siris Partners IV, L.P. received clearance from the German competition authority. On May 24, 2019, clearance was also obtained from the Turkish competition authority. As a result, all necessary regulatory approvals to complete the merger have been obtained.

The Merger Agreement (Page 87)

Treatment of Common Stock, Stock-Based Awards and Performance Awards (Page 88)

 

   

Common Stock. Each share of our common stock outstanding immediately prior to the effective time of the merger (other than excluded shares and dissenting shares) will be converted into the right to receive the merger consideration from Parent, without interest and less any applicable withholding taxes.



 

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Time-Based Restricted Stock Unit Awards. At or immediately prior to the effective time of the merger, except with regards to any new restricted stock unit award granted after April 14, 2019, each EFI restricted stock unit (which we refer to as a “RSU”) award that is subject to only time-based vesting requirements (which we refer to as an “EFI Time-Based RSU”) and that is then outstanding (including any RSU awards for which the applicable performance period has ended and only time-based vesting requirements remain) and either is vested or will vest within 12 months after the effective time of the merger, will be converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such portion of the EFI Time-Based RSU award multiplied by (ii) the merger consideration . At the effective time of the merger, each other EFI Time-Based RSU that is outstanding will be assumed and will be converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such portion of the EFI Time-Based RSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

 

   

2019 Annual Bonus Restricted Stock Unit Awards. At or immediately prior to the effective time of the merger, each then-outstanding RSU award that is subject to both time-based and performance-based vesting requirements (which we refer to as a “PSU”) and was granted under EFI’s 2019 annual bonus program (which we refer to as the “EFI 2019 Annual PSU”) will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI 2019 Annual PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including achievement of the applicable performance goals, the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

 

   

Target Long-Term Incentive Restricted Stock Unit Awards. At or immediately prior to the effective time of the merger, each PSU award granted under EFI’s long-term incentive program that is then outstanding, to the extent it would vest if the target level of performance established for the award had been attained (which we refer to as an “EFI LTIP Target PSU”), will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI LTIP Target PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing time-based vesting schedule (but in no event earlier than the end of the applicable performance period) and applicable terms and conditions immediately prior to the effective time (other than the performance-based vesting conditions), including the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

 

   

Overachievement Long-Term Incentive Restricted Stock Unit Awards. At or immediately prior to the effective time of the merger, each PSU award granted under EFI’s long-term incentive program, that is then outstanding and would vest only if the target level of performance established for the award is exceeded (which we refer to as an “EFI LTIP Overachievement PSU”) and that is held by an individual employed by EFI or one of its subsidiaries, will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI LTIP Overachievement PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including achievement of the applicable performance-based vesting requirements, the holder’s



 

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continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award. Any EFI LTIP Overachievement PSU award held by an individual who is not employed by EFI or one of its subsidiaries will be cancelled without payment at the effective time.

 

   

Options. At or immediately prior to the effective time of the merger, each EFI stock option (whether vested or unvested) (which we refer to as a “EFI stock option”) that has an exercise price that is less than the merger consideration will be cancelled and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash determined by multiplying (i) the excess of the merger consideration over the exercise price of the EFI stock option by (ii) the number of shares of our common stock issuable upon exercise in full of such EFI stock option. At or immediately prior to the effective time, each EFI stock option that has an exercise price that is equal to or greater than the merger consideration (whether or not vested) shall be cancelled without payment.

 

   

Treatment of Employee Stock Purchase Plan. The offering period currently in progress under the EFI employee stock purchase plan (which we refer to as the “ESPP”) will be the final offering period under the ESPP and will be terminated on the earlier of the day prior to the effective time of the merger and July 31, 2019 (the currently-scheduled termination date for such offering) (which we refer to as the “final exercise date”). No new participants may be added to the ESPP and no increases may be made to any participant’s contribution amount after April 14, 2019. On the final exercise date, the funds credited for each participant under the ESPP will be used to purchase shares of our common stock in accordance with the terms of the ESPP, and each share purchased under the ESPP that is outstanding immediately prior the effective time will be converted into the right to receive (less any applicable withholding taxes) the merger consideration. Any funds credited to a participant under the ESPP that are not used to purchase shares in accordance with the terms of the ESPP will be refunded to such participant on or promptly following the final exercise date. No further share purchase rights will be granted or exercised under the ESPP after the final exercise date and the ESPP will be suspended. The ESPP will be terminated as of or immediately prior to the effective time of the merger.

Solicitation of Acquisition Proposals; Board Recommendation Changes (Page 96)

Go-Shop Period. The merger agreement provides that during the “go-shop” period commencing on the date of the merger agreement until 12:01 a.m., New York City time, on May 29, 2019 (which we refer to as the “no-shop period start date”), EFI and its subsidiaries and their respective directors, officers, employees, investment bankers, attorneys, accountants and other advisors or representatives (collectively, which we refer to as “representatives”) had the right to, among other things and subject to certain conditions:

 

   

solicit, initiate, propose, cause or induce the making, submission or announcement of, or encourage, facilitate or assist, whether publicly or otherwise, any acquisition proposal (as defined in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Change”), including by furnishing to any person and its representatives any information (including non-public information and data) relating to EFI or any of its subsidiaries and affording access to the business, properties, assets, books, records or other non-public information, or to any personnel, of EFI or any of its subsidiaries to any person (and its representatives, including potential financing sources) pursuant to an acceptable confidentiality agreement (as defined in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Change”); provided that EFI provides or makes available to Parent and Merger Sub any information or data that is provided by or on behalf of EFI to any person given such access that was not previously made available to Parent or Merger Sub prior to or promptly (and, in any event, within 24 hours) following the time it is provided to such person or its representatives (including potential financing sources); and

 

   

engage in, enter into, continue, maintain, or otherwise participate in, any discussions or negotiations with any persons (and their respective representatives, including potential financing sources) with



 

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respect to any acquisition proposal and cooperate with or assist or participate in or facilitate any such inquiries, proposals, offers, discussions or negotiations or any effort or attempt to make any acquisition proposals.

If EFI terminates the merger agreement in accordance with its terms for the purpose of entering into an alternative acquisition agreement (defined in the section entitled “The Merger Agreement—The “No-Shop” Period—No Solicitation of Other Offers”) in respect of a superior proposal prior to the no-shop period start date (or prior to the excluded party end date (as defined in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Change”) for the purpose of entering into an alternative acquisition agreement in respect of a superior proposal with an excluded party (as defined in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Change”)), EFI must pay a termination fee of $25.37 million to Parent. For more information, please see the sections entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Change” beginning on page 96 and “The Merger Agreement—Termination Fees” beginning on page 111.

No-Shop Period. Under the merger agreement, from the no-shop period start date until the earlier to occur of the termination of the merger agreement pursuant to its terms and the effective time of the merger, other than with respect to an excluded party prior to the excluded party end date and subject to certain exceptions, EFI has agreed not to, and to cause its subsidiaries and its and their respective directors, officers and employees not to, and to instruct and use its and its’ subsidiaries’ unaffiliated representatives not to, directly or indirectly:

 

   

solicit, initiate, propose or knowingly induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or offer that is or would reasonably be expected to constitute an acquisition proposal;

 

   

furnish to any third person any non-public information or data relating to EFI or any of its subsidiaries or afford to any third person access to the business, properties, assets, books, records or other non-public information, or to any personnel, of EFI or any of its subsidiaries, in any such case with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist, an acquisition proposal or any inquiries or the making of any proposal that would reasonably be expected to lead to an acquisition proposal;

 

   

participate or engage in discussions or negotiations with any person with respect to any proposal or offer that would reasonably be expected to lead to an acquisition proposal (other than to inform such person of the non-solicitation obligations in the merger agreement and to clarify the terms and conditions of any such acquisition proposal); or

 

   

authorize or enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to an acquisition proposal, other than an acceptable confidentiality agreement.

From the no-shop period start date until the earlier to occur of the termination of the merger agreement pursuant to its terms and the effective time of the merger, and subject to certain exceptions including with respect to excluded parties prior to the excluded party end date, EFI has also agreed to, and to cause its subsidiaries and its and their respective directors, officers and employees to, and to instruct and use reasonable best efforts to cause its and its’ subsidiaries’ unaffiliated representatives to promptly cease and terminate any discussions or negotiations with any person and its affiliates and representatives that would be prohibited by the non-solicitation provisions of the merger agreement, immediately terminate such person’s and its affiliates’ and representatives’ access to any data room and request that all confidential information furnished by EFI to such person be returned or destroyed in accordance with the terms of the relevant acceptable confidentiality agreement.

Notwithstanding these restrictions, at any time after the no-shop period start date until the earlier to occur of the termination of the merger agreement pursuant to its terms and EFI’s receipt of the requisite stockholder



 

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approval, EFI may participate or engage in discussions or negotiations with, furnish any non-public information relating to, or provide certain access to, EFI or any of its subsidiaries pursuant to an acceptable confidentiality agreement so long as such actions are in response to a written acquisition proposal from any third party that did not result from a material breach of the non-solicitation obligations of EFI contained in the merger agreement and that the Board determines in good faith (after consultation with its financial advisor and outside legal counsel) constitutes a superior proposal (as defined in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Changes” beginning on page 96) or would reasonably be expected to lead to a superior proposal and that the failure to take such action would reasonably be expected to cause the Board to violate its fiduciary duties under applicable laws; provided that EFI will promptly (and, in any event, within 24 hours) make available to Parent any non-public information concerning EFI and its subsidiaries that is provided to any such person or its representatives that was not previously made available to Parent.

If EFI terminates the merger agreement under certain circumstances after the no-shop period start date, EFI must pay a termination fee of $59.2 million to Parent. For more information, please see the section entitled “The Merger Agreement—Termination Fees” starting on page 111.

Conditions to the Merger (Page 108)

The respective obligations of EFI, Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain customary conditions, including the adoption of the merger agreement by our stockholders, receipt of certain regulatory approvals, the absence of any legal prohibitions to the consummation of the merger, the accuracy of the representations and warranties of the parties and compliance by the parties with their respective obligations under the merger agreement.

Termination of the Merger Agreement and Termination Fees (Page 111)

Parent and EFI have certain rights to terminate the merger agreement under customary circumstances, including by mutual agreement, the imposition of laws or non-appealable court orders that make the merger illegal or otherwise prohibit the merger, an uncured breach of the merger agreement by the other party, if the merger has not been consummated by 11:59 p.m., Eastern time, on October 14, 2019, or if the EFI’s stockholders fail to approve the merger proposal at the special meeting. Parent may also terminate the merger agreement under certain circumstances, including if the Board effects a Board recommendation change (as defined below). EFI may also terminate the merger agreement under certain circumstances, including to enter into a definitive agreement to consummate the transactions contemplated by a superior proposal.

Market Price of Common Stock (Page 119)

EFI’s common stock is listed on Nasdaq under the symbol “EFII.” The closing price of our common stock on Nasdaq on April 12, 2019, the last trading day prior to the public announcement of the execution of the merger agreement, was $29.40 per share. On June 10, 2019, the most recent practicable date before this proxy statement was mailed to our stockholders, the closing price for our common stock on Nasdaq was $36.68 per share. You are encouraged to obtain current market quotations for our common stock in connection with voting your shares of common stock.

Delisting and Deregistration of Common Stock (Page 127)

If the merger is completed, our common stock will be delisted from Nasdaq and deregistered under the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”), and we will no longer file periodic reports with the Securities and Exchange Commission (which we refer to as the “SEC”).



 

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Appraisal Rights (Page 123)

If the merger is completed, EFI’s stockholders will be entitled to appraisal rights under Section 262 of the DGCL. This means that you are entitled to have the fair value of your shares of our common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the merger consideration if you follow exactly the procedures set forth in Section 262 of the DGCL. The ultimate amount you receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.

To exercise your appraisal rights, you must submit a written demand for appraisal to EFI before the vote is taken on the merger proposal and you must not vote (either in person or by proxy) in favor of the merger proposal. If you fail to follow exactly the procedures set forth in Section 262 of the DGCL, you may lose your appraisal rights. See “Appraisal Rights” beginning on page 123 and the text of the DGCL appraisal rights statute reproduced in its entirety as Annex D to this proxy statement. If you hold your shares of our common stock through a broker, bank or other nominee and you wish to exercise your appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your broker, bank or other nominee. In view of the complexity of the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly.



 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a stockholder of EFI. Please refer to the “Summary” beginning on page 1 and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, which you should read carefully and in their entirety. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under “Where You Can Find More Information” beginning on page 129 or “Incorporation of Certain Information By Reference” beginning on page 129.

 

Q.

Why am I receiving this proxy statement?

 

A.

You are receiving these proxy materials because you own shares of common stock. This proxy statement describes matters on which we urge you to vote and is intended to assist you in deciding how to vote your shares of common stock with respect to such matters. On April 14, 2019, EFI entered into the merger agreement providing for the merger of Merger Sub with and into EFI, with EFI continuing as the surviving corporation in the merger and a wholly owned subsidiary of Parent. Parent is an affiliate of Siris, a private equity firm. You are receiving this proxy statement in connection with the solicitation of proxies in favor of the approval of the merger proposal and the other proposals to be voted on at the special meeting.

 

Q.

What is the proposed merger and what effects will it have on EFI?

 

A.

The proposed merger is the acquisition of EFI by Parent pursuant to the merger agreement. If the merger proposal is approved by our stockholders and the other closing conditions under the merger agreement have been satisfied or waived, Merger Sub will merge with and into EFI, with EFI continuing as the surviving corporation and becoming a wholly owned subsidiary of Parent. We refer to this transaction as the merger. As a result of the merger, EFI will no longer be a publicly held corporation, and you, as a holder of our common stock, will no longer be a stockholder of EFI and will no longer have any interest in our future earnings or growth. In addition, following the merger, our common stock will be delisted from Nasdaq and deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC on account of our common stock.

 

Q.

What will I receive if the merger is completed?

 

A.

Upon completion of the merger, you will be entitled to receive the merger consideration of $37.00 in cash, without interest, less any applicable withholding taxes, for each share of our common stock that you own, unless you have properly exercised your appraisal rights under the DGCL and do not thereafter withdraw, fail to perfect or otherwise lose your appraisal rights with respect to such shares. For example, if you own 100 shares of our common stock, you will receive $3,700 in cash in exchange for your shares of our common stock, less any applicable withholding taxes. You will not own any shares of the capital stock in the surviving corporation. Please do NOT return any stock certificates you hold with your proxy.

 

Q.

When and where is the special meeting?

 

A.

The special meeting of stockholders of EFI will be held on July 15, 2019 at 9:00 a.m., local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, CA 94025.

 

Q.

What am I being asked to vote on at the special meeting?

 

A.

At the special meeting, holders of our common stock will be asked to consider and vote on the following three proposals:

 

   

the merger proposal;

 

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the proposal to approve the merger-related executive compensation; and

 

   

the adjournment proposal.

 

Q.

How does the Board recommend that I vote?

 

A.

The Board unanimously recommends that you vote your shares of our common stock:

 

   

FOR” the merger proposal;

 

   

FOR” the proposal to approve the merger-related executive compensation; and

 

   

FOR” the adjournment proposal.

For a discussion of the factors that the Board considered in determining to approve the execution and delivery of the merger agreement by EFI and to recommend to EFI stockholders the adoption of the merger agreement, please see the section entitled “The Merger—Reasons for the Merger; Recommendation of the Board.” In considering the recommendation of the Board that you vote to adopt the merger agreement, you should be aware that EFI’s directors and executive officers may have interests in the merger that may be different from, or in addition to, those of EFI stockholders generally. For a discussion of these interests, please see the section entitled “The Merger—Interests of Certain Persons in the Merger.”

 

Q.

Who is entitled to attend and vote at the special meeting?

 

A.

All holders of shares of EFI common stock as of the close of business on June 10, 2019, the record date, are entitled to vote at the special meeting. Each holder of our common stock is entitled to one vote for each share of our common stock held on the record date. As of the close of business on the record date, there were 43,156,485 shares of our common stock outstanding.

 

Q.

What is the difference between holding shares as a stockholder of record and in street name as a beneficial owner?

 

A.

Our stockholders may hold their shares of our common stock through a broker, bank or other nominee (that is, in “street name”) rather than directly in their own name. Summarized below are some of the differences between shares held of record and those owned beneficially in street name.

 

   

Stockholder of Record. If your shares are registered directly in your name with EFI’s transfer agent, American Stock Transfer and Trust Company, LLC, you are considered, with respect to those shares, the stockholder of record and this proxy statement was sent directly to you by EFI. As the stockholder of record, you have the right to vote your shares in person at the special meeting or to grant your proxy directly to certain officers of EFI to vote your shares at the special meeting.

 

   

Beneficial Owner. If your shares are held through a broker, bank or other nominee, you are considered the beneficial owner of shares held in street name, and this proxy statement was forwarded to you by your broker, bank or other nominee. As the beneficial owner, you have the right to direct your broker, bank or other nominee how to vote your shares on your behalf at the special meeting, or you may contact your broker, bank or other nominee to obtain a “legal proxy” giving you the right to vote in person at the special meeting.

 

Q.

What must I do if I want to attend the special meeting in person?

 

A.

All holders of shares of EFI common stock as of the close of business on the record date, including stockholders of record and stockholders who hold our common stock through a broker, bank or other nominee, are invited to attend the special meeting. Proof of ownership of EFI common stock (such as a brokerage statement or the appearance of such stockholder’s name on EFI’s stockholder list as of the record

 

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  date), along with valid government-issued photo identification (such as a driver’s license or passport), must be presented to be admitted to the special meeting. Please note that if you hold your shares in street name, you may not vote your shares in person at the special meeting unless you obtain a “legal proxy” from the broker, bank or other nominee that holds your shares, giving you the right to vote your shares at the special meeting.

In addition, corporations and other stockholders that are not natural persons, which we refer to as “institutions,” may be represented at the meeting only by a duly authorized officer, director, or employee of the institution, or (in the case of LLCs and partnerships) a manager or partner. Each such representative must provide satisfactory evidence of his or her position with, and due authorization by, the institution. Statements by or on behalf of an institution’s bank or broker will not be sufficient evidence of a representative’s position or authorization. Unless the institution’s name is listed as a stockholder of record, representatives of institutional beneficial owners must also provide proof of the institution’s beneficial ownership on the record date. We encourage our institutional stockholders to register their representatives in advance by sending a written request, along with the documentation described above, to EFI’s Investor Relations at 6750 Dumbarton Circle, Fremont, California 94555. Please allow sufficient time for EFI to process your request. Upon receipt of sufficient documentation, we will send you a confirmation that your representative has been authorized for entry. The name on the representative’s government-issued photo identification must match the authorized name.

 

Q.

What is a quorum?

 

A.

The presence at the special meeting of the holders of a majority of the common stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at the special meeting. If a quorum is not present at the special meeting, we expect that the special meeting will be adjourned by the chairman of the special meeting to solicit additional proxies as permitted by our bylaws. Abstentions will count as present and entitled to vote for purposes of determining the existence of a quorum. If you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares at the special meeting, your shares will not be counted for purposes of determining the existence of a quorum.

 

Q.

How do I vote?

 

A.

Voting in Person at the Special Meeting

All holders of shares of EFI common stock as of the close of business on the record date, including stockholders of record and stockholders who hold shares of our common stock in street name, may attend the special meeting and vote their shares in person. Please note that if you hold your shares in street name, you may not vote your shares in person at the special meeting unless you obtain a “legal proxy” from the broker, bank or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.

Voting by Proxy

 

   

Submitting a Proxy for Shares Registered Directly in the Name of the Stockholder. If you hold your shares of common stock as a record holder, you may cause your shares to be voted by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid envelope. You may also submit a proxy over the Internet or by telephone by following the instructions on the enclosed proxy card. If you submit a proxy by Internet or telephone, you need not return a written proxy card by mail.

 

   

Submitting Voting Instructions for Shares Registered in Street Name. If you hold your shares of common stock in street name, you will receive instructions from your broker, bank or other nominee on

 

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how to vote your shares. Your broker, bank or other nominee will allow you to deliver your voting instructions over the Internet and may also permit you to provide your voting instructions by telephone. In addition, you may submit your voting instructions by completing, signing and dating the voting instruction form that was included with this proxy statement and returning it in the accompanying prepaid envelope. If you provide voting instructions by Internet or telephone, you need not return a written voting instruction form by mail.

 

Q.

What is the deadline for voting?

 

A.

If you are a stockholder of record, your proxy must be received by telephone or Internet by 11:59 p.m. Eastern Time on July 14, 2019, the day before the special meeting, in order for your shares to be voted at the special meeting. If you are a stockholder of record and you choose to cause your shares to be voted by completing, signing, dating, and returning the enclosed proxy card, your proxy card must be received before the special meeting in order for your shares to be voted at the special meeting.

If you hold your shares in street name, please comply with the deadlines for submitting voting instructions provided by the broker, bank or other nominee that holds your shares.

 

Q.

How can I change or revoke my vote?

 

A.

If you are a stockholder of record, you may change or revoke a previously submitted proxy at any time before it is exercised by one of the following methods:

 

   

delivering a later dated proxy card or by submitting another proxy by telephone or the Internet as provided above under “How do I vote?” (your latest telephone or Internet voting instructions will be followed);

 

   

delivering to the Corporate Secretary of EFI a written notice of revocation prior to the voting of the proxy at the special meeting; or

 

   

by voting in person at the special meeting. Attendance at the special meeting will not, by itself, revoke your proxy.

Written notices of revocation should be addressed to:

Electronics For Imaging, Inc.

Attn: Corporate Secretary

6750 Dumbarton Circle

Fremont, California 94555

Telephone: (650) 357-3500

Any change to your proxy that is provided by telephone or the Internet must be submitted by 11:59 p.m. Eastern Time on July 14, 2019, the day before the special meeting.

If your shares are held in “street name,” you must contact your broker, bank or other nominee to find out how to change or revoke your voting instructions.

 

Q.

What happens if I do not give specific voting instructions?

 

A.

If you are a stockholder of record and you properly submit a signed proxy card or submit your proxy by telephone or the Internet, but do not specify how you want to vote your shares on one or more proposals, then the named proxy holders will vote your shares in accordance with the recommendation of the Board on such proposal(s) at the special meeting as presented in this proxy statement. See above under “How does the Board recommend that I vote?”

 

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In accordance with applicable stock exchange rules, if you hold your shares through a brokerage account and you fail to provide voting instructions to your broker, your broker may generally vote your uninstructed shares of common stock in its discretion on routine matters at a stockholder meeting. However, a broker cannot vote shares of common stock held in street name on non-routine matters unless the broker receives voting instructions from the stockholder. Generally, if a broker exercises this discretion on routine matters at a stockholder meeting, a stockholder’s shares will be voted on the routine matter in the manner directed by the broker, but will constitute a “broker non-vote” on all of the non-routine matters to be presented at the stockholder meeting. All of the proposals to be voted on at the special meeting are non-routine matters. Accordingly, if you hold your shares in street name through a brokerage account, your broker will not be able to exercise its discretion to vote uninstructed shares on any of the proposals presented at the special meeting. As a result, we do not expect any broker non-votes at the special meeting.

 

Q.

What will happen if I abstain from voting or fail to vote on the proposals or fail to instruct my broker, bank or other nominee how to vote on the proposals?

 

A.

For the merger proposal, you may vote “FOR,” “AGAINST” or “ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” the merger proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

For the proposal to approve the merger-related executive compensation and the adjournment proposal, you may vote FOR,” AGAINST” or “ABSTAIN.” Abstentions with respect to each of the proposal to approve the merger-related executive compensation and the adjournment proposal will have the same effect as a vote “AGAINST” the proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger-related executive compensation or the adjournment proposal, your shares will not be voted at the special meeting on such matter, as applicable, and will not be counted in determining the outcome of the proposal to approve the merger-related compensation or the adjournment proposal, as applicable.

 

Q.

Who will count the votes?

 

A.

The votes will be counted by the inspector of elections appointed for the special meeting.

 

Q.

What do I do if I receive more than one proxy or set of voting instructions?

 

A.

If you received more than one proxy card or voting instruction form, your shares are likely registered in different names or with different addresses or are in more than one account. You must separately submit a proxy or voting instruction form to vote the shares shown on each proxy card or voting instruction form that you received in order for all of your shares to be voted at the special meeting.

 

Q.

What vote is required for EFI’s stockholders to approve the merger proposal?

 

A.

Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon. Abstentions will have the same effect as a vote “AGAINST” the merger proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

 

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Q.

What vote of our stockholders is required to approve the proposal to approve the merger-related executive compensation?

 

A.

Approval of the proposal to approve the merger-related executive compensation requires the affirmative vote of the holders of a majority of the shares of our common stock having voting power present in person or represented by proxy at the special meeting at which a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the proposal to approve the merger-related executive compensation. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the proposal to approve the merger-related executive compensation, your shares will not be voted at the special meeting on such matter and will not be counted in determining the outcome of the proposal to approve the merger-related compensation.

 

Q.

What vote of our stockholders is required to approve the adjournment proposal?

 

A.

Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of our common stock having voting power present in person or represented by proxy at the special meeting at which a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the adjournment proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the adjournment proposal, your shares will not be voted at the special meeting on such matter and will not be counted in determining the outcome of the adjournment proposal.

 

Q.

Why am I being asked to consider and vote on a proposal to approve, by non-binding, advisory vote, certain compensation arrangements for EFI’s named executive officers in connection with the merger?

 

A.

Under SEC rules, we are required to seek a non-binding, advisory vote with respect to the compensation that may be paid or become payable to our named executive officers that is based on or otherwise relates to the merger, or “golden parachute” compensation.

 

Q.

What will happen if EFI’s stockholders do not approve the proposal to approve, by non-binding, advisory vote, certain compensation arrangements for EFI’s named executive officers in connection with the merger?

 

A.

The vote on the proposal to approve the merger-related executive compensation is a vote separate and apart from the vote to adopt the merger agreement. Accordingly, a stockholder may vote to approve the proposal to approve the merger-related executive compensation and vote not to adopt the merger agreement and vice versa. Because the vote on the proposal to approve the merger-related executive compensation is advisory in nature only, it will not be binding on EFI, Parent or the Merger Sub. Accordingly, if the merger agreement is approved by EFI’s stockholders and the merger is completed, the merger-related compensation may be paid to EFI’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and arrangements even if the stockholders do not approve the proposal to approve the merger-related executive compensation.

 

Q.

How does the merger consideration compare to the market price of our common stock?

 

A.

The merger consideration of $37.00 per share represents a premium of approximately 25.85% to $29.40 per share, the closing price of our common stock on Nasdaq on April 12, 2019, the last trading day prior to the public announcement of the execution of the merger agreement.

 

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Q.

What will holders of EFI equity-based and performance awards receive in the merger?

 

A.

At or immediately prior to the effective time of the merger, except with regards to any new RSU award granted after April 14, 2019, each EFI Time-Based RSU that is then outstanding (including any RSU awards for which the applicable performance period has ended and only time-based vesting requirements remain) and either is vested or will vest within 12 months after the effective time of the merger, will be converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such portion of the EFI Time-Based RSU award multiplied by (ii) the merger consideration. At the effective time of the merger, each other EFI Time-Based RSU that is outstanding will be assumed and will be converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such portion of the EFI Time-Based RSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

At or immediately prior to the effective time of the merger, each EFI 2019 Annual PSU that is then outstanding will be assumed and converted into the right to receive (less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI 2019 Annual PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including achievement of the applicable performance goals, the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

At or immediately prior to the effective time of the merger, each EFI LTIP Target PSU award will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI LTIP Target PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing time-based vesting schedule (but in no event earlier than the end of the applicable performance period) and applicable terms and conditions immediately prior to the effective time (other than the performance-based vesting conditions), including the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

At or immediately prior to the effective time of the merger, each EFI LTIP Overachievement PSU award held by an individual employed by EFI or one of its subsidiaries will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI LTIP Overachievement PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including achievement of the applicable performance-based vesting requirements, the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award. Any EFI LTIP Overachievement PSU award held by an individual who is not employed by EFI or one of its subsidiaries will be cancelled without payment at the effective time.

At or immediately prior to the effective time of the merger, each EFI stock option that has an exercise price that is less than the merger consideration will be cancelled and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash determined by multiplying (i) the excess of the merger consideration over the exercise price of the EFI stock option by (ii) the number of shares of our common stock issuable upon exercise in full of such EFI stock option. At or immediately prior to the effective time, each EFI stock option that has an exercise price that is equal to or greater than the merger consideration (whether or not vested) shall be cancelled without payment.

 

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The offering period currently in progress under the ESPP will be the final offering period under the ESPP and will be terminated on the final exercise date. No new participants may be added to the ESPP and no increases may be made to any participant’s contribution amount after April 14, 2019. On the final exercise date, the funds credited for each participant under the ESPP will be used to purchase shares of our common stock in accordance with the terms of the ESPP, and each share purchased under the ESPP that is outstanding immediately prior to the effective time will be converted into the right to receive (less any applicable withholding taxes) the merger consideration. Any funds credited to a participant under the ESPP that are not used to purchase shares in accordance with the terms of the ESPP will be refunded to such participant on or promptly following the final exercise date. No further share purchase rights will be granted or exercised under the ESPP after the final exercise date and the ESPP will be suspended. The ESPP will be terminated as of or immediately prior to the effective time of the merger.

 

Q.

When do you expect the merger to be completed?

 

A.

We are working towards completing the merger as soon as possible. Assuming timely receipt of required regulatory approvals and satisfaction of other closing conditions, including approval by our stockholders of the merger proposal, we anticipate that the merger will be completed in the third quarter of 2019.

 

Q.

When will stockholders receive the merger consideration?

 

A.

At or prior to the closing of the merger, Parent will deposit or cause to be deposited with a paying agent designated by Parent and reasonably satisfactory to EFI (which we refer to as the “paying agent”) cash sufficient to pay the aggregate merger consideration payable to the stockholders (other than in respect of excluded shares or dissenting shares).

Promptly following the effective time (and in any event within two business days following the effective time), the paying agent will send to each holder of record as of immediately prior to the effective time (other than holders of dissenting shares or excluded shares) of (i) certificates representing outstanding shares of our common stock (other than dissenting shares or excluded shares) (which we refer to as the “certificates”), and (ii) uncertificated common shares that represented outstanding shares (other dissenting shares or excluded shares) (which we refer to as “uncertificated shares”) (A) in the case of certificates and uncertificated shares not held through the Depository Trust Company (which we refer to as the “DTC”), a letter of transmittal in such form as Parent, the surviving corporation and the paying agent reasonably agree; and (B) in the case of certificates and uncertificated shares held through DTC, instructions for effecting the surrender of the certificates and uncertificated shares in exchange for the merger consideration payable in respect thereof.

Upon receipt by the paying agent of a duly completed and validly executed letter of transmittal with respect to uncertificated shares not held through DTC or upon surrender of certificates for cancellation to the paying agent, together with a duly completed and validly executed letter of transmittal, the holders of such uncertificated shares and certificates will be entitled to receive the merger consideration multiplied by the aggregate number of shares of our common stock underlying such uncertificated shares and certificates, as applicable. Upon receipt of an “agent’s message” by the paying agent (or such other evidence, if any, of transfer as the Paying Agent may reasonably request) in the case of a book-entry transfer of uncertificated shares held through DTC, the holders of such uncertificated shares will be entitled to receive in exchange therefor an amount in cash equal to the product obtained by multiplying (1) the aggregate number of shares of common stock represented by such holder’s transferred uncertificated shares; by (2) the merger consideration (less any applicable withholding taxes payable in respect thereof).

 

Q.

What happens if the merger is not completed?

 

A.

If the merger proposal is not approved by the stockholders of EFI or if the merger is not completed for any other reason, the stockholders of EFI will not receive any payment for their shares of our common stock in

 

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  connection with the merger. Instead, EFI will remain an independent public company, our common stock will continue to be listed and traded on Nasdaq and the EFI stockholders will remain stockholders of EFI. Under specified circumstances, EFI will be required to pay to Parent a termination fee of either $25.37 million or $59.2 million upon the termination of the merger agreement, as described under “The Merger Agreement—Termination Fees” beginning on page 111.

 

Q.

What conditions must be satisfied to complete the merger?

 

A.

The respective obligations of EFI, Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain customary conditions, including the adoption of the merger agreement by our stockholders, receipt of certain regulatory approvals, the absence of any legal prohibitions to the consummation of the merger, the accuracy of the representations and warranties of the parties and compliance by the parties with their respective obligations under the merger agreement. For more information, please see the section entitled “The Merger Agreement—Conditions to the Merger” beginning on page 108.

 

Q.

Is the merger expected to be taxable to me?

 

A.

Yes. The exchange of shares of our common stock for the merger consideration of $37.00 per share in cash pursuant to the merger generally will be a taxable transaction to U.S. holders (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” on page 83) for U.S. federal income tax purposes. If you are a U.S. holder and you exchange your shares of our common stock in the merger for cash, you generally will recognize gain or loss in an amount equal to the difference, if any, between the amount of cash received with respect to such shares and your adjusted tax basis in such shares. We encourage you to read “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 83 for a more detailed discussion of the U.S. federal income tax consequences of the merger. You should also consult your tax advisor for a complete analysis of the effect of the merger on your federal, state and local and/or foreign taxes.

 

Q.

Do any of EFI’s directors or officers have interests in the merger that may differ from or be in addition to my interests as a stockholder?

 

A.

In considering the recommendation of the Board with respect to the merger proposal, you should be aware that our directors and executive officers may have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally. The Board was aware of and considered these interests, at the time, among other matters, in evaluating and negotiating the merger agreement and the merger, approving the merger agreement and the merger, and in recommending that the merger agreement be adopted by the stockholders of EFI. See “The Merger—Interests of Certain Persons in the Merger” beginning on page 77 and “Non-Binding, Advisory Vote on Merger-Related Compensation for EFI’s Named Executive Officers” beginning on page 115.

 

Q.

What happens if I sell my shares of our common stock before the special meeting?

 

A.

The record date for stockholders entitled to vote at the special meeting is earlier than both the date of the special meeting and the consummation of the merger. If you transfer your shares of our common stock after the record date but before the special meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you transfer your shares, you will retain your right to vote such shares at the special meeting but will transfer the right to receive the merger consideration to the person to whom you transfer your shares.

 

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Q.

What happens if I sell my shares of common stock after the special meeting but before the effective time of the merger?

 

A.

If you transfer your shares after the special meeting but before the effective time of the merger, you will have transferred the right to receive the merger consideration to the person to whom you transfer your shares. In order to receive the merger consideration, you must hold your shares of our common stock through the completion of the merger.

 

Q.

Should I send in my stock certificates now?

 

A.

No. If you hold certificated shares of our common stock and the merger proposal is approved and the merger is consummated, you will be sent a letter of transmittal promptly, and in any event within two business days after the effective time of the merger, describing how you may exchange your certificates that formerly represented shares of our common stock for the merger consideration. If your shares of our common stock are held in “street name” through a broker, bank or other nominee, you should contact your broker, bank or other nominee for instructions as to how to effect the surrender of your “street name” shares of our common stock in exchange for the merger consideration. See “The Merger Agreement—Exchange and Payment Procedures” beginning on page 89. Please do NOT return any stock certificates you hold with your proxy.

 

Q.

Am I entitled to exercise appraisal rights under the DGCL instead of receiving the merger consideration for my shares of our common stock?

 

A.

Yes. As a holder of our common stock, you are entitled to exercise appraisal rights under Section 262 of the DGCL in connection with the merger if you take certain actions and meet certain conditions, including that you do not vote (in person or by proxy) in favor of the merger proposal. See “Appraisal Rights” beginning on page 123.

 

Q.

Who will solicit and pay the cost of soliciting proxies?

 

A.

EFI has engaged D.F. King & Co., Inc. (which we refer to as the “proxy solicitor”) to assist in the solicitation of proxies for the special meeting. EFI estimates that it will pay the proxy solicitor a fee of $12,500, plus reimbursement of related expenses. EFI has also agreed to reimburse the proxy solicitor for certain reasonable and documented fees and expenses and will indemnify the proxy solicitor and all of its directors, officers, employees and agents against certain claims, expenses, losses, damages and/or liabilities. EFI may also reimburse banks, brokers or their agents for their expenses in forwarding proxy materials to beneficial owners of our common stock. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q.

Who can help answer any other questions I might have?

 

A.

If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of our common stock, or need additional copies of the proxy statement or the enclosed proxy card, please contact D.F. King & Co., Inc. our proxy solicitor, by calling (212) 269-5550 if you are a bank or broker or, for all others, calling toll-free at (866) 721-1324 or using the contact information below.

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Banks and Brokers Call: (212) 269-5550

All Others Call Toll-free: (866) 721-1324

Email: EFII@dfking.com

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (which we refer to as the “Securities Act”), and Section 21E of the Exchange Act, and is subject to risks and uncertainties and actual results or events may differ materially. When used herein, words such as “address,” “anticipate,” “believe,” “consider,” “continue,” “develop,” “estimate,” “expect,” “further,” “goal,” “intend,” “may,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will,” variations of such words, and similar expressions as they relate to EFI or its management are intended to identify such statements as forward-looking statements. Such statements reflect the current views of EFI and its management with respect to future events, including the proposed transaction, and are subject to certain risks and uncertainties that may cause actual results to differ materially from the results expressed in, or implied by, these forward looking statements. These risks and uncertainties include, but are not limited to, the following: (i) EFI may be unable to obtain stockholder approval as required for the proposed transaction; (ii) other conditions to the closing of the merger may not be satisfied, including that a governmental entity may prohibit, delay or refuse to grant a necessary regulatory approval; (iii) the merger may involve unexpected costs, liabilities or delays; (iv) the business of EFI may suffer as a result of uncertainty surrounding the merger; (v) stockholder litigation in connection with the merger may affect the timing or occurrence of the merger or result in significant costs of defense, indemnification and liability; (vi) EFI may be adversely affected by other economic, business, and/or competitive factors; (vii) the occurrence of any event, change or other circumstances could give rise to the termination of the merger agreement with affiliates of Siris; (viii) EFI’s ability to recognize the anticipated benefits of the merger; (ix) the risk that the merger disrupts EFI’s current plans and operations or diverts management’s or employees’ attention from ongoing business operations; (x) the risk of potential difficulties with EFI’s ability to retain and hire key personnel and maintain relationships with suppliers and other third parties as a result of the merger; and (xi) other risks to consummation of the merger, including the risk that the merger will not be consummated within the expected time period or at all. Additional factors that may affect the future results of EFI and the merger are set forth in filings that EFI makes with the SEC from time to time, including those listed under “Risk Factors” in EFI’s Annual Report on Form 10-K for the year ended December 31, 2018 and filed with the SEC on February 27, 2019, as updated or supplemented by subsequent reports that EFI has filed or files with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. EFI assumes no obligation to publicly update any forward-looking statement after it is made, whether as a result of new information, future events or otherwise, except as required by law.

 

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PARTIES TO THE MERGER

EFI

Electronics For Imaging, Inc.

6750 Dumbarton Circle

Fremont, California 94555

Telephone: (650) 357-3500

Electronics For Imaging, Inc., a Delaware corporation, is a world leader in customer-centric digital printing innovation focusing on the transformation of the printing, packaging, ceramic tile decoration, and textile industries from the use of traditional analog based printing to digital on-demand printing. EFI was incorporated in Delaware in 1988 and commenced operations in 1989. Our initial public offering of common stock was completed in 1992.

EFI’s common stock is listed on Nasdaq under the symbol “EFII.”

Parent

East Private Holdings II, LLC

601 Lexington Ave., 59th Floor

New York, New York 10022

East Private Holdings II, LLC, a Delaware limited liability company, was formed for the sole purpose of consummating the transactions contemplated by the merger agreement. Prior to the effective time of the merger, Parent will have engaged in no other business activities and will have incurred no liabilities or obligations other than those contemplated by or related to the merger agreement. Parent is an affiliate of Siris, a private equity firm.

Merger Sub

East Merger Sub, Inc.

601 Lexington Ave., 59th Floor

New York, New York 10022

East Merger Sub, Inc., a Delaware corporation, is a direct wholly owned subsidiary of Parent and was incorporated for the sole purpose of consummating the transactions contemplated by the merger agreement. Prior to the effective time of the merger, Merger Sub will have engaged in no other business activities and will have incurred no liabilities or obligations other than those contemplated by or related to the merger agreement. Merger Sub is an affiliate of Siris, a private equity firm.

 

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THE SPECIAL MEETING

We are furnishing this proxy statement to EFI stockholders as part of the solicitation of proxies by the Board for use at the special meeting or any adjournment or postponement thereof. This proxy statement provides EFI stockholders with the information they need to know to be able to vote at the special meeting or any adjournment or postponement thereof.

Date, Time and Place of the Special Meeting

The special meeting will be held on July 15, 2019 at 9:00 a.m., local time, at the offices of O’Melveny & Myers LLP, located at 2765 Sand Hill Road, Menlo Park, CA 94025, or at any adjournment or postponement thereof.

Purpose of the Special Meeting

At the special meeting, holders of our common stock will be asked to consider and vote on the following:

 

   

the merger proposal;

 

   

the proposal to approve the merger-related executive compensation; and

 

   

the adjournment proposal.

The Board has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and fair to, and in the best interests of, EFI and its stockholders and unanimously recommends that our stockholders vote “FOR” approval of the merger proposal, “FOR” approval of the proposal to approve the merger-related executive compensation, and “FOR” the adjournment proposal.

If our stockholders fail to approve the merger proposal, the merger will not occur. A copy of the merger agreement is attached as Annex A to this proxy statement, and the material provisions of the merger agreement are summarized in the section of this proxy statement entitled “The Merger Agreement” beginning on page 87 of this proxy statement.

Record Date and Quorum

The Board has fixed the close of business on June 10, 2019 as the record date for determination of stockholders entitled to receive notice of, and to vote at, the special meeting, and any adjournments or postponements thereof. As of the close of business on the record date, there were 43,156,485 shares of our common stock outstanding.

The presence at the special meeting of the holders of a majority of the common stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum for the transaction of business at the special meeting. If a quorum is not present at the special meeting, we expect that the special meeting will be adjourned or postponed by the chairman of the special meeting to solicit additional proxies as permitted by our bylaws. See below under “Adjournments and Postponements” for additional information.

Abstentions will count as present and entitled to vote for purposes of determining the existence of a quorum. If you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares at the special meeting, your shares will not be counted for purposes of determining the existence of a quorum.

Your vote is very important, regardless of the number of shares of our common stock you own. Because stockholders cannot take any action at the meeting unless a majority of our common stock issued and outstanding and entitled to vote thereat is represented, it is important that you attend the meeting in person or are represented by proxy at the special meeting.

 

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Attendance at the Special Meeting

All holders of shares of EFI common stock as of the close of business on the record date, including stockholders of record and stockholders who hold our common stock through a broker, bank or other nominee, are invited to attend the special meeting. Proof of ownership of EFI common stock (such as a brokerage statement or the appearance of such stockholder’s name on EFI’s stockholder list as of the record date), along with valid government-issued photo identification (such as a driver’s license or passport), must be presented to be admitted to the special meeting. Please note that if you hold your shares in street name, you may not vote your shares in person at the special meeting unless you obtain a “legal proxy” from the broker, bank or other nominee that holds your shares, giving you the right to vote your shares at the special meeting.

In addition, corporations and other stockholders that are not natural persons, which we refer to as “institutions,” may be represented at the meeting only by a duly authorized officer, director, or employee of the institution, or (in the case of LLCs and partnerships) a manager or partner. Each such representative must provide satisfactory evidence of his or her position with, and due authorization by, the institution. Statements by or on behalf of an institution’s bank or broker will not be sufficient evidence of a representative’s position or authorization. Unless the institution’s name is listed as a stockholder of record, representatives of institutional beneficial owners must also provide proof of the institution’s beneficial ownership on the record date. We encourage our institutional stockholders to register their representatives in advance by sending a written request, along with the documentation described above, to EFI’s Investor Relations at 6750 Dumbarton Circle, Fremont, California 94555. Please allow sufficient time for EFI to process your request. Upon receipt of sufficient documentation, we will send you a confirmation that your representative has been authorized for entry. The name on the representative’s government-issued photo identification must match the authorized name.

Please note that cameras, recording devices and other electronic devices will not be permitted at the special meeting.

Shares Held in Street Name

If your shares are held in “street name” through a broker, bank or other nominee, you will need to provide voting instructions to your broker, bank or other nominee to instruct how to vote your shares at the special meeting. Please follow the instructions provided by your broker, bank or other nominee.

In accordance with applicable stock exchange rules, if you hold your shares through a brokerage account and you fail to provide voting instructions to your broker, your broker may generally vote your uninstructed shares of common stock in its discretion on routine matters at a stockholder meeting. However, a broker cannot vote shares of common stock held in street name on non-routine matters unless the broker receives voting instructions from the stockholder. Generally, if a broker exercises this discretion on routine matters at a stockholder meeting, a stockholder’s shares will be voted on the routine matter in the manner directed by the broker, but will constitute a “broker non-vote” on all of the non-routine matters to be presented at the stockholder meeting. All of the proposals to be voted on at the special meeting and all of such proposals are non-routine matters. Accordingly, if you hold your shares in street name through a brokerage account, your broker will not be able to exercise its discretion to vote uninstructed shares on any of such proposals presented at the special meeting. As a result, we do not expect any broker non-votes at the special meeting.

Vote Required

Each holder of our common stock is entitled to one vote for each share of our common stock held on the record date.

Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote thereon (which we refer to as the “requisite stockholder approval”).

 

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For the merger proposal, you may vote FOR,” AGAINST” or ABSTAIN.” Abstentions will have the same effect as a vote “AGAINST” the merger proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal.

If a quorum is present at the special meeting, approval of the proposal to approve the merger-related executive compensation and the adjournment proposal each require the affirmative vote of the holders of a majority of the shares of our common stock having voting power present in person or represented by proxy at the special meeting. For each of these proposals, you may vote “FOR,” AGAINST” or ABSTAIN.” Abstentions with respect to each of the proposal to approve the merger-related executive compensation and the adjournment proposal will have the same effect as a vote “AGAINST” the proposal. In addition, if you do not submit a valid proxy or attend the special meeting to vote your shares of common stock in person or if you hold your shares of common stock in street name and fail to instruct your broker, bank or other nominee how to vote your shares on the proposal to approve the merger-related executive compensation or the adjournment proposal, your shares will not be voted at the special meeting on the proposal to approve the merger-related executive compensation or the adjournment proposal, as applicable, and will not be counted in determining the outcome of the proposal to approve the merger-related compensation or the adjournment proposal, as applicable.

Because the vote on the proposal to approve the merger-related executive compensation is advisory in nature only, it will not be binding on EFI, Parent or the surviving corporation in the merger. Accordingly, if the merger agreement is adopted by EFI’s stockholders at the special meeting and the merger is completed, the merger-related compensation may be paid to EFI’s named executive officers to the extent payable in accordance with the terms of their compensation agreements and arrangements even if the stockholders do not approve the proposal to approve the merger-related executive compensation.

Voting

Voting in Person at the Special Meeting

All holders of shares of EFI common stock as of the close of business on the record date, including stockholders of record and stockholders who hold shares of our common stock in street name, may attend the special meeting and vote their shares in person. Please note that if you hold your shares in street name, you may not vote your shares in person at the special meeting unless you obtain a “legal proxy” from the broker, bank or other nominee that holds your shares, giving you the right to vote the shares at the special meeting.

Voting by Proxy

 

   

Submitting a Proxy for Shares Registered Directly in the Name of the Stockholder. If you hold your shares of common stock as a record holder, you may cause your shares to be voted by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid envelope. You may also submit a proxy over the Internet or by telephone by following the instructions on the enclosed proxy card. If you submit a proxy by Internet or telephone, you need not return a written proxy card by mail.

 

   

Submitting Voting Instructions for Shares Registered in Street Name. If you hold your shares of common stock in street name, you will receive instructions from your broker, bank or other nominee on how to vote your shares. Your broker, bank or other nominee will allow you to deliver your voting instructions over the Internet and may also permit you to provide your voting instructions by telephone. In addition, you may submit your voting instructions by completing, signing and dating the voting instruction form that was included with this proxy statement and returning it in the accompanying prepaid envelope. If you provide voting instructions by Internet or telephone, you need not return a written voting instruction form by mail.

 

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If you are a stockholder of record and you properly submit a proxy card or submit your proxy by telephone or over the Internet, your shares will be voted as instructed or, if no instruction is given, “FOR” approval of the merger proposal, “FOR” approval of the proposal to approve the merger-related executive compensation, and “FOR” the adjournment proposal. If you hold your shares in street name through a brokerage account and you do not submit voting instructions to your broker on one or more proposals, your shares will not be voted on such proposal(s) at the special meeting. See above under “Shares Held in Street Name.”

As of the date of this proxy statement, we have no knowledge of any business that may come before the special meeting other than the matters set forth in the accompanying notice of the special meeting. If any other matter is properly presented at the special meeting for consideration, it is intended that the persons named as proxyholders in the enclosed proxy card will vote in their discretion on such matter.

Deadline for Voting

If you are a stockholder of record, your proxy must be received by telephone or the Internet by 11:59 p.m. Eastern Time on July 14, 2019, the day before the special meeting, in order for your shares to be voted at the special meeting. If you are a stockholder of record and you choose to cause your shares to be voted by completing, signing, dating, and returning the enclosed proxy card, your proxy card must be received before the special meeting in order for your shares to be voted at the special meeting.

If you hold your shares in street name, please comply with the deadlines for voting provided by the broker, bank or other nominee that holds your shares.

Revocation of Proxies

If you are a stockholder of record, you may change or revoke a previously submitted proxy at any time before it is exercised by one of the following methods:

 

   

delivering a later dated proxy card or by submitting another proxy by telephone or the Internet as provided above under “Voting” (your latest telephone or Internet voting instructions will be followed);

 

   

delivering to the Corporate Secretary of EFI a written notice of revocation prior to the voting of the proxy at the special meeting; or

 

   

by voting in person at the special meeting. Attendance at the special meeting will not, by itself, revoke your proxy.

Written notices of revocation should be addressed to:

Electronics For Imaging, Inc.

Attn: Corporate Secretary

6750 Dumbarton Circle

Fremont, California 94555

Telephone: (650) 357-3500

Any change to your proxy that is provided by telephone or via the Internet must be received by 11:59 p.m. Eastern Time on July 14, 2019, the day before the special meeting.

If your shares are held in “street name,” you must contact your broker, bank or other nominee to find out how to change or revoke your voting instructions.

Voting by EFI’s Directors and Executive Officers

As of the close of business on the record date, the directors and executive officers of EFI beneficially owned and were entitled to vote, in the aggregate, 649,345 (1.50%) shares of our common stock (not including any shares of our common stock deliverable upon exercise or conversion of or underlying any options or unvested EFI restricted stock unit awards).

 

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Solicitation of Proxies; Payment of Solicitation Expenses

EFI has engaged D.F. King & Co., Inc. to assist in the solicitation of proxies for the special meeting. EFI estimates that it will pay the proxy solicitor a fee of $12,500, plus reimbursement of related expenses. EFI has also agreed to reimburse the proxy solicitor for certain reasonable and documented fees and expenses and will indemnify the proxy solicitor and all of its directors, officers, employees and agents against certain claims, expenses, losses, damages and/or liabilities. EFI may also reimburse banks and brokers or their agents for their expenses in forwarding proxy materials to beneficial owners of our common stock. EFI’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

Householding

In accordance with the rules of the SEC, we are permitted to send a single set of proxy materials to stockholders who share the same address, unless such stockholders have notified us of their desire to receive multiple copies of our proxy materials. This is known as householding. We will promptly deliver, upon oral or written request, a separate copy of the proxy materials to any stockholder residing at an address to which only one copy was mailed. Stockholders who currently receive multiple copies of proxy materials at their address and would like to request householding of their communications should contact us. Requests for additional copies or requests for householding now or in the future should be directed in writing to our principal executive offices at 6750 Dumbarton Circle, Fremont, California 9455, Attn: Investor Relations or by telephone at (650) 357-3500.

If you hold your shares in street name, please contact your broker, bank or other nominee directly if you have questions, require additional copies of the proxy materials, or wish to receive multiple copies of the proxy materials now or in the future.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed. If a quorum is not present or represented at the special meeting, our bylaws provide that either (i) the chairman of the special meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the special meeting. If a quorum is present at the special meeting but there are not sufficient votes at the time of the special meeting to approve the merger proposal, then EFI stockholders may be asked to vote on the adjournment proposal. Pursuant to our bylaws, notices of an adjourned meeting need not be given if the time and place, if any, to which the meeting is adjourned and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At any subsequent reconvening of the special meeting at which a quorum is present, any business may be transacted which might have been transacted at the special meeting as originally notified and all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.

Anticipated Date of Completion of the Merger

We are working towards completing the merger as soon as possible. Assuming timely receipt of required regulatory approvals and satisfaction of other closing conditions, including the approval by our stockholders of the merger proposal, we anticipate that the merger will be completed in the third quarter of 2019. If our stockholders vote to approve the merger proposal, the merger will become effective as promptly as practicable following the satisfaction or waiver of the remaining conditions to the merger, subject to the terms of the merger agreement. See “The Merger—Closing and Effective Time of the Merger” beginning on page 30.

 

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Rights of Stockholders Who Seek Appraisal

If the merger is completed, EFI’s stockholders will be entitled to appraisal rights under Section 262 of the DGCL in connection with the merger. This means that you are entitled to have the fair value of your shares of our common stock determined by the Delaware Court of Chancery and to receive payment based on that valuation in lieu of the merger consideration if you follow exactly the procedures set forth in Section 262 of the DGCL. The ultimate amount you receive in an appraisal proceeding may be less than, equal to or more than the amount you would have received under the merger agreement.

To exercise your appraisal rights, you must submit a written demand for appraisal to EFI before the vote is taken on the merger proposal and you must not vote (either in person or by proxy) in favor of the merger proposal. If you fail to follow exactly the procedures set forth in Section 262 of the DGCL, you may lose your appraisal rights. See “Appraisal Rights” beginning on page 123 and the text of the DGCL appraisal rights statute reproduced in its entirety as Annex D to this proxy statement. If you hold your shares of our common stock through a broker, bank or other nominee and you wish to exercise your appraisal rights, you should consult with your broker, bank or other nominee to determine the appropriate procedures for the making of a demand for appraisal by your broker, bank or other nominee. In view of the complexity of the DGCL, stockholders who may wish to pursue appraisal rights should consult their legal and financial advisors promptly.

Other Information

You should not return any evidence of your shares of EFI’s common stock or send documents representing EFI’s common stock with the proxy card. If the merger is completed, the paying agent for the merger will send to you a letter of transmittal, if applicable, and related materials and instructions for exchanging your shares of EFI’s common stock.

Questions and Additional Information

If you have questions about the merger, need assistance in submitting your proxy or voting your shares of our common stock, or need additional copies of the proxy statement or the enclosed proxy card, please contact the proxy solicitor using the contact information below.

D.F. King & Co., Inc.

48 Wall Street, 22nd Floor

New York, NY 10005

Banks and Brokers Call: (212) 269-5550

All Others Call Toll-free: (866) 721-1324

Email: EFII@dfking.com

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

THE MERGER

This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Annex A. You should read the entire merger agreement carefully and in its entirety, as it is the legal document that governs the merger.

Effect of the Merger

The merger agreement provides that Merger Sub will merge with and into EFI subject to the terms and conditions in the merger agreement. EFI will be the surviving corporation following the merger. As a result of the merger, EFI will cease to be a publicly traded company and will become a wholly owned subsidiary of Parent. You will not own any shares of the capital stock of the surviving corporation. Upon the completion of the merger, our common stock will be delisted from Nasdaq, will be deregistered under the Exchange Act, will cease to be publicly traded and will cease to be held by EFI stockholders.

Closing and Effective Time of the Merger

The merger agreement provides that the closing of the merger (which we refer to as the “closing”) will take place via the electronic exchange of signatures and documentation on (i) a date to be agreed upon by Parent, Merger Sub and EFI that is no later than the third business day after the later of (A) the satisfaction or waiver (to the extent permitted hereunder) of the last to be satisfied or waived of the conditions to closing (other than those conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver (to the extent permitted hereunder) of such conditions) (described under “The Merger Agreement—Conditions to the Merger”), and (B) the completion of the marketing period (as defined under “The Merger—Marketing Period”); or (ii) such other time, location and date as Parent, Merger Sub and EFI mutually agree in writing.

Assuming timely satisfaction of closing conditions, including the approval by our stockholders of the merger proposal, we currently expect the closing of the merger to occur in the third quarter of 2019.

The effective time of the merger (which we refer to as the “effective time”) will occur upon the later of (a) the date and time of the filing of the certificate of merger with the Secretary of State of the State of Delaware or (b) such other date and time as may be mutually agreed upon by Parent and EFI and set forth in the certificate of merger.

Following the effective time, our common stock will be delisted from Nasdaq, will be deregistered under the Exchange Act and will cease to be publicly traded.

Marketing Period

Under the merger agreement, EFI has agreed to allow Parent and Merger Sub a period of fifteen consecutive business days to market the debt financing (which we refer to as the “marketing period”). The marketing period is the first fifteen consecutive business days throughout which Parent and Merger Sub has certain required financial and other information referred to in the debt commitment letter (which we refer to as the “required information”) and the required information remains compliant as set forth in the merger agreement. The delivery of any required information for any new fiscal period shall result in the “restart” of the marketing period.

Merger Consideration

In the merger, each outstanding share of our common stock will automatically be converted into the right to receive an amount in cash equal to $37.00, without interest and less any applicable withholding taxes, other than

 

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the excluded shares and dissenting shares. Dissenting shares will not be converted into a right to receive the merger consideration but instead shall be entitled to such holder’s right to appraisal pursuant to the DGCL. Dissenting shares will not be converted into a right to receive the merger consideration but instead shall entitle the holder thereof to receive payment of the fair value of such shares as determined by the Delaware Court of Chancery in accordance with Section 262 of the DGCL.

Background of the Merger

The Board, together with EFI’s management team (which we refer to as “management”), reviews and assesses EFI’s performance, future growth prospects, business strategies, opportunities and challenges as part of its evaluation of EFI’s prospects and strategies for enhancing stockholder value. As part of that review process, the Board and management have regularly reviewed and considered EFI’s strategic direction and business objectives, including strategic opportunities that might be available to EFI, such as possible acquisitions, divestitures and business combination transactions.

The merger and the terms of the merger agreement are the result of arm’s length negotiations conducted among representatives of Siris, EFI and their respective advisors. The following is a summary of the principal events, meetings, negotiations and actions among the parties leading to the execution and public announcement of the merger agreement.

On January 8, 2018, Mr. Guy Gecht, the then current Chief Executive Officer of EFI and currently a member of the Board, had dinner with a representative of a potential strategic acquirer (which we refer to as “Party A”) during which such representative raised with Mr. Gecht interest in Party A potentially acquiring EFI.

Also on January 8, 2018, a potential financial acquirer (which we refer to as “Party B”) reached out to Mr. Gecht and expressed an interest in acquiring EFI’s Productivity Software segment business (which we refer to as the “Software business”) and EFI’s Fiery segment business (which we refer to as the “Fiery business”).

On January 22, 2018, EFI and Party B entered into a confidentiality agreement, which included a customary standstill provision that would automatically terminate upon EFI’s entry into a merger agreement with a third party for a sale of EFI.

On January 26, 2018, the Board held a special meeting. Also present were members of management, representatives of Morgan Stanley (for a portion of the meeting), a potential financial advisor, and representatives of O’Melveny & Myers LLP, legal counsel to EFI (which we refer to as “O’Melveny”). Representatives of Morgan Stanley, at the invitation of the Board, reviewed with the Board EFI’s position in its industry, EFI’s historical operating and trading performance, potential strategic acquirers, potential acquisition scenarios and potential next steps in EFI’s review of strategic opportunities. Representatives of Morgan Stanley then left the meeting, and the Board discussed the Morgan Stanley presentation and certain strategic transactions available to EFI, including, without limitation, a potential acquisition of EFI by different potential acquirers (which included the outreaches by Party A and Party B each on January 8, 2018) and EFI remaining independent. At this time, the Board made no determination as to engaging Morgan Stanley formally or whether to formally commence a process to sell EFI or business segments of EFI.

On January 30, 2018, the Board held a special meeting. Also present were members of management and representatives of O’Melveny. Mr. Gecht led the Board in an extensive discussion regarding the strategic transaction presentation made by Morgan Stanley to the Board on January 26, 2018. The Board then discussed various potential strategic transactions, including a potential acquisition of EFI by potential acquirers and EFI remaining independent. A representative of O’Melveny then reviewed for the Board their fiduciary duties under Delaware law. At this time, the Board made no determination as to engaging Morgan Stanley formally or whether to formally commence a process to sell EFI or business segments of EFI.

 

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On February 2, 2018, Mr. Gecht had lunch with representatives of a potential strategic acquirer (which we refer to as “Party C”) during which representatives of Party C indicated interest in potentially acquiring EFI or certain assets of EFI.

On February 7, 2018, representatives of another potential financial advisor, at the invitation of management, presented to management information regarding a potential sale of the Fiery business and indicated that such potential financial advisor knew of a potential financial acquirer (which we refer to as “Party D”) of the Fiery business, but did not disclose the identity of Party D at this time. Management informed the representatives of such potential financial advisor that management would discuss this potential strategic transaction with the Board.

On February 8, 2018, the Board held a regularly scheduled meeting. Also present were members of management and representatives of O’Melveny. Mr. Gecht led the Board in a discussion concerning potential strategic transactions with respect to EFI, including a potential sale of EFI, a potential sale of certain assets of EFI and remaining an independent company. Mr. Gecht then updated the Board on potential interest in acquiring EFI or certain business segments of EFI, including Party B’s outreach on January 8, 2018, discussions between Mr. Gecht and Party A on January 8, 2018, discussions between Mr. Gecht and Party C on February 2, 2018 and that representatives of another potential financial advisor indicated to management on February 7, 2018 that Party D was interested in potentially acquiring the Fiery business. The Board then discussed the potential retention of Morgan Stanley as EFI’s financial advisor, including the qualifications, credibility, experience and relationships of Morgan Stanley. Mr. Gecht reviewed the proposed terms of the engagement letter with Morgan Stanley and, subject to the review of any relationship disclosures from Morgan Stanley, the Board unanimously agreed to retain Morgan Stanley as EFI’s financial advisor. The Board then discussed the process of communicating with potential strategic acquirers, the timeline for such a process and potential strategic acquirers. The Board reviewed potentially interested parties and discussed only including a limited number of potential strategic acquirers in the Company’s process to avoid the potential damage that a more widespread outreach could potentially cause to the operations and value of the Company. Following such discussion, the Board determined to have management instruct Morgan Stanley to reach out to five specific potential strategic acquirers regarding a potential acquisition of EFI, including Party A and Party C.

On February 12, 2018, the Board held a special meeting. Also present were members of management and representatives of O’Melveny. Mr. Cogan led the Board in a discussion concerning potential strategic transactions, including the potential sale of EFI, the potential sale of certain assets of EFI and remaining an independent company. Mr. Cogan discussed with the Board again that EFI had received an inbound inquiry from Party B regarding a potential acquisition of the Software business and Fiery business. The Board discussed the process of communicating with potential strategic acquirers, including Party A and Party C, and potential financial sponsors, including Party D and Party B.

Between February 12, 2018 and April 10, 2018, representatives of Morgan Stanley and members of management contacted five potential strategic acquirers (including Party A and Party C), as authorized by the Board on February 8, 2018, of which four potential strategic acquirers (including Party A and Party C) participated in discussions with management and representatives of Morgan Stanley regarding a potential acquisition of EFI and of which three potential strategic acquirers (including Party A) executed a confidentiality agreement with EFI. Following the determination by one potential strategic acquirer to not participate in EFI’s process, Mr. Gecht reached out to one additional potential strategic acquirer regarding the potential acquisition of EFI (for a total of six potential strategic acquirers (including Party A and Party C) approached during this time by representatives of Morgan Stanley and EFI regarding a potential acquisition of EFI) and such potential strategic acquirer participated in discussions with management and representatives of Morgan Stanley, and executed a confidentiality agreement with EFI. In addition, during this period the potential financial advisor that presented to management on February 7, 2018, at the request of management, disclosed the identity of Party D, and introduced management to representatives of Party D. At the instruction of management, representatives of Morgan Stanley also contacted Party D, Party B, and one additional potential strategic acquirer, of which Party D

 

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and the additional potential strategic acquirer executed a confidentiality agreement with EFI (and Party B had previously entered into a confidentiality agreement with EFI on January 22, 2018) and each (including Party B) participated in discussions with management and representatives of Morgan Stanley regarding a potential acquisition of the Fiery business. During this period, representatives of Party B informed Mr. Gecht that it would not further participate in EFI’s process. All of the confidentiality agreements entered into by EFI in this process contained a standstill provision that automatically terminated upon EFI’s entry into a merger agreement with a third party for a sale of EFI.

On March 19, 2018, representatives of Party D reached out to Mr. Gecht indicating that Party D desired to pursue an acquisition of the Fiery business and would submit an indication of interest during the week of April 23, 2018.

On or around March 29, 2018, representatives of Morgan Stanley provided to EFI certain relationship disclosures with respect to certain of the potential strategic acquirers and potential financial acquirers considering a potential acquisition of EFI or the Fiery business. Such relationship disclosures were provided to the Board.

On April 4, 2018, EFI entered into the engagement letter with Morgan Stanley, as approved by the Board at the meeting of the Board on February 8, 2018.

On April 11, 2018, the Board held a regularly scheduled meeting. Also present were members of management, representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Representatives of Morgan Stanley provided an update to the Board on its and EFI’s outreach to potential strategic acquirers and potential financial acquirers. Representatives of Morgan Stanley stated that Party C was still considering whether to participate in EFI’s process. Representatives of Morgan Stanley indicated that four potential strategic acquirers (including Party A) that were contacted by representatives of Morgan Stanley and management had signed confidentiality agreements, and that each such potential strategic acquirer that signed such a confidentiality agreement was interested in continuing discussions with EFI regarding a potential acquisition of EFI. Representatives of Morgan Stanley provided background information on each of such four potential strategic acquirers and informed the Board that such four potential strategic acquirers were or would be instructed to provide their level of interest in acquiring EFI by the week of April 23, 2018. Representatives of Morgan Stanley also stated to the Board that, as directed by management, Morgan Stanley had separately reached out to Party D, Party B, and one additional potential strategic acquirer regarding a potential acquisition of the Fiery business. Representatives of Morgan Stanley discussed that EFI had received interest from Party D regarding a potential acquisition of the Fiery business and that on March 19, 2018, representatives of Party D reached out to Mr. Gecht to indicate that Party D would submit an offer to acquire the Fiery business during the week of April 23, 2018. Representatives of Morgan Stanley then provided an overview of the preliminary process timeline for a potential acquisition of EFI or for a potential acquisition of the Fiery business. Representatives of Morgan Stanley then provided the Board with a general overview of the market for EFI and its peer companies and EFI’s recent operating and valuation data. Following such discussion, the Board indicated to representatives of Morgan Stanley that it should continue to encourage such potential strategic acquirer and potential financial acquirers to provide meaningful input to EFI on their level of interest in acquiring EFI or the Fiery business no later than the week of April 23, 2018.

Between April 12, 2018 and June 3, 2018, representatives of Morgan Stanley and members of management continued to have discussions with the remaining five potential strategic acquirers (including Party A and Party C) previously approached in EFI’s process to discuss a potential acquisition of EFI. During this period, representatives of Morgan Stanley and members of management also continued to have discussions with the one potential strategic acquirer previously approached regarding a potential acquisition of the Fiery business. In addition, representatives of Morgan Stanley contacted an additional fifteen potential financial acquirers (which excludes Party D) regarding a potential acquisition of the Fiery business, of which eight such potential financial acquirers executed a confidentiality agreement with EFI and participated in discussions with management and representatives of Morgan Stanley regarding a potential acquisition of the Fiery business. Of such eight potential

 

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financial acquirers, seven participated in meetings with management. All such confidentiality agreements entered into by EFI contained a standstill provision that automatically terminated upon EFI’s entry into a merger agreement with a third party for a sale of EFI. All of such potential financial acquirers (excluding, for the avoidance of doubt, Party D), other than one potential financial acquirer (which we refer to as “Party E”), either declined to participate further in the process or ceased to have communications with representatives of Morgan Stanley and members of management. Also during this period, each of the five remaining potential strategic acquirers potentially interested in acquiring EFI, including Party A and Party C, informed representatives of Morgan Stanley or members of management that such potential strategic acquirer was electing not to proceed further in EFI’s process.

On April 27, 2018, representatives of Party D submitted to representatives of Morgan Stanley a non-binding written indication of interest to acquire the Fiery business for an all cash purchase price in the range of $450 million to $500 million, on a debt free, cash free basis, subject to adjustments, including for working capital purposes.

On May 3, 2018, the Board held a special meeting. Also present were members of management, representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Representatives of Morgan Stanley informed the Board that none of the potential strategic acquirers expressed an interest in continuing discussions with EFI regarding a potential acquisition of EFI. The Board discussed, together with representatives of Morgan Stanley, potential reasons for the lack of interest in acquiring EFI, including, among other things, an unwillingness expressed by certain of the potential strategic acquirers to acquire as part of EFI the Fiery business. Representatives of Morgan Stanley then discussed the outreach to several potential financial acquirers, including Party D, and one other potential strategic acquirer regarding a potential acquisition of the Fiery business. Representatives of Morgan Stanley then discussed the non-binding written indication of interest received from Party D to acquire the Fiery business for an all cash purchase price in the range of $450 million to $500 million, on a debt free, cash free basis, subject to adjustments, including for working capital purposes. The Board, together with representatives of Morgan Stanley, then discussed considerations relating to the potential sale of the Fiery business. The Board instructed representatives of Morgan Stanley to continue to pursue potential financial acquirers and the potential strategic acquirer potentially interested in acquiring the Fiery business and to have such potential financial acquirers and the potential strategic acquirer submit their respective level of interest in acquiring the Fiery business by May 30, 2018. Representatives of Morgan Stanley then left the meeting, and the Board discussed terminating EFI’s efforts to sell all of EFI and considerations relating to potentially selling the Fiery business. The Board decided to cease attempting to sell all of EFI, but to continue to explore the possibility of selling the Fiery business.

On May 8, 2018, Mr. Gecht spoke with a representative of Party D regarding the indication of interest provided by Party D to representatives of Morgan Stanley on April 27, 2018. Mr. Gecht discussed ways in which Party D could improve its offer, and the representatives of Party D indicated that Party D would need to conduct further diligence on the Fiery business.

On May 11, 2018, representatives of Party E submitted to representatives of Morgan Stanley a non-binding written indication of interest to acquire the Fiery business for an all cash purchase price in the range of $400 million to $470 million, on a debt free, cash free basis, subject to adjustments, including for working capital purposes.

On May 17, 2018, representatives of Party E were provided access to an electronic data room for due diligence purposes.

On May 18, 2018, representatives of Party D were provided access to an electronic data room for due diligence purposes.

On May 24, 2018, representatives of Party D reaffirmed Party D’s interest in acquiring the Fiery business and submitted to representatives of Morgan Stanley a non-binding written indication of interest to acquire the

 

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Fiery business for an all cash purchase price in the range of $450 million to $500 million, on a debt free, cash free basis, subject to adjustments, including for working capital purposes. Representatives of Party D also requested exclusivity and stated their belief that, if granted, they could enter into a definitive agreement in the course of four to six weeks.

Also on May 24, 2018, representatives of Party E submitted to representatives of Morgan Stanley a revised non-binding written indication of interest to acquire the Fiery business for an all cash purchase price of $400 million, on a debt free, cash free basis, subject to adjustments, including for working capital purposes.

On May 26, 2018, the one potential strategic acquirer potentially interested in acquiring the Fiery business informed representatives of Morgan Stanley that such potential strategic acquirer was electing not to proceed further in EFI’s process.

On May 30, 2018, Mr. Gecht had a call with a representative of Party D regarding the value and structure of the proposal from Party D to acquire the Fiery business. Mr. Gecht indicated that he believed that the Board was not likely to support any proposal to acquire the Fiery business below $500 million. Representatives of Party D also indicated to Mr. Gecht that Party D desired for certain of the equity of EFI to rollover into the equity of the acquirer in such a transaction.

On May 31, 2018, the Board held a regularly scheduled meeting. Also present were members of management, representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Representatives of Morgan Stanley provided an update to the Board regarding the potential sale of the Fiery business, including that, as directed by management and throughout this process, representatives of Morgan Stanley had reached out to several potential financial acquirers (including Party D and Party E) and one potential strategic acquirer regarding a potential sale of the Fiery business. Representatives of Morgan Stanley reported to the Board that EFI had received two non-binding written indications of interest from two potential financial acquirers, Party D and Party E, for the potential acquisition of the Fiery business. Representatives of Morgan Stanley summarized the terms of each indication of interest. Representatives of Morgan Stanley then led the Board in a discussion of certain considerations relating to a potential sale of the Fiery business, including a discussion on potential uses of proceeds from the sale of the Fiery business, the contribution of the Fiery business to the total revenue and earnings of EFI and potential communications with EFI’s stockholders on the potential impact of such a sale.

Between May 31, 2018 and June 4, 2018, management and representatives of Morgan Stanley had discussions with representatives of each of Party D and Party E regarding their respective indications of interest and due diligence matters.

On June 4, 2018, the Board held a special meeting. Also present were members of management and representatives of O’Melveny. The Board discussed the potential sale of the Fiery business, including recent discussions with Party D. The Board then discussed new business opportunities for EFI and considerations relating to selling the Fiery business, including the potential use of the proceeds from such a sale. Following such discussion, the Board determined not to continue EFI’s current efforts to sell the Fiery business at this time as a result of, in part, the low indications of price by Party D and Party E to acquire the Fiery business and the potential disruption such a process would further have on EFI’s business.

On July 30, 2018, EFI announced that Mr. Gecht had informed the Board that he intended to step down from his operating role at EFI when a successor is named.

In August 2018, representatives of Siris called Mr. Gecht and inquired as to whether the Board would be willing to consider a potential acquisition of EFI by affiliates of Siris. Mr. Gecht responded that Siris should in the first instance submit a non-binding indication of interest regarding acquiring EFI to give the Board a sense of value.

 

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On September 4, 2018, a representative of a potential strategic acquirer (which we refer to as “Party F”) contacted Mr. Gecht and indicated to Mr. Gecht that Party F may be interested in exploring a potential acquisition of EFI, but did not provide any details regarding a purchase price or valuation for such a transaction.

On September 11, 2018, representatives of Siris submitted a non-binding, written indication of interest to acquire EFI for an all cash purchase price in the range $39.00 to $40.50 per share of our common stock, subject to completion of due diligence and negotiation of definitive agreements. On September 11, 2018, the closing price of our common stock on the Nasdaq Global Select Market was $32.38 per share.

Also on September 11, 2018, Mr. Gecht spoke to a representative of Siris and indicated that he believed that Siris’ proposal to acquire EFI would not likely be compelling to the Board and that the Board would likely require a higher proposal to engage with Siris on a potential acquisition of EFI by affiliates of Siris. Such representative of Siris indicated that Siris would like to sign a confidentiality agreement in order to commence its due diligence review of EFI.

Also on September 11, 2018, representatives of Morgan Stanley contacted representatives of Siris to indicate that the Board was not likely to move forward with the proposal from Siris unless such proposal was materially improved.

On September 12, 2018, Siris submitted a revised nonbinding, written indication of interest, which increased Siris’ all cash proposal to $45.00 per share of our common stock, subject to completion of due diligence and negotiation of definitive agreements. Siris indicated that its affiliates would be in a position to sign a definitive agreement in four weeks. A representative of Siris stated to Mr. Gecht that Siris would provide EFI with a more definitive valuation proposal to acquire EFI within ten days of September 13, 2018, but that Siris required further due diligence materials from EFI in order to meet such timing.

Also on September 12, 2018, representatives of Party F contacted Mr. Gecht to convey an oral, non-binding indication of interest to acquire EFI for an all cash purchase price of $42.00 per share of our common stock. On September 12, 2018, the closing price of our common stock on the Nasdaq Global Select Market was $32.51 per share.

On September 13, 2018, the Board held a special meeting. Also present were members of management, representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Mr. Gecht updated the Board on recent inquiries EFI received in September 2018 from Siris and Party F. Mr. Gecht reviewed with the Board the non-binding written indication of interest received by EFI on September 11, 2018 from Siris, which provided for the acquisition of EFI for a purchase price in the range of $39.00 to $40.50 per share of our common stock and the revised, non-binding written indication of interest received by EFI from Siris on September 12, 2018, which provided for the acquisition of EFI for $45.00 per share of our common stock. Mr. Gecht summarized his conversations with Siris, including that Siris had stated it would provide EFI with a more definitive valuation proposal to acquire EFI within ten days of this Board meeting, subject to the timely receipt of required due diligence materials from EFI. Mr. Gecht then stated that he had also received on September 12, 2018 an oral preliminary indication of interest from Party F to acquire EFI for $42.00 per share of our common stock. Representatives of Morgan Stanley then discussed with the Board a strategic update as well as background information on Siris and Party F. Representatives of O’Melveny then reviewed for the Board their fiduciary duties under Delaware law. The Board then discussed the request by Siris to conduct further due diligence in order to allow Siris to provide a more definitive valuation for the Board to consider. The Board determined to allow Siris to conduct further due diligence subject to Siris’ agreement to provide input on its valuation of EFI by September 24, 2018, subject to the execution of a confidentiality agreement by Siris. The Board also directed Mr. Gecht to speak with representatives of Party F regarding Party F’s level of interest in acquiring EFI and providing Party F with the same deadline and access to due diligence material as being provided to Siris, subject to the execution of a confidentiality agreement by Party F. On September 13, 2018, the closing price of our common stock on the Nasdaq Global Select Market was $33.17 per share.

 

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On September 14, 2018, representatives of Morgan Stanley spoke with a representative of Siris and informed him that the Board had authorized EFI to provide further diligence materials to Siris and that the Board required that Siris provide greater certainty on its price by September 24, 2018.

On or around September 15, 2018, Mr. Gecht spoke with representatives of Party F and informed such representatives of Party F of the need to submit a formal proposal to acquire EFI by September 24, 2018. Representatives of Morgan Stanley also spoke to representatives at Party F and indicated that there was another potential acquirer of EFI considering a potential acquisition of EFI.

On September 15, 2018, EFI entered into a confidentiality agreement with Siris, which included a customary standstill provision that would automatically terminate upon EFI’s entry into a merger agreement with a third party for a sale of EFI.

On September 17, 2018, EFI entered into a confidentiality agreement with Party F, which included a customary standstill provision that would automatically terminate upon EFI’s entry into a merger agreement with a third party for a sale of EFI.

Also on September 17, 2018, representatives of Siris were provided access to an electronic data room for due diligence purposes.

On September 19 and 20, 2018, management held meetings with representatives of Siris regarding due diligence matters.

Also on September 19, 2018, representatives of Party F were provided access to an electronic data room for due diligence purposes.

On September 23, 2018, representatives of Party F submitted a non-binding, written indication of interest to acquire EFI for an all cash purchase price of $42.00 per share of our common stock, subject to completion of due diligence and negotiation of definitive agreements. On September 21, 2018, the last trading day before September 23, 2018, the closing price of our common stock on the Nasdaq Global Select Market was $34.70 per share.

On September 24, 2018, Mr. Gecht spoke with a representative of Siris and such representative of Siris stated that, following Siris’ review of certain of EFI’s due diligence materials, $42.00 per share of our common stock was Siris’ best proposal with respect to acquiring EFI. On September 24, 2018, the closing price of our common stock on the Nasdaq Global Select Market was $34.62 per share.

Late on September 24, 2018, the Board held a special meeting. Also present were members of management, representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Mr. Gecht updated the Board on the level of interest in potentially acquiring EFI conveyed by Siris and Party F. Mr. Gecht summarized that he had, in the prior ten days, met with representatives of Siris and representatives of Party F, separately, and that both Siris and Party F had been granted access to a data room for due diligence purposes. Mr. Gecht reviewed for the Board the written non-binding indication of interest, dated September 23, 2018, received from Party F, which provided for the acquisition of EFI for $42.00 per share of our common stock, which was previously distributed to the Board. Mr. Gecht further reported that representatives of Siris had indicated that Siris could not confirm its previous indication of interest, which provided for the acquisition of EFI for $45.00 per share of our common stock, and that Siris’ best proposal was at a lower price per share after completion of its due diligence, which was $42.00 per share of our common stock. Representatives of Morgan Stanley then provided the Board with a strategic update. Representatives of O’Melveny then reviewed for the Board their fiduciary duties under Delaware law. The Board then discussed the indication of interest from Party F and the reduced indication of interest from Siris as well as the alternative of EFI remaining independent, including the potential upside of EFI relating to EFI’s Nozomi platform. Following discussion, the Board

 

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determined to not accept either the proposal from Party F or the proposal from Siris and remain as an independent company and proceed with an offer to Mr. William D. Muir, Jr. to serve as EFI’s new chief executive officer.

On October 4, 2018, the Board held a special meeting. Also present were members of management and representatives of O’Melveny. Following an extensive search for a new chief executive officer of EFI, the Board approved the hiring of Mr. Muir as the new chief executive officer of EFI. Mr. Muir became a director of EFI effective October 15, 2018.

In November 2018, Ms. Durbin Chaffin was granted an initial equity award of 3,153 RSUs in connection with her appointment to the Board, as well as the annual equity award of 6,500 RSUs for 2018 noted above. Her initial equity award vests 25% on the first anniversary of the grant date, and in monthly installments over 30 months thereafter, subject to her continued service on the Board through the applicable vesting date.

On January 4, 2019, a representative of Siris reached out to Mr. Olin to request a meeting with Mr. Olin on January 17, 2019.

On January 15, 2019 after the national securities exchanges had closed, EFI pre-announced its results of operations for the fourth quarter 2018, which provided lower guidance for the fourth quarter 2018 results of operations. As part of such pre-announcement, EFI disclosed, among other things, that EFI had missed certain of its financial targets for the fourth quarter 2018 and its target for sales of EFI’s Nozomi platform. EFI reported that for the three months ended December 31, 2018, revenues were expected to be between $255 million to $257 million, down from $275 million to $285 million disclosed as expected guidance for Q4 2018 when EFI released its third quarter 2018 results of operations and down from $280.7 million, which was the Wall Street Q4 2018 consensus (based on analyst estimates), GAAP earnings per share for the period were expected to be $(0.20) to $0.00, revised from $(0.07) to $(0.02), non-GAAP earnings per share were expected to be $0.45 to $0.47, down from $0.57 to $0.65 disclosed as expected guidance for Q4 2018 when EFI released its third quarter 2018 results of operations and down from $0.60, which was the Wall Street Q4 2018 consensus (based on analyst estimates), and cash flow from operating activities was expected to be $30 million to $33 million for the quarter or approximately 93-98% of non-GAAP net income for the full year. EFI indicated that its results were impacted by weakening economic conditions experienced across its direct businesses, with customers delaying spend on capital equipment and software, which materially reduced EFI’s close rates at quarter end. By the end of trading on January 16, 2019, EFI’s trading price on the Nasdaq Global Select Market closed at $22.37 per share of our common stock, which represented a drop of approximately 17.7% from the closing price of EFI common stock of $27.18 per share on January 15, 2019 prior to the pre-announcement of EFI’s results for operations for the fourth quarter of 2018.

On January 16, 2019, Mr. Olin was contacted by a representative of Party D who indicated a desire to meet, which was scheduled to occur on January 28, 2019.

On January 17, 2019, Mr. Olin met with a representative of Siris and such representative of Siris indicated Siris’ interest in resuming discussions with EFI regarding a potential acquisition of EFI. Mr. Olin indicated that he would convey this interest to Messrs. Gecht and Muir, which Mr. Olin did later on January 17, 2019.

On January 28, 2019, Messrs. Muir and Olin met with representatives of Party D during which such representatives of Party D indicated a desire to reengage in discussions with EFI regarding a potential acquisition of the Fiery business by Party D. Messrs. Muir and Olin indicated that they would express Party D’s interest to the Board and let Party D know whether the Board was willing to reengage in discussions regarding a potential acquisition of the Fiery business.

On January 30, 2019, EFI reported its fourth quarter 2018 and full year 2018 results and provided guidance for the first quarter 2019 and the full year 2019, which were significantly below Wall Street consensus numbers

 

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(based on analyst estimates) that had been previously published and called for a decline in revenue versus prior year financial results of 6-10%, GAAP EPS of ($0.37) to ($0.31), down from GAAP EPS of ($0.08) and non-GAAP EPS of $0.20 to $0.27, down from prior year results of $0.38. For the three months ended December 31, 2018, EFI reported revenue of $256.9 million, down 5% compared to $269.2 million for the same period in 2017. GAAP net loss was $3.1 million compared to GAAP net loss of $26.3 million for the same period in 2017 or $(0.07) per diluted share compared to $(0.58) per diluted share for the same period in 2017. Non-GAAP net income was $20.5 million, down 14% compared to $24.0 million for the same period in 2017 or $0.46 per diluted share, down 12% compared to $0.52 per diluted share for the same period in 2017. Cash flow from operating activities was $33.4 million, 162% of non-GAAP net income compared to $8.9 million, 37% of non-GAAP net income during the same period in 2017. For the year ended December 31, 2018, EFI reported revenue of $1.02 billion, up 2% compared to $993.3 million for the year ended December 31, 2017. GAAP net loss was $1.0 million compared to GAAP net loss of $15.3 million for 2017 or $(0.02) per diluted share compared to $(0.33) per diluted share for 2017. Non-GAAP net income was $82.9 million, down 18% compared to $100.7 million or $1.83 per diluted share, down 14% compared to $2.14 per diluted share for 2017. Cash flow from operating activities for the year ended December 31, 2018 was $83.5 million, 101% of non-GAAP net income compared to $51.3 million, 51% of non-GAAP net income for 2017.

On February 6, 2019, representatives of Party D contacted management regarding a potential acquisition of the Fiery business and provided a written non-binding indication of interest to acquire the Fiery business for $500 million in cash, on a cash-free, debt-free basis, subject to adjustments, including for working capital purposes. In such indication of interest, Party D requested twenty business days of exclusive negotiations with respect only to the sale of the Fiery business and not the sale of all of EFI.

On February 7, 2019, Mr. Muir spoke with a representative of Siris regarding a potential acquisition of EFI by Siris. Such representative of Siris verbally indicated to Mr. Muir that Siris believed it could offer an all cash purchase price to acquire EFI in the range of $35.00 to $36.00 per share of our common stock. Mr. Muir indicated to such representative of Siris that he would discuss this proposal with the Board. On February 7, 2019, the closing price of our common stock on the Nasdaq Global Select Market was $26.19 per share.

Also on February 7, 2019, the Board held a regularly scheduled meeting. Also present were members of management and representatives of O’Melveny. Messrs. Muir and Olin summarized and discussed with the Board the non-binding written indication of interest, dated February 6, 2019, received from Party D, which provided for Party D to potentially acquire the Fiery business for $500 million, all-cash, on a cash free, debt free basis, subject to adjustments, including for working capital purposes, and requested exclusivity for twenty business days with respect to selling the Fiery business only and not with respect to selling the whole Company. Messrs. Muir and Olin discussed the historical results of operations and preliminary projections for the Fiery business and the advantages and disadvantages of retaining or divesting the Fiery business. Mr. Olin also reviewed with the Board a pro forma preliminary forecast, based on a variety of assumptions, of EFI’s potential preliminary results of operations (including revenues, margins, operating expenses, EBIT and EBITDA (with and without synergies)), excluding the Fiery business. Messrs. Muir and Olin then discussed with the Board the potential impact of a sale of the Fiery business on EFI and preliminary potential uses of the cash proceeds that might be received from the sale of the Fiery business. Messrs. Muir and Olin then provided an update to the Board regarding the potential acquisition of EFI by affiliates of Siris, including that earlier on February 7, 2019, representatives of Siris had indicated orally to Mr. Muir and representatives of Morgan Stanley that Siris may be interested in acquiring EFI as a whole for $35.00 to $36.00 per share of our common stock, all cash. The Board then discussed considerations relating to selling the Fiery business, selling all of EFI or remaining an independent company. The Board encouraged management to work with representatives of Morgan Stanley to determine the level of interest of each of Siris in acquiring all of EFI and of Party D in acquiring the Fiery business. The Board also expressed its support for EFI to enter into the exclusivity agreement with Party D with respect to the Fiery business.

On February 8, 2019, EFI entered into an exclusivity agreement with Party D, which provided (i) that for a period of twenty business days EFI would not, among other things, attempt to directly sell the Fiery business to a

 

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third party other than Party D and (ii) that any attempts to sell all of EFI was not prohibited under the exclusivity agreement.

On February 12, 2019, representatives of Siris contacted representatives of Morgan Stanley to discuss a potential acquisition of EFI and next steps. Representatives of Siris stated that Siris would not be able to provide an indication of interest to acquire EFI in excess of $36.00 per share of our common stock, but expressed confidence they could complete the acquisition of EFI at such price.

Also on February 12, 2019, representatives of Siris contacted Mr. Gecht in his capacity as a Board member to discuss Siris’ proposal, indicating that Siris’ proposal to acquire EFI for $36.00 per share of our common stock reflected concerns around how EFI’s business would perform in a potential recession scenario. Representatives of Siris also expressed that in a recession scenario, the sale of the Fiery business may prove problematic for EFI given the Fiery business’ significant cash flow contribution to EFI as a whole. Mr. Gecht reminded the representatives of Siris that he did not represent all Board members, but that his belief was that an offer to acquire EFI at $36.00 per share of our common stock would not likely have the support of the Board. Mr. Gecht also indicated that a process to sell the Fiery business was underway and that if Siris wanted to complete a transaction to acquire EFI, Siris would need to be mindful of timing.

On February 18, 2019, Messrs. Cogan and Gecht met with representatives of Siris to discuss a potential acquisition of EFI by affiliates of Siris and whether Siris would be able to improve its offer from the $36.00 per share of our common stock verbally communicated to Mr. Muir.

Also on February 18, 2019, representatives of Siris contacted representatives of Morgan Stanley to discuss a written proposal to acquire EFI that Siris intended to submit to the Board. Representatives of Morgan Stanley indicated that Siris should improve its proposal as Siris’ proposal to acquire EFI for $36.00 per share of our common stock would not likely be acceptable to the Board.

On February 19, 2019, representatives of Siris submitted a written, non-binding indication of interest to acquire EFI for $37.00 per share of our common stock in cash, subject to completion of due diligence and negotiation of definitive agreements. The indication of interest from Siris stated that EFI must retain the Fiery business and confirmed that Siris was willing to agree to a “go-shop” period after signing a definitive merger agreement to acquire EFI. Siris also communicated to EFI that $37.00 per share for our common stock was its best and final offer price. On February 19, 2019, the closing price of our common stock on the Nasdaq Global Select Market was $27.13 per share.

On February 25, 2019, the Board held a special meeting. Also present were members of management, representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Messrs. Muir and Olin then summarized and discussed with the Board (i) the non-binding written indication of interest, dated February 6, 2019, received from Party D, which provided for Party D to potentially acquire the Fiery business for $500 million, all-cash, on a cash free, debt free basis, subject to adjustments, including for working capital purposes, and (ii) the non-binding written indication of interest, dated February 19, 2019, which provided for the potential acquisition of all of EFI by affiliates of Siris for $37.00 per share of our common stock in cash and (A) included a request for four weeks of exclusivity, (B) included a requirement that EFI retain the Fiery business and (C) confirmed a willingness to agree to a “go-shop” period after signing a definitive merger agreement. Messrs. Muir and Olin then discussed the management projections (which were previously made available to the Board), including the base-case management projections, the upside-case management projections and the downside-case management projections, as well as the assumptions and risks associated with achieving such management projections. See “The Merger — Certain Company Forecasts” beginning on page 56. Messrs. Muir and Olin then discussed with the Board the potential impact on the remaining businesses of EFI if the Board determined to sell the Fiery business as well as the potential use of the cash proceeds from such a sale. Representatives of Morgan Stanley then reviewed with the Board the indications of interest received from Party D and Siris, considerations relating to remaining an independent company, selling the Fiery business

 

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and selling all of EFI, the management projections and various other strategic considerations relating to the indications of interest from Party D and Siris. The Board then discussed considerations relating to the indication of interest from Party D as compared to the indication of interest from Siris, including considerations of selling only the Fiery business as opposed to selling all of EFI. Following such discussion, the Board determined to reconvene an additional meeting of the Board to further discuss the two indications of interest and the Board’s consideration of a strategic review process.

On February 27, 2019, the Board held a special meeting. Also present were members of management, representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Messrs. Muir and Olin discussed with the Board the potential growth prospects of the Company, including that the Company is facing near term challenges with respect to its inkjet revenue, some softness in Fiery revenue in Second Quarter 2019 compared to Second Quarter 2018, and a potential decline in Fiery revenue consistent with prior declines around the time of the drupa trade show, with another such show upcoming in 2020. Messrs. Muir and Olin discussed with the Board the indications of interest received from Party D and Siris on February 6, 2019 and February 19, 2019, respectively, and the potential challenges of EFI as a standalone entity. Representatives of O’Melveny then reviewed for the Board their fiduciary duties under Delaware law.    Messrs. Muir and Olin again discussed the management projections, including the assumptions and risks associated with achieving each of the base-case management projections, the upside-case management projections and the downside-case management projections, and discussed including an additional year of forecasts in the base-case management projections and the upside-case management projections, which the Board supported. See “The Merger—Certain Company Forecasts” beginning on page 56. The Board then extensively discussed, together with representatives of O’Melveny the indications of interest received from Party D and Siris on February 6, 2019 and February 19, 2019, respectively, as well as considerations relating to selling the Fiery business as opposed to selling all of EFI, including the potential financial and operational challenges of operating the remaining Company if the Fiery business is sold. The Board, together with representatives of O’Melveny, discussed potentially conducting a pre-signing market check regarding the potential sale of all of EFI and the potential impacts such a process may have on the operations of EFI. The Board, together with representatives of O’Melveny, also discussed the willingness of Siris to agree to a “go-shop” period following the execution of a definitive merger agreement with affiliates of Siris, which “go-shop” period, as noted below, would allow the Company to conduct a market check following the execution of the merger agreement and avoid the potential damage that a pre-announcement market check could potentially cause to the operations and value of the Company. Following such discussion, the Board determined to pursue a sale of all of EFI as opposed to a sale of only the Fiery business and authorized Morgan Stanley to determine whether Party D would be interested in acquiring all of EFI. The Board authorized management to negotiate a potential acquisition of EFI by affiliates of Siris for $37.00 per share of our common stock and authorized representatives of Morgan Stanley to provide the base-case management projections and the upside-case management projections to Siris and Party D, as revised to include an additional year of forecasts. The Board then determined that, in light of (i) the process conducted in 2018 with potential strategic acquirers regarding a potential acquisition of EFI that did not result in an offer for all of EFI, (ii) the potential damage that a pre-signing market check could cause to the operations and value of EFI, (iii) EFI’s discussions with Siris and continuing discussions with representatives of Party D and (iv) Siris’ offer to include a “go-shop” period in a definitive merger agreement, the Board would utilize a “go-shop” instead of conducting a pre-signing market check, but would continue discussions with Party D as discussed at this meeting of the Board. On February 27, 2019, the closing price of our common stock on the Nasdaq Global Select Market was $26.88 per share.

On February 28, 2019, Mr. Olin informed representatives of Party D that EFI was pursuing a sale of all of EFI as opposed to a sale of the Fiery business. At this stage, representatives of Party D conveyed that it would stop work on a Fiery-only transaction and evaluate the opportunity of acquiring all of EFI instead.

Also on February 27, 2019, representatives of Morgan Stanley spoke with representatives of Siris regarding the Board’s decision to pursue a potential acquisition of EFI by affiliates of Siris and regarding a due diligence plan.

 

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Also on February 28, 2019, representatives of Siris contacted Messrs. Muir and Olin to indicate that Siris was ready to commence diligence based on the communication they had received from representatives of Morgan Stanley regarding the Board’s decision to pursue a potential acquisition of EFI by affiliates of Siris.

Between February 28, 2019 and March 26, 2019, representatives of Party D conducted due diligence on EFI in connection with Party D’s consideration of acquiring all of EFI, which included meetings with management, follow-up diligence calls and the delivery by EFI to representatives of Party D of additional diligence materials. Also during this time, representatives of Siris conducted due diligence on EFI, which included meetings with management, follow-up diligence calls and the delivery by EFI to representatives of Siris of additional diligence materials.

On March 25, 2019, a representative of Siris submitted a proposal to acquire EFI reconfirming the all cash purchase price of $37.00 per share of our common stock. Such representative of Siris also delivered the initial draft of the merger agreement, which included, among other things: (i) a thirty-day go-shop period, (ii) a Company termination fee equal to 2.0% of equity value of EFI if such fee was payable by EFI to affiliates of Siris during the “go-shop” period and 4.0% of the equity value of EFI if such fee was payable by EFI to affiliates of Siris after the expiration of the “go-shop” period, (iii) a reverse termination fee equal to 5.0% of equity value payable by investment funds affiliated with Siris to EFI if the merger agreement was terminated by EFI as a result of a financing failure by affiliates of Siris and (iv) the assumption of EFI’s restricted stock units, whether time based or performance based, subject to the same vesting schedule and terms and conditions applicable to such Company restricted stock units. On March 25, 2019, the closing price of our common stock on the Nasdaq Global Select Market was $25.61 per share.

On March 26, 2019, representatives of Party D informed representatives of Morgan Stanley that Party D was potentially interested in acquiring all of EFI, but that Party D’s purchase price would be in the mid-thirties per share of our common stock and that it would be a stretch for Party D to offer $36.00 per share of our common stock. Representatives of Morgan Stanley communicated to representatives of Party D that a $36.00 per share of our common stock offer to acquire the Company would not be the highest bid that EFI had received as of such time. Representatives of Party D then informed representatives of Morgan Stanley that Party D would cease to conduct further work with respect to a potential acquisition of EFI or the Fiery business. On March 26, 2019, the closing price of our common stock on the Nasdaq Global Select Market was $26.03 per share.

On March 28, 2019, representatives of Morgan Stanley delivered to representatives of O’Melveny a relationship disclosure letter in which Morgan Stanley disclosed certain prior and current relationships with Siris and its majority-controlled affiliates and portfolio companies (which we refer to as the “Relationship Disclosure Letter”), including that (i) in the two years prior to the date of the Relationship Disclosure Letter, Morgan Stanley and its affiliates had received fees from Siris and its majority-controlled affiliates and portfolio companies (“Siris Capital Entities”) in a range specified by Morgan Stanley in the Relationship Disclosure Letter, (ii) that Morgan Stanley and its affiliates have provided certain Siris Capital Entities a commitment to fund a revolving credit facility (which at such time was undrawn) and (iii) that no member of the senior deal team of Morgan Stanley that advised the Board in connection with the contemplated merger with affiliates of Siris was involved in the financial advisory and financing services for the Siris Capital Entities as referenced in items (i) and (ii) immediately above. The Relationship Disclosure Letter also stated that, in the prior two years from the date of the Relationship Disclosure Letter, Morgan Stanley and its affiliates have not been engaged on any financial advisory or financing assignments for Party D or its related parties and have not received any fees for such services from Party D or its related parties during such period. Thereafter, management, representatives of Morgan Stanley and representatives of O’Melveny had multiple discussions regarding the Relationship Disclosure Letter, including the amount and timing of the fees earned by Morgan Stanley and its affiliates from Siris and its majority-controlled affiliates and portfolio companies as well as an offer from representatives of Morgan Stanley to management to pay for a portion of the fee of a second financial advisor with respect to a second fairness opinion. Subsequently, representatives of Morgan Stanley confirmed in writing that, consistent with the Relationship Disclosure Letter, in the prior two years, Morgan Stanley and its affiliates had received

 

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fees from Siris and its affiliates of approximately $29 million and that Morgan Stanley and its affiliates have provided one Siris Capital Entity a commitment to fund a revolving credit facility (which at such time was undrawn) (which we collectively refer to as the “Supplemental Confirmation”). See “The Merger—Opinion of Financial Advisors—Opinion of Morgan Stanley” beginning on page 61. The Board held multiple meetings between March 28, 2019 and April 4, 2019 in which it, together with representatives of O’Melveny, discussed, among other things, the Relationship Disclosure Letter, the Supplemental Confirmation and potential actions the Board could take relating to the Relationship Disclosure Letter and the Supplemental Confirmation. After receiving the Supplemental Confirmation, discussing the Company’s process and that during such process Morgan Stanley had acted at the instruction of the Board, including with respect to discussions with Siris, the Board ultimately determined that it was in the best interests of EFI and its stockholders to engage a second financial advisor to deliver a second fairness opinion and potentially lead and facilitate, or participate in, at the direction of the Board or any committee thereto, the “go-shop” process. Following discussions by management with multiple potential financial advisors, including Greenhill, and review by management with the Board of such discussions and potential fee arrangements with such potential financial advisors, and based on the economic terms of engagement offered by Greenhill and Greenhill’s qualifications, credibility, experience and relationship disclosures, the Board authorized management to negotiate and enter into an engagement letter with Greenhill consistent with the terms described in the section of this proxy statement entitled. See “The Merger—Opinions of Financial Advisors—Opinion of Greenhill” beginning on page 70.

Also on March 28, 2019, the Board held a special meeting. Also present were members of management, representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Representatives of Morgan Stanley provided an update to the Board regarding the current status of discussions with Siris and Party D, including that Siris had reconfirmed its written indication of interest, dated February 19, 2019, which provided that affiliates of Siris would be willing to acquire EFI for $37.00 per share of our common stock, all-cash. Mr. Grab and representatives of O’Melveny then discussed the draft merger agreement received from representatives of Siris, including the “go-shop” period and related provisions. Representatives of Morgan Stanley then discussed that, consistent with the Board’s instruction, representatives of Morgan Stanley inquired with Party D whether Party D would have an interest in acquiring all of EFI. Representatives of Morgan Stanley reported to the Board that representatives of Party D had expressed interest on March 26, 2019 in acquiring all of EFI, but that Party D had indicated that Party D’s purchase price would be in the mid-thirties per share of our common stock and that it would be a stretch for Party D to offer $36.00 per share of our common stock. Representatives of Morgan Stanley further reported that, as of March 26, 2019, representatives of Party D had ceased reviewing the potential acquisition of EFI or the Fiery business as a result of representatives of Morgan Stanley communicating that the mid-thirties, including $36.00 per share, was below the current offer the Company had received. Representatives of Morgan Stanley then left the meeting. Mr. Muir then discussed the current status of negotiations with Siris and the current status of Siris’ diligence efforts. Mr. Muir further discussed certain open issues in the draft merger agreement, including the “go-shop” period and related provisions. On March 28, 2019, the closing price of our common stock on the Nasdaq Global Select Market was $26.49 per share.

On March 29, 2019, representatives of O’Melveny delivered to representatives of Sidley Austin LLP (“Sidley”), legal counsel to Siris, a markup of the draft merger agreement, which, among other things: (i) lengthened the go-shop period to sixty days, (ii) included a Company termination fee equal to 1.0% of equity value of EFI if such fee became payable by EFI to affiliates of Siris during the go-shop period or if payable by EFI to affiliates of Siris after the expiration of the “go-shop” period as a result of accepting a superior proposal from a third party that submitted an acquisition proposal during the “go-shop” period (which we refer to herein as an “excluded party”) and 2.0% of the equity value of EFI if such fee was payable by EFI to affiliates of Siris after the expiration of the go-shop period, other than in connection with an excluded party, (iii) included a reverse termination fee equal to 7.5% of equity value of EFI payable by investment funds affiliated with Siris to EFI if the merger agreement was terminated by EFI as a result of a financing failure by affiliates of Siris or a material uncured breach of the merger agreement by affiliates of Siris such that EFI had a right to terminate the merger agreement as a result thereof, (iv) revised the deal protection mechanics and (v) removed the treatment of EFI’s restricted stock units and noted that such treatment remained subject to discussion among management and representatives of Siris.

 

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On March 30, 2019, representatives of Sidley delivered to representatives of O’Melveny a draft exclusivity agreement.

On or around April 1, 2019, Mr. Muir conveyed to a representative of Siris that EFI would not agree to enter into exclusivity with Siris.

On April 2, 2019, the Board held a special meeting. Also present were members of management and representatives of O’Melveny. The Board, together with a representative of O’Melveny, discussed the formation of a transaction committee (which we refer to as the “Transaction Committee”) that would (subject to Delaware law) (i) lead and facilitate the “go-shop” process with the assistance of Morgan Stanley, and (ii) assist the Board in the negotiation, consideration, review and evaluation of a potential acquisition of EFI. Following such discussion, the Board concluded that the Board would form the Transaction Committee. The Board then approved the formation of the Transaction Committee with Messrs. Cogan and Brown as its sole members and directed representatives of O’Melveny to meet with the Transaction Committee.

After the special meeting of the Board on April 2, 2019, the Transaction Committee held a meeting. Also present were representatives of O’Melveny. The Transaction Committee discussed, among other things, having Morgan Stanley prepare a “go-shop” process plan and timeline, which was made available to the Board on April 9, 2019 and again to the Transaction Committee on April 13, 2019.

On April 2, 2019, representatives of Sidley delivered to representatives of O’Melveny a markup of the merger agreement, which, among other things: (i) shortened the go-shop period to forty days, (ii) included a Company termination fee equal to 1.75% of equity value of EFI if such fee was payable by EFI to affiliates of Siris during the go-shop period and 3.75% of the equity value of EFI if such fee was payable by EFI to affiliates of Siris after the expiration of the go-shop period, (iii) removed the concept of an excluded party, (iv) included a reverse termination fee equal to 5.5% of equity value of EFI payable by investment funds affiliated with Siris to EFI if the merger agreement was terminated by EFI as a result of a financing failure by affiliates of Siris or a material uncured breach of the merger agreement by affiliates of Siris such that EFI had a right to terminate the merger agreement as a result thereof, (iv) revised the deal protection mechanics to generally revert back to Siris’ initial draft of the merger agreement and (v) left blank the treatment of EFI’s restricted stock units. Representatives of Sidley also delivered to representatives of O’Melveny the initial drafts of the equity commitment letter and the limited guarantee.

Also on April 4, 2019, a representative of Siris delivered to representatives of Morgan Stanley the initial draft of the debt commitment letter.

Later on April 4, 2019, representatives of O’Melveny and representatives of Sidley discussed the markup of the merger agreement delivered to representatives of O’Melveny on April 2, 2019.

On April 5, 2019, representatives of O’Melveny delivered to representatives of Sidley a markup of the merger agreement, which, among other things: (i) lengthened the “go-shop” period to forty-five days, (ii) included a Company termination fee equal to 1.0% of equity value of EFI if such fee was payable by EFI to affiliates of Siris during the go-shop period or was payable by EFI to affiliates of Siris after the expiration of the “go-shop” period in connection with a superior proposal from an excluded party and 2.5% of the equity value of EFI if such fee was payable by EFI to affiliates of Siris after the expiration of the “go-shop” period, other than with respect to a superior proposal from an excluded party, (iii) added back the concept of an excluded party that would survive for a period of seventy-five days after the date of the merger agreement, (iv) included a reverse termination fee equal to 7.0% of equity value of EFI payable by affiliates of Siris to EFI if the merger agreement was terminated by EFI as a result of a financing failure by affiliates of Siris or a breach of the merger agreement by affiliates of Siris such that EFI had a right to terminate the merger agreement as a result thereof, (iv) revised the deal protection mechanics to generally revert back to EFI’s initial markup of the merger agreement and (v) left blank the treatment of EFI’s restricted stock units. Representatives of O’Melveny also delivered to representatives of Sidley markups of the equity commitment letter and the limited guarantee.

 

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On April 6, 2019, representatives of O’Melveny delivered to representatives of Sidley the initial draft of EFI disclosure letter.

On April 7, 2019, representatives of Sidley delivered to representatives of O’Melveny a list of certain issues in the markup of the merger agreement, which, among other things: (i) accepted the “go-shop” period of forty-five days, (ii) included a Company termination fee equal to 1.5% of equity value of EFI if such fee was payable by EFI to affiliates of Siris during the go-shop period and 3.5% of the equity value of EFI if such fee was payable by EFI to affiliates of Siris after the expiration of the go-shop period, (iii) rejected the concept of an excluded party and (iv) included a reverse termination fee equal to 6.0% of equity value of EFI payable by affiliates of Siris to EFI if the merger agreement was terminated by EFI as a result of a financing failure by affiliates of Siris or a breach of the merger agreement by affiliates of Siris such that EFI had a right to terminate the merger agreement as a result thereof.

Also on April 7, 2019, the Transaction Committee held a meeting. Also present were members of management and representatives of O’Melveny. Mr. Grab then discussed with the Transaction Committee certain of the material issues in the list of issues in the markup of the merger agreement delivered by representatives of Sidley to representatives of O’Melveny. The Transaction Committee, together with Mr. Grab and a representative of O’Melveny, discussed responses to certain of such issues and instructed representatives of O’Melveny to speak with representatives of Sidley regarding EFI’s responses to such issues in the issues list.

Later on April 7, 2019, representatives of Sidley and representatives of O’Melveny discussed the list of issues provided by representatives of Sidley earlier on April 7, 2019.

Later on April 7, 2019, representatives of O’Melveny delivered to representatives of Sidley responses to the list of certain issues in the markup of the merger agreement delivered by representatives of Sidley earlier in the day on April 7, 2019, which, among other things: (i) included a Company termination fee equal to 1.15% of equity value of EFI if such fee was payable by EFI to affiliates of Siris during the “go-shop” period or was payable by EFI to affiliates of Siris after the expiration of the “go-shop” period in connection with a superior proposal from an excluded party and 2.75% of the equity value of EFI if such fee was payable by EFI to affiliates of Siris after the expiration of the “go-shop” period, other than with respect to a superior proposal from an excluded party, (ii) added back the concept of an excluded party that would survive for a period of twenty days after the expiration of the “go-shop” period and (iii) included a reverse termination fee equal to 6.5% of equity value of EFI payable by affiliates of Siris to EFI if the merger agreement was terminated by EFI as a result of a financing failure by affiliates of Siris or a breach of the merger agreement by affiliates of Siris such that EFI had a right to terminate the merger agreement as a result thereof.

Also on April 7, 2019, management shared with representatives of Siris a draft of the press release announcing the potential acquisition of EFI by affiliates of Siris and drafts of other communications to employees, customers and other business relationships of EFI relating to the potential acquisition of EFI by affiliates of Siris.

On April 8, 2019, the Board held a special meeting. Also present were members of management and representatives of O’Melveny. Mr. Grab summarized certain material points in the issues list delivered by representatives of Sidley to representatives of O’Melveny on April 7, 2019, including, among others, that Siris had proposed a Company termination fee equal to 1.5% of equity value of EFI if such fee was payable by EFI to affiliates of Siris during the go-shop period and 3.5% of the equity value of EFI if such fee was payable by EFI to affiliates of Siris after the expiration of the “go-shop” period and that Siris had rejected the concept of an excluded party. Mr. Grab then reported to the Board that representatives of O’Melveny had discussions with representatives of Sidley and that representatives of O’Melveny had, at the instruction of management, proposed responses to certain of the items listed in the issues list, including that (i) EFI termination fee would equal 1.15% of equity value of EFI if such fee was payable by EFI to affiliates of Siris during the “go-shop” period or was payable by EFI to affiliates of Siris after the expiration of the “go-shop” period in connection with a superior

 

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proposal from an excluded party and would equal 2.75% of the equity value of EFI if such fee was payable by EFI to affiliates of Siris after the expiration of the “go-shop” period, other than with respect to a superior proposal from an excluded party, (ii) added back the concept of an excluded party that would survive for a period of twenty days after the expiration of the go-shop period and (iii) included a reverse termination fee equal to 6.5% of equity value of EFI payable by affiliates of Siris to EFI if the merger agreement was terminated by EFI as a result of a financing failure by affiliates of Siris or a breach of the merger agreement by affiliates of Siris such that EFI had a right to terminate the merger agreement as a result thereof. Mr. Olin then discussed the potential engagement of Greenhill as a second financial advisor and provided the Board with background information on, and the credentials of, Greenhill. Mr. Olin summarized the potential economic terms of engagement with Greenhill. The Board then discussed the qualifications and the engagement of Greenhill to provide a second fairness opinion and the potential of Greenhill leading and facilitating the “go-shop” process (as directed by the Transaction Committee and the Board), including the fees of Greenhill associated therewith. The Board then authorized management to negotiate and enter into an engagement letter with Greenhill consistent with the fee structure described by Mr. Olin to the Board, subject to the receipt of an acceptable relationship disclosure letter from Greenhill.

Also on April 8, 2019, the Transaction Committee had a meeting. Also present was Mr. Grab and representatives of O’Melveny. Mr. Grab reported to the Transaction Committee that representatives of Siris had delivered to management a post-closing organizational chart of the surviving company in the merger, which included, among other things, that Messrs. Muir and Olin would continue serving the surviving company. Mr. Grab reported to the Transaction Committee that, according to Messrs. Muir and Olin, no discussions had taken place regarding the post-merger employment and compensation arrangements between either of Messrs. Muir and Olin, on the one hand, and representatives of Siris, on the other hand. The Transaction Committee, together with representatives of O’Melveny, then discussed the contemplated fee arrangements for the potential engagement of Greenhill and whether Morgan Stanley, Greenhill or a combination thereof should, as directed by the Transaction Committee and the Board, lead and facilitate, the “go-shop” process on behalf of the Transaction Committee and the Board. The Transaction Committee discussed, among many factors, Morgan Stanley’s familiarity with EFI, Morgan Stanley’s strong relationships with potential strategic acquirers in Japan and Morgan Stanley’s disclosed relationships with Siris and its potential impact on the “go-shop” process. The Transaction Committee determined at this time not to decide whether Morgan Stanley or Greenhill, or some combination thereof, would, as directed by the Transaction Committee and the Board, lead and facilitate the “go-shop” process.

Also on April 8, 2019, representatives of O’Melveny delivered to representatives of Sidley a markup of the debt commitment letter.

Also on April 8, 2019, representatives of Greenhill delivered to management a formal relationship disclosure memorandum, which was then delivered to the Board on April 9, 2019. The relationship disclosure letter stated that, in the prior three years from the date of the such letter, Greenhill and its affiliates had not provided investment banking services for which Greenhill had received compensation for EFI or Siris (or any of affiliates of Siris identified to Greenhill) other than amounts that were paid to Greenhill under the letter agreement pursuant to which Greenhill was retained as a financial advisor to EFI in connection with the merger.

Later on April 8, 2019, representatives of Sidley delivered to representatives of O’Melveny a further markup of the debt commitment letter.

Also later on April 8, 2019, representatives of Sidley delivered to representatives of O’Melveny a markup of the merger agreement, which, among other things: (i) included a Company termination fee equal to 1.50% of equity value of EFI if such fee became payable by EFI to affiliates of Siris during the go-shop period and 3.5% of the equity value of EFI if such fee became payable by EFI to affiliates of Siris after the expiration of the go-shop period, (ii) removed the concept of an excluded party, (iii) included a reverse termination fee equal to 6.5% of equity value of EFI payable by investment funds affiliated with Siris to EFI if the merger agreement was

 

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terminated by EFI as a result of a financing failure by affiliates of Siris or a material uncured breach of the merger agreement by affiliates of Siris such that EFI had a right to terminate the merger agreement as a result thereof, (iv) revised the deal protection mechanics and (v) included the treatment of EFI’s restricted stock units. Representatives of Sidley also delivered to representatives of O’Melveny markups of the equity commitment letter and the limited guarantee.

On April 9, 2019, the Board held a special meeting. Also present were members of management, representatives of Greenhill (for a portion of the meeting), representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Mr. Muir provided an update to the Board regarding recent developments in connection with the potential acquisition of EFI by affiliates of Siris, including the revised markup of the merger agreement provided by representatives of Sidley on April 8, 2019. Mr. Grab summarized certain of the material changes in the markup of the merger agreement delivered by representatives of Sidley on April 8, 2019. Following discussion, the Board instructed that Mr. Muir speak with a representative of Siris regarding the limited progress made in EFI’s favor in the markup of the merger agreement, that representatives of O’Melveny speak with representatives of Sidley regarding the markup of the merger agreement in an attempt to resolve open issues in the draft and that if any open issues in the draft merger agreement remained, that management and representatives of Siris would attempt to resolve such issues. Representatives of Greenhill then joined the meeting. Representatives of Greenhill presented to the Board their financial analyses of the $37.00 per share of our common stock cash consideration to be received by the holders of shares of our common stock pursuant to the merger agreement. Representatives of Greenhill then left the meeting. Representatives of Morgan Stanley then joined the meeting. Representatives of Morgan Stanley presented to the Board their financial analyses of the $37.00 per share of our common stock cash consideration to be received by the holders of shares of our common stock pursuant to the merger agreement. On April 9, 2019, the closing price of our common stock on the Nasdaq Global Select Market was $28.44 per share.

Following the Board meeting on April 9, 2019, management, representatives of Siris, representatives of O’Melveny and representatives of Sidley discussed the status of the merger agreement and a plan for representatives of O’Melveny and representatives of Sidley to discuss each of the open points in the merger agreement and to create a list of any unresolved points in the merger agreement.

Later on April 9, 2019, representatives of O’Melveny and representatives of Sidley discussed the latest markup of the merger agreement.

Also later on April 9, 2019, representatives of O’Melveny delivered to representatives of Sidley the list of open points in the merger agreement, which included, among other things, the size of EFI termination fee, the concept of an excluded party and the remedies of Parent in the event of a willful and material breach of the merger agreement by EFI.

Also later on April 9, 2019, management, representatives of Siris, representatives of O’Melveny and representatives of Sidley discussed the list of open points in the merger agreement, which included, among other things, the size of EFI termination fee, the concept of an excluded party and the remedies of affiliates of Siris in the event of a willful and material breach of the merger agreement by EFI.

Also later on April 9, 2019, representatives of O’Melveny delivered to representatives of Sidley a markup of the merger agreement, which, among other things: (i) included a Company termination fee equal to 1.5% of equity value of EFI if such fee was payable by EFI to affiliates of Siris during the go-shop period or was payable by EFI to affiliates of Siris after the termination of the “go-shop” period in connection with a superior proposal from an excluded party and 3.5% of the equity value of EFI if such fee was payable by EFI to Siris after the termination of the “go-shop” period, other than with respect to a superior proposal from an excluded party, (ii) added back the concept of an excluded party that would survive for a period of fifteen days after the expiration of the “go-shop” period, (iii) accepted a reverse termination fee equal to 6.5% of equity value of EFI payable by affiliates of Siris to EFI if the merger agreement was terminated by EFI as a result of a financing

 

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failure by affiliates of Siris or a breach of the merger agreement by affiliates of Siris such that EFI had a right to terminate the merger agreement as a result thereof and (iv) revised the deal protection mechanics in accordance with the discussions earlier in such day between representatives of O’Melveny and representatives of Sidley.

Also on April 9, 2019, representatives of Sidley delivered to representatives of O’Melveny a markup of EFI disclosure letter.

On April 10, 2019, representatives of O’Melveny and representatives of Sidley discussed the latest markups of the equity commitment letter and debt commitment letter. Representatives of O’Melveny also confirmed to representatives of Sidley that O’Melveny had no further comments to the debt commitment letter.

Later on April 10, 2019, representatives of Sidley delivered to representatives of O’Melveny a markup of the merger agreement, which, among other things: (i) accepted the concept of an excluded party but provided that such concept would survive for a period of five business days after the expiration of the “go-shop” period and (ii) provided that EFI’s maximum liability for a willful and material breach of the merger agreement is 6.5% of the equity value of EFI. Representatives of Sidley also delivered to representatives of O’Melveny markups of the equity commitment letter and the limited guarantee.

Also on April 10, 2019, representatives of a potential strategic acquirer (which we refer to as “Party G”) contacted representatives of Morgan Stanley concerning Party G’s interest to explore a potential acquisition of EFI.

Also on April 10, 2019, representatives of Party D reached out to Mr. Olin and representatives of Morgan Stanley to state that while Party D understood that in terms of acquiring all of EFI, Party D’s potential purchase price per share was below the current offer received by EFI, Party D was ready to reengage on a potential strategic transaction to either acquire EFI or acquire the Fiery business.

Also on April 10, 2019, the Transaction Committee had a meeting. Also present were representatives of Morgan Stanley. Representatives of Morgan Stanley discussed that Party G had reached out to Morgan Stanley regarding potentially acquiring EFI. Representatives of Morgan Stanley reported to the Transaction Committee that Party G, at this time, could not provide any specificity on the structure of an acquisition of EFI, the purchase price for such an acquisition or the timetable. The Transaction Committee instructed Morgan Stanley to speak with representatives of Party G to obtain further clarity on a potential offer from Party G to acquire EFI.

Later on April 10, 2019, representatives of O’Melveny delivered to representatives of Sidley a markup of the merger agreement, equity commitment letter, limited guarantee and EFI disclosure letter.

On April 11, 2019, the Transaction Committee had a meeting. Also present were members of management, representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Representatives of the Morgan Stanley reported to the Committee that representatives of Party D had reached out to Mr. Olin and to representatives of Morgan Stanley to state that while Party D understood that in terms of acquiring all of EFI, Party D’s potential purchase price per share was below the current offer received by EFI, Party D was ready to reengage on a potential strategic transaction to either acquire EFI or acquire the Fiery business. Following discussion, the Transaction Committee then instructed representatives of Morgan Stanley to inquire with Party D as to the certainty of Party D with respect to acquiring all of EFI, the timing of signing a definitive agreement to acquire all of EFI and the price per share that Party D was prepared to offer to acquire all of EFI. Representatives of Morgan Stanley again discussed that Party G had reached out to Morgan Stanley regarding potentially acquiring EFI. Representatives of Morgan Stanley informed the Transaction Committee that, at the instruction of the Transaction Committee, it was planning to speak with representatives of Party G later on April 11, 2019 to obtain further clarity on a potential offer from Party G to acquire EFI. The Transaction Committee expressed its support for such a conversation and discussed that if EFI enters into a merger agreement with affiliates of Siris, Party G would have an opportunity to participate in the “go-shop” process.

 

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Representatives of Morgan Stanley then left the meeting. Mr. Muir and a representative of O’Melveny discussed the current status of discussions and negotiations with Siris, including several open points in the draft merger agreement and draft company disclosure letter relating to, among others, the disclosure of material contracts, the interim operating covenants, disclosure obligations to Siris relating to the “go-shop” process, a potential regulatory filing, the bring-down closing condition regarding the capitalization representation and the termination date of the merger agreement. The Transaction Committee then discussed the potential impact of this process with Siris on the operations of the business of EFI and that the timing of process with Siris had, as of this date, taken longer than expected. The Transaction Committee then discussed the inquiry from Party D and the limited diligence that Party D had conducted to date with respect to a potential acquisition of all of EFI. The Transaction Committee then instructed management to inform representatives of Siris that the Transaction Committee was directing management to return its focus on the operation of the business of EFI. The Transaction Committee further informed management that while the Transaction Committee would not prohibit management from continuing negotiations and discussions with Siris regarding a potential acquisition of EFI, the Transaction Committee expected management to return its focus to the operation of the business of EFI.

Later on April 11, 2019, Mr. Muir spoke with a representative of Siris regarding the Transaction Committee’s position that management return its focus to the operation of the business of EFI, but that management was not prohibited from continuing to discuss with Siris the potential acquisition of EFI by affiliates of Siris.

Later on April 11, 2019, the Board held a special meeting. Also present were members of management and representatives of O’Melveny. Mr. Muir discussed certain of the material open issues in the draft merger agreement between EFI and affiliates of Siris and summarized for the Board the results of the meeting of the Transaction Committee held earlier in the day on April 11, 2019. Following discussion, the Board expressed its support for the Transaction Committee’s position regarding management returning its focus to the operation of the business of EFI.

Later on April 11, 2019, Messrs. Olin and Grab and a representative of Siris, along with representatives of O’Melveny and representatives of Sidley, discussed the merger agreement and the EFI disclosure letter, including the interim operating covenants.

Also on April 11, 2019, representatives of Sidley delivered to representatives of O’Melveny a markup of EFI disclosure letter.

Also on April 11, 2019, representatives of Morgan Stanley spoke with representatives of Party G regarding Party G’s potential interest in acquiring EFI. Representatives of Party G again expressed an interest in potentially acquiring EFI. Representatives of Morgan Stanley communicated that EFI was in advanced discussions regarding a potential acquisition of EFI and inquired with Party G how quickly Party G could provide a proposal to potentially acquire EFI. Representatives of Party G indicated to representatives of Morgan Stanley that Party G would need several weeks to get organized to submit a proposal to potentially acquire EFI.

Also on April 11, 2019, representatives of Morgan Stanley spoke with representatives of Party D. Representatives of Party D stated that Party D remained interested in a potential acquisition of EFI and indicated that Party D’s potential price per share of our common stock would still be in the mid-thirties. Representatives of Party D indicated that it would take approximately three weeks from re-commencing diligence to provide an offer to acquire EFI. On April 11, 2019, the closing price of our common stock on the Nasdaq Global Select Market was $29.19 per share.

On April 12, 2019, representatives Greenhill and EFI executed an engagement letter. See “The Merger—Opinions of Financial Advisors—Opinion of Greenhill” beginning on page 70.

Also on April 12, 2019, representatives of O’Melveny delivered to representatives of Sidley a markup of the merger agreement and EFI disclosure letter.

 

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Later on April 12, 2019, representatives of O’Melveny had multiple conversations with representatives of Sidley regarding the EFI disclosure letter.

Later on April 12, 2019, representatives of Sidley delivered to representatives of O’Melveny markups of the merger agreement, equity commitment letter, limited guarantee and EFI disclosure letter. With the authorization of management, representatives of O’Melveny thereafter on April 12, 2019 confirmed to representatives of Sidley that EFI had no further comments on such transaction documents.

On April 13, 2019, the Transaction Committee had a meeting. Also present were members of management (for a portion of the meeting) and a representative of O’Melveny (for a portion of the meeting). Mr. Muir updated the Transaction Committee regarding the current status of discussion and negotiations with Siris and noted for the Transaction Committee that, subject to approval by the Board, management and representatives of Siris had reached agreement on all of the open points in the draft merger agreement and other transaction documents. The Transaction Committee then again discussed the “go-shop” process and whether Greenhill or Morgan Stanley should lead and facilitate such process at the direction of the Transaction Committee and the Board, including the potential fees of the financial advisors. The Transaction Committee requested the “go-shop” process plans that had previously been prepared by Morgan Stanley and Greenhill (which were subsequently delivered to the Transaction Committee). The Transaction Committee then held a discussion without members of management or the representative of O’Melveny.

On April 14, 2019, the Board held a special meeting. Also present were members of management, representatives of Greenhill (for a portion of the meeting), representatives of Morgan Stanley (for a portion of the meeting) and representatives of O’Melveny. Mr. Muir reviewed the agenda for this meeting. Representatives of Greenhill then joined the meeting. Representatives of Greenhill again briefly reviewed and updated the financial analyses they had discussed with the Board on April 9, 2019. At the request of the Board, a representative of Greenhill then delivered Greenhill’s oral opinion for the benefit of the Board, which was subsequently confirmed in writing the same day, to the effect that, as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Greenhill as set forth in the written opinion letter, Greenhill was of the opinion on April 14, 2019 that the merger consideration to be received by the holders of shares of EFI common stock (other than EFI, Siris, Merger Sub or their respective subsidiaries and other than holders who properly exercise dissenters rights) pursuant to the merger agreement is fair, from a financial point of view, to such holders. The full text of the written opinion of Greenhill, dated April 14, 2019, which sets forth, among other matters, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Greenhill in rendering its opinion, is attached as Annex C to this proxy statement. See also “The Merger—Opinions of Financial Advisors—Opinion of Greenhill” beginning on page 70. Representatives of Greenhill then left the meeting. Representatives of Morgan Stanley then joined the meeting. Representatives of Morgan Stanley updated the Board on its discussions with representatives of Party D and representatives of Party G on April 11, 2019. Representatives of Morgan Stanley again briefly reviewed and updated the financial analyses they had discussed with the Board on April 9, 2019. At the request of the Board, a representative of Morgan Stanley rendered for the benefit of the Board Morgan Stanley’s oral opinion, subsequently confirmed in writing on April 14, 2019, that as of such date and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in the written opinion, the consideration to be received by the holders of shares of common stock (other than excluded shares or dissenting shares) pursuant to the merger agreement was fair from a financial point of view to such holders. The full text of the written opinion of Morgan Stanley, dated April 14, 2019, which sets forth, among other matters, the assumptions made, procedures followed, matters considered and limitations and qualifications of the review undertaken by Morgan Stanley in rendering its opinion, is attached as Annex B to this proxy statement. See also “The Merger—Opinions of Financial Advisors—Opinion of Morgan Stanley” beginning on page 61. Representatives of O’Melveny then reviewed the material terms in the merger agreement and discussed the contemplated amendment to EFI’s Amended and Restated Bylaws, which provided for Delaware to be EFI’s exclusive forum for certain litigation involving EFI. After discussion among the directors,

 

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the Board unanimously (i) adopted the merger agreement and the transactions contemplated thereby, including the merger; (ii) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and fair to, and in the best interests of, EFI and EFI stockholders; (iii) directed that the merger agreement be submitted to EFI stockholders for their adoption; and (iv) resolved to recommend that EFI stockholders adopt the merger agreement. The Board also unanimously approved the contemplated amendment to EFI’s Amended and Restated Bylaws, which provided for Delaware to be EFI’s exclusive forum for certain litigation involving EFI. The Board also approved a modification to Ms. Durbin Chaffin’s initial equity award to provide for full accelerated vesting of the award to the extent it is outstanding and otherwise unvested as of immediately prior to the effective time of the merger.

Following the special meeting of the Board on April 14, 2019, EFI and affiliates of Siris entered into the merger agreement and on April 15, 2019 issued a press release announcing the proposed merger prior to the opening of the trading in EFI’s common stock. On April 12, 2019, the last trading day prior to April 14, 2019, the closing price of our common stock on the Nasdaq Global Select Market was $29.40 per share.

On April 15, 2019, the Transaction Committee held a meeting, which was also attended by representatives of O’Melveny. The Transaction Committee discussed whether to authorize Morgan Stanley, Greenhill or a combination thereof to lead and facilitate, together with the Transaction Committee and the Board, the “go-shop” process. The Transaction Committee discussed, among other things, Morgan Stanley’s familiarity with EFI, Morgan Stanley’s contacts with potential strategic acquirers in Japan and Morgan Stanley’s disclosed relationships with Siris and its potential impact on the “go-shop” process. Following the discussion, the Transaction Committee determined that it was in the best interests of EFI and its stockholders to authorize Morgan Stanley to lead and facilitate, as directed by the Transaction Committee and the Board, the “go-shop” process.

Since the execution of the merger agreement, at the direction of the Transaction Committee and the Board and in connection with the “go-shop” period, which expired at 12:01 a.m. New York City time on May 29, 2019, representatives of Morgan Stanley contacted 39 potential acquirers, comprising 19 potential strategic acquirers, including Party G, and 20 potential financial acquirers, including Party D, to gauge interest in such potential acquirers providing an acquisition proposal. During the “go-shop” period, EFI executed confidentiality agreements with two potential acquirers (not including Party D, because EFI and Party D previously entered into a confidentiality agreement), Party G and one additional potential financial acquirer (which we refer to as “Party H”). None of the confidentiality agreements executed during the “go-shop” period included a standstill provision. Since the execution of the merger agreement and during the “go-shop” period, each of Party D, Party G and Party H received due diligence materials and had discussions with management and representatives of Morgan Stanley regarding a potential acquisition of EFI. Representatives of Party H subsequently informed representatives of Morgan Stanley that it did not intend to submit an acquisition proposal. In addition, during this period, the Board and the Transaction Committee had multiple meetings, including with representatives of Morgan Stanley and O’Melveny, regarding the “go-shop” process.

On or around April 30, 2019, representatives of Party G requested that EFI consent, under the confidentiality agreement between EFI and Party G, to Party G discussing a potential acquisition of EFI with representatives of Party D, including Party D and Party G potentially submitting a joint indication of interest to acquire EFI or Party G potentially submitting an indication of interest to acquire EFI and Party D separately agreeing to acquire the Fiery business and EFI’s Productivity Software business from Party G after consummation of such acquisition of EFI by Party G. With the authorization of the Transaction Committee, EFI granted such consent. Thereafter, until approximately May 28, 2019, management (i) had multiple due diligence meetings with representatives of Party G (and its financial advisor), including in-person meetings in New Hampshire, Spain and Italy as well as additional telephonic meetings, and representatives of Party D, (ii) responded to due diligence inquiries from representatives of Party G and Party D and (iii) had discussions regarding a potential acquisition of EFI by Party G or by Party G and Party D together.

 

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On May 1, 2019, representatives of Party G delivered to management a written, non-binding offer to potentially acquire EFI in an all-cash transaction. The offer price from Party G was $39.50 per share of our common stock, which offer price was inclusive of the EFI termination fee of $25.37 million, and as a result reflected a per share price net to the EFI stockholders of approximately $38.85 in cash.

On May 3, 2019, representatives of Party G delivered to Mr. Muir a written, non-binding indication of interest providing for the acquisition of the Company in an all-cash transaction for $38.85 per share of our common stock and stating that Party G was prepared to finance the transaction with a combination of cash on Party G’s balance sheet and Party G’s existing commitment line with its relationship banks.

After May 3, 2019 through the expiration of the “go-shop” period, at the instruction of the Board and the Transaction Committee, management, representatives of Morgan Stanley and representatives of O’Melveny continued to hold due diligence meetings with, respond to due diligence inquiries from, and engage in discussions and negotiations regarding a potential acquisition of EFI with representatives of Party G and Party D and their respective advisors.

On May 16, 2019, affiliates of Siris granted EFI a limited waiver of EFI’s obligation to file with the SEC a preliminary proxy statement in connection with the merger by the date that was twenty-five business days after the execution of the merger agreement. Instead, the parties agreed that EFI would be obligated to file such preliminary proxy statement no later than June 5, 2019.

On May 17, 2019, representatives of Party G’s legal counsel delivered to representatives of O’Melveny a draft merger agreement regarding a potential acquisition of EFI by Party G. Representatives of Party G’s legal counsel advised representatives of O’Melveny that it was continuing to review such draft merger agreement and would send an updated draft merger agreement at a later date. Such an updated draft merger agreement was never ultimately sent.

Later on May 17, 2019, representatives of O’Melveny delivered to representatives of Party G’s legal counsel an initial draft of the EFI disclosure letter.

On May 27, 2019, representatives of Party G’s financial advisor informed representatives of Morgan Stanley that following discussions between Party G and Party D, Party G would not be further participating in the “go-shop” process. Shortly thereafter on May 27, 2019, representatives of Party G delivered to representatives of Morgan Stanley a letter addressed to Mr. Muir confirming that Party G would not be further participating in the “go-shop” process.

On May 28, 2019, representatives of Morgan Stanley, at the instruction of the Board, continued to have discussions with representatives of Party G regarding ways in which Party G could continue to pursue a potential acquisition of EFI. Representatives of Party G again indicated to representatives of Morgan Stanley that Party G would not continue in EFI’s process.

Ultimately, except as noted herein with respect to Party D, Party G and Party H, all potential acquirers contacted during the “go-shop” period declined to pursue an alternative transaction with EFI, and the Board did not determine any third party to be an “excluded party” under the merger agreement.

Starting at 12:01 a.m. New York City time on May 29, 2019, EFI became subject to customary “no shop” restrictions, as further described below under the heading “The Merger AgreementThe “No-Shop” Period—No Solicitation of Other Offers” beginning on page 99.

Reasons for the Merger; Recommendation of the Board

The Board unanimously recommends that you vote “FOR” the merger proposal.

The Board held numerous meetings at which the business strategies, opportunities and challenges of EFI were evaluated and potential strategic alternatives, including a sale of EFI, were considered.

 

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At a meeting held on April 14, 2019, the Board unanimously (i) determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and fair to, and in the best interests of, EFI and its stockholders, (ii) adopted the merger agreement and the transactions contemplated thereby, including the merger, (iii) directed that the merger agreement be submitted to the stockholders of EFI for their adoption, and (iv) resolved to recommend, subject to Section 5.3 of the merger agreement, that the stockholders of EFI adopt the merger agreement (which we refer to as the “Board recommendation”), all upon the terms and subject to the conditions set forth in the merger agreement.

The Board consulted with the representatives of management, O’Melveny, Morgan Stanley and Greenhill at various times and considered a number of factors, including the following principal factors (not in any relative order of importance) that the Board believes support its decision:

 

   

historical information regarding (i) EFI’s business, financial performance and results of operations, (ii) market prices, volatility and trading activity with respect to EFI common stock, and (iii) market prices with respect to other industry participants and general market indices;

 

   

current information regarding (i) EFI’s business, prospects, financial condition, operations, technology, products, services, management, competitive position and strategic business goals and objectives, (ii) general economic, industry and financial market conditions, and (iii) opportunities and competitive factors within EFI’s industry;

 

   

the prospects and likelihood of realizing superior value through remaining an independent company, risks associated with remaining an independent company, and possible alternative business strategies;

 

   

the fact that EFI will no longer exist as an independent public company and the stockholders of EFI will forego any future increase in its value as an independent public company that might result from its possible growth;

 

   

the potential for other third parties to enter into strategic relationships with or to seek to acquire EFI, including a review of management’s dealings with other possible acquirers in the past and assessment of the likelihood that a third party would offer a transaction that would be more favorable to the stockholders of EFI from a financial point of view than the merger and the other transactions contemplated by the merger agreement;

 

   

the timing of the merger and the risk that if EFI did not accept Parent’s offer on April 14, 2019, it may not have another opportunity to do so or to pursue an opportunity offering the same value and certainty of closing to the stockholders of EFI;

 

   

the oral opinion of Morgan Stanley rendered to the Board, subsequently confirmed in writing, that as of April 14, 2019 and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Morgan Stanley as set forth in the written opinion, the consideration to be received by the holders of shares of common stock (other than excluded shares or dissenting shares) pursuant to the merger agreement was fair from a financial point of view to such holders, as set forth in such opinion as more fully described below under “Opinion of Financial AdvisorsOpinion of Morgan Stanley & Co. LLC” beginning on page 61;

 

   

the oral opinion of Greenhill rendered to the Board, subsequently confirmed in writing, that as of April 14, 2019 and based upon and subject to the various assumptions made, procedures followed, matters considered, and qualifications and limitations on the scope of the review undertaken by Greenhill as set forth in the written opinion, the merger consideration to be received by the holders of shares of common stock (other than, with respect to such shares, the holders of dissenting shares or excluded shares) pursuant to the merger agreement was fair, from a financial point of view to such holders, as set forth in such opinion, as more fully described below under “Opinion of Financial AdvisorsOpinion of Greenhill & Co., LLC” beginning on page 70;

 

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the fact that the consideration payable under the merger agreement is all cash, which provides certainty of value, while eliminating the effect of long-term business and execution risk to the stockholders of EFI, compared to continuing to operate EFI as a stand-alone entity;

 

   

the consideration payable pursuant to the merger agreement represents a 25.8% premium based on the closing price per share of our common stock as of April 12, 2019;

 

   

the fact that the consideration to be received by the stockholders of EFI in the merger will be taxable for U.S. federal income tax purposes;

 

   

the fact that Parent is financing the merger consideration in part through debt and equity financing and, concurrently with the execution of the merger agreement, delivered to EFI (i) an executed commitment letter between Parent and each of the guarantors pursuant to which the guarantors have committed to provide the equity financing as described and subject to the conditions therein, and (ii) an executed debt commitment letter among Merger Sub and the lenders pursuant to which the lenders have committed, subject to the terms and conditions thereof, to provide the debt financing described therein;

 

   

the risk that the financing contemplated by the debt commitment letter and the equity commitment letters for the consummation of the merger might not be obtained;

 

   

the fact that the guarantors are providing limited guarantees in favor of EFI guaranteeing, among other things, the payment of the Parent termination fee pursuant to the terms and conditions of the merger agreement and such limited guarantees;

 

   

EFI’s right, under the merger agreement, during the “go-shop” period beginning on the date of the merger agreement and continuing until 12:01 a.m. on the 45th day after the date of the merger agreement, to solicit, initiate, propose, cause or induce the making, submission or announcement of, or encourage, facilitate or assist any competing acquisition proposal from third parties, including by providing third parties with nonpublic information pursuant to acceptable confidentiality agreements, and to engage in or enter into, continue or otherwise participate in discussions and negotiations with any third party in connection with a competing acquisition proposal in accordance with the merger agreement;

 

   

EFI’s ability to continue discussions after the end of the go-shop period and before the date that is five business days after such expiration, with any third party from which EFI received during the go-shop period a written competing proposal (i) that remains pending as of the end of the go-shop period, and (ii) that the Board determines in good faith constitutes or could reasonably be expected to lead to a superior proposal and (iii) as of any date following the end of the go-shop period, has not been withdrawn or abandoned as described in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Change” beginning on page 96;

 

   

the fact that, subject to certain exceptions, following the expiration of the go-shop period, the merger agreement precludes EFI from actively soliciting competing acquisition proposals during the “no-shop” period and obligates EFI (or its successor) to pay Parent a termination fee equal to $25.37 million or $59.2 million under specified circumstances, which could discourage the making of a competing acquisition proposal or adversely impact the price offered in such a proposal, as described in the sections entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Change” beginning on page 96 and “The Merger Agreement—The “No-Shop” Period—No Solicitation of Other Offers” beginning on page 99;

 

   

the Board’s right, under certain circumstances, to withdraw, withhold, qualify or modify its recommendation that the stockholders of EFI adopt the merger agreement in a manner adverse to Parent or Merger Sub, as described in the section entitled “The Merger Agreement—Board Recommendation Change” beginning on page 100;

 

   

the fact that EFI would be permitted, under circumstances described in the merger agreement, to terminate the merger agreement in order to enter into an agreement with respect to a superior proposal

 

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(as defined in the section entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Change”) after giving Parent the opportunity to match the superior proposal and upon payment of a termination fee equal to $25.37 million or $59.2 million, as described in the sections entitled “The Merger Agreement—Solicitation of Acquisition Proposals; Board Recommendation Change” beginning on page 96 and “The Merger Agreement—The “No-Shop” Period—No Solicitation of Other Offers” beginning on page 99;

 

   

the obligation of Parent to pay EFI a $109.94 million reverse termination fee, or approximately 6.5% of the aggregate equity value of the transaction, if the merger agreement is terminated in accordance with its terms as a result of Parent’s breach of the merger agreement or Parent fails to consummate the merger if all the mutual conditions and Parent’s conditions to closing are satisfied or waived, as described in the sections entitled “The Merger Agreement—Parent Termination Fee” beginning on page 112;

 

   

the fact that Parent and Merger Sub are newly-formed entities with essentially no assets other than their rights under the debt commitment letter and the equity commitment letters, and that EFI’s remedy in the event of the termination of the merger agreement in certain scenarios would be limited to receipt of the Parent termination fee, even in the event of a deliberate or willful breach of the merger agreement by Parent or Merger Sub;

 

   

EFI’s inability to seek specific performance to require Parent or Merger Sub to complete the merger if debt financing is not then available, and the fact that EFI’s sole remedy in connection with the merger agreement in such scenario, even for a breach by Parent or Merger Sub that is deliberate or willful, would be limited to the Parent termination fee that is payable in certain circumstances, as described in the sections entitled “The Merger Agreement—Sole and Exclusive Limitations of Liability” beginning on page 113 and “The Merger Agreement—Specific Performance” beginning on page 113;

 

   

the possible negative effects of the merger and public announcement of the merger on EFI’s financial performance, operating results and stock price and EFI’s relationships with customers, suppliers, distributors, other business partners, management and employees;

 

   

the fact that the merger agreement imposes restrictions on the conduct of EFI’s business in the pre-closing period, which may adversely affect EFI’s business in the event the merger is not completed (including by delaying or preventing EFI from pursuing business opportunities that may arise or precluding actions that would be advisable if EFI were to remain an independent company), as described in the section entitled “The Merger Agreement—Conduct of Our Business Pending the Merger” beginning on page 93;

 

   

the risks involved with the merger and the likelihood that EFI and Parent will be able to complete the merger, the possibility that the merger might not be consummated (including because of failure to obtain the required antitrust clearances) and EFI’s prospects going forward without the combination with Parent;

 

   

the substantial transaction expenses to be incurred in connection with the merger and the negative impact of such expenses on EFI’s cash reserves and operating results should the merger not be completed;

 

   

all known interests of directors and executive officers of EFI in the merger that may be different from, or in addition to, their interests as stockholders of EFI or the interests of EFI’s other stockholders generally, as described in the section entitled “The Merger—Interests of Certain Persons in the Merger” beginning on page 77;

 

   

the availability of appraisal rights to stockholders of EFI in connection with the merger; and

 

   

all other factors the Board deems relevant.

 

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The foregoing discussion of the factors considered by the Board is not intended to be exhaustive, but includes the material factors considered by the Board. In view of the variety of factors considered in connection with its evaluation of the merger, the Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Board based its recommendation on the totality of the information presented.

Portions of this explanation of the reasons for the merger and other information presented in this section are forward-looking in nature and, therefore, should be read in light of the section titled “Cautionary Statement Regarding Forward-Looking Statements.”

The Company Board unanimously recommends that you vote “FOR” the approval of the merger proposal.

Certain Company Forecasts

EFI generally does not disclose projections of its expected future financial performance or position because of, among other things, the inherent difficulty of accurately predicting financial performance for future periods and the possibility that the underlying assumptions and estimates may prove incorrect. While EFI has not generally published financial projections, in connection with EFI’s evaluation of the merger, management prepared certain financial forecasts regarding EFI for the calendar years from 2019 to 2023.

In connection with discussions between EFI and Siris regarding a potential acquisition of EFI by affiliates of Siris, management prepared non-public financial projections and operating data for EFI as a stand-alone company, without giving effect to the merger, that included (i) an unaudited forecast, which we refer to as the “base-case management projections”, (ii) an additional unaudited forecast, which we refer to as the “upside-case management projections”, and (iii) a further additional unaudited forecast, which we refer to as the “downside-case management projections.” The base-case management projections, upside-case management projections and the downside-case management projections, which collectively we refer to as the “management projections”, were initially prepared by management as of February 19, 2019, and, in the case of the base-case management projections and upside-case management projections, were thereafter updated as of March 1, 2019. The management projections were based solely upon information available to management at the time of their preparation. Management did not update the management projections to take into account a variety of detailed assumptions or other matters that have changed since the preparation of the management projections, such as EFI’s actual 2019 year-to-date financial performance, changes to general industry or economic conditions, geopolitical matters, the effects that the strategic review process may have had on EFI’s business, or the restrictions on the conduct of EFI’s business imposed by the terms of the merger agreement.

In connection with the evaluation of the indications of interest from Siris and Party D as well as from Party G, management provided the base-case management projections and the upside case management projections to Siris, Party D and Party G. The base-case management projections and the upside case management projections were provided by management to such parties with a view to showing the potential performance of EFI, subject to certain assumptions reflected therein. In addition and subject to the notes to the management projections set forth below, the management projections were provided to Morgan Stanley and Greenhill. Based on its professional judgment and experience evaluating merger and acquisition transactions, Morgan Stanley used the management projections as the basis for its financial analyses of EFI. With the consent of management, Greenhill only utilized the base-case management projections for its financial analyses of EFI. Management also provided the management projections to the Board.

 

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The management projections were not prepared with a view toward public disclosure, and the inclusion of summaries of the management projections below should not be regarded as an indication that any of EFI, Siris or any other recipient of this information considered, or now considers, it to be necessarily predictive of actual future results.

In addition, the management projections were not prepared on a basis designed to comply with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants with respect to the preparation and presentation of projections or U.S. GAAP. The management projections included in this proxy statement have been prepared by, and are the responsibility of, management. Neither EFI’s independent registered public accounting firms, which are listed as experts in the section entitled “Experts”, nor any other independent accountants, has compiled, examined or performed any procedures with respect to the management projections summarized below, nor expressed any opinion or any other form of assurance with respect to this information or its achievability. The reports of the independent registered public accounting firms included or incorporated by reference in this proxy statement relate to historical financial statements. They do not extend to the management projections and should not be read to do so.

Although presented with numerical specificity, the management projections reflect the use of variables, estimates and assumptions that are inherently uncertain, susceptible to multiple interpretations and may be beyond the control of EFI, and which may prove not to have been, or to no longer be, accurate. While in the view of management, the management projections were developed on bases that were reasonable at the time of their preparation, the management projections are subject to many risks and uncertainties. Important factors that may affect actual results and cause actual results to differ materially from the management projections include, but are not limited to, risks and uncertainties relating to EFI’s businesses (including the effects that the pending merger may have on EFI’s business), industry performance, the regulatory environment, general business and economic conditions, market and financial conditions, tax rates, transactions or events that were not anticipated at the times the management projections were prepared, various risks set forth in EFI’s reports filed with the Securities and Exchange Commission, and other factors described or referenced in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” and in the section entitled “Risk Factors”.

The management projections also do not take into account any circumstances, transactions or events occurring after the dates the management projections were prepared. Accordingly, actual results have differed and will likely continue to differ, and may differ materially, from those contained in the management projections.

None of EFI, Siris or their respective affiliates, officers, directors, or other representatives gives any EFI stockholder, or any other person, any assurance that actual results will be realized, or that future financial results of EFI will not differ materially from the management projections, and, except as otherwise required by law, none of them undertakes any obligation to update or otherwise revise or reconcile the management projections to reflect circumstances after the dates the management projections were prepared, or to reflect the occurrence of future events, even in the event that any or all of the assumptions and estimates underlying the management projections are shown to be in error.

No one has made or makes any representation to any EFI stockholder, or anyone else regarding, nor assumes any responsibility for the validity, reasonableness, accuracy or completeness of the management projections. You are cautioned not to rely on the management projections. The inclusion of the summaries of the management projections below should not be regarded as an indication that EFI, Siris or any other recipient of this information considered, or now considers, it to be material or to be a reliable prediction of actual future results. The management projections have not been included to influence EFI stockholders’ decision to vote for the merger proposal.

The summaries of the management projections included below cover multiple years, and this information by its nature becomes subject to greater uncertainty with each successive year. The management projections should be evaluated, if at all, in conjunction with the historical financial statements and other information contained in this proxy statement and EFI’s public filings with the Securities and Exchange Commission incorporated by reference herein.

 

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The following tables present summaries of the management projections. The dollar amounts below are in U.S. dollars and in millions.

Base-case management projections

The base-case management projections were based on the following key assumptions:

 

   

The base-case management projections are the management projections that reflect the most likely outcome for the business of EFI over the period of the management projections.

 

   

The base-case management projections assume modest growth acceleration of EFI’s Inkjet business and stable growth of EFI’s Productivity Software business.

 

   

The base-case management projections assume that EFI’s Fiery business experiences significant reductions with double digit percentage declines in future years, which is comparable to the prior performance of EFI’s Fiery business, including such declines that occurred following the large industry trade show, “drupa”, in 2016.

 

   

The base-case management projections assume modest operating leverage with slight margin improvement, along with certain non-linear improvements in supply chain procurement and manufacturing efficiency.

The following table presents a summary of the base-case management projections:

 

$MM, except where noted(1)    Fiscal Year  
     CY2019E     CY2020E     CY2021E     CY2022E     CY2023E  

Revenue

   $ 1,066     $ 1,124     $ 1,164     $ 1,200     $ 1,248  

Non-GAAP Operating Income

   $ 117     $ 132     $ 146     $ 151     $ 164  

Less: OI&E

   $ (4   $ (4   $ (4   $ (4   $ (4

Pre-Tax Income

   $ 113     $ 128     $ 142     $ 147     $ 160  

Less: Taxes

   $ (21   $ (24   $ (27   $ (28   $ (30

Non-GAAP Net Income

   $ 92     $ 104     $ 115     $ 119     $ 130  

Non-GAAP Earnings Per Share

   $ 2.11     $ 2.36     $ 2.58     $ 2.64     $ 2.88  

 

(1)

Each of “Non-GAAP Operating Income”, “Non-GAAP Net Income” and “Non-GAAP Earnings Per Share” are non-GAAP financial measures calculated to exclude the impact of amortization of intangible assets, stock-based compensation expense, restructuring and other expenses, acquisition-related transaction costs, costs to integrate such acquisitions into our business, incremental cost of revenue due to the fair value adjustment to inventories acquired in business acquisitions, changes in the fair value of contingent consideration including the related foreign exchange fluctuation impact, revenue recognition and accounting review costs, litigation settlements and non-cash interest expense related to EFI’s 2019 convertible senior notes and EFI’s 2023 convertible notes. For each such financial measure, EFI uses a constant non-GAAP tax rate of 19% of the Pre-Tax Income.

The following is a summary of the projected unlevered free cash flow, which inputs were provided to Morgan Stanley and Greenhill by management from the base-case management projections summarized in the table above.

 

$MM, except where noted    Fiscal Year  
     CY2019E     CY2020E     CY2021E     CY2022E     CY2023E  

Revenue

   $ 1,066     $ 1,124     $ 1,164     $ 1,200     $ 1,248  

Non-GAAP EBITDA(1)

   $ 133     $ 149     $ 163     $ 168     $ 181  

Less: Stock based compensation(2)

   $ (28   $ (30   $ (31   $ (32   $ (33

Less: Cash Taxes(3)

   $ (17   $ (19   $ (22   $ (23   $ (25

Less: Change in Net Working Capital(4)

   $ (5   $ (6   $ (4   $ (4   $ (5

Less: Capital Expenditures(5)

   $ (21   $ (22   $ (23   $ (24   $ (25

Unlevered Free Cash Flow(6)

   $ 62     $ 71     $ 83     $ 86     $ 94  

 

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(1)

Non-GAAP EBITDA is a non-GAAP financial measure calculated by starting with Non-GAAP Operating Income and adding back depreciation

(2)

Per guidance from management, Morgan Stanley derived stock based compensation by taking 2.65% of the total revenue of EFI per year and Greenhill derived stock based compensation by taking 2.7% of the total revenue of EFI per year. As a result, for calendar years 2019 and 2023, Greenhill used $(29) and $(34), respectively, for stock based compensation.

(3)

Calculated as 19% of the difference between Non-GAAP Operating Income and stock based compensation (as each of Morgan Stanley and Greenhill calculated stock based compensation pursuant to Note 2 above, which resulted in Greenhill deriving $(22) for taxes for calendar year 2022).

(4)

Net working capital projections are based on EFI’s prior performance and the forecast of a shift to more industrial inkjet revenue, which is more capital intensive for EFI than its software businesses.

(5)

Capital expenditure projections are based on prior levels of capital expenditure trends of EFI combined with the expectation of capital requirements to support increased industrial inkjet revenue.

(6)

Unlevered Free Cash Flow” is a non-GAAP financial measure calculated by starting with Non-GAAP EBITDA and subtracting stock based compensation (as each of Morgan Stanley and Greenhill calculated stock based compensation pursuant to Note 2 above, which resulted in Greenhill deriving $82 for Unlevered Free Cash Flow for calendar year 2021), cash taxes paid, change in working capital and capital expenditures.

Upside-case management projections

The upside-case management projections were based on the following key assumptions:

 

   

The upside-case management projections were viewed by management as a “stretch” case with low likelihood of achievement.

 

   

The upside-case management projections assume that the growth of EFI is driven by strong performance of EFI’s product Nozomi, with EFI’s Inkjet business achieving double digit percentage revenue growth assisted by accelerating textile and display graphics revenue.

 

   

The upside-case management projections assume EFI’s Productivity Software business reaccelerates and EFI’s Fiery business contributes low single-digit percentage growth in contrast to prior cyclical business trends.

 

   

The upside-case management projections assumes significant leverage achieved with rapid top line growth.

The following table presents a summary of the upside-case management projections:

 

$MM, except where noted(1)    Fiscal Year  
     CY2019E     CY2020E     CY2021E     CY2022E     CY2023E  

Revenue

   $ 1,066     $ 1,161     $ 1,257     $ 1,354     $ 1,455  

Non-GAAP Operating Income

   $ 117     $ 150     $ 187     $ 219     $ 250  

Less: OI&E

   $ (4   $ (4   $ (4   $ (4   $ (4

Pre-Tax Income

   $ 113     $ 146     $ 183     $ 215     $ 246  

Less: Taxes

   $ (21   $ (28   $ (35   $ (41   $ (47

Non-GAAP Net Income

   $ 92     $ 118     $ 149     $ 174     $ 199  

Non-GAAP Earnings Per Share

   $ 2.11     $ 2.69     $ 3.34     $ 3.87     $ 4.43  

 

(1)

Each of “Non-GAAP Operating Income”, “Non-GAAP Net Income” and “Non-GAAP Earnings Per Share” are non-GAAP financial measures calculated to exclude the impact of amortization of intangible assets, stock-based compensation expense, restructuring and other expenses, acquisition-related transaction costs, costs to integrate such acquisitions into our business, incremental cost of revenue due to the fair value adjustment to inventories acquired in business acquisitions, changes in the fair value of contingent

 

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  consideration including the related foreign exchange fluctuation impact, revenue recognition and accounting review costs, litigation settlements and non-cash interest expense related to EFI’s 2019 convertible senior notes and EFI’s 2023 convertible notes. For each such financial measure, EFI uses a constant non-GAAP tax rate of 19% of the Pre-Tax Income.

The following is a summary of the projected unlevered free cash flow, which inputs were provided to Morgan Stanley and Greenhill by management from the upside-case management projections summarized in the table above. Greenhill did not derive unlevered free cash flow for the upside-case management projections.

 

$MM, except where noted    Fiscal Year  
     CY2019E     CY2020E     CY2021E     CY2022E     CY2023E  

Revenue

   $ 1,066     $ 1,161     $ 1,257     $ 1,354     $ 1,455  

Non-GAAP EBITDA(1)

   $ 133     $ 167     $ 205     $ 237     $ 271  

Less: Stock based compensation

   $ (28   $ (31   $ (33   $ (36   $ (39

Less: Cash Taxes(2)

   $ (17   $ (23   $ (29   $ (35   $ (40

Less: Change in Net Working Capital(3)

   $ (5   $ (10   $ (10   $ (10   $ (10

Less: Capital Expenditures(4)

   $ (21   $ (23   $ (25   $ (27   $ (29

Unlevered Free Cash Flow(5)

   $ 62     $ 81     $ 108     $ 130     $ 153  

 

(1)

Non-GAAP EBITDA is a non-GAAP financial measure calculated by starting with Non-GAAP Operating Income and adding back depreciation

(2)

Calculated as 19% of the difference between Non-GAAP Operating Income and stock based compensation.

(3)

Net working capital projections are based on EFI’s prior performance and the forecast of a shift to more industrial inkjet revenue, which is more capital intensive for EFI than its software businesses.

(4)

Capital expenditure projections are based on prior levels of capital expenditure trends of EFI combined with the expectation of capital requirements to support increased industrial inkjet revenue.

(5)

Unlevered Free Cash Flow” is a non-GAAP financial measure calculated by starting with Non-GAAP EBITDA and subtracting stock based compensation, cash taxes paid, change in working capital and capital expenditures.

Downside-case management projection

The downside-case management projections were based on the following key assumptions:

 

   

The downside-case management projections reflects significant declines across all three businesses of EFI due to broader macro factors.

 

   

The downside-case management projections experience a trough in 2020E, with all three businesses of EFI experiencing double digit revenue declines as a side effect of macro-economic slowdowns in purchasing behavior.

 

   

The downside-case management projections assume little to no margin expansion.

The following table presents a summary of the unaudited downside-case management projections:

 

$MM, except where noted(1)    Fiscal Year  
     CY2019E      CY2020E      CY2021E      CY2022E      CY2023E(2)  

Revenue

   $ 1,066      $ 924      $ 987      $ 1,083        1,170  

Non-GAAP Operating Income

   $ 117      $ 81      $ 102      $ 122      $ 141  

Non-GAAP Net Income(3)

   $ 91      $ 61      $ 79      $ 96      $ 104  

Non-GAAP Earnings Per Share(4)

   $ 2.10      $ 1.39      $ 1.79      $ 2.14      $ 2.29  

 

(1)

Each of “Non-GAAP Operating Income”, “Non-GAAP Net Income” and “Non-GAAP Earnings Per Share” are non-GAAP financial measures calculated to exclude the impact of amortization of intangible

 

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  assets, stock-based compensation expense, restructuring and other expenses, acquisition-related transaction costs, costs to integrate such acquisitions into our business, incremental cost of revenue due to the fair value adjustment to inventories acquired in business acquisitions, changes in the fair value of contingent consideration including the related foreign exchange fluctuation impact, revenue recognition and accounting review costs, litigation settlements and non-cash interest expense related to EFI’s 2019 convertible senior notes and EFI’s 2023 convertible notes. For each such financial measure, EFI uses a constant non-GAAP tax rate of 19% of pre-tax income, which was extrapolated by starting with Non-GAAP Operating Income and subtracting $4 million, $5.9 million, $4.4 million and $3.4 million for years 2019 through 2022, respectively, for OI&E.
(2)

The forecasts for CY2023 were prepared by Morgan Stanley using extrapolations, and were reviewed and consented to by management. The forecasts for CY 2023 were not made available to representatives of Greenhill.

(3)

The downside-case management projections did not expressly include detail regarding OI&E, pre-tax income or taxes. Accordingly, management derived Non-GAAP Net Income for the downside-case management projection by using $4 million for the annual interest cost of EFI for OI&E and a 19% tax rate.

(4)

Management derived Non-GAAP Earnings Per Share for the downside-case management projections by starting with Non-GAAP Operating Income and subtracting $4 million as the cash interest value for all interest payments of EFI.

The following is a summary of the projected unlevered free cash flow, which inputs were provided to Morgan Stanley by management from the downside-case management projections summarized in the table above. Greenhill did not derive unlevered free cash flow for the downside-case management projections.

 

$MM, except where noted    Fiscal Year  
     CY2019E     CY2020E     CY2021E     CY2022E     CY2023E(1)  

Revenue

   $ 1,066     $ 924     $ 987     $ 1,083       1,170  

Non-GAAP EBITDA(2)

   $ 133     $ 96     $ 118     $ 138     $ 160  

Less: Stock based compensation

   $ (28   $ (25   $ (26   $ (29   $ (31

Less: Cash Taxes(3)

   $ (17   $ (11   $ (14   $ (18   $ (21

Less: Change in Net Working Capital(4)

   $ (5   $ 14     $ (6   $ (10   $ (9

Less: Capital Expenditures(5)

   $ (21   $ (18   $ (19   $ (21   $ (23

Unlevered Free Cash Flow(6)

   $ 62     $ 57     $ 51     $ 61     $ 76  

 

(1)

The forecasts for CY2023 were prepared by Morgan Stanley using extrapolations, and were reviewed and consented to by management. The forecasts for CY 2023 were not made available to representatives of Greenhill.

(2)

Non-GAAP EBITDA is a non-GAAP financial measure calculated by starting with Non-GAAP Operating Income and adding back depreciation

(3)

Calculated as 19% of the difference between Non-GAAP Operating Income and stock based compensation.

(4)

Net working capital projections are based on EFI’s prior performance and the forecast of a shift to more industrial inkjet revenue, which is more capital intensive for EFI than its software businesses.

(5)

Capital expenditure projections are based on prior levels of capital expenditure trends of EFI combined with the expectation of capital requirements to support increased industrial inkjet revenue.

(6)

Unlevered Free Cash Flow” is a non-GAAP financial measure calculated by starting with Non-GAAP EBITDA and subtracting stock based compensation, cash taxes paid, change in working capital and capital expenditures.

Opinions of Financial Advisors

Opinion of Morgan Stanley

EFI retained Morgan Stanley to provide it with financial advisory services and a financial opinion in connection with the possible sale of EFI. The Board selected Morgan Stanley to act as its financial advisor based

 

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on Morgan Stanley’s qualifications, expertise and reputation, its knowledge of and involvement in recent transactions in EFI’s industry, its knowledge of EFI’s business and affairs and its understanding of EFI’s business based on its long-standing relationship with EFI. At the meeting of the Board on April 14, 2019, Morgan Stanley rendered its oral opinion, subsequently confirmed in writing, that as of April 14, 2019, and based upon and subject to the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of review undertaken by Morgan Stanley as set forth in the written opinion, the consideration to be received by the holders of shares of common stock (other than excluded shares or dissenting shares) pursuant to the merger agreement was fair from a financial point of view to such holders.

The full text of the written opinion of Morgan Stanley, dated as of April 14, 2019, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached to this proxy statement as Annex B and is incorporated by reference in this proxy statement in its entirety. The summary of the opinion of Morgan Stanley in this proxy statement is qualified in its entirety by reference to the full text of the opinion. You are encouraged to read Morgan Stanley’s opinion carefully and in its entirety. Morgan Stanley’s opinion was directed to the Board, in its capacity as such, and addresses only the fairness from a financial point of view of the consideration to be received by the holders of shares of common stock (other than excluded shares or dissenting shares) pursuant to the merger agreement as of the date of the opinion and does not address the relative merits of the merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. It was not intended to, and does not, constitute an opinion or a recommendation as to how EFI stockholders should vote at the stockholders’ meeting to be held in connection with the merger. The summary of the opinion of Morgan Stanley set forth below is qualified in its entirety by reference to the full text of the opinion.

In connection with rendering its opinion, Morgan Stanley, among other things:

 

   

Reviewed certain publicly available financial statements and other business and financial information of EFI;

 

   

Reviewed certain internal financial statements and other financial and operating data concerning EFI;

 

   

Reviewed certain financial projections prepared by the management of EFI;

 

   

Discussed the past and current operations and financial condition and the prospects of EFI with senior executives of EFI;

 

   

Reviewed the reported prices and trading activity for EFI common stock;

 

   

Compared the financial performance of EFI and the prices and trading activity of EFI common stock with that of certain other publicly-traded companies comparable with EFI and their securities;

 

   

Reviewed the financial terms, to the extent publicly available, of certain comparable acquisition transactions;

 

   

Participated in discussions and negotiations among representatives of EFI and Siris and their financial and legal advisors;

 

   

Reviewed the draft merger agreement in the form of the draft dated April 13, 2019, the draft commitment letters from certain equity and debt financing providers in the form of the drafts dated April 13, 2019 (which we refer to as the “commitment letters”) and certain related documents; and

 

   

Performed such other analyses, reviewed such other information and considered such other factors as Morgan Stanley deemed appropriate.

In arriving at its opinion, Morgan Stanley assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made

 

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available to them by EFI, and formed a substantial basis for its opinion. With respect to the financial projections, Morgan Stanley assumed that they were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of EFI of the future financial performance of EFI. In addition, Morgan Stanley assumed that the merger will be consummated in accordance with the terms set forth in the merger agreement without any waiver, amendment or delay of any terms or conditions, including, among other things, that Parent will obtain financing in accordance with the terms set forth in the commitment letters and that the definitive merger agreement will not differ in any material respect from the draft thereof furnished to Morgan Stanley. Morgan Stanley assumed that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed merger, no delays, limitations, conditions or restrictions will be imposed that would have a material adverse effect on the contemplated benefits expected to be derived in the proposed merger. Morgan Stanley is not a legal, tax or regulatory advisor. Morgan Stanley is a financial advisor only and relied upon, without independent verification, the assessment of EFI and its legal, tax or regulatory advisors with respect to legal, tax or regulatory matters. Morgan Stanley expressed no opinion with respect to the fairness of the amount or nature of the compensation to any of EFI’s officers, directors or employees, or any class of such persons, relative to the consideration to be received by the holders of shares of EFI common stock in the merger. Morgan Stanley did not make any independent valuation or appraisal of the assets or liabilities of EFI, and was not furnished with any such valuations or appraisals. Morgan Stanley’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it as of April 14, 2019. Events occurring after April 14, 2019 may affect Morgan Stanley’s opinion and the assumptions used in preparing it, and Morgan Stanley has not assumed any obligation to update, revise or reaffirm its opinion.

Summary of Financial Analyses

The following is a brief summary of the material analyses performed by Morgan Stanley in connection with its oral opinion and the preparation of its written opinion letter dated April 14, 2019 to the Board. The following summary is not a complete description of Morgan Stanley’s opinion or the financial analyses performed and factors considered by Morgan Stanley in connection with its opinion, nor does the order of analyses described represent the relative importance or weight given to those analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before April 12, 2019, the last full trading day prior to the meeting of the Board to approve and adopt the merger agreement. The various analyses summarized below were based on the closing price of $29.40 per share of EFI common stock as of April 12, 2019 (the last full trading day prior to the meeting of the Board to approve and adopt the merger agreement), and are not necessarily indicative of current market conditions. Some of these summaries of financial analyses include information presented in tabular format. In order to fully understand the financial analyses used by Morgan Stanley, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. The analyses listed in the tables and described below must be considered as a whole; considering any portion of such analyses and of the factors considered, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying Morgan Stanley’s opinion.

In performing the financial analysis summarized below and arriving at its opinion, Morgan Stanley used and relied upon certain financial projections provided by EFI management and referred to below as the Base Case, Upside Case, and Downside Case Projections. The financial projections are more fully described below under the caption “The Merger—Certain Company Forecasts.” In accordance with direction from EFI’s Board, Morgan Stanley used the base case, upside case, and downside case projections in its valuation analysis. In the assessment of EFI management, the base case projections reflected the most likely standalone financial forecast of EFI’s business. Morgan Stanley also used and relied upon certain financial projections based on Wall Street research reports and referred to below as the Street Case.

 

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Public Trading Comparables Analysis

Morgan Stanley performed a public trading comparables analysis, which attempts to provide an implied value of a company by comparing it to similar companies that are publicly traded. Morgan Stanley reviewed and compared certain financial estimates for EFI with comparable publicly available consensus equity analyst research estimates for companies in the printing industry, selected based on Morgan Stanley’s professional judgment and experience, that share similar business characteristics and have certain comparable operating characteristics including, among other things, similarly sized revenue and/or revenue growth rates, market capitalizations, profitability, scale and/or other similar operating characteristics (these companies are referred to herein as the comparable companies).

For purposes of this analysis, Morgan Stanley analyzed the multiple of aggregate value, which Morgan Stanley defined as fully-diluted market capitalization plus total debt, plus non-controlling interest, less cash and cash equivalents, to adjusted EBITDA, which Morgan Stanley defined as net income excluding net interest expense, income tax expense and certain other non-cash and non-recurring items, principally depreciation, amortization and stock-based compensation, as well as the multiple of price to earnings, which Morgan Stanley defined as the multiple of price per share to estimated earnings per share, for calendar years 2019 and 2020, of each of these comparable companies based on publicly available financial information compiled by Thomson Reuters for comparison purposes.

These companies and their applicable multiples, as well as the corresponding multiples for EFI based on the Street Case, were the following:

 

     2019      2020      2019      2020  

Comparable Company

   AV/EBITDA      AV/EBITDA      Price to Earnings      Price to Earnings  

Brother Industries, Ltd.

     5.4x        5.3x        11.9x        10.5x  

Canon Inc.

     6.2x        6.3x        14.6x        14.6x  

Seiko Epson Corporation

     4.7x        4.4x        11.3x        11.1x  

FujiFilm Holding Corporation

     6.3x        6.0x        14.2x        13.0x  

HP, Inc.

     6.8x        6.6x        9.2x        8.8x  

Konica Minolta, Inc.

     6.1x        5.5x        15.9x        12.9x  

Kyocera Corporation

     8.5x        7.2x        21.3x        15.7x  

Ricoh Company, Ltd.

     8.7x        7.8x        13.7x        11.0x  

Xerox Corporation

     8.3x        7.9x        9.1x        8.5x  

Zebra Technologies

     15.3x        14.4x        18.7x        17.4x  
  

 

 

    

 

 

    

 

 

    

 

 

 

EFI (Street Case)

     11.2x        10.2x        16.8x        14.2x  

Based on its analysis of the relevant metrics for each of the comparable companies and upon the application of its professional judgment and experience, Morgan Stanley selected representative ranges of aggregate value to adjusted EBITDA multiples and of price to earnings multiples and applied these ranges of multiples to the estimated relevant metric for EFI for the base case, upside case, and downside case.

 

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Based on the estimated outstanding shares of EFI common stock on a fully-diluted basis applying the treasury stock method and the net debt of EFI each as of June 30, 2019 and as provided by EFI management on March 15, 2019, Morgan Stanley calculated the estimated implied value per share of EFI common stock as of April 14, 2019 as follows:

 

Calendar Year Financial Statistic

   Selected Calendar
Year Multiple
Ranges
     Implied Value
Per Share of EFI
Common Stock ($)
 

Base Case

     

Aggregate Value to Estimated 2019 Adjusted EBITDA

     8.0x – 12.0x        20.90 – 32.56  

Price to Estimated 2019 Earnings

     12.0x – 16.0x        25.27 – 33.69  

Aggregate Value to Estimated 2020 Adjusted EBITDA

     7.0x – 11.0x        20.41 – 33.45  

Price to Estimated 2020 Earnings

     10.0x – 14.0x        23.61 – 33.05  

Upside Case

     

Aggregate Value to Estimated 2020 Adjusted EBITDA

     7.0x – 11.0x        23.19 – 37.64  

Price to Estimated 2020 Earnings

     10.0x – 14.0x        26.88 – 37.63  

Downside Case

     

Aggregate Value to Estimated 2020 Adjusted EBITDA

     7.0x – 11.0x        12.35 – 20.79  

Price to Estimated 2020 Earnings

     10.0x – 14.0x        13.89 – 19.44  

No company utilized in the public trading comparables analysis is identical to EFI. In evaluating the comparable companies, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond EFI’s control. These include, among other things, the impact of competition on EFI’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of EFI and the industry, and in the financial markets in general. Mathematical analysis (such as determining the average or median) is not in itself a meaningful method of using comparable company data.

Discounted Equity Value Analysis.

Morgan Stanley performed a discounted equity value analysis, which is designed to provide insight into the potential future equity value of a company as a function of EFI’s estimated earnings per share. The resulting equity value is subsequently discounted to arrive at an estimate of the implied present value as of June 30, 2019. In connection with this analysis, Morgan Stanley calculated a range of implied present equity values per share of common stock on a standalone basis. To calculate the discounted equity value, Morgan Stanley used calendar year EPS estimates from EFI’s financial projections for 2021 and 2022. Based upon the application of its professional judgment and experience, Morgan Stanley applied a range of price to earnings multiples (based on the range of price to earnings multiples for the comparable companies and the growth profile of EFI) to these estimates and applied a discount rate of 11.0%, which rate was selected based on EFI’s estimated cost of equity, which was arrived at by applying the capital asset pricing model.

The following table summarizes Morgan Stanley’s analysis:

 

Based on Calendar Year 2021 EPS    Comparable Company
Representative
P/E Multiple
Range
     Implied Present
Value Per
Share of EFI
Common Stock ($)
 

Base Case

     12.0x – 16.0x        26.48 – 35.31  

Upside Case

     12.0x – 16.0x        34.23 – 45.64  

Downside Case

     12.0x – 16.0x        18.30 – 24.39  

 

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Based on Calendar Year 2022 EPS    Comparable Company
Representative
P/E Multiple
Range
     Implied Present
Value Per
Share of EFI
Common Stock ($)
 

Base Case

     12.0x – 16.0x        24.39 – 32.53  

Upside Case

     12.0x – 16.0x        35.76 – 47.68  

Downside Case

     12.0x – 16.0x        19.78 – 26.37  

Discounted Cash Flow Analysis

Morgan Stanley performed a discounted cash flow analysis, which is designed to provide an implied value of a company by calculating the present value of the estimated future cash flows and terminal value of such company. Morgan Stanley calculated a range of equity values per share for EFI common stock based on a discounted cash flow analysis to value EFI as a stand-alone entity. Morgan Stanley utilized estimates from the base case, upside case, and downside case for purposes of its discounted cash flow analysis, as more fully described below.

Morgan Stanley first calculated, utilizing estimates provided by EFI management, the estimated unlevered free cash flow which is defined as adjusted EBITDA less (1) stock-based compensation expense, (2) taxes, (3) capital expenditures, and (4) changes in net working capital. For a summary of the unlevered free cash flow inputs provided by EFI management, see “The Merger—Certain Company Forecasts” beginning on page 56. The base case and upside case each included estimates prepared by EFI management through 2023. The downside case included estimates provided by EFI management through 2022. EFI management reviewed and approved extrapolations for the downside case management projections for 2023. Morgan Stanley calculated the net present value of free cash flows for EFI for the years 2019 through 2023 (using one half of the 2019 projected free cash flow). Based on perpetual growth rates of 1% to 3%, selected based upon the application of its professional judgment and experience, Morgan Stanley calculated terminal values at the midpoint of year 2023. The free cash flows and terminal values were discounted to present values as of June 30, 2019 at a discount rate ranging from 8.8% to 10.2%, which discount rates were selected, upon the application of Morgan Stanley’s professional judgment and experience, to reflect an estimate of EFI’s weighted average cost of capital, which reflects the weighted average (by value) of (i) the estimated cost of equity determined by the application of the capital asset pricing model and (ii) the estimated cost of debt.

Based on the outstanding shares of EFI common stock on a fully-diluted basis applying the treasury stock method and the net debt of EFI each as of June 30, 2019 and as provided by EFI management on March 15, 2019, Morgan Stanley calculated the estimated implied value per share of EFI common stock as June 30, 2019 as follows:

 

     Implied
Value Per
Share of EFI
Common Stock ($)
 

Base Case

     19.24 – 30.08  

Upside Case

     31.18 – 47.78  

Downside Case

     14.79 – 23.56  

Precedent Transactions Analysis

Morgan Stanley performed a precedent transactions analysis, which is designed to imply a value of a company based on publicly available financial terms and premia of selected transactions. Morgan Stanley compared publicly available statistics for printing and hardware transactions with consideration greater than $100 million since 2005 for printing transactions and 2009 for hardware transactions. For such transactions, Morgan Stanley noted the multiple of aggregate value of the transaction to (i) the last twelve months EBITDA for which financial information was publicly available at the time of announcement for the transaction (which we refer to as “LTM”), and (ii) the estimated next twelve months (which we refer to as “NTM”) adjusted EBITDA based on publicly available information at the time of announcement.

 

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The following is a list of the printing and hardware transactions reviewed, together with the applicable multiples:

 

Selected Printing and Hardware Transactions (Target / Acquiror)

   LTM
AV/EBITDA
   NTM
AV/EBITDA

Aastra Technologies Limited / Mitel Networks Corp

   7.5x    7.3x

ARRIS International plc / CommScope Inc.

   9.4x    7.9x

CommScope Inc. / The Carlyle Group

   8.4x    7.7x

Comverse Technology / Verint Systems

   4.4x    4.7x

Domino Printing Sciences / Brother Industries

   16.2x    N.A

Emulex Corporation / Avago Technologies Limited

   8.4x    6.9x

Hypercom Corporation / VeriFone Systems Inc.

   6.0x    5.6x

IBM Printing Systems Division / Ricoh Company, Ltd.

   N.A    N.A

Ikon Office Solutions / Ricoh Company, Ltd.

   8.8x    7.9x

Imagistics International Inc. / Océ N.V.

   7.1x    N.A

Lexmark International, Inc. / Apex Technology Co., Ltd. and PAG Asia Capital

   7.0x    6.2x

NUR Macroprinters Ltd. / Hewlett-Packard Company

   N.A    N.A

Océ N.V. / Canon Inc.

   7.7x    N.A

Polycom Inc. / Siris Capital Group, LLC

   6.7x    7.4x

Scitex Vision / Hewlett-Packard Company

   N.A    N.A

Tekelec Global, Inc. / Siris Capital Group, LLC

   11.0x    6.0x

Tandberg / Cisco Systems

   13.2x    11.5x

VUTEk, Inc. / Electronics For Imaging, Inc.

   10.0x    N.A

Xerox Corporation / FUJIFILM Holdings Corporation

   12.7x    11.4x

Zebra Technologies Corporation / Motorola Solutions, Inc. Enterprise Business

   10.9x    8.3x

Morgan Stanley reviewed precedent premia in the technology industry for all cash acquisitions greater than $250 million since 2011. Morgan Stanley noted the distributions of the following financial statistics: (1) the implied premium to the acquired company’s closing share price on the last trading day prior to announcement (or the last trading day prior to the share price being affected by acquisition rumors or similar merger-related news); and (2) the implied premium to the acquired company’s 30-trading-day volume-weighted average share price prior to announcement (or the last 30-trading-day average share price prior to the share price being affected by acquisition rumors or similar merger-related news).

 

Precedent Transactions Financial Statistic

   1-Day     30-Day Average  

Mean Premia

     37     40

Median Premia

     30     35

Based on its analysis of the relevant metrics and time frame for each of the transactions listed above and upon the application of its professional judgment and experience, Morgan Stanley selected representative ranges of implied premia and financial multiples of the transactions and applied these ranges of premia and financial multiples to the relevant financial statistic for EFI. With respect to the aggregate value amounts, Morgan Stanley referred to the estimate of net debt as of June 30, 2019 as provided by EFI management as of March 15, 2019. The following table summarizes Morgan Stanley’s analysis:

 

Precedent Transactions Financial Statistic

   Representative
Ranges
     Implied Value
Per Share of
EFI Common
Stock ($)
 

Precedent Multiples

     

Aggregate Value to Estimated LTM EBITDA (Street Case)

     8.0x – 11.0x        19.27 – 27.39  

Aggregate Value to Estimated NTM EBITDA (Street Case)

     7.0x – 10.0x        17.51 – 26.05  

Premia

     

Premium to 1-Day Prior Closing Share Price

     20% – 40%        35.28 – 41.16  

Premium to 30-Day Volume-Weighted Average Share Price

     20% – 40%        32.90 – 38.38  

 

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No company or transaction utilized in the precedent transactions analysis is identical to EFI or the Merger. In evaluating the precedent transactions, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond EFI’s control. These include, among other things, the impact of competition on EFI’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of EFI and the industry, and in the financial markets in general, which could affect the public trading value of the companies and the aggregate value and equity value of the transactions to which they are being compared. The fact that points in the range of implied present value per share of EFI derived from the valuation of precedent transactions were less than or greater than the consideration is not necessarily dispositive in connection with Morgan Stanley’s analysis of the consideration for the Merger, but is one of many factors Morgan Stanley considered.

Other Information

Morgan Stanley observed additional factors that were not considered part of Morgan Stanley’s financial analysis with respect to its opinion, but which were noted as reference data for the Board including the following information described under the sections titled “Historical Trading Ranges” and “Equity Research Analysts’ Future Price Targets.”

Historical Trading Ranges

Morgan Stanley noted the trading range with respect to the historical share prices of EFI common stock. Morgan Stanley reviewed the range of closing prices of EFI common stock for various periods ending on April 12, 2019 (the last full trading day prior to the meeting of the Board to approve and adopt the merger agreement). Morgan Stanley observed the following:

 

Period Ending April 12, 2019    Range of Trading Prices Per Share ($)  

Last 3 Calendar Months

     22.37 – 29.40  

Last 12 Calendar Months

     22.37 – 35.30  

Morgan Stanley observed that EFI common stock closed at $29.40 per share on April 12, 2019 (the last full trading day prior to the meeting of the Board to approve and adopt the merger agreement). Morgan Stanley noted that the consideration per share of EFI common stock of $37.00 pursuant to the merger agreement reflected a 26% premium to the closing price per share of EFI common stock on April 12, 2019 and a 35% premium to the volume-weighted average price per share of EFI common stock for the 30 trading days prior to and including April 12, 2019.

Equity Research Analysts’ Future Price Targets

Morgan Stanley reviewed future public market trading price targets for EFI common stock prepared and published by equity research analysts prior to April 12, 2019 (the last full trading day prior to the meeting of the Board to approve and adopt the merger agreement). These one-year forward targets reflected each analyst’s estimate of the future public market trading price of EFI common stock. The range of undiscounted analyst price targets for EFI common stock was $20.00 to $35.00 per share as of April 12, 2019. The range of analyst price targets per share for common stock discounted for one year at a rate of 11.0%, which rate was selected based on EFI’s estimated cost of equity, upon the application of Morgan Stanley’s professional judgment, was $18.01 to $31.52 per share as of April 12, 2019.

The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for EFI common stock, and these estimates are subject to uncertainties, including the future financial performance of EFI and future financial market conditions.

 

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General

In connection with the review of the merger by the Board, Morgan Stanley performed a variety of financial and comparative analyses for purposes of rendering its opinion. The preparation of a financial opinion is a complex process and is not necessarily susceptible to a partial analysis or summary description. In arriving at its opinion, Morgan Stanley considered the results of all of its analyses as a whole and did not attribute any particular weight to any analysis or factor it considered. Morgan Stanley believes that selecting any portion of its analyses, without considering all analyses as a whole, would create an incomplete view of the process underlying its analyses and opinion. In addition, Morgan Stanley may have given various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. As a result, the ranges of valuations resulting from any particular analysis described above should not be taken to be Morgan Stanley’s view of the actual value of EFI. In performing its analyses, Morgan Stanley made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial conditions and other matters, many of which are beyond EFI’s control. These include, among other things, the impact of competition on EFI’s business and the industry generally, industry growth, and the absence of any adverse material change in the financial condition and prospects of EFI and the industry, and in the financial markets in general. Any estimates contained in Morgan Stanley’s analyses are not necessarily indicative of future results or actual values, which may be significantly more or less favorable than those suggested by such estimates.

Morgan Stanley conducted the analyses described above solely as part of its analysis of the fairness from a financial point of view of the consideration to be received by the holders of shares of EFI common stock (other than excluded shares or dissenting shares) pursuant to the merger agreement and in connection with the delivery of its opinion dated April 14, 2019 to the Board. These analyses do not purport to be appraisals or to reflect the prices at which shares of EFI common stock might actually trade.

The consideration to be received by the holders of shares of EFI common stock (other than excluded shares or dissenting shares) pursuant to the merger agreement was determined through arm’s-length negotiations between EFI and Parent and was approved by the Board. Morgan Stanley provided advice to the Board during these negotiations but did not, however, recommend any specific consideration to EFI or the Board, nor did Morgan Stanley opine that any specific consideration constituted the only appropriate consideration for the merger. Morgan Stanley’s opinion did not address the relative merits of the merger as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available. Morgan Stanley’s opinion was not intended to, and does not, constitute an opinion or a recommendation as to how EFI stockholders should vote at the stockholders’ meeting to be held in connection with the merger.

Morgan Stanley’s opinion and its presentation to the Board was one of many factors taken into consideration by the Board to approve and adopt the merger agreement. Consequently, the analyses as described above should not be viewed as determinative of the opinion of the Board with respect to the consideration pursuant to the merger agreement or of whether the Board would have been willing to agree to different consideration. Morgan Stanley’s opinion was approved by a committee of Morgan Stanley investment banking and other professionals in accordance with Morgan Stanley’s customary practice.

The Board retained Morgan Stanley based upon Morgan Stanley’s qualifications, experience and expertise. Morgan Stanley is a global financial services firm engaged in the securities, investment management and individual wealth management businesses. Its securities business is engaged in securities underwriting, trading and brokerage activities, foreign exchange, commodities and derivatives trading, prime brokerage, as well as providing investment banking, financing and financial advisory services. Morgan Stanley, its affiliates, directors and officers may at any time invest on a principal basis or manage funds that invest, hold long or short positions, finance positions, and may trade or otherwise structure and effect transactions, for their own account or the accounts of their customers, in debt or equity securities or loans of Parent, EFI, the Siris Capital equity entities

 

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(as defined below) or any other company, or any currency or commodity, that may be involved in the merger, or any related derivative instrument. In addition, Morgan Stanley, its affiliates, directors or officers, including individuals working with EFI in connection with the merger, may have committed and may commit in the future to invest in private equity funds managed by Siris or its affiliates.

Under the terms of its engagement letter, Morgan Stanley provided EFI financial advisory services and a fairness opinion, described in this section and attached to this proxy statement as Annex B, in connection with the merger, and EFI has agreed to pay Morgan Stanley a fee of approximately $30.1 million for its services, $3.5 million of which became due and payable upon the execution of the merger agreement and the remainder is contingent upon the consummation of the merger. EFI has also agreed to reimburse Morgan Stanley for certain of its expenses, including certain fees of outside counsel and other professional advisors, incurred in connection with its engagement. In addition, EFI has agreed to indemnify Morgan Stanley and its affiliates, its and their respective directors, officers, agents and employees and each other person, if any, controlling Morgan Stanley or any of its affiliates against certain liabilities and expenses relating to, arising out of or in connection with Morgan Stanley’s engagement.

In addition, Morgan Stanley is counterparty to 50% of the bond hedge and warrant overlay to EFI’s 2019 convertible notes. In connection with the merger, it is likely that such bond hedge will either terminate worthless or result in a de minimis payment from Morgan Stanley to EFI. The consummation of the merger will result in the unwind of such warrant and result in a payment to be made by EFI to Morgan Stanley, in an amount to be calculated at the time of the merger, such amount currently estimated to be $2.38 million.

In the two years prior to the date of Morgan Stanley’s opinion, Morgan Stanley and its affiliates have been engaged on financial advisory and financing assignments for Siris and its affiliates and portfolio companies (which we refer to collectively as the “Siris Capital equity entities”) and have received approximately $29 million in fees for such services from the Siris Capital equity entities. Siris Partners IV, L.P. or one of its affiliates is the controlling stockholder of Parent. In addition, Morgan Stanley and its affiliates have provided one of the Siris Capital equity entities a commitment to fund a revolving credit facility (which at this time is undrawn). In the two years prior to the date of Morgan Stanley’s opinion, Morgan Stanley and its affiliates have been engaged on financing assignments for EFI, and have received approximately $1 million in fees for such services from EFI during such time. Morgan Stanley may seek to provide financial advisory or financing services to EFI, Parent, or Siris and each of their respective affiliates in the future and would expect to receive fees for the rendering of these services.

Opinion of Greenhill

EFI retained Greenhill as one of the financial advisors of the Board in connection with the merger. As part of Greenhill’s engagement, the Board requested that Greenhill evaluate the fairness, from a financial point of view, to the holders of EFI common stock (other than, with respect to such shares, the holders of dissenting shares or excluded shares (which we refer to in this section of this proxy statement as “excluded holders”)) of the merger consideration to be received by such holders pursuant to the merger agreement. At the April 14, 2019 meeting of the Board held to evaluate the merger, Greenhill rendered an oral opinion, confirmed by delivery of a written opinion dated as of April 14, 2019, to the effect that, as of such date and subject to and based on the various assumptions made, procedures followed, matters considered and qualifications and limitations of the review set forth therein, the merger consideration to be received by the holders of EFI common stock (other than the excluded holders) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

The full text of the written opinion of Greenhill, dated as of April 14, 2019, which discusses, among other things, the assumptions made, procedures followed, matters considered, and qualifications and limitations of the review undertaken by Greenhill in rendering its opinion, is attached to this document as Annex C and is incorporated herein by reference. The summary of the Greenhill opinion provided in this document is qualified in its entirety by reference to the full text of the opinion. EFI stockholders are urged

 

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to read the Greenhill opinion carefully and in its entirety. The Greenhill opinion is for the information of the Board, in its capacity as such, and addresses only the fairness, from a financial point of view, to the holders of EFI common stock (other than the excluded holders) of the merger consideration to be received by such holders pursuant to the merger agreement as of the date of the opinion. Greenhill was not requested to opine as to, and its opinion did not in any manner address, the underlying business decision to proceed with or effect the merger, or the relative merits of the merger as compared to other potential strategies or transactions that may be available to EFI. The Greenhill opinion is not intended to be and does not constitute a recommendation to the members of the Board as to whether they should approve the merger or the merger agreement or take any other action in connection therewith, nor does it constitute a recommendation as to how any stockholder should vote on any matter or otherwise act with respect to the merger.

For purposes of its opinion, Greenhill, among other things:

 

   

reviewed the draft of the merger agreement presented to the Board at its meeting on April 14, 2019 and certain related documents;

 

   

reviewed certain publicly available financial statements of EFI;

 

   

reviewed certain other publicly available business and financial information relating to EFI that Greenhill deemed relevant;

 

   

reviewed certain information, including financial forecasts and projections and other financial and operating data concerning EFI, prepared by the management of EFI and discussed such information, including the financial forecasts and projections and other data, with senior executives of EFI;

 

   

discussed the past and present operations and financial condition and the prospects of EFI with senior executives of EFI;

 

   

reviewed the historical market prices and trading activity for EFI’s common stock and analyzed its implied valuation multiples;

 

   

compared the value of the merger consideration with the trading valuations of certain publicly traded companies that Greenhill deemed relevant;

 

   

compared the value of the merger consideration to the valuation derived by discounting projected future unlevered free cash flows and a terminal value of the business at a range of discount rates that Greenhill deemed appropriate;

 

   

compared the value of the merger consideration with that received in certain publicly available transactions that Greenhill deemed relevant;

 

   

participated in discussions among representatives of EFI; and

 

   

performed such other analyses and considered such other factors as Greenhill deemed appropriate.

In arriving at its opinion, Greenhill assumed and relied upon, without independent verification, the accuracy and completeness of the information publicly available, supplied or otherwise made available to Greenhill by representatives and management of EFI for the purposes of its opinion and Greenhill further relied upon the assurances of the representatives and management of EFI that they were not aware of any facts or circumstances that would make any such information inaccurate or misleading. With respect to the financial forecasts and projections of EFI and other data with respect to EFI that were furnished or otherwise provided to Greenhill, Greenhill assumed that such financial forecasts, projections and data were reasonably prepared on a basis reflecting the best currently available estimates and good faith judgments of the management of EFI as to those matters, and Greenhill relied upon such forecasts, projections and data in arriving at its opinion. Greenhill expressed no opinion with respect to such financial forecasts, projections and data or the assumptions upon which they were based. With the consent of management, Greenhill only utilized the base-case management projections in conducting its analysis (see the section entitled “The Merger—Certain Company Forecasts”).

 

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In arriving at its opinion, Greenhill did not make any independent valuation or appraisal of the assets or liabilities of EFI, nor was Greenhill furnished with any such valuations or appraisals. Greenhill assumed that the merger will be consummated in accordance with the terms set forth in the final, executed merger agreement, which Greenhill further assumed was identical in all material respects to the April 14, 2019 draft that Greenhill reviewed, and without waiver of any material terms or conditions set forth in the merger agreement. Greenhill further assumed that all material governmental, regulatory and other consents and approvals necessary for the consummation of the merger will be obtained without any effect on EFI or the merger meaningful to Greenhill’s analysis. Greenhill’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Greenhill as of the date of its opinion. It should be understood that subsequent developments may have affected Greenhill’s opinion, and Greenhill does not have any obligation to update, revise, or reaffirm its opinion.

Greenhill is not expressing, and has not expressed, an opinion as to any aspect of the merger, other than the fairness to the holders of EFI common stock (other than the excluded holders) of the merger consideration to be received by them from a financial point of view. Greenhill has not expressed any opinion with respect to the amount or nature of any compensation to any officers, directors or employees of EFI, or any class of such persons relative to the merger consideration to be received by the holders of the EFI common stock in the merger or with respect to the fairness of any such compensation. Greenhill did not express any opinion regarding matters that require legal, regulatory, accounting, insurance, tax, environmental, executive compensation or other similar professional advice and Greenhill assumed that opinions, counsel and interpretations regarding such matters have been or will be obtained from the appropriate professional sources. Greenhill’s opinion did not address the fairness of any consideration to be received by the excluded holders pursuant to the merger agreement or otherwise.

Summary of Greenhill’s Financial Analysis

The following is a summary of the material financial and comparative analyses contained in the presentation that was made by Greenhill to the Board in connection with rendering its opinion described above. The following summary, however, does not purport to be a complete description of the analyses performed by Greenhill, nor does the order of analyses described represent the relative importance or weight given to those analyses by Greenhill. Some of the summaries of the financial analyses include information presented in tabular format. In order to fully understand the financial analyses performed by Greenhill, the tables must be read together with the full text of each summary and are not alone a complete description of Greenhill’s financial analyses. Considering the data set forth in the tables below without considering the narrative description of the financial analyses, including the methodologies and assumptions underlying such analyses, could create a misleading or incomplete view of Greenhill’s financial analysis. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before April 12, 2019, and is not necessarily indicative of current market conditions.

Selected Comparable Company Analysis

Greenhill performed a selected comparable company analysis of EFI, which compared selected financial information, ratios and multiples for EFI to the corresponding data for publicly traded companies selected by Greenhill.

The companies used in the selected comparable company analysis were:

 

   

Agfa-Gevaert N.V.

 

   

Brother Industries, Ltd.

 

   

Canon Inc.

 

   

HP Inc.

 

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Konica Minolta, Inc.

 

   

Ricoh Company, Ltd.

 

   

Sato Holdings Corporation

 

   

Xerox Corporation

 

   

Zebra Technologies Corporation

Although none of the selected companies is directly comparable to EFI, Greenhill selected each of the above-listed companies because, among other reasons, they are publicly traded companies with operations or businesses in related sectors, end markets and geographies, or for purposes of analysis may be considered similar or reasonably similar to the operations of EFI. However, because of the inherent differences between the business, operations and prospects of EFI and those of the selected companies, Greenhill believed that it was inappropriate to, and therefore did not, rely solely on the numerical results of the selected company analysis. Accordingly, Greenhill also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of EFI and the selected companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, growth prospects, revenue mix, profitability levels and degree of operational risk between EFI and the companies included in the selected company analysis. Greenhill also made judgments as to the relative comparability of the various valuation parameters with respect to those companies. Greenhill’s analysis was based on publicly available data and information for the selected companies, including information published by FactSet Research Systems Inc., public filings, and forecasts provided by EFI’s management.

For each of the selected companies, Greenhill compared financial information and reviewed, among other information, the ratio of enterprise value (which we refer to in this section of this proxy statement as “EV”) which Greenhill calculated as fully diluted equity value derived by multiplying the number of fully diluted outstanding shares of that company (calculated using the treasury stock method) as reported in such company’s most recent public filings by the company’s common stock closing share price on April 12, 2019, plus the book value of debt, plus minority interest, plus preferred equity securities, less cash and cash equivalents, less investments in unconsolidated affiliates (in each case, as reported in such company’s most recent public filings), as a multiple of estimated earnings from operations before interest expense, income taxes and depreciation and amortization (which we refer to in this section of this proxy statement as “EBITDA”) for 2019. For each of the selected companies, Greenhill also reviewed the ratio of the current stock price as of April 12, 2019 divided by the estimated diluted earnings per share (which we refer to in this section of this proxy statement as “EPS”) for 2019. This analysis resulted in a range of multiples for EV/2019E EBITDA and share price / 2019E earnings of 5.5x to 15.3x and 9.1x to 18.7x, a median (excluding EFI) of 6.9x and 12.2x, and an average (excluding EFI) of 8.0x and 13.0x, respectively.

From these analyses, based on its professional judgment and experience, Greenhill selected ranges of multiples it deemed most meaningful for its analysis. Greenhill applied such ranges of multiples to the corresponding management projections and market consensus data and, as a result, arrived at high and low implied estimated per share values for EFI’s common stock as follows:

 

     Reference
Range
     Implied
Share Prices
 

EV/2019E EBITDA (Management Projections)

     8.5x  –  13.5x      $ 22.35  –  $36.63  

EV/2019E EBITDA (Market Consensus)

     8.5x  –  13.5x      $ 18.08  –  $30.14  

Price/2019E Non-GAAP EPS (Management Projections)

     11.0x  –  16.0x      $ 23.16  –  $33.69  

Price/2019E Non-GAAP EPS (Market Consensus)

     11.0x  –  16.0x      $ 18.89  –  $27.47  

In arriving at these results, Greenhill assumed net debt of $111 million, comprised of $345 million under the 0.75% Convertible Senior Notes due 2019 (which we refer to in this section of this proxy statement as the “2019

 

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Notes”), $150 million under the 2.25% Convertible Senior Notes due 2023 (which we refer to in this section of this proxy statement as the “2023 Notes”) and $384 million in cash, which reflect EFI management’s projected balances as of June 30, 2019. The number of fully diluted shares of EFI common stock was calculated (using the treasury stock method) as an estimate of shares, award units and options projected by EFI’s management to be outstanding as of June 30, 2019.

Discounted Cash Flow

Greenhill performed a discounted cash flow analysis of EFI to determine indications of implied per share values for EFI common stock using the management projections provided by EFI. Market data utilized by Greenhill was as of April 12, 2019. The number of fully diluted shares of EFI common stock was calculated (using the treasury stock method) as an estimate of shares, award units and options projected by EFI’s management to be outstanding as of June 30, 2019. Net debt as of June 30, 2019 was estimated as $111 million, as projected by EFI’s management.

Greenhill calculated the estimated range of present values per share of EFI common stock by discounting to present value as of June 30, 2019 using a discount rate range of 9.00% to 11.00% based on EFI’s estimated weighted average cost of capital (calculated using the cost of equity derived from the capital asset pricing model and the estimated cost of debt), the sum of (1) the estimated after-tax unlevered free cash flows of EFI for fiscal year 2019 (net of the estimated first half of 2019E unlevered free cash flow per management guidance) through fiscal year 2023 (derived from EFI’s management projections), plus (2) the present value of a terminal year projection of the after-tax unlevered free cash flows of EFI for fiscal year 2023 (derived from EFI’s management projections), growing in perpetuity at a range of rates from 2.50% to 3.50%, less (3) net debt of $111 million (comprised of $345 million 2019 Notes, $150 million 2023 Notes and $384 million in cash, as projected to exist as of June 30, 2019 by EFI’s management), divided by fully diluted shares (calculated using the treasury stock method). The perpetuity growth rates were selected based on Greenhill’s judgements concerning the future sustainable grown rate of EFI. This discounted cash flow analysis resulted in an implied per share value range for EFI common stock of approximately $22.25 to $34.35. Greenhill compared this range to the consideration to be received by holders of EFI common stock (other than the Excluded Holders) pursuant to the merger agreement. See the section entitled “The Merger—Certain Company Forecasts” beginning on page 56 for additional information regarding the inputs and methodology used in these calculations.

Selected Precedent Transactions Analysis

Greenhill performed an analysis of selected recent combination transactions involving target companies in the industrial printing and industrial technology industries that in Greenhill’s judgment were relevant for its analysis. This analysis was based on public filings, press releases, and data from the Capital IQ and FactSet databases.

Although Greenhill analyzed the multiples implied by the selected transactions, none of these transactions or associated companies is identical to the merger or EFI. Accordingly, Greenhill’s analysis of the selected transactions necessarily involved complex considerations and judgments concerning the differences in financial and operating characteristics, the parties involved and the terms of their transactions and other factors that would necessarily affect the implied value of EFI versus the values of the companies in the selected transactions. In evaluating the selected business transactions, Greenhill made judgments and assumptions concerning industry performance, general business, economic, market and financial conditions and other matters. Greenhill also made judgments as to the relative comparability of those companies to EFI and judgments as to the relative comparability of those companies to EFI and judgments as to the relative comparability of the various valuation parameters with respect to the companies.

Greenhill reviewed the consideration paid in the transactions and analyzed the EVs implied by such consideration as a multiple of last-12-month (which we refer to in this section of this proxy statement as “LTM”)

 

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EBITDA (for the most recent 12-month period for which information was publicly available prior to the public announcement of the transaction).

The following table identifies the selected transactions reviewed by Greenhill in this analysis:

 

Date Announced

    

Acquiror

  

Target

  

EV ($mm)

September 2016

     HP Inc.    Samsung Electronics Co., Ltd. – Printing Solutions Business    1,005

July 2016

     Honeywell International Inc.    Intelligrated, Inc.    1,488

June 2016

     Kion Group AG    Dematic Corp.    3,250

April 2016

     Apex Technology Co., Ltd.    Lexmark International, Inc.    3,903

March 2015

     Brother Industries, Ltd.    Domino Printing Sciences plc    1,511

December 2014

     Honeywell International Inc.    Datamax-O’Neil Corporation    185

April 2014

     Zebra Technologies Corp    Motorola Solutions Inc. – Enterprise Business    3,450

December 2012

     Honeywell International Inc.    Intermec Inc.    600

November 2009

     Canon Inc.    Océ N.V.    1,787

August 2008

     Ricoh Company, Ltd.    IKON Office Solutions, Inc.    1,711

For the transactions listed above, Greenhill calculated the EV/LTM EBITDA multiples. This analysis (which excluded the (1) HP Inc. / Samsung Printing Solutions, (2) Honeywell International Inc. / Intelligrated, (3) Kion Group AG / Dematic Corp and (4) Honeywell International Inc. / Datamax-O’Neil Corporation transactions due to a lack of sufficient publicly available information) resulted in a range of EV/EBITDA multiples of 7.0x to 15.4x and an average of 10.3x. Based in part on the foregoing multiples, as well as qualitative judgments concerning differences between the characteristics of these transactions and the merger, Greenhill derived indicative enterprise values of EFI by applying multiples of EV to LTM EBITDA ranging from 11.0x to 15.5x to EFI’s 2018A EBITDA. This analysis resulted in an implied per share value range for EFI common stock of approximately $26.18 to $37.73. In arriving at these results, Greenhill assumed net debt of $140 million (comprised of $345 million 2019 Notes, $150 million 2023 Notes and $384 million in cash management, as projected to exist as of June 30, 2019 by EFI’s management, adjusted to reflect approximately $29 million in costs triggered in connection with a change of control). Greenhill compared this range to the consideration to be received by holders of EFI common stock (other than the excluded holders) in the merger.

Other Information

Greenhill observed certain additional information that was not considered part of its financial analysis for its opinion but was noted solely for informational purposes, including the following:

 

   

Greenhill performed a present value (as of April 12, 2019) of future share price analysis, which is designed to provide insight, on a theoretical basis, into the potential future value of EFI’s common stock as a function of its projected non-GAAP EPS from fiscal year 2019 through 2023 (per management estimates) and current 1-year forward price to earnings multiple, which value is subsequently discounted by a selected discount rate to arrive at a present value for EFI’s stock price. Greenhill multiplied forecasted non-GAAP EPS for the fiscal year 2019 through 2023 by a range of 1-year forward price to earnings multiples from 11.0x to 16.0x to derive a range of future values per share of EFI common stock. Greenhill then discounted this range using a discount rate of 11.0% based on an estimate of EFI’s cost of equity. The analysis, applied to management projections, resulted in a range of implied present values per share of EFI common stock of $20.86 to $34.03.

 

   

Greenhill performed an analysis of the premiums paid in transactions announced in the last five years in which the acquired company was a U.S. public company with a market capitalization between $1 billion to $2 billion and involved all-cash consideration. Using publicly available information at the time of the announcement of the relevant transaction, including information published by FactSet

 

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Research Systems Inc., Greenhill analyzed the premium in each such transaction over the closing prices one trading day, five trading days and thirty trading days, in each case, before the announcement of the applicable transaction. Based on this analysis, Greenhill applied a range of percentages to the closing share price of EFI common stock on April 12, 2019 in cash in order to derive an implied per share value range for EFI’s common stock. This methodology resulted in an implied per share value range of approximately $36.02 to $38.37 for EFI common stock.

 

   

Using market data as of April 12, 2019, Greenhill reviewed the historical trading range for EFI’s common stock for the 52 weeks up to (and including) April 12, 2019. Using information published by FactSet Research Systems Inc., the range between the intraday low and intraday high for EFI common stock over the 52-week period was $19.76 to $35.62 per share.

 

   

Using various equity research reports provided by management as of April 7, 2019 and information published by FactSet Research Systems Inc. as of April 12, 2019, Greenhill reviewed and analyzed the most recent price targets for EFI common stock published by eight equity research analysts. These targets reflect each analyst’s estimate of the future public market trading price of EFI’s common stock and are not discounted to present value. This review presented a range of $20.00 to $35.00 per share of EFI common stock, with a mean estimate of $27.00.

General

The summary set forth above does not purport to be a complete description of the analyses or data presented by Greenhill, but simply describes, in summary form, the material analyses that Greenhill conducted in connection with rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. In arriving at its opinion, Greenhill did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor, considered in isolation, supported or failed to support its opinion. Rather, Greenhill considered the totality of the factors and analyses performed in determining its opinion. Accordingly, Greenhill believes that the summary set forth above and its analyses must be considered as a whole and that selecting portions thereof, without considering all of its analyses, could create an incomplete view of the processes underlying its analyses and opinion. Greenhill based its analyses on assumptions that it deemed reasonable, including assumptions concerning general business and economic conditions and industry-specific factors. Analyses based on forecasts or projections of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties or their advisors. Accordingly, Greenhill’s analyses are not necessarily indicative of actual values or actual future results that might be achieved, which values may be higher or lower than those indicated. Moreover, Greenhill’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be bought or sold. In addition, no company or transaction used in Greenhill’s analysis as a comparison is directly comparable to EFI or the merger. Because these analyses are inherently subject to uncertainty, being based on numerous factors or events beyond the control of the parties or their respective advisors, none of EFI, Siris or Greenhill or any other person assumes responsibility if future results are materially different from those forecasts or projections.

The merger consideration to be paid pursuant to the merger agreement was determined through arms’ length negotiations between EFI and Siris and was approved by the Board. Greenhill did not provide advice to the Board during these negotiations. Greenhill did not recommend any specific merger consideration to EFI or the Board or that any specific consideration constituted the only appropriate consideration for the merger. Greenhill’s opinion did not in any manner address the underlying business decision to proceed with or effect the merger.

Greenhill’s opinion was approved by Greenhill’s fairness opinion committee.

Except in connection with issuing its opinion Greenhill did not act as a financial advisor to EFI in connection with the merger. During the course of its engagement, Greenhill was not asked by the Board to, and

 

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nor did Greenhill, solicit indications of interest from any strategic, financial or other third parties regarding the potential acquisition of or any other extraordinary corporate transaction involving EFI, and Greenhill is not expressing, and has not expressed, any view or rendering any opinion as to any solicitation process undertaken by EFI and its other financial advisors in rendering its opinion. During the three years ended April 8, 2019, Greenhill and its affiliates had not performed investment banking services for which it received compensation for EFI or Siris and its affiliates other than amounts that were paid to Greenhill under the letter agreement pursuant to which Greenhill was retained as a financial advisor to EFI in connection with the merger.

In connection with the merger, EFI paid Greenhill a fee of $1.5 million, none of which was contingent on completion of the merger or any specific conclusion. EFI has also agreed to reimburse Greenhill for certain out-of-pocket expenses incurred by it in connection with its engagement and will indemnify Greenhill against certain liabilities that may arise out of its engagement. In the event the Board requested that Greenhill deliver an additional opinion with respect to alternative proposals by a new or prior bidder, Greenhill was to be paid additional fee for each such opinion rendered. Greenhill was also to be paid a contingent fee in the event the Board requested that Greenhill, or an adviser other than Morgan Stanley, assisted in connection with marketing EFI during the “go-shop” period provided for under the merger agreement and, during the term of Greenhill’s engagement or within 12 months of termination of such engagement, an alternative transaction is consummated or a definitive agreement is entered into that subsequently resulted in an alternative transaction.

Greenhill is an internationally recognized investment banking firm regularly engaged in providing financial advisory services in connection with mergers and acquisitions. EFI selected Greenhill as its financial advisor in connection with the merger on the basis of Greenhill’s experience in similar transactions, its reputation in the investment community and its familiarity with the industries in which EFI operates.

Greenhill’s opinion was one of the many factors considered by the Board in its evaluation of the merger and should not be viewed as determinative of the views of the Board with respect to the merger.

Interests of Certain Persons in the Merger

In considering the recommendation of the Board that you vote to adopt the merger agreement, you should be aware that aside from their interests as EFI stockholders, EFI’s directors and executive officers may have interests in the merger that may be different from, or in addition to, those of EFI stockholders generally. Members of the Board were aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to EFI stockholders that the merger agreement be adopted. For more information, see the sections entitled “The Merger—Background of the Merger” beginning on page 31 and “The Merger—Reasons for the Merger; Recommendation of the Board” beginning on page 52. These interests are described in more detail below, and certain of them are quantified in the narrative and in the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for EFI’s Named Executive Officers—Golden Parachute Compensation” beginning on page 115.

Issuance of Certain Equity-Based Awards

EFI’s practice has been to make an annual award of 6,500 RSUs to each director who is not employed by EFI or any of its subsidiaries (each, a “non-employee director”), with each such award vesting in one installment on the first anniversary on the date of grant of the award, subject to the director’s continued service through the vesting date. These annual equity awards are typically granted in or about November of each year. EFI’s practice has also been that the chairman of the Board receives an additional award on the first trading day of the year of a number of RSUs equal to $30,000 divided by the closing stock price on the trading day preceding the annual grant date. EFI’s 2017 Equity Incentive Plan (“2017 Plan”) limits the number of shares that can be awarded to any one non-employee director in any calendar year to 9,750 shares (10,750 shares as to a non-employee director serving as the independent chair of the Board or as a lead independent director, and the limit does not apply to awards granted to an individual who, at the time of grant of the award, is an officer or employee of EFI). The

 

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non-employee directors’ annual equity awards that typically would have been made in or about November 2017 were not granted until January 26, 2018, and, in accordance with EFI’s practice noted above, each non-employee director at that time (i.e. Messrs. Brown, Cogan, Georgens, Kashnow and Maydan) received a grant of 6,500 RSUs on January 26, 2018. Mr. Cogan received his additional chair award, consisting of 1,015 RSUs, on January 2, 2018. Because of the delay in the grant of the annual awards intended for 2017 (the awards actually granted on January 26, 2018), when the non-employee directors’ annual equity awards were to be granted in November 2018 the number of shares available for grant within the applicable limits of the 2017 Plan was only 3,250 shares for each of Messrs. Brown, Georgens, Kashnow and Maydan and 3,235 shares for Mr. Cogan. However, EFI’s intent was that the delay in the grant of the annual awards intended for 2017 should not impact the non-employee directors’ annual awards for 2018. Accordingly, in November 2018, the Board intended that each non-employee director should receive his or her full award for 2018 (6,500 RSUs, plus the additional chair award for Mr. Cogan) in accordance with its standard practice. However, the award grants in November 2018 were limited by the annual limit on grants to non-employee directors under the 2017 Plan. As a result, the annual awards for 2018 were delivered on two grant dates as described below. On November 8, 2018, each non-employee director was awarded his or her annual director’s award for 2018 up to the applicable limit of the 2017 Plan.

At its special meeting held on April 9, 2019, the Board approved the formation of a special committee (which we refer to as the “Special Committee”) and delegated to such Special Committee the authority to grant and ratify equity awards to non-employee directors. Ms. Janice Durbin Chaffin, a member of the Board, and Mr. Gecht were appointed the sole members of the Special Committee. On April 10, 2019 the Special Committee held a meeting. Also present were representatives of O’Melveny and outside compensation consultants. At such meeting, 3,250 RSUs (the amount by which the director’s intended annual equity award for 2018 had been limited by the terms of the 2017 Plan) were awarded by the Special Committee to each of Messrs. Brown, Georgens, Kashnow and Maydan and 3,235 RSUs (the amount by which Mr. Cogan’s intended annual equity award for 2018 had been limited by the terms of the 2017 Plan) were awarded to Mr. Cogan, and the Special Committee ratified the awards that had been granted to Messrs. Brown, Cogan, Georgens, Kashnow and Maydan in November 2018 up to, but not in excess of, the limits of the 2017 Plan. Taking the November 2018 and April 2019 grants into account, each of these non-employee directors received no more than the 6,500 annual RSUs that he would have received for 2018 in accordance with EFI’s practice noted above. Each of the April 2019 RSUs will vest in one installment on the first anniversary of the grant date, subject to the director’s continued service through the vesting date and subject to accelerated vesting should a change in control of EFI occur, such as the merger. No additional RSUs were awarded to Ms. Durbin Chaffin or Mr. Gecht in April 2019 as EFI had been able to award each of them the full intended annual grant of 6,500 RSUs in November 2018.

Treatment of Outstanding Equity-Based Awards

The EFI Time-Based RSUs, EFI 2019 Annual PSUs, EFI LTIP Target PSUs, EFI LTIP Overachievement PSUs, and EFI stock options (which we collectively refer to as “EFI equity awards”), held by EFI’s executive officers and non-employee directors and outstanding as of immediately prior to the effective time of the merger will be treated in the same manner as those EFI equity awards held by other employees of EFI. None of EFI’s executive officers hold any EFI stock options, and any outstanding purchase rights they may have under the ESPP will be treated in the same manner as ESPP purchase rights held by other employees. As described further in the section titled “The Merger Agreement—Treatment of Common Stock, Stock-Based Awards and Performance Awards” beginning on page 88, EFI equity awards will be subject to the following treatment:

 

   

Time-Based Restricted Stock Unit Awards. At or immediately prior to the effective time of the merger, except with regards to any new RSU award granted after April 14, 2019, each EFI Time-Based RSU award that is then outstanding (including any RSU awards for which the applicable performance period has ended and only time-based vesting requirements remain) and either is vested or will vest within 12 months after the effective time of the merger, will be converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of

 

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our common stock subject to such portion of the EFI Time-Based RSU award multiplied by (ii) the merger consideration. At the effective time of the merger, each other EFI Time-Based RSU that is outstanding will be assumed and will be converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such portion of the EFI Time-Based RSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

 

   

Annual Bonus Restricted Stock Unit Awards. At or immediately prior to the effective time of the merger, each EFI 2019 Annual PSU award that is then outstanding will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI 2019 Annual PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including achievement of the applicable performance goals and the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

 

   

Target Long-Term Incentive Restricted Stock Unit Awards. At or immediately prior to the effective time of the merger, each EFI LTIP Target PSU award will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI LTIP Target PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing time-based vesting schedule (but in no event earlier than the end of the applicable performance period) and applicable terms and conditions immediately prior to the effective time (other than the performance-based vesting conditions), including the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

 

   

Overachievement Long-Term Incentive Restricted Stock Unit Awards. At or immediately prior to the effective time of the merger, each EFI LTIP Overachievement PSU award held by an individual employed by EFI or one of its subsidiaries will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI LTIP Overachievement PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including achievement of the applicable performance based vesting requirements, the holder’s continued employment or service through the applicable vesting date subject to any acceleration provisions applicable to the award. Any EFI LTIP Overachievement PSU award held by an individual who is not employed by EFI or one of its subsidiaries will be cancelled without payment at the effective time.

 

   

Options. At or immediately prior to the effective time of the merger, each EFI stock option that has an exercise price that is less than the merger consideration will be cancelled and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash determined by multiplying (i) the excess of the merger consideration over the exercise price of the EFI stock option by (ii) the number of shares of our common stock issuable upon exercise in full of such EFI stock option. At or immediately prior to the effective time, each EFI stock option that has an exercise price that is equal to or greater than the merger consideration (whether or not vested) shall be cancelled without payment.

 

   

Employee Stock Purchase Plan. The offering period currently in progress under the ESPP will be the final offering period under the ESPP and will be terminated on the final exercise date. No new

 

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participants may be added to the ESPP and no increases may be made to any participant’s contribution amount after April 14, 2019. On the final exercise date, the funds credited for each participant under the ESPP will be used to purchase shares of our common stock in accordance with the terms of the ESPP, and each share purchased under the ESPP that is outstanding immediately prior to the effective time will be converted into the right to receive (less any applicable withholding taxes) the merger consideration. Any funds credited to a participant under the ESPP that are not used to purchase shares in accordance with the terms of the ESPP will be refunded to such participant on or promptly following the final exercise date. No further share purchase rights will be granted or exercised under the ESPP after the final exercise date and the ESPP will be suspended. The ESPP will be terminated as of or immediately prior to the effective time of the merger.

Assuming the merger was completed on May 24, 2019, the estimated aggregate amount that would be payable to EFI’s current executive officers (i.e., Messrs. William D. Muir, Jr. and Marc Olin) for their EFI equity awards is as follows: (a) with respect to EFI Time-Based RSU awards that are either vested or will vest within 12 months after the effective time, $397,121; (b) with respect to other unvested EFI Time-Based RSU awards that may become payable after the effective time as described above, $2,109,494; (c) with respect to EFI 2019 Annual PSU awards that may become payable after the effective time as described above (and assuming such awards will be eligible to vest as to 100% of the target number of shares subject to the award), $1,555,628 (or $3,111,256 assuming the EFI 2019 Annual PSU awards would be eligible to vest as to the maximum number of PSUs subject to the award); (d) with respect to EFI LTIP Target PSU awards that may become payable after the effective time as described above, $7,094,824; and (e) with respect to EFI LTIP Overachievement PSU awards that may become payable after the effective time as described above (and assuming such awards would be eligible to vest as to the maximum number of PSUs subject to the award), $1,778,183.

Assuming the merger was completed on May 24, 2019, the estimated aggregate amount that would be payable to EFI’s non-employee directors (i.e. Messrs. Brown, Cogan, Gecht, Georgens, Kashnow and Maydan and Ms. Durbin Chaffin) as a group for their EFI equity awards is as follows: (a) with respect to vested EFI stock options, $1,532,250, and (b) with respect to EFI Time-Based RSUs (including RSUs that will vest in connection with the merger as described below), $4,985,491 (which includes $3,140,597 with respect to EFI Time-Based RSUs granted to Mr. Gecht in connection with his former service as EFI’s Chief Executive Officer). The estimated amount that would be payable to Mr. Gecht in connection with his EFI LTIP Target PSU awards (which were granted to Mr. Gecht in connection with his former service as EFI’s Chief Executive Officer and will vest in connection with the merger) is $6,277,827. As provided in the merger agreement, Mr. Gecht’s EFI LTIP Overachievement PSUs will be cancelled without payment at the effective time. EFI’s non-employee directors do not currently hold any PSU awards, other than the EFI LTIP Target PSU and EFI LTIP Overachievement PSU awards held by Mr. Gecht.

For an estimate of the amounts that would be payable to each of EFI’s named executive officers (i.e., Messrs. Muir, Olin and Gecht) in connection with any acceleration of their EFI equity awards, see the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for EFI’s Named Executive Officers—Golden Parachute Compensation” beginning on page 115. The amounts in the preceding paragraph were determined using the merger consideration of $37.00 per share.

Acceleration of Non-Employee Director RSU Awards

Pursuant to the terms of the merger agreement and the applicable award agreements, the then-outstanding RSU awards (all of which are subject to time-based vesting only) held by each of our non-employee directors other than Mr. Gecht will vest in full at the effective time of the merger.

Acceleration of Mr. Gecht’s RSU Awards

In connection with Mr. Gecht’s resignation as EFI’s Chief Executive Officer, EFI entered into a consulting agreement with Mr. Gecht that provides for a term ending on March 31, 2020 (subject to an extension through a

 

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change of control for which EFI has entered into an agreement on or prior to March 31, 2020). The agreement provides for Mr. Gecht’s then-outstanding equity awards to continue to vest during the term of the agreement (with awards granted after 2016 continuing to vest so long as he serves on the Board). The agreement also provides that upon a change of control during the term of the agreement (such as the merger), Mr. Gecht’s outstanding unvested equity awards will fully vest upon (or immediately prior to) the change of control, with performance-based awards for which the performance period has not ended prior to the date of such change of control deemed to vest at a target level of performance. In connection with this agreement, all of Mr. Gecht’s EFI Time-Based RSUs and EFI LTIP Target PSUs will fully vest at the effective time. As provided in the merger agreement, Mr. Gecht’s EFI LTIP Overachievement PSUs will be cancelled without payment at the effective time. For an estimate of the value that would be payable in connection with such acceleration of Mr. Gecht’s equity awards, see the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for EFI’s Named Executive Officers—Golden Parachute Compensation” beginning on page 115.

Employment Agreements

Each of Messrs. Muir and Olin is party to an employment agreement that provides for certain severance benefits in the event the executive officer’s employment is terminated by EFI without cause or by the executive officer for good reason (as such terms are defined in the applicable employment agreement) (which we refer to as a “qualifying termination”) on or within twenty-four months following a change of control of EFI (which we refer to as the “change of control period”). The merger will constitute a change of control for purposes of the employment agreements. Mr. Muir’s employment agreement has a one year term (ending in October 2019), and Mr. Olin’s employment agreement had a three year term (which ended April 2018), and each of the employment agreements automatically renew for additional one year terms following the expiration of the initial term of the agreement, unless either party gives sixty-days’ notice of non-renewal. A termination due to non-renewal of the term by EFI will be treated as a termination by EFI without cause in the case of Mr. Muir.

The employment agreements provide that, in the event the executive officer’s employment is terminated in a qualifying termination within the change of control period, the executive officer will be entitled to:

 

   

a lump sum payment of thirty-six months (in the case of Mr. Muir) or twelve months (in the case of Mr. Olin) of the executive officer’s base salary;

 

   

a lump sum payment equal to the bonus the executive officer would have earned had he been employed by the Company at the end of the calendar year in which the qualifying termination occurs (and as if 100% of the performance targets, if any, were attained);

 

   

continued payment or reimbursement by EFI of premiums for the executive officer’s health insurance under COBRA until the earliest of (i) the third anniversary (in the case of Mr. Muir) or the first anniversary (in the case of Mr. Olin) of the qualified termination or (ii) the date the executive ceases to be eligible for coverage under COBRA;

 

   

outplacement services (up to a maximum value of $35,000); and

 

   

full acceleration of the executive officer’s outstanding and unvested equity awards (other than equity awards granted in connection with the executive officer’s annual bonus which would be treated as described above, and with PSU awards deemed to vest at maximum performance level with respect to any open performance periods).

All payments to the executive officers in connection with a qualifying termination are contingent upon the executive officer’s execution of a general release agreement in favor of EFI. The lump sum severance payments will be paid sixty days following termination (unless a delay is required under Section 409A of the Code). Each executive officer is subject to 12 month post-termination non-disparagement and non-solicitation of employees, contractors, customers and suppliers covenants.

Mr. Muir’s employment agreement provides that in the event any payments and benefits provided to Mr. Muir under any EFI plan or agreement would cause Mr. Muir to be subject to an excise tax for “excess

 

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parachute payments” under Sections 280G and 4999 of the Code, then such payments and benefits will be reduced if and to the extent a reduction in payments or benefits would result in Mr. Muir retaining a larger amount on an after-tax basis than if Mr. Muir received all the payments and benefits.

For an estimate of the value of the payments and benefits described above that would be payable to EFI’s executive officers under their respective employment agreements upon a qualifying termination of the executive officer’s employment in connection with the merger, see the section entitled “Non-Binding, Advisory Vote on Merger-Related Compensation for EFI’s Named Executive Officers—Golden Parachute Compensation” beginning on page 115.

Indemnification and Insurance

Pursuant to the terms of the merger agreement, EFI’s directors and officers will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies. See the section entitled “The Merger Agreement—Directors’ and Officers’ Indemnification and Insurance” beginning on page 112 for a description of such ongoing indemnification and coverage obligations.

Financing of the Merger

The obligation of Parent and Merger Sub to consummate the merger is not subject to any financing condition.

The amounts committed under the financing commitments described in this section, together with cash on hand at EFI, are expected to be sufficient to enable Parent and Merger Sub to make all payments required to be made in connection with the transactions contemplated by the merger agreement. However, those amounts might be insufficient if, among other things, one or more of the parties to the financing commitments fail to fund the committed amounts in breach of such financing commitments or if the conditions to such commitments are not met. Although obtaining the proceeds of any financing, including the financing under the financing commitments, is not a condition to the consummation of the merger, the failure of Parent and Merger Sub to obtain any portion of the equity financing or debt financing (or any alternative financing) is likely to result in the failure of the merger to be completed. In that case, Parent may be obligated to pay EFI a termination fee of $109.94 million, as described in the section entitled “The Merger Agreement—Termination Fees,” beginning on page 111.

Equity Financing

In connection with the financing commitments, each of the guarantors (on a several, and not joint and several, basis) and Parent entered into the equity commitment letter pursuant to which the guarantors have agreed, subject to the terms and conditions of the equity commitment letter, to provide Parent with equity financing that collectively aggregate up to $690 million in cash available to fund a portion of the aggregate merger consideration and to pay the fees and expenses required to be paid at the closing by Parent and Merger Sub as contemplated by, and subject to the terms and conditions of, the merger agreement or the debt financing. The equity commitment letter provides, among other things, that EFI is an express third party beneficiary of certain provisions thereof in connection with EFI’s exercise of its rights related to specific performance under the merger agreement.

Debt Financing

In connection with the financing commitments, the debt commitment parties and Merger Sub entered into the debt commitment letter pursuant to which the debt commitment parties committed, subject to the terms and conditions thereof, to provide Parent with up to $875.0 million first lien term loan facility (plus, at the borrower’s election, an amount sufficient to fund any upfront fees or original issue discount required to be funded in

 

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connection therewith), (ii) a $100.0 million first lien revolving credit facility and (iii) a $225.0 million second lien term loan facility (plus, at the borrower’s election, an amount sufficient to fund any upfront fees or original issue discount required to be funded in connection therewith). The new credit facilities will be used to fund a portion of the merger consideration, to finance the repayment, prepayment or discharge of certain indebtedness of EFI, and to pay the fees and expenses required to be paid at the closing of the merger by Parent and Merger Sub as contemplated by, and subject to the terms and conditions of, the merger agreement and the debt financing. The commitments of the debt commitment parties to provide the debt financing remain in effect until the fifth business day after the end date (as defined in the section entitled “The Merger Agreement—Termination”) unless the merger agreement is terminated prior thereto or the merger is consummated without the funding of the debt financing. The availability of the debt financing is subject to limited conditions precedent, customary for financings of transactions comparable to the merger.

Limited Guarantee

Pursuant to a limited guarantee delivered by the guarantors in favor of EFI, dated as of April 14, 2019 (which we refer to as the “limited guarantee”), each of the guarantors has severally (and not jointly and severally) agreed to guarantee Parent’s obligation to pay a proportional amount (based on the amount of such guarantor’s equity financing commitment) of any termination fee or certain additional amounts as specified therein, including certain reimbursement and indemnification obligations of Parent under the merger agreement (collectively, which we refer to as the “guaranteed obligations”), subject to an aggregate cap of $109.94 million.

Subject to certain exceptions, the limited guarantee will terminate upon the earliest of:

 

   

the closing (if the merger has been consummated in accordance with the terms of the merger agreement) and the funding of the funds to the paying agent in accordance with the merger agreement;

 

   

the termination of the merger agreement in accordance with its terms under circumstances in which the Parent would not be obligated to pay the Parent termination fee (as defined and described in the section entitled “The Merger Agreement—Termination Fees” beginning on page 111);

 

   

four months after the valid termination of the merger agreement in any circumstance in which Parent would be obligated to pay the Parent termination fee;

 

   

the payment to EFI by any combination of Parent, the guarantors and/or any other person of the full amount of the guaranteed obligations with respect to the guarantors; or

 

   

the date on which EFI asserts any claim against a guarantor under the equity commitment letter (other than a claim for specific performance pursuant to the equity commitment letter) or certain related parties of the guarantors, including their former, current or future direct or indirect equity holders, controlling persons, directors, officers, employees, agents co-investors, affiliates, members, managers or general or limited partners, in violation of the limited guarantee.

Material U.S. Federal Income Tax Consequences of the Merger

The following is a summary of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) whose shares of our common stock are converted into the right to receive cash in the merger. This summary does not purport to consider all aspects of U.S. federal income taxation that might be relevant to our stockholders. For purposes of this discussion, we use the term “U.S. holder” to mean a beneficial owner of shares of our common stock that is, for U.S. federal income tax purposes:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States or any of its political subdivisions;

 

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a trust that (i) is subject to the primary supervision of a court within the United States and of which one or more U.S. persons have the authority to control all substantial decisions or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

 

   

an estate that is subject to U.S. federal income tax on its income regardless of its source.

If a partnership (including an entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds our common stock, the U.S. federal income tax treatment of a partner generally will depend on the status of the partner and the tax treatment of the partnership. A partner of a partnership holding our common stock should consult its tax advisor regarding the U.S. federal income tax consequences of the merger.

This discussion is based on the Internal Revenue Code of 1986, as amended (which we refer to as the “Code”), Treasury regulations promulgated under the Code and published rulings of the Internal Revenue Service and court decisions, all as of the date hereof. These laws are subject to change or differing interpretation, possibly on a retroactive basis, which could affect the treatment described below. In addition, we have not sought, and do not intend to seek, any ruling from the Internal Revenue Service (which we refer to as the “IRS”) with respect to the statements made and the conclusions reached in the following discussion, and no assurance can be given that the IRS will agree with the views expressed herein, or that a court will not sustain any challenge by the IRS in the event of litigation. The discussion applies only to U.S. holders who hold shares of our common stock as capital assets, and does not apply to holders of shares of our common stock received in connection with the exercise of employee stock options or otherwise as compensation, holders who hold an equity interest, actually or constructively, in Parent or EFI after the merger, holders who have perfected and not withdrawn a demand for, or lost the right to, appraisal under the DGCL or to holders who may be subject to special rules under the U.S. federal income tax laws (such as insurance companies, banks, tax-exempt organizations, financial institutions, broker-dealers, partnerships, S corporations or other pass-through entities (or investors therein), mutual funds, traders in securities who elect the mark-to-market method of accounting, stockholders subject to the alternative minimum tax, stockholders that have a functional currency other than the U.S. dollar or stockholders who hold our common stock as part of a hedge, straddle, wash sale, constructive sale or conversion transaction). This discussion also does not address the U.S. tax consequences of the receipt of cash in connection with the treatment of stock-based awards or any other matters relating to equity compensation or benefit plans or any aspect of state, local or foreign tax laws. This discussion does not address any consequences under the U.S. federal tax laws other than those pertaining to the income tax, does not discuss the unearned income Medicare contribution tax on “net investment income” imposed pursuant to the Health Care and Education Reconciliation Act of 2010 and does not address any consequences under any applicate state, local or foreign tax laws. Holders of our common stock should consult their own tax advisors to determine the particular tax consequences to them of the merger, including the applicability and effect of any state, local, foreign or other tax laws.

Exchange of Shares of Our Common Stock for Cash Pursuant to the Merger

The exchange of shares of our common stock for cash in the merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder whose shares of our common stock are converted into the right to receive cash in the merger will recognize capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the amount of cash received with respect to such shares (determined before the deduction of any applicable withholding taxes, as described below under “Backup Withholding and Information Reporting”) and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis will generally equal the price the U.S. holder paid for its shares. Gain or loss will be determined separately for each block of shares of our common stock held by a U.S. holder (i.e., shares of our common stock acquired at the same cost in a single transaction). Any such capital gain or loss will be long-term capital gain or loss where the U.S. holder’s holding period for such shares of our common stock is more than one year at the effective time of the merger. Long-term capital gain of a non-corporate U.S. holder is generally taxed at preferential rates. There are limitations on the deductibility of capital losses.

 

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Backup Withholding and Information Reporting

A U.S. holder may be subject to information reporting with respect to any payments made pursuant to the merger. In addition, backup withholding of tax will apply at the statutory rate to such payments, unless the U.S. holder or other applicable payee provides a taxpayer identification number, certifies that such number is correct and otherwise complies with the backup withholding rules or otherwise establishes an exemption. Each U.S. holder should complete and sign, under penalty of perjury, the Form W-9 to be included as part of the letter of transmittal and return it to the payment agent, in order to provide the information and certification necessary to avoid backup withholding, unless an exemption applies and is established in a manner satisfactory to the payment agent.

Backup withholding is not an additional tax. Any amounts withheld from cash payments to a U.S. holder pursuant to the merger under the backup withholding rules will generally be allowable as a refund or a credit against such U.S. holder’s U.S. federal income tax liability provided the required information is timely furnished to the Internal Revenue Service. U.S. holders are urged to consult their tax advisors as to qualifications for exemption from backup withholding and the procedure for obtaining the exemption.

The U.S. federal income tax consequences described above are not intended to constitute a complete description of all tax consequences relating to the merger. Because individual circumstances may differ, each stockholder should consult the stockholder’s tax advisor regarding the applicability of the rules discussed above to the stockholder and the particular tax effects to the stockholder of the merger in light of such stockholder’s particular circumstances, the application of state, local and foreign tax laws, and, if applicable, the treatment of stock-based awards or any other matters relating to equity compensation or benefit plans.

Regulatory Approvals

Each of Parent and EFI have agreed to use their respective reasonable best efforts to cause the expiration or termination of the applicable waiting periods pursuant to the HSR Act and to obtain any required consents pursuant to the applicable merger control rules in Germany and Turkey, subject to certain exceptions in the merger agreement. On May 3, 2019, the FTC granted early termination of the waiting period under the HSR Act with respect to the merger. On May 16, 2019, EFI and Siris Partners IV, L.P. received clearance from the German competition authority. On May 24, 2019, clearance was also obtained from the Turkish competition authority. As a result, all necessary regulatory approvals to complete the merger have been obtained.

Hart Scott Rodino Antitrust Improvements Act

The merger is subject to the requirements of the HSR Act and the related rules and regulations, which provide that certain transactions may not be completed until required information has been furnished to the Antitrust Division and the FTC and until certain waiting periods have been terminated or have expired. The HSR Act requires EFI and Siris Partners IV, L.P. to observe a 30-day waiting period after the submission of their HSR filings before consummating the merger, unless the waiting period is terminated early. By April 25, 2019, each of EFI and Siris Partners IV, L.P. filed a Notification and Report Form under the HSR Act with the Antitrust Division and the FTC, which filings started the initial 30 day waiting period required by the HSR Act. On May 3, 2019, EFI and Siris Partners IV, L.P. received early termination of the waiting period under the HSR Act with respect to the merger.

Other Regulatory Approvals

The merger is also conditioned on the expiration or termination of any applicable waiting period, or receipt of all requisite consents, under applicable laws in Germany and Turkey. The relevant merger control filings were filed with the German competition authority and the Turkish competition authority on April 30, 2019. On

 

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May 16, 2019, EFI and Siris Partners IV, L.P. received clearance from the German competition authority. On May 24, 2019, clearance was also obtained from the Turkish competition authority. As a result, all necessary regulatory approvals to complete the merger have been obtained.

One or more governmental agencies may impose a condition, restriction, qualification, requirement or limitation when it grants the necessary approvals and consents. Third parties may also seek to intervene in the regulatory process or litigate to enjoin or overturn regulatory approvals, any of which actions could significantly impede or even preclude obtaining required regulatory approvals. There is currently no way to predict how long it will take to obtain all of the required regulatory approvals or whether such approvals will ultimately be obtained and there may be a substantial period of time between the approval by EFI stockholders and the completion of the merger.

Although we expect that all required regulatory clearances and approvals will be obtained, we cannot assure you that these regulatory clearances and approvals will be timely obtained, obtained at all or that the granting of these regulatory clearances and approvals will not involve the imposition of additional conditions on the completion of the merger, including the requirement to divest assets, or require changes to the terms of the merger agreement. These conditions or changes could result in the conditions to the Merger not being satisfied.

 

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THE MERGER AGREEMENT

This section describes the material terms of the merger agreement. The description of the merger agreement in this section and elsewhere in this proxy statement is qualified in its entirety by reference to the complete text of the merger agreement, a copy of which is attached as Annex A and is incorporated by reference into this proxy statement. This summary does not purport to be complete and may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully and in its entirety.

Explanatory Note Regarding the Merger Agreement

The merger agreement, a copy of which is attached as Annex A, and this summary of its terms are included in this proxy statement to provide you with information regarding its terms. Factual disclosures about EFI contained in this proxy statement or in EFI’s public reports filed with the SEC may supplement, update or modify the factual disclosures about EFI contained in the merger agreement. The representations, warranties and covenants made in the merger agreement by EFI, Parent and Merger Sub were made solely to the parties to, and solely for the purposes of, the merger agreement and as of specific dates and were qualified and subject to important limitations agreed to by EFI, Parent and Merger Sub in connection with negotiating the terms of the merger agreement. In particular, in your review of the representations and warranties contained in the merger agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated for the principal purposes of establishing the circumstances in which a party to the merger agreement may have the right not to consummate the merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the merger agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and, in some cases, were qualified by matters set forth on the disclosure letter delivered to Parent and Merger Sub in connection with the merger agreement (which we refer to as the “disclosure letter”), which disclosures are not reflected in the merger agreement. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement. Stockholders should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts of the Company, Parent, Merger Sub or any of their respective subsidiaries or affiliates.

The Merger; Closing and Effective Time of the Merger

The merger agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will be merged with and into EFI, at which time the separate corporate existence of Merger Sub will cease. EFI will be the surviving corporation and a wholly owned subsidiary of Parent with all its properties, rights, privileges, immunities, powers and franchises continuing unaffected by the merger, and all debts, liabilities and duties of EFI and Merger Sub shall become the debts, liabilities and duties of the surviving corporation.

The merger agreement provides that the closing of the merger will take place via the electronic exchange of signatures and documentation on (a) a date to be agreed upon by Parent, Merger Sub and EFI that is no later than the third business day after the later of (i) the satisfaction or waiver (to the extent permitted hereunder) of the last to be satisfied or waived of the conditions to closing (other than those conditions that by their terms are to be satisfied at the closing, but subject to the satisfaction or waiver (to the extent permitted hereunder) of such conditions), and (ii) the completion of the marketing period or (b) such other time, location and date as Parent, Merger Sub and EFI mutually agree to in writing. Assuming receipt of required regulatory approvals and timely satisfaction of other closing conditions, including the approval by our stockholders of the merger proposal, we currently expect the closing of the merger to occur in the third quarter of 2019.

 

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The effective time of the merger will occur upon the later of (a) the date and time of the filing of the certificate of merger with the Secretary of State of the State of Delaware or (b) such other date and time as may be mutually agreed upon by Parent and EFI and set forth in the certificate of merger.

Following the effective time, our common stock will be delisted from Nasdaq, will be deregistered under the Exchange Act and will cease to be publicly traded and the stockholders of EFI immediately prior to the effective time will cease to be stockholders of EFI and will not be stockholders of the surviving corporation.

Directors and Officers; Certificate of Incorporation; Bylaws

From and after the effective time of the merger agreement, the directors of Merger Sub immediately prior to the effective time will be the directors of the surviving corporation and the officers of EFI immediately prior to the effective time will be the officers of the surviving corporation, in each case, until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal in accordance with the charter and the bylaws of the surviving corporation.

The certificate of incorporation of EFI as in effect immediately prior to the effective time will be amended and restated in its entirety at the effective time of the merger to read as set forth in an agreed-upon exhibit to the merger agreement until amended in accordance with applicable law and the applicable provisions of such certificate of incorporation, and the bylaws of Merger Sub as in effect immediately prior to the effective time of the merger will be the bylaws of the surviving corporation until amended in accordance with applicable law and the applicable provisions of such bylaws.

Treatment of Common Stock, Stock-Based Awards and Performance Awards

Each share of our common stock issued and outstanding immediately prior to the effective time (other than excluded shares and dissenting shares) will automatically be canceled, extinguished and converted into the right to receive $37.00 (which we refer to as the “merger consideration”), without interest, less any applicable withholding taxes.

At or immediately prior to the effective time of the merger, except with regards to any new RSU award granted after April 14, 2019, each EFI Time-Based RSU that is then outstanding (including any RSU awards for which the applicable performance period has ended and only time-based vesting requirements remain) and either is vested or will vest within 12 months after the effective time of the merger, will be converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such portion of the EFI Time-Based RSU award multiplied by (ii) the merger consideration. At the effective time of the merger, each other EFI Time-Based RSU that is outstanding will be assumed and will be converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such portion of the EFI Time-Based RSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

At or immediately prior to the effective time of the merger, each EFI 2019 Annual PSU that is then outstanding will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI 2019 Annual PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including achievement of the applicable performance goals, the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

 

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At or immediately prior to the effective time of the merger, each EFI LTIP Target PSU award will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI LTIP Target PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing time-based vesting schedule (but in no event earlier than the end of the applicable performance period) and applicable terms and conditions immediately prior to the effective time (other than the performance-based vesting conditions), including the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award.

At or immediately prior to the effective time of the merger, each EFI LTIP Overachievement PSU award held by an individual employed by EFI or one of its subsidiaries will be assumed and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash equal to (i) the number of shares of our common stock subject to such EFI LTIP Overachievement PSU award multiplied by (ii) the merger consideration, which shall vest (if applicable) and become payable in accordance with its existing vesting schedule and applicable terms and conditions immediately prior to the effective time, including achievement of the applicable performance-based vesting requirements, the holder’s continued employment or service through the applicable vesting date and any acceleration provisions applicable to the award. Any EFI LTIP Overachievement PSU award held by an individual who is not employed by EFI or one of its subsidiaries will be cancelled without payment at the effective time.

At or immediately prior to the effective time of the merger, each EFI stock option that has an exercise price that is less than the merger consideration will be cancelled and converted into the right to receive (without interest and less applicable withholding taxes) an amount in cash determined by multiplying (i) the excess of the merger consideration over the exercise price of the EFI stock option by (ii) the number of shares of our common stock issuable upon exercise in full of such EFI stock option. At or immediately prior to the effective time, each EFI stock option that has an exercise price that is equal to or greater than the merger consideration (whether or not vested) shall be cancelled without payment.

The offering period currently in progress under the ESPP will be the final offering period under the ESPP and will be terminated on the final exercise date. No new participants may be added to the ESPP and no increases may be made to any participant’s contribution amount after April 14, 2019. On the final exercise date, the funds credited for each participant under the ESPP will be used to purchase shares of our common stock in accordance with the terms of the ESPP, and each share purchased under the ESPP that is outstanding immediately prior the effective time will be converted into the right to receive (less any applicable withholding taxes) the merger consideration. Any funds credited to a participant under the ESPP that are not used to purchase shares in accordance with the terms of the ESPP will be refunded to such participant on or promptly following the final exercise date. No further share purchase rights will be granted or exercised under the ESPP after the final exercise date and the ESPP will be suspended. The ESPP will be terminated as of or immediately prior to the effective time of the merger.

Exchange and Payment Procedures

Not less than five business days prior to the anticipated closing, Parent will select a bank or trust company reasonably acceptable to EFI to act as paying agent in the merger (which we refer to as the “paying agent”). At or prior to the closing, Parent will deposit or cause to be deposited with the paying agent cash sufficient to pay the aggregate merger consideration payable to the stockholders (other than in respect of excluded shares or dissenting shares).

Promptly following the effective time (and in any event within two business days following the effective time), the paying agent will send to each holder of record as of immediately prior to the effective time (other than holders of dissenting shares or excluded shares) of (i) certificates representing outstanding shares of our common stock (other than dissenting shares or excluded shares) (which we refer to as the “certificates”), and

 

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(ii) uncertificated shares of our common stock (other than dissenting shares or excluded shares)    (which we refer to as “uncertificated shares”) (A) in the case of certificates and uncertificated shares not held through the Depository Trust Company (which we refer to as the “DTC”), a letter of transmittal in such customary form as Parent, the surviving corporation and the paying agent reasonably agree; and (B) in the case of certificates and uncertificated shares held through DTC, instructions for effecting the surrender of the certificates and uncertificated shares in exchange for the merger consideration payable in respect thereof.

Upon receipt by the paying agent of a duly completed and validly executed letter of transmittal with respect to uncertificated shares not held through DTC or upon surrender of certificates for cancellation to the paying agent, together with a duly completed and validly executed letter of transmittal, the holders of such uncertificated shares and certificates will be entitled to receive an amount in cash equal to the merger consideration multiplied by the aggregate number of shares of our common stock underlying such uncertificated shares and certificates, as applicable. Upon receipt of an “agent’s message” by the paying agent (or such other evidence, if any, of transfer as the Paying Agent may reasonably request) in the case of a book-entry transfer of uncertificated shares held through DTC, the holders of such uncertificated shares will be entitled to receive in exchange therefor an amount in cash equal to the product obtained by multiplying the aggregate number of shares of common stock represented by such holder’s transferred uncertificated shares by the merger consideration.

If any cash deposited with the paying agent is not claimed within one year following the effective time, such cash will be returned to Parent (or the surviving corporation as directed by Parent) upon demand, and any stockholders of EFI who have not complied with the exchange procedures in the merger agreement will thereafter look only to Parent, solely as general creditors thereof, for any claim to the merger consideration.

Parent, EFI, the surviving corporation, and the paying agent will each be entitled to deduct and withhold any amounts due under applicable tax laws from the amounts that would otherwise become payable under the terms of the merger agreement, and any such withheld amounts that are paid to the appropriate taxing authorities will be treated as having been paid to the person from whom such amounts were originally withheld.

Representations and Warranties

Representations and Warranties of EFI

We made customary representations and warranties in the merger agreement that are subject, in many cases, to exceptions and qualifications contained in the merger agreement, in the disclosure letter or in certain reports filed with the SEC. These representations and warranties relate to, among other things:

 

   

due organization, valid existence, good standing and power and authority to conduct business with respect to EFI and its subsidiaries;

 

   

corporate authority and approval relating to the execution, delivery and performance of the merger agreement;

 

   

the necessary approval of the Board;

 

   

the rendering of each of Morgan Stanley’s and Greenhill’s fairness opinion to the Board;

 

   

the inapplicability of anti-takeover statutes to the merger;

 

   

the necessary vote of stockholders in connection with the merger agreement;

 

   

the absence of any conflict or violation of any organizational documents, or existing material contracts of, or laws applicable to, EFI or its subsidiaries, or the resulting creation of any lien upon EFI’s assets due to the performance of the covenants, obligations and transactions set forth in the merger agreement;

 

   

the absence of required consents, approvals, orders or authorizations of, filing or registrations with, or notifications to any governmental authority in connection with the merger agreement and the performance of the covenants, obligations and transactions set forth therein;

 

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EFI and its subsidiaries’ capitalization;

 

   

EFI’s SEC filings and financial statements;

 

   

the accuracy and compliance with law of this proxy statement;

 

   

internal controls over financial reporting and the maintenance of disclosure controls and procedures;

 

   

EFI’s and its subsidiaries’ indebtedness;

 

   

the absence of specified undisclosed liabilities;

 

   

the absence of certain changes or events since December 31, 2018;

 

   

certain matters relating to EFI’s material contracts;

 

   

material customers and material suppliers of EFI and its subsidiaries;

 

   

real property leased or subleased by EFI and its subsidiaries;

 

   

certain environmental matters relating to EFI and its subsidiaries;

 

   

certain intellectual property matters relating to EFI and its subsidiaries;

 

   

certain tax matters relating to EFI and its subsidiaries;

 

   

certain labor, employment and benefit plans matters relating to EFI and its subsidiaries;

 

   

compliance with applicable laws;

 

   

EFI’s possession of necessary permits;

 

   

the absence of any pending or threatened legal proceedings;

 

   

insurance plans maintained and used;

 

   

the absence of any contracts, transactions, arrangements or understandings between EFI or any of its subsidiaries with certain related persons;

 

   

payment of fees to brokers in connection with the merger;

 

   

anti-corruption, export controls, international trade and anti-money laundering matters and compliance with various applicable laws including the Foreign Corrupt Practices Act of 1977; and

 

   

the exclusivity and terms of the representations and warranties made by Parent and Merger Sub.

The representations and warranties in the merger agreement of EFI will not survive the consummation of the merger.

Material Adverse Effect

Many of our representations and warranties are qualified by, among other things, exceptions relating to the absence of a “company material adverse effect,” which means any change, event, occurrence, development, condition or effect that, individually or in the aggregate, is or would reasonably be expected to (i) be materially adverse to the business, assets, financial condition, results of operations, properties or liabilities of EFI and its subsidiaries, taken as a whole or (ii) prevent EFI from consummating the merger or have a material adverse effect on the ability of EFI to consummate the merger in a timely manner, but excluding, in the case of clause (i) only, any of the foregoing resulting from:

 

   

changes in general economic conditions, or changes in conditions in the global, international or regional economy generally;

 

   

changes in conditions in the financial markets, credit markets or capital markets in the United States or any other country or region of the world, including (A) changes in interest rates or credit ratings; or (B) changes in exchange rates for the currencies of any country;

 

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changes in conditions in the industries, markets or geographical areas in which EFI and its subsidiaries conduct business;

 

   

changes in regulatory, legislative or political conditions in the United States or any other country or region of the world;

 

   

any geopolitical conditions, outbreak of hostilities, acts of war, sabotage, terrorism or military actions (including any escalation or general worsening of any such hostilities, acts of war, sabotage, terrorism or military actions);

 

   

earthquakes, volcanic activity, hurricanes, tsunamis, tornadoes, floods, mudslides, wild fires or other natural disasters, pandemics and other similar events in the United States or any other country or region of the world;

 

   

the public announcement, execution or pendency of the merger agreement or the consummation of the transactions contemplated thereby or the identity of Parent, Merger Sub or the guarantors, including the impact thereof on the relationships, contractual or otherwise, of EFI and its subsidiaries with employees, suppliers, lessors, customers, partners, vendors or any other third person (provided that this list shall not apply to any representation or warranty of EFI in the merger agreement to the extent such representation or warranty is expressly intended to address the consequences resulting from the execution of the merger agreement or the consummation of the transactions contemplated thereby);

 

   

any action taken or refrained from being taken by EFI that is required to be taken or refrained from being taken by the express terms of the merger agreement;

 

   

any action taken by EFI or its subsidiaries, which Parent, Merger Sub or their respective affiliates has expressly approved, consented to or requested in writing following the date of the merger agreement;

 

   

changes in GAAP or other accounting standards or in any applicable laws or regulations (or the enforcement, implementation or interpretation of any of the foregoing);

 

   

changes in the price or trading volume of the our common stock or the ratings or ratings outlook of EFI, in and of itself (it being understood that any cause of such change may be taken into account when determining whether a company material adverse effect has occurred or would reasonably be expected to occur);

 

   

any failure, in and of itself, by EFI and its subsidiaries to meet (A) any published estimates or expectations of EFI’s revenue, earnings or other financial performance or results of operations for any period; or (B) any internal budgets, plans, projections or forecasts of its revenues, earnings or other financial performance or results of operations (it being understood that any cause of any such failure may be taken into account when determining whether a company material adverse effect has occurred or would reasonably be expected to occur);

 

   

the availability or cost of equity, debt or other financing to Parent or Merger Sub (it being understood that any cause of any such failure arising out of or resulting from the status or performance of the business, assets, financial condition, results of operations, liabilities or properties of EFI and its subsidiaries, taken as a whole, from and after the date of the merger agreement may be taken into account when determining whether a company material adverse effect has occurred or would occur); and

 

   

any stockholder litigation, suit, action or proceeding, or derivative litigation, suit, action or proceeding, in respect of the merger agreement or the ancillary agreements thereto or the transactions contemplated by the merger agreement brought by any current or former stockholders against EFI, any of its executive officers or other employees or any member of the Board.

except, in the case of the first, second, third, fourth, fifth, sixth and tenth bullets above, to the extent that such change, event, occurrence, development, condition or effect has had a material and disproportionate adverse

 

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impact on EFI and its subsidiaries, taken as a whole, relative to other companies operating in the industries in which EFI and its subsidiaries conduct business, in which case only the incremental disproportionate adverse impact may be taken into account in determine whether a company material adverse effect has occurred or would reasonably be expected to occur.

Representations and Warranties of Parent and Merger Sub

The merger agreement also contains customary representations and warranties made by Parent and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the merger agreement. The representations and warranties of Parent and Merger Sub relate to, among other things:

 

   

due organization, good standing and authority and power to conduct business with respect to Parent and availability of the organizational documents of Parent;

 

   

Parent’s and Merger Sub’s authority to enter into and perform the Merger Agreement and the enforceability of the Merger Agreement;

 

   

the absence of any conflict or violation of any organizational documents, existing contracts, applicable laws or the resulting creation of any lien upon Parent’s or Merger Sub’s assets due to the performance of the covenants, obligations and transactions set forth in the merger agreement;

 

   

required governmental consents and regulatory filings in connection with the merger agreement;

 

   

the absence of any pending or threatened legal proceedings or orders;

 

   

the absence of ownership of shares of EFI common stock;

 

   

payment of fees to brokers in connection with the merger;

 

   

the formation and pre-closing liabilities of Parent and Merger Sub;

 

   

the absence of any required consent of holders of equity or voting interests in Parent and the approval of Parent as the only approval of the shares of Merger Sub necessary to adopt and approve the merger agreement, the ancillary agreements thereto and the transactions contemplated thereby;

 

   

execution, delivery and enforceability of the limited guarantees;

 

   

the financing commitments obtained by Parent for the transactions contemplated by the merger agreement;

 

   

the absence of shareholder or management arrangements related to the merger;

 

   

the solvency of the surviving corporation and its subsidiaries (on a consolidated basis) after the consummation of the merger assuming the accuracy of the representations and warranties contained in the merger agreement and the satisfaction of the closing conditions set forth in the merger agreement;

 

   

the accuracy of information supplied or to be supplied for use in this proxy statement; and

 

   

the exclusivity and terms of the representations and warranties made by EFI.

The representations and warranties in the merger agreement of each of Parent and Merger Sub will not survive the consummation of the merger.

Conduct of Our Business Pending the Merger

Under the merger agreement, between the date of the merger agreement and the earlier of the effective time and the termination of the merger agreement in accordance with its terms, except as (i) expressly required or contemplated by the merger agreement, (ii) set forth on the disclosure letter, (iii) required by applicable law, or

 

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(iv) approved by Parent (which approval will not be unreasonably withheld, conditioned or delayed), EFI has agreed that it will, and will cause its subsidiaries to, use its reasonable best efforts to:

 

   

subject to the restrictions and exceptions in the merger agreement, conduct its business and operations in the ordinary course of business in all material respects;

 

   

maintain its existence in good standing pursuant to applicable law; and

 

   

in all material respects and other than in the ordinary course of business, preserve intact its assets, properties, contracts, licenses, business organization and material relationships with customers, suppliers, distributors, lessors, creditors, licensors, licensees, partners, co-venturers and governmental authorities.

EFI has further agreed that, between the date of the merger agreement and the earlier of the effective time and the termination of the merger agreement in accordance with its terms, except as (i) expressly required or contemplated by the merger agreement, (ii) set forth on the disclosure letter, (iii) required by applicable law, or (iv) approved by Parent (which approval will not be unreasonably withheld, conditioned or delayed), EFI will not, and will not permit its subsidiaries to take certain actions, including the following:

 

   

amend, modify or otherwise change the organizational documents of EFI or any of its subsidiaries;

 

   

propose or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, amalgamation, restructuring, recapitalization or other reorganization;

 

   

acquire (including by merger, amalgamation, consolidation or acquisition of shares or substantially all of the assets of) any assets, securities, properties, interests, businesses or persons other than purchases of inventory and equipment and other assets in the ordinary course of business consistent with past practice;

 

   

issue, sell, deliver, dispose of, grant or transfer, or agree to issue, sell, deliver, dispose of, grant or transfer any securities or equity or voting interest in EFI or any of its subsidiaries, subject to certain exceptions with respect to EFI equity awards and the conversion of the existing notes in accordance with the terms of the existing indentures (in each case, as defined in the section entitled “The Merger Agreement—Treatment of Company Indebtedness” on page 104);

 

   

acquire, repurchase or redeem any securities of EFI or any of its subsidiaries, subject to certain limited exceptions with respect to EFI equity awards, transactions between EFI and any of its subsidiaries, and the existing notes;

 

   

adjust, split, combine or reclassify any securities of EFI or any of its subsidiaries, or issue or authorize or propose the issuance of any other any securities of EFI or any of its subsidiaries in respect of, in lieu of or in substitution for, shares or other equity or voting interest;

 

   

declare, set aside, make or pay any dividend or other distribution in respect of any shares or other equity or voting interest except for cash dividends made by any subsidiary of EFI to EFI or one of its other subsidiaries;

 

   

pledge or encumber any shares or other equity or voting interest, modify the terms of any shares or other equity or voting interest, or enter into any agreement with respect to the voting or registration of shares or other equity or voting interest;

 

   

incur, assume or suffer certain indebtedness or issue any debt securities, subject to certain limited exceptions;

 

   

assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except with respect to obligations of direct or indirect wholly owned subsidiaries of EFI;

 

   

make any loans, advances or capital contributions to, or investments in, any other person in excess of $2,000,000 in the aggregate, except for extensions of credit to customers or service providers and

 

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advances to, or reimbursement of expenses of, employees of EFI or any of its subsidiaries, in each case, in the ordinary course of business consistent with past practice;

 

   

mortgage or pledge (or otherwise encumber) any assets, tangible or intangible, or create or suffer to exist any lien thereupon, other than certain permitted liens;

 

   

enter into, adopt, amend, modify, or terminate any employee plan or plan, agreement or arrangement that would constitute an employee plan if in effect as of the date of the merger agreement;

 

   

(i) materially increase or accelerate the vesting of the compensation of any director, officer, independent contractor who is a natural person, or current or former employee other than as required under an employee plan as in effect as of the date of the merger agreement and set forth on the disclosure letter, (ii) hire any officer or employee or engage an independent contractor who is a natural person, subject to certain specified exceptions, or (iii) terminate the employment of any employee with annual base salary above $300,000, except for “cause” (the term “cause” includes, for example, neglect of duties, breach of applicable policies and procedures, or any other act of misconduct subject to applicable law) or performance related reasons and except for the termination of any employee whose termination of employment was communicated prior to the date of the merger agreement;

 

   

waive, release, assign, compromise, settle, enter into any agreement or consent or permit the entry of any judgment or order relating to any pending or threatened legal proceeding, except for the settlement of any such legal proceeding that is for solely monetary payments of no more than $1.5 million individually and $5 million in the aggregate in each case where EFI does not admit any fault or guilt;

 

   

except as required by applicable law or GAAP, (i) revalue in any material respect any of its properties or assets, including writing-off notes or accounts receivable, other than in the ordinary course of business, (ii) make any material change in any of its accounting principles or practices, or (iii) amend or modify any privacy policy in any material respect;

 

   

except as required by applicable law or GAAP, change in any material respect the cash management practices, policies or procedures of EFI or any of its subsidiaries with respect to collection of accounts receivable, establishment of reserves for uncollectible accounts receivable, accrual of accounts receivable, payment of accounts payable, purchases, prepayment of expenses or deferral of revenue, from EFI’s and its subsidiaries’ practices, policies and procedures with respect thereto in the ordinary course of business consistent with past practice, including taking (or omitting to take) any action that would have the effect of delaying or postponing the payment of any accounts payable to post-closing periods that would otherwise be expected to be paid in pre-closing periods;

 

   

(i) prepare or file any tax return inconsistent with past practice or, on any such tax return, take any position or adopt any method that is inconsistent with positions taken or methods used in preparing or filing similar tax returns in prior periods, (ii) make, change or revoke any material tax election, (ii) enter into any tax allocation agreement, tax indemnity agreement or tax sharing agreement, (iii) settle or compromise any material tax claim or assessment or surrender a right to a material refund of taxes, (iv) consent to any extension or waiver of any limitation period with respect to any claim or assessment, or (v) enter into any “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of state, local or foreign law);

 

   

incur or commit to incur any capital other than (i) capital expenditures that do not exceed, in the aggregate, the total capital expenditures set forth in the illustrative capital expenditure set forth in the disclosure letter, or (ii) pursuant to express obligations in existence as of the date of the merger agreement under certain material contract disclosed in the disclosure letter;

 

   

enter into, modify in any material respect, amend in any material respect, fail to renew, terminate or cancel or waive or relinquish any material right or claim under any (i) contract that if so entered into, modified, amended terminated, cancelled, waived or relinquished would have, individually or in the aggregate, a company material adverse effect, or (ii) certain material contracts;

 

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engage in any transaction with, or enter into any agreement, arrangement or understanding with, any affiliate of EFI or other person covered by Item 404 of Regulation S-K promulgated by the SEC that would be required to be disclosed pursuant to Item 404 of Regulation S-K;

 

   

forgive any loans to directors, officers, employees or any of their respective affiliates;

 

   

effectuate a “plant closing” or “mass layoff” (as defined in the United States Worker Adjustment and Retraining Notification Act (which we refer to as “WARN”)) affecting in whole or in part any site of employment, facility, operating unit or employee without complying with WARN;

 

   

sell, pledge, transfer, assign, lease, license, abandon or otherwise dispose of any material asset or enter into any new line of business, except for (i) any acquisition or disposition for consideration that is individually in excess of  $1 million or in the aggregate in excess of  $5 million (other than with respect to any material intellectual property of EFI) or (ii) any disposition of obsolete or worn out equipment, or non-exclusive licenses of intellectual property of EFI, in each case, in the ordinary course of business consistent with past practice;

 

   

enter into any joint venture, strategic alliance or similar legal partnership;

 

   

fail to maintain insurance policies in such amounts and against such risks and losses as are consistent with past practice;

 

   

take any action that requires an adjustment to, or authorize any adjustment to, the Conversion Rate (as defined in each of the existing indentures, as applicable) in respect of the existing notes;

 

   

agree, authorize or enter a contract to take, or otherwise make any commitment to do, any of the foregoing.

Solicitation of Acquisition Proposals; Board Recommendation Change

The merger agreement provides for a “go-shop” period during which EFI is permitted to solicit, initiate, propose, cause or induce the making, submission or announcement of, or encourage, facilitate or assist, whether publicly or otherwise, any acquisition proposal, subject to, among other things, certain notice and reporting obligations owed to Parent. Following the end of the “go-shop” period and for the duration of the “no-shop” period, EFI is generally not permitted to solicit or discuss acquisition proposals with third parties, subject to certain exceptions (including that EFI may continue discussions with any excluded party (as defined below)).

As defined in the merger agreement and as used in this proxy statement:

 

   

“acceptable confidentiality agreement” means an agreement with EFI that is either (i) in effect as of the execution and delivery of the merger agreement; or (ii) executed, delivered and effective after the execution and delivery of the merger agreement, in either case containing provisions that require any counterparty thereto (and any of its affiliates and representatives) that receive material non-public information of, or with respect to, EFI to keep such information confidential; provided, however, that, in the case of clause (ii) only of this definition, the confidentiality and use provisions contained therein are no less favorable, and the other provisions contained therein are no less favorable in the aggregate, to EFI than the terms of the confidentiality agreement entered into between EFI and Siris, as amended (which we refer to as the “confidentiality agreement”). An “acceptable confidentiality agreement” pursuant to clause (ii) of this definition shall not include any provision (a) granting any exclusive right to negotiate with such counterparty, (b) prohibiting EFI from satisfying its obligations under the merger agreement or (c) requiring EFI or its subsidiaries to pay or reimburse the counterparty’s fees, costs or expenses.

 

   

“acquisition proposal” means any offer or proposal (other than an offer or proposal by Parent or Merger Sub) to engage in an acquisition transaction (as defined below).

 

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“acquisition transaction” means any transaction or series of related transactions (other than the merger) involving:

 

   

any (i) acquisition of securities in which EFI issues securities representing 15% or more of the outstanding shares of any class of voting securities of EFI or (ii) tender offer or exchange offer by any person or “group” of persons that, if consummated in accordance with its terms, would result in such person or “group” of persons beneficially owning securities representing more than 15% of the outstanding voting power of EFI or any class of equity or voting securities of EFI, in each case, after giving effect to the consummation of such tender or exchange offer;

 

   

any direct or indirect sale, exclusive license, exchange, transfer, purchase or other disposition with or by any non-affiliated person or “group” (as defined pursuant to Section 13(d) of the Exchange Act) of persons with respect to more than 15% of the consolidated assets (measured by the fair market value thereof as of the date of such purchase or acquisition), including equity interests in subsidiaries of EFI, consolidated revenues of EFI and its subsidiaries, taken as a whole; or

 

   

any merger, amalgamation, consolidation, business combination (including any share exchange, tender offer or exchange offer), recapitalization, reorganization, liquidation, dissolution or other similar transaction involving EFI or any subsidiary of EFI whose assets, individually or in the aggregate, constitute 15% or more of the consolidated assets of EFI or to which 15% or more of the consolidated revenues of EFI and its subsidiaries, taken as a whole, are attributable, which would result in any person or group (other than EFI, any wholly owned subsidiary of EFI or any parent entity of which EFI is a wholly owned subsidiary), or the shareholders or equityholders of any such person or group, beneficially owning, directly or indirectly, more than 15% of the outstanding shares of our common stock or 15% of the voting power of the surviving entity in a merger involving EFI or the resulting direct or indirect parent of EFI or such surviving entity (or any securities convertible into, or exchangeable for, securities representing such voting power).

 

   

“excluded party” means any third person from whom EFI or any of its representatives has received after the date of the merger agreement and prior to the no-shop period start date a written acquisition proposal (inclusive of any amendment or modification thereto, if delivered prior to the no-shop period start date) that the Board determines in good faith (such determination to be made no later than the no-shop period start date), after consultation with outside legal counsel and its financial advisors, constitutes or would reasonably be expected to result in a superior proposal (as defined below); provided that any such third person ceases to be an excluded party at such time as such third person finally withdraws its acquisition proposal(s) or such acquisition proposal is abandoned; provided, further, that any amendment, supplement or modification to an acquisition proposal does not constitute withdrawal of an acquisition proposal.

 

   

“intervening event” means a material change, event, occurrence, development, condition or effect that affects or would be reasonably likely to affect the business, assets, financial condition, results of operations, properties or liabilities of EFI and its subsidiaries, taken as a whole, that (i) is not known (or if known, the effect of which was not reasonably foreseeable) by the Board as of the date of the merger agreement and (ii) does not relate to any acquisition proposal.

 

   

“superior proposal” means any bona fide written acquisition proposal (where all references to 15% in the definition of “acquisition transaction” are deemed to be references to 50% for purposes of this definition) for an acquisition transaction on terms that the Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) that is more favorable, from a financial point of view, to the EFI stockholders (in their capacity as such) than the merger (taking into account any legal, regulatory, financial, timing, financing and other aspects of such proposal (including the identity of the person(s) making the proposal)) and is reasonably likely to be consummated in accordance with its terms.

 

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“third person” means any person or “group” (within the meaning of Section 13(d) of the Exchange Act), other than (i) EFI or any of its controlled affiliates or (ii) Parent or any of its affiliates or any “group” including Parent or any of its affiliates.

The “Go-Shop” Period—Solicitation of Other Offers

During the period beginning on the date of the merger agreement and continuing until no-shop period start date, EFI and its subsidiaries and their respective representatives had the right to, among other things and subject to certain conditions:

 

   

solicit, initiate, propose, cause or induce the making, submission or announcement of, or encourage, facilitate or assist, whether publicly or otherwise, any acquisition proposal (or any inquiry, proposal or offer that could lead to, an acquisition proposal);

 

   

pursuant to an acceptable confidentiality agreement, furnish to any person and its representatives any information (including non-public information and data) relating to EFI or any of its subsidiaries and afford access to the business, properties, assets, books, records or other non-public information, or to any personnel, of EFI or any of its subsidiaries to any person (and its representatives, including potential financing sources); provided that EFI will provide or make available to Parent and Merger Sub any information or data that is provided by or on behalf of EFI to any person given such access that was not previously made available to Parent or Merger Sub prior to or promptly (and, in any event, within 24 hours) following the time it is provided to such person or its representatives (including potential financing sources); and

 

   

engage in, enter into, continue, maintain, or otherwise participate in, any discussions or negotiations with any persons (and their respective representatives, including potential financing sources) with respect to any acquisition proposal (or inquiries, proposals or offers or other efforts that could lead to an acquisition proposal) and cooperate with or assist or participate in or facilitate any such inquiries, proposals, offers, discussions or negotiations or any effort or attempt to make any acquisition proposals.

EFI is not entitled to terminate the merger agreement for the purpose of entering into an agreement in respect of a superior proposal, unless it complies with certain procedures in the merger agreement, including, but not limited to, negotiating with Parent in good faith over a three business day period in an effort to amend the terms and conditions of the merger agreement, so that such superior proposal no longer constitutes a “superior proposal” relative to the transactions contemplated by the merger agreement, as amended pursuant to such negotiations.

Every seventh day after the date of the merger agreement and ending on the no-shop period start date, EFI was required to provide written notice to Parent disclosing (i) a copy of any written acquisition proposal received after the date of the merger agreement and as of the date of such notice and copies of all relevant documents relating to such acquisition proposal received by EFI from a third person and (ii) the number of acceptable confidentiality agreements entered into after the date hereof and as of the date of such notice (inclusive of any acceptable confidentiality agreements entered into prior to the date hereof if the counterparty to such acceptable confidentiality agreement is actively engaged in discussions or negotiations with EFI regarding an acquisition proposal prior to the no-shop period start date); provided, that in no event shall EFI be required to provide the identity of any third party in any such notice pursuant to this sentence.

If EFI terminated the merger agreement in accordance with its terms for the purpose of entering into an agreement in respect of a superior proposal prior to the no-shop period start date, EFI must pay a termination fee of $25.37 million to Parent substantially currently with such termination. For more information, please see the section of this proxy statement captioned “Termination” starting on page 109 and “—Termination Fees” starting on page 111.

 

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The “No-Shop” Period—No Solicitation of Other Offers

Except with respect to any excluded party, from the no-shop period start date until the earlier to occur of the termination of the merger agreement in accordance with its terms and the effective time, EFI has agreed not to, and to cause its subsidiaries and its and their respective directors, officers and employees not to, and to instruct and use its reasonable best efforts to cause its and its subsidiaries’ unaffiliated representatives not to, directly or indirectly:

 

   

solicit, initiate, propose or knowingly induce the making, submission or announcement of, or knowingly encourage, facilitate or assist, any proposal or offer that is or would reasonably be expected to constitute an acquisition proposal;

 

   

furnish to any person (other than Parent, Merger Sub or any designees of Parent or Merger Sub) any non-public information or data relating to EFI or any of its subsidiaries or afford to any person (other than Parent, Merger Sub or any designees of Parent or Merger Sub) access to the business, properties, assets, books, records or other non-public information, or to any personnel, of EFI or any of its subsidiaries, in any such case with the intent to induce the making, submission or announcement of, or to knowingly encourage, facilitate or assist, an acquisition proposal or any inquiries or the making of any proposal that would reasonably be expected to lead to an acquisition proposal;

 

   

participate or engage in discussions or negotiations with any person (other than EFI’s representatives) with respect to any proposal or offer that would reasonably be expected to lead to an acquisition proposal (subject to certain limited exceptions); or

 

   

authorize or enter into any letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to an acquisition proposal (or any offer or proposal that would reasonably be expected to lead to any acquisition proposal), other than an acceptable confidentiality agreement (any such letter of intent, memorandum of understanding, merger agreement, acquisition agreement or other contract relating to an acquisition transaction, which we refer to as an “alternative acquisition agreement”).

Notwithstanding the foregoing, EFI may continue to take any of the actions described in the first three bullets above with respect to any excluded party (for so long as such person or group is an excluded party), from and after the no-shop period start date until the earliest of (i) the date on which the excluded party has terminated or finally withdrawn the acquisition proposal made prior to the no-shop period start date (provided that any amended or modified acquisition proposal submitted by such excluded party will not be deemed to constitute, in and of itself, an expiration, termination or withdrawal of such previously submitted acquisition proposal), (ii) the third person submitting the relevant acquisition proposal ceases to be an excluded party because the Board (after consultation with outside legal counsel and its financial advisors) determines that such acquisition proposal (inclusive of any amendment or modification thereto, regardless of when delivered) does not constitute or could not reasonably be expected to result in a superior proposal, and (iii) the receipt of requisite stockholder approval.

Further, under certain circumstances, at any time from the no-shop period start date until the earlier to occur of the termination of the merger agreement pursuant to its terms and EFI stockholders’ approval of the merger proposal, EFI may participate or engage in discussions or negotiations with, furnish any non-public information relating to EFI or any of its subsidiaries to, or afford access to the business, properties, assets, books, records or other non-public information, or to any personnel, of EFI or any of its subsidiaries pursuant to an acceptable confidentiality agreement to any person or its representatives that has made, renewed or delivered to EFI an acquisition proposal after the date of the merger agreement that did not result from any material breach of the non-solicitation obligations of EFI set forth in the merger agreement, and otherwise facilitate such acquisition proposal or assist such person (and its representatives and financing sources) with such acquisition proposal (in each case, if requested by such person) if, and only if, the Board determines in good faith (after consultation with its financial advisor and outside legal counsel) that such acquisition proposal either constitutes a superior proposal or would reasonably be expected to lead to a superior proposal and that the failure to take such action

 

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would reasonably be expected to cause the Board to violate its fiduciary duties under applicable laws; provided that EFI will promptly (and, in any event, within 24 hours) make available to Parent any non-public information concerning EFI and its subsidiaries that is provided to any such person or its representatives that was not previously made available to Parent.

From the no-shop period start date until the earlier to occur of the termination of the merger agreement in accordance with its terms and the effective time, EFI will promptly (and, in any event, within 24 hours) notify Parent if any acquisition proposals are received by EFI or any of its representatives from any person or “group” of persons other than any excluded party. Such notice must include (i) the identity of the person or “group” of persons making such offers or proposals, (ii) the material terms and conditions of such acquisition proposal, including any financing contemplated thereby, and (iii) a copy of any written acquisition proposal and copies of all relevant documents relating to such acquisition proposal received by EFI from the person or “group” of persons making such acquisition proposal, other than an excluded party. Thereafter, EFI must keep Parent reasonably informed, on a reasonably prompt basis, of all material developments affecting the status and terms of any such acquisition proposal (including any amendments thereto).

In addition, from the no-shop period start date until the earlier to occur of the termination of the merger agreement in accordance with its terms and the effective time, EFI has agreed not to, and will cause its subsidiaries and its and their respective directors, officers and employees not to, and to use its reasonable best efforts to cause its and its subsidiaries’ unaffiliated representatives not to, directly or indirectly:

 

   

terminate, amend, release, modify or waive any provision of or fail to enforce any confidentiality or non-solicitation provision under a confidentiality agreement;

 

   

grant any waiver, amendment or release under any takeover laws; or

 

   

resolve, agree or propose to do any of the foregoing, in each case, except if the Board determines in good faith (after consultation with is outside legal counsel) that the failure to do so would reasonably be expected to result in the Board’s violation of its fiduciary duties under applicable laws.

Further, except with respect to any excluded party, from the no-shop period start date until the earlier to occur of the termination of the merger agreement in accordance with its terms and the effective time, EFI has agreed to, and to cause its subsidiaries and its and their respective directors, officers and employees to and will instruct and use its reasonable best efforts to cause its and its subsidiaries’ unaffiliated representatives to, (i) promptly cease and terminate (or cause to be terminated) any discussions or negotiations with any person and its affiliates and representatives that would be prohibited by the non-solicitation provisions of the merger agreement, (ii) request the return or destruction (in accordance with the terms of the applicable confidentiality agreements) of all confidential information furnished by or on behalf of EFI to such person, and (iii) immediately terminate (or cause to be terminated) all access granted to such person and its respective affiliates and representatives to any data room.

If EFI terminates the merger agreement under certain circumstances after the no-shop period start date, EFI must pay a termination fee of $59.2 million to Parent. For more information, please see the section entitled “The Merger Agreement—Termination” starting on page 109 and “The Merger Agreement—Termination Fees” starting on page 111.

Board Recommendation Change

As described above, and subject to the provisions described below, the Board has unanimously made the recommendation that the stockholders of EFI vote “FOR” the Merger Proposal. The merger agreement provides that (subject to certain exceptions described below) the Board may not take any of the following actions (any such action, we refer to as a “Board recommendation change”): (i) fail to make, withhold, withdraw, amend, qualify or modify the Board recommendation in a manner adverse to Parent or make any public statement that is

 

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clearly inconsistent with the Board recommendation, (ii) adopt, approve or recommend an acquisition proposal, (iii) if an acquisition proposal has been publicly made or has otherwise become public (other than by Parent, Merger Sub or any of their respective affiliates or representatives), fail to publicly recommend against such acquisition proposal or fail to reaffirm the Board recommendation, in either case within ten business days (or such fewer number of days as remains prior to the special meeting) of a written request from Parent to do so, (iv) fail to include the Board recommendation in this proxy statement, or (v) publicly propose to do any of the foregoing.

Notwithstanding the foregoing, and subject to the procedures described below, the Board may effect a Board recommendation change at any time before the requisite stockholder approval is obtained if (i) it is in response to an intervening event, or (ii) EFI has received a bona fide written acquisition proposal that the Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) constitutes a superior proposal, each as further described below.

The Board may effect a Board recommendation change in response to an intervening event only if:

 

   

the Board determines in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to do so would reasonably be expected to cause the Board to violate its fiduciary duties under applicable laws;

 

   

EFI has provided prior written notice to Parent at least three business days in advance (which we refer to as a “negotiation period”) of affecting the Board recommendation change notifying Parent to the effect that the Board has (i) so determined and (ii) resolved to effect a Board recommendation change pursuant to the applicable terms of the merger agreement absent any revision to the terms of the merger agreement and any ancillary agreement thereto, which such notice will specify the intervening event in reasonable detail;

 

   

prior to effecting such Board recommendation change, EFI and its representatives, during the negotiation period, are reasonably available to negotiate with Parent and its representatives in good faith (to the extent that Parent desires to so negotiate) to make such adjustments to the terms and conditions of the merger agreement and any ancillary agreement thereto as would permit the Board to no longer determine that the failure to make a Board recommendation change in response to such intervening event would reasonably be expected to cause the Board to violate its fiduciary duties under applicable laws;

 

   

following the negotiation period, after taking into account any revisions to the merger agreement and any ancillary agreement thereto agreed to by Parent in writing, the Board determines in good faith (after consultation with its financial advisor and outside legal counsel) that the failure to effect a Board recommendation change in response to such intervening event would reasonably be expected to cause the Board to violate its fiduciary duties under applicable laws.

Further, the Board may effect a Board recommendation change or authorize EFI to terminate the merger agreement to enter into an alternative acquisition agreement providing for an acquisition transaction with respect to and in response to a bona fide written acquisition proposal that the Board has determined in good faith (after consultation with its financial advisor and outside legal counsel) constitutes a superior proposal, in each case, only if:

 

   

such written acquisition proposal did not result from a material breach of the non-solicitation obligations of EFI contained in the merger agreement;

 

   

EFI has provided prior written notice to Parent at least three business days in advance (which we refer to as the “notice period”) to the effect that the Board has (i) received a superior proposal, and (ii) resolved to effect a Board recommendation change or to terminate the merger agreement pursuant to the applicable provisions of the merger agreement, and such notice has included the identity of the third person or persons making such acquisition proposal, the material terms and conditions of such

 

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acquisition proposal and has attached a copy of any acquisition proposal and copies of the relevant alternative acquisition agreement and any other document relating to such acquisition proposal;

 

   

during the notice period, EFI and its representatives are reasonably available to negotiate with Parent and its representatives in good faith (to the extent that Parent desires to so negotiate) to make such adjustments to the terms and conditions of the merger agreement and the ancillary agreements thereto as would permit the Board to determine that such acquisition proposal would cease to constitute a superior proposal (provided that EFI delivered a new notice and entered into a new two business day notice period for any modification or revisions (or proposed written modification or revision) to the price, conditions or other material terms of such acquisition proposal);

 

   

following the notice period, the Board determines in good faith (after consultation with its financial advisor and outside legal counsel) that such acquisition proposal continues to constitute a superior proposal and that, after taking into account any revisions to the merger agreement and any ancillary agreement thereto agreed to by Parent in writing, the failure to do so would reasonably be expected to result in a breach of the Board’s fiduciary duties under applicable laws; and

 

   

in the event of any termination of the merger agreement in order to cause or permit the EFI or any of its subsidiaries to enter into an agreement providing for the acquisition transaction contemplated by such acquisition proposal, EFI will have validly terminated the merger agreement in accordance with its terms, including paying (or causing to be paid) the applicable EFI termination fee (as discussed further in the section of this proxy statement captioned “Termination” starting on page 109 and “—Termination Fees” starting on page 111)

Stockholders Meeting

EFI has agreed, subject to its organization documents and applicable law, to establish a record date for, duly call and give notice of a meeting of its stockholders and, as promptly as reasonably practicable following the mailing of this proxy statement to the stockholders of EFI, convene and hold such a meeting for the purpose of obtaining the requisite stockholder approval, but EFI will not be required to convene and hold the stockholders meeting any time prior to the 20th business day following the mailing of this proxy statement. EFI has also agreed that its obligation to hold the special meeting will not be affected by the commencement, public proposal, public disclosure or communication to EFI of any acquisition proposal or by the making of Board recommendation change. Without limiting the foregoing, if the Board effects a Board recommendation change pursuant to, and in accordance with the provisions of the merger agreement discussed above under “The Merger Agreement—Solicitations of Offers; Board Recommendation Change” beginning on page 96, then the Board must submit the merger agreement to the EFI stockholders, in which event the Board may communicate the Board recommendation change or the basis for its lack of a recommendation EFI stockholders in the proxy statement or an appropriate amendment or supplement thereto. EFI will not postpone or adjourn the stockholders meeting without the prior written consent of Parent; provided, that if EFI or Parent reasonably determines in good faith that the requisite stockholder approval is unlikely to be obtained at the stockholders meeting, including due to an absence of a quorum, then on no more than two occasions (for each of EFI and Parent) and prior to the vote contemplated having been taken, each of EFI and Parent shall have the right to require an adjournment or postponement of the stockholders meeting for the purpose of soliciting additional votes in favor of the merger agreement.

Financing; Cooperation with Debt Financing

Although the obligation of Parent and Merger Sub to consummate the merger is not subject to any financing condition (including, without limitation, consummation of any debt financing), EFI has agreed that, prior to the effective time, it will use its reasonable best efforts, and will cause each of its subsidiaries and their respective officers, employees and advisors to use its respective reasonable best efforts, to provide Parent and Merger Sub with all cooperation reasonably requested by Parent and Merger Sub to assist it in connection with the arrangement of debt financing, including using reasonable best efforts in connection with:

 

   

participating in a reasonable and limited number of meetings, presentations, road shows, due diligence sessions, drafting sessions and sessions with rating agencies and otherwise reasonably cooperating with

 

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the marketing efforts of Parent and the financing sources with respect to the debt financing (including using commercially reasonable efforts to cause the syndication of the debt financing to benefit from the existing banking relationships of EFI);

 

   

assisting Parent and the financing sources with the preparation of rating agency presentations and bank information memoranda customarily required in connection with the financing;

 

   

reasonably assisting Parent in connection with the preparation and registration of any pledge and security documents, supplemental indentures, currency or interest hedging arrangements and other definitive financing documents as may be reasonably requested by Parent or the financing sources (including using reasonable best efforts to obtain consents of accountants for use of their reports in any materials relating to the debt financing, in each case as reasonably requested by Parent), and otherwise reasonably cooperating with Parent in facilitating the pledging of collateral and the granting of security interests required by the debt commitment letters, executing and delivering any credit agreements, pledge and security documents, guarantees and other definitive financing documents or requested customary certificates and documents (including a certificate of the chief financial officer of EFI with respect to solvency matters); provided that except for a customary authorization letter such documents will not take effect until the effective time;

 

   

if any of the indebtedness of EFI in respect of the existing credit agreement (as defined below) remains outstanding as of the closing, obtaining customary payoff letters, lien terminations and instruments of discharge (A) indicating the amount required for the payoff, discharge and termination in full on the closing date of such indebtedness and liens thereunder which are required to be terminated and released substantially concurrently with the closing pursuant to the terms and conditions of the debt commitment letter to discharge such indebtedness at closing and/or releasing the obligations of EFI and its subsidiaries thereunder, and (B) if such indebtedness is secured by any liens, agreeing to release such liens upon receipt of the payoff amount;

 

   

providing the required information; and

 

   

furnishing Parent and any financing sources promptly, and in any event at least five (5) business days prior to the closing date, with all necessary documentation and other information with respect to EFI and its subsidiaries required by any governmental authority with respect to the debt financing under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act of 2001, as amended, to the extent requested by Parent in writing at least nine (9) business days prior to the expected closing date, including a beneficial ownership certification as defined in 31 C.F.R. §1010.230;

Notwithstanding the foregoing, neither EFI nor any of its subsidiaries or any of their directors, officers or employees are required to:

 

   

waive or amend any terms of the merger agreement or agree to pay any fees or reimburse any expenses or incur any liability of any kind or cause their representatives to incur any liability of any kind (unless such liability is covered as a reimbursement obligation under the terms of the merger agreement) prior to the effective time for which it has not received prior reimbursement or is not otherwise indemnified by or on behalf of Parent;

 

   

cause any closing condition with respect to the merger to fail to be satisfied;

 

   

enter into any definitive certificate, agreement, arrangement, document or instrument prior to the effective time (other than the customary authorization letters);

 

   

give any indemnities that are effective prior to the effective time;

 

   

take any action that, in the good faith determination of EFI, would unreasonably interfere with the conduct of the business or EFI and its subsidiaries (i) unreasonably interfere with the conduct of the

 

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business or EFI and its subsidiaries, (ii) cause any representation, warranty, covenant or agreement in the merger agreement or any ancillary agreement thereto to be breached, (iii) cause EFI or any director, manager, officer or employee of EFI to incur any personal liability, (iv) require EFI or any of the its subsidiaries to take any action that will conflict with or violate EFI’s organizational documents or any laws, or result in the contravention thereof, or (v) reasonably be expected to result in a violation or breach of, or default under, any material contract not entered into in contemplation thereof to which EFI or any of its subsidiaries is a party (it being agreed in the merger agreement that EFI shall, and shall cause its subsidiaries to use reasonable best efforts to notify Parent and Merger Sub and cooperate in good faith to design and implement alternative arrangements to avoid such conflicts);

 

   

provide or prepare pro forma financial information, including pro forma costs savings, synergies, capitalization or other pro forma adjustments desired to be incorporated into any pro forma financing information;

 

   

provide any certificate, comfort letter or opinion of any of its representatives; or

 

   

provide access to or disclose any information to Parent or its representatives to the extent such disclosure would jeopardize the attorney-client privilege, attorney work product protections or similar protections or violate any applicable law (it being agreed in the merger agreement that EFI shall, and shall cause its subsidiaries to use reasonable best efforts to cooperate in good faith to design and implement alternative disclosure arrangements to enable Parent or its representatives to evaluate any such information without resulting in any waiver of such privileges or protections or contravention of law or contract).

In addition, no action, liability or obligation of EFI, any of its subsidiaries or any of their respective representatives pursuant to any certificate, agreement, arrangement, document or instrument relating to the debt financing will be effective until the effective time (other than with respect to the customary authorization letters), and neither EFI nor any of its subsidiaries will be required to take any action pursuant to any certificate, agreement, arrangement, document or instrument that is not contingent on the occurrence of the closing or that must be effective prior to the effective time.

Promptly upon request by EFI, Parent will reimburse EFI for any reasonable and documented out of pocket costs and expenses (including attorneys’ fees) incurred by EFI or any of its subsidiaries or representatives (if any) in connection with the cooperation of EFI, its subsidiaries and its representatives contemplated by the provisions of the merger agreement summarized above.

For more information regarding the financing, please see the section entitled “The Merger—Financing of the Merger” beginning on page 82.

Treatment of Company Indebtedness

Credit Agreement

Concurrently with the effective time, Parent will repay and discharge (or provide the funds to EFI to repay and discharge) in full all amounts outstanding pursuant to the terms of that certain Credit Agreement, dated as of January 2, 2019 (the “existing credit agreement”), among EFI, and Citibank, N.A., as Administrative Agent, Sole Lead Arranger and Sole Bookrunner, Bank Of The West, as Syndication Agent, and each lender from time to time party thereto).

Existing Notes

EFI has agreed to, prior to the effective time, take all such actions as reasonably may be required with respect to the existing notes (as defined below) in accordance with, and subject to, the terms of the existing indentures or under applicable law, including preparing any notices that may be required to be delivered prior to

 

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or upon the closing with respect to the existing notes in connection with the transactions contemplated by the merger agreement and any repurchases or conversions of the existing notes occurring prior to the effective time as a result of or in connection with the transactions contemplated by the merger agreement.

In addition, EFI has agreed, to the extent reasonably requested by Parent in connection with the transactions contemplated by the merger agreement, and the consummation thereof, to undertake the preparation of, and to execute and deliver, any supplemental indentures, legal opinions, officers’ certificates or other documents or instruments reasonably required in connection with the transactions contemplated by the merger agreement and the consummation thereof pursuant to the existing indentures or under any applicable law. EFI has agreed to provide Parent and its representatives reasonable opportunity to review and comment on any notices, press releases, supplemental indentures, legal opinions, conversion rate adjustments, officers’ certificates or other documents or instruments deliverable pursuant to or in connection with either or both of the existing indentures prior to the dispatch, making or execution thereof, and EFI will promptly respond to any reasonable questions from, and reflect any reasonable comments made by, Parent and its representatives with respect thereto prior to the dispatch, making or execution thereof. In addition, EFI will promptly notify Parent following the occurrence of any (i) event that would require an adjustment to the applicable Conversion Rate (as defined in the applicable existing indenture) or any related or similar economic terms of any such existing indenture or (ii) the timing of any conversion, repurchase or similar rights or obligations under either of the existing indentures.

To the extent reasonably practicable, EFI will provide Parent and its representatives with reasonable opportunity to participate in any discussions between the trustee under either of the existing indentures or any representative of any such trustee, on the one hand, and EFI or any of EFI’s representatives, on the other hand.

For purposes of the merger agreement and this proxy statement,

 

   

the term “2014 Indenture” means the Indenture (including Form of Notes), dated as of September 9, 2014, between EFI and U.S. Bank National Association, as trustee, as amended by the First Supplemental Indenture, dated as of November 5, 2018, between EFI and U.S. Bank National Association, as trustee;

 

   

the term the “2019 Indenture” means the Indenture (including Form of Notes), dated as of November 30, 2018, between EFI, as issuer, and U.S. Bank National Association, as trustee;

 

   

the term “existing indentures” means, collectively, the 2014 Indenture and the 2019 Indenture;

 

   

the term “existing notes” means the 0.75% Convertible Senior Notes due 2019 issued pursuant to the 2014 Indenture and the 2.25% Convertible Senior Notes due 2023 issued pursuant to the 2019 Indenture.

Efforts to Close the Merger; Filings; Other Actions

Each of EFI, Parent and Merger Sub has agreed to use its commercially reasonable best efforts to take all actions, to do all things, and to assist and cooperate with the other parties in doing all things, in each case as are necessary, proper or advisable pursuant to applicable law or otherwise to consummate and make effective, in the most expeditious manner practicable, the merger and the other transactions contemplated by the merger agreement, including: (i) causing the closing conditions to the merger to be satisfied, (ii) obtaining all consents, waivers, approvals, orders and authorizations from certain specified governmental authorities and making all registrations, declarations and filings with certain specified governmental authorities, other than as would reasonably be expected to cause a burdensome effect, (iii) obtaining all consents, waivers and approvals and delivering all notifications pursuant to any material contracts set forth on the disclosure letter in connection with the merger agreement and the consummation of the merger so as to maintain and preserve the benefits to the surviving corporation of such material contract as of and following the consummation of the merger, (iv) defending any lawsuits or other legal proceedings, whether judicial or administrative, challenging the merger agreement or the consummation of the transactions contemplated by the merger agreement, including the merger, including seeking to have any stay or temporary restraining order entered by any court or other governmental

 

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authority vacated or reversed and (v) executing and delivering any additional certificates, instruments and other documents as may be reasonably necessary or appropriate to carry out and effectuate the purpose and intent of the merger agreement.

The parties have also agreed to make certain regulatory filings (as described more particularly in the section entitled “The Merger—Regulatory Approvals” beginning on page 85), including (i) filing (or causing to be filed) with the FTC and the Antitrust Division a Notification and Report Form relating to the merger agreement and the merger as required by the HSR Act within 10 business days following the date of the merger agreement and (ii) as promptly as practicable following the date of the merger agreement (and in any event within 20 business days) file (or cause to be filed) such notification filings, forms and submissions, including any draft notifications in jurisdictions requiring pre-notification, including any draft notifications in jurisdictions requiring pre-notification, with certain specified governmental authorities.

Each of Parent and EFI will use reasonable efforts to (i) cooperate and coordinate with the other in the making of such filings, (ii) supply the other (or cause the other to be supplied) with any information that may be required in order to make such filings, (iii) supply (or cause to be supplied) any additional information that reasonably may be required or requested by the FTC, the Antitrust Division or other specified governmental authorities, and (iv) subject to certain exceptions, take all action necessary, proper or advisable to (A) cause the expiration or termination of the applicable waiting periods pursuant to the HSR Act; and (B) obtain any specified required consents pursuant to the applicable German and Turkish merger control rules, in each case as soon as practicable.

Each of Parent, Merger Sub and EFI have agreed to promptly inform the other parties of any substantive communication from any governmental authority regarding the merger in connection with such filings. If any party or affiliate thereof receives, directly or indirectly, a request for additional information or documentary material from any governmental authority with respect to the merger pursuant to the HSR Act or the German and Turkish merger control rules, then such party will make (or cause to be made), as soon as reasonably practicable and after consultation with the other parties, an appropriate response to such request; provided that neither party may extend any waiting period or enter into any agreement or understanding with any governmental authority with respect to the foregoing matters without the prior written approval of the other party, which shall not be unreasonably delayed, conditioned or withheld.

Further, each of Parent and Merger Sub have agreed that, between the date of the merger agreement and the closing, it will not, and will not permit any of its affiliates to, enter into any contracts for an acquisition (by stock purchase, merger, consolidation, amalgamation, purchase of assets, license or otherwise) of any ownership interest or assets of any person that would likely prevent or materially delay the consummation of the merger. EFI has agreed that, between the date of the merger agreement and the closing, it will not, and will not permit any of its subsidiaries to, enter into any contracts for an acquisition (by stock purchase, merger, consolidation, amalgamation, purchase of assets, license or similar transaction) of any ownership interest or assets of any person that would be reasonably likely to prevent or materially delay the consummation of the merger or the other transactions contemplated by the merger agreement.

Parent, Merger Sub or any of their respective affiliates shall not be required to take, and EFI and its subsidiaries shall not take or agree to take, any remedial action that would reasonable be expected to result in a burdensome effect.

As defined in the merger agreement and as used in this proxy statement:

“burdensome effect” means, in connection with any remedial action, any condition, limitation or qualification imposed by a governmental authority on its grant of any consent, authorization, order, approval or exemption that a party seeks to obtain in connection with the transactions contemplated by the merger agreement that, individually or together with all such conditions, limitations or qualifications would or would reasonably be

 

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expected to have a material impact on the business, assets, results of operations, financial condition, properties or liabilities of (a) EFI and its Subsidiaries, taken together or (b) Parent, Merger Sub and their respective affiliates, taken together.

“remedial action” means (i) the sale, divestiture, transfer, license, disposition, or hold separate (through the establishment of a trust or otherwise), of any and all of the capital stock or other equity or voting interest, assets (whether tangible or intangible), rights, properties, products or businesses of Parent and Merger Sub (and their respective subsidiaries, if applicable) and/or of EFI and its subsidiaries; (ii) the termination, modification, or assignment of existing relationships, contracts, or obligations of Parent and Merger Sub (and their respective subsidiaries, if applicable) and/or of EFI and its subsidiaries; (iii) the modification of any course of conduct regarding future operations of Parent and Merger Sub (and their respective subsidiaries, if applicable) and/or of EFI and its subsidiaries; and (iv) any other restrictions on the activities of Parent and Merger Sub (and their respective subsidiaries, if applicable) and/or of EFI and its subsidiaries, including the freedom of action of Parent and Merger Sub (and their respective subsidiaries, if applicable) and/or of EFI and its subsidiaries with respect to, or their ability to retain, one or more of their respective operations, divisions, businesses, product lines, customers, assets or rights or interests, or their freedom of action with respect to the assets, properties, or businesses to be acquired pursuant to the merger agreement.

Employee Benefits Matters

Parent has agreed that employees of EFI and any subsidiary of EFI who continue to be employed after the effective time of the merger (which we refer to collectively as the “continuing employees”), will:

 

   

during the period commencing at the effective time of the merger and ending on the first anniversary of the effective time of the merger (or, if earlier, the termination date of the employee), be provided with employee benefits (excluding equity-based benefits or compensation) that in the aggregate are no less favorable than those in effect prior to the effective time of the merger; and

 

   

during the period commencing at the effective time of the merger and ending on the first anniversary of the effective time of the merger (or, if earlier, the termination date of the employee), be provided with annual rates of base salary or wages and annual target cash incentive compensation opportunities (excluding any equity-based compensation opportunities) that are no less favorable than as provided to such continuing employee immediately prior to the effective time of the merger.

Additionally, from and after the effective time of the merger, Parent has agreed to (i) provide credit for such continuing employee’s employment with EFI or its subsidiaries for purposes of eligibility to participate, vesting, and entitlement of benefits under any compensation or benefit arrangement made available to the continuing employee where length of service is relevant (including for purposes of vacation accrual and severance entitlement, but excluding any equity, equity based incentive or long term compensation), except to the extent it would result in a duplication of coverage or benefits for the same period of service; (ii) use commercially reasonably best efforts to provide that (A) each continuing employee will be immediately eligible to participate, without any waiting period, in any and all employee benefit plans of the surviving company and its subsidiaries to the extent that such plan replaces coverage pursuant to a corresponding EFI benefit plans the continuing employee participated in prior to the effective time (B) any waiting periods, pre-existing condition exclusions, evidence of insurability requirements and actively-at-work or similar requirements under welfare benefit plans of the surviving company or its affiliates will be waived with respect to the continuing employees, (C) each continuing employee will receive credit for eligible expenses for deductible, coinsurance and out-of-pocket expenses paid under the EFI benefit plans the continuing employee participated in prior to the effective time of the merger for purposes of satisfying the deductible, coinsurance and maximum out-of-pocket expense requirements under the corresponding benefit plans of the surviving company and its subsidiaries for the plan year in which the effective time occurs, and (D) the account of any flexible spending plan maintained by the surviving company or any of its subsidiaries in which the continuing employee participates will be credited with

 

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the unused balance in the EFI flexible spending plan account of the continuing employee; and (iii) credit any vacation or paid time off accrued but unused by the continuing employee as of immediately prior to the effective time of the merger.

Other Covenants and Agreements

The merger agreement contains additional agreements relating to, among other matters, the suspension of the ESPP, coordination with respect to this proxy statement, litigation relating to the merger, public announcements with respect to the merger, notice of certain events, access to certain information, properties, books and records of EFI, and de-listing and deregistration of our common stock.

Conditions to the Merger

The respective obligations of EFI, Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver (to the extent permitted by applicable law) prior to the effective time of the following conditions:

 

   

receipt by EFI of the requisite stockholder approval at the special meeting;

 

   

(i) any waiting periods (and any extensions thereof) applicable to the merger pursuant to the HSR Act will have expired or otherwise been terminated, or all requisite consents pursuant thereto will have been obtained or deemed obtained following the expiry of a waiting period, and (ii) the consents, approvals, clearances, permits, orders, declarations or filings with, or notice to, certain specified governmental authorities will have been made or obtained; and

 

   

no temporary restraining order, preliminary or permanent injunction or other judgment or governmental order issued by any court of competent jurisdiction or other law preventing the consummation of the transactions contemplated by the merger agreement (or any of them) will be in effect, and no law, statute, rule, regulation or order will have been enacted, entered, enforced or deemed applicable to transactions contemplated by the merger agreement (or any of them), that, in each case, prohibits, makes illegal, or enjoins the consummation of the transactions contemplated by the merger agreement (or any of them).

The obligations of Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver (where permissible pursuant to applicable law) prior to the effective time of each of the following further conditions, any of which may be waived exclusively by Parent:

 

   

the representations and warranties of EFI regarding incorporation, existence and good standing, corporate power, enforceability, non-contravention with organizational documents, the inapplicability of certain takeover statutes, requisite stockholder approval, certain aspects of the EFI’s capitalization, the absence of a company material adverse effect since December 31, 2018, and broker’s and finder’s fees that (i) are not qualified by company material adverse effect or other materiality qualifiers must be true and correct in all material respects as of the date of the merger agreement and as of the closing date as if made at and as of the closing date (other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time), and (ii) that are qualified by company material adverse effect or other materiality qualifiers must be true and correct in all respects (without disregarding such company material adverse effect or other materiality qualifiers qualifications) as of the date the merger agreement and as of the closing date as if made at and as of the closing date (other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time);

 

   

the representations and warranties of EFI relating to certain aspects of EFI’s capitalization must true and correct in all respects as of the date of the merger agreement and as of the closing date as if made at and as of the closing date (other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time), except where the

 

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failure of such representations and warranties to be so true and correct, individually or in the aggregate with all other failures to be so true and correct, would not reasonably be expected to result in additional cost, expense or liability to EFI (or the surviving corporation), Parent or their affiliates in excess of $3.383 million;

 

   

the other representations and warranties of EFI set forth in the merger agreement must be true and correct (without giving effect to any materiality or company material adverse effect qualifications set forth therein) as of the date of the merger agreement and as of the closing date as if made at and as of the closing date (other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time (without giving effect to any materiality or company material adverse effect qualifications set forth therein)), except for such failures to be so true and correct that, individually or in the aggregate with all other failures to be so true and correct, would not have, or would not reasonably be expected to have, a company material adverse effect;

 

   

EFI must have performed and complied in all material respects with the covenants, obligations and conditions of the merger agreement required to be performed and complied with by it at or prior to the closing;

 

   

no company material adverse effect will have occurred that is continuing as of immediately prior to the closing; and

 

   

the receipt by Parent and Merger Sub of a certificate of EFI, validly executed for and on behalf of EFI and in its name by a duly authorized executive officer thereof, certifying as to the satisfaction of all of the above conditions.

EFI’s obligations to consummate the merger are subject to the satisfaction or waiver (where permissible pursuant to applicable law) prior to the effective time of each of the following further conditions, any of which may be waived exclusively by EFI:

 

   

the representations and warranties of Parent and Merger Sub set forth in the merger agreement must be true and correct as of the date of the merger agreement and as of the closing date as if made at and as of the closing date (other than such representations and warranties that by their terms address matters only as of another specified time, which must be true only as of such time), except for any failure to be so true and correct that would not, individually or in the aggregate, prevent or materially delay the consummation of the merger or the ability of Parent and Merger Sub to perform their respective covenants and obligations pursuant to the merger agreement;

 

   

Parent and Merger Sub must have performed and complied in all material respects with the covenants, obligations and conditions of the merger agreement required to be performed and complied with by Parent and Merger Sub at or prior to the closing; and

 

   

the receipt by EFI of a certificate of Parent and Merger Sub, validly executed for and on behalf of Parent and Merger Sub and in their respective names by a duly authorized executive officer thereof, certifying as to the satisfaction of all of the above conditions.

Termination

EFI and Parent may, by mutual written agreement, terminate the merger agreement and abandon the merger (whether prior to or after requisite stockholder approval) at any time prior to the effective time.

The merger agreement may also be terminated and the merger abandoned at any time prior to the effective time of the merger, as follows:

 

   

by either Parent or EFI if:

 

   

(i) any permanent injunction or other judgment or order issued by any court of competent jurisdiction is in effect preventing the consummation of the merger and has become final and

 

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non-appealable, or any governmental order has been issued by any governmental authority of competent jurisdiction, that prohibits, makes illegal or enjoins the consummation of the merger and has become final and non-appealable, or (ii) any law, statute, rule, regulation or order will have been enacted, entered, or enforced that prohibits, makes illegal or enjoins the consummation of the merger, except that neither party has the right to terminate if such party has breached in any material respect its obligations under the merger agreement to resist any such legal restraint;

 

   

the merger has not been consummated by 11:59 p.m., New York City time, on October 14, 2019 (which we refer to such date as the “end date,” and such termination right as the “end date termination right”), except that neither party has the right to terminate if such party’s breach of any provision of the merger agreement in any material respect is the primary cause of, or primarily resulted in, either the failure to satisfy the conditions to the obligations of the terminating party to consummate the merger or the failure of the merger to be consummated by the end date;

 

   

EFI fails to obtain the requisite stockholder approval at the special meeting (we refer to such termination right as a “stockholder vote failure termination right”);

 

   

by Parent, if:

 

   

EFI has breached any of its representations or warranties or EFI has failed to perform any covenants or other agreements contained in the merger agreement that EFI is obligated to perform, which breach or failure to perform results in a failure of the related closing conditions (we refer to such termination right as the “EFI breach termination right”), except that Parent will not be entitled to exercise the EFI breach termination right prior to the earlier of (i) the day immediately preceding the end date and (ii) the date that is 30 days after the delivery by Parent to EFI of written notice of such breach stating Parent’s intention to exercise the EFI breach termination right and the basis for such termination (it being understood that Parent will not be entitled to exercise the EFI breach termination right if such breach has been cured prior to the end of such period); provided that Parent will not have the right to terminate the merger agreement pursuant to the EFI breach termination right if Parent is then in an equivalent breach position with respect to any of its representations, warranties, covenants or agreements set forth in the merger agreement;

 

   

prior to obtaining the requisite stockholder approval, the Board has effected a Board recommendation change (we refer to such termination right as the “Board recommendation change termination right”), except that Parent will only have the right to terminate the merger agreement pursuant to the Board recommendation change termination right if it exercises such right within the earlier of (i) the business day immediately preceding the special meeting, and (ii) ten business days after EFI has notified Parent that the Board has effected a Board recommendation change;

 

   

by EFI, if:

 

   

Parent or Merger Sub has breached or failed to perform any of its respective representations, warranties, covenants or other agreements set forth in the Merger Agreement such that the related closing conditions are not satisfied (we refer to such termination right as the “Parent breach termination right”), except that EFI will not be entitled to exercise the Parent breach termination right prior to the earlier of (i) the day immediately preceding the end date and (ii) the date that is 30 days after the delivery by EFI to Parent of written notice of such breach stating EFI’s intention to exercise the Parent breach termination right and the basis for such termination (it being understood that EFI will not be entitled to exercise the Parent breach termination right if such breach has been cured prior to the end of such period); provided that EFI will not have the right to terminate the merger agreement pursuant to the Parent breach termination right if EFI is then in an equivalent breach position with respect to any of its representations, warranties, covenants or agreements set forth in the merger agreement;

 

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at any time prior to receiving the requisite stockholder approval if the Board has received a superior proposal and has authorized EFI to enter into an alternative acquisition agreement to consummate the acquisition transaction contemplated by such superior proposal in compliance with the applicable terms of the merger agreement (we refer to such termination right as a “superior proposal termination right”), subject to EFI paying to Parent a termination fee of either $25.37 million or $59.2 million (as applicable) substantially concurrently with such termination; or

 

   

(i) all of the mutual closing conditions and all of the conditions to the obligations of Parent have been satisfied as of such termination (other than those conditions that by their terms are to be satisfied by actions taken at the closing of the merger, each of which is capable of being satisfied at that closing), (ii) EFI has at least three business days prior to such termination irrevocably (in the case of the immediately succeeding clause (A) only) notified Parent in writing (A) that if Parent performs its obligations under the merger agreement and the equity financing and the debt financing are funded, EFI is ready, willing and able to consummate the merger throughout such three business day period, (B) that, effective as of the closing, all conditions to the obligations of EFI have been satisfied or that, effective as of the closing, it is irrevocably waiving any such unsatisfied conditions and (C) of EFI’s intention to terminate the merger agreement, and (iii) Parent and Merger Sub fail to consummate the merger by the end of such three business day period and at such time EFI remains ready, willing and able to consummate the merger (we refer to such termination right as the “financing failure termination right”).

Termination Fees

EFI Termination Fee

Parent will be entitled to receive the applicable EFI termination fee from EFI if the merger agreement is terminated by:

 

   

either Parent or EFI pursuant to an end date termination right or the stockholder vote failure termination right, or Parent terminates the merger agreement pursuant to an EFI breach termination right, and (i) prior to such termination, an acquisition proposal has become publicly known, in the case of a termination pursuant to the end date termination right or the stockholder vote failure termination right or an acquisition proposal has been made to the Board, in the case of a termination pursuant to the EFI breach termination right, and (ii) within 12 months of such termination, either any acquisition transaction is consummated or EFI enters into a definitive agreement providing for the consummation of any acquisition transaction and such acquisition transaction is at any point thereafter consummated (in each case, the references to “15%” in the definition of “acquisition proposal” being deemed to be references to “50%”), in which case EFI must pay Parent the EFI termination fee promptly, but in any event on the earlier of the date of such definitive agreement is signed or the consummation of such acquisition transaction;

 

   

EFI pursuant to a superior proposal termination right, in which case EFI must Parent the applicable EFI termination fee substantially concurrently with such termination; or

 

   

Parent pursuant to a Board recommendation change termination right, in which case EFI must pay Parent the applicable EFI termination fee within two business days after such termination.

The “EFI termination fee” is an amount equal to $59.2 million, except that in the event that the merger agreement is terminated by (i) EFI pursuant to a superior proposal termination right (A) prior to the no-shop period start date or (B) prior to June 5, 2019 (we refer to such date as the “excluded party end date”) in order into a definitive agreement to consummate an acquisition transaction for a superior proposal with an excluded party, or (ii) by Parent (A) prior to the no-shop period start date if the Board has effected a Board recommendation change (other than in connection with a Board recommendation change resulting from an intervening event) or

 

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(B) prior to the excluded party end date in connection with a board recommendation change resulting from a superior proposal with an excluded party, subject to certain requirements, the EFI termination fee is $25.37 million.

Parent Termination Fee

EFI will be entitled to receive $109.94 million in cash (which we refer to as the “Parent termination fee”) from Parent if the merger agreement is terminated by:

 

   

EFI pursuant to the Parent breach termination, in which case Parent must pay EFI the Parent termination fee within two business days after such termination; or

 

   

EFI pursuant to the financing failure termination right, in which case Parent must pay EFI the Parent termination fee within two business days after such termination.

Directors’ and Officers’ Indemnification and Insurance

The merger agreement provides that the surviving corporation and its subsidiaries will (and Parent will cause the surviving corporation and its subsidiaries to) honor and fulfill, in all respects, the obligations of EFI and its subsidiaries pursuant to any indemnification agreements between EFI and any of its subsidiaries, on the one hand, and any of their respective current or former directors or officers (and any person who becomes a director or officer of EFI or any of its subsidiaries prior to the effective time) (whether or not a party to an indemnification agreement), on the other hand (which we refer to as an “indemnified person”), in effect on the date of the merger agreement and made available to Parent.

In addition, from and after at the effective time and ending on the sixth anniversary of the effective time, the surviving corporation and its subsidiaries will (and Parent will cause the surviving corporation and its subsidiaries to) cause the organizational documents of the surviving corporation and its subsidiaries to contain provisions with respect to indemnification, exculpation and advancement of expenses that are at least as favorable for periods prior to the effective time as the indemnification, exculpation and advancement of expenses provisions set forth in the organizational documents of EFI or any of its subsidiaries, as applicable, as of the date of the merger agreement. During such period, such provisions may not be repealed, amended or otherwise modified in any manner except as required by applicable law.

In addition, without limiting the foregoing, unless EFI has purchased a “tail” policy from an insurance carrier with the same or better credit rating as EFI’s current directors’ and officers’ liability insurance carrier, prior to the effective time (which EFI may purchase, provided that the premium for such insurance does not exceed 300% of the aggregate annual premiums currently paid), the merger agreement requires, for a period of at least six years commencing at the effective time, the surviving corporation to (and Parent to cause the surviving corporation to) maintain for the benefit of the directors and officers of EFI and its subsidiaries, at any time prior to the Effective Time, directors’ and officers’ liability insurance policies in respect of acts or omissions occurring at or prior to the Effective Time on terms that are substantially equivalent to and in any event not less favorable in the aggregate than those of EFI’s directors’ and officers’ liability insurance in effect on the date of the merger agreement. Neither Parent nor the surviving corporation will be required to pay premiums for such policy to the extent such premiums exceed, on an annual basis, 300% of the aggregate annual premiums currently paid by EFI, and if the premium for such insurance coverage would exceed such amount Parent shall be obligated to cause the surviving corporation to obtain the greatest coverage available for a cost equal to such amount from an insurance carrier with the same or better credit rating as EFI’s current directors’ and officers’ liability insurance carrier.

If Parent or the surviving corporation (i) consolidates or amalgamates with or merge into any other person and not be the continuing or surviving company or entity in such consolidation, amalgamation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then proper provision must be made so that such continuing or surviving corporation or entity or transferee of such assets, as the case may be, assumes the obligations set forth above relating to the indemnified person.

 

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For more information, please see the section entitled “The Merger—Interests of Certain Persons in the Merger.”

Expenses

Except as otherwise provided in the merger agreement, all costs and expenses incurred in connection with the merger agreement will be paid by the party incurring such cost or expense.

Sole and Exclusive Limitations of Liability

If Parent or Merger Sub breaches the merger agreement or fails to perform thereunder, then, except for specific performance as and to the extent permitted by the merger agreement and except for EFI’s third party beneficiary rights under the equity commitment letter and EFI’s right to enforce its rights under the confidentiality agreement, the sole and exclusive remedies against Parent, Merger Sub or any related party for any breach, loss or failure to perform, which recourse may be sought solely against Parent, Merger Sub and, in the case of EFI’s right to enforce the limited guarantee and the equity commitment letter, the guarantors, in the merger agreement and subject to the limitations set forth therein, will be, if applicable, upon termination of the merger agreement, for EFI to receive (i) the Parent termination fee under the circumstances in which it is payable under the merger agreement from Parent (or the guarantors under the limited guarantee, solely to the extent provided therein and subject to the limitations set forth therein), (ii) the reasonable costs of collection relating thereto, and (iii) any payments to the extent owed by Parent pursuant to specified reimbursement, indemnification and fees and expenses obligations set forth in the merger agreement.

If EFI breaches the merger agreement or fails to perform thereunder, then, except for specific performance as and to the extent permitted by the merger agreement and except for Siris’ right to enforce its right under the confidentiality agreement, the sole and exclusive remedies against EFI or any related party for any breach, loss or failure to perform, which recourse may be sought solely against EFI under the merger agreement and subject to the limitations set forth therein, will be: (i) if applicable, upon termination of the merger agreement, for Parent to receive (A) the EFI termination fee under the circumstances in which the EFI termination fee is payable under the merger agreement, (B) any payments to the extent owed by EFI pursuant to specified payment obligations set forth in the merger agreement and (C) the reasonable cost of collection relating thereto; or (ii) following a termination of the merger agreement (other than in the event of a valid termination of the merger agreement in which the EFI termination fee is paid or payable under the merger agreement), for Parent or Merger Sub to seek to recover monetary damages from the Company for a willful and material breach; provided that any recovery under clause (ii) will not exceed $109.94 million.

Specific Performance

EFI and Parent have agreed that irreparable damage for which monetary damages and/or the payment of the Parent termination fee, even if available, would not be an adequate remedy would occur in the event that the parties do not perform the provisions of the merger agreement in accordance with its specified terms or otherwise breach such provisions. The parties have agreed that, subject to certain specified limitations in the merger agreement, they will be entitled, in addition to any other remedy to which they are entitled at law or in equity, to an injunction, specific performance and other equitable relief to prevent breaches of the merger agreement and to enforce specifically the terms and provision of the merger agreement without proof of damages. Notwithstanding the foregoing, EFI’s right to an injunction, specific performance or other equitable remedy in connection with enforcing Parent’s obligation to cause the equity financing to be funded and to consummate the merger is subject to certain conditions including the satisfaction or waiver of the closing conditions in the merger agreement and the availability of the debt financing.

 

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Amendments

The merger agreement may be amended, modified or supplemented in any and all respects by a written agreement of the parties with respect to any of the terms contained in the merger agreement, either before or after the requisite stockholder approval; provided, however, that no amendment may be made following the receipt of the requisite stockholder approval unless, to the extent required by DGCL, such amendment, modification or supplement is approved by EFI stockholders, and provided further that no amendment, modification or supplement may be made to the merger agreement that would materially adversely affect the rights of the debt financing sources without the consent of the debt financing sources.

Governing Law

The merger agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such State.

 

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PROPOSAL 2: NON-BINDING, ADVISORY VOTE ON MERGER-RELATED COMPENSATION

FOR EFI’S NAMED EXECUTIVE OFFICERS

This section sets forth the information required by Item 402(t) of the SEC’s Regulation S-K regarding compensation for each named executive officer of EFI that is based on, or otherwise relates to, the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the merger-related compensation payable to our named executive officers. The “golden parachute” compensation payable to these individuals is subject to a non-binding, advisory vote of EFI’s stockholders, as described below in this section.

The table below sets forth, for the purposes of this golden parachute disclosure, the amount of payments and benefits that each of EFI’s named executive officers would receive, assuming that (1) the effective time of the merger occurred on May 24, 2019 (which is the assumed date solely for purposes of this golden parachute compensation disclosure), (2) each of Messrs. Muir and Olin experienced a qualifying termination (as described on page 81 above) at such time, (3) none of the named executive officers would receive “excess parachute payments” subject to an excise tax under Section 4999 of the Code, and (4) none of the named executive officers would enter into a new agreement or otherwise become legally entitled to, prior to the merger, additional compensation or benefits. The amounts below are determined using the merger consideration of $37.00 per share, and are based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including the assumptions described in the footnotes to the table. These amounts are based upon the named executive officer’s compensation levels in effect on May 24, 2019 and outstanding equity awards on May 24, 2019. As a result of the foregoing assumptions, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below.

Golden Parachute Compensation

 

Name

   Cash
($)(1)
     Equity
($)(2)
     Perquisites/Benefits
($)(3)
     Total
($)
 

William D. Muir, Jr.

     4,061,648        6,707,027        69,574        10,838,249  

Guy Gecht

     —          9,662,254        —          9,662,254  

Marc Olin

     1,279,608        4,469,082        63,848        5,812,538  

 

(1)

The estimated amount listed in this column for each named executive officer represents the aggregate value of cash severance (i.e., 36 months of base salary for Mr. Muir, 12 months of base salary for Mr. Olin, plus the value of each executive’s EFI 2019 Annual PSUs that would have vested assuming that 100% of any performance targets applicable to the EFI 2019 Annual PSUs were achieved) that such named executive officer would be entitled to receive from EFI under his respective employment agreement upon a “double trigger” qualifying termination, where the named executive officer’s employment is terminated by EFI without cause or by the named executive officer for good reason on or within 24 months following a change of control of EFI. (The terms “cause,” “good reason,” and “change of control” are each defined in the applicable employment agreement). For additional information see the section entitled “The Merger—Interests of Certain Persons in the Merger—Employment Agreements” beginning on page 81.

The following table quantifies each separate form of cash compensation included in the aggregate total reported in the column.

 

Name

   Lump Sum
Base Salary
($)
     Lump Sum Bonus
Payment ($)
     Total ($)  

William D. Muir, Jr.

     1,860,000        2,201,648        4,061,648  

Guy Gecht

     —          —          —    

Marc Olin

     370,000        909,608        1,279,608  

 

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(2)

Pursuant to the terms of the merger agreement (subject to certain limitations set forth therein) and as described in the section entitled “The Merger—Interests of Certain Persons in the Merger—Treatment of Outstanding Equity Awards” beginning on page 78, each of the named executive officer’s EFI Time-Based RSUs that are vested or will vest within 12 months after the effective time of the merger will be payable at the effective time.

Pursuant to the terms of their employment agreements, each other outstanding EFI equity award held by Messrs. Muir and Olin will immediately vest upon a “double trigger” qualifying termination, where the named executive officer’s employment is terminated by EFI without cause or by the named executive officer for good reason (as such terms are defined in the employment agreement) on or within 24 months following a change of control, as described in the section entitled “The Merger—Interests of Certain Persons in the Merger—Employment Agreements” beginning on page 81.

Pursuant to the terms of the consulting agreement with Mr. Gecht, all of his outstanding EFI equity awards granted in connection with his employment with EFI will “single-trigger” vest upon a change of control of EFI, with PSUs vesting at the target performance level for any open performance period, as described in the section entitled “The Merger—Interests of Certain Persons in the Merger—Acceleration of Mr. Gecht’s RSU Awards” beginning on page 80. Mr. Gecht’s outstanding EFI LTIP Overachievement PSU awards will be cancelled without payment at the effective time of the merger. Mr. Gecht’s EFI Time-Based RSUs granted in connection with his service on the Board will accelerate pursuant to the merger agreement.

For purposes of this note and the table above, the value of the unvested EFI Time-Based RSU, EFI LTIP Target PSUs, and EFI LTIP Overachievement PSUs is calculated using the merger consideration of $37.00 per share multiplied by the number of shares of EFI common stock subject to the EFI Time-Based RSU, EFI LTIP Target PSUs, and EFI LTIP Overachievement PSUs. For purposes of this disclosure, the number of shares of EFI common stock subject to each EFI LTIP Overachievement PSU award for Messrs. Muir and Olin is calculated at the maximum level of performance, as provided in their employment agreements. The value of unvested EFI 2019 Annual PSUs has been excluded from this “Equity” column as these awards will be settled in cash pursuant to the employment agreements as described in footnote (1) above and thus is reflected in the “Cash” column above.

The following table illustrates the allocation of the aggregate total reported in the column for each named executive officer’s (i) unvested EFI Time-Based RSUs, (ii) unvested EFI LTIP Target PSUs, and (iii) unvested EFI LTIP Overachievement PSUs (at maximum level of performance).

 

Name

   EFI Time-Based
RSUs ($)
     EFI LTIP Target
PSUs ($)
     EFI LTIP
Overachievement
PSUs (at
Maximum Level
of Performance)
($)
     Total ($)  

William D. Muir, Jr.

     1,399,747        4,432,452        874,828        6,707,027  

Guy Gecht

     3,381,097        6,281,157        —          9,662,254  

Marc Olin

     903,355        2,662,372        903,355        4,469,082  

 

(3)

This column includes, for Messrs. Muir and Olin, (i) the estimated amount of the executive’s COBRA premiums for health insurance for 18 months (in the case of Mr. Muir) or 12 months (in the case of Mr. Olin) and (ii) outplacement services, which will be provided upon a “double trigger” qualifying termination where the named executive officer’s employment is terminated by EFI without cause or by the named executive officer for good reason (as such terms are defined in the employment agreements) on or within 24 months following a change of control, as described in the section entitled “The Merger—Interests of Certain Persons in the Merger—Employment Agreements” beginning on page 81.

 

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The following table quantifies each separate perquisite, benefit, and health care and welfare benefits included in the aggregate total reported in the column.

 

Name

   Payment of COBRA
Premiums ($)
     Outplacement
Services ($)
     Total ($)  

William D. Muir, Jr.

     34,574        35,000        69,574  

Guy Gecht

     —          —          —    

Marc Olin

     28,848        35,000        63,848  

Merger-Related Compensation Proposal

Pursuant to Section 14A of the Exchange Act and Rule 14a-21(c) thereunder, EFI is seeking a non-binding, advisory stockholder approval of the compensation of EFI’s named executive officers that is based on or otherwise relates to the merger as disclosed above in this section. The proposal gives EFI’s stockholders the opportunity to express their views on the merger-related compensation of EFI’s named executive offic