ELECTRONICS FOR IMAGING INC (Form: 10-K, Received: 02/27/2019 17:29:46)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)



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

For the fiscal year ended December 31, 2018



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

Commission File Number: 000-18805

ELECTRONICS FOR IMAGING, INC.

(Exact name of registrant as specified in its charter)



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

6750 Dumbarton Circle, Fremont, CA 94555

(Address of principal executive offices) (Zip Code)

(650) 357-3500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of Each Class		Name of Exchange on which Registered
Common Stock, $.01 Par Value		The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þ

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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



Large accelerated filer	þ	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	¨
Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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

The aggregate market value of the voting and non-voting common stock held by non-affiliates computed by reference to the price at which the common stock was last sold on June 29, 2018 was $1,431,471,129 *

The number of shares outstanding of the registrant’s common stock, $.01 par value per share, as of February 22, 2019 was 42,642,184 .

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the 2019 Annual Meeting of Stockholders are incorporated by reference into Part III hereof.

* Based on the last trade price of the registrant’s common stock reported on The Nasdaq Global Select Market on June 29, 2018, the last business day of the registrant’s second quarter of the 2018 fiscal year.

Electronics For Imaging, Inc.

Table of Contents



		Page No.
PART I
ITEM 1	Business	3
ITEM 1A	Risk Factors	19
ITEM 1B	Unresolved Staff Comments	36
ITEM 2	Properties	36
ITEM 3	Legal Proceedings	36
ITEM 4	Mine Safety Disclosures	37

PART II
ITEM 5	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	37
ITEM 6	Selected Financial Data	40
ITEM 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	41
ITEM 7A	Quantitative and Qualitative Disclosures about Market Risk	67
ITEM 8	Financial Statements and Supplementary Data	68
ITEM 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	127
ITEM 9A	Controls and Procedures	127
ITEM 9B	Other Information	130

PART III
ITEM 10	Directors, Executive Officers and Corporate Governance	130
ITEM 11	Executive Compensation	130
ITEM 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	130
ITEM 13	Certain Relationships and Related Transactions, and Director Independence	131
ITEM 14	Principal Accountant Fees and Services	131

PART IV
ITEM 15	Exhibits and Financial Statement Schedules	131
ITEM 16	Form 10-K Summary	134
Signatures		135

FORWARD-LOOKING STATEMENTS

Certain of the information contained in this Annual Report on Form 10-K, including, without limitation, statements made under this Part I, Item 1, “Business,” Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Part II Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” which are not historical facts, may include “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”), and is subject to risks and uncertainties and actual results or events may differ materially. When used herein, 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 the Company or its management are intended to identify such statements as “forward-looking statements.” Such statements reflect the current views of the Company and its management with respect to future events and are subject to certain risks, uncertainties, and assumptions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company’s actual results, performance, or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Important factors that could cause the Company’s actual results to differ materially from those included in the forward-looking statements made herein include, without limitation, those factors discussed in Item 1, “Business,” in Item 1A, “Risk Factors,” and elsewhere in this Annual Report on Form 10-K and in the Company’s other filings with the Securities and Exchange Commission (“SEC”), including the Company’s most recent Quarterly Report on Form 10-Q and Current Reports on Form 8-K, and any amendments thereto. The Company assumes no obligation to revise or update these forward-looking statements to reflect actual results, events, or changes in factors or assumptions affecting such forward-looking statements.

PART I

References to “EFI,” the “Company,” “we,” “us,” and “our” mean Electronics For Imaging, Inc. and its subsidiaries, unless the context indicates otherwise.

Item 1: Business

Overview

EFI 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. Our common stock is traded on The Nasdaq Global Select Market under the symbol EFII. Our corporate headquarters are located at 6750 Dumbarton Circle, Fremont, California 94555.

We offer a wide-range of products and services for industrial digital printing. Our products and services are grouped in the following categories: Industrial Inkjet, Productivity Software, and Fiery.

Products and Services

Industrial Inkjet

Our Industrial Inkjet products address the high-growth industrial digital inkjet markets where significant conversion of production from analog to digital inkjet printing is occurring. The Industrial Inkjet operating segment consists of our VUTEk super-wide and wide format display graphics, Nozomi corrugated packaging and display, Reggiani textile, and Cretaprint ceramic tile decoration and building material industrial digital inkjet printers; digital ultra-violet ("UV") curable, light emitting diode ("LED") curable, ceramic, water-based, thermoforming, and specialty inks, as well as a variety of textile inks including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, water-based dispersed printing ink, and

coatings; digital inkjet printer parts; and professional services. Printing surfaces include paper, vinyl, corrugated, textile, glass, plastic, aluminum composite, ceramic tile, wood, and many other flexible and rigid substrates.

Display Graphics. Our display graphics products consist of super-wide format VUTEk printers (including h-series, HS-series and GS/LX-series, ) and roll-to-roll product families (including r-series). Our new VUTEk hybrid LED printer h-series debuted in October 2018 when we launched VUTEk h3 which offers maximum throughput of up to 74 boards per hour. In January 2019, we launched VUTEk h5, our newest higher-speed, premium-quality hybrid flatbed/roll-to-roll super-wide format LED printer, which can run up to 109 boards per hour and offers eight-color and optional four-color printing modes plus white, as well as an up to nine-layer print capability.

Our HS series of high-speed printers are alternatives to analog presses used by high volume graphic producers and are based on pin & cure printing technology. In 2018, we launched the HS125 F4 and HS 100 F4 inkjet presses for “Fast Graphics” out-of-home applications of hybrid flatbed/roll super-wide format products. The two new printers reconfigure the eight ink channels of the VUTEk HS series platform in a CMYK x 2 setup, efficiently addressing the need for cost-effective production on banners, billboards, building wraps and similar applications.

VUTEk super-wide format roll-to-roll printers include advanced material handling features such as in-line cutting and slitting. In 2018, we launched the VUTEk 3r+ and 5r+ LED roll-to-roll printers, which print at speeds up to 4,896 square feet per hour, with resolutions up to 1,200 dpi, and incorporate 7-picoliter Ultra-Drop technology.

Our wide format display graphics products consist of roll-to-roll, flatbed, and hybrid product families for the entry-level and mid-range industrial digital inkjet printer market. In 2018, we launched a new 3.2-meter Pro 32r wide format roll-to-roll LED printer providing a more competitive and economical, all-in-one, production-level printer, delivering up to 5,000 square meters per month. In 2017, we launched our wide format Pro 24f flatbed and Pro 16h LED hybrid printers.

Corrugated Packaging and Display . Our first single pass, ultra-high-speed LED industrial inkjet corrugated packaging press, Nozomi C18000, debuted in 2017. It is a revolutionary cost-effective solution for the corrugated, paper packaging, display printing, and other markets as it produces on-demand and just-in-time customized campaigns with direct to substrate printing as well as proofs on demand. In 2018, we announced new Nozomi print capabilities including a white ink feature and updated corrugated production workflow. With the new white ink feature, packaging converters can create impressive photographic images and vivid colors directly on brown kraft liner board.

Our VUTEk display graphics super-wide and wide format, and Nozomi corrugated packaging and display industrial digital inkjet printers incorporate “cool cure” LED printing technology. LED technology uses less heat than the traditional curing process resulting in increased uptime and greater reliability.

Textile . Our textile industrial inkjet products consist of the Reggiani and VUTEk FabriVU product families.

Reggiani industrial inkjet textile printers address the full scope of advanced textile printing with versatile printers suitable for dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, and water-based dispersed printing ink. Reggiani is at the forefront of digital printing as an alternative to either analog printing or single color (dyed) garments. Reggiani provides an overall solution for the entire textile printing process from yarn treatment to fabric printing and finishing for a wide variety of substrates and applications (fashion, home textile, sportswear, signage, automotive, and outdoor).

A significant driver for the adoption of digital textile printing is the growth of “fast fashion,” which is a term used by fashion retailers to express the need for designs to move quickly from the runway to the retailer to capture current fashion trends. The digital textile printing market has also benefited from sports apparel with short run production quantities, closer geographic proximity to end-use markets, and environmental awareness, as digital printing has a significantly lower environmental footprint than analog production, consuming less water, and generating less waste.

We demonstrated our new Reggiani BOLT textile printer in November 2018. It is an advanced ultra-high-speed digital single-pass printer with the potential to revolutionize the textile printing market, designed to provide users with high uptime and reliability, outstanding performance, superior printing uniformity and accuracy, long print head life and minimal maintenance needs. We anticipate commercially releasing this product in 2019.

In 2018 we launched the COLORS and POWER industrial digital textile inkjet printers. The COLORS printer offers 12 color printing for the most accurate color reproduction in our product line and vivid colors on a variety of textiles. The POWER printer features our recirculating ink system which increases inkjet head life and our ink recovery system that reduces overall ink consumption.

Our VUTEk FabriVU textile printers are specialty hybrid flatbed/roll-fed printers that produce digitally printed fabrics, soft signage, or deep draw thermoformed and other custom applications. We launched the 3.4M FabriVU 340i in 2018 which features in-line sublimation for direct to textile signage printing in a single step, eliminating the need for running the textile in a heat press after printing.

Ceramic Tile Decoration . Our Cretaprint ceramic tile decoration inkjet printers are utilized by the ceramic tile and building material manufacturing industries.

In 2018, we launched Cretaprint C5 and D5 models which feature the new e•D5 print head that optimizes printer performance by assuring better alignment and higher throughput speeds. In 2017, we launched the Cretaprint C4 Twin, featuring a dual print head approach with up to four double print bars and widths up to 0.7 meters. We also launched the Cretaprint P4 in 2017 featuring up to 12 print bars, 1.4 meter print widths, and resolution of 360 dpi.

Ink . Our ink provides a recurring revenue stream generated from sales to our existing customer base of installed printers.

VUTEk printers primarily use digital UV and LED curable ink, although our solvent ink printers remain in use in the field. We were first to market with digital UV curable ink incorporating “cool cure” LED technology for use in high-end production super-wide, wide format, and corrugated packaging and display digital inkjet printing systems. We sell a variety of third party branded textile ink to users of our textile digital inkjet printers, including dye sublimation, pigmented, reactive dye, acid dye, water-based dispersed printing ink, and coatings. We launched our internal formulation of our reactive dye ink in 2016. In 2016, we introduced our soluble salt-based ceramic digital ink formulation.

Rialco Limited (“Rialco”), which we acquired in 2016, supplies dye powders and color products for the textile, digital print, and other decorating industries. Rialco’s pure disperse dyes are particularly important in the manufacture of high-quality dye sublimation inkjet ink for textile applications, which is a key growth area in the global migration from analog to digital print. Rialco’s technical and commercial capabilities benefit the Industrial Inkjet segment in the sourcing, specification, and purification of high quality dyes and expand our research, development, and innovation base to develop ink for our markets.

Label Printing . We entered into a Support Services and License Agreement (“Agreement”) with Xeikon, N.V. (“Xeikon”), a division of the Flint Group, in November 2017. Pursuant to the Agreement, we provided Xeikon access to the Jetrion customer list, which enabled Xeikon to sell Jetrion printers and re-sell our UV and LED label ink. Xeikon will purchase UV and LED label ink exclusively from us and resell to both our current customer base as well as new Xeikon inkjet customers over the four-year term of the Agreement. We cannot sell Jetrion printers during the four-year term of the Agreement.

Customer Base . Our industry-leading VUTEk display graphics super-wide and wide format UV, LED, and thermoforming industrial inkjet printers and inks are used by commercial photo labs, large sign shops, graphic screen printers, specialty commercial printers, and digital and billboard graphics providers serving the out-of-home advertising and industrial specialty print segments by printing banners, signage, building wraps, flags, point of purchase and exhibition signage, backlit displays, fleet graphics, photo-quality graphics, art exhibits, customized architectural elements, billboards, thermoplastic decoration, and other large graphic displays. Our Nozomi single-pass industrial digital inkjet platform and ink are sold to the corrugated, paper packaging, display graphics, and other markets. We sell our hybrid, roll-to-roll, and flatbed UV wide format graphics printers and ink to the industrial digital inkjet display graphics printer market. We sell Reggiani textile digital inkjet printers and textile ink to the display graphics soft signage market and textile contract printers serving major textile brand owners and fashion designers, the home furnishings market, as well as the global printed textile industry. We sell Cretaprint ceramic tile decoration and building material digital inkjet printers and ceramic ink to the ceramic tile and building materials manufacturing industries.

Our primary industrial digital inkjet printers and their related features are summarized as follows:



Printer Type	Models	Capabilities	Application Examples
VUTEk super-wide format	h3 and h5	Offers maximum throughput of up to 74 and 108 boards per hour for h3 and h5, respectively	Super-wide format banners, signage, building wraps, flags, point of purchase and exhibition signage, backlit displays, fleet graphics, photo-quality graphics, art exhibits, customized architectural elements, billboards, and thermoplastic decoration.

	HS, GS/LX, H/QS, and FabriVU Series printers EFI and 3M(R) co-branded Digital UV and LED, and thermoforming UV ink	Printing widths of 2 to 5 meters; up to two-inch thickness; 6, 7, and 8 colors, plus white and greyscale; up to 2400 dpi; flexible and rigid substrates; 1.8-meter and 3.4-meter wide aqueous-based soft signage printer models with speeds up to 500 square meters per hour; UV curable, LED “cool cure,” aqueous, and thermoforming digital UV inks

VUTEk super-wide roll-to-roll	VUTEk 3r and 5r, Quantum series, Q series, and Flex series printers Quantum LED curable ink Matan UV curable ink MatanFlex stretchable ink	Speeds up to 455 square meters per hour Printing widths of 3 to 5 meters; up to two-inch thickness; 4, 7, and 8 colors, plus white and greyscale; up to 1200 dpi; flexible and rigid substrates; UV curable and LED “cool cure” ink	Fleet graphics, traffic signage, labels, tags, decals, membranes, license plates, and sign printing

EFI wide format	EFI Pro hybrid and flatbed EFI H1625 LED 3M ink SD thermoforming ink 32R roll-to-roll	Speeds up to 207 square meters per hour (flatbed) and 91 square meters per hour (hybrid), up to 1200 dpi, 4 colors plus white and greyscale, up to two-inch thickness, flexible and rigid substrates, UV curable, and LED “cool cure” ink	Wide format indoor and outdoor graphics with photographic image quality. Entry-level and mid-range markets. Overflow and specialty markets

Nozomi	EFI Nozomi C18000	High-quality, high-speed digital LED printing up to 75 linear meters per minute on substrates up to 1.8 meters wide	Corrugated packaging and merchandise display printing

Reggiani textile	Reggiani textile printers Dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed printing ink	Speeds up to 325 square meters per hour. Substrates from ultra-light to heavy, up to 2400 dpi; dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed printing ink	Contract printers serving major textile brand owners and fashion designers. Textile soft signage market. Global printed textile industry

Cretaprint ceramic tile decoration	Cretaprint C4, C4 twin, and C5; Cretaprint P4, D4, and D5; Cretaprint M4 and SOL; Cretaprint ink	Single chassis accommodates up to 8 print bars. 1,000 customizable settings controlling printer widths up to 1.4 meters, speed, direction, and discharge.	Ceramic tile industry Construction materials industry

Cretaprint building materials	Cubik building materials	Cubik: printing width up to 1.8 meters print speed up to 75 linear m/min, up to 8 printing bars	Construction materials industry

Productivity Software

To provide our customers with solutions to manage and streamline their printing and packaging operations, we have developed technology that enhances printing workflow and makes printing and packaging operations more powerful, productive, cost-effective, and easier to manage. Most of our software solutions have been developed with the express goal of automating print processes and streamlining workflow via open, integrated, and inter-operable products, services, and solutions.

The Productivity Software operating segment consists of a complete set of productivity software suites that enable efficient and automated end-to-end business and production workflows for the print and packaging industries. These productivity software suites also provide tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or to be hosted in the cloud. The productivity software suites address all segments of the print industry and consist of the: (i) Packaging Suite, with Radius at its core, for tag & label, cartons, and flexible packaging businesses; (ii) Corrugated

Packaging Suite, with Corrugated Technologies, Inc. ("CTI") at its core, for corrugated packaging businesses, including corrugated control capability; (iii) Enterprise Commercial Print Suite with Monarch at its core, for enterprise print businesses; (iv) Publication Print Suite, with Monarch or Technique at its core, for publication print businesses; (v) Midmarket Print Suite, with Pace at its core, for medium size print businesses; (vi) Quick Print Suite, with PrintSmith Vision and essential capabilities of Digital StoreFront at its core, for small printers and in-plant sites; and (vii) Value Added Products, available with the suite and standalone, such as web-to-print, e-commerce, cross media marketing, warehousing, fulfillment, shop floor data collection, and shipping to reduce costs, increase profits, and offer new products and services to their existing and future customers. We also provide Optitex textile two-dimensional (“2D”) and three-dimensional (“3D”) computer aided fashion design (“CAD”) applications, which facilitate increased efficiency in the textile and fashion industries. Optitex markets integrated 2D and 3D CAD software that shortens the design cycle, reduces our customers’ costs, and helps accelerate the adoption of fast fashion.

Our enterprise resource planning and collaborative supply chain business process automation software solutions are designed to enable printers and print buyers to improve productivity and customer service while reducing costs. Web-to-print applications for print buyers and print producers facilitate web-based collaboration across the print supply chain. Customers recognize that business process automation is essential to improving their business practices and profitability. We are focused on making our business process automation solutions the global industry standard. We provide consulting and support services, as well as warranty support for our software products. We sell annual full-service maintenance agreements with each license that provide warranty protection from date of shipment, and Software as a Service ("SaaS") subscriptions. The sale and renewal of annual maintenance agreements and SaaS agreements provide us with recurring revenue streams.

Escada Innovations Limited and Escada Systems, Inc. (collectively, “Escada”), which we acquired in 2017, offer the corrugated packaging market corrugator control systems, which provide comprehensive control and traceability for the entire corrugation process. The acquisition of Optitex Ltd. (“Optitex”) in 2016 expanded our presence in the digital inkjet textile printing workflow market through the synergy of Optitex technology with the Reggiani digital inkjet textile printer business.

New Version Releases and Product Offerings . Integration among our software offerings is achieved through end-to-end automation including certified workflows and synchronized releases across multiple products afforded by our Productivity Suite. Integration of our software product offerings provides:


•	Out-of-the-box, end-to-end optimized workflows;


•	Certified integration and automation;


•	Global visibility that makes effective and proactive decision making possible; and


•	a solid modular, flexible, and scalable software foundation supporting product and customer diversification.

New versions have been released for each of our significant software components and new product offerings have resulted from strategic business acquisitions, which are described under “Growth and Expansion Strategies” below.

The Packaging Suite includes 22 certified workflows that provide unprecedented levels of business and production automation geared toward folding carton, tag and label, and flexible package converting environments. Enhancements integrate Radius software, intelligent estimating and planning with iQuote software, automated planning optimization with Metrix software, and key third party software such as the Esko Automation Engine.

The Corrugated Packaging Suite was enhanced with the acquisition of Escada in 2017, a leading provider of corrugator control systems for the corrugated packaging market. The Enterprise Commercial Print Suite includes improvements in inventory and purchasing, support for Digital StoreFront web-to-print services, stronger customer relationship management tools including the ability to add attachments to forms and expanded reporting capabilities and extended capabilities in dynamic estimating and planning. The Midmarket Print Suite includes web-to-print, cross-media marketing, estimating, scheduling, accounting, and fulfillment applications.

Enhancements include easier access to quotes, improved estimating, and more advanced filtering tools to drive efficiency in job estimating and production. Product-specific applications unique to the super-wide format print space, such as fleet and vehicle wraps, point-of-purchase signage and outdoor graphics. The Quick Print Suite includes a cloud-based platform for in-plant and quick print operations to reduce the customer deployment and maintenance burden.

The Optitex Collaborate Application was released in early 2017 and is driven by cloud-based textile design technology that enables instant sharing among pattern makers, designers, and print teams for faster and more accurate apparel prototyping. In 2018, we launched the Optitex 3D Design Illustrator, a plug-in tool that allows designers the freedom to validate and customize 3D garments in Adobe® Illustrator®. This helps designers to visualize 3D garments, with accurate proportion and scaling, and customize the garment’s fabric, texture, print patterns and graphic placement without waiting for a printed sample.

We have established a new e-commerce platform specifically for fabric soft signage production operations and ink. The on-line ordering technology offers a new level of turnkey flexibility for increasingly popular fabric graphics applications, including outdoor, trade show, and point-of-purchase displays.

Our primary software offerings are summarized as follows:



Software Suite	Description	Users
Packaging Suite: with Radius at its core	Business and production workflows for tag & label, cartons, and flexible packaging companies	All users with a production facility associated with the sales, item specification, production, material purchasing, billing and shipping of packaging related products

Corrugated Packaging Suite: with CTI at its core, including corrugated control capability using EFI Escada	Business and production workflows for corrugated board and packaging manufacturers	Administration, sales, production and logistics employees producing corrugated sheets and/or corrugated boxes

Enterprise Commercial Print Suite; with Monarch at its core	Business and production workflows for Enterprise commercial print businesses, (offset, digital, large format, direct mail, specialty printing and shipping / logistics companies)	Front office sales, management and finance and shop floor production, inventory controllers, mailing and logistics employees involved in the production of various commercial print products

Publication Print Suite: with Monarch or Technique at its core	Business and production workflows for Publication Print companies (books and periodicals)	Sales, contract administrators, production planners and shop floor personnel associated production of books, catalogs, magazines, and periodicals

Midmarket Print Suite: with Pace at its core	Business and production workflows for mid size Print companies (including commercial, digital, display graphics, in-plant, and print for pay printing companies; government printing operations)	Business & Production personnel, e.g., sales, estimators, customer service, production schedulers, finance and floor personnel & logistics

Quick Print Suite: with PrintSmith Vision and essential capabilities of Digital StoreFront at its core	Hosted and modular, web-enabled digital printing and business management	Owners, managers, sales, estimators, customer service and accounting

Value Added Products	Web-to-print, e-commerce, cross media marketing, imposition solutions, warehousing, fulfillment, shop floor data collection, and logistics	Marketing professionals, production planners, production floor staff, warehouse and inventory managers, shipping and logistics

Optitex Textile 3D Design Software	Development and production software that builds patterns, visualize in 3D, streamlines marker making and cut order workflow, and cloud-based applications for show case design	Leading fashion brands, fashion retailers, and manufacturers in commercial and apparel industries

Fiery

Fiery products include (i) stand-alone Digital Front Ends ("DFEs"), which are connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our DFE solutions such as Fiery JobMaster, Graphics Arts Package, and Color Profiler (iv) Fiery Self Serve, our self-service and payment solution, and (v) stand-alone software-based solutions such as our proofing and textile solutions.

Fiery and FFPS DFEs . Our Fiery segment consists of Fiery and the FreeFlow Print Server business (“FFPS”), which was acquired from Xerox Corporation (“Xerox”) in January 2017. DFEs transform digital copiers and printers into high performance networked printing devices for the office, commercial, and industrial printing markets. We have direct relationships with several leading printer manufacturers with whom we work closely to design, develop, and integrate Fiery DFE and software technology to maximize the capability of each print engine. The printer manufacturers act as distributors and sell Fiery products to end customers through reseller channels. End customer and reseller channel preference for the Fiery DFE and software solutions drives demand for Fiery products through the printer manufacturers.

In 2018, we launched two new Fiery DFEs, the Color Controller E-85A and E-45A, driving Ricoh ProTM C7200X Series production printers. The new Fiery DFEs include powerful tools to make expert color adjustments, plus job make-ready and automation enhancements. We also launched a new Fiery proServer Premium DFE technology in 2018 offering faster processing on individual jobs for EFI super-wide format printers. The Fiery NX Pro was launched in 2017, which provides faster views of job status and easier device management. The Fiery FS300 Pro was launched in 2017 with enhanced functionality with throughput up to 2,400 ppm.

Software Options for DFEs . Fiery Command WorkStation 6.0 job management interface software was released in 2017 featuring automated job presets, faster job searching capabilities, new user interface, advanced tools for printing multi-bank and bleed-edge tabbed documents, and the Home integrated interface, which is a new feature that provides at-a-glance status information for all connected Fiery servers and a snapshot of key print production statistics.

Fiery Workflow Suite is an integrated set of Fiery products, including Fiery Central, Fiery JobFlow, and Fiery JobMaster, among others, to deliver a fully integrated workflow from job submission and business management to scheduling, preparation, and production.

In January 2019, we launched our new Fiery FS350 software which further enhances graphic design productivity and versatility. Fiery Navigator is a cloud-based digital printing business intelligence tool for digital production presses that was first launched in 2016. Fiery Navigator provides printers with more insight into their production data to optimize resource allocation, ensure compliance with operating procedures, and make equipment decisions by capturing key operational data points and displaying production analytics in a comprehensive, customizable dashboard.

Fiery Self Serve is a leading solution of self-service and payment solutions that allows service providers to offer access to business machines including printers, copiers, computers, internet access, fax machines, and photo printing kiosks from mobile phones, iPad ® , and USB drives. The M600 kiosk is a flexible and scalable system, which addresses demands for printing from any mobile device as well as from popular cloud storage services, and accepts credit cards, campus cards, and cash cards at the device, thereby eliminating the need for coin-operated machines.

Standalone Software Solutions. Our standalone Fiery software solutions include Fiery XF and Generation Digital Solutions, Inc. (“Generation Digital”). Fiery XF is an interface for the management, layout, and editing of digital print jobs. The 2017 acquisition of Generation Digital strengthens our fast fashion offerings, with design software for the textile and fashion industries. The Generation Digital textile design workflow is marketed under the name Fiery DesignPro and combines with our Fiery textile DFEs and Reggiani digital textile printers linking textile design and production.

Our DFE platforms, primary printer manufacturer customers, and end user environments are summarized as follows:



Platform	Printer Manufacturers or Customers	User Environments
Fiery and FFPS external DFEs	Xerox, Ricoh, Canon, Konica Minolta, Fuji Xerox, Sharp, Kyocera Document Solutions, RISO, Landa, and Oki Data	Print for pay, corporate reprographic departments, graphic arts, advertising agencies, and transactional & commercial printers

Fiery embedded DFEs and design-licensed solutions	Canon, Xerox, Konica Minolta, Kyocera Document Solutions, and Sharp	Office, print for pay, and quick turnaround printers

Fiery Central, Fiery Navigator, Fiery Workflow Suite	Canon, Konica Minolta, Kyocera Document Solutions, Ricoh, Sharp, Xerox	Corporate reprographic departments, commercial printers, and production workflow solutions

Fiery Self Serve	Canon, FedEx Office, Konica Minolta, Ricoh, Staples, Xerox	ExpressPay self-service and payment solutions for retail copy and print stores, hotel business centers, college campuses, and convention centers

Production Inkjet and Proofing software: ColorProof XF, Pro, Fiery XF, Fiery proServer, textile	Digital color proofing and inkjet production print solutions offering fast, flexible workflow, power, and expandability; creation and design of prints, patterns, and color palettes	Digital, commercial and hybrid printers, prepress providers, publishers, creative agencies and photographers, ceramic tile, decoration, and super-wide & wide format print providers; fashion and textile designers

Fiery DesignPro	Designers of fashion, textile, fabric, wallpaper, and other pattern-based material	Independent designers, fashion and textile manufactures, and textile printers

Sales, Marketing, and Distribution

We have assembled, internally and through acquisitions, an experienced team of technical support, sales, and marketing personnel with backgrounds in color reproduction, digital pre-press, image processing, business process automation systems, networking, and software and hardware engineering, as well as market knowledge of the sectors we serve. We expect to continue to expand the scope and sophistication of our products and gain access to new markets and channels of distribution by applying our expertise in these areas.

Industrial Inkjet

Our Industrial Inkjet products are sold primarily through our direct sales force, augmented by some select distributors. We entered the corrugated inkjet printer market with the introduction of our Nozomi digital inkjet corrugated printer in 2017. We are leveraging our existing display graphics sales team together with dedicated packaging specialists and participation in corrugated packaging trade shows in most major markets around the globe. The market for corrugated digital printers is new and our team will also be building market demand for this approach as well as selling our printers.

Textile digital printing is an alternative to either analog printing or dyed garments. Widespread adoption of digital textile printing depends on the willingness and ability of businesses in the printed textile industry to replace their existing analog printing systems with digital printing systems. The adoption of digital textile printing is dependent to some extent on the growth of “fast fashion,” and has also benefited from sports apparel with shorter production runs, closer geographic proximity to end-use markets, and environmental awareness. A key element of our inkjet textile printing growth strategy is to market digital inkjet printing systems to contract printers that serve major textile brand owners and fashion designers. We have a dedicated team of textile sales and support personnel located in geographies around the world and leverage a select group of distributors and agents in a number of markets to augment our capabilities.

The ceramic tile industry has undergone a shift from southern Europe (e.g., Spain and Italy) to the emerging markets of China, India, Brazil, and Indonesia. As a result, we operate a Cretaprint sales and support center in Foshan, Guangdong,

China, in addition to our facilities in Spain. Foshan is home to the largest concentration of ceramic tile manufacturers in China.

We promote our Industrial Inkjet products through public relations, direct mail, advertising, promotional material, trade shows, and ongoing customer communication programs. The majority of sales leads for our inkjet printer sales are generated from trade shows, including our recent 20th EFI Connect User Conference held in January 2019 in Las Vegas, NV, at which our management and sales force interacted with existing and potential customers directly to demonstrate certain products and help customers understand our product capabilities through workshops, exhibits, and keynote speeches.

Productivity Software

Our enterprise resource planning and collaborative supply chain business process automation software solutions within our Productivity Software portfolio are primarily sold directly to end users by our direct sales force. An additional distribution channel for our Productivity Software products is through sales by authorized distributors, dealers, and resellers who in turn sell the software solutions to end users either stand-alone or bundled with other solutions they offer.

We have distribution agreements with some of these channel partners, including Canon, Konica Minolta, Ricoh, Xerox, Esko, and Veritiv (formerly xpedx). There are a number of small private resellers of our business process automation software in different geographic regions throughout the world where a direct sales force is not cost-effective. We sell Optitex directly to the leading fashion brands and manufacturers through a direct sales force and distribution channels consisting of authorized distributors, dealers, and resellers.

Fiery

The primary distribution channel for our Fiery products is through our direct relationships with several leading printer manufacturers. We work closely together to design, develop, and integrate Fiery DFE and software technology to maximize the capability of each print engine. The printer manufacturers act as distributors and sell Fiery products to end customers through reseller channels. End customer and reseller channel preference for our Fiery DFE and software solutions drives demand for Fiery products through the printer manufacturers.

Our relationships with the leading printer and copier industry companies are important to our business and we have established relationships with Canon, Seiko Epson, Fuji Xerox, Kodak, Konica Minolta, Kyocera Document Solutions, Landa, OKI Data, Ricoh, Riso, Sharp, Toshiba, and Xerox. These relationships are based on business relationships that have been established over time. As of December 31, 2018, our agreements generally do not require them to make any future purchases from us. They are generally free to purchase and offer products from our competitors, or build their own products for sale to the end customer, or cease purchasing our products at any time, for any reason, or no reason.

Fiery Self Serve is our self-service and payment solution that is sold to Canon, FedEx Office, Konica Minolta, Ricoh, Staples, and Xerox. Fiery Self Serve is also marketed to college campuses and libraries.

We sell our proofing products primarily to authorized distributors, dealers, and resellers who in turn sell the solutions to end users either stand-alone or bundled with other solutions they offer. Primary customers with whom we have established distribution agreements include Canon, Epson, Xerox, and Heidelberg. We sell color matching, color palette creation, and print design software to the fashion industry. There can be no assurance that we will continue to successfully distribute our products through these channels.

Growth and Expansion Strategies

The growth and expansion of our revenue will be derived from (i) product innovation through internal development efforts or business acquisition, (ii) increasing market coverage through internal efforts or business acquisition, (iii) expanding the addressable market, and (iv) establishing enterprise coherence and leveraging industry standardization.

Product Innovation . We achieve product innovation through internal research and development efforts, as well as by acquiring businesses with technology that is synergistic with our product lines and may be attractive to our customers. We expect to continue to expand and improve our offerings of new generations of products to our customers.

We have established relationships with many leading distribution companies in the graphic arts and commercial print industries such as Nazdar, 3M, and Veritiv, as well as significant printer manufacturing companies including Xerox, Ricoh, Canon, and Konica Minolta. We have also established global relationships with many of the leading print providers, such as R.R. Donnelley, FedEx Office, and Staples. These direct sales relationships, along with dealer arrangements, are important for our understanding of the end markets for our products and serve as a source of future product development ideas. In many cases, our products are customized for the needs of large customers yet maintain the common intuitive interfaces that we are known for around the world.

Increasing Market Coverage . We are increasing our market coverage through penetration of our sales and distribution networks, expansion into emerging markets in China, India, Latin America and Asia Pacific (“APAC”), and acquisitions that are synergistic with our other businesses such as the Generation Digital and Escada acquisitions. The Generation Digital textile design workflow is integrated with our Fiery textile DFEs and Reggiani digital textile printers linking textile design and production. Escada offers the corrugated packaging market corrugation control systems, which provide comprehensive control and traceability for the entire corrugation process and can ensure better quality corrugated materials are consumed by our Nozomi digital printers.

Expanding the Addressable Market . We are expanding our addressable market by extending into new markets within each of our operating segments. Further growth in the addressable markets for Industrial Inkjet, Productivity Software, and Fiery has been driven by our integration of the production workflow among these operating segments. Growth in the addressable market for corrugated packaging has resulted from our new Nozomi printer and we expect our new Bolt textile printer to expand our addressable market in textile production.

Establishing Enterprise Coherence and Leveraging Industry Standardization. Our goal is to offer best in class solutions that are inter-operable and conform to open standards, which will allow customers to configure the most efficient solution for their business by establishing enterprise coherence and leveraging industry standardization.

We establish coherence across our product lines by designing products and platforms that provide a consistent “look and feel” to the end user. Cross-product coherence creates higher productivity levels as a result of shortened learning curves. The integration that end users can achieve using our products for all of their digital printing and imaging needs leads to a lower total cost of ownership. Open architecture utilizing industry-established standards to provide interoperability across a range of digital printing devices and software applications ultimately provides end users with more choice and flexibility in their selection of products with advantages when a customer selects an EFI product as part of that architecture. For example, integration between our cloud-based Digital StoreFront application, our Pace business process automation application, and our Fiery XF Production Color RIP including integration to our Fiery or VUTEk product lines, is achieved by leveraging the industry standard Job Definition Format. Our Productivity Suite has taken this integration further through end-to-end automation including certified workflows and synchronized releases across multiple products consisting of our Packaging Suite, Corrugated Packaging Suite, Enterprise Commercial Print Suite, Publication Print Suite, Midmarket Print Suite, Quick Print Suite, and Value Added Products.

Recent Business Acquisitions . We achieve product innovation through internal research and development efforts, as well as by acquiring businesses with technology that is synergistic with our product lines and may be attractive to our customers. We also acquire businesses to expand our market coverage and customer base.

Recent business acquisitions are summarized as follows:



Year	Acquired Business	Acquired Product Line or Customer Base
2018	None

2017	FFPS	FFPS servers and customer base
	CRC Information Systems (“CRC”)	North America print MIS customer base
	Generation Digital	Software for textile and fashion designers
	Escada	Machine control for corrugated packaging systems

2016	Rialco	Dye powders and color products for digital printing and industrial manufacturing
	Optitex	Integrated 3D design software

We intend to continue to make strategic acquisitions in the future that support our product innovation, market coverage, and total addressable market expansion strategies.

Backlog

Although we obtain firm purchase orders from our significant printer manufacturer customers in our Fiery operating segment, these customers typically do not issue such purchase orders until 30 to 90 days before shipment. The non-linear nature of our Industrial Inkjet and Productivity Software operating segments results in limited customer contracts and purchase orders that are not shipped at the end of the period, which are not material and are not a meaningful indicator of future business prospects. See also Note 4 - Revenue of Notes to Consolidated Financial Statements for additional discussion.

Significant Relationships

We have established and continue to build and expand relationships with the leading printer manufacturers and distributors of digital printing technology to benefit from their products, distribution channels, and marketing resources. Our customers include domestic and international manufacturers, distributors, and sellers of digital printers. We work closely with the leading printer manufacturers to develop solutions that incorporate leading technology and work optimally in conjunction with their products. The top revenue-generating printer manufacturers, that we sold products to in 2018, in alphabetical order, were Canon, Fuji Xerox, Konica Minolta, Kyocera, Landa, OKI Data, Ricoh, Sharp, Toshiba, Seiko Epson, and Xerox Document Solutions. Because sales of our printer and copier-related products constitute a significant portion of our Fiery revenue and there are a limited number of printer manufacturers producing copiers and printers in sufficient volume to be attractive customers for us, we expect to continue to depend on a relatively small number of printer manufacturers for a significant portion of our revenue in future periods. Revenue from these leading printer manufacturers was 22% , 26%, and 28% of our consolidated revenue, during 2018, 2017, and 2016, respectively.

We customarily enter into development and distribution agreements with our significant printer manufacturer customers. These agreements can be terminated under a range of circumstances and often on relatively short notice. The circumstances under which an agreement can be terminated vary from agreement to agreement and there can be no assurance that these significant printer manufacturers will continue to purchase products from us in the future, despite such agreements. Our agreements generally do not commit such customers to make future purchases from us. They could decline to purchase products from us in the future and could purchase and offer products from our competitors, or develop their own products for sale to the end customer. We recognize the importance of, and strive to maintain, our relationships with the leading printer manufacturers. Relationships with these companies are affected by a number of factors including, among others: competition from other suppliers, competition from their own internal development efforts, and changes in general economic, competitive, or market conditions including changes in demand for our products, changes in demand for the printer manufacturers’ products, industry consolidation, or fluctuations in currency exchange rates. There can be no assurance that we will continue to maintain or build the relationships we have developed to date.

We have a continuing relationship pursuant to a license agreement with Adobe Systems, Inc. (“Adobe”). We license PostScript ® software from Adobe for use in many of our Fiery solutions under the OEM Distribution and License Agreement

entered into in September 2005, as amended from time to time. Under our agreement with Adobe, we have a non-exclusive, non-transferable license to use the Adobe deliverables (including any software, development tools, utilities, software development kits, fonts, drivers, documentation, or related materials). The scope of additional licensing terms varies depending on the type of Adobe deliverable. Our agreement with Adobe was amended on February 1, 2018, to automatically renew annually. The agreement can be terminated by either party upon 120 days prior written notice. All royalties due to Adobe under the agreement are payable within 45 days after the end of each calendar quarter.

Each Fiery solution requires page description language software provided by Adobe, which is a leader in providing page description software. Adobe’s PostScript ® software is widely used to manage the geometry, shape, and typography of hard copy documents. Adobe can terminate our current PostScript ® software license agreement without cause. Although to date we have successfully obtained licenses to use Adobe’s PostScript ® software when required, Adobe is not required to, and we cannot be certain that Adobe will, grant future licenses to Adobe PostScript ® software on reasonable terms, in a timely manner, or at all. In addition, to obtain licenses from Adobe, Adobe requires that we obtain quality assurance approvals from them for our products that use Adobe software. If Adobe does not grant us such licenses or approvals, if the Adobe licenses are terminated, or if our relationship with Adobe is otherwise materially impaired, we would likely be unable to sell products that incorporate Adobe PostScript ® software. If that occurred, we would have to license, acquire, develop, or re-establish our own competing software as a viable alternative for Adobe PostScript ® software and our financial condition and results of operations could be significantly harmed for a period of time.

Our industrial inkjet printers require inkjet print heads that are manufactured by a limited number of suppliers. If we experience difficulty obtaining print heads, our inkjet printer production would be limited. In addition, we manufacture UV curable, textile digital, and ceramic digital ink for use in our printers and rely on a limited number of suppliers for certain pigments and other components used in our ink. Our ink sales would decline significantly if we were unable to obtain the pigments and other components when needed.

Corporate Responsibilities and Environmental Sustainability

We have taken steps to reduce the environmental impact of our operations and products and to promote sustainability. Our efforts include the following:


•	Transitioning from chemical-based to water-based inks. We have expended considerable resources in the development of water-based inks and printers that can use them. We have introduced new water-based printers and inks and are developing additional products using water-based technology. These printers can reduce emissions from the curing process which would otherwise result in greenhouse gases.

•

Transitioning printer ink curing technology from mercury vapor UV lamps to LED UV lamps. Our display graphics and corrugated printres offer LED "cool cure" technology. LED technology uses less heat than the traditional curing process resulting in increased uptime and greater reliability. Energy assessments conducted by the Fogra Graphic Technology Research Association have shown that our super-wide format printers with LED curing can reduce energy consumption by up to 82% when compared with printers that use conventional mercury arc lamps.Transition to LED UV lamp curing also has the additional benefits of reducing ozone created during the curing process as well as the ability to use thinner substrates. The use of thinner substrates reduces the material load used in the overall image and the substrate thickness by over 30% compared to standard mercury UV lamp systems. In addition, use of LED UV lamps in our printers reduces the amount of landfill waste because LED UV lamps generally last about 16,000 hours before replacement, whereas mercury vapor UV lamps typically only last about 1000 hours before replacement.

•

Reggiani Sustainability Initiatives. Our textile business is a worldwide provider of complete solutions for the textile market, with a focus on the development of sustainable processes. All our industrial printers can be used with a complete range of water-based inks. In 2010, we undertook a certification process as a commitment to our customers in order to offer eco-sustainable processes guaranteed by “Green Label” certification issued by the Association of Italian Textile Machinery Manufacturers, a private non-profit association. EFI Reggiani’s innovations are the result of extensive research targeted to improve productivity and quality, optimize the textile manufacturing process, and reduce energy and water consumption, as well as environmental impact. For example, our TERRA pigment solution is a unique in-line polymerization process for faster, greener printing that eliminates the need for steaming or washing on

direct-to-textile applications. As a result, users can achieve superior printing results while using less time, water and energy.

We are committed to sustainable business practices and products and will continue our efforts to proactively evaluate any potential changes that will benefit the environment.

Employees

As of December 31, 2018 , we have approximately 3,400 full time employees.

Research and Development

As of December 31, 2018 , 1,200 of our 3,400 full-time employees were involved in research and development. We believe that development of new products and enhancement of existing products are essential to our continued success. We intend to continue to devote substantial resources to research and new product development, as well as improvements to existing products. New platforms and ink formulations will continue to be developed for our Industrial Inkjet products as the industry accelerates its transition from analog to digital technology, from solvent-based printing to UV curable ink printing, and adopts digital textile printing due to the growth of “fast fashion.” We are developing new software applications designed to maximize work flow efficiencies and meet the needs of the graphic arts, packaging, and commercial print professions, including business process automation, web-to-print, e-commerce, cross-media marketing, imposition, proofing solutions, and 3D textile CAD applications. We are developing products to support additional printing devices including high-end color copiers and multi-functional devices. We have research and development sites in numerous U.S. locations, as well as in India, Europe, Israel, the United Kingdom (“U.K.”), Brazil, and Canada. Substantial additional expense is expected to be required to complete and bring to market products that are currently under development.

Manufacturing

We are leveraging efficiencies in our worldwide digital inkjet printer manufacturing operations by centralizing certain aspects of our product manufacturing. Our VUTEk display graphics super-wide, wide format industrial hybrid and flatbed inkjet printers were primarily manufactured in our Meredith, New Hampshire facility until March 2018. Starting in April 2018, we began to manufacture these printers in our new facility in Manchester, New Hampshire. In 2016, we transferred VUTEk roll-to-roll printer production to our Rosh Ha’Ayin, Israel, facility, our FabriVU textile digital inkjet printer production to our Bergamo, Italy, facility, and certain wide format industrial digital inkjet printers to our Castellon, Spain, facility.

We utilize subcontractors to manufacture our Fiery products and, to a lesser extent, our super-wide and wide format industrial printers. These subcontractors work closely with us to promote low cost and high quality while manufacturing our products. Subcontractors purchase components needed for our products from third parties. We are dependent on the ability of our subcontractors to produce the products we sell. Although we supervise our subcontractors, there can be no assurance that such subcontractors will perform efficiently or effectively. We have outsourced our Fiery production with Avnet, Inc. (“Avnet”), formulation of ceramic ink to two subcontractors, and formulation of textile ink to third party branded suppliers, with the exception of reactive dye textile ink, which we formulate in our Bedford, U.K. facility.

Should our subcontractors experience inability or unwillingness to manufacture or deliver our products, then our business, financial condition, and operations could be harmed. Since we generally do not maintain long-term agreements with our subcontractors and such agreements may be terminated with relatively short notice, any of our subcontractors could terminate their relationship with us and/or enter into agreements with our competitors that might restrict or prohibit them from manufacturing our products or could otherwise lead to an inability or unwillingness to fill our orders in a timely manner or at all.

Our VUTEk roll-to-roll super-wide format industrial printers are manufactured in a single location in our Rosh Ha’Ayin, Israel facility. Our Reggiani textile industrial printers are manufactured in a single location in our Bergamo, Italy facility. Our Cretaprint ceramic tile decoration and Nozomi corrugated packaging printers are manufactured in a single location in our Castellon, Spain facility. Our UV curable and LED curable digital ink that is used in our display graphics super-wide and wide-format industrial digital inkjet printers are formulated in a single location in our Ypsilanti, Michigan facility. Our

reactive dye ink that is used in our textile digital inkjet printers is formulated in a single location in our Bedford, U.K., facility.

Most components used to manufacture our printers and ink are available from multiple suppliers, except for inkjet print heads, branded textile ink, and certain key ingredients (primarily pigments and photoinitiators) for our digital UV curable ink. Although typically in low volumes, many key components are sourced from single vendors. If we were unable to obtain the print heads currently used, we would be required to redesign our printers to use different print heads. If we were unable to obtain the branded textile ink or the components required for our digital ceramic, digital textile, or digital UV curable inks, we would have to qualify other sources, if possible, or reformulate and test the new ink formulations. In our Industrial Inkjet facilities, we use hazardous materials to formulate digital UV curable, digital textile, and ceramic digital ink, as well as store internally formulated and third-party ink. The storage, use, and disposal of those materials must meet the requirements of various environmental regulations.

Significant components necessary for manufacturing our products are obtained from a sole supplier or a limited group of suppliers. We depend largely on the following sole and limited source suppliers for our components and manufacturing services:



Supplier		Components
Intel		Central processing units (“CPUs”); chip sets
Toshiba		Application-specific integrated circuits (“ASIC”) & inkjet print heads
Open Silicon		ASICs
Altera		ASICs & programmable devices
Tundra		Chip sets
Avnet		Electric components, Contract manufacturing (Fiery)
Adobe		PostScript ® (Fiery and Productivity Software)
Dell Electronics		Contract manufacturing (FFPS)
HCL Technologies		Sustaining engineering (FFPS)
Third party branded: DuPont, Huntsman, Sensient		Textile ink
Ink pigment and component suppliers		Ink pigments, photoinitiators, and other components
Columbia Tech		Inkjet sub-assemblies
Schneider Electric		Inkjet electrical sub-assemblies
Phoseon		LED lamps
Shenzhen Runtianzhi Tech		Inkjet sub-assemblies
Seiko		Inkjet print heads
Xaar		Inkjet print heads
Ricoh		Inkjet print heads
Kyocera Mita		Inkjet print heads
Progress Software		Monarch and Radius operating system
Printable		Digital StoreFront modular offering
Enabling Technologies Ltd		Sensor interface and electronics

We generally do not maintain long-term agreements with our component suppliers. We primarily conduct business with such suppliers largely on a purchase order basis. If any of our sole or limited source suppliers were unwilling or unable to supply us with the components for which we rely on them, we may be unable to continue manufacturing our products utilizing such components.

Competition

Competition in our markets is significant and involves rapidly changing technologies and frequent new product introductions. To maintain and improve our competitive position, we must continue to develop and introduce new products and features on a timely and cost-effective basis to keep pace with the evolving needs of our customers and the product offerings of our competitors. We believe the principal competitive factor affecting our markets is the market acceptance rates for new printing technology.

Industrial Inkjet

Our super-wide and wide format industrial digital inkjet printers compete with printers produced by Agfa, Durst, Canon, Hewlett-Packard (“HP”), Inca, Mimaki, Roland, and Mutoh throughout most of the world. There are also Chinese and Korean printer manufacturers in the marketplace, but their products are typically sold in their domestic markets and are not currently perceived as viable alternatives in most other markets, given product quality and more limited after-sales service and support. Our UV and LED curable ink is sold to users of our UV industrial inkjet printers, which have advanced quality control systems to ensure that correct color and non-expired ink is used to prevent damage to the printer. This results in most ink used in our printers being sold by us. While third party ink is available, its use may compromise the printer’s quality control system and also voids certain provisions of our printer warranty and service contracts. Our Nozomi corrugated packaging digital inkjet printers compete with printers offered by Barberan, Durst, HP, and Sun Automation.

Our Reggiani industrial digital inkjet textile printers compete with Dover, Durst, Mimaki, Roland, Epson, Konica Minolta, Robustelli, Atexco, Shenzhen Homer Textile, Kornit, Ricoh, and Digital Graphics. Competitive digital inkjet textile printers are manufactured in Italy, Japan, China, and smaller emerging markets such as Indonesia. Key competitors driving digitalization of the textile printer market include Dover and Kornit. Reggiani also competes with other digital inkjet textile printing technologies including pre-washing and post-washing printing techniques.

Our Cretaprint ceramic tile decoration digital inkjet printers compete with ceramic tile decoration printers manufactured in Spain (KERAjet), Austria (Durst), Italy (Technoferrari, Projecta, Intesa, and System), China (Flora, Hope, Meijia, and Teckwin), and smaller emerging competition in other markets such as Indonesia. The ceramic tile industry has experienced a relocation from southern Europe to the emerging markets of China, India, Brazil, and Indonesia, among others. Competition in the Chinese market consists of small Chinese ceramic tile decoration digital inkjet printers and European manufacturers that are reducing prices to gain market share.

Productivity Software

Our Productivity Software segment, which includes our business process automation, cloud-based order entry and order management systems, cross media marketing, and imposition solution systems faces competition from software application vendors that specifically target the printing and packaging industries. These vendors are typically small, privately-owned companies. We also face competition from larger vendors that currently offer, or are seeking to develop, business process automation printing products including HP, Epicor, and SAP. We face competition from Oracle, SAP, Kiwiplan, and Heidelberg in the packaging software market.

Our Optitex 3D CAD software competes with Lectra, Assyst, CLO, Browzwear, and Gerber. Optitex provides 2D CAD design and 3D CAD visualization in the same application. Therefore, the CAD information and the 3D information are tightly integrated. Furthermore, the incremental learning curve from using 2D to using 3D is minimal.

Fiery

The principal competitive factors affecting the market for our Fiery solutions include customer service and support, product reputation, quality, performance, price, and product features such as functionality, scalability, ease of use, and ability to interface with products produced by the significant printer manufacturers. Although we have direct relationships with each of the leading printer manufacturers and work closely with them to integrate Fiery DFE and software technology into the design and development of their print engines to maximize their quality and capability, our primary competitors for stand-alone color DFEs, embedded DFEs, and design-licensed solutions are these same leading printer manufacturing companies. They

each maintain substantial investments in research and development. Some of this investment is targeted at integrating products and technology that we have designed and some of this investment is targeted at developing products and technology that compete with our Fiery brand.

We are the largest third party DFE developer, although our market compared with DFEs developed internally by the leading printer manufacturers, since we primarily focus on production printers, rather than office or consumer printers, is small. We believe that our advantages include continuously advancing technology, short time-to-market, brand recognition, end user loyalty, sizable installed base, number of products supported, price driven by lower development costs, and market knowledge. We intend to continue to develop new DFEs with capabilities that meet the changing needs of the printer manufacturers’ product development road maps. Although we do not directly control the distribution channels, we provide a variety of features as well as unique “look and feel” to the printer manufacturers’ products to differentiate our customers’ products from those of their competitors. Ultimately, we believe that end customer and reseller channel preference for the Fiery DFE and software solutions drives demand for Fiery products through the printer manufacturers.

Intellectual Property Rights

We rely on a combination of patent, copyright, trademark, and trade secret laws; non-disclosure agreements; and other contractual provisions to establish, maintain, and protect our intellectual property rights. Although we believe that our intellectual property rights are important to our business, no single patent, copyright, trademark, or trade secret is solely responsible for the development and manufacturing of our products.

We are currently pursuing patent applications in the U.S. and certain foreign jurisdictions to protect various inventions. Over time, we have accumulated a portfolio of patents issued in these jurisdictions. We own or have rights to the copyrights of the software code in our products and rights to the trademarks under which our products are marketed. We have registered certain trademarks in the U.S. and certain foreign jurisdictions and will continue to evaluate the registration of additional trademarks as appropriate.

Certain of our products include intellectual property licensed from our customers. We have also granted and may continue to grant licenses to our intellectual property, when and as we deem appropriate.

Financial Information about Foreign and Domestic Operations and Export Sales

See Note 3 – Segment, Geographic, and Major Customer Information and Note 17 – Income Taxes of Notes to Consolidated Financial Statements. See also Item 1A: Risk Factors – We face risks from currency fluctuations and We face risks from our international operations .

Available Information

Our Internet address is www.efi.com. We make the following filings available free of charge through our Investor Relations website (ir.efi.com): our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and, if applicable, amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained, or referred to, on our website is not part of this annual report or any other report that we file with, or furnish to, the SEC unless expressly noted.

We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements, and other documents with the SEC under the Exchange Act. Such reports, proxy statements and other documents are available on the SEC website (www.sec.gov).

Item 1A: Risk Factors

If we fail to continue to introduce new products that achieve market acceptance on a timely basis, we will not be able to compete effectively, and we will be unable to increase or maintain net revenue and gross margins.

We operate in a highly competitive and quickly changing environment. Our future success depends in large part upon our ability to identify demand trends and quickly develop or acquire, and manufacture and sell, products that satisfy these demands in a cost-effective manner. In order to differentiate our products from our competitors’ products, we must continue to invest in research and development. For example, we need a broad product portfolio and have identified gaps such as those we are currently experiencing in the high-end of Display Graphics, and are committing substantial resources to develop new products to strengthen our product portfolio.

Successfully predicting demand trends is difficult, and it is very difficult to predict the effect introducing any new products will have on our existing product sales. We will also need to respond effectively to new product announcements by our competitors and quickly introduce or enhance competitive products. Any delays in product development and introduction, or product introductions that do not meet broad market acceptance, or unsuccessful launches of new product lines, could result in:


•	loss of or delay in revenue and loss of market share;


•	negative publicity and damage to our reputation and brands;


•	a decline in the average selling price of our products;


•	adverse reactions in our sales channels, such as reduced online product visibility, or loss of a sales channel;


•	product returns; or


•	failure to recover amounts invested.

We face competition in our Industrial Inkjet and Productivity Software operating segments which could cause downward pressure on prices and loss of market share.

We operate in highly competitive markets in our Industrial Inkjet and Productivity Software segments.


•	Our super-wide and wide format industrial inkjet products compete against several companies that market industrial inkjet printing systems based on electrostatic, drop-on-demand, and continuous drop-on-demand inkjet and other technologies and printers utilizing UV curable ink, including Agfa, Durst, Canon, HP, Inco, Mimaki, Roland, and Mutoh;


•	Our Reggiani industrial inkjet textile printers compete with printers offered by Dover, Durst, Mimaki, Roland, Epson, Konica Minolta, Robustelli, Atexco, Shenzhen Homer Textile, Kornit and Digital Graphics;


•	Our Cretaprint ceramic tile decoration inkjet printers compete with ceramic tile decoration printers manufactured in Spain, Austria, Italy, Brazil, China, and smaller emerging competitors in other markets such as Indonesia;


•	Our Productivity Software operating segment faces competition from software application vendors, which include many small private companies, that specifically target the printing industry, as well as larger vendors that currently offer, or are seeking to develop, business process automation printing products. Competitors include HP, Epicor and SAP; and


•	Our packaging software market faces competition from Oracle, SAP, SolarSoft, and Heidelberg, and our Optitex 3D CAD software competes with Lectra, Assyst, CLO, Browzwear, and Gerber.

Some of our competitors have greater resources to develop new products and technologies and market those products, as well as acquire or develop critical components at lower costs, which would provide them with a competitive advantage. Our competitors could also exert downward pressure on product pricing to gain market share.

For example, the local competitors in the Chinese and Korean markets are developing, manufacturing, and selling inexpensive printers mainly to the local markets and in the ceramic tile decoration market, small Chinese ceramic tile decoration digital inkjet printer manufacturers and European manufacturers have been reducing prices to gain market share. We also face competition from existing conventional and digital inkjet super-wide and wide format printing methods,

including screen printing and offset printing and Reggiani faces competition from other digital inkjet textile printing technologies including pre-washing and post-washing printing techniques.

We face strong competition for printing supplies such as ink and we have experienced supply issues in ink production, which may limit our growth in ink sales.

We compete with independent manufacturers in the ink market consisting of smaller vendors, as well as larger vendors such as DuPont Digital Printing and Sun Chemical.

Our UV curable ink is sold to users of our super-wide and wide format UV industrial inkjet printers, which have advanced quality control systems to ensure that correct color and non-expired ink is used to prevent damage to the printer. This results in most ink used in our super-wide and wide format printers being sold by us. While third party ink is available, its use compromises the printer’s quality control system and voids most provisions of our printer warranty and service contracts. Nevertheless, we cannot guarantee we will be able to remain the principal ink supplier for our super-wide and wide format UV industrial inkjet printers. We could experience an overall price reduction within the ink market, which would also adversely affect our gross profit.

We sell both our own inks and third party branded textile ink to users of our textile inkjet printer. We offer a strong value proposition with our own and third party branded inks, but cannot guarantee that we will be the primary supplier of textile ink to the users of our printers as these branded inks are available on the market.

Our solvent-based ceramic ink is sold to users of our ceramic tile decoration inkjet printers. The ceramic ink market is generally an open system for ink and therefore customers may change between suppliers. Although we are focused on developing this recurring revenue stream, we cannot guarantee that we will become the primary supplier of ceramic ink to the users of our printers.

In addition, we have recently experienced supply issues, primarily in China, where we saw changes in tariff structure, price increases in ink components, and short supplies of ink components due to reduced production levels at a number of suppliers, which limited the amount of ink we could manufacture. Although we are working to increase purchases from new sources for ink components, we may not be able to supply the same volume of ink as we have historically and may lose market share to our competitors, thereby limiting our growth in ink sales.

If the market for digital textile printing does not develop as we anticipate, we may not be able to grow our digital inkjet textile printing business.

If the global printed textile industry does not broadly accept digital printing as an alternative to either analog printing or single color (dyed) garments, our revenue may not grow as quickly as expected. Widespread adoption of digital textile printing depends on the willingness and ability of businesses in the printed textile industry to replace their existing analog printing systems and single color (dyed) garments with digital printing systems. The adoption of digital textile printing is dependent to some extent on the growth of “fast fashion.”

A key element of our digital inkjet textile printing growth strategy is to market digital inkjet printing systems to contract printers that serve major textile brand owners and fashion designers. If leading textile brand owners and fashion designers are not convinced of the benefits of digital inkjet textile printing or if there is a significant reduction in the popularity of printed textiles, especially those that are customized or personalized, among the consumers to whom such brand owners and fashion designers cater, or if these businesses decide that digital inkjet printing processes are less reliable, less cost-effective, lower quality, or otherwise less suitable for their commercial needs than analog printing processes and single color (dyed) garments, then the market for digital textile printers and software may not develop as we anticipate and we may not be able to grow our inkjet textile printing business.

We do not typically have long-term purchase commitments with the printer manufacturer customers that purchase and resell our Fiery DFE and software solutions. They have in the past reduced or ceased to purchase products from us, and could at any time in the future reduce or cease to purchase products from us, thereby harming our operating results and business.

Although end customer and reseller channel preference for Fiery DFE and software solutions drives demand, most Fiery revenue relies on printer manufacturers to integrate Fiery technology into the design and development of their print engines. We have established direct relationships with several leading printer manufacturers and work closely with them to design, develop, and integrate Fiery DFE and software technology to maximize the capability of their print engines. These manufacturers act as distributors and sell Fiery products to end customers through reseller channels. A significant portion of our revenue is, and has been, generated by sales of our Fiery DFE and software solutions to a relatively small number of leading printer manufacturers. Our reliance on revenue from the leading printer manufacturers was 22% , 26%, and 28% of our consolidated revenue, during 2018 , 2017 , and 2016 , respectively. Because sales of our Fiery products constitute a significant portion of our revenue and there are a limited number of printer manufacturers producing printers in sufficient volume to be attractive customers for us, we expect that we will continue to depend on a relatively small number of printer manufacturers for a significant portion of our Fiery revenue in future periods. Accordingly, if we lose or experience reduced sales to one of these printer manufacturer customers, we will have difficulty replacing that revenue with sales to new or existing customers.

With the exception of certain minimum purchase obligations, we typically do not have long-term volume purchase contracts with our significant printer manufacturer customers, including Konica Minolta, Ricoh, and Canon, and they are not obligated to purchase products from us. Accordingly, our printer manufacturer customers could at any time reduce their purchases from us or cease purchasing our products altogether. In the past, these printer manufacturer customers have elected to develop products on their own for sale to end customers, incorporated technologies developed by other companies into their products, and have directly sold third party competitive products, rather than rely solely or partially on our products. We expect that these printer manufacturer customers will continue to make such elections in the future.

Many of the products and technologies we are developing require that we coordinate development, quality testing, marketing, and other tasks with these printer manufacturers. We cannot control their development efforts or the timing of these efforts. We rely on these printer manufacturers to develop new printer and copier solutions, applications, and product enhancements that utilize our Fiery DFE technologies and software solutions in a timely and cost-effective manner. Our success in the DFE industry depends on the ability of these printer manufacturers to utilize our technologies to develop the right solutions with the right features to meet ever changing customer requirements and responding to emerging industry standards and other technological changes.

Because our printer manufacturer customers incorporate our products into products they manufacture and sell, any decline in demand for copiers or laser printers or any other negative developments affecting our major customers or the computer industry in general, including reduced end user demand, would likely harm our results of operations. Certain printer manufacturer customers have experienced serious financial difficulties in the past, which led to a decline in sales of our products. If any significant customers face such difficulties in the future, our operating results could be harmed through, among other things, decreased sales volume, write-off of accounts receivable, and write-off of inventories related to products we have manufactured for these customers’ products.

Economic uncertainty has negatively affected our business in the past and may negatively affect our business in the future.

Our revenue and profitability depend significantly on the overall demand for information technology products that enable printing of digital data, which in turn depends on a variety of macro- and micro-economic conditions. In addition, revenue growth and profitability in our Industrial Inkjet operating segment depends on demand and spending for advertising and marketing products and programs, which also depends on a variety of macro-and micro-economic conditions.

Uncertainty about current global economic conditions poses a risk as our customers may delay purchases of our products in response to tighter credit, negative financial news, and/or declines in income or asset values. For example, during the fourth quarter, we experienced many of our customers delaying spending on capital equipment and software as they became

increasingly concerned about the economic environment. Any financial turmoil affecting the banking system and financial markets and the possibility that financial institutions may consolidate or terminate their activities have resulted in a tightening in the credit market, a low level of liquidity in many financial markets, and extreme volatility in fixed income, credit, currency, and equity markets. There could be a number of follow-on effects from a credit crisis on our business, including insolvency of key suppliers resulting in product delays; inability of customers and distributors to obtain credit to finance purchases of our products and/or customer and distributor insolvencies; increased difficulty in managing inventories; and other financial institutions negatively impacting our treasury operations.

Economic uncertainty remains in the European countries due to uncertainty associated with Brexit, uncertainty in Spain related to Catalonia, and uncertainty in Italy related to significant public debt and uncollectible loans in the banking system, among other considerations. We have no European sovereign debt investments. Our European debt investments consist of non-sovereign corporate debt securities of $4.5 million , which represents 10% of our corporate debt instruments ( 4% of our short-term investments) as of December 31, 2018 . European debt investments are with corporations domiciled in the northern and central European countries of Netherlands, Sweden, and France. We do not have any short-term investments with corporations domiciled in the higher risk “southern European” countries (i.e., Italy, Spain, and Portugal). We believe that we do not have significant exposure with respect to our money market and corporate debt investments in Europe, although we do have some exposure due to the interdependencies among the European Union countries.

Economic conditions and regulatory changes leading up to and following the United Kingdom’s likely exit from the European Union could have a material adverse effect on our business and results of operations.

There remains significant uncertainty about the process for and the impacts of the U.K.'s leaving the European Union, typically referred to as Brexit. While the full effects of Brexit will not be known for some time, Brexit could cause disruptions to, and create uncertainty surrounding, our business and results of operations. The most immediate effect has been significant volatility in global equity and debt markets and currency exchange rate fluctuations. Ongoing global market volatility and a deterioration in economic conditions due to uncertainty surrounding Brexit, could significantly disrupt the markets in which we operate and lead our customers to closely monitor their costs and delay capital spending decisions.

The effects of Brexit will depend on any agreements the U.K. makes to retain access to E.U. markets, either during a transitional period or more permanently. The measures could potentially disrupt the markets we serve and may cause us to lose customers and employees. In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the U.K. determines which E.U. laws to replace or replicate as well as potential import duties for the products we produce in the U.K. and export to the European Union.

We have significant customers and operations in the U.K. and any of these effects of Brexit could adversely affect our business, results of operations and financial condition.

Our business, results of operations, and financial condition may be negatively impacted by conditions abroad, including local economies, political environments, fluctuating foreign currencies, shifting regulatory schemes, and the imposition of tariffs.

A significant amount of our revenue is generated from operations outside the U.S. We expect that sales outside of the U.S. will continue to represent a significant portion of our total revenue. We maintain significant operations and acquire or manufacture many of our products and/or their components outside the U.S. Our future revenue, costs, and results of operations could be significantly affected by changes in each country’s economic conditions, foreign currency exchange rates relative to the U.S. dollar, political conditions, trade protection measures, licensing requirements, local tax issues, capitalization, and other related legal matters. If our future revenue, costs, and results of operations are significantly affected by economic conditions abroad, our results of operations and financial condition could be negatively impacted. Specifically, the deceleration of the economy in China has negatively impacted, and may continue to negatively impact, our results of operations as our customers in China reduce their spending. The Chinese government continues to rebalance the country’s economic model with tightening real estate and environmental regulation.

In addition, we work with some suppliers located in China to obtain certain components for our products. The United States government has recently announced import tariffs on goods manufactured in China. These tariffs, depending upon the

ultimate scope, duration and how they are implemented, could negatively impact our business by continuing to increase our costs and by making our products less competitive. We may not be able to pass such increased costs on to our customers. In addition, any changes to suppliers outside of China may increase our costs and could impact the global competitiveness of our products. We sell U.S. origin products in the Chinese market and any tariffs on U.S. goods imposed by the Chinese government, depending upon the ultimate scope, duration and how they are implemented, could negatively impact our business by making our products less competitive in that market.

We face risks from currency fluctuations .

Given the significance of non-U.S. sales to our total revenue, we face a continuing risk from the fluctuation of the U.S. dollar versus foreign currencies. Although the majority of our receivables are invoiced and collected in U.S. dollars, we have exposure from non-U.S. dollar-denominated sales (consisting primarily of the Euro, British pound sterling, and Chinese renminbi). We have a substantial number of international employees and facilities, resulting in material operating expenses denominated in foreign currencies. We have exposure from non-U.S. dollar-denominated operating expenses in foreign countries (primarily the Euro, British pound sterling, Israeli shekel, and Indian rupee).

We can benefit from or be adversely affected by either a weaker or stronger U.S. dollar relative to major currencies worldwide with respect to our consolidated financial statements. Accordingly, we can benefit from a stronger U.S. dollar due to the corresponding reduction in our foreign operating expenses translated into U.S. dollars and at the same time we can be adversely affected by a stronger U.S. dollar due to the corresponding reduction in foreign revenue translated into U.S. dollars. From time to time we have hedged our operating expense exposure in Indian rupees. We did not have any foreign currency derivative contracts designated as cash flow hedges as of December 31, 2018 .

We hedge balance sheet remeasurement exposures using forward contracts not designated for hedge accounting treatment with notional amounts of $191.8 million as of December 31, 2018 . Forward contracts not designated as hedging instruments consist of hedges of Australian dollars, British pounds sterling, Canadian dollars, Chinese renminbi, Euro, Israeli shekel, and Japanese yen. Please refer to Note 11 – Derivatives and Hedging of Notes to Consolidated Financial Statements for further information.

As of December 31, 2018 , we had not entered into hedges against any other currency exposures, but we may consider hedging against movements in other currencies in the future. Our efforts to reduce risk from our international operations and from fluctuations in foreign currencies or interest rates may not be successful, which could harm our financial condition and operating results.

We face risks from our international operations .

We are subject to certain risks because of our international operations including:


•	restrictions on our ability to access cash generated by international operations, especially in China and Brazil, due to restrictions on the repatriation of dividends, distribution of cash to shareholders outside such countries, foreign exchange control, and other restrictions;


•	security concerns, such as armed conflict and civil or military unrest, crime, political instability, and terrorist activity;


•	customer credit risk, especially in emerging or economically challenged regions, with accompanying challenges to enforce our legal rights should collection issues arise;


•	changes in governmental regulation, including labor regulations, and our inability or failure to obtain required approvals, permits, or registrations could harm our international and domestic sales and adversely affect our revenue, business, and operations;


•	violations of governmental regulation, including labor regulations, could result in fines and penalties, including prohibiting us from exporting our products to one or more countries, and could materially adversely affect our business;


•	trade legislation in either the U.S. or other countries, such as a change in the current tariff structures, export compliance laws, or other trade policies, could adversely affect our ability to sell or manufacture in international markets;


•	adverse tax consequences, including imposition of withholding or other taxes on payments by subsidiaries, and


•	some of our sales to international customers are made under export licenses that must be obtained from the U.S. Department of Commerce (“DOC”) and certain transactions require prior approval of the DOC or other governmental agencies.

We incur additional legal compliance costs associated with our international operations and could become subject to legal penalties in foreign countries if we do not comply with local laws and regulations, which may be substantially different from those in the U.S. In many foreign countries, particularly those with developing economies, it may be common to engage in business practices that are prohibited by U.S. regulations such as the Foreign Corrupt Practices Act of 1977, as amended. Although we have implemented policies and procedures designed to ensure compliance with these laws, there can be no assurance that all of our employees, contractors, and agents, as well as outsourced business operations, including those based in or from countries where practices that violate such U.S. laws may be customary, will not take actions in violation of our policies. Furthermore, there can be no assurance that employees, contractors, and agents of acquired companies did not take actions in violation of such laws and regulations prior to the date they were acquired by us, although we perform due diligence procedures to endeavor to discover any such actions prior to the acquisition date.

We license software used in most of our Fiery products and certain Productivity Software products from Adobe and the loss of these licenses would prevent shipment of these products.

We are required to obtain separate licenses from Adobe for the right to use Adobe PostScript ® software in each copier or printer model that uses a Fiery DFE, and other Adobe software for certain Productivity Software products. Although to date we have successfully obtained licenses to use Adobe PostScript ® and other Adobe software when required, Adobe is not required to, and we cannot be certain that Adobe will, grant future licenses to Adobe PostScript ® and other Adobe software on reasonable terms, in a timely manner, or at all. To obtain licenses from Adobe, Adobe requires that we obtain quality assurance approvals from them for our products that use Adobe software. Although to date we have successfully obtained such quality assurance approvals from Adobe, we cannot be certain they will grant us such approvals in the future. If Adobe does not grant us such licenses or approvals, if the Adobe licenses are terminated, or if our relationship is otherwise materially impaired, we would likely be unable to sell products that incorporate Adobe PostScript ® or other Adobe software and our financial condition and results of operations would be significantly harmed.

We manufacture super-wide and wide format industrial digital inkjet printers and formulate UV curable, LED curable, and reactive dye ink in single locations. Any significant interruption in the manufacturing process at these facilities could adversely affect our business .

Our VUTEk hybrid super-wide and wide format industrial digital inkjet printers are primarily manufactured in a single location in our Manchester, New Hampshire facility. Our VUTEk roll-to-roll super-wide format industrial digital inkjet printers are manufactured in a single location in our Rosh Ha’Ayin, Israel facility. Our FabriVU and other Reggiani industrial digital inkjet textile printers are manufactured in a single location in our Bergamo, Italy facility. Our Cretaprint ceramic tile decoration and Nozomi corrugated packaging digital inkjet printers are manufactured in a single location in our Castellon, Spain facility. We formulate our UV curable and LED curable digital ink that is used in our display graphics super-wide and wide-format industrial digital inkjet printers in a single location in our Ypsilanti, Michigan facility. We formulate our reactive dye ink that is used in our textile digital inkjet printers in a single location in our Bedford, U.K., facility. Any significant interruption in the manufacturing process at any of these facilities could affect the supply of our products, our ability to meet customer demand, and our ability to maintain market share.

We are developing contingency plans utilizing our manufacturing facilities in multiple locations and the capabilities of certain contract manufacturers in the event of a significant interruption in the manufacturing process at any of the aforementioned facilities. Until those plans are complete, disruptions in the manufacturing process at any of our sole source internal facilities could adversely affect our business.

We depend on a limited group of suppliers for key components in our products. The loss of any of these suppliers, the inability of any of these suppliers to meet our requirements, or delays or shortages of supply of these components, could adversely affect our business .

Certain components necessary for the manufacture of our products are obtained from a sole supplier or a limited group of suppliers. These include CPUs, chip sets, ASICs, and other related semiconductor components; inkjet print heads for our industrial inkjet printers; branded textile ink; and certain key ingredients (primarily pigments and photoinitiators) for our digital UV curable ink. We generally do not maintain long-term agreements with our component suppliers and conduct business with such suppliers largely on a purchase order basis. If we are unable to continue to procure these sole or limited sourced components from our current suppliers in the required quantities, we will have to qualify other sources, if possible, or redesign our products. If we were unable to obtain the branded textile ink or the pigments required for our digital UV curable ink, we would have to qualify other sources, if possible, or reformulate and test the new ink formulations. These suppliers may be concentrated within similar industries or geographic locations, which could potentially exacerbate these risks. We cannot provide assurance that other sources of these components exist or will be willing to supply us on reasonable terms or at all, or that we will be able to design around these components. Any unavailability, delays, or shortages of these components or any inability of our suppliers to meet our requirements, could harm our business.

Because the purchase of certain key components involves long lead times, in the event of unanticipated volatility in demand for our products, we have in the past been, and may in the future be, unable to manufacture certain products in a quantity sufficient to meet current demand. Further, as has occurred in the past, in the event that anticipated demand does not materialize, we may hold excess quantities of inventory that could become obsolete. To meet projected demand, we maintain an inventory of components for which we are dependent on sole or limited source suppliers and components with prices that fluctuate significantly. As a result, we are subject to risk of inventory obsolescence, which could adversely affect our operating results and financial condition.

Market prices and availability of certain components, particularly memory subsystems and Intel-designed components, which collectively represent a substantial portion of the total manufactured cost of our products, have fluctuated significantly in the past. Such fluctuations could have a material adverse effect on our operating results and financial condition including reduced gross profit.

We are dependent on a limited number of subcontractors, with whom we generally do not have long-term contracts, to manufacture and deliver products to our customers. The loss of any of these subcontractors could adversely affect our business.

We subcontract with other companies to manufacture certain of our products and we generally do not have long-term agreements with these subcontractors. While we closely monitor our subcontractors’ performance, we cannot be assured that such subcontractors will continue to manufacture our products in a timely and effective manner. In the past, a weakened economy led to the dissolution, bankruptcy, or consolidation of some of our subcontractors, which decreased the available number of subcontractors. If the available number of subcontractors were to decrease in the future, it is possible that we would not be able to secure appropriate subcontractors to fulfill our demand in a timely manner, or at all, particularly if demand for our products increases.

The existence of fewer subcontractors may reduce our negotiating leverage, thereby potentially resulting in higher product costs. Financial problems resulting in the inability of our subcontractors to make or ship our products, could harm our business, operating results, and financial condition. If we change subcontractors, we could experience delays in finding, qualifying, and commencing business with new subcontractors, which would result in delayed delivery of our products and potentially the cancellation of orders for our products.

We have outsourced our Fiery production with Avnet, FFPS production with Dell, FFPS sustaining engineering with HCL, ceramic ink formulation with subcontractors in China and Italy, and formulation of certain textile ink with third party branded suppliers. Certain Industrial Inkjet sub-assemblies and wide format printer products are manufactured in the U.S. and China. Should our manufacturers experience any inability, or unwillingness, to manufacture or deliver our products, then our business, financial condition, and operations could be harmed. Since we generally do not maintain long-term agreements with our manufacturers, any of our manufacturers could enter into agreements with our competitors that might restrict or prohibit

them from manufacturing our products or could otherwise lead to an inability to fill our orders in a timely manner. In such event, we may not be able to find suitable replacements, in which case our financial condition and operations would likely be harmed.

We may face increased risk of inventory obsolescence, excess, or shortages related to our Industrial Inkjet printers and ink.

We procure raw materials and internally manufacture our super-wide format, textile, and ceramic tile decoration industrial inkjet printers and formulate digital UV curable and reactive dye ink based on our sales forecasts. If we do not accurately forecast demand for our products, we may produce or purchase excess inventory, which may result in our inventory becoming obsolete. We might not produce the correct mix of products to match actual demand if our sales forecast is not accurate, resulting in lost sales. If we have excess printers, ink, or other products, we may need to lower prices to stimulate demand.

Our ink products have a defined shelf life. If we do not sell our ink before the end of its shelf life, it will have to be written off. We have also experienced UV curable ink shortages in the past and may continue to experience such shortages in the future. UV curable ink shortages may require that we incur additional costs to respond to increased demand and overcome such shortages.

If we are not able to hire and retain skilled employees, we may not be able to develop and manufacture products, or meet demand for our products, in a timely fashion .

We depend on skilled employees, such as software and hardware engineers, quality assurance engineers, chemists, chemical engineers, and other technical professionals with specialized skills. We are headquartered in the Silicon Valley and have research and development employees in facilities in 15 U.S. locations. We also have research and development employees in facilities in India, Europe, Israel, the U.K., Brazil, and Canada. Competition has historically been intense among companies hiring engineering and technical professionals. In times of professional labor imbalances, it has in the past and is likely in the future, to be difficult to locate and hire qualified engineers and technical professionals and to retain these employees. There are many technology companies located near our corporate offices in the Silicon Valley and our operations in India that may attempt to hire our employees.

The movement of our stock price may also impact our ability to hire and retain employees. If we do not offer competitive compensation, we may not be able to recruit or retain employees, which may have an adverse effect on our ability to develop products in a timely fashion, which could harm our business, financial condition, and operating results.

We rely on our distribution channels to ensure sales growth.

The leading printer manufacturers, which comprise the majority of the customer base in our Fiery operating segment, are typically large profitable customers with little credit risk to us. Our Productivity Software and Industrial Inkjet operating segments sell primarily through a direct sales force, augmented by some select distributors, to a broader base of customers than Fiery. Any interruption of these distribution channels could negatively impact us in the future.

Successfully managing the interaction of our direct and indirect channel efforts to reach various potential customer industries for our products and services is a complex process. For example, in response to our direct sales strategies or for other business reasons, our current distributors may choose to represent our competitors in place of us. In addition, from time to time we grant concessions to some of our distributors and allow them to return previously purchased products. Accordingly, reserves for estimated returns and exchanges are recorded as a reduction of revenues upon applicable product shipment, and are based upon our historical experience. Our reliance upon indirect distribution methods may reduce visibility to demand and pricing issues, and therefore make forecasting more difficult and, to the extent that returns exceed estimates, our revenues and operating results may be adversely affected.

The sales cycle for our products is long and we may incur substantial non-recoverable expenses or devote significant resources to sales that do not occur when anticipated.

Potential or existing customers, particularly larger enterprise customers, generally commit significant resources to an evaluation of available products and require us to expend substantial time, effort and money educating them as to the value of our products and services. Sales of our products to these customers often require an extensive education and marketing effort.

We could expend significant funds and resources during a sales cycle and ultimately fail to win the customer. Our sales cycle for all our products and services is subject to significant risks and delays over which we have little or no control, including:


•	our customer’s budgetary constraints;


•	the timing of our customers’ budget cycles and approval processes;


•	our customers’ willingness to replace their current print solutions;


•	our need to educate potential customers about the uses and benefits of our products and services; and


•	the timing of the expiration of our customers’ current outsourcing agreements for similar products and services.

If our sales cycles lengthen unexpectedly, they could adversely affect the timing of our revenues or increase costs, which may cause fluctuations in our quarterly revenues and results of operations. Finally, if we are unsuccessful in closing sales of our products after spending significant funds and management resources, our operating margins and results of operations could be adversely impacted, and the price of our common stock could decline.

Our revenue for a particular period is difficult to predict, and a shortfall in revenue may harm our operating results.

Our revenue for a particular quarter is difficult to predict, especially in light of a challenging and inconsistent global macroeconomic environment and related market uncertainty. Our revenue may grow at a slower rate than in past periods or decline on a year-over-year basis. Our ability to meet financial expectations could also be adversely affected if the nonlinear sales pattern seen in some of our past quarters recurs in future periods. We have experienced periods of time during which bookings have exceeded shipments or manufacturing issues have delayed shipments, leading to nonlinearity in shipping patterns. In addition to making it difficult to predict revenue for a particular period, nonlinearity in shipping can increase costs, because irregular shipment patterns result in periods of underutilized capacity and periods in which overtime expenses may be incurred, as well as in potential additional inventory management-related costs. In addition, to the extent that manufacturing issues and any related component shortages result in delayed shipments in the future, and particularly in periods in which our contract manufacturers are operating at higher levels of capacity, it is possible that revenue for a quarter could be adversely affected if such matters occur and are not remediated within the same quarter.

The timing of large orders can also have a significant effect on our business and operating results from quarter to quarter, primarily in the United States and in emerging countries. From time to time, we receive large orders that have a significant effect on our operating results in the period in which the order is recognized as revenue. The timing of such orders is difficult to predict, and the timing of revenue recognition from such orders may affect period to period changes in revenue. As a result, our operating results could vary materially from quarter to quarter based on the receipt of such orders and their ultimate recognition as revenue.

Inventory management remains an area of focus. We have experienced longer than normal manufacturing lead times in the past which have caused some customers to place the same order multiple times within our various sales channels and to cancel the duplicative orders upon receipt of the product, or to place orders with other vendors with shorter manufacturing lead times. Such multiple ordering (along with other factors) or risk of order cancellation may cause difficulty in predicting our revenue and, as a result, could impair our ability to manage parts inventory effectively. In addition, our efforts to improve manufacturing lead-time performance may result in corresponding reductions in order backlog. A decline in backlog levels could result in more variability and less predictability in our quarter-to-quarter revenue and operating results. In addition, when facing component supply-related challenges, we have increased our efforts in procuring components in order to meet customer expectations which in turn contributes to an increase in purchase commitments. Increases in our purchase commitments to shorten lead times could also lead to excess and obsolete inventory charges if the demand for our products is less than our expectations.

We plan our operating expense levels based primarily on forecasted revenue levels. These expenses and the impact of long-term commitments are relatively fixed in the short term. A shortfall in revenue could lead to operating results being below expectations because we may not be able to quickly reduce these expenses in response to short-term business changes.

Any of the above factors could have a material adverse impact on our operations and financial results.

Growing market share in the Productivity Software and Industrial Inkjet operating segments increases the possibility that we will experience increased bad debt expense and increased accounts receivable.

Many of the Productivity Software and Industrial Inkjet customers are smaller and potentially less credit worthy than the leading printer manufacturers that purchase from our Fiery segment. Our ceramic tile decoration digital inkjet customer base is primarily located in geographic regions, which have recently been subject to economic challenges, including southern Europe (primarily Spain and Italy) and emerging markets in APAC. Furthermore, if we increase the percentage of Productivity Software and Industrial Inkjet products that are sold internationally, it may be challenging to enforce our legal rights should collection issues arise. In addition, many of our Industrial Inkjet customers are requesting extended payment terms, and we have been granting them on a limited basis in response to our competitors offers. Due to these and other factors, growing Industrial Inkjet and Productivity Software market share may cause us to experience an increase in bad debt expense and an increase in days sales outstanding (“DSOs”).

DSOs increased during the year ended December 31, 2018 , compared with December 31, 2017 , primarily due to higher DSO across our businesses, except for Fiery and the textile market. We calculate DSO by dividing net accounts receivable at the end of the quarter by revenue recognized during the quarter, multiplied by the total days in the quarter, which is a measure of the relationship between sales and accounts receivable.

Acquisitions may result in unanticipated accounting charges or otherwise adversely affect our results of operations and result in difficulties assimilating and integrating operations, personnel, technologies, products, and information systems of acquired businesses.

We seek to develop new technologies and products from both internal and external sources. We have also purchased companies and businesses for the primary purpose of acquiring their customer base. As part of this effort, we have in the past made, and will likely continue to make, acquisitions of other businesses. Acquisitions involve numerous risks, including:


•	difficulties integrating operations, employees, technologies, products, information systems, and the required focus of management attention, time, and effort to accomplish successful integration;


•	information systems may be inadequate to operate the business of the acquired company until we are able to integrate the acquired business into our information technology system;


•	integration of acquired business into our information system may be delayed, which may limit our ability to manage the acquired business and implement financial and operational controls;


•	information systems may be poorly maintained by the acquired business;


•	risk of entering markets in which we have little or no prior experience, or entering markets where competitors have stronger market positions;


•	possible write-downs of impaired assets;


•	changes in the fair value of contingent consideration;


•	possible restructuring of personnel or leased facilities;


•	potential loss of key employees of the acquired company;


•	possible overruns (compared to expectations) relative to the expense levels and cash outflows of the acquired business;


•	adverse reactions by customers, suppliers, or parties transacting business with the acquired company or us;


•	risk of negatively impacting stock analyst ratings;


•	potential litigation or any administrative proceedings arising from prior transactions or prior actions of the acquired company;


•	inability to protect or secure technology rights;


•	possible overruns of direct acquisition and integration costs; and


•	equity securities issued in connection with acquisitions may be dilutive to our existing stockholders unless mitigating actions are taken such as treasury stock purchases; alternatively, acquisitions made entirely or partially for cash reduce cash reserves.

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

We face risks relating to the potential impairment of goodwill and long-lived assets.

We complete a review of the carrying value of our goodwill and long-lived assets annually and, based on a combination of factors (i.e., triggering events), we may be required to perform an interim analysis.

Given the uncertainty of the economic environment and its potential impact on our business, there can be no assurance that our estimates and assumptions regarding the duration of any economic downturn, or the period or strength of any subsequent recovery, made for purposes of our goodwill impairment testing as of December 31, 2018 will prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or gross profit rates are not achieved, we may be required to record goodwill impairment charges in future periods relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth quarter of 2019 or prior to that, if an interim triggering event were to occur. It is not possible to determine if any such future impairment charge would result or, if it does, whether such charge would be material. No goodwill impairment foreshadowing events have occurred as of December 31, 2018 .

During the fourth quarter of 2017, management approved a plan to sell approximately 31.5 acres of land and two related manufacturing buildings located in Meredith, New Hampshire (“Meredith facility”). The fair value of the Meredith facility, based on expected sales proceeds less cost to sell, was estimated to be less than the carrying amount of the assets. As a result, we incurred an impairment loss of approximately $0.9 million in our consolidated results of operations for the year ended December 31, 2017. During the year ended December 31, 2018, we sold one of the buildings and associated land but the remaining building and land continue to be held-for-sale as of December 31, 2018. In the fourth quarter of 2018, we updated our analysis of the expected sales proceeds less cost to sell, and recognized an additional impairment charge of $0.3 million on the remaining Meredith facility. We may be required to record additional impairment charges or a loss on sale if the sales proceeds for the remaining Meredith facility do not meet our expectations. We may also need to record impairment charges if we decide to sell or dispose of other long-term assets.

We are currently subject to securities lawsuits and we may be subject to similar or other litigation in the future, which may divert management’s attention and have a material adverse effect on our business, financial condition, and results of operations.

The market price of our common stock declined significantly following our August 3, 2017 announcement concerning our assessment of the timing of recognition of revenue and the effectiveness of our current and historical disclosure controls and internal control over financial reporting. Subsequently in August, a purported class action lawsuit was filed alleging, among other things, that we and certain of our officers violated federal securities laws by making allegedly false and misleading statements concerning our financial reporting, revenue recognition, internal controls, and disclosure controls and procedures, prior to our August 2017 announcement. The plaintiffs seek unspecified monetary damages on behalf of the putative class and an award of costs and expenses, including attorney’s fees. In addition, later in August 2017, a shareholder derivative complaint was filed alleging, among other things, that certain of our officers and directors had breached fiduciary duties and had been unjustly enriched and had made allegedly false and misleading statements concerning our financial reporting, revenue recognition, internal controls, and disclosure controls and procedures. The complaint alleges that the Company has suffered damages and seeks an unspecified amount of damages, restitution, and declaratory and other relief.

We cannot predict the outcome of these lawsuits, and we may be subject to other similar litigation in the future. Monitoring and defending against legal actions, whether or not meritorious, is time-consuming for our management and detracts from our ability to fully focus our internal resources on our business activities. In addition, we may incur substantial legal fees and costs in connection with litigation. Although we maintain insurance coverage, recovery could be denied or prove to be insufficient. We are not currently able to estimate the possible cost to us from the currently pending lawsuits, and we cannot be certain how long it may take to resolve these matters or the possible amount of any damages that we may be required to

pay. We have not established any reserves for any potential liability relating to these or future securities lawsuits. It is possible that we could, in the future, incur judgments or enter into settlements of claims for monetary damages. A decision adverse to our interests on these actions could result in the payment of substantial damages and could have a material adverse effect on our business, results of operations, and financial condition. In addition, the uncertainty of the currently pending lawsuits could lead to more volatility in our stock price.

We are subject to numerous federal, state, and foreign employment laws and may face claims in the future under such laws.

We are subject to numerous federal, state, and foreign employment laws and from time to time face claims by our employees and former employees under such laws. There are no material claims pending or threatened against us under federal, state, or foreign employment laws, but we cannot be sure that material claims under such laws will not be made in the future against us, nor can we predict the likely impact of any such claims on us, or that, if asserted, we would be able to successfully resolve any such claims without incurring significant expense.

We may be unable to adequately protect our proprietary information and may incur expenses to defend our proprietary information .

We rely on copyright, patent, trademark, and trade secret protection, in addition to nondisclosure agreements, licensing, and cross-licensing arrangements to establish, maintain, and protect our intellectual property rights, all of which afford only limited protection. We have patents and pending patent applications in the U.S. and various foreign countries. There can be no assurance that patents will issue from our pending applications or from any future applications, or that, if issued, any claims allowed will be sufficiently broad to protect our technology. Any failure to adequately protect our proprietary information could harm our financial condition and operating results. We cannot be certain that any patents that have been, or may in the future be issued to us, or which we license from third parties, or any other proprietary rights will not be challenged, invalidated, or circumvented. In addition, we cannot be certain that any rights granted to us under any patents, licenses, or other proprietary rights will provide adequate protection of our proprietary information.

Many countries in which we derive revenue do not have comprehensive and highly developed legal systems, particularly with respect to the protection of intellectual property rights, which, among other things, can result in a prevalence of infringing products and counterfeit goods in certain countries, which could harm our business and reputation.

As different areas of our business change or mature, from time to time we evaluate our patent portfolio and decide to either pursue or not pursue specific patents and patent applications related to such areas. Choosing not to pursue certain patents, patentable applications, and failing to file applications for potentially patentable inventions, may harm our business by, among other things, enabling our competitors to more effectively compete with us, reducing potential claims we can bring against third parties for patent infringement, and limiting our potential defenses to intellectual property claims brought by third parties.

Litigation has been, and may continue to be, necessary to defend and enforce our proprietary rights. Such litigation, whether or not concluded successfully, could involve significant expense and the diversion of our attention and other resources, which could harm our financial condition and operating results.

We face risks from third party claims of infringement and potential litigation.

Third parties have claimed in the past, and may claim in the future, that our products infringe, or may infringe, their proprietary rights. Such claims have resulted in lengthy and expensive litigation in the past and could have a similar result in the future. Such claims and any related litigation, whether or not we are successful in the litigation, could result in substantial costs and diversion of our resources, which could harm our financial condition and operating results. Although we may seek licenses from third parties covering intellectual property that we are allegedly infringing, we cannot assure that any such licenses could be obtained on acceptable terms, if at all.

We are subject to risk of loss due to fire or earthquakes, floods, or other natural disasters.

We use flammable materials in the digital UV curable and ceramic digital ink formulation process; therefore, we may be subject to risk of loss resulting from fire. We maintain insurance policies to cover losses caused by fire, including business interruption insurance. If one or more of our facilities is damaged or otherwise ceases operations as a result of fire, it would reduce our digital UV curable and ceramic digital ink manufacturing capacity, which may reduce revenue and adversely affect our business.

Our corporate headquarters, including a significant portion of our research and development facilities, are located in the San Francisco Bay Area, which is known for seismic activity. This area has also experienced flooding in the past. Many of the components necessary for our products are purchased from suppliers based in areas that are subject to risk from natural disasters, including the San Francisco Bay Area, China, and Japan. A significant natural disaster, such as an earthquake, flood, tsunami, hurricane, typhoon, or other business interruptions due, for example, to power shortages and other interruptions have harmed our business, financial condition, and operating results in the past and could do so again in the future.

We may be subject to environmental-related liabilities due to our use of hazardous materials and solvents .

Our business operations involve the use of certain hazardous materials at certain of our locations. We formulate UV curable, reactive dye, and ceramic ink at certain locations and store UV curable, ceramic, solvent, and thermoforming ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, and water-based dispersed printing ink at certain locations. Our outsourced partners in China and Italy formulate our ceramic solvent-based ink. The solvents used in ceramic digital ink formulation have low volatility and flammability by design. As a result, ceramic digital ink poses less environmental risk compared with true solvent ink. We launched internal formulation of reactive dye ink during 2016 at our facility in Bedford, U.K. Reactive dye is a water-based dye.

The hazardous materials and solvents that we use are subject to various governmental regulations relating to their transfer, handling, packaging, use, and disposal. We store ink at warehouses worldwide, including Europe, China, Israel, the U.K., and the U.S., and shipping companies distribute ink at our direction. We face potential liability for problems such as large spills or fires that may arise at ink manufacturing locations. While we customarily obtain insurance coverage typical for this kind of risk, such insurance may not be sufficient. If we fail to comply with these laws or an accident involving our ink waste or chemicals occurs, or if our insurance coverage is not sufficient, then our business and financial results could be harmed.

Future sales of our products could be limited if we do not comply with current and future environmental and chemical content regulations.

We believe that our products are currently compliant with RoHS, WEEE, REACH, and other regulations for the European Union as well as with China RoHS and other applicable international, U.S., state, and local environmental regulations. We monitor environmental compliance regulations to ensure that our products are fully compliant prior to the implementation of any potential new requirements. However, new unforeseen legislation could require us to re-engineer our products, complete costly analyses, or perform supplier surveys, which could harm our business and negatively impact our financial results. We could also incur additional costs, sanctions, and liabilities in connection with non-compliant product recalls, regulatory fines, and exclusion of non-compliant products from certain markets.

Environmental regulations and their enforcement have tightened in China, which has resulted in the closure of facilities without notice. Although such closures have not occurred with respect to our suppliers, the unexpected shutdown of supplier factories in China may impact our supply of raw material for digital inkjet ink. Some of our ceramic printing customers in China have experienced plant closures due to stricter environmental enforcement, which has impacted our sales of ceramic ink and may impact our sales in the future.

Our products may contain defects, which are not discovered until after shipping, which could subject us to warranty claims in excess of our warranty reserves.

Our products consist of hardware and software developed by ourselves and others, which may contain undetected defects. We have in the past discovered software and hardware defects in certain of our products after their introduction, resulting in warranty expense and other expenses incurred in connection with rectifying such defects or, in certain circumstances, replacing the defective product, which may damage our relationships with our customers. Defects could be found in new versions of our products after commencement of commercial shipment and any such defects could result in a loss or delay in market acceptance of such products and thus harm our reputation and revenue. Defects in our products (including defects in licensed third-party software) detected prior to new product releases could result in delays in the introduction of new products and the incurrence of additional expense, which could harm our operating results. We generally provide a thirteen-month hardware limited warranty commencing upon installation for certain Industrial Inkjet printers, which may cover both parts and labor. Our Fiery DFE limited warranty is 12 to 15 months.

Our standard warranties contain limits on damages and exclusions, including but not limited to alteration, modification, misuse, mishandling, and storage or operation in improper environments. While we recorded an accrual of $12.8 million at December 31, 2018 , for estimated warranty costs that are estimable and probable based on historical experience, we may incur additional costs of revenue and operating expenses if our warranty provision does not reflect adequately the cost to resolve or repair defects in our products or if our liability limitations are declared enforceable, which could harm our business, financial condition, and operating results.

Actual or perceived security vulnerabilities in our products could adversely affect our revenue or costs.

Maintaining the security of our software and hardware products is an issue of critical importance to our customers and for us. There are individuals and groups who develop and deploy viruses, worms, and other malicious software programs that could attack our products. Although we take preventive measures to protect our products, and we have a response team that is notified of high risk malicious events, these procedures may not be sufficient to mitigate damage to our products. Actual or perceived security vulnerabilities in our products could lead some customers to seek to return products, reduce or delay future purchases, or purchase competitive products. Any actual security vulnerabilities in our products could require us to incur additional costs to eliminate the vulnerabilities. Customers may also increase their expenditures to protect their computer systems from attack, which could delay or reduce purchases of our products. Any of these actions or responses by customers could adversely affect our revenue.

System failures, or system unavailability, could harm our business.

We rely on our network infrastructure, internal and external technology systems and websites for our operations, development, marketing, support, and sales activities. These systems are also subject to potential disruptions and acts of vandalism. Any event that causes failures or interruption in our hardware or software systems could harm our business, financial condition, and operating results.

Our business could be adversely impacted in the event of a failure of our information technology infrastructure or adversely impacted by a successful cyber-attack.

We have experienced cyber-security threats, threats to our information technology infrastructure and unauthorized attempts to gain access to our sensitive information. Prior cyber-attacks directed at us have not had a material impact on our business or financial results; however, this may not continue to be the case in the future. Cyber-security assessment analyses undertaken by us have identified and prioritized steps to enhance our cyber-security safeguards. We are in the process of implementing these recommendations. Nevertheless, there can be no assurance that we will adequately protect our information or that we will not experience any future successful attacks. Due to the evolving nature of security threats, the impact of any future incident cannot be predicted, and we may be required to expend significant additional resources to modify our cyber-security protective measures, to investigate and remediate vulnerabilities or other exposures or to make required notifications. In addition, we may be subject to litigation and financial losses. These costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Occurrence of any of these events could adversely affect our operations, the services we provide to our customers, our financial results or our reputation; or such events could result in

the loss of competitive advantages derived from our research and development efforts or other intellectual property or early obsolescence of our products and services.

Our stock price has been volatile historically and may continue to be volatile.

The market price for our common stock has been and may continue to be volatile. During the twelve months ended December 31, 2018 , the price of our common stock as reported on The Nasdaq Global Select Market ranged from a low of $23.01 to a high of $35.62. We expect our stock price to be subject to fluctuations as a result of a variety of factors, including factors beyond our control. These factors include:


•	actual or anticipated variations in our quarterly or annual operating results;


•	ability to initiate or complete stock repurchase programs;


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


•	announcements relating to strategic relationships, acquisitions, or investments;


•	announcements by our customers regarding their businesses or the products in which our products are included;


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


•	any failure to meet security analyst expectations;


•	changes in the securities analysts’ rating of our securities;


•	terrorist attacks and the affects of military engagements or natural disasters;


•	commencement of litigation or adverse results of pending litigation;


•	changes in the financial performance and/or market valuations of other software and high technology companies; and


•	changes in general economic conditions.

Because of this volatility, we may fail to meet the expectations of our stockholders or of securities analysts from time to time and the trading price of our securities could decline as a result. The stock market has experienced significant price and volume fluctuations that have particularly affected the trading prices of equity securities of many high technology companies. These fluctuations have often been unrelated or disproportionate to the operating performance of these companies. Any negative change in the public’s perception of high technology companies could depress our stock price regardless of our operating results.

Our stock repurchase program could affect our stock price and add volatility.

In November 2015, our board of directors authorized $150 million for the repurchase of our outstanding common stock. This authorization was scheduled to expire on December 31, 2018. On September 11, 2017, the board of directors approved the repurchase of an additional $125 million for our share repurchase program commencing September 11, 2017 and ending December 31, 2018. At that time, $28.8 million remained available for repurchase under the 2015 authorization. The 2017 authorization thereby increased the repurchase authorization to $153.8 million of our common stock. As of December 31, 2018 , we have completed purchases of $275 million under our authorized stock repurchase program which expired at the end of 2018.

Any repurchases pursuant to our stock repurchase program could affect our stock price and add volatility. There can be no assurance that repurchases will be made at the best possible price. Potential risks and uncertainties also include, but are not necessarily limited to, the amount and timing of future stock repurchases and the origin of funds used for such repurchases. The existence of a stock repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock. Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time. Any such suspension could cause the market price of our stock to decline.

Our profitability may be affected by unanticipated changes in our tax provisions, the adoption of new U.S. or foreign tax legislation, or exposure to additional income tax liabilities.

We are subject to income taxes in the U.S. and many foreign countries. Intercompany transaction pricing can impact our tax liabilities. We are potentially subject to tax audits in various countries and tax authorities may disagree with our tax treatments, including intercompany pricing or other matters, and assess additional taxes. We regularly review the likely

outcomes of these audits to determine whether our tax provisions are sufficient. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the final assessments of these audits can have a material impact on our net income (loss).

Our effective tax rate in the future may be impacted by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in tax laws, new information discovered during the preparation of our tax returns, deemed repatriation of foreign earnings, and enactment of future U.S. and foreign tax legislative initiatives, such as tax reform legislation (“2017 Tax Act”) enacted on December 22, 2017 in the United States (“U.S.”) or multi-jurisdictional actions to address “base erosion and profit-shifting” by multinational companies. The Organisation for Economic Co-operation and Development, or OECD, issued a series of reports on October 5, 2015 recommending changes to numerous well-established tax principles. Many countries are beginning to implement legislation to align their international tax rules with these recommendations. These actions could adversely impact our effective tax rate.

The 2017 Tax Act may significantly impact our tax liabilities, current business deductions, and the U.S. taxation of income earned by our foreign subsidiaries. Many of the provisions significantly differ from prior U.S. tax law resulting in changes to tax reporting and potentially increasing tax liabilities incurred.

In December 2017, the 2017 Tax Act was enacted, which included a broad range of changes impacting businesses, including corporate tax rates, business deductions, and international tax provisions. Many of the provisions significantly differ from previous U.S. tax law.

The 2017 Tax Act also will also significantly impact current and future tax liabilities including, but not limited to the reduction of the U.S. federal corporate tax rate from 35% to 21%, a minimum tax to address base erosion and profit shifting from the U.S., the elimination of U.S. federal income taxes on dividends from foreign subsidiaries, a new tax on global intangible low-tax income (“GILTI”), a limitation of deductible interest expense, and the repeal of the domestic production activity deduction. There are additional limitations imposed on the deductibility of certain executive compensation, the use of foreign tax credits to reduce U.S. income tax liabilities, and the utilization of net operating losses generated after December 31, 2017. Final regulations have not been issued to interpret many provisions of the 2017 Tax Act. These regulations, when issued, may have an adverse effect to our financial results.

We may not have the ability to raise the funds necessary to settle conversions of our 0.75% Convertible Senior Notes due 2019 (“2019 Notes”) and 2.25% Convertible Senior Notes due 2023 (“2023 Notes” and together with the 2019 Notes, the “Notes”) in cash, repay the Notes at maturity, or repurchase the Notes upon a fundamental change.

In September 2014, we completed a private placement of $345 million principal amount of 2019 Notes and in November 2018, we completed a private placement of $150 million principal amount of the 2023 Notes. Holders of the Notes will have the right to require us to repurchase all or a portion of their Notes upon the occurrence of a fundamental change at a repurchase price equal to 100% of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, as described in Note 12 – Debt of Notes to Consolidated Financial Statements.

Upon conversion of the Notes, we will be required to make conversion payments in cash, unless we elect to deliver solely shares of our common stock to settle such conversion, as described in Note 12 – Debt of Notes to Consolidated Financial Statements. Moreover, we will be required to repay the Notes in cash at their maturity, unless earlier converted or repurchased. However, we may not have enough available cash or be able to obtain financing when the Notes are to be repurchased, converted, or at their maturity.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and results of operations.

In the event the conditional conversion feature of the Notes is triggered, holders of Notes will be entitled to convert the Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock, we would be required to settle all or a portion of the conversion obligation through the payment of cash, which could adversely affect our liquidity. Even if holders do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the

outstanding principal of the 2023 Notes as a current liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash (such as the Notes) could have a material effect on our reported financial results.

Financial Accounting Standards Board (“FASB”) ASC 470-20, Debt with Conversion and Other Options, requires us to separately account for the liability and equity components of the Notes that may be settled entirely or partially in cash upon conversion in a manner that reflects our non-convertible debt interest rate. Accordingly, the equity component of the Notes is included in additional paid-in capital within stockholders’ equity in our Consolidated Balance Sheet and the value of the equity component is treated as original issue discount for purposes of accounting for the debt component of the Notes. As a result, we are required to recognize non-cash interest expense in our Consolidated Statement of Operations in current and future periods as a result of the amortization of the discounted carrying value of the Notes to their principal amount over their term. We will report lower net income (loss) because ASC 470-20 requires interest to include both the current period’s amortization of the original issue discount and the Notes’ non-convertible interest rate. This could adversely affect our future consolidated financial results, the trading price of our common stock, and the trading price of the Notes.

Under certain circumstances, in calculating earnings per share, convertible debt instruments (such as the Notes) that may be settled entirely or partially in cash are accounted for utilizing the treasury stock method. The effect of the treasury stock method is that the shares of common stock issuable upon conversion of the Notes, if any, are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the Notes exceeds their principal amount. Under the treasury stock method, diluted earnings per share is calculated as if the number of shares of common stock that would be necessary to settle such excess were issued, if we elected to settle such excess in shares. We cannot be sure that accounting standards will continue to permit the use of the treasury stock method in the future. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the Notes, if any, then our diluted consolidated earnings per share would be adversely affected.

Our debt obligations may be a burden on our future cash flows and cash resources.

On January 2, 2019, we entered into a credit agreement (the “Credit Agreement”) which provides for revolving commitments of up to $150 million (including up to $10 million for swing line loans and up to $25 million for letters of credit). The Credit Agreement also contains a feature permitting us, subject to certain requirements, to arrange with lenders for additional revolving commitments or term loans for up to an aggregate of $50 million. As of December 31, 2018, we had $345 million principal amount outstanding of the 2019 Notes and $150 million principal amount outstanding of the 2023 Notes. Our ability to repay the principal of, to pay interest on or to refinance our indebtedness, or to make cash payments in connection with any conversion of the Notes depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt, or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

Our Credit Agreement contains restrictions that could limit our flexibility in operating our business.

Our Credit Agreement contains various covenants that could limit our ability to engage in specified types of transactions under certain conditions. These covenants could limit our ability to, among other things:


•	incur additional debt;


•	create liens;


•	make certain investments, acquisitions, loans and advances;


•	sell assets or enter into sale and leaseback transactions;


•	pay dividends or make distributions or make other restricted payments;


•	prepay other indebtedness;


•	engage in certain transactions with affiliates; and


•	amend certain charter documents and material agreements relating to other indebtedness.

A breach of any of these covenants could result in a default under the Credit Agreement. In the event of a default under the Credit Agreement, the lenders could elect to declare all amounts outstanding to be immediately due and payable. If our lenders accelerate the repayment of borrowings, we may not be able to repay our debt obligations. If we were unable to repay amounts due to the lenders under our credit facility, those lenders could proceed against the collateral granted to them to secure that indebtedness.

Certain provisions contained in our amended and restated certificate of incorporation, our amended and restated bylaws, and under Delaware law could delay or impair a change in control.

Certain provisions in our amended and restated certificate of incorporation and amended and restated bylaws could have the effect of rendering more difficult or discouraging an acquisition of the Company deemed undesirable by our board of directors. Our amended and restated certificate of incorporation allows the board of directors to issue preferred stock, which may include powers, preferences, privileges, and other rights superior to our common stock, thereby limiting our stockholders’ ability to transfer their shares and may affect the price they are able to obtain. Our amended and restated bylaws do not allow stockholders to call special meetings and include, among other things, procedures for advance notification of stockholder nominations and proposals, which may have the effect of delaying or impairing attempts by our stockholders to remove or replace management, to commence proxy contests, or to effect changes in control or hostile takeovers of the Company.

As a Delaware corporation, we are subject to Delaware law, including Section 203 of the Delaware General Corporation Law, which imposes restrictions on certain transactions between a corporation and certain significant stockholders. These provisions could also have the effect of delaying or impairing the removal or replacement of management, proxy contests, or changes in control. Any provision of our amended and restated certificate of incorporation and amended and restated bylaws that has the effect of delaying or impairing a change in control of the Company could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could affect the price that certain investors may be willing to pay for our common stock.

Item 1B: Unresolved Staff Comments:

None.

Item 2: Properties

Our corporate and Fiery segment headquarters is located in Fremont, California where we currently own approximately 119,000 square feet of space. We lease 16.9 acres (736,166 square feet) of land from the City of Manchester in New Hampshire and we lease 225,000 square feet of manufacturing and office space in Manchester, NH consisting of our display graphics operations and manufacturing facility. The lease is for a six-year term with MUFG Americas Capital Leasing & Finance, LLC (“MUFG”), formerly Bank of Tokyo – Mitsubishi UFJ Leasing & Finance LLC ("BTMU").

We own and lease additional facilities throughout the United States and various international locations, including, but not limited to, Belgium, China, Germany, India, Israel, Italy, Netherlands, Spain, and the United Kingdom.

In 2018, land and one building we owned in Meredith, NH were sold for $1.1 million that was held-for-sale as of December 31, 2017. The second building and related land we own in Meredith, NH continue to be classified as held-for-sale on the Consolidated Balance Sheet as of December 31, 2018.

We believe that our current facilities are adequate to meet our ongoing needs, and that, if we require additional space, we will be able to obtain additional facilities on commercially reasonable terms.

Item 3: Legal Proceedings

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

For a description of our significant pending legal proceedings, please see Note 13 – Commitments and Contingencies of Notes to Consolidated Financial Statements.

Item 4: Mine Safety Disclosures

Not applicable.

PART II

Item 5: Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock has traded on The Nasdaq Global Select Market (formerly The NASDAQ National Market) under the symbol EFII since October 2, 1992.

As of February 1, 2019, there were 100 stockholders of record, excluding a substantially greater number of “street name” holders or beneficial holders of our common stock, whose shares are held of record by banks, brokers, and other financial institutions.

We did not declare or pay cash dividends on our common stock during 2018 and 2017. We anticipate that we will retain all available funds for the repayment of our indebtedness and the operation of our business, and we do not plan to pay any cash dividends in the foreseeable future. We believe that the most strategic uses of our cash resources include business acquisitions, strategic investments to gain access to new technologies, repurchases of shares of our common stock, and working capital.

Equity Compensation Plan Information

Information regarding our equity compensation plans may be found in Note 15 – Stock-based Compensation and Other Employee Benefits of Notes to Consolidated Financial Statements and Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters of this Annual Report on Form 10-K and is incorporated herein by reference.

Repurchases of Equity Securities

Our stock repurchases during the year ended December 31, 2018 were as follows (in thousands except per share amounts):



Fiscal month	Total number of shares purchased ⁽¹⁾	Average price paid per share		Total number of shares purchased as part of publicly announced plans ⁽¹⁾	Approximate dollar value of shares that may yet be purchased under the plans ⁽²⁾
January 2018	174	$	30.03	174	$	104,199
February 2018	229	28.12		224	97,890
March 2018	211	28.07		209	92,019
April 2018	154	27.93		138	88,168
May 2018	47	28.53		45	86,878
June 2018	170	34.01		169	81,117
July 2018	176	34.01		176	75,142
August 2018	219	31.18		200	68,333
September 2018	297	35.92		279	58,921
October 2018	350	31.34		348	48,005
November 2018	1,513	27.62		1,457	8,004
December 2018	317	26.06		307	4
Total	3,857	29.43		3,726


⁽¹⁾	The difference between total number of shares purchased and total number of shares purchased as part of publicly announced program is the shares withheld by us to satisfy any tax withholding obligations incurred in connection with the vesting of restricted stock units ("RSUs").

⁽²⁾

On September 11, 2017, the board of directors approved $125.0 million for our share repurchase program in addition to the $150.0 million previously authorized in November 2015. At that time, $28.8 million remained available for repurchase under the 2015 authorization. The 2017 authorization thereby increased the repurchase authorization to $153.8 million . This authorization commenced on the date of approval and expired December 31, 2018. Under this publicly announced program, we repurchased 3.7 million shares for an aggregate purchase price of $109.4 million during the year ended December 31, 2018 .

Comparison of Cumulative Total Return among Electronics For Imaging, Inc., NASDAQ Composite, and NASDAQ Computer Manufacturers Index

The stock price performance graph below includes information required by the SEC and shall not be deemed incorporated by reference by any general statement incorporating by reference in this Annual Report on Form 10-K into any filing under the Securities Act or under the Exchange Act, except to the extent the Company specifically incorporates this information by reference, and shall not otherwise be deemed soliciting material or filed under the Securities Act or the Exchange Act, or subject to the liabilities of Section 18 of the Exchange Act.

The following graph compares cumulative total returns based on an initial investment of $100 in our common stock to the NASDAQ Composite and the NASDAQ Computer Manufacturers Index. The stock price performance shown on the graph below is not indicative of future price performance and only reflects the Company’s relative stock price for the five-year period ending on December 31, 2018 . All values assume reinvestment of dividends and are calculated at December 31 of each year.

Item 6: Selected Financial Data

The following table summarizes selected consolidated financial data as of and for the five years ended December 31, 2018 . This information should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and related notes thereto. For a more detailed description, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

(in thousands, except per share amounts):



	For the years ended December 31,
	2018			2017			2016		2015		2014
Operations ⁽¹⁾
Revenue	$	1,015,021		$	993,260		$	992,065	$	882,513	$	790,427
Gross profit	$	498,573		$	506,456		$	508,165	$	457,430	$	429,737
Income from operations ⁽²⁾	$	19,686		$	27,547		$	55,819	$	54,689	$	53,439
Net income (loss) ^{(2) (3)}	$	(971	)	$	(15,345	)	$	44,949	$	32,199	$	33,714
Net income (loss) per basic common share	$	(0.02	)	$	(0.33	)	$	0.96	$	0.68	$	0.72
Net income (loss) per diluted common share	$	(0.02	)	$	(0.33	)	$	0.94	$	0.67	$	0.70
Shares used in basic per-share calculation	44,429			46,281			46,900		47,217		46,866
Shares used in diluted per-share calculation	44,429			46,281			47,797		48,150		48,406

	As of December 31,
	2018			2017			2016		2015		2014
Financial Position
Cash, cash equivalents, and short-term investments	$	411,401		$	319,042		$	459,741	$	497,367	$	616,732
Working capital ⁽⁴⁾	212,131			456,668			549,668		584,782		666,405
Total assets	1,499,034			1,458,001			1,478,929		1,448,246		1,297,422
Convertible senior notes, net ^{(4) (5)}	118,688			318,957			304,484		290,734		277,670
Stockholders’ equity	726,108			781,311			826,015		822,902		788,689


⁽¹⁾	Includes acquired company results of operations beginning on the date of each acquisition (there were no acquisitions during the year ended December 31, 2018 ). See Item 1 – Business for a summary of recent acquisitions.


⁽²⁾	Income from operations and net income (loss) includes the following:



	For the years ended December 31,
	2018			2017		2016		2015			2014
Amortization of identified intangibles	$	45,291		$	47,339	$	39,560	$	26,510		$	20,673
Stock-based compensation expense	45,281			26,532		31,826		34,071			36,061
Restructuring and other costs	13,581			7,562		6,731		5,731			6,578
Revenue recognition and accounting review costs ⁽⁶⁾	1,888			6,443		—		—			—
Litigation settlement expenses	99			436		1,027		584			897
Change in fair value of contingent consideration ⁽⁷⁾	(21,486		)	6,472		6,939		(2,135		)	(3,810		)
Acquisition-related transaction costs	1,193			2,058		2,241		5,494			1,501
Total charges, net of recoveries	$	85,847		$	96,842	$	88,324	$	70,255		$	61,900


⁽³⁾	Net income (loss) includes the following:


•	Tax charge of $27.5 million during the year ended December 31, 2017, and a tax benefit of $1.2 million in the year ended December 31, 2018, resulting from the enactment of the 2017 Tax Act and our accounting under SAB 118.


•	Net tax benefits of $3.6 , $3.5, $16.6, $7.4, and $2.9 million for the years ended December 31, 2018 , 2017, 2016, 2015 and 2014, respectively, resulting from the release of previously unrecognized tax benefits due to the expiration of U.S. federal, state, and foreign statutes of limitations.


•	Tax benefit of $3.1 million during the year ended December 31, 2014 resulting from the increased valuation of intangible assets for Brazilian tax reporting.

⁽⁴⁾

In September 2014, we completed a private placement of $345 million principal amount of the 2019 Notes. These notes contained rights to convert the note principal into common stock under certain circumstances. The notes mature on September 1, 2019. They were previously classified as long-term debt through December 31, 2017 but are classified as current debt on the Consolidated Balance Sheet as of December 31, 2018. See further information in Note 12 – Debt of Notes to Consolidated Financial Statements.


⁽⁵⁾	In November 2018, we completed a private placement of $150 million principal amount of the 2023 Notes. These notes contained rights to convert the note principal into common stock under certain circumstances. See further information in Note 12 – Debt of Notes to Consolidated Financial Statements.

⁽⁶⁾

As of December 31, 2017, our management concluded that we had material weaknesses in our internal control over financial reporting related to revenue recognition practices and the valuation of certain textile printer inventories. The review of our revenue recognition practices and valuation of textile printer inventories required that we expend significant management time and incurred significant accounting, legal, and other expenses of $1.9 and $6.4 million in the years ended December 31, 2018 and 2017, respectively, to investigate and remediate these material weaknesses. Please see Item 9A for management's report on internal control over financial reporting as of December 31, 2018 in which we concluded that the material weaknesses had been remediated.

⁽⁷⁾

Many of our acquisitions include contingent consideration based on future financial performance of the acquired business against targets established in the acquisition agreements. We estimate the fair value of this contingent consideration at the acquisition date and record the amount as part of the initial purchase accounting. Over time, as new information becomes available concerning the acquired business's actual and projected performance against the targets, the fair value of the contingent consideration is periodically updated resulting in a charge, or credit to general and administrative expenses in the Consolidated Statements of Operations. These non-cash charges and (credits) are presented on this line item to provide additional information about fluctuations in our operating and net income (loss) by period.

Item 7: Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the audited consolidated financial statements and related notes thereto included in this Annual Report on Form 10-K.

All assumptions, anticipations, expectations, and forecasts contained herein are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that involve risks and uncertainties. Forward-looking statements include, among others, those statements including 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. Our actual results could differ materially from those discussed here. For a discussion of the factors that could impact our results, readers are referred to Item 1A, “Risk Factors,” in Part I of this Annual Report on Form 10-K and to our other reports filed with the SEC, including the Company’s most recent Quarterly Report on Form 10-Q and Current Reports on Form 8-K, and any amendments thereto. We do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

Results of Operations

Consolidated results of operations are summarized as follows (in thousands):



	Year Ended December 31,											Year Ended December 31,
	2018			2017			Change					2017			2016			Change
							Amount			Percent								Amount			Percent
Revenue	$	1,015,021		$	993,260		$	21,761		2	%	$	993,260		$	992,065		$	1,195		—	%
Cost of revenue	516,448			486,804			29,644			6	%	486,804			483,900			2,904			1	%
Gross profit	498,573			506,456			(7,883		)	(2	)%	506,456			508,165			(1,709		)	—	%
Operating expenses:
Research and development	159,941			157,358			2,583			2	%	157,358			151,395			5,963			4	%
Sales and marketing	183,498			173,697			9,801			6	%	173,697			169,042			4,655			3	%
General and administrative	76,576			92,953			(16,377		)	(18	)%	92,953			85,618			7,335			9	%
Amortization of identified intangibles	45,291			47,339			(2,048		)	(4	)%	47,339			39,560			7,779			20	%
Restructuring and other	13,581			7,562			6,019			80	%	7,562			6,731			831			12	%
Total operating expenses	478,887			478,909			(22		)	—	%	478,909			452,346			26,563			6	%
Income from operations	19,686			27,547			(7,861		)	(29	)%	27,547			55,819			(28,272		)	(51	)%
Interest expense	(20,169		)	(19,505		)	(664		)	3	%	(19,505		)	(17,716		)	(1,789		)	10	%
Interest income and other income, net	1,604			4,088			(2,484		)	(61	)%	4,088			545			3,543			*
Income before income taxes	$	1,121		$	12,130		$	(11,009	)	*		$	12,130		$	38,648		$	(26,518	)	(69	)%

___________

* Percentage not meaningful.

Out-of-Period Adjustments

As discussed more fully in Note 1 – The Company and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements, during the year ended December 31, 2017, we recorded out-of-period adjustments related to certain bill and hold transactions, which decreased revenue by $3.4 million, decreased gross profit by $0.5 million, and increased net loss by $0.3 million (or $0.01 per diluted share).

Consolidated Revenue

Consolidated revenue grew by $21.8 million or 2% in the year ended December 31, 2018 compared to the year ended December 31, 2017 , reflecting growth of 6% in Industrial Inkjet, 7% growth in Productivity Software, and a decrease of 10% in Fiery revenues. Sales in the Americas grew by 3% , sales in EMEA declined by 1% , and sales in APAC increased by 9% in the year ended December 31, 2018 compared to the year ended December 31, 2017 .

Consolidated revenue grew by $1.2 million or less than 1% in the year ended December 31, 2017 compared to the year ended December 31, 2016 , reflecting growth of 1% in Industrial Inkjet, 3% growth in Productivity Software, and a decrease of 4% in Fiery revenues. Sales in the Americas decreased by 2% , while sales in EMEA and APAC both increased by 3% in the year ended December 31, 2017 compared to the year ended December 31, 2016 .

We completed our acquisitions of FFPS, Generation Digital, CRC, and Escada in the year ended December 31, 2017 . Post-acquisition revenue was $27.1 million in 2017 related to these four acquisitions. We completed our acquisitions of Rialco and Optitex in the year ended December 31, 2016 . Post-acquisition revenue was $19.8 million in 2016 related to these two acquisitions.

Revenue by Operating Segment

We manage our business in three operating segments as follows:

Industrial Inkjet, which consists of super-wide and wide format display graphics, corrugated packaging and display, textile, and ceramic tile and building material industrial digital inkjet printers; digital UV curable, LED curable, ceramic, water-based, and thermoforming and specialty ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, water-based dispersed printing ink, and coatings; digital inkjet printer parts; and professional services.

Productivity Software, which consists of a complete software suite that enables efficient and automated end-to-end business and production workflows for the print and packaging industry. This Productivity Suite also provides tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or to be hosted in the cloud. The Productivity Suite addresses all segments of the print industry. We also market Optitex fashion CAD software, which facilitates fast fashion and increased efficiency in the fashion and textile industries.

Fiery, which consists of Fiery and FFPS, that transform digital copiers and printers into high performance networked printing devices for the office, industrial, and commercial printing markets. This operating segment is comprised of (i) stand-alone DFEs connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our DFE solutions, (iv) self-service and payment solutions, and (v) stand-alone software-based solutions such as our proofing, textile, and scanning solutions.

See additional discussion of our business and operating segments in Item 1: Business.

Revenue by operating segment is presented below (in thousands):



Revenue by Segment	Year Ended December 31,						Year Ended December 31,
	2018	2017	Change				2017		2016		Change
			Amount		Percent						Amount			Percent
Industrial Inkjet	$607,559	$570,688	$36,871		6	%	$	570,688	$	562,583	$	8,105		1	%
Productivity Software	168,284	156,561	11,723		7		156,561		151,737		4,824			3
Fiery	239,178	266,011	(26,833	)	(10	)	266,011		277,745		(11,734		)	(4	)
Total	$1,015,021	$993,260	$21,761		2	%	$	993,260	$	992,065	$	1,195		—	%

The percentage of consolidated revenue by operating segment was as follows (in thousands):



	For the Years Ended December 31,
	2018				2017				2016
Industrial Inkjet	$	607,559	60	%	$	570,688	57	%	$	562,583	57	%
Productivity Software	168,284		17		156,561		16		151,737		15
Fiery	239,178		23		266,011		27		277,745		28
Total	$	1,015,021	100	%	$	993,260	100	%	$	992,065	100	%

Overview

During the past several years, revenue from our Industrial Inkjet and Productivity Software segments has grown while revenue from our Fiery segment has decreased. This shifting in product mix has important implications for us because our gross profit margins have historically been lower in the Industrial Inkjet segment than in either the Productivity Software or Fiery segments. If this trend continues our consolidated gross profit margin may be lower in future periods, although management is implementing plans to improve gross margins in the Industrial Inkjet segment to help mitigate this impact.

Industrial Inkjet

Industrial Inkjet revenue increased by $36.9 million or 6% in the year ended December 31, 2018 compared to the year ended December 31, 2017 . Industrial Inkjet revenue increased primarily due to:


•	continuing sales of our Nozomi single-pass industrial digital inkjet platform for the corrugated market which was launched in the second half of 2017, and reached total revenue of $65.7 million in 2018, compared to $16.1 million in 2017,


•	increased ink revenue due to the increase in our installed printer base and the high utilization that our industrial inkjet printers are experiencing in the field, and


•	increased revenue from parts and service.


•	These increases were partially offset by decreased printer sales in the display graphics and ceramic market segments due to reduced customer demand.

Industrial Inkjet revenue increased by $8.1 million or 1% in the year ended December 31, 2017 compared to the year ended December 31, 2016 . Industrial Inkjet revenue increased primarily due to:


•	the launch of our Nozomi single-pass industrial digital inkjet platform in 2017,


•	a full year of post-acquisition Rialco ink products revenue, which closed in March 2016,


•	increased ink revenue due to the increase in our installed printer base and the high utilization that our industrial digital inkjet printers are experiencing in the field, and


•	increased revenue from parts and service, partially offset by


•	decreased digital inkjet printer revenue due to reduced demand in anticipation of future product launches and


•	printer revenue, which would have been higher by $3.4 million when considering out-of-period adjustments related to certain bill and hold transactions, which were recorded during the year ended December 31, 2017.

Productivity Software

Productivity Software revenue increased by $11.7 million or 7% in the year ended December 31, 2018 compared to the year ended December 31, 2017 , primarily due to post-acquisition revenue from Escada, which was acquired in October 2017, increased license revenue in our other products, and post-acquisition revenue from CRC, which was acquired in May 2017.

Productivity Software revenue increased by $4.8 million or 3% in the year ended December 31, 2017 compared to the year ended December 31, 2016 , primarily due to post-acquisition revenue from Optitex, which was acquired in June 2016, post-acquisition revenue from CRC, post-acquisition revenue from Escada, increased service revenue, and annual price increases related to our maintenance contracts, partially offset by decreased license revenue.

Fiery

Fiery revenue decreased by $26.8 million or 10% in the year ended December 31, 2018 compared to the year ended December 31, 2017 . Although end customer and reseller preference for Fiery products drives demand, most Fiery revenue relies on printer manufacturers to design, develop, and integrate Fiery technology into their print engines. We believe sales of the printers on which Fiery is available decreased during 2018. In addition, several of these leading printer manufacturers have developed competing DFEs for their printers in lieu of using Fiery DFEs. The leading printer manufacturers further reduced their purchases during 2018 compared to 2017 for controller units, software options, and DFE solutions. These decreases were partially offset by post-acquisition revenue from Generation Digital, which was acquired in August 2017.

Fiery revenue decreased by $11.7 million or 4% in the year ended December 31, 2017 compared to the year ended December 31, 2016 . The leading printer manufacturers tightly managed their inventory levels in the first half of 2017, which decreased demand, partially offset by increased inventory levels and increased demand in the second half of 2017. This decrease in volume was partially offset by post-acquisition revenue from FFPS, which was acquired in January 2017, and post-acquisition revenue from Generation Digital.

Recurring Revenue

We define recurring revenue as ongoing sales of products and services which by their nature are expected to continue over a reasonable period of time. We include ink sales in recurring revenue because our customers typically buy their ink from us throughout the life of our printers. We include revenue from extended service, warranty, and maintenance plans because we generally provide these services over an extended contract period. We include revenue from software subscriptions because it is provided over a contractual period of time, and our experience is that most customers renew their subscriptions on an ongoing basis.

Our recurring revenue by segment and the percentage of total segment revenue is summarized as follows (in thousands):



Recurring Revenue	Year Ended December 31,
	2018				2017				2016
	Amount		Percent		Amount		Percent		Amount		Percent
Industrial Inkjet	$	226,887	37	%	$	221,316	39	%	$	206,540	37	%
Productivity Software	91,487		54		89,375		57		83,051		55
Fiery	18,169		8		14,642		6		14,379		5
Total	$	336,543			$	325,333			$	303,970

Recurring revenue increased by $11.2 million or 3% in the year ended December 31, 2018 compared to the year ended December 31, 2017 , primarily due to increased ink volume and higher software maintenance and support revenues, partially offset by a slight decline in extended warranty revenue within the Industrial Inkjet segment.

Recurring revenue increased by $21.4 million or 7% in the year ended December 31, 2017 compared to the year ended December 31, 2016 , primarily due to increased ink volume and higher software maintenance and support revenues.

From time to time we may experience supply issues like we did during the third quarter of 2018, primarily in China, where we saw changes in tariff structure, price increases in ink components, and short supplies of ink components due to reduced production levels at a number of suppliers, which limited the amount of ink we could manufacture. We are working to increase purchases from new sources for ink components but we could still experience some negative impact on ink volume growth in the short term.

Revenue by Geographic Region

Revenue by geographic region is summarized as follows (in thousands):



Revenue by Region	Year Ended December 31,									Year Ended December 31,
	2018		2017		Change					2017		2016		Change
					Amount			Percent						Amount			Percent
Americas	$	502,820	$	487,968	$	14,852		3	%	$	487,968	$	500,411	(12,443		)	(2	)%
EMEA	364,908		369,610		(4,702		)	(1	)	369,610		360,305		9,305			3
APAC	147,293		135,682		11,611			9		135,682		131,349		4,333			3
Total	$	1,015,021	$	993,260	$	21,761		2	%	$	993,260	$	992,065	$	1,195		—	%

Americas

Revenue in the Americas increased by $14.9 million or 3% in the year ended December 31, 2018 compared to the year ended December 31, 2017 . The Americas accounted for 50% of consolidated revenue compared to 49% in the prior year. The increase was driven by a 13% increase in Industrial Inkjet revenues in the region due primarily to sales of our Nozomi corrugated printers, and an increase in sales to the textile market segment, partially offset by reduced sales in the display graphics market. Productivity Software sales in the Americas increased by 2% while Fiery sales decreased by 11% compared to the prior year.

Americas revenue decreased by $12.4 million or 2% in the year ended December 31, 2017 compared to the year ended December 31, 2016 . The Americas accounted for 49% of consolidated revenue compared to 51% in the prior year. The decrease was primarily due to decreased Industrial Inkjet printer revenue resulting from reduced demand in anticipation of future product launches, Industrial Inkjet revenue that would have been higher by $3.4 million when considering out-of-period adjustments related to certain bill and hold transactions, and decreased Fiery revenue, partially offset by increased ink revenue.

EMEA

Revenue in EMEA decreased by $4.7 million or 1% in the year ended December 31, 2018 compared to the year ended December 31, 2017 . EMEA accounted for 36% of consolidated revenue compared to 37% in the prior year. The decrease was attributable to a decrease of 18% in Fiery sales in the region due to reduced demand, partially offset by a 16% increase in Productivity Software revenues and a 1% increase in Industrial Inkjet sales compared to the prior year. Movements in currency exchange rates reduced the year-over-year decrease.

EMEA revenue increased by $9.3 million or 3% in the year ended December 31, 2017 compared to the year ended December 31, 2016 . EMEA accounted for 37% of consolidated revenue compared to 36% in the prior year. The increase was primarily due to increased Industrial Inkjet revenue from the Nozomi corrugated printer, higher ink revenue, post-acquisition Optitex revenue, and post-acquisition Escada revenue, partially offset by decreased Fiery revenue.

APAC

Revenue in APAC increased by $11.6 million or 9% in the year ended December 31, 2018 compared to the year ended December 31, 2017 . APAC accounted for 14% of consolidated revenue compared to 14% in the prior year. The increase was primarily due to a 15% increase in Fiery sales in the region, as well as a 4% increase in Industrial Inkjet and a 32% increase in Productivity Software sales compared to the prior year. Within Industrial Inkjet, sales of textile printers increased while sales of ceramic printers decreased.

APAC revenue increased by $4.3 million or 3% in the year ended December 31, 2017 compared to the year ended December 31, 2016 . APAC accounted for 14% of consolidated revenue compared to 13% in the prior year. The increase was primarily due to increased industrial digital inkjet printer and ink revenue and post-acquisition Optitex revenue, partially offset by decreased Fiery revenue.

Revenue Concentration

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

Although end customer and reseller channel preference for Fiery products drives demand, most Fiery revenue relies on printer manufacturers to design, develop, and integrate Fiery technology into their print engines. A significant portion of our revenue is, and has been, generated by sales of our Fiery DFE products to a relatively small number of leading printer manufacturers. During the year ended December 31, 2017 , Xerox provided 11% of our consolidated revenue. No customer accounted for more than 10% of our revenue for the years ended December 31, 2018 or December 31, 2016.

Our reliance on revenue from the leading printer manufacturers was 22% , 26% , and 28% during the years ended December 31, 2018, 2017, and 2016, respectively. Over time, we expect our revenue from the leading printer manufacturers to decline as a percentage of our consolidated revenue as we grow our Industrial Inkjet and Productivity Software segments. Because sales of our Fiery DFE products constitute a significant portion of our revenue and there are a limited number of printer manufacturers producing copiers and printers in sufficient volume to be attractive customers for us, we expect that we will continue to depend on a relatively small number of printer manufacturers for a significant portion of our Fiery DFE revenue in future periods. Accordingly, if we lose or experience reduced sales to one of these printer manufacturer/distributors, we will have difficulty replacing that revenue with sales to new or existing customers.

Consolidated Gross Profit

Gross profit declined by $7.9 million and gross margin decreased from 51.0% in year ended December 31, 2017 to 49.1% in the year ended December 31, 2018 . The decrease in gross profit and margin was primarily due to shifts in product mix resulting in a greater proportion of our consolidated revenues coming from the Industrial Inkjet segment and a lower proportion coming from the Fiery segment. We have historically earned higher gross margins in the Fiery segment than in the Industrial Inkjet segment. We also recognized a $1.2 million increase in stock-based compensation expense within cost of revenues compared to the prior year.

Gross profit declined by $1.7 million and gross margin decreased from 51.2% in the year ended December 31, 2016 to 51.0% in the year ended December 31, 2017 . The decrease in gross profit and margin was primarily due to shifts in product mix resulting in a greater proportion of our consolidated revenues coming from the Industrial Inkjet segment and a lower proportion coming from the Fiery segments compared to the prior year.

Gross Profit by Segment

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

Gross profit by operating segment, excluding stock-based compensation, was as follows (in thousands):



	Year Ended December 31,
Segment Gross Profit	2018			2017			2016
Industrial Inkjet
Revenue	$	607,559		$	570,688		$	562,583
Gross profit	210,792			208,620			198,923
Gross profit percentages	34.7		%	36.6		%	35.4		%
Productivity Software
Revenue	$	168,284		$	156,561		$	151,737
Gross profit	119,470			114,460			114,179
Gross profit percentages	71.0		%	73.1		%	75.2		%
Fiery
Revenue	$	239,178		$	266,011		$	277,745
Gross profit	172,081			185,937			198,322
Gross profit percentages	71.9		%	69.9		%	71.4		%

Industrial Inkjet Gross Profit

The Industrial Inkjet gross profit percentage decreased to 34.7% in the year ended December 31, 2018 compared to 36.6% in the year ended December 31, 2017 . The decrease was primarily due to lower gross margins on ink sales reflecting an increase in customer incentive discount programs during 2018, as well as higher ink and ink component costs due to a change in supplier. In addition, printer gross margins also declined slightly due to a higher mix of revenue coming from our Nozomi corrugated printers, which were not at their targeted gross margin levels until the end of 2018.

The Industrial Inkjet gross profit percentage increased to 36.6% in the year ended December 31, 2017 compared to 35.4% in the year ended December 31, 2016 . Gross profit percentages improved in ink, parts, and service, while printer gross profit percentages were comparable. The printer gross profit percentage continued to benefit from manufacturing efficiencies related to super-wide format printer production, reduced warranty expense due to engineering and quality improvements, and increased ink revenue at a higher gross profit percentage, partially offset by lower gross profit during the launch of our Nozomi single-pass platform and inventory write downs as a result of our Xeikon License Agreement.

Productivity Software Gross Profit

The Productivity Software gross profit percentage decreased to 71.0% in the year ended December 31, 2018 compared to 73.1% in the year ended December 31, 2017 . The decrease was primarily due to a higher mix of lower margin hardware and decreased gross margins on maintenance contracts, partially offset by increased gross margins on licenses and subscriptions.

The Productivity Software gross profit percentage decreased to 73.1% in the year ended December 31, 2017 compared to 75.2% in the year ended December 31, 2016 . The decrease was primarily due to decreased license revenue and increased product maintenance costs, partially offset by price increases on annual maintenance renewal contracts.

Fiery Gross Profit

The Fiery gross profit percentage increased to 71.9% in the year ended December 31, 2018 compared to 69.9% in the year ended December 31, 2017 . The Fiery gross profit percentage was negatively impacted by a charge of $1.4 million to cost of revenue in the year ended December 31, 2017, which reflects the cost of manufacturing plus a portion of the expected profit margin related to the acquired FFPS inventories. Inventory acquired in the acquisition of FFPS was required to be recorded at fair value rather than historical cost in accordance with ASC 805, Business Combinations. This amount is not included in the financial information regularly reviewed by management as this acquisition-related charge is not indicative of the gross margin trends in the FFPS business. Excluding this charge, the Fiery gross profit percentage would have been 70.4% during the year ended December 31, 2017. The remainder of the increase was primarily due to improved margins on customized solutions provided to customers.

The Fiery gross profit percentage decreased to 69.9% in the year ended December 31, 2017 compared to 71.4% in the year ended December 31, 2016 . The Fiery gross profit percentage, excluding the fair value adjustment related to acquired FFPS inventories of $1.4 million, would have been 70.4% during the year ended December 31, 2017. The revenue mix between standalone and embedded DFEs, which have a lower margin compared with higher margin software options, accounts for this margin fluctuation between the periods.

Reconciliation to Consolidated Gross Profit

A reconciliation of operating segment gross profit to the consolidated statements of operations for the years ended December 31, 2018 , 2017, and 2016 is as follows (in thousands):



	Year Ended December 31,
	2018			2017			2016
Segment gross profit	$	502,343		$	509,017		$	511,424
Stock-based compensation expense	(3,770		)	(2,561		)	(2,784		)
Other items excluded from segment profit	—			—			(475		)
Gross profit	$	498,573		$	506,456		$	508,165

Operating Expenses

We are a global company and much of our operating expense is incurred in foreign locations. Accordingly, our operating expenses, as reported in U.S. Dollars, fluctuate due to changes in foreign currency exchange rates. We expect that if the U.S. dollar remains volatile against the British pound sterling, Euro, Indian rupee, Israeli shekel, or other currencies, operating expenses reported in U.S. dollars could fluctuate.

Research and Development

Research and development expenses include personnel, consulting, travel, research and development facilities, prototype materials, and non-recurring engineering expenses.

Research and development expense increased by $2.6 million or 2% in the year ended December 31, 2018 compared to the year ended December 31, 2017 . The increase was primarily due to increased performance-based compensation of $2.0 million and increased stock-based compensation of $3.9 million due to higher probability of achieving certain performance based restricted stock units ("PSUs"). Partially offsetting these increases were reduced expenditures for outside consulting of $2.7 million and a $0.7 million reduction in prototype costs.

Research and development expense increased by $6.0 million or 4% in the year ended December 31, 2017 compared to the year ended December 31, 2016 . The increase was primarily related to prototypes and non-recurring engineering, consulting, contractors, supplies, freight, and related travel expenses which increased by $7.6 million related to future product launches and FFPS sustaining engineering. Partially offsetting these increases were decreased personnel costs of $4.2 million primarily due to reduced variable compensation expense. The remaining increase of $2.6 million is primarily due to facilities and information technology expenses related to our research and development activities.

Sales and Marketing

Sales and marketing expenses include personnel, trade shows, marketing programs and promotional materials, sales commissions, travel and entertainment, depreciation, and worldwide sales office expenses.

Sales and marketing expense increased by $9.8 million or 6% in the year ended December 31, 2018 compared to the year ended December 31, 2017 . The increase was primarily due to higher personnel costs including increased salaries, and variable compensation of $7.0 million, and increased stock-based compensation expense of $2.4 million due to higher probability of achieving certain performance-based awards.

Sales and marketing expense increased by $4.7 million or 3% in year ended December 31, 2017 compared to the year ended December 31, 2016 . The increase was primarily due to higher personnel costs of $4.8 million primarily due to increased head count related to our business acquisitions. Stock-based compensation expense decreased by $1.1 million primarily due to reduced probability of achieving certain performance-based awards and delayed timing of granting our annual stock awards, partially offset by increased ESPP participation by employees compared to the prior year. The remaining increase of $1.0 million is primarily due to facilities and information technology expenses related to our sales and marketing activities.

General and Administrative

General and administrative expenses consist primarily of human resources, legal, finance, bad debts, and accounting expenses, as well as changes in the fair value of earnout liabilities.

General and administrative expense decreased by $16.4 million or 18% in the year ended December 31, 2018 compared to the year ended December 31, 2017 . The decrease was primarily due to a change of $27.9 million in fair value adjustments to contingent consideration liabilities on previous acquisitions. The net contingent consideration liability reductions of $21.5 million in 2018 compare to a net increase of $6.5 million recognized during 2017, for a total change of $27.9 million. During 2018 we recorded a $20.9 million reduction in the contingent consideration liability for our 2016 acquisition of Optitex based on updated actual and projected performance against the earnout targets specified in the acquisition agreement. We also recognized a $2.6 million reduction in the contingent consideration liability for our prior acquisition of Generation Digital and a $2.2 million increase in the contingent consideration liability of our 2017 acquisition of Escada during the year ended December 31, 2018.

In addition to the fair value adjustments, bad debts expense decreased by $2.0 million in the current year compared to the prior year. Legal, accounting, and consulting expenses decreased by $2.1 million in 2018 compared to 2017 primarily related to our revenue recognition and accounting review costs which were higher in 2017. Partially offsetting these reductions were increases of $11.3 million in stock-based compensation due to the impacts of the transition of our Chief Executive Officer ("CEO") position, which required acceleration of stock-based compensation expense recognition on prior grants to our previous CEO at the date of change in his employment status, and higher probability of achieving certain performance-based awards for other employees. In addition, salaries increased by $2.7 million compared to the prior year due to increased headcount and annual merit adjustments and increased building rent and maintenance of $1.5 million.

General and administrative expenses increased by $7.3 million , or 9% in the year ended December 31, 2017 compared to the year ended December 31, 2016 . Personnel costs increased by $2.3 million primarily due to head count increases related to our business acquisitions. Professional services fees increased by $1.2 million. Reserves for litigation and doubtful accounts increased by $0.6 million and the fair value adjustments to contingent consideration increased by $0.4 million. Legal and accounting fees related to the revenue recognition and accounting review were $6.4 million. Stock-based compensation expense decreased by $4.2 million primarily due to reduced probability of achieving certain performance-based awards and delayed timing of granting our annual awards.

The fair value of contingent consideration increased by $6.5 million during the year ended December 31, 2017 , including earnout interest accretion of $1.7 million related to all acquisitions. The Optitex, CTI, and Rialco earnout performance probabilities increased while the Shuttleworth earnout performance probability decreased during 2017. The estimated probabilities of achieving the Optitex, Reggiani, DirectSmile, and CTI earnout performance targets increased during the year ended December 31, 2016, partially offset by reduced probabilities of achieving the DIMS and Shuttleworth earnout performance targets, resulting in an increase in the associated liability and a charge to general and administrative expense of $6.9 million, including accretion of interest related to all acquisitions.

Many of our acquisitions have included elements of contingent consideration in the purchase price which are primarily linked to financial performance of the acquired business following our acquisition. The fair value of this contingent consideration is estimated and recorded at the acquisition date. In subsequent periods, as the actual and expected financial performance of the business changes, the contingent consideration liabilities are adjusted to updated estimated fair values.

We recorded impairment losses of $0.3 and $0.9 million during the years ended December 31, 2018 and 2017, respectively, related to the Meredith, NH manufacturing facilities and related land. For additional information, please refer to Note 9 – Property and Equipment, net of Notes to Consolidated Financial Statements for details. There were no asset impairment charges recognized during the year ended December 31, 2016.

Amortization of Identified Intangibles

Amortization of identified intangibles decreased by $2.0 million or 4% in the year ended December 31, 2018 compared to the year ended December 31, 2017 , primarily because we made no acquisitions during 2018, and certain identified intangibles from earlier acquisitions became fully amortized.

Amortization of identified intangibles increased by $7.7 million , or 20% in the year ended December 31, 2017 compared to the year ended December 31, 2016 , primarily due to amortization of identified intangibles resulting from the Escada, Generation Digital, CRC, and FFPS acquisitions made in 2017, as well as full year amortization expense recognized on 2016 acquisitions, partially offset by decreased amortization due to certain intangible assets from prior year acquisitions becoming fully amortized.

Restructuring and Other

Restructuring and other expenses were $13.6 million in the year ended December 31, 2018 and included severance costs of $7.6 million related to head count reductions of 148. Severance costs include severance payments, related employee benefits, retention bonuses, outplacement fees, recruiting, and relocation costs. We also incurred facilities relocation and downsizing expenses of $1.7 million, primarily consisting of costs to relocate operations from our prior Meredith, NH facilities to our new Manchester, NH facility and to consolidate our headquarters in Fremont, CA from two buildings into one. Facilities restructuring and other expenses are primarily related to the relocation of certain manufacturing and administrative locations to accommodate decreased or different space requirements. We also recognized $4.3 million in integration costs incurred to integrate our previously acquired businesses, including costs incurred in the project to implement SAP at our Reggiani subsidiary.

Restructuring and other expenses were $7.6 million in the year ended December 31, 2017 and included severance costs of $4.7 million related to head count reductions of 144. We incurred facilities relocation and downsizing expenses of $0.6 million consisting of costs to relocate certain manufacturing and administrative locations to accommodate decreased or different space requirements. We also recognized $2.3 million in integration costs incurred to integrate our previously-acquired businesses.

Restructuring and other expenses were $6.7 million in the year ended December 31, 2016 and included severance costs of $4.1 million related to head count reductions of 128. We incurred facilities relocation and downsizing expenses of $0.5 million primarily consisting of costs to relocate certain manufacturing and administrative locations to accommodate decreased or different space requirements. We also recognized $2.1 million in integration costs incurred to integrate our previously-acquired businesses.

Stock-based Compensation

Stock-based compensation expense for the years ended December 31, 2018 , 2017, and 2016 was $45.3 , $26.5 , and $31.8 million , respectively. Stock-based compensation expense is included in cost of sales, research and development, sales and marketing, and general and administrative expenses in the Consolidated Statement of Operations.

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

Stock-based compensation expense increased by $18.7 million or 71% in the year ended December 31, 2018 compared to the year ended December 31, 2017 primarily due to increased probability of achieving performance-based awards and the impacts of the transition of our CEO during 2018, which required acceleration of stock-compensation expense recognition on prior grants to our previous CEO at the date of change in his employment status. Stock-based compensation expense decreased by $5.3 million or 17% in the year ended December 31, 2017 compared to the year ended December 31, 2016 primarily due to reduced probability of achieving performance-based awards and delayed timing of granting our annual awards, partially offset by increased ESPP expense resulting from higher employee participation compared to the prior year.

Interest Expense

Interest expense increased by $0.7 million or 3% in the year ended December 31, 2018 compared to the year ended December 31, 2017 , primarily due to interest recognized on the 2023 Notes issued in November 2018. Interest expense increased by $1.8 million or 10% in the year ended December 31, 2017 compared to the year ended December 31, 2016 primarily due to interest accretion related to the FFPS purchase liability, long-term warranties, the Reggiani non-compete agreement liability, and contingent consideration liabilities.

Interest Income and Other Income, Net

Interest income and other income, net, includes interest income on our cash equivalents and short-term investments, gains and losses from sales of our cash equivalents and short-term investments, and net foreign currency exchange gains and losses.

Interest income and other income, net decreased by $2.5 million or 61% in the year ended December 31, 2018 compared to the year ended December 31, 2017 , primarily due to reduced interest income of $0.8 million due to reduced levels of cash investments during most of the year and a $0.8 million increase in loss on investments. Interest income and other income, net increased by $3.5 million in the year ended December 31, 2017 compared to the year ended December 31, 2016 , primarily due to increased investment income of $0.8 million resulting from increased market interest rates, decreased foreign currency exchange losses of $2.2 million, and $0.3 million related to the Xeikon License Agreement.

Income (Loss) before Income Taxes

Income (loss) before income taxes is summarized as follows (in thousands):



	Year Ended December 31,
	2018			2017			2016
U.S.	$	(64,810	)	$	(27,926	)	$	8,254
Foreign	65,931			40,056			30,394
Total income before income taxes	$	1,121		$	12,130		$	38,648

For the year ended December 31, 2018 , income before income taxes of $1.1 million consisted of a U.S. loss before income taxes of $64.8 million and foreign income before income taxes of $65.9 million , respectively. Loss before income taxes attributable to U.S. operations included stock-based compensation of $45.3 million , interest expense related to our Notes of $14.2 million, amortization of identified intangible assets of $11.7 million, restructuring and other of $9.2 million, legal and

accounting fees related to the revenue recognition review and assessment of $2.4 million, acquisition-related costs of $1.3 million, loss on investments of $0.9 million, and asset impairment charges of $0.3 million, partially offset by a decrease in the fair value of contingent consideration of $2.6 million. Income before income taxes attributable to foreign operations included amortization of identified intangible assets of $33.6 million, restructuring and other of $4.2 million, and a decrease in the fair value of contingent consideration of $19.1 million. The exclusion of these items from income before income taxes would result in U.S. and foreign income before income taxes of $17.7 and $84.7 million, respectively, during the year ended December 31, 2018 .

For the year ended December 31, 2017, income before income taxes of $12.1 million consisted of U.S. loss before income taxes of $27.9 million and foreign income before income taxes of $40.1 million , respectively. Loss before income taxes attributable to U.S. operations included amortization of identified intangible assets of $13.6 million, stock-based compensation of $26.5 million, restructuring and other of $5.5 million, legal and accounting fees related to the revenue recognition review and assessment of $6.4 million, asset impairment of $0.9 million, acquisition-related costs of $1.8 million, cost of revenue resulting from the fair value adjustment of FFPS inventory of $0.6 million, increased fair value of contingent consideration of $0.7 million, and interest expense related to our Notes of $17.1 million. Income before income taxes attributable to foreign operations included amortization of identified intangible assets of $33.7 million, restructuring and other of $2.1 million, cost of revenue resulting from the fair value adjustment of FFPS inventory of $0.8 million, litigation settlement expense of $0.3 million, earnout interest accretion of $1.7 million, acquisition-related costs of $0.3 million, and increased fair value of contingent consideration of $4.1 million. The exclusion of these items from income before income taxes would result in U.S. and foreign income before income taxes of $45.2 and $83.0 million, respectively, during the year ended December 31, 2017.

For the year ended December 31, 2016, income before income taxes of $38.6 million consisted of U.S. and foreign income before income taxes of $8.3 and $30.4 million , respectively. The income before income taxes attributable to U.S. operations included amortization of identified intangibles of $7.6 million, stock-based compensation of $31.8 million, restructuring and other costs of $3.8 million, acquisition-related costs of $0.6 million, litigation settlement expense of $1.0 million, and interest expense and amortization of debt issuance costs related to our Notes of $16.3 million, and the change in fair value of contingent consideration of $0.6 million. The income before income taxes attributable to foreign operations included amortization of identified intangibles of $31.9 million, restructuring and other costs of $2.9 million, acquisition-related costs of $1.6 million, earnout interest accretion of $2.7 million, and the change in fair value of contingent consideration of $3.7 million. The exclusion of these items from income before income taxes would result in a U.S. and foreign income before income taxes of $69.9 and $73.2 million, respectively, for the year ended December 31, 2016.

Provision for (Benefit from) Income Taxes

Our provision for (benefit from) income taxes are as follows (in thousands):



Income Tax Provision (Benefit)	Year Ended December 31,
	2018			2017			2016
Income Before Tax	$	1,121		$	12,130		$	38,648
Provision for (benefit from) income taxes	2,092			27,475			(6,301		)
Effective income tax rate	186.6		%	226.5		%	(16.3		)%

Primary differences between our effective tax rate and U.S. statutory tax rate of 21% in 2018 and 35% in 2017 and 2016 include taxes on permanently reinvested foreign earnings, the tax effects of stock-based compensation expense pursuant to ASC 718-740, Stock Compensation – Income Taxes, which are non-deductible for tax purposes, the release of previously unrecognized tax benefits due to the expiration of U.S. federal, state and foreign statute of limitations, and tax benefits related to research and development tax credits.

In December 2017, the U.S. enacted the 2017 Tax Act which has wide ranging impacts including, but not limited to, a deemed repatriation transition tax and the revaluation of U.S. deferred tax assets and liabilities. The SEC issued SAB 118 which allowed us to record a provisional estimate of the income tax effects of the 2017 Tax Act in the period in which we

could make a reasonable estimate of its effects. We initially recorded a $27.5 million tax charge in the year ended December 31, 2017 as a provisional estimate. This charge included an estimated charge of $17.0 million related to the deemed repatriation transition tax, which was comprised of a gross transition tax of $27.0 million offset by foreign tax credits of $10.0 million. In addition, we recorded a $10.5 million charge related to the remeasurement of U.S. deferred tax assets and liabilities. In 2018, pursuant to SAB 118, we recorded a net adjustment of a $1.2 million benefit to the deemed repatriation tax and remeasurement of U.S. deferred tax balances, as a result of the filing of our 2017 U.S. federal and state tax returns. We have completed our accounting for the impacts of the 2017 Tax Act.

The 2017 Tax Act also created a minimum tax on certain foreign earnings, also known as the GILTI provision, commencing in the year ending December 31, 2018. In 2018, we recorded a net charge of $4.7 million (GILTI inclusion less GILTI foreign tax credits) for the full year. In addition, we have made an accounting policy election to record GILTI as a period expense and not record deferred tax assets associated with GILTI.

During the years ended December 31, 2018 and 2017, we recognized tax benefits (including state tax benefit) of $3.6 million and $3.5 million, respectively, from the release of previously unrecognized tax benefits due to the expiration of U.S. federal, state, and foreign statute of limitations. During the year ended December 31, 2016, we recognized a $16.6 million tax benefit from the release of previously unrecognized tax benefits due to the expiration of U.S. federal, state, and foreign statutes of limitations, of which $10.3 million related to the 2012 gain on sale of our Foster City building and land.

We earn a significant amount of our operating income outside the U.S., which is permanently reinvested in foreign jurisdictions. Of the income generated in foreign jurisdictions, most is earned in the Netherlands, Spain, U.K., Italy, Israel, and the Cayman Islands. In 2017 and 2016, we realigned the ownership of certain intellectual property to augment operational synergies and parallel both our worldwide intellectual property ownership and our worldwide supply chain. Our effective tax rate could fluctuate significantly and be adversely impacted if anticipated earnings in the Netherlands, Spain, Italy, U.K., Israel, and the Cayman Islands are materially different than current projections.

While we currently do not foresee a need to repatriate the earnings of foreign operations, should we require more capital in the U.S. than our cash and cash equivalents and short-term investments located in the U.S., along with cash generated by our U.S. operations and potential borrowings under our revolving line of credit, we may elect to repatriate funds held in our foreign jurisdictions or raise capital in the U.S. through debt or equity issuances. These alternatives could result in higher effective tax rates, the cash payment of taxes and/or increased interest expense, and foreign income and withholding taxes.

As of December 31, 2018, the Company has accumulated undistributed earnings generated by our foreign subsidiaries of approximately $301 million. Since these earnings were subjected to the one-time transition tax on foreign earnings as required by the 2017 Tax Act, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign and state taxes. We intend, however, to indefinitely reinvest these earnings and expect future U.S. cash generation to be sufficient to meet future U.S. cash needs .

In Altera Corp. v. Commissioner, the U.S. Tax Court issued an opinion on July 27, 2015 to exclude stock-based compensation expense in an intercompany cost-sharing arrangement. To date, the U.S. Department of the Treasury has not withdrawn the requirement to include stock-based compensation in intercompany cost-sharing arrangements from its regulations. On July 24, 2018, the Ninth Circuit Court reversed the Tax Court decision to require U.S. corporations to share their stock-based compensation with their foreign affiliates. The Ninth Circuit Court subsequently withdrew its initial decision on August 7, 2018. A final decision has not been reached as of December 31, 2018. Due to the uncertainty related to the status of both the current regulations and the appeal that has been filed by the Internal Revenue Service, we have not recorded any benefit as of December 31, 2018 in our Consolidated Statements of Operations. We will continue to monitor ongoing developments and potential impacts to our consolidated financial statements.

Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we considered all available evidence, including recent operating results, projections of future taxable income, our ability to utilize loss and credit carryforwards, and the feasibility of tax planning strategies. Other than valuation allowances on deferred tax assets related to California, Luxembourg, Israel, Netherlands, Turkey, and the Optitex business unit that are likely to not be realized based on the size of the net operating loss and research and development credits being generated, we have determined that it is more likely than not that we will realize the benefits related to all other deferred tax assets. To the extent we increase a valuation allowance, we will include an expense in the Consolidated Statement of Operations in the period in which such determination is made.

Liquidity and Capital Resources

Overview



	As of December 31,
	2018		2017		2016
Cash and cash equivalents	$	309,052	$	170,345	$	164,313
Short-term investments	102,349		148,697		295,428
Cash, cash equivalents, and short-term investments	$	411,401	$	319,042	$	459,741

During the year ended December 31, 2018 , cash, cash equivalents, and short-term investments increased by $92.4 million to $411.4 million as of December 31, 2018 . The increase was primarily due to net proceeds of $146.3 million generated by the issuance of the 2023 Notes, cash flows from operating activities of $83.5 million , and $10.5 million received from the issuance of stock. These cash inflows were partially offset by purchases of treasury stock and net stock settlements totaling $113.5 million , net purchases of property and equipment of $12.3 million , $11.2 million paid in satisfaction of acquisition-related debt, and $7.3 million in funding of restricted cash related to the build-to-suit lease project in Manchester, NH.

During the year ended December 31, 2017 , cash, cash equivalents, and short-term investments decreased by $140.7 million to $319.0 million as of December 31, 2017 . The decrease was primarily due to purchases of treasury stock and net share settlements totaling $101.8 million , payments related to business acquisitions of $63.6 million , restricted cash equivalent funding of $26.3 million related to the build-to-suit lease construction project in Manchester, NH, and net purchases of property and equipment of $13.8 million . These cash outflows were partially offset by cash flows from operating activities of $51.3 million and $12.1 million received from the issuance of stock.

During the year ended December 31, 2016 , cash, cash equivalents, and short-term investments decreased by $37.6 million to $459.7 million as of December 31, 2016 . The decrease was primarily due to purchases of treasury stock and net share settlements totaling $83.3 million , payments related to acquisitions of $56.3 million , cash payments for property and equipment of $22.4 million , and restricted cash equivalent funding of $6.3 million related to the build-to-suit lease construction project in Manchester, NH. These cash outflows were partially offset by cash flows provided by operating activities of $121.0 million and proceeds from issuance of stock of $11.1 million .

As of December 31, 2018 , we have approximately $301.0 million of unremitted foreign earnings which are deemed to be permanently reinvested. Cash, cash equivalents, and short-term investments held outside of the U.S. in various foreign subsidiaries were $155.6 and $88.4 million as of December 31, 2018 and 2017, respectively. These foreign-based funds are expected to be used to fund local operations and finance international acquisitions.

Based on past performance and current expectations, we believe that our cash, cash equivalents, short-term investments, cash generated from operating activities, and available borrowing under our $150 million Revolving Credit Facility will be adequate to satisfy our debt service, working capital, capital expenditure, investment, stock repurchase, commitments, and other liquidity requirements associated with our existing operations through at least the next twelve months. Our 2019 Notes mature on September 1, 2019 and on that date we expect to pay the $345 million principal amount in cash. We believe that the most strategic uses of our cash resources include business acquisitions, strategic investments to gain access to new technologies, repurchases of shares of our common stock, and working capital. See Note 9 – Property and Equipment, net , Note 12 – Debt , and Note 13 – Commitments and Contingencies of Notes to Consolidated Financial Statements, as well as

Contractual Obligations below, for additional information about our expected obligations. As of December 31, 2018 , cash, cash equivalents, and short-term investments available were $411.4 million .

Operating Activities

Net cash provided by operating activities is summarized as follows (in thousands):



	As of December 31,
	2018			2017			2016
Net income (loss)	$	(971	)	$	(15,345	)	$	44,949
Depreciation and amortization	65,557			65,647			55,081
Deferred taxes	(11,381		)	8,753			(11,091		)
Stock-based compensation, net of cash settlements	45,281			26,532			31,726
Change in fair value of contingent obligations	(21,486		)	6,980			6,813
Non-cash accretion of interest expense on convertible notes and imputed financing obligation	15,239			14,981			13,489
Other non-cash charges and credits	11,295			18,378			15,024
Changes in operating assets and liabilities, net of effect of acquired business	(20,029		)	(74,631		)	(34,987		)
Net cash provided by operating activities	$	83,505		$	51,295		$	121,004

Net cash provided by operating activities in the year ended December 31, 2018 consisted primarily of net loss of $1.0 million , depreciation and amortization of $65.6 million , a deferred tax benefit of $11.4 million , non-cash stock-based compensation of $45.3 million , non-cash changes in the fair value of contingent obligations from prior acquisitions of $21.5 million , non-cash interest accretion of $15.2 million , and other non-cash charges and credits and changes in operating assets and liabilities. The change in fair value of contingent obligations is primarily due to a reduction in the obligation related to Optitex. Other non-cash charges and credits included a provision for bad debts and sales-related allowances of $7.0 million and a provision for inventory obsolescence of $6.0 million . Changes in operating assets and liabilities included a net increase in accounts receivable of $7.4 million , a $18.1 million increase in inventories reflecting lower than anticipated sales volumes in the fourth quarter, an increase in other current assets of $18.9 million primarily due to increased lease receivables, and an increase in accounts payable and accrued liabilities of $27.4 million reflecting timing of payments to vendors.

Net cash provided by operating activities in the year ended December 31, 2017 consisted primarily of net loss of $15.3 million , depreciation and amortization of $65.6 million , a deferred tax provision of $8.8 million , non-cash stock-based compensation of $26.5 million , non-cash changes in the fair value of contingent obligations from acquisitions of $7.0 million , non-cash interest accretion of $15.0 million , and other non-cash charges and credits and changes in operating assets and liabilities. The change in fair value of contingent obligations is primarily due to interest accretion on the obligations and increases in the estimated liabilities for Optitex, CTI, and Rialco, partially offset by a reduction for Shuttleworth. Other non-cash charges and credits included a provision for bad debts and sales-related allowances of $12.4 million and provision for inventory obsolescence of $6.3 million . Changes in operating assets and liabilities included a net increase in accounts receivable of $29.2 million , a $24.4 million increase in inventories reflecting lower than anticipated sales volumes in the fourth quarter, an increase in other current assets of $9.2 million , and a decrease in accounts payable and accrued liabilities of $6.2 million reflecting timing of payments to vendors.

Net cash provided by operating activities in the year ended December 31, 2016 consisted primarily of net income of $44.9 million , depreciation and amortization of $55.1 million , a deferred tax benefit of $11.1 million , non-cash stock-based compensation of $31.7 million , non-cash changes in the fair value of contingent obligations from acquisitions of $6.8 million , non-cash interest accretion of $13.5 million , and other non-cash charges and credits and changes in operating assets and liabilities. The change in fair value of contingent obligations is primarily due to interest accretion on the obligations and increases in the estimated liabilities for Optitex, Reggiani, DirectSmile, and CTI, partially offset by a reduction for DIMS and Shuttleworth. Other non-cash charges and credits included a provision for bad debts and sales-related allowances of $10.7

million and provision for inventory obsolescence of $5.7 million . Changes in operating assets and liabilities included a net increase in accounts receivable of $31.2 million .

Accounts Receivable

Our primary source of operating cash flow is the collection of accounts receivable from our customers. One measure of the effectiveness of our collection efforts is DSO. DSOs were 87 , 84 , and 76 days as of December 31, 2018 , 2017, and 2016, respectively.

DSOs increased during the year ended December 31, 2018 , compared to the year ended December 31, 2017 , primarily due to sales with extended payment terms and reduced down payment requirements as a result of a higher portion of our sales coming from our two direct-sales businesses; Industrial Inkjet and Productivity Software. DSOs increased during the year ended December 31, 2017 compared to the year ended December 31, 2016 , primarily due to sales with extended payment terms and a non-linear sales cycle resulting in significant billings at the end of the quarter. Industrial Inkjet and Productivity Software were 76% , 73% , and 72% of consolidated revenue during the years ended December 31, 2018 , 2017, and 2016, respectively. Our DSOs related to the Industrial Inkjet and Productivity Software segments are traditionally higher than those related to the significant printer manufacturer customers or distributors in our Fiery segment as, historically, these Fiery customers have been granted shorter payment terms and have paid on a more timely basis. We expect DSOs to continue to vary from period to period because of changes in the mix of business between direct customers and the leading printer manufacturers, the effectiveness of our collection efforts both domestically and overseas, and variations in the linearity of our sales. If the percentage of Industrial Inkjet and Productivity Software related revenue increases, we expect DSOs will trend higher.

We have facilities in the U.S. and Italy that enable us to sell to third parties, on an ongoing basis, certain trade receivables. Trade receivables sold are generally short-term receivables with payment due dates of less than 10 days from date of sale, which are subject to a servicing obligation. We also have facilities in Spain and Italy that enable us to sell to third parties, on an ongoing basis, certain trade receivables. Trade receivables sold without recourse are generally short-term receivables with payment due dates of less than one year, which are secured by international letters of credit. Trade receivables sold under these facilities were $27.0 million during the year ended December 31, 2018 , which approximates the cash received. The receivables that were sold to third parties were removed from the Consolidated Balance Sheets and were reflected as cash provided by operating activities in the Consolidated Statements of Cash Flows.

Inventories

Our inventories are procured primarily in support of the Industrial Inkjet and Fiery operating segments. The majority of our Industrial Inkjet products are manufactured internally, while Fiery production is primarily outsourced. One result of this approach is lower inventory turnover for Industrial Inkjet inventories compared with Fiery inventories.

Our net inventories increased by $8.5 million to $134.3 million as of December 31, 2018 , compared to $125.8 million as of December 31, 2017 , primarily due to an increase in Industrial Inkjet inventories, including our Nozomi product line, due to actual sales in the fourth quarter of 2018 being lower than expected. Inventory turnover was 3.9 during the quarter ended December 31, 2018 , compared to 4.4 turns during the quarter ended December 31, 2017. We calculate inventory turnover by dividing annualized current quarter cost of revenue by ending inventories.

Working Capital

Our working capital, defined as current assets minus current liabilities, was $212.1 million and $456.7 million as of December 31, 2018 and 2017, respectively. The reduction in working capital is primarily due to the classification of our 2019 Notes within current liabilities as of December 31, 2018 , due to their maturity date being September 1, 2019.

Investing Activities

Net cash provided by (used for) investing activities was $36.2 million , $107.8 million , and $(10.9) million for the years ended December 31, 2018 , 2017, and 2016, respectively.



	Year Ended December 31,
Investing Activities	2018			2017			2016
Purchases of short-term investments	$	—		$	(87,623	)	$	(216,349	)
Proceeds from sales and maturities of short-term investments	46,624			233,633			252,856
Purchases (Sales) of restricted cash investments	—			5,115			(5,110		)
Purchases, net of proceeds from sales, of property and equipment	(12,290		)	(13,754		)	(22,373		)
Proceeds from sale of held-for-sale building and land	1,130			—			—
Businesses and technology purchased, net of cash acquired and dispositions	697			(29,559		)	(19,932		)
Net cash provided by (used for) investing activities*	$	36,161		$	107,812		$	(10,908	)

* Certain prior period amounts have been revised due to the implementation of ASU 2016-18. See Note 1 – The Company and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for details.

Investments

We invest cash in excess of our current operating needs in highly liquid, high-quality investment vehicles, of generally short-term duration. Our investments are made with a policy of capital preservation and liquidity as primary objectives. We may hold investments in fixed income debt securities to maturity; however, we may sell an investment at any time if the quality rating of the investment declines, the yield on the investment is no longer attractive, or we have better uses for the cash. Since we invest primarily in investment securities that are highly liquid with a ready market, we believe the purchase, maturity, or sale of our investments has no material impact on our overall liquidity.

Restricted Cash and Investments

We have restricted cash equivalents that are required to be maintained by the lease related to our Manchester, NH facility described more fully in Note 9 – Property and Equipment, net , of Notes to Consolidated Financial Statements. The funds are pledged as collateral against the lease of that facility and are held on deposit with MUFG, our landlord for the facility. We had $39.8 million and $32.5 million of these restricted funds included in non-current assets on the Consolidated Balance Sheets, as of December 31, 2018 and 2017, respectively.

Property and Equipment

Net purchases of property and equipment were $12.3 million , $13.8 million , and $22.4 million in the years ended December 31, 2018 , 2017, and 2016, respectively. Our property and equipment additions have historically been funded from cash flows from operating activities. We anticipate that we will continue to purchase necessary property and equipment in the normal course of our business. The amount and timing of these purchases and the related cash outflows in future periods is difficult to predict and is dependent on a number of factors including the hiring of employees, the rate of change in computer hardware and software used in our business, new product development, and our business outlook.

Property Held-for-Sale

During the year ended December 31, 2018 , we sold one of our two buildings and the related land in Meredith, NH for net proceeds of $1.1 million and recognized a gain of $0.1 million. See additional discussion in Note 9 –- Property and Equipment, net .

Acquisitions

On October 1, 2017, we acquired Escada for cash consideration of $11.9 million, net of cash acquired, plus an additional potential future cash earnout contingent on achieving certain revenue and operating profit performance targets. Escada offers the corrugated packaging market corrugator control systems, which provide comprehensive control and traceability for the entire corrugated packaging process.

On August 14, 2017, we acquired Generation Digital for cash consideration of $3.2 million, net of cash acquired, plus an additional potential future cash earnout contingent on achieving certain revenue and operating profit performance targets. Generation Digital provides software to textile and fashion designers for the creation and design of prints and patterns, color matching, and color palette creation and management.

On May 8, 2017, we acquired CRC for cash consideration of $7.6 million. CRC provides business process automation software for commercial, label, and packaging printers.

On January 31, 2017, we purchased the FFPS business from Xerox for cash consideration of $5.9 million, plus $18.0 million of future cash payments, of which $9.0 million was paid in July 2017 and $9.0 million was paid in July 2018. The FFPS business manufactures and markets the FFPS DFE, which previously competed with our Fiery DFE.

On June 16, 2016, we purchased Optitex for cash consideration of $11.6 million, net of cash acquired, plus an additional potential future cash earnout contingent on achieving revenue and operating profit performance targets. We received a $0.2 million purchase price adjustment payment in 2017. Optitex has developed and markets integrated 2D and 3D CAD software that is shortening the design cycle, reducing costs, and accelerating the adoption of fast fashion.

On March 1, 2016, we purchased Rialco for cash consideration of $8.4 million, net of cash acquired, plus an additional potential future cash earnout contingent on achieving revenue and gross profit targets. Rialco is a leading European supplier of dye powders and color products for the textile, digital print, and other decorating industries.

A tax recovery liability of $1.0 million related to the Creta Print S.L. “(Cretaprint”) acquisition was paid during the year ended December 31, 2016. The escrow of $1.5 million related to the Reggiani acquisition was remitted to us in return for the issuance of shares of common stock for the year ended December 31, 2016. We also purchased additional intellectual property related to the Reggiani business for $0.2 and $0.3 million in 2017 and 2016, respectively. We paid $1.4 million, which was the first payment related to a four-year non-compete agreement with the sellers of the Reggiani business in 2017.

We acquired privately-held CTI and Shuttleworth during the fourth quarter of 2015, which have been included in our Productivity Software operating segment, for aggregate cash consideration of $9.3 million, net of cash acquired, $9.7 million in shares of EFI stock, plus a potential future cash earnout contingent on achieving certain performance targets.

Xeikon License Agreement

On November 1, 2017, we entered into an Agreement with Xeikon to license the right to the manufacturing, technology, marketing, and support of the Jetrion product line. During 2017, pursuant to the Agreement, we received $1.5 million of royalty payments, which are reflected as operating cash inflows, and $0.5 million of intellectual property payments, which are reflected as investing cash inflows.

Financing Activities

Net cash provided by (used for) financing activities was $28.8 million , $(125.9) million , and $(109.1) million for the years ended December 31, 2018 , 2017, and 2016, respectively.

Convertible Senior Notes

In November 2018, we completed a private placement of $150 million principal amount of 2.25% convertible notes due in 2023. The net proceeds from this offering were $146.3 million , after deducting commissions and offering expenses paid by us. We used $40.0 million of the net proceeds to repurchase our common shares.

In September 2014, we completed a private placement of $345.0 million principal amount of 0.75% convertible notes due September 1, 2019 . The Notes are not callable and will mature on September 1, 2019 , unless previously purchased or converted in accordance with their terms prior to such date. Our management believes the likelihood of conversion prior to the maturity date is low, and expects to repay the principal in cash utilizing the Company's existing cash, cash equivalents, and short-term investments, cash generated from operations prior to the maturity date, and available borrowings under the Company's revolving credit facility. At the maturity date, payment of the principal equal to the original discount of $63.6 million will be reported within cash flows from operating activities.

See Note 12 – Debt of Notes to Consolidated Financial Statements for additional information about the Company's convertible notes.

Revolving Credit Facility

On January 2, 2019, we entered into a 5-year $150 million revolving credit agreement with an option for an additional $50 million, subject to certain requirements. Interest is variable with a premium applied to an index rate. This credit facility is secured by substantially all of our domestic assets and the pledge of 65% of the stock of our foreign subsidiaries. See Note 12 – Debt for additional information about the Company's revolving credit facility.

Stock Option and ESPP Proceeds

We received proceeds from the issuance of our common stock through exercise of stock options and employee purchases of ESPP shares of $10.5 million , $12.1 million , and $11.1 million , respectively, during the years ended December 31, 2018 , 2017, and 2016. While we may continue to receive proceeds from these plans in future periods, the timing and amount of such proceeds are difficult to predict and are contingent on a number of factors including the price of our common stock, the timing and number of stock options exercised by employees that had participated in these plans, net settlement options, employee participation in our ESPP, and general market conditions. We anticipate that cash provided from the exercise of stock options will decline over time as we have shifted to issuance of RSUs, rather than stock options, although we may grant stock option awards in the future.

Treasury Stock Purchases

The most significant use of funds for financing activities during the years ended December 31, 2018 , 2017, and 2016 was the repurchase of our common stock, which totaled $113.5 million , $101.8 million , and $83.3 million , respectively. These totals include cash used for net settlement of shares for the exercise price of certain stock options and any tax withholding obligations incurred connected with such exercises and tax withholding obligations that arose on the vesting of RSUs.

The repurchases of our stock was made under a plan approved and publicly announced and as of December 31, 2018 , the program has ended and there is no remaining authorization for additional purchases. See Item 5 – Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities for further discussion of our common stock repurchase programs.

Contingent Consideration (Earnout) Payments

Cash payments related to contingent consideration totaled $3.2 million during the year ended December 31, 2018 . These payments related to the prior acquisitions of Rialco, Generation Digital, Shuttleworth, and PrintLeader.

Cash payments related to contingent consideration totaled $30.9 million during the year ended December 31, 2017 . These payments related to the acquisitions of Reggiani, Optitex, Rialco, and Shuttleworth. The portion of the Reggiani earnout

representing performance targets achieved in excess of the fair value recorded in the opening balance sheet as of the acquisition date was $5.9 million and is reflected as cash used for operating activities in the Consolidated Statement of Cash Flows. The remaining $15.6 million related to the Reggiani earnout is included in cash used for financing activities.

Cash payments related to contingent consideration totaled $28.1 million during the year ended December 31, 2016 . These payments related to the acquisitions of Reggiani, DirectSmile, SmartLinc, Inc. (SmartLinc), and Metrix Software (“Metrix”).

Acquisition-related Debt Payments

We made $11.2 million , $9.0 million , and $8.3 million of acquisition-related debt payments in the years ended December 31, 2018 , 2017, and 2016. These payments included $9.0 million to Xerox for the purchase of FFPS in both 2018 and 2017. The payments in the year ended December 31, 2016 primarily related to indebtedness assumed in the Optitex and Matan acquisitions.

New Leases Accounting Standard

Effective January 1, 2019, we will adopt the new accounting standard for leases using the optional transition method to initially apply the new lease standard at the adoption date, and will recognize a cumulative-effect adjustment to the opening balance of retained earnings. We expect to record total right of use assets and lease liabilities on our opening Consolidated Balance Sheet of between $35.0 and $40.0 million as of January 1, 2019. Please see Note 1 – The Company and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for additional information. The Company and Summary of Significant Accounting Policies for additional information.

Contractual Obligations

The following table summarizes our significant contractual obligations as of December 31, 2018 and the effect that such obligations are expected to have on our liquidity and cash flows in future periods (in thousands):



			Payments Due by Period
	Total		2019		2020		2021		2022		2023		Thereafter
Operating lease obligations	$	45,315	$	6,559	$	6,216	$	4,355	$	2,582	$	1,423	$	24,180
Contingent consideration ⁽¹⁾	10,501		8,269		2,232		—		—		—		—
Purchase obligations ⁽²⁾	74,092		69,736		4,356		—		—		—		—
Convertible senior notes ⁽³⁾	514,463		350,963		3,375		3,375		3,375		153,375		—
Noncurrent tax liabilities ⁽⁴⁾	32,007		—		—		—		—		—		—
Total ⁽²⁾	$	676,378	$	435,527	$	16,179	$	7,730	$	5,957	$	154,798	$	24,180

_________________


(1)	Represents the fair value of acquisition-related contingent consideration liabilities. The current portion is included in accrued and other liabilities, representing earnout liabilities that are payable within one year, and those that are payable beyond one year are included in noncurrent contingent and other liabilities on the Consolidated Balance Sheets.


(2)	Excludes contractual obligations recorded on the balance sheet as current liabilities and cancellable purchase orders.


(3)	Obligations to make interest and principal payments related to the 2019 and 2023 Notes. See Note 12 – Debt of Notes to Consolidated Financial Statements for further information.

(4)

As of December 31, 2018 , the liability for noncurrent tax liabilities, including interest and penalties, is reflected in the Consolidated Balance Sheet as $15.5 million of noncurrent income taxes payable and $16.5 million as a reduction of deferred tax assets. Due to the uncertainty of the timing of future payments, noncurrent tax liabilities are presented in the total column on a separate line in this table. Please refer to Note 17–Income Taxes of Notes to the Consolidated Financial Statements for additional discussion of noncurrent tax liabilities.

Purchase obligations in the table above include agreements to purchase goods or services that are enforceable, noncancellable, and legally binding that specify all significant terms including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transactions. Purchase obligations exclude purchase orders for raw materials and other goods and services that are cancellable without penalty. Our purchase orders are

based on current manufacturing needs and are generally fulfilled by our vendors within short time horizons. We also enter into contracts for outsourced services; however, the obligations under these contracts were not significant and the contracts generally contain clauses allowing for cancellation without significant penalty. Accordingly, such contracts are not included in the preceding table. The expected timing of payment for the obligations listed above is estimated based on current information. Timing of payments and actual amounts paid may be different depending on when the goods or services are received or changes to agreed-upon amounts for some obligations.

Off-Balance Sheet Financing

In August 2016, we entered into a lease agreement for a term of 48.5 years, inclusive of two renewal options of 5.0 and 3.5 years, with the City of Manchester to lease 16.9 acres of land adjacent to the Manchester Regional Airport. Minimum lease payments are $13.3 million during the entire 48.5 year term of the land lease, excluding six months of the land lease which was financed by the manufacturing facility lease. This obligation is included in the Contractual Obligations table above within the operating lease category.

In August 2016, we entered into a six-year lease with BTMU whereby a 225,000 square foot manufacturing and warehouse facility in Manchester, New Hampshire was constructed for our Industrial Inkjet operating segment. Construction was completed in April 2018 at a total cost of $39.8 million. Minimum lease payments during the six-year term are $1.8 million. This obligation is included in the Contractual Obligations table above within the operating lease category. Upon completion of the six-year term, we have the option to renew the lease, purchase the facility, or return the facility to BTMU subject to an 89% residual value guarantee. We are treated as the owner of the facility for federal income tax purposes. Cash and cash equivalents of $39.8 million are on deposit with BTMU and restricted as collateral until the end of the lease term.

Critical Accounting Policies

The preparation of consolidated financial statements requires estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates on an ongoing basis. Estimates are based on historical and current experience, the impact of the current economic environment, and various assumptions believed to be reasonable under the circumstances at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies and estimates include the following:


•	revenue recognition;


•	allowances for doubtful accounts,


•	inventory valuation and purchase commitment reserves,


•	warranty reserves,


•	litigation accruals,


•	restructuring reserves,


•	fair value of financial instruments;


•	accounting for stock-based compensation;


•	accounting for income taxes;


•	valuation analysis of goodwill and intangible assets;


•	business combinations;


•	build-to-suit leases; and


•	determination of functional currencies for consolidating international operations.

Revenue recognition. Significant management judgments and estimates must be made and used in connection with the revenue recognized in any accounting period. Please refer to Note 1 – The Company and Summary of Significant Accounting Policies and Note 4 – Revenue of Notes to Consolidated Financial Statements for additional description of our revenue recognition accounting policies.

The key estimates and assumptions and corresponding uncertainties for recognizing revenue are summarized as follows:



Key Estimates and Assumptions		Key Uncertainties
For customer arrangements that include multiple products or services, judgment is required to determine the standalone selling price (“SSP”) for each distinct performance obligation. Where an observable price is not available, we gather all reasonable available data points, consider adjustments based on market conditions, entity-specific factors, and the need to stratify selling prices into meaningful groups (e.g., geographic region) in determining SSP. We allocate the total contract consideration to each distinct performance obligation on a relative SSP basis. Revenue is then recognized in accordance with the timing of the transfer of control to the customer for each performance obligation. Distributors and resellers participate in various marketing and other programs, and we maintain estimated accruals and allowances for these programs based on contractual terms and historical experience. If the arrangement includes a customer-negotiated refund or right of return relative to the delivered item and the delivery and performance of the undelivered item is considered probable and substantially in our control, the delivered element constitutes a separate unit of accounting. We limit revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services, future performance obligations, or subject to customer-specified return or refund privileges. Estimated period over which contract acquisition costs are amortized.		As our business and offerings evolve over time, modifications to our pricing and discounting methodologies, changes in the scope and nature of service offerings and/or changes in customer segmentation may result in a lack of consistency required to establish and/or maintain SSP or to maintain consistent SSP. Additionally, technological changes resulting in variability in product costs and gross margins may require changes to our SSP model. Changes in SSP may result in a different allocation of revenue to the deliverables in multiple-element arrangements. These factors, among others, may adversely impact the amount of revenue and gross margins we report in a particular period. If we experience changes in market or competitive conditions resulting in credits issued to our distributors and partners deviating significantly from our estimates, our revenue may be adversely impacted. Revenue recognition is dependent on proper identification of the separate units of accounting in an arrangement and determining whether they have stand-alone value. Significant contract interpretation can be required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and, if so, how the price should be allocated among the elements and when to recognize revenue for each element. The period of time over which our customers purchase products from us could be different than our estimate.

Allowances for doubtful accounts. We establish an allowance for doubtful accounts to ensure that trade receivables are not overstated due to uncollectibility. To ensure that we have established an adequate allowance for doubtful accounts, management analyzes accounts receivable and historical bad debts, customer concentrations, customer creditworthiness, current economic trends and macroeconomic conditions, changes in customer payment terms, the length of time receivables are past due, and significant one-time events. We record specific reserves for individual accounts when we become aware of specific customer circumstances, such as bankruptcy filings, deterioration in the customer’s operating results or financial position, or potential unfavorable outcomes from disputes with customers or vendors.

Inventory valuation. We state our inventory at the lower of cost and market. Management estimates potential inventory obsolescence and noncancellable purchase commitments to properly value inventory and establish reserves for potential losses on purchase commitments. Significant management judgment and estimates must be made related to inventory valuation including the evaluation of current economic trends, changes in customer demand, product design changes, product life cycle and development plans, product pricing, physical deterioration, and quality issues.

Warranty reserves. An accrual is established when the warranty liability is estimable and probable based upon historical experience. A provision for estimated future warranty work is recorded in cost of revenue when revenue is recognized. The warranty liability is reviewed regularly and periodically adjusted to reflect changes in warranty estimates. Significant management judgments and estimates must be made in connection with establishing and updating warranty reserves including estimated potential inventory return rates and replacement or repair costs.

Litigation accruals. We may be involved, from time to time, in a variety of claims, lawsuits, investigations, or proceedings relating to contractual disputes, securities laws, intellectual property rights, employment, or other matters that may arise in the normal course of business. We assess our potential liability in each of these matters by using the information available to

us. We develop our views on estimated losses in consultation with inside and outside counsel, which involves a subjective analysis of potential results and various combinations of appropriate litigation and settlement strategies. We accrue estimated losses from contingencies if a loss is deemed probable and can be reasonably estimated. The material assumptions used by management to estimate litigation accruals include:


•	consultation with our external attorneys regarding the expected duration of a claim or lawsuit, the potential outcome, and the likelihood of settlement;


•	likelihood of assertion of unasserted claims and assessments;


•	our strategy regarding the claim or lawsuit;


•	expected insurance coverage under our policies; and


•	past experiences with similar claims and lawsuits.

Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

Restructuring reserves. We have engaged, and may continue to engage, in restructuring actions, which require management to utilize significant estimates related to the timing and the expense for severance and other employee separation costs, realizable values of assets made obsolete, lease cancellation, facility downsizing, and other exit costs. If actual amounts differ from our estimates, the amount of the restructuring charges could be materially impacted.

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

As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy as more fully defined in Note 8 – Fair Value Measurements of Notes to Consolidated Financial Statements. We utilize the market approach to measure fair value of our fixed income securities. The market approach is a valuation technique that uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The fair value of our fixed income securities is obtained using readily-available market prices from a variety of industry standard data providers, large financial institutions, and other third-party sources for the identical underlying securities.

As part of this process, we engage pricing services to assist management in its analysis. All estimates, key assumptions, and forecasts are either provided by or reviewed by us. While we utilize third party pricing services, the impairment analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party.

We obtain the fair value of our Level 2 financial instruments from third party asset managers, the custodian bank, and the accounting service provider. Independently, these service providers use professional pricing services to gather pricing data, which may include quoted market prices for identical or comparable instruments or inputs other than quoted prices that are observable either directly or indirectly.

The validation procedures performed by management include the following:


•	obtaining an understanding of the pricing service’s valuation methodologies, including the timing and frequency,


•	evaluating the type, nature, and complexity of our investments in financial instruments,


•	evaluating the activity level in the market for the type of securities in which we have invested including the volatility of price movements requiring analysis, and


•	validating the quoted market prices provided by our service providers by completing a three-way reconciliation, comparing the assessment of the fair values provided by the asset manager, the custody bank, and the accounting book of record provider for each portfolio.

Accounting for stock-based compensation. We recognize stock-based compensation based on the fair value of such awards on the date of grant. We amortize stock-based compensation expense on a graded vesting basis over the vesting period, after assessing the probability of achieving the requisite performance criteria with respect to performance-based awards. Stock-based compensation expense is recognized over the requisite service period for each separately vesting tranche as though the award were, in substance, multiple awards. We account for forfeitures when they occur. We use the Black-Scholes-Merton (“BSM”) option pricing model to value stock-based compensation for all equity awards, except market-based awards which are valued using a Monte Carlo valuation model. Option pricing models were developed to estimate the value of traded options that have no vesting or hedging restrictions and are fully transferable. We must use judgment in determining and applying the assumptions needed for the valuation of stock awards and issuance of common stock under our ESPP.

Accounting for income taxes. Significant management judgment is required to determine our provision for income taxes, our deferred tax assets and liabilities, and any valuation allowance recorded against our deferred tax assets. We estimate our actual current tax expense, including permanent charges and benefits, and temporary differences resulting from differing treatment of items, such as deferred revenue for tax and book accounting purposes. These temporary differences result in deferred tax assets and liabilities, which are included within our Consolidated Balance Sheets. We assess the likelihood that our deferred tax assets will be recovered from future taxable income by considering both positive and negative evidence relating to their recoverability. If we believe that recovery of these deferred tax assets is not more likely than not, we establish a valuation allowance. To the extent that we adjust a valuation allowance in a period, we include the impact in the Consolidated Statement of Operations in the period in which such determination is made.

In assessing the need for a valuation allowance, we considered all available evidence, including recent operating results, projections of future taxable income, our ability to utilize loss and credit carryforwards, and the feasibility of tax planning strategies.

We account for uncertainty in income taxes by recognizing a tax position only when it is more likely than not that the tax position, based on its technical merits, will be sustained upon ultimate settlement with the applicable tax authority. The tax benefit recognized is the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with the applicable tax authority that has full knowledge of all relevant information.

Significant management judgment is required in evaluating our uncertain tax positions. Our gross unrecognized benefits are $36.5 million as of December 31, 2018 . Our evaluation of uncertain tax positions is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law, effectively settled issues under audit, and new audit activity. If actual settlements differ from these estimates, or we adjust these estimates in future periods, we may need to recognize additional tax benefits or charges that could materially impact our financial position and results of operations.

Valuation analysis of goodwill and intangible assets. We perform our annual goodwill impairment analysis in the fourth quarter of each year or more frequently if we believe indicators of impairment exist. Triggering events that may require an interim impairment analysis include indicators such as adverse industry or economic trends, restructuring actions, significant changes in the manner of our use of the acquired assets, significant changes in the strategy for our overall business, our assessment of growth and profitability in each reporting unit for future years, significant decline in our stock price for a sustained period, or a sustained decline in our market capitalization relative to net book value. In our goodwill impairment assessment, we compare the fair value of each reporting unit to its carrying value. If the fair value of a reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not impaired. If the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting unit’s carrying value over the fair value is recognized as an impairment loss.

Our goodwill valuation analysis is based on our respective reporting units (Industrial Inkjet, Productivity Software, and Fiery), which are consistent with our operating segments identified in Note 3 – Segment, Geographic, and Major Customer Information of Notes to Consolidated Financial Statements. We determined the fair value of our reporting units as of December 31, 2018 by equally weighting the market and income approaches. Under the market approach, we estimated fair value based on market multiples of revenue or earnings of comparable companies. Under the income approach, we estimated fair value based on a discounted projected cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model.

The key estimates and assumptions and corresponding uncertainties for goodwill impairment analysis are summarized as follows:


•	identification of comparable companies to benchmark under the market approach giving due consideration to the following factors:


◦	financial condition and operating performance of the reporting unit being evaluated relative to companies operating in the same or similar businesses,


◦	economic, environmental, and political factors faced by such companies, and


◦	companies that are considered to be reasonable investment alternatives.


•	impact of goodwill impairments recognized in prior years,


•	susceptibility of each of our reporting units to fair value fluctuations,


•	reporting unit revenue, gross profit, and operating expense growth rates,


•	financial forecasts,


•	discount rate to apply to estimated cash flows,


•	terminal values based on the Gordon growth methodology,


•	appropriate market comparables,


•	estimated multiples of revenue and earnings before interest expense and taxes (“EBIT”) that a willing buyer is likely to pay,


•	reasonable gross profit levels,


•	estimated control premium a willing buyer is likely to pay, including consideration of the following:


◦	the most similar transactions in relevant industries and determined the average premium indicated by the transactions deemed to be most similar to a hypothetical transaction involving our reporting units


◦	weighted average and median control premiums offered in relevant industries,


◦	industry specific control premiums, and


◦	specific transaction control premiums.


•	significant events or changes in circumstances including the following:


◦	significant negative industry or economic trends,


◦	significant decline in our stock price for a sustained period,


◦	our market capitalization relative to net book value,


◦	significant changes in the manner of our use of the acquired assets,


◦	significant changes in the strategy for our overall business, and


◦	our assessment of growth and profitability in each reporting unit over the coming years.

Given the inherent uncertainty of forecasting future economic activity or financial results, there can be no assurance that our estimates and assumptions made for purposes of our goodwill impairment testing as of December 31, 2018 will prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or gross profit rates are not achieved, we may be required to record goodwill impairment charges in future periods relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth quarter of the following fiscal year or prior to that, if any such change constitutes an interim triggering event.

Business combinations. We account for business acquisitions as purchase business combinations in accordance with ASC 805, which requires that the acquisition method of accounting be used for all business combinations. Please refer to Note 1 – The Company and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for our accounting policy with respect to accounting for business combinations.

We allocate the purchase price of acquired companies to the tangible and intangible assets acquired, including in-process research & development (“IPR&D”), and liabilities assumed based on their estimated fair values. Such a valuation requires management to make significant estimates and assumptions, especially with respect to intangible assets. The results of operations for each acquisition are included in our financial statements from the date of acquisition.

The key estimates and assumptions and corresponding uncertainties to account for business acquisitions are summarized as follows:



Key Estimates and Assumptions		Key Uncertainties
Management estimates fair value based on assumptions believed to be reasonable. These estimates are based on historical experience and information obtained from the management of the acquired companies. Critical estimates in valuing certain intangible assets include, but are not limited to: future expected cash flows; acquired developed technologies and patents; expected costs to develop IPR&D into commercially viable products and estimating cash flows from the projects when completed; the acquired company’s brand awareness and market position, as well as assumptions about the period of time the acquired brand will continue to be used in our product portfolio; and discount rates. We estimate fair value of acquisition-related contingent consideration based on the probability of realization of the performance targets. This estimate is based on significant inputs that are not observable in the market, which ASC 820-10-35 refers to as Level 3 inputs, reflecting our assessment of the assumptions market participants would use to value these liabilities. The fair value of contingent consideration is measured at each reporting period, with any changes in the fair value recognized as a component of general and administrative expense. Other estimates associated with the accounting for acquisitions include severance costs and the costs to vacate or downsize facilities, including the future costs to operate and eventually abandon or relinquish duplicate facilities. These costs are recognized as restructuring and other expenses (i.e., not included in purchase accounting), are based on management estimates, and are subject to refinement.		Our financial projections may ultimately prove to be inaccurate and unanticipated events and circumstances may occur. As a result, these estimates are inherently uncertain and unpredictable, assumptions may be incomplete or inaccurate, and unanticipated events and circumstances may occur, which may affect the accuracy or validity of such assumptions, estimates or other actual results. Therefore, no assurance can be given that the underlying assumptions used to establish the valuation for these acquired businesses will prove to be correct. We typically engage a third party valuation firm to assist management in its analysis. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party valuation firm, the valuations represent the conclusions of management and not the conclusions or statements of any third party. Estimated costs may change as additional information becomes available regarding assets acquired and liabilities assumed and as management continues its assessment of the pre-merger operations.

Build-to-Suit leases. If we are deemed to be the accounting owner of a facility we account for the property as a depreciable asset and the related lease agreement is accounted for as an imputed financing obligation. If we are not deemed to be the accounting owner, then we account for the property as an operating lease. Significant judgments are required to make this determination, which relate to actions, guarantees, and investments that we make as a lessee that may be considered to be actions that only an owner would take. In addition, our potential investments in these facilities must comply with the maximum guarantee test to ensure that potential investments cannot exceed 90% of the fair value of each facility. We have three leases subject to the build-to-suit accounting requirements, located in New Hampshire, Spain, and the Netherlands. The New Hampshire and Spain facilities consist of construction of new facilities. The facility in the Netherlands was an existing facility, but was not functional in its current form at lease inception, and thus, represented a construction project subject to the guidance. When leasing an existing facility, we must consider whether the leased asset is fully functional and may be occupied by any lessee in its current form without requiring improvement (commonly referred to as the “second tenant scope exception”).

In August 2016, we entered into a six-year lease with MUFG (formerly BTMU) whereby a 225,000 square foot manufacturing and warehouse facility in New Hampshire was constructed for our Industrial Inkjet operating segment. Upon completion of the six-year term, we have the option to renew the lease, purchase the facility, or return the facility to BTMU subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment. We have assessed our exposure in relation to the residual value guarantee and believe that there is no deficiency to the guaranteed value with respect to funds expended by MUFG to construct the facility. We are not deemed to be the accounting owner of this facility as we do not have responsibility for actions, guarantees, or investments for which only an owner would accept responsibility.

We are not deemed to be the accounting owner of the leased facilities in the Netherlands or Spain as we only have responsibility for normal tenant improvement costs in each of these facilities. Similarly, we are not responsible for actions, guarantees, or investments for which only an owner would accept responsibility.

Determining functional currencies for the purpose of consolidating our international operations. We have a number of foreign subsidiaries, which together account for approximately 50% of our net revenue, approximately 37% of our total assets, and approximately 38% of our total liabilities as of December 31, 2018.

For those subsidiaries that operate in a local functional currency environment, all assets and liabilities are translated into U.S. dollars using current exchange rates, while revenue and expenses are translated using monthly exchange rates, which approximate the average exchange rates in effect during each period. Resulting translation adjustments are reported as a separate component of accumulated other comprehensive income (“AOCI”), adjusted for deferred income taxes. Consequently, determination of the functional currency of each entity has a material impact on our financial position and results of operations. Management assesses the salient economic factors, both individually and collectively when determining the functional currency. The economic factors that must be evaluated include cash flows, sales price, sales market, expense, financing, and intercompany transaction indicators.

Recent Accounting Pronouncements

See Note 1 – The Company and Summary of Significant Accounting Policies of Notes to Consolidated Financial Statements for a full description of recent accounting pronouncements (adopted and not yet adopted) including the respective and prospective dates of adoption.

Item 7A: Quantitative and Qualitative Disclosures about Market Risk

The following discussion of our risk management activities includes “forward-looking statements” that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. Please refer to the discussion of Forward-Looking Statements preceding Part I of this Annual Report on Form 10-K.

Market Risk

We are exposed to various market risks. Market risk is the potential loss arising from adverse changes in market rates and prices, general credit conditions, foreign currency exchange rate fluctuations, liquidity, and interest rates. From time to time we have and may in the future enter into financial instrument contracts to manage and reduce the impact of changes in foreign currency exchange rates on earnings and cash flows. The counter parties to such contracts are major financial institutions. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Europe represents a significant portion of our revenue and cash flow. Since Europe is comprised of varied countries and regional economies, our European risk profile is somewhat more diversified due to the varying economic conditions among the countries. Approximately 37% of our receivables are with European customers as of December 31, 2018 . Of this amount, 27% of our European receivables ( 10% of consolidated gross receivables) are in the higher risk southern European countries (mostly Italy, Spain, and Portugal), which our management believes to be adequately reserved.

Marketable Securities

We maintain an investment portfolio of short-term fixed income debt securities of various holdings, types, and maturities. These short-term investments are generally classified as available-for-sale and, consequently, are recorded on our Consolidated Balance Sheets at fair value. During the year ended December 31, 2018, we recognized a $0.9 million loss on this investment portfolio due to changes in fair value of the underlying securities. In early 2019, we liquidated all of our available for sale securities in the anticipation of satisfying our obligation on the 2019 Notes that mature in September 2019. The proceeds have been deposited in highly liquid interest-bearing saving deposit accounts with variable interest rates. We do not have material future exposure to the valuation of these funds from future changes in interest rates.

We have no European sovereign debt investments. Our European debt investments consist of non-sovereign corporate debt securities of $4.5 million , which represents 10% of our corporate debt instruments ( 4% of our short-term investments) as of December 31, 2018 . European debt investments are with corporations domiciled in the northern and central European countries of Sweden, Netherlands and France. We believe that we do not have significant exposure with respect to our money market and corporate debt investments in Europe.

Interest Rate Risk on Marketable Securities

Hypothetical changes in the fair values of financial instruments held by us as of December 31, 2018 that are sensitive to changes in interest rates are presented below. The modeling technique measures the change in fair value arising from selected potential changes in interest rates. Market changes reflect immediate hypothetical parallel shifts in the yield curve of plus or minus 100 basis points over a twelve-month time horizon (in thousands):



Valuation of securities assuming an interest rate decrease of 100 basis points	No change in interest rates	Valuation of securities assuming an interest rate increase of 100 basis points
$131,764	$131,064	$130,363

Market Risk on Convertible Notes

As of December 31, 2018 , we have a total of $495.0 million principal amount of Notes outstanding. We carry these instruments at face value less unamortized discount on our Consolidated Balance Sheets. Since these instruments bear interest at fixed rates, we have no financial statement risk associated with changes in interest rates. Although the fair value of these instruments fluctuates when interest rates change, the market value of our Notes is also influenced by the conversion premium. Please refer to Note 8 – Fair Value Measurements and Note 12 – Debt of Notes to Consolidated Financial Statements for additional information.

Foreign Currency Exchange Risk

A large portion of our business is conducted in countries outside of the U.S. We are primarily exposed to changes in exchange rates for the Euro, British pound sterling, Indian rupee, Chinese renminbi, and Israeli shekel. Although the majority of our receivables are invoiced and collected in U.S. dollars, we have exposure from non-U.S. dollar-denominated sales (primarily consisting of the Euro, British pound sterling, and Chinese renminbi) and operating expenses (primarily the Euro, British pound sterling, Chinese renminbi, Israeli shekel, and Indian rupee) in foreign countries. Accordingly, we can benefit from a stronger U.S. dollar resulting in the corresponding reduction in our foreign operating expenses translated to U.S. dollars and at the same time we can be adversely affected by a stronger U.S. dollar resulting in the corresponding reduction in foreign revenue translated to U.S. dollars.

The impact of hypothetical changes in foreign exchanges rates on revenue and income from operations are presented below. The modeling technique measures the change in revenue and income from operations resulting from hypothetical changes in selected foreign exchange rates with respect to the Euro, British pound sterling, and Chinese renminbi of plus or minus one percent during the year ended December 31, 2018 as follows (in thousands):



	Impact of a foreign exchange rate decrease of one percent		No change in foreign exchange rates		Impact of a foreign exchange rate increase of one percent
Revenue	$	1,017,735	$	1,015,021	$	1,012,307
Income from operations	$	20,067	$	19,686	$	19,305

Item 8: Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS




	Page
Report of Independent Registered Public Accounting Firm	70
Consolidated Balance Sheets as of December 31, 2018 and 2017	71
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017, and 2016	72
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2018, 2017, and 2016	73
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018, 2017, and 2016	74
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017, and 2016	75
Notes to Consolidated Financial Statements	76
Unaudited Quarterly Consolidated Financial Information	127

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Electronics For Imaging, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Electronics For Imaging, Inc. and subsidiaries (the “Company”) as of December 31, 2018 and 2017 , and the related consolidated statements of operations, comprehensive income, cash flows, and stockholders’ equity for each of the three years in the period ended December 31, 2018 , and the related notes and schedule listed in the Index at Item 15(2) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017 , and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018 , in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018 , based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 27, 2019 , expressed an unqualified opinion on the Company’s internal control over financial reporting.

Adoption of New Revenue Recognition Accounting Standard (ASC 606)

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for revenue from contracts with customers in 2018 due to the adoption of the new revenue standard. The Company adopted the new revenue standard using the modified retrospective approach.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ D ELOITTE & T OUCHE LLP

San Jose, California

February 27, 2019

We have served as the Company’s auditor since 2014.

Electronics For Imaging, Inc.

Consolidated Balance Sheets



	December 31,
(in thousands)	2018			2017
Assets
Current assets:
Cash and cash equivalents	$	309,052		$	170,345
Short-term investments	102,349			148,697
Accounts receivable, net of allowances of $32.3 and $32.2 million, respectively	241,841			244,416
Inventories	134,348			125,813
Income taxes receivable	4,926			4,565
Assets held for sale	2,800			4,200
Other current assets	44,623			41,799
Total current assets	839,939			739,835
Property and equipment, net	77,613			98,762
Restricted cash equivalents	39,809			32,531
Goodwill	390,109			403,278
Intangible assets, net	74,722			123,008
Deferred tax assets	39,449			45,083
Other assets	37,393			15,504
Total assets	$	1,499,034		$	1,458,001
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	148,587		$	123,935
Accrued and other liabilities	79,323			98,090
Deferred revenue	60,547			55,833
Convertible senior notes, net – current	334,274			—
Income taxes payable	5,077			5,309
Total current liabilities	627,808			283,167
Convertible senior notes, net – noncurrent	118,688			318,957
Imputed financing obligation related to build-to-suit lease	—			13,944
Noncurrent contingent and other liabilities	7,179			28,801
Deferred tax liabilities	3,770			11,652
Noncurrent income taxes payable	15,481			20,169
Total liabilities	772,926			676,690
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding	—			—
Common stock, $0.01 par value; 150,000 shares authorized; 55,347 and 54,249 shares issued, respectively	553			542
Additional paid-in capital	821,205			745,661
Treasury stock, at cost; 12,927 and 9,070 shares, respectively	(489,083		)	(375,574		)
Accumulated other comprehensive income (loss)	(12,814		)	8,138
Retained earnings	406,247			402,544
Total stockholders’ equity	726,108			781,311
Total liabilities and stockholders’ equity	$	1,499,034		$	1,458,001

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.

Consolidated Statements of Operations



	Year Ended December 31,
(in thousands, except per share amounts)	2018			2017			2016
Revenue	$	1,015,021		$	993,260		$	992,065
Cost of revenue	516,448			486,804			483,900
Gross profit	498,573			506,456			508,165
Operating expenses:
Research and development	159,941			157,358			151,395
Sales and marketing	183,498			173,697			169,042
General and administrative	76,576			92,953			85,618
Amortization of identified intangibles	45,291			47,339			39,560
Restructuring and other	13,581			7,562			6,731
Total operating expenses	478,887			478,909			452,346
Income from operations	19,686			27,547			55,819
Interest expense	(20,169		)	(19,505		)	(17,716		)
Interest income and other income, net	1,604			4,088			545
Income before income taxes	1,121			12,130			38,648
Provision for (benefit from) income taxes	2,092			27,475			(6,301		)
Net income (loss)	$	(971	)	$	(15,345	)	$	44,949
Net income (loss) per basic common share	$	(0.02	)	$	(0.33	)	$	0.96
Net income (loss) per diluted common share	$	(0.02	)	$	(0.33	)	$	0.94
Shares used in basic per-share calculation	44,429			46,281			46,900
Shares used in diluted per-share calculation	44,429			46,281			47,797

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.

Consolidated Statements of Comprehensive Income (Loss)



	Year Ended December 31,
(in thousands)	2018			2017			2016
Net income (loss)	$	(971	)	$	(15,345	)	$	44,949
Net unrealized investment gains (losses):
Unrealized holding gains (losses), net of tax provision of $0.4 million for the year ended December 31, 2018, and net of tax benefit of less than $0.1 million for the years ended December 31, 2017 and 2016, respectively	678			(84		)	(97		)
Reclassification adjustments included in net income, net of tax*	19			(140		)	—
Net unrealized investment gains (losses)	697			(224		)	(97		)
Currency translation adjustments, net of tax benefit of $0.3 million for the year ended December 31, 2018, and tax provision of $0.5 and $0.1 million for the years ended December 31, 2017 and 2016, respectively	(21,608		)	32,905			(7,111		)
Unrealized gains (losses) on cash flow hedges	(41		)	32			8
Comprehensive income (loss)	$	(21,923	)	$	17,368		$	37,749

_____________________________________

* Tax effect was less than $0.1 million for each of the periods presented above.

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.

Consolidated Statements of Stockholders’ Equity



	Common stock			Additional paid-in capital			Treasury stock					Accumulated Other comprehensive income (loss)			Retained earnings			Total stockholders’ equity
(in thousands)	Shares	Amount					Shares		Amount
Balances as of December 31, 2015	51,808	$	518	$	657,354		(4,476	)	$	(190,439	)	$	(17,375	)	$	372,844		$	822,902
Comprehensive income (loss), net of tax												(7,200		)	44,949			37,749
Exercise of common stock options	116	1		1,344														1,345
Restricted stock vested	787	8		(8		)												—
Common stock issued in connection with business acquisition	30	—		(73		)												(73		)
Cumulative effect adjustment upon adoption of ASU 2016-09				2,743											96			2,839
Stock-based compensation, net of cash settlements				31,726														31,726
Non-cash settlement of vacation liabilities by issuing RSUs				3,059														3,059
Stock repurchases							(1,981	)	(83,291		)							(83,291		)
Stock issued pursuant to ESPP	297	3		9,756														9,759
Balances as of December 31, 2016	53,038	$	530	$	705,901		(6,457	)	$	(273,730	)	$	(24,575	)	$	417,889		$	826,015
Comprehensive income (loss), net of tax												32,713			(15,345		)	17,368
Exercise of common stock options	166	2		2,064														2,066
Restricted stock vested	761	7		(7		)												—
Stock-based compensation				26,532														26,532
Non-cash settlement of employee-related liabilities by issuing RSUs				1,166														1,166
Stock repurchases							(2,613	)	(101,844		)							(101,844		)
Stock issued pursuant to ESPP	284	3		10,005														10,008
Balances as of December 31, 2017	54,249	$	542	$	745,661		(9,070	)	$	(375,574	)	$	8,138		$	402,544		$	781,311
Comprehensive loss, net of tax												(20,952		)	(971		)	(21,923		)
Cumulative effect adjustment upon adoption of ASC 606															4,674			4,674
Exercise of common stock options	75	1		1,070														1,071
Restricted stock vested	639	6		(6		)												—
Common stock issued in connection with business acquisition	5	—		123														123
Escrow settlement in connection with business acquisition				(945		)												(945		)
Equity component of convertible senior notes issued				20,573														20,573
Stock-based compensation				45,281														45,281
Stock repurchases							(3,857	)	(113,509		)							(113,509		)
Stock issued pursuant to ESPP	379	4		9,448														9,452
Balances as of December 31, 2018	55,347	$	553	$	821,205		(12,927	)	$	(489,083	)	$	(12,814	)	$	406,247		$	726,108

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.

Consolidated Statements of Cash Flows



	For the years ended December 31,
(in thousands)	2018			2017			2016
Cash flows from operating activities:
Net income (loss)	$	(971	)	$	(15,345	)	$	44,949
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	65,557			65,647			55,081
Deferred taxes	(11,381		)	8,753			(11,091		)
Provision for bad debts and sales-related allowances	7,034			12,416			10,678
Provision for inventory obsolescence	6,016			6,312			5,716
Stock-based compensation, net of cash settlements	45,281			26,532			31,726
Change in fair value of contingent obligations	(21,486		)	6,980			6,813
Payments of contingent obligations	(699		)	(5,906		)	—
Non-cash accretion of interest expense on convertible notes and imputed financing obligation	15,239			14,981			13,489
Net change in derivative assets and liabilities	(2,286		)	2,938			(2,125		)
Other non-cash charges and credits	1,230			2,618			755
Changes in operating assets and liabilities, net of effect of acquired businesses:
Accounts receivable	(7,394		)	(29,189		)	(31,221		)
Inventories	(18,068		)	(24,398		)	4,510
Other current assets	(18,898		)	(9,218		)	(6,498		)
Accounts payable and other accrued liabilities	27,389			(6,235		)	651
Income taxes receivable/payable, net	(3,058		)	(5,591		)	(2,429		)
Net cash provided by operating activities	83,505			51,295			121,004
Cash flows from investing activities:
Purchases of short-term investments	—			(87,623		)	(216,349		)
Proceeds from sales and maturities of short-term investments	46,624			233,633			252,856
Purchases (Sales) of restricted cash investments	—			5,115			(5,110		)
Purchases, net of proceeds from sales, of property and equipment	(12,290		)	(13,754		)	(22,373		)
Proceeds from sale of held-for-sale building and land	1,130			—			—
Businesses and technology purchased, net of cash acquired and dispositions	697			(29,559		)	(19,932		)
Net cash provided by (used for) investing activities*	36,161			107,812			(10,908		)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes	150,000			—			—
Debt issuance costs	(3,750		)	—			—
Proceeds from issuance of common stock	10,522			12,074			11,100
Purchases of treasury stock and net share settlements	(113,509		)	(101,844		)	(83,292		)
Repayment of acquisition-related debt	(11,209		)	(9,000		)	(8,275		)
Contingent consideration payments related to businesses acquired	(2,503		)	(25,018		)	(28,111		)
Repayment of short-term obligations	(755		)	(2,094		)	(528		)
Net cash provided by (used for) financing activities	28,796			(125,882		)	(109,106		)
Effect of foreign exchange rate changes on cash and cash equivalents	(2,477		)	4,196			374
Increase (decrease) in cash and cash equivalents*	145,985			37,421			1,364
Cash, cash equivalents, and restricted cash at beginning of year*	202,876			165,455			164,091
Cash, cash equivalents, and restricted cash at end of year*	$	348,861		$	202,876		$	165,455

_____________________________________

* Certain prior period amounts have been revised due to the implementation of ASU 2016-18. See Note 1 for details.

See accompanying notes to consolidated financial statements.

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements

Note 1 . The Company and Summary of Significant Accounting Policies

The Company

We are a world leader in customer-centric digital printing innovation focused 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.

Our products include industrial super-wide and wide format display graphics, corrugated packaging and display, textile, and ceramic tile decoration digital inkjet printers, digital ink, industrial digital inkjet printer parts, and professional services; print production workflow, web-to-print, cross-media marketing, fashion design, and business process automation software solutions; and color printing DFEs creating an on-demand digital printing ecosystem. Our ink includes digital UV curable, LED curable, ceramic, water-based, thermoforming, and specialty ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, water-based dispersed printing ink, and coatings. Our business process automation solutions are integrated from creation to print and are vertically integrated with our industrial inkjet printers, and products produced by the leading printer manufacturers that are driven by our Fiery DFEs.

2017 Out-of-Period Adjustments

During the year ended December 31, 2017, we recorded out-of-period adjustments related to certain bill and hold transactions, which decreased revenue by $3.4 million , decreased gross profit by $0.5 million , and increased net loss by $0.3 million (or $0.01 per diluted share). We evaluated these adjustments considering both qualitative and quantitative factors and the impact of these adjustments in relation to each period, as well as the periods in which they originated. Management believes these adjustments were immaterial to these consolidated financial statements and all previously issued financial statements.

Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements include the accounts of EFI and our subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements requires estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, comprehensive income, cash flows, and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to revenue recognition, bad debts, inventory valuation and purchase commitment reserves, warranty obligations, litigation expenses, restructuring activities, fair value of financial instruments, stock-based compensation, income taxes, valuation of goodwill and intangible assets, business combinations, build-to-suit lease accounting, functional currency determination, contingent consideration in acquisitions, and contingencies on an ongoing basis. Estimates are based on historical and current experience, the impact of the current economic environment, and various other assumptions believed to be reasonable under the circumstances at the time of the estimate, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.

Cash, Cash Equivalents, and Short-term Investments

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

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Notes to Consolidated Financial Statements – (Continued)

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

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

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

Based on this analysis, we determined that there were other-than-temporary impairments in our available for sale securities at December 31, 2018. In the three months ended December 31, 2018 we determined that it was more likely than not we would sell a substantial portion of our available for sale securities in anticipation of satisfying our obligation on the 2019 Notes when they mature in September 2019 . We recognized an unrealized loss of $0.9 million which has been reported in interest income and other income, net in the Consolidated Statements of Operations. There were no other than temporary impairments, including credit-related impairments, during the years ended December 31, 2017 and 2016 . We classify our investments as current or noncurrent based on the nature of the investments and their availability for use in current operations.

Fair Value of Financial Instruments

We assess the fair value of our financial instruments each reporting period. The carrying amounts of cash, cash equivalents, accounts receivable, accounts payable, and accrued and other liabilities, approximate their respective fair values due to the short maturities of these financial instruments and because accounts receivable are reduced by an allowance for doubtful accounts. The fair value of our available-for-sale securities, contingent acquisition-related liabilities, self-insurance liability, derivative instruments, and convertible senior notes are disclosed in Note 8 – Fair Value Measurements.

Revenue Recognition

On January 1, 2018, we adopted Accounting Standards Codification (“ASC”) 606 Revenue from Contracts with Customers (“ASC 606”) using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. ASC 606 supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (“ASC 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. On January 1, 2018, we also adopted ASC 340-40, Other Assets and Deferred Costs – Contracts with Customers (“ASC 340-40”), using the modified retrospective method to all incomplete contracts as of the date of initial application.

Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 and ASC 340-40, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. Additional discussion of these recently adopted pronouncements and their impact on our Consolidated Financial Statements

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Notes to Consolidated Financial Statements – (Continued)

is included below under Significant Accounting Policies, in Note 4 – Revenue , and in Note 5 – Supplemental Financial Statement Information .

The nature of our products and services are as follows:

Hardware . Our hardware, such as Industrial Inkjet printers, Productivity Software devices, and Fiery DFEs, is generally sold with software that is integral to the functionality of the product. In these cases, the hardware and software license are accounted for as a single performance obligation. The contract consideration is generally in the form of a fixed fee at contract inception and revenue is recognized at the point in time when control is transferred to the customer. Consideration received from customers may include trade-in printers, which are valued at the lower of cost or net realizable value.

We offer shipping and handling services to customers related to the sale of hardware. We have elected the practical expedient to account for shipping and handling activities performed after transferring control of goods to our customer as a cost to fulfill the contract. The cost of shipping and handling is accrued at the point in which control transfers to the customer and revenue is recognized.

Ink . We typically enter into contracts with our existing customer base of installed printers to purchase ink that is not bundled with other deliverables within the contract. The ink is accounted for as a single performance obligation and revenue is recognized at the point in time when control of the ink is transferred to the customer.

Licenses . Our software license arrangements provide the customer with the right to install and use functional intellectual property (as it exists at the point in time at which the license is granted) for the duration of the contract term (perpetual or term license). Revenue from distinct software licenses is recognized at the point in time when the software is made available to the customer for download.

Maintenance . Our software license arrangements typically include an initial (bundled) post contract customer support (maintenance or “PCS”) term. Our promise to those customers who elect to purchase PCS represents a distinct, stand-alone performance obligation. Contract consideration is allocated to the PCS based on its relative SSP and revenue is recognized over the PCS term.

Professional Services . We provide various professional services to customers, primarily project management, software implementation, non-recurring engineering design, and training. Revenues from arrangements to provide professional services are generally distinct from the other promises in the contract(s). The majority of our professional services contracts are billed on a time and materials basis and revenue is recognized over time as the services are performed.

Software as a Service . Our SaaS-based arrangements provide customers with continuous access to our software solutions in the form of a service hosted in the cloud. These arrangements may include initial implementation and setup and/or on-going support that represent a single promise (i.e. each individual promised component is not distinct) to provide continuous access to the software solution. Any setup fees associated with our SaaS arrangements are recognized ratably over the contract term plus expected renewal periods. As the customer simultaneously receives and consumes the benefits as access is provided, our performance obligation under our SaaS-based arrangements is comprised of a series of distinct components delivered over time. Our SaaS-based arrangements consideration is typically fixed.

Extended Service Plans (“ESP”) . For our hardware arrangements, we enter into contracts with certain customers to provide services to maintain and repair the hardware for an extended period. ESPs are classified as service-type warranties under ASC 606 as they are sold separately and provide services which are incremental to the assurance that the product will perform to the agreed upon standards. The ESPs are accounted for as a separate performance obligation. Revenue from ESPs are recognized ratably over the contract period as the service is provided.

Contracts With Multiple Performance Obligations. For customer arrangements that include multiple products or services, judgment is required to determine the standalone selling price (“SSP”) for each distinct performance obligation. Where an observable price is not available, we gather all reasonable available data points, consider adjustments based on market conditions, entity-specific factors, and the need to stratify selling prices into meaningful groups (e.g., geographic region) in determining SSP. We allocate the total contract consideration to each distinct performance obligation on a relative SSP basis.

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Notes to Consolidated Financial Statements – (Continued)

Revenue is then recognized in accordance with the timing of the transfer of control to the customer for each performance obligation.

Assessing Collectibility. We apply judgment in determining the customer’s ability and intention to pay. Judgments are made after considering a variety of factors including the customer’s historical payment experience, current creditworthiness, current economic impacts on the customer, past due balances, and significant one-time events or, in the case of a new customer, published credit and financial information.

Contract Acquisition Costs. Management exercises judgment to determine the period of benefit to amortize contract acquisition costs by considering factors such as expected renewals of customer contracts, duration of customer relationships and our technology development life cycle. Although we believe that the historical assumptions and estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results. Amortization of deferred contract acquisition costs is included in sales and marketing expense in the Consolidated Statements of Operations. We periodically review these deferred costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit of these deferred contract acquisition costs.

Shipping and Handling Costs. Amounts billed to customers for shipping and handling costs are included in revenue. Shipping and handling costs are charged to cost of revenue as incurred.

Significant Financing Component. Effective January 1, 2018 under ASC 606, for contracts with extended payment terms greater than 12 months, we determine whether the implicit financing component is significant or not. If significant, we defer the portion of the revenue represented by the significant financing component and recognize it as interest income over the term of the contract using the effective interest method.

Prior Period Revenue Recognition. For the years ended December 31, 2017 and 2016, prior to the adoption of ASC 606, we recognize revenue on the sale of DFEs, printers, and ink in accordance with the provisions of SAB 104, Revenue Recognition, and when applicable, ASC 605-25. As such, revenue was generally recognized when persuasive evidence of an arrangement exists, the product has been delivered or services have been rendered, the fee is fixed or determinable, and collection is reasonably assured.

Service sales, principally representing software license and printer maintenance agreements, customer support, training, and consulting were recognized over the contractual period or as services were rendered. Subscription arrangements where the customer pays a fixed fee and receives services over a period of time were recognized ratably over the service period. Any up front setup fees associated with our subscription arrangements were recognized ratably, generally over one year. Revenue from contracts with multiple element arrangements involving tangible products containing software and non-software components that function together to deliver the product’s essential functionality by applying the relative sales price method of allocation were recognized in accordance with ASC 605-25. The sales price for each element was determined using vendor-specific objective evidence ("VSOE") when available (including post-contract customer support, professional services, hosting, and training). When VSOE was not available, then third party evidence ("TPE") was used. If VSOE or TPE are not available, then best estimated selling price was used when applying the relative sales price method for each unit of accounting. When the arrangement included software and non-software elements, revenue was first allocated to the non-software and software elements as a group based on their relative sales price. Thereafter, the relative sales price allocated to the software elements as a group was further allocated to each unit of accounting in accordance with ASC 985-605.

Leasing Arrangements. If the sales arrangement is classified as a sales-type lease, then revenue is recognized upon shipment. Leases that are not classified as sales-type leases are accounted for as operating leases with revenue recognized ratably over the lease term. A lease is classified as a sales-type lease with revenue recognized upon shipment if the lease is determined to be collectible and has no significant uncertainties and if any of the following criteria are satisfied:


•	present value of all minimum lease payments is greater than or equal to 90% of the fair value of the equipment at lease inception,


•	noncancellable lease term is greater than or equal to 75% of the economic life of the equipment,


•	bargain purchase option that allows the lessee to purchase the equipment below fair value, or


•	transfer of ownership to the lessee upon termination of the lease.

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Notes to Consolidated Financial Statements – (Continued)

Deferred Revenue. Deferred revenue represents amounts received in advance for product support contracts, software customer support contracts, consulting and integration projects, or product sales. Product support contracts include stand-alone product support packages, routine maintenance service contracts, and upgrades or extensions to standard product warranties. We defer these amounts when we invoice the customer and then generally recognize revenue either ratably over the support contract life, upon performing the related services, under the percentage of completion method, or in accordance with our revenue recognition policy.

Allowance for Doubtful Accounts and Sales-related Allowances

We establish an allowance for doubtful accounts to ensure that trade receivables are not overstated due to uncollectibility. We record specific reserves for individual accounts when we become aware of specific customer circumstances, such as bankruptcy filings, deterioration in the customer’s operating results or financial position, or potential unfavorable outcomes from disputes with customers or vendors.

We perform ongoing credit evaluations of the financial condition of our customers and require collateral, such as letters of credit and bank guarantees, in certain circumstances. The past due or delinquency status of a receivable is based on the contractual payment terms of the receivable. Balances are written off when we deem it probable that the receivable will not be recovered.

We make provisions for sales rebates and revenue adjustments based on analysis of current sales programs and revenue in accordance with our revenue recognition policy.

Concentration of Risk

We are exposed to credit risk in the event of default by any of our customers to the extent of amounts recorded on the Consolidated Balance Sheets. We perform ongoing evaluations of the collectibility of accounts receivable balances for our customers and maintain allowances for estimated credit losses. Actual losses have not historically been significant, but have increased over the past several years as our customer base has grown through acquisitions.

Our Fiery products, which constitute approximately 23% of revenue for the year ended December 31, 2018 , are primarily sold to a limited number of leading printer manufacturers. We expect that we will continue to depend on a relatively small number of leading printer manufacturers for a significant portion of our revenue, although their significance is expected to decline in future periods as our revenue increases from Industrial Inkjet and Productivity Software products. We generally have experienced longer accounts receivable collection cycles in our Industrial Inkjet and Productivity Software operating segments compared to our Fiery operating segment as, historically, the leading printer manufacturers have paid on a more timely basis. Down payments are generally required from Industrial Inkjet and Productivity Software customers as a means to ensure payment.

Since Europe is composed of varied countries and regional economies, our European risk profile is somewhat more diversified due to the varying economic conditions among the countries. Approximately 37% of our receivables are with European customers as of December 31, 2018 . Of this amount, 27% of our European receivables ( 10% of consolidated gross receivables) are in the higher risk southern European countries (mostly Italy, Spain, and Portugal), which our management believes to be adequately reserved.

Inventories

Inventories are generally stated at standard cost, which approximates the lower of actual cost, using the first-in, first-out (“FIFO”) cost flow assumption, or market. Reggiani inventories are stated at weighted average cost, which approximates the FIFO cost flow assumption, or market. We periodically review our inventories for potential excess or obsolete items and write down specific items to net realizable value as appropriate. Work-in-process inventories consist of our product at various levels of assembly and include materials, labor, and manufacturing overhead. Finished goods inventory represents completed products awaiting shipment.

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Notes to Consolidated Financial Statements – (Continued)

We estimate potential inventory obsolescence and purchase commitments to evaluate the need for inventory reserves. Current economic trends, changes in customer demand, historical sales experience, product design changes, product life, demand, and the acceptance of our products are analyzed to evaluate the adequacy of such reserves.

Property and Equipment, Net

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: desktop, laptop computers, and computer server equipment ( two to three years), software under perpetual licenses ( three to five years), manufacturing equipment ( seven years), testing and other equipment ( three years), tooling (lesser of three years or the product life), research and development equipment with alternative future uses ( three years), equipment leased to customers on operating leases (greater of three years or the lease term), furniture ( five years), land improvements such as parking lots or sidewalks ( seven years), leasehold improvements (the shorter of the useful life or lease term), building improvements ( five to ten years), building and improvements under a build-to-suit lease ( forty years), and purchased buildings ( forty years).

When assets are retired or disposed, the asset and accumulated depreciation are removed from our Consolidated Balance Sheets, with any gain or loss recognized in our Statements of Operations. Repairs and maintenance expenditures are expensed as incurred, unless they are improvements that extend the useful life of the asset.

Goodwill

Goodwill is recorded when the consideration paid for an acquisition exceeds the fair value of net tangible and identified intangible assets acquired. We perform our annual goodwill impairment analysis in the fourth quarter of each year or more frequently if we believe indicators of potential impairment exist. Triggering events that may require an interim impairment analysis include indicators such as adverse industry or economic trends, restructuring actions, significant changes in the manner of our use of the acquired assets, significant changes in the strategy for our overall business, our assessment of growth and profitability in each reporting unit for future years, significant decline in our stock price for a sustained period, or a sustained decline in our market capitalization relative to net book value. In our goodwill impairment assessment, we compare the fair value of each reporting unit to its carrying value. If the fair value of a reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not impaired. If the fair value of the reporting unit is less than its carrying amount, goodwill is impaired and the excess of the reporting unit’s carrying value over the fair value is recognized as an impairment loss.

Long-lived Assets, including Intangible Assets

Purchased intangible assets are amortized on a straight-line basis over their economic lives of two to six years for developed technology, three to nine years for customer contracts/relationships, four to five years for covenants not to compete, and three to sixteen years for trademarks and trade names as we believe this method most closely reflects the pattern in which the economic benefits of the assets will be consumed.

We review the carrying values of long-lived assets whenever events and circumstances, such as reductions in demand, lower projections of profitability, significant changes in the manner of our use of acquired assets, or significant negative industry or economic trends, indicate that the net book value of an asset may not be recovered through expected future cash flows from its use and eventual disposition. An asset is considered impaired if its carrying amount exceeds the undiscounted future cash flow the asset is expected to generate. If this review indicates that an impairment has occurred, the impaired asset is written down to its fair value, which is typically calculated using quoted market prices and/or discounted expected future cash flows. Our estimates regarding future anticipated net revenue and cash flows, the remaining economic life of the products and technologies, or both, may differ from those used to assess the recoverability of assets. In that event, impairment charges or shortened useful lives of certain long-lived assets may be required, resulting in charges to our Consolidated Statements of Operations when such determinations are made.

An impairment loss is recorded for long-lived assets held-for-sale when the carrying amount of the asset exceeds its estimated fair value less cost to sell. A long-lived asset is not depreciated while it is classified as held-for-sale.

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Notes to Consolidated Financial Statements – (Continued)

Warranty Reserves

Our Industrial Inkjet printers are generally accompanied by a 13 -month limited warranty commencing on the installation date, which covers both parts and labor. Our Fiery DFE limited warranty is 12 to 15 months. Estimated future hardware and software warranty costs are recorded as a cost of product revenue when the related revenue is recognized based on historical and projected warranty claim rates, historical and projected cost-per-claim, and knowledge of specific product failures that are outside our typical experience. Factors that affect our warranty liability include the number of installed units subject to warranty protection, product failure rates, and estimated material, distribution, and labor costs. We have agreed to continue to provide warranty coverage for certain expired FFPS warranties for five years subsequent to the acquisition date of the FFPS business.

Restructuring Reserves

Restructuring liabilities are established when the costs have been incurred. Severance and other employee separation costs are incurred when management commits to a plan of termination identifying the number of employees impacted, their termination dates, and the terms of their severance arrangements. The liability is accrued at the employee notification date unless service is required beyond the greater of 60 days or the legal notification period, in which case the liability is recognized ratably over the service period. Facility downsizing and closure costs are accrued at the earlier of the lessor notification date, if the lease agreement allows for early termination, or the cease use date. Relocation costs are incurred when the related relocation services are performed. Costs related to contracts without future benefit are incurred at the earlier of the cease use date or the contract cancellation date.

Research and Development

Research and development costs include salaries and benefits of employees performing research and development activities, supplies, and other expenses incurred from research and development efforts, and are expensed as incurred. We expense research and development costs associated with new software products as incurred until technological feasibility is established. To date, we have not capitalized research and development costs associated with software development as products and enhancements have generally reached technological feasibility, as defined by U.S. GAAP, and have been released for sale at substantially the same time. We have capitalized research and development equipment that has been acquired or constructed for research and development activities and has alternative future uses (in research and development projects or otherwise). Such research and development equipment is depreciated on a straight-line basis over a three -year useful life.

Advertising

Advertising costs are expensed as incurred. Total advertising and promotional expenses were $6.7 , $5.9 , and $4.6 million for the years ended December 31, 2018 , 2017 , and 2016 , respectively.

Income Taxes

We account for income taxes in accordance with the provisions of ASC 740, which requires that deferred tax assets and liabilities be determined based on the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. Accordingly, the tax bases of assets and liabilities reflect the impact of the tax reform legislation that was enacted on December 22, 2017. We estimate our actual current tax expense including permanent charges and benefits and the temporary differences resulting from differing treatment of items for tax and financial accounting purposes. These temporary differences result in deferred tax assets and liabilities, which are included on our Consolidated Balance Sheets. In some cases, provisional amounts were recorded based on reasonable estimates. SAB 118 provides that the measurement period may not extend beyond one year from the enactment date. We recorded the provisional amounts of the tax effects of the 2017 Tax Act in 2017, and finalized the calculation of the tax effects in 2018.

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Notes to Consolidated Financial Statements – (Continued)

more likely than not, we establish a valuation allowance. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. We account for uncertainty in income taxes by recognizing a tax position only when it is more likely than not that the tax position, based on its technical merits, will be sustained upon ultimate settlement with the applicable tax authority. The tax benefit to be recognized is the largest amount of tax benefit that is greater than fifty percent likely of being realized upon ultimate settlement with the applicable tax authority that has full knowledge of all relevant information. Tax benefits that are deemed to be less than fifty percent likely of being realized are recorded in noncurrent income taxes payable until the uncertainty has been resolved through either examination by the relevant taxing authority or expiration of the pertinent statutes of limitations.

Business Combinations

We allocate the purchase price of acquired companies to the tangible and identifiable intangible assets acquired, including IPR&D, and liabilities assumed based on their estimated fair values. Such a valuation requires management to make significant estimates and assumptions, especially with respect to intangible assets. The results of operations for each acquisition are included in our financial statements from the date of acquisition.

Our acquisitions are accounted for as purchase business combinations using the acquisition method of accounting in accordance with ASC 805. Key provisions of the acquisition method of accounting include the following:


•	one hundred percent of assets and liabilities of the acquired business, including goodwill, are recorded at fair value, regardless of the percentage of the business acquired;


•	contingent assets and liabilities are recognized at fair value at the acquisition date;


•	contingent consideration is recognized at fair value at the acquisition date with changes in fair value recognized in earnings as assumptions are updated or upon settlement;


•	IPR&D is recognized at fair value at the acquisition date subject to amortization after product launch or otherwise assessed for impairment;


•	acquisition-related transaction and restructuring costs are expensed as incurred;


•	reversals of valuation allowances related to acquired deferred tax assets and liabilities and changes to acquired income tax uncertainties are recognized in earnings;


•	when making adjustments to finalize preliminary accounting during the measurement period, which may be up to one year, we recognize measurement period adjustments in the reporting period in which the adjustment amounts are determined; and,


•	upon final determination of the fair value of assets acquired and liabilities assumed during the measurement period, any subsequent adjustments are recorded in our Consolidated Statements of Operations.

Stock-Based Compensation

We account for stock-based compensation based on the fair value of such awards on the date of grant. We amortize stock-based compensation expense on a graded vesting basis over the vesting period after assessing the probability of achieving the requisite performance criteria with respect to performance-based awards. Stock-based compensation expense is recognized over the requisite service period for each separately vesting tranche as though the award were, in substance, multiple awards.

Our determination of the fair value of stock-based payment awards on the date of grant using an option pricing model is affected by volatility, expected term, and interest rate assumptions. Expected volatility is based on the historical volatility of our stock over a preceding period commensurate with the expected term of the option. The expected term is based on management’s consideration of the historical life of the options, the vesting period of the options granted, and the contractual period of the options granted. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yield was not considered in the option pricing formula since we do not pay dividends and have no current plans to do so in the future.

Foreign Currency Translation

In preparing our consolidated financial statements, for subsidiaries that operate in a U.S. dollar functional currency environment, we remeasure balance sheet monetary items into U.S. dollars. Foreign currency assets and liabilities are

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Notes to Consolidated Financial Statements – (Continued)

remeasured from the transaction currency into the functional currency at current exchange rates, except for non-monetary assets, liabilities, and capital accounts, which are remeasured at historical exchange rates. Revenue and expenses are remeasured at monthly exchange rates, which approximate average exchange rates in effect during each period. Gains or losses from foreign currency remeasurement are included in interest income and other income (expense), net. Net losses resulting from foreign currency transactions, including hedging gains and losses, are reported in interest income and other income (expense), net, and were $1.7 , $1.6 , and $3.8 million for the years ended December 31, 2018 , 2017 , and 2016 , respectively.

For subsidiaries that operate in a local functional currency environment, all assets and liabilities are translated into U.S. dollars using current exchange rates, while revenue and expenses are translated using monthly exchange rates, which approximate the average exchange rates in effect during each period. Resulting translation adjustments are reported as a separate component of AOCI, adjusted for deferred income taxes. The cumulative translation adjustment balance, net of tax, was an unrealized loss of $12.8 million at December 31, 2018 , and an unrealized gain of $8.8 million at December 31, 2017 .

We determine the functional currency of each of our foreign subsidiaries based on our assessment of the salient economic indicators discussed in ASC 830-10-55-5, Foreign Currency Matters.

Diluted Net Income (Loss) per Share

Diluted net income (loss) per share is computed using the weighted average number of common shares and dilutive potential common shares outstanding during the period. Potential common shares result from the assumed exercise of outstanding common stock options having a dilutive effect using the treasury stock method, non-vested shares of restricted stock having a dilutive effect, non-vested restricted stock for which the performance criteria have been met, shares to be purchased under our ESPP having a dilutive effect, the assumed issuance at the beginning of 2017 of shares potentially released from escrow related to the acquisition of CTI, the assumed issuance at the beginning of 2016 of shares issued from escrow during 2016 related to the acquisition of Reggiani, the assumed conversion of our convertible notes having a dilutive effect using the treasury stock method when the stock price exceeds the conversion price of the convertible notes, as well as the dilutive effect of our warrants when the stock price exceeds the warrant strike price. Any potential shares that are anti-dilutive as defined in ASC 260, Earnings Per Share, are excluded from the effect of dilutive securities.

Performance-based and market-based restricted stock and stock options that would be issuable if the end of the reporting period were the end of the vesting period, if the result would be dilutive, are assumed to be outstanding for purposes of determining net income (loss) per diluted common share as of the later of the beginning of the period or the grant date.

Derivative Instruments and Risk Management

Our derivative instruments consist of foreign currency exchange contracts as described below:

Cash Flow Hedges. We utilize foreign currency exchange forward contracts to hedge foreign currency exchange exposures related to forecasted operating expenses denominated in Indian rupees. These derivative instruments are designated and qualify as cash flow hedges and in general, closely match the underlying forecasted transactions in duration. The changes in fair value of these contracts are reported as a component of AOCI and reclassified to operating expense in the periods of payment of the hedged operating expenses. We measure the effectiveness of hedges of forecasted transactions by comparing the fair value of the designated foreign currency exchange forward purchase contracts with the fair values of the forecasted transactions. Any ineffective portion of the derivative hedging gain or loss, as well as changes in the derivative time value (which is excluded from the assessment of hedge effectiveness), are recognized as a component of interest income and other income (expense), net.

Balance Sheet Hedges. We utilize foreign currency exchange forward and option contracts to hedge against the short-term impact of foreign currency exchange rate fluctuations related to certain foreign-currency-denominated monetary assets and liabilities. These derivative instruments are not designated for hedge accounting treatment since there is a natural offset for the remeasurement of the underlying foreign currency denominated asset or liability. We recognize changes in the fair value of non-designated derivative instruments in earnings in the period of change. Gains and losses on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest income and other income (expense), net, in the same period as the remeasurement gain or loss of the related foreign currency denominated assets and liabilities.

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Notes to Consolidated Financial Statements – (Continued)

Factors that could have an impact on the effectiveness of our balance sheet and cash flow hedging program include the accuracy of forecasts and the volatility of foreign currency markets. These programs reduce, but do not entirely eliminate, the impact of currency exchange movements. The maturities of these instruments are generally less than one year. Currently, we do not enter into any foreign exchange forward contracts to hedge exposures related to firm commitments or nonmarketable investments. We do not have any leveraged derivatives, nor do we use derivative contracts for speculative purposes. The cash flow impacts of our derivative contracts are reflected as cash flows from operating activities in the Consolidated Statements of Cash Flows.

Recently Adopted Accounting Pronouncements

Revenue Recognition. Effective January 1, 2018, we adopted ASC 606 using the modified retrospective method applied to all incomplete contracts as of the date of initial application. ASC 606 supersedes the revenue recognition requirements in ASC 605, and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. In addition, ASC 606 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Effective January 1, 2018, we also adopted ASC 340-40 using the modified retrospective method to all incomplete contracts as of the date of initial application. ASC 340-40 requires the deferral of incremental costs of obtaining a contract with a customer.

Results for reporting periods beginning after January 1, 2018 are presented under ASC 606 and ASC 340-40, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC 605. Additional discussion of these recently adopted pronouncements is included above under Significant Accounting Policies, in Note 4 – Revenue , and in Note 5 – Supplemental Financial Statement Information .

Income Taxes . SAB 118 provides guidance for the application of ASC 740 in the reporting period that includes December 22, 2017, which is the date the Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 (“2017 Tax Act”) was signed into law. SAB 118 requires that we recognize those income tax effects in our financial statements for which the accounting can be completed, as might be the case for the effect of rate changes on deferred tax assets and deferred tax liabilities. The measurement period is up to one year from the enactment date, which expired on December 22, 2018. We recorded the provisional amounts of the tax effects of the 2017 Tax Act in 2017, and finalized the calculation of the tax effects in 2018.

Restricted Cash . Accounting Standard Updates (“ASU”) 2016-18, Statement of Cash Flows: Restricted Cash, became effective in the first quarter of 2018 requiring the statement of cash flows to explain the change in cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents are included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts in the statement of cash flows. We previously included the changes in restricted cash equivalents in operating or investing activities in the Consolidated Statements of Cash Flows. Upon the adoption of ASU 2016-18, changes in restricted cash equivalents related to the off-balance sheet financing arrangement described in Note 13 – Commitments and Contingencies are no longer presented as an investing cash outflow, but instead are presented as a component of the beginning and ending balance of cash, cash equivalents, and restricted cash equivalents in the Consolidated Statements of Cash Flows. Prior period amounts have been revised to conform to the current year presentation.

A reconciliation of cash, cash equivalents, and restricted cash equivalents is as follows (in thousands):



	December 31,
	2018		2017
Cash and cash equivalents	$	309,052	$	170,345
Restricted cash equivalents	39,809		32,531
Cash, cash equivalents, and restricted cash equivalents shown in the statement of cash flows	$	348,861	$	202,876

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

Settlement of Convertible Debt . ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, issued in August 2016, requires that cash settlements of principal amounts of debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the debt must classify the portion of the principal payment attributable to the accreted interest related to the debt discount as cash outflows from operating activities. This is consistent with the classification of the coupon interest payments. ASU 2016-15 became effective in the first quarter of 2018. Accordingly, the debt discount attributable to the difference between the coupon interest rate and the effective rate on our 2019 and 2023 Notes will be classified as an operating cash outflow in the Consolidated Statement of Cash Flows upon cash settlement.

Recent Accounting Pronouncements Not Yet Adopted

Lease Arrangements . In February 2016, the FASB issued ASU 2016- 02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing transactions. The primary change that will impact us is the recognition of right-of-use ("ROU") assets and lease liabilities, as lessee, for those leases classified as operating leases and with a term of greater than 12 months. We will recognize a ROU asset and a lease liability, initially measured at the present value of the lease payments. There will continue to be a differentiation between finance leases and operating leases. We do not currently have finance leases as lessee. For operating leases, a lessee is required to recognize lease expense generally on a straight-line basis. All operating lease payments are classified as operating activities in the statement of cash flows. The current build-to-suit lease accounting guidance will be rescinded by the new guidance, although this guidance will be replaced with guidance restricting lessee control during the construction period. The accounting for build-to-suit leases will be the same as operating leases unless the lessee control provisions are applicable. The new standard requires lessors to account for leases using an approach that is substantially the same as existing guidance for sales-type leases, direct financing leases, and operating leases.

We will adopt this standard in the first quarter of 2019, using the optional transition method to initially apply the new lease standard at the adoption date, and will recognize a cumulative-effect adjustment to the opening balance of retained earnings. We expect to record total ROU Assets and Lease Liabilities on our opening Consolidated Balance Sheet of between $35.0 and $40.0 million . As stated above, the recognition, measurement, and presentation of expenses and cash flows by a lessee will not significantly change from previous guidance; accordingly, the impact on our results of operations as reflected in our Consolidated Statements of Operations is not expected to be material.

Hedge Accounting . In August 2017, the FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which amends the hedge accounting recognition and presentation requirements. The new guidance continues to require an initial prospective quantitative hedge effectiveness assessment unless the hedging relationship qualifies for the critical-terms-match method or facts and circumstances method, which permit an assumption of perfect hedge effectiveness. After the initial quantitative assessment, the new guidance permits a qualitative ongoing effectiveness assessment for certain hedges if we can reasonably support an expectation of high effectiveness throughout the term of the hedge. The ASU also requires additional disclosure related to the effect on the income statement of cash flow hedges.

Upon adoption, a cumulative-effect adjustment will be recorded to charge any ineffective portion of derivative contracts designated as cash flow hedges existing at the date of adoption to AOCI with a corresponding adjustment to retained earnings as of the beginning of the fiscal year of the adoption. ASU 2017-12 will be effective in the first quarter of 2019. We expect the implementation of this guidance will not have a material impact on our consolidated financial statements.

Financial Instruments . ASU 2016-13, Measurement of Credit Losses on Financial Instruments, issued in June 2016, amends current guidance regarding other-than-temporary impairment of available-for-sale debt securities. The new guidance requires an estimate of expected credit loss when fair value is below the amortized cost of the asset without regard for the length of time that the fair value has been below the amortized cost or the historical or implied volatility of the asset. Credit losses on available-for-sale debt securities will be limited to the difference between the security’s amortized cost basis and its fair value. The use of an allowance to record estimated credit losses (and subsequent recoveries) will also be required under the new guidance. ASU 2016-13 will be effective in the first quarter of 2020. We expect that the implementation of this guidance will not have a material impact to our consolidated financial statements.

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

Note 2 . Earnings Per Share

Net income (loss) per basic common share is computed using the weighted average number of common shares outstanding during the period. Net income (loss) per diluted common share is computed using the weighted average number of common shares and potential dilutive common shares outstanding during the period. See Note 1 – The Company and Summary of Significant Accounting Policies for additional information.

PSUs and market-based RSUs and stock options that would be issuable if the end of the reporting period were the end of the vesting period, if the result would be dilutive, are assumed to be outstanding for purposes of determining net income (loss) per diluted common share as of the later of the beginning of the period or the grant date. Accordingly, PSUs, which vested on various dates during the years ended December 31, 2018 , 2017 , and 2016 based on achievement of specified performance criteria related to revenue, cash flows from operating activities, and non-GAAP operating income targets; and performance-based stock options, which vested during the year ended December 31, 2016 based on achievement of specified targets related to non-GAAP return on equity, are included in the determination of net income (loss) per diluted common share as of the beginning of each respective year.

Basic and diluted earnings per share are reconciled as follows (in thousands, except for per share amounts):



	Year Ended December 31,
	2018			2017			2016
Basic net income (loss) per share:
Net income (loss) available to common shareholders	$	(971	)	$	(15,345	)	$	44,949
Weighted average common shares outstanding	44,429			46,281			46,900
Basic net income (loss) per share	$	(0.02	)	$	(0.33	)	$	0.96
Diluted net income (loss) per share:
Net income (loss) available to common shareholders	$	(971	)	$	(15,345	)	$	44,949
Weighted average common shares outstanding	44,429			46,281			46,900
Dilutive stock options, restricted stock, and ESPP purchase rights	—			—			897
Weighted average common shares outstanding for purposes of computing diluted net income (loss) per share	44,429			46,281			47,797
Diluted net income (loss) per share	$	(0.02	)	$	(0.33	)	$	0.94

Potential shares of common stock that were not included in the determination of diluted net income (loss) per share for the periods presented because the impact of including them would have been anti-dilutive or because their performance conditions have not been met, consisted of the following (in thousands):



	Year Ended December 31,
	2018	2017	2016
Options	63	138	—
RSUs & PSUs	1,110	692	183
ESPP purchase rights	203	160	10
Total potential shares of common stock excluded from the computation of diluted earnings per share	1,376	990	193

The weighted-average number of common shares outstanding does not include the effect of the potential common shares from conversion of our 2019 Notes and exercise of our Warrants because the effects would have been anti-dilutive since the conversion price of the Notes and the strike price of the Warrants exceeded the average market price of our common stock. We have the option to pay cash, issue shares of common stock, or any combination thereof for the aggregate amount due upon conversion of the 2019 Notes. Our intent is to settle the principal amount of the 2019 Notes in cash upon conversion. The weighted-average number of common shares outstanding also does not include the effect of the potential common shares from conversion of our 2023 Notes because the effects would have been anti-dilutive since the conversion price of the 2023

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

Notes exceeded the average market price of our common stock. Only amounts payable in excess of the principal amount of the 2019 or 2023 Notes would be considered in diluted net income (loss) per share under the treasury stock method. We also entered into convertible note hedge transactions with respect to our common stock (“2019 Note Hedges”) in September 2014. The 2019 Note Hedges are also not included in the calculation of diluted net income (loss) per share because the effect of any exercise of the 2019 Note Hedges would also be anti-dilutive. Please refer to Note 12 – Debt of Notes to Consolidated Financial Statements for additional information.

Note 3 . Segment, Geographic, and Major Customer Information

Operating Segments

Operating segment information is presented based on the internal reporting used by the chief operating decision making group (“CODM”) to allocate resources and evaluate operating segment performance. Our CODM is comprised of our Chief Executive Officer and Chief Financial Officer. Our three operating segments consist of Industrial Inkjet, Productivity Software, and Fiery.

Our operating segments are integrated through their reporting and operating structures, shared technology and practices, shared sales and marketing, shared back office support functions, and combined production facilities. Our enterprise management processes use financial information that is closely aligned with our three operating segments at the gross profit level. Relevant discrete financial information is prepared at the gross profit level for each of our three operating segments, which is used by the CODM group to allocate resources and assess the performance of each operating segment.

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

Industrial Inkjet consists of our VUTEk super-wide and wide format display graphics, Nozomi corrugated packaging and display, Reggiani textile, and Cretaprint ceramic tile decoration and building material industrial inkjet printers; digital UV curable, LED curable, ceramic, water-based, and thermoforming and specialty ink, as well as a variety of textile ink including dye sublimation, pigmented, reactive dye, acid dye, pure disperse dye, water-based dispersed printing ink, and coatings; digital inkjet printer parts; and professional services.

Productivity Software consists of complete software suites that enable efficient and automated end-to-end business and production workflows for the print and packaging industries. These productivity suites also provide tools to enable revenue growth, efficient scheduling, and optimization of processes, equipment, and personnel. Customers are provided the financial and technical flexibility to deploy locally within their business or to be hosted in the cloud. The Productivity Suites address all segments of the print industry. We also market Optitex fashion CAD software, which facilitates fast fashion and increased efficiency in the textile and fashion industries, and Escada corrugator control systems for the corrugated packaging market.

Fiery consists of Fiery and FFPS DFEs, which transform digital copiers and printers into high performance networked printing devices for the office, commercial, and industrial printing markets. This operating segment is comprised of (i) stand-alone DFEs connected to digital printers, copiers, and other peripheral devices, (ii) embedded DFEs and design-licensed solutions used in digital copiers and multi-functional devices, (iii) optional software integrated into our DFE solutions such as Fiery Central and Graphics Arts Package, (iv) Fiery Self Serve, our self-service and payment solution, and (v) stand-alone software-based solutions such as our proofing, textile, and scanning solutions.

Our CODM group evaluates the performance of our operating segments based on net sales and gross profit. Gross profit for each operating segment includes revenue from sales to third parties and related cost of revenue attributable to the operating segment. Cost of revenue for each operating segment excludes certain expenses managed outside the operating segments consisting primarily of stock-based compensation expense.

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

Revenue and gross profit for each operating segment, excluding stock-based compensation expense, are summarized as follows (in thousands):



	Year Ended December 31,
	2018			2017			2016
Industrial Inkjet
Revenue	$	607,559		$	570,688		$	562,583
Gross profit	210,792			208,620			198,923
Gross profit percentages	34.7		%	36.6		%	35.4		%
Productivity Software
Revenue	$	168,284		$	156,561		$	151,737
Gross profit	119,470			114,460			114,179
Gross profit percentages	71.0		%	73.1		%	75.2		%
Fiery
Revenue	$	239,178		$	266,011		$	277,745
Gross profit	172,081			185,937			198,322
Gross profit percentages	71.9		%	69.9		%	71.4		%

Segment gross profit is reconciled to the Consolidated Statements of Operations as follows (in thousands):



	Year Ended December 31,
	2018			2017			2016
Segment gross profit	$	502,343		$	509,017		$	511,424
Stock-based compensation expense	(3,770		)	(2,561		)	(2,784		)
Other items excluded from segment profit	—			—			(475		)
Gross profit	$	498,573		$	506,456		$	508,165

The Fiery gross profit percentage was negatively impacted by $1.4 million during the year ended December 31, 2017, charged to cost of revenue, which reflects the cost of manufacturing plus a portion of the expected profit margin related to the acquired FFPS inventories. Inventory acquired in the acquisition of FFPS is required to be recorded at fair value rather than historical cost.

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



	Industrial Inkjet		Productivity Software			Fiery		Corporate and Unallocated Net Assets		Total
December 31, 2018
Goodwill	$	147,932	$	168,186		$	73,991	$	—	$	390,109
Identified intangible assets, net	38,782		21,677			14,263		—		74,722
Tangible assets, net of liabilities	234,689		(12,747		)	21,092		18,243		261,277
Net tangible and intangible assets	$	421,403	$	177,116		$	109,346	$	18,243	$	726,108

December 31, 2017
Goodwill	$	154,373	$	174,644		$	74,261	$	—	$	403,278
Identified intangible assets, net	66,547		36,379			20,082		—		123,008
Tangible assets, net of liabilities	221,933		(27,755		)	11,286		49,561		255,025
Net tangible and intangible assets	$	442,853	$	183,268		$	105,629	$	49,561	$	781,311

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

Corporate and unallocated assets and liabilities primarily consist of cash and cash equivalents, short-term investments, restricted investments and cash equivalents, corporate headquarters facility, convertible senior notes, net, imputed financing obligation related to build-to-suit lease, income taxes receivable, and income taxes payable.

Geographic Information

We report revenue by geographic region based on ship-to destination. Shipments to some of our significant printer manufacturer/distributor customers are made to centralized purchasing and manufacturing locations, which in turn sell through to other locations. As a result of these factors, we believe that sales to certain geographic locations might be higher or lower, as the ultimate destinations are difficult for us to ascertain.

Our revenue by ship-to destination is summarized as follows (in thousands):



	Year Ended December 31,
	2018		2017		2016
Americas	$	502,820	$	487,968	$	500,411
EMEA	364,908		369,610		360,305
APAC	147,293		135,682		131,349
Total Revenue	$	1,015,021	$	993,260	$	992,065

The net book value of our property and equipment are summary as follows by geographic region (in thousands):



	December 31,
	2018		2017
Americas	$	60,612	$	77,683
EMEA	15,580		19,048
APAC	1,421		2,031
Total Property and Equipment, net	$	77,613	$	98,762

Major Customers

No individual customer accounted for more than 10% of our revenue for the years ended December 31, 2018 and 2016. One customer, Xerox, provided 11% of our consolidated revenue for the year ended December 31, 2017 . No customer accounted for more than 10% of our net consolidated accounts receivables as of December 31, 2018 and 2017 .

Note 4 . Revenue

We derive our revenue primarily from product revenue, which includes industrial inkjet printers, ink, and parts; productivity software; and DFEs. We also receive service revenue from printer maintenance agreements, customer support, training, software development, and consulting.

Upon the adoption of ASC 606 and ASC 340-40, we recorded a net increase to our opening balance of retained earnings of $4.7 million as of January 1, 2018, due to the cumulative effect of adoption. The adoption impact primarily related to capitalizing customer contract acquisition costs consisting of sales commissions, partially offset by an increase in deferred revenue to reflect the deferral of a significant financing component that will be recognized as interest income as payments are received over the contractual terms, and deferral of upfront setup fees that will be recognized ratably over the expected contractual terms.

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

The cumulative effect of applying ASC 606 and ASC 340-40 to active contracts as of the adoption date resulted in the following adjustments to the Consolidated Balance Sheet as of January 1, 2018 (in thousands):



	Reported as of December 31, 2017		ASC 606 Adjustments			As Adjusted January 1, 2018
Assets
Accounts receivable, net	$	244,416	$	102		$	244,518
Other current assets	41,799		(1,628		)	40,171
Deferred tax assets	45,083		(1,466		)	43,617
Other assets	15,504		8,062			23,566
Liabilities
Deferred revenue	55,833		(95		)	55,738
Noncurrent contingent and other liabilities	28,801		491			29,292
Stockholders’ equity:
Retained earnings	402,544		4,674			407,218

The impact of adopting ASC 606 and ASC 340-40 on our Consolidated Statement of Operations is summarized as follows (in thousands):



	Year Ended December 31, 2018
	Amounts in Accordance with ASC 606			Amounts in Accordance with ASC 605			Effect of change higher (lower)
Revenue	$	1,015,021		$	1,009,906		$	5,115
Cost of revenue	516,448			515,718			730
Gross profit	498,573			494,188			4,385
Operating expenses	478,887			479,378			(491		)
Income from operations	19,686			14,810			4,876
Interest income and other income, net	1,604			986			618
Income (loss) before income taxes	1,121			(4,373		)	5,494
Provision for income taxes	2,092			1,304			788
Net loss	(971		)	(5,677		)	4,706

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

The impact of adopting ASC 606 and ASC 340-40 on our Consolidated Balance Sheet as of December 31, 2018 was as follows (in thousands):



	Amounts in Accordance with ASC 606		Amounts in Accordance with ASC 605		Effect of change higher (lower)
Assets
Accounts receivable, net	$	241,841	$	236,438	$	5,403
Other current assets	44,623		46,981		(2,358		)
Deferred tax assets	39,449		41,702		(2,253		)
Other assets	37,393		28,840		8,553
Liabilities
Deferred revenue	60,547		60,837		(290		)
Noncurrent contingent and other liabilities	7,179		6,924		255
Stockholders’ equity
Retained earnings	406,247		396,867		9,380

The following table presents our disaggregated revenue by source (in thousands). Sales and usage-based taxes are excluded from revenue:



	Year Ended December 31,
	2018		2017		2016
Major Products and Service Lines:
Industrial Inkjet
Printers and parts	$	380,672	$	349,372	$	356,043
Ink, supplies, and maintenance	226,887		221,316		206,540
Productivity Software
Licenses	46,458		37,438		41,120
Professional services	30,339		29,748		27,566
Maintenance and subscriptions	91,487		89,375		83,051
Fiery
Digital front ends and related products	221,009		251,369		263,366
Maintenance and subscriptions	18,169		14,642		14,379
Total	$	1,015,021	$	993,260	$	992,065

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)



	Industrial Inkjet		Productivity Software		Fiery		Total
Year Ended December 31, 2018
Timing of Revenue Recognition:
Transferred at a Point in Time	$	586,079	$	46,458	$	221,009	$	853,546
Transferred Over Time	21,480		121,826		18,169		161,475
Recurring/Non-Recurring:
Non-Recurring	$	380,672	$	76,797	$	221,009	$	678,478
Recurring	226,887		91,487		18,169		336,543

Year Ended December 31, 2017
Timing of Revenue Recognition:
Transferred at a Point in Time	$	548,021	$	37,438	$	251,369	$	836,828
Transferred Over Time	22,667		119,123		14,642		156,432
Recurring/Non-Recurring:
Non-Recurring	$	349,372	$	67,186	$	251,369	$	667,927
Recurring	221,316		89,375		14,642		325,333

Year Ended December 31, 2016
Timing of Revenue Recognition:
Transferred at a Point in Time	$	541,084	$	41,120	$	263,366	$	845,570
Transferred Over Time	21,499		110,617		14,379		146,495
Recurring/Non-Recurring:
Non-Recurring	$	356,043	$	68,686	$	263,366	$	688,095
Recurring	206,540		83,051		14,379		303,970

Remaining Performance Obligations

Revenue allocated to remaining performance obligations includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods (“backlog”). Remaining performance obligations were $85.5 million as of December 31, 2018 , of which we expect to recognize substantially all of the revenue over the next 12 months.

Contract Balances

Timing of revenue recognition may differ from timing of invoicing to customers. Payment terms and conditions vary by contract. Deferred revenue (contract liability) represents amounts received in advance, or invoiced in advance, for product support contracts, software customer support contracts, consulting and integration projects, SaaS arrangements, or product sales. We defer these amounts when we collect or invoice the customer and then generally recognize revenue either ratably over the support contract term, upon performing the related services, under the cost-to-cost method, or in accordance with our revenue recognition policy. Revenue recognized during the year ended December 31, 2018 , which was included in deferred revenue as of December 31, 2017, was $50.8 million .

Unbilled accounts receivable represents contract assets for revenue that has been recognized in advance of billing the customer, which is common for long-term contracts. Billing requirements vary by contract but are generally structured around the completion of certain development milestones. Unbilled accounts receivable as of December 31, 2017 , that were transferred to accounts receivable during the year ended December 31, 2018 , were $26.2 million .

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

The following table reflects the balances in unbilled accounts receivable and deferred revenue (in thousands):



	December 31, 2018		January 1, 2018
Unbilled accounts receivable – current	$	20,507	$	23,296
Unbilled accounts receivable – noncurrent	8,320		4,122
Deferred revenue – current	60,547		55,738
Deferred revenue – noncurrent	290		565

Note 5 . Supplemental Financial Statement Information

Inventories

Inventories are as follows (in thousands):



	As of December 31,
Inventories	2018		2017
Raw materials	$	55,794	$	57,061
Work in process	12,971		9,792
Finished goods	65,583		58,960
Total inventories	$	134,348	$	125,813

Deferred Contract Acquisition Costs

Some of our sales incentive programs meet the definition of an incremental cost of obtaining a customer contract; and therefore, are required to be capitalized under ASC 340-40. We recognize an asset for the incremental costs of obtaining a contract with a customer if we expect the benefit of those costs to be longer than one year.

Sales commissions for renewal of a contract may not be commensurate with the commissions paid for the acquisition of the initial contract because commissions are generally not paid on the renewal of a specifically anticipated contract. Sales commissions for initial contracts are deferred and then amortized generally on a straight-line basis over a period of benefit that we have determined to be three to four years. We determined the period of benefit by taking into consideration our customer contracts, our technology, and other factors.

Upon adoption of ASC 340-40 on January 1, 2018, we capitalized $8.1 million in contract acquisition costs related to contracts that were not completed. For contracts that have durations of less than one year, we follow the practical expedient and expense these costs when incurred. During the year ended December 31, 2018 , we amortized $4.4 million of deferred contract acquisition costs, and we recognized no impairment losses in relation to costs capitalized. During the year ended December 31, 2018 , an additional $4.9 million of contract acquisition costs were capitalized. Deferred contract acquisition costs are included within other noncurrent assets on our Consolidated Balance Sheets.

Equipment Leased to Customers Under Operating Leases, Net

Equipment leased to customers under operating leases, which is included in property and equipment, net on the Consolidated Balance Sheets, was as follows (in thousands):



	As of December 31,
Equipment Leased to Customers	2018			2017
Equipment leased to customers under operating leases	$	7,376		$	5,432
Accumulated depreciation	(3,555		)	(1,927		)
Equipment leased to customers under operating leases, net	$	3,821		$	3,505

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

Supplemental Disclosure of Cash Flow Information

Supplemental disclosures about cash flow information are as follows (in thousands):



	For the Year Ended December 31,
	2018		2017			2016
Net cash paid for income taxes	$	16,342	$	23,279		$	6,812
Cash paid for interest expense	3,138		3,174			2,975
Acquisitions of businesses and technology:
Cash paid for businesses and technology purchased, excluding contingent consideration	$	—	$	30,230		$	21,560
Cash acquired in business acquisitions	—		(671		)	(1,628		)
Net cash paid for business acquisitions	$	—	$	29,559		$	19,932
Common stock issued in connection with business acquisitions	$	123	$	—		$	73
Non-cash investing and financing activities:
Non-cash settlement of employee-related liabilities by issuing RSUs	—		1,171			3,059
Property and equipment received, but not paid	1,185		681			1,257

Deferred Cost of Revenue

Deferred cost of revenue related to unrecognized revenue on shipments to customers was $0.4 and $3.5 million as of December 31, 2018 and December 31, 2017 , respectively, and is included in other current assets on the Consolidated Balance Sheets.

Accrued and Other Liabilities

Accrued and other liabilities are as follows (in thousands):



Accrued and Other Liabilities	As of December 31,
	2018		2017
Accrued compensation and benefits	$	31,917	$	29,113
Warranty provision – current	11,130		12,931
Contingent consideration – current	8,268		14,922
Debt assumed through business acquisitions	1,451		11,101
Accrued royalty payments	4,839		4,903
Accrued litigation and consulting	2,976		4,277
Technology transfer	3,374		3,593
Hedging liability	3,399		3,281
Deferred rent	1,868		2,846
Sales tax liabilities	2,547		2,574
Restructuring and other	1,971		2,452
Other accrued liabilities	5,583		6,097
Total accrued and other liabilities	$	79,323	$	98,090

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

Accumulated Other Comprehensive Income (Loss) (“AOCI”)

AOCI classified within stockholders’ equity in our Consolidated Balance Sheets as of December 31, 2018 and 2017 was as follows (in thousands):



Other Comprehensive Income (Loss)	As of December 31,
	2018			2017
Net unrealized investment losses	$	—		$	(697	)
Currency translation gains (losses)	(12,814		)	8,794
Net unrealized gains on cash flow hedges	—			41
Total other comprehensive income (Loss)	$	(12,814	)	$	8,138

There were less than $0.1 and $0.1 million , net of tax, reclassified out of AOCI for the years ended December 31, 2018 and 2017 , respectively, consisting of unrealized gains and losses from investments in debt securities reported within interest income and other income, net, in our Consolidated Statements of Operations.

Note 6 . Business Acquisitions

We did not complete any business acquisitions during 2018 . We acquired FFPS and Generation Digital during 2017 , which have been included in our Fiery operating segment, and two business process automation businesses, CRC and Escada, which have been included in our Productivity Software operating segment. Post-acquisition revenue was $27.1 million in the year ended December 31, 2017 related to these four acquisitions. We acquired Optitex and Rialco during 2016 , which have been included in our Productivity Software and Industrial Inkjet operating segments, respectively. Post-acquisition revenue was $19.8 million in the year ended December 31, 2016 related to these two acquisitions. Acquisition-related transaction costs were $1.2 , $2.1 , and $2.2 million during the years ended December 31, 2018 , 2017 , and 2016 , respectively.

These acquisitions were accounted for as purchase business combinations. We allocated the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed on the basis of their estimated fair value on their respective acquisition dates. Excess purchase consideration was recorded as goodwill. Factors contributing to a purchase price that results in goodwill include, but are not limited to, the retention of research and development personnel with skills to develop future technology, manufacturing capacity in the Industrial Inkjet operating segment, support personnel to provide maintenance services related to the products, a trained sales force capable of selling current and future products, the positive reputation of each of these businesses in the market, the opportunity to integrate acquired technology into our products, the opportunity to sell Fiery DFEs to FFPS customers, and the opportunity to expand our presence in the DFE market through the synergy of FFPS technology with existing Fiery products, and the opportunity to sell our Productivity Software Suite to customers of the acquired businesses. Rialco’s technical and commercial capabilities benefit the Industrial Inkjet operating segment in the sourcing, specification, and purification of high quality dyes and expand our research, development, and innovation base to develop ink for the signage, ceramic, and packaging markets.

2017 Acquisitions

Fiery Segment

We acquired certain assets comprising the FFPS business from Xerox on January 31, 2017 for cash consideration of $23.9 million consisting of $5.9 million paid at closing, $9.0 million paid in July 2017, and $9.0 million paid in July 2018. These subsequent payments were discounted at our incremental borrowing rate of 4.98% , resulting in a purchase price of $23.1 million . The FFPS business manufactures and markets the FFPS DFE, which is a DFE that previously competed with our Fiery DFEs and is included in our Fiery segment.

We acquired privately held Generation Digital on August 14, 2017 for cash consideration of $3.2 million , net of cash acquired, plus an additional potential future cash earnout, which is contingent on achieving certain revenue and operating profit performance targets during a 6 -month period followed sequentially by a 12 -month period. Generation Digital provides

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Notes to Consolidated Financial Statements – (Continued)

software to textile and fashion designers for the creation and design of prints and patterns, color matching, and color palette creation and management. Generation Digital has been integrated into the Fiery segment.

We made a contingent consideration payment for the initial 6 -month period but the fair value of the remaining earnout related to the Generation Digital acquisition is currently estimated to be zero as of December 31, 2018 , by applying the income approach. Key assumptions include probability-adjusted revenue and operating profit levels. Probability-adjusted revenue and operating profit are significant inputs that are not observable in the market, which ASC 820-10-35 refers to as a Level 3 inputs. Changes in the fair value of contingent consideration subsequent to the acquisition date are recognized in general and administrative expenses.

Productivity Software Segment

During 2017 we acquired privately-held CRC and Escada, which have been included in our Productivity Software operating segment, for cash consideration of approximately $19.5 million , net of cash acquired, plus an additional potential future cash earnout related to Escada, which is contingent on Escada achieving certain revenue and operating profit performance targets over two consecutive 12 -month periods.

CRC, acquired from Reynolds on May 8, 2017, offers business process automation software for commercial, label, and packaging printers.

Escada, acquired on October 1, 2017, offers the corrugated packaging market corrugator control systems, which provide comprehensive control and traceability for the entire corrugated packaging process.

The fair value of the earnout related to the Escada acquisition is currently estimated to be $4.2 million as of December 31, 2018 by applying the income approach in accordance with ASC 805-30-25-5, Business Combinations. Key assumptions include a risk-free discount rate of 2.97% and probability-adjusted revenue and operating profit levels. This contingent liability is reflected in our Consolidated Balance Sheet as of December 31, 2018 , as a current and noncurrent liability of $2.4 and $1.9 million .

2016 Acquisitions

Industrial Inkjet Segment

Rialco was acquired on March 1, 2016 for cash consideration of $8.4 million , net of cash acquired, plus an additional potential future cash earnout, which is contingent on achieving certain revenue and gross profit performance targets over three consecutive 12-month periods. Rialco is a leading European supplier of dye powders and color products for the textile, digital print, and other decorating industries. Rialco’s pure disperse dyes are particularly important in the manufacture of high-quality dye sublimation inkjet ink for textile applications, which is a key growth area in the global migration from analog to digital print. Rialco has been included in the Industrial Inkjet segment.

The fair value of the earnout related to the remaining Rialco acquisition is estimated to be $1.9 million as of December 31, 2018 by applying the income approach, adjusted for the impact of post-acquisition foreign currency translation changes. Key assumptions include a risk-free discount rate of 0.8% and probability-adjusted revenue and gross profit levels. This contingent liability is reflected on the Consolidated Balance Sheet as of December 31, 2018 , as a current liability of $1.9 million .

Productivity Software Segment

Optitex was acquired on June 16, 2016 for cash consideration of $11.6 million , net of cash acquired, plus an additional potential future cash earnout, which is contingent on achieving certain revenue and operating profit performance targets over three consecutive 12-month periods. Optitex has developed and markets integrated 2D and 3D CAD software that is shortening the design cycle, reducing our customers’ costs, and accelerating the adoption of fast fashion. Optitex has been integrated into the Productivity Software segment.

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Notes to Consolidated Financial Statements – (Continued)

The fair value of the earnout related to the Optitex acquisition is estimated to be zero as of December 31, 2018 , by applying the income approach, adjusted for the impact of post-acquisition foreign currency translation changes. Key assumptions include a risk-free discount rate of 3.39% and probability-adjusted revenue and operating profit levels. During the year ended December 31, 2018, we reduced the contingent consideration liability for Optitex by a total of $20.9 million with a credit to general and administrative expenses.

Valuation Methodologies

Intangible assets acquired in 2017 , and 2016 consist of customer relationships, the Master Purchasing Agreement (the “Purchasing Agreement”) with Xerox, “take-or-pay” contractual penalty with Xerox, trade names, existing technology, backlog, and IPR&D. The intangible asset valuation methodologies for each acquisition assumes discount rates between 14% and 30% .

Customer Relationships and Backlog were valued using the excess earnings method, which is an income approach. The value of customer relationships lies in the generation of a consistent and predictable revenue source and the avoidance of costs associated with developing the relationships. Customer relationships were valued by estimating the revenue and operating income attributable to existing customer relationships and probability-weighting each forecast year to reflect the uncertainty of maintaining existing relationships based on historical attrition rates. Backlog represents unfulfilled customer purchase orders at the acquisition date that will provide a relatively secure revenue stream, subject only to potential customer cancellation.

Trade Names were valued using the relief from royalty method, which is an income approach, with royalty rates based on various factors including an analysis of market data, comparable trade name agreements, and historical advertising dollars spent supporting the trade name.

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

Rialco existing technology was valued using the cost approach. The value of existing technology was estimated based on the historical time and cost to develop the technology, the estimated man-years required to recreate the technology, historical employee compensation and benefits, and a reasonable mark-up based on profit for companies with similar operations.

Purchasing Agreement was valued using the excess earnings method, which is an income approach. The Purchasing Agreement entered into with Xerox states that we will be Xerox’s preferred supplier of DFEs provided that we meet quality, cost, delivery, and services requirements. The value of the Purchasing Agreement lies in the generation of a consistent and predictable revenue source without incurring the costs normally required to acquire the Purchasing Agreement. The Purchasing Agreement was valued by estimating the revenue and operating profit attributable to the Purchasing Agreement and probability-weighting each forecast year to reflect the uncertainty of maintaining the existing relationship with Xerox beyond the initial five-year term of the agreement.

Take-or-pay Contract was valued using the Monte Carlo method, which is an income approach. If Xerox’s purchases of Fiery and FFPS DFEs during each of four consecutive 12-month periods is less than the minimum level defined for each purchase period, then Xerox shall make a one-time payment in an amount equal to a percentage of such shortfall compared to the minimum level, subject to the maximum payment amount agreed between the parties for each purchase period. Key assumptions include a risk-free discount rate of 4.98% , asset volatility of 27% , and probability-adjusted DFE revenue. If Xerox’s purchases of Fiery and FFPS DFEs exceed the minimum purchase levels defined for each purchase period, then we will pay a percentage of such excess to Xerox.

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Notes to Consolidated Financial Statements – (Continued)

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



	2017 Acquisitions												2016 Acquisitions
	Fiery								Productivity Software				Industrial Inkjet			Productivity Software
	FFPS				Generation Digital				CRC and Escada				Rialco			Optitex
	Weighted average useful life	Purchase Price Allocation			Weighted average useful life	Purchase Price Allocation			Weighted average useful life	Purchase Price Allocation			Weighted average useful life	Purchase Price Allocation		Weighted average useful life	Purchase Price Allocation
Purchasing agreement	10 years	$	9,330		—	$	—		—	$	—		—	$	—	—	$	—
Take-or-pay contract	4 years	9,000			—	—			—	—			—	—		—	—
Customer relationships	—	—			8 years	3,030			7-9 years	5,240			6 years	2,512		3-4 years	8,890
Existing technology	2 years	2,570			5 years	890			4-6 years	5,870			5 years	846		5 years	7,760
Trade names	5 years	1,020			5 years	290			4-5 years	850			5 years	763		4 years	2,020
IPR&D	< one year	70			—	—			—	—			—	—		—	—
Backlog	—	—			—	—			one year	191			< one year	56		< one year	370
Goodwill	—	6,590			—	3,012			—	11,632				1,426			28,147
Total intangible assets		28,580				7,222				23,783				5,603			47,187
Net tangible assets (liabilities)		(5,537		)		(298		)		(3,738		)		5,177			(11,924		)
Total purchase price		$	23,043			$	6,924			$	20,045			$	10,780		$	35,263

The initial preliminary purchase price allocations were adjusted by $0.7 and $0.8 million during the years ended December 31, 2017 , and 2016 , respectively, primarily related to certain current assets and deferred tax liabilities. Proforma results of operations have not been presented because they are not material to our Consolidated Statements of Operations.

Goodwill represents the excess of the purchase price over the net tangible and intangible assets acquired. Goodwill that was generated by our acquisitions of Rialco, CRC and Escada is not deductible for tax purposes. Goodwill that was generated by our acquisitions of FFPS and Generation Digital is deductible for tax purposes. Goodwill that was generated by our acquisition of Optitex is deductible for U.S. tax purposes, but is not deductible for tax purposes in Israel.

Escada and Rialco generate revenue and incur operating expenses primarily in British pounds sterling. Upon consideration of the salient economic indicators, we consider British pounds sterling to be the functional currency for Escada and Rialco. Optitex generates revenue and incurs operating expenses primarily in Israeli shekels. Upon consideration of the salient economic indicators, we consider the Israeli shekel to be the functional currency for Optitex.

Note 7 . Accounts Receivable

The accounts receivable allowance consists of the following (in thousands):



Accounts Receivable Allowance	As of December 31,
	2018		2017
Allowance for doubtful accounts	$	21,354	$	20,278
Allowance for returns	4,417		3,690
Allowance for trade-ins	4,955		6,486
Allowance for sales rebates	1,540		1,782
Total accounts receivable allowance	$	32,266	$	32,236

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Notes to Consolidated Financial Statements – (Continued)

Accounts Receivable Sales Arrangements

In accordance with ASC 860-20, Transfers and Servicing, trade receivables are derecognized from our Consolidated Balance Sheets when sold to third parties upon determining that such receivables are presumptively beyond the reach of creditors in a bankruptcy proceeding. Any servicing obligation is determined based on the fair value that a third party would charge to service these receivables. These liabilities were determined to not be material at December 31, 2018 and 2017 . We have facilities in the U.S. that enable us to sell to third parties, on an ongoing basis, certain trade receivables without recourse. Trade receivables sold without recourse are generally short-term receivables with payment due dates of less than 10 days from the date of sale, which are subject to a servicing obligation. Trade receivables sold under these facilities were $16.7 and $21.4 million during the years ended December 31, 2018 and 2017 , respectively, which approximates the cash received.

We have facilities in Europe that enable us to sell to third parties, on an ongoing basis, certain trade receivables without recourse. Trade receivables sold without recourse are generally short-term receivables secured by international letters of credit. Trade receivables sold under these facilities were $10.3 and $5.9 million during the years ended December 31, 2018 and 2017 , respectively, which approximates the cash received.

We report collections from the sale of trade receivables to third parties as operating cash flows in the Consolidated Statements of Cash Flows.

Financing Receivables

Our financing receivables consist of sales-type lease and trade receivables that have an original contractual maturity in excess of one year. Sales-type lease receivables are included within other current assets and other assets, while trade receivables are included in accounts receivable, net and in other non-current assets. Our financing receivables are summarized as follows (in thousands):



	As of December 31,
Financing Receivables	2018		2017
Sales-type lease receivables	$	31,201	$	16,558
Trade receivables	14,681		12,125
Total financing receivables	$	45,882	$	28,683

Scheduled to be received in excess of one year	$	29,470	$	15,191

Note 8 . Fair Value Measurements

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

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Notes to Consolidated Financial Statements – (Continued)

Our available-for-sale short-term investments are as follows (in thousands):



	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair value
As of December 31, 2018
U.S. Government and sponsored entities	$	50,329	$	—	$	—		$	50,329
Corporate debt securities	47,434		—		—			47,434
Municipal securities	379		—		—			379
Asset-backed securities	4,091		—		—			4,091
Mortgage-backed securities – residential	116		—		—			116
Total short-term investments	$	102,349	$	—	$	—		$	102,349

As of December 31, 2017
U.S. Government and sponsored entities	$	59,824	$	—	$	(660	)	$	59,164
Corporate debt securities	79,356		—		(450		)	78,906
Municipal securities	382		—		(2		)	380
Asset-backed securities	9,808		44		(47		)	9,805
Mortgage-backed securities – residential	445		—		(3		)	442
Total short-term investments	$	149,815	$	44	$	(1,162	)	$	148,697

The fair value and duration of the available for sale short term investments that are in a gross unrealized loss position are as follows (in thousands):



	Less than 12 Months					More than 12 Months					Total
As of December 31, 2017	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
U.S. Government and sponsored entities	$	23,023	$	(206	)	$	35,989	$	(454	)	$	59,012	$	(660	)
Corporate debt securities	45,857		(207		)	32,634		(243		)	78,491		(450		)
Municipal securities	378		(2		)	—		—			378		(2		)
Asset-backed securities	6,779		(31		)	2,947		(16		)	9,726		(47		)
Mortgage-backed securities – residential	162		(2		)	142		(1		)	304		(3		)
Total	$	76,199	$	(448	)	$	71,712	$	(714	)	$	147,911	$	(1,162	)

In the three months ended December 31, 2018 we determined that it was more likely than not we would sell a substantial portion of our available for sale securities in anticipation of satisfying our obligation on the 2019 Notes when they mature in September 2019 . We recognized an unrealized loss of $0.9 million which has been reported in interest income and other income, net in the Consolidated Statements of Operations. Accordingly, there are no unrecognized losses in this investment portfolio as of December 31, 2018.

Amortized cost and estimated fair value of investments are summarized by maturity date as follows (in thousands):



	As of December 31, 2018
	Amortized cost		Fair value
Mature in less than one year	$	70,811	$	70,811
Mature in one to three years	31,538		31,538
Total short-term investments	$	102,349	$	102,349

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Notes to Consolidated Financial Statements – (Continued)

For the year ended December 31, 2018 , our net and gross realized gain on sales of investments were less than $0.1 million . For the years ended December 31, 2017 and 2016 , our net realized gain on sales of investments were $0.3 million and $0.4 million , respectively, which were comprised of $0.3 million and $0.4 million in realized gains from sales of investments, respectively, partially offset by less than $ 0.1 million in realized losses in both years. As of December 31 2017 , net unrealized losses of $1.1 million were included in AOCI on the accompanying Consolidated Balance Sheets. There were no net unrealized losses included in AOCI as of December 31, 2018 .

Fair Value Measurements

Our fair value hierarchy is defined as follows:

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

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

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

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

We obtain the fair value of our Level 2 financial instruments from several third party asset managers, custodian banks, and accounting service providers. Independently, these service providers use professional pricing services to gather pricing data, which may include quoted market prices for identical or comparable instruments or inputs other than quoted prices that are observable either directly or indirectly. As part of this process, we utilized these pricing services to assist management in its pricing analysis and assessment of other-than-temporary impairment. All estimates, key assumptions, and forecasts were either provided by or reviewed by us. While we chose to utilize a third party pricing service, the impairment analysis and related valuations represent conclusions of management and not conclusions or statements of any third party.

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Notes to Consolidated Financial Statements – (Continued)

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



	As of December 31, 2018								As of December 31, 2017
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	28,715	$	—	$	—	$	28,715	$	9,897	$	—	$	—	$	9,897
U.S. Government and sponsored entities	28,885		21,444		—		50,329		33,261		25,903		—		59,164
Corporate debt securities	—		47,434		—		47,434		—		78,906		—		78,906
Municipal securities	—		379		—		379		—		380		—		380
Asset-backed securities	—		4,036		55		4,091		—		9,754		51		9,805
Mortgage-backed securities—residential	—		116		—		116		—		442		—		442
Total Assets	$	57,600	$	73,409	$	55	$	131,064	$	43,158	$	115,385	$	51	$	158,594
Liabilities:
Contingent consideration, current and noncurrent	$	—	$	—	$	10,501	$	10,501	$	—	$	—	$	35,702	$	35,702
Self-insurance	—		—		840		840		—		—		902		902
Total Liabilities	$	—	$	—	$	11,341	$	11,341	$	—	$	—	$	36,604	$	36,604

Money market funds have been classified as cash equivalents on the Consolidated Balance Sheets as of December 31, 2018 and 2017 , respectively.

Investments are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices or alternative pricing sources with reasonable levels of price transparency. There have been no transfers between Level 1 and 2 during the years ended December 31, 2018 and 2017 .

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

Liabilities for Contingent Consideration

Acquisition-related liabilities for contingent consideration (i.e., earnouts) are related to the purchase business combinations of Generation Digital and Escada, acquired in 2017; Optitex and Rialco in 2016; Shuttleworth, CDM, CTI, and Reggiani in 2015; and PrintLeader Software (“PrintLeader”) in 2013.

The fair value of these earnouts is estimated to be $10.5 and $35.7 million as of December 31, 2018 and 2017 , respectively, by applying the income approach in accordance with ASC 805-30-25-5. Key assumptions include risk-free discount rates between 0.6% and 5.0% (Monte Carlo valuation method) and discount rates between 4.7% and 6.0% (probability-adjusted method), as well as probability-adjusted revenue and earnings levels. Probability-adjusted revenue, gross margin, and earnings are significant inputs that are not observable in the market, and are therefore classified as Level 3 inputs. These contingent liabilities have been reflected in the Consolidated Balance Sheet as of December 31, 2018 as current and noncurrent liabilities of $8.3 and $2.2 million , respectively.

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Notes to Consolidated Financial Statements – (Continued)

Changes in the fair value of the contingent consideration liability are summarized as follows (in thousands):



Fair value of contingent consideration at December 31, 2016	$	56,463
Fair value of Generation Digital contingent consideration at August 14, 2017	3,600
Fair value of Escada contingent consideration at October 1, 2017	2,049
Escrow adjustment for Reggiani acquisition	(4,711		)
Changes in valuation	6,472
Payments and settlements	(30,924		)
Foreign currency adjustment	2,753
Fair value of contingent consideration at December 31, 2017	$	35,702
Escrow adjustment	(200		)
Changes in valuation	(21,486		)
Payments and settlements	(3,193		)
Foreign currency adjustment	(322		)
Fair value of contingent consideration at December 31, 2018	$	10,501

The fair value of contingent consideration decreased by $25.2 million during the year ended December 31, 2018 . The primary contributors to the decrease included a reduction in the fair value of the Optitex earnout of $20.9 million , and earnout payments of $1.3 and $1.1 million to Rialco and Generation Digital, respectively. The fair value of contingent consideration decreased by $20.8 million during the year ended December 31, 2017 . The $30.9 million of earnout payments consisted of payments of $21.5 , $6.8 , $1.3 , and $1.2 million to Reggiani, Optitex, Rialco, and Shuttleworth, respectively. The $6.5 million of valuation changes pertain to $1.7 million of interest accretion on the outstanding liability, an increase in earnout performance probability of $2.9 , $2.1 , and $0.6 million for Optitex, Rialco, and CTI respectively, partially offset by a $1.2 million decrease in the earnout performance probability for Shuttleworth.

Since the primary inputs to the fair value measurement of the contingent consideration liability are the probability-adjusted revenue and discount rate, we reviewed the sensitivity of the fair value measurement to changes in these inputs. We assessed the probability of achieving the revenue performance targets for the contingent consideration associated with each acquisition at percentage levels between 50% and 100% as of each respective acquisition date based on an assessment of the historical performance of each acquired entity, our current expectations of future performance, and other relevant factors. A change in probability-adjusted revenue of five percentage points from the level assumed in the current valuations would result in an increase in the fair value of contingent consideration of $0.7 million or a decrease of $0.5 million , resulting in a corresponding adjustment to general and administrative expense. A change in the discount rate of one percentage point would result in an increase or decrease in the fair value of contingent consideration of less than $0.1 million . The potential undiscounted amount of future contingent consideration cash payments that we could be required to make related to our business acquisitions, beyond amounts currently accrued, is $19.3 million as of December 31, 2018 .

Fair Value of Derivative Instruments

We utilize the income approach to measure the fair value of our derivative assets and liabilities. The income approach uses pricing models that rely on market observable inputs such as yield curves, currency exchange rates, and forward prices, and are therefore classified as Level 2 measurements. The notional amount of our derivative assets and liabilities was $191.8 and $239.4 million as of December 31, 2018 and 2017 , respectively. There were no derivatives that were designated as cash flow hedges as of December 31, 2018 . The fair value of our derivative assets and liabilities designated for cash flow hedge with notional amount of $3.9 million as of December 31, 2017 was not material.

Fair Value of Convertible Senior Notes

In September 2014, we issued $345 million aggregate principal amount of convertible senior notes. The 2019 Notes are carried at their original issuance value, net of unamortized debt discount, and are not marked to market each period. The fair value of the 2019 Notes as of December 31, 2018 was approximately $335 million and was considered a Level 2 fair value

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Notes to Consolidated Financial Statements – (Continued)

measurement. Fair value was estimated based upon actual quotations obtained at the end of the reporting period or the most recent date available. A substantial contributing factor to the market value of our 2019 Notes is the conversion premium.

In November 2018, we issued $150 million aggregate principal amount of convertible senior notes. The 2023 Notes are carried at their original issuance value, net of unamortized debt discount, and are not marked to market each period. The fair value of the 2023 Notes as of December 31, 2018 was approximately $143 million and was considered a Level 2 fair value measurement. Fair value was estimated based upon actual quotations obtained at the end of the reporting period or the most recent date available. A substantial contributing factor to the market value of our 2023 Notes is the conversion premium.

Note 9 . Property and Equipment, net

Property and equipment, net, is as follows (in thousands):



	As of December 31,
Property and Equipment, Net	2018			2017
Land, buildings, and improvements	$	50,123		$	68,404
Equipment and purchased software	93,170			93,849
Furniture and leasehold improvements	18,338			20,270
Gross	161,631			182,523
Less accumulated depreciation and amortization	(84,018		)	(83,761		)
Property and equipment, net	$	77,613		$	98,762

Depreciation expense was $18.6 , $16.8 , and $14.1 million for the years ended December 31, 2018 , 2017 , and 2016 , respectively.

Fremont, California . We entered into a 15 -year lease agreement pursuant commencing on September 1, 2013 to which we leased approximately 59,000 square feet of a building located in Fremont, California next to our corporate headquarters. Minimum lease payments were $18.5 million , net of full abatement of rent for the first three years of the lease term. During the initial lease term, we also had certain rights of first refusal to (i) lease the remaining portion of the facility and/or (ii) purchase the facility. This location contained the engineering, marketing, and administrative operations for our Fiery operating segment.

On July 27, 2018 , we executed an agreement (the “Termination Agreement”) to terminate the above lease agreement dated April 19, 2013 . The Termination Agreement was effective July 31, 2018 . The Company moved its Fiery segment operations and personnel from the formerly leased facility into our adjacent headquarters building in July 2018. Prior to executing the Termination Agreement, the underlying lease had a remaining term of ten years and minimum noncancellable lease payments of $16.0 million . For accounting purposes, we were considered the owner of the building and had recorded the asset at a net book value of $13.7 million in property and equipment, net, on our Consolidated Balance Sheet prior to the termination. As of July 31, 2018, we had derecognized the lease asset and removed the corresponding liability of $14.5 million , which represented the present value of the lease obligation. The Termination Agreement required us to pay total penalties of $0.8 million . The net loss from this lease termination of $0.1 million was charged to restructuring expense during the year ended December 31, 2018.

Prior to the termination date, the monthly lease payments were allocated between the land element of the lease, which was accounted for as an operating lease, and the imputed financing obligation. The imputed financing obligation was being amortized in accordance with the effective interest method.

Eagan, Minnesota . In 2016, management approved a plan to sell approximately 5.6 acres and the office building located at 1340 Corporate Center Curve, Eagan, Minnesota, consisting of 43,682 square feet, and the related improvements were classified as assets held-for-sale. On April 13, 2017 , we entered into an agreement under which we agreed to sell the office building, improvements, and related land, subject to completion of a 150-day due diligence period, which expired on September 7, 2017 without the transaction closing. Accordingly, assets previously recorded as assets held-for-sale of $3.8 million , which consisted of $2.9 million net book value of the facility and $0.9 million of related land as of December 31,

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2016, have been classified as assets held for use within property and equipment, net, in our Consolidated Balance Sheets as of December 31, 2018 and 2017.

Manchester, New Hampshire . On August 26, 2016, we entered into a lease agreement and have accounted for a lease term of 48.5 years , inclusive of two renewal options of 5.0 and 3.5 years, with the City of Manchester, NH to lease 16.9 acres adjacent to the Manchester Regional Airport. The land is subleased to MUFG during the term of the lease related to the manufacturing facility that was constructed on the site, which is described below. Minimum lease payments are $13.3 million during the entire 48.5 -year term of the land lease, excluding six months of the land lease that were financed into the manufacturing facility lease.

On August 26, 2016, we entered into a six -year lease with MUFG whereby a 225,000 -square foot manufacturing and warehouse facility was constructed for our Industrial Inkjet operating segment at a cost of $39.8 million . Construction was completed in April 2018. Minimum lease payments during the initial six-year term are $1.8 million . Upon completion of the initial six-year term, we have the option to renew the lease, purchase the facility, or return the facility to MUFG subject to an 89% residual value guarantee under which we would recognize additional rent expense in the form of a variable rent payment. We have assessed our exposure in relation to the residual value guarantee and believe that there is no deficiency to the guaranteed value as of December 31, 2018. During the construction period, we were required to maintain restricted cash equivalents or restricted investments equal to the amount expended to date on the construction of the building as collateral. The funds were deposited with a third-party trustee and were restricted during the construction period. Upon completion of construction, $39.8 million was deposited with MUFG and is restricted as collateral until the end of the underlying building lease period.

Meredith, New Hampshire. During the fourth quarter of 2017, our management approved a plan to sell approximately 31.5 acres of land and two manufacturing buildings located at One Vutek Place and 189 Waukewan Street, Meredith, New Hampshire, consisting of 163,000 total square feet. These assets, which were previously recorded within property and equipment, net at a net book value of $5.1 million , were reclassified as assets held-for-sale upon the approval of the plan. We recognized an impairment charge of $0.9 million in the fourth quarter of 2017, and reported the assets at $4.2 million on our Consolidated Balance Sheet as of December 31, 2017. During the three months ended September 30, 2018, we sold the 189 Waukewan Street land and building for net proceeds of $1.1 million and recognized a gain of $0.1 million . During the fourth quarter of 2018, we recognized an additional impairment charge of $0.3 million on the One Vutek Place property. The current carrying value of $2.8 million is classified as assets held-for-sale on the Consolidated Balance Sheet as of December 31, 2018.

Note 10 . Goodwill and Long-Lived Intangible Assets

Purchased Intangible Assets

Our purchased intangible assets are as follows (in thousands, except for weighted average useful life):



		As of December 31, 2018								As of December 31, 2017
	Weighted average original useful life (in years)	Gross carrying amount		Accumulated amortization			Weighted average remaining useful life (in years)	Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Goodwill	—	$	390,109	$	—		—	$	390,109	$	403,278	$	—		$	403,278
Customer relationships and other	5.9	$	79,558	$	(47,224	)	3.1	$	32,334	$	95,862	$	(45,862	)	$	50,000
Existing technology	4.0	189,737		(164,814		)	1.0	24,923		196,693		(149,300		)	47,393
Trademarks and trade names	10.9	70,326		(53,250		)	4.7	17,076		72,048		(46,822		)	25,226
IPR&D	0	389		—			0	389		389		—			389
Amortizable intangible assets	5.9	$	340,010	$	(265,288	)	2.8	$	74,722	$	364,992	$	(241,984	)	$	123,008

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Acquired customer relationships, existing technology, and trademarks and trade names are amortized over their estimated useful lives of 1 to 16 years using the straight-line method, which approximates the pattern in which the economic benefits of the identified intangible assets are realized. There was no change in useful life of intangible assets during the year ended December 31, 2018 . During the years ended December 31, 2017 and 2016, the remaining useful lives of certain amortizable intangible assets were reduced based on re-assessment, resulted in a $0.2 million and $1.6 million increase in amortization expense, respectively. Aggregate amortization expense was $45.3 , $47.3 , and $39.6 million during the years ended December 31, 2018 , 2017 , and 2016 , respectively.

IPR&D is subject to amortization after product completion over the estimated product life or otherwise assessed for impairment in accordance with acquisition accounting guidance. There were no impairments of IPR&D recognized during the years ended December 31, 2018 , 2017 , or 2016 .

Future estimated amortization expense on identified intangible assets as of December 31, 2018 is as follows (in thousands):



Fiscal Year	Future amortization expense
2019	$	34,782
2020	15,948
2021	7,721
2022	5,756
2023	2,863
Thereafter	7,652
Total	$	74,722

Goodwill Rollforward

The goodwill rollforward for the years ended December 31, 2018 and 2017 is as follows (in thousands):



	Industrial Inkjet			Productivity Software			Fiery			Total
As of December 31, 2016	$	141,068		$	155,475		$	63,298		$	359,841
Additions (FFPS, Generation Digital, CRC, and Escada acquisitions)	—			11,632			9,602			21,234
Opening balance sheet adjustments	—			10			679			689
Foreign currency adjustments	13,305			7,527			682			21,514
As of December 31, 2017	154,373			174,644			74,261			403,278
Foreign currency adjustments	(6,441		)	(6,458		)	(270		)	(13,169		)
As of December 31, 2018	$	147,932		$	168,186		$	73,991		$	390,109
Accumulated impairment as of December 31, 2018, recognized in 2008	$	103,991		$	—		$	—		$	103,991

Goodwill Assessment

As further described in Note 1 – The Company and Summary of Significant Accounting Policies , ASU 2011-08, Intangibles – Goodwill and Other (ASC 350): Testing Goodwill for Impairment, requires that a good will impairment test be performed at least annually and whenever there are indications of potential impairment.

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Our goodwill valuation analysis is based on our respective goodwill reporting units (Industrial Inkjet, Productivity Software, and Fiery), which are consistent with our operating segments identified in Note 3 – Segment, Geographic, and Major Customer Information of Notes to Consolidated Financial Statements. We determined the fair value of our reporting units as of December 31, 2018 by equally weighting the market and income approaches. Under the market approach, we estimated fair value based on market multiples of revenue or earnings of comparable companies. Under the income approach, we estimated fair value based on a projected cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. Based on our valuation results, we have determined that the fair values of our Industrial Inkjet, Productivity Software, and Fiery reporting units exceed their carrying values as of December 31, 2018 , by $95.0 , $49.0 and $362.0 million , respectively, or 22% , 28% , and 331% , respectively.

To identify suitable comparable companies under the market approach, consideration was given to the financial condition and operating performance of the reporting unit being evaluated relative to companies operating in the same or similar businesses, potentially subject to corresponding economic, environmental, and political factors and considered to be reasonable investment alternatives. Consideration was given to the investment characteristics of the subject companies relative to those of similar publicly traded companies (i.e., guideline companies), which are actively traded. In applying the Public Company Market Multiple Method, valuation multiples were derived from historical and projected operating data of guideline companies and applied to the appropriate operating data of our reporting units to arrive at an indication of fair value. Six suitable guideline companies were identified for the Industrial Inkjet, reporting unit. Seven suitable guideline companies were identified for the Productivity Software and Fiery reporting units, respectively.

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

The income approach requires that we project future revenues, earnings, and cash flows and discount them to their present value. Such an approach involves numerous assumptions and predictions about future performance. Despite ongoing economic uncertainty, our reporting units’ revenue is assumed to grow at historical normalized rates between 2019 and 2024 for the following primary reasons:


•	Our Industrial Inkjet segment is positioned to outpace the market with the successful introductions of several new products, including the Nozomi corrugated packaging printer platform, the VUTEk h3 and h5 & the BOLT textile printing platform expected to launch in 2019. Additional new product introductions are expected through the forecast horizon.


•	Our acquisition of Rialco in 2016 will contribute to the achievement of historical normalized Industrial Inkjet revenue growth rates through the forecast horizon.


•	Our acquisitions of Escada and CRC in 2017 and Optitex in 2016 will contribute to the achievement historical normalized Productivity Software revenue growth rates through the forecast horizon.


•	Other assumptions include:


▪	Long-term industry growth rates.


▪	Gross profit percentages will approximate historical average levels.

Our discounted cash flow projections are twelve -year financial forecasts, which were based on annual financial forecasts developed internally by management for use in managing our business and through discussions with the valuation firm engaged by us. The significant assumptions utilized in these twelve -year financial forecasts included consolidated annual revenue growth rates ranging from 4% to 9% which equates to a consolidated compound annual growth rate of 8% . The upper end of the range exceeds our historical normalized growth rates due to the factors described above. Future cash flows were discounted to present value using a mid-year convention and a consolidated discount rate of 11.9% . Terminal values were calculated using the Gordon growth methodology with a consolidated long-term growth rate of 4% for Industrial Inkjet and Productivity Software and 2.5% for Fiery. The sum of the fair values of the Industrial Inkjet, Productivity Software, and Fiery reporting units was reconciled to our current market capitalization (based on our stock price) plus an estimated control premium. Percentages of revenue growth over the forecast horizon were compared to approximate percentages realized by the guideline companies. To assess the reasonableness of the estimated control premium we examined the most similar transactions in relevant industries and determined the average premium indicated by the transactions deemed to be most

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similar to a hypothetical transaction involving our reporting units. We examined the weighted average and median control premiums offered in relevant industries, industry specific control premiums, and specific transaction control premiums, as well as considering the historical and current price of our common stock, to conclude that our estimated control premium is reasonable.

We assess the impairment of identifiable intangibles and long-lived assets annually and whenever events or changes in circumstances indicate the carrying value may not be recoverable or the life of the asset may need to be revised. We recognized no impairments of identifiable intangibles during the three years ended December 31, 2018 .

Given the uncertainty of the economic environment and the potential impact on our business, there can be no assurance that our estimates and assumptions used in the evaluation of goodwill and identified intangible assets for impairment as of December 31, 2018 will prove to be accurate predictions of the future. If our assumptions regarding forecasted revenue or gross profit rates are not achieved, we may be required to record additional goodwill impairment charges in future periods relating to any of our reporting units, whether in connection with the next annual impairment testing in the fourth quarter of 2019 or prior to that, if any such change constitutes an interim triggering event. It is not possible to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

Long-Lived Assets

We evaluate potential impairment with respect to long-lived assets whenever events or changes in circumstances indicate their carrying amount may not be recoverable. An asset is considered impaired if its carrying amount exceeds the undiscounted future cash flows the asset is expected to generate. An impairment loss is recorded for long-lived assets held-for-sale when the carrying amount of the asset exceeds its fair value less cost to sell. A long-lived asset is not depreciated while it is classified as held-for-sale.

We recorded total impairment losses of $0.5 million during the year ended December 31, 2018 related to the reassessment of the One Vutek Building in Meredith, NH, which is classified as held-for-sale on the Consolidated Balance Sheets, and other long-lived assets. We recognized an impairment loss of $0.9 million during the year ended December 31, 2017 on the properties in Meredith, NH. Please refer to Note 9 – Property and Equipment, net , for additional information. There were no asset impairment charges recognized during the year ended December 31, 2016.

Note 11 . Derivatives and Hedging

We are exposed to market risk and foreign currency exchange risk from changes in foreign currency exchange rates, which could affect operating results, financial position, and cash flows. We manage our exposure to these risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are used to hedge monetary assets and liabilities, intercompany balances, and trade receivables, and to reduce earnings and cash flow volatility resulting from shifts in foreign currency exchange rates. Our objective is to offset gains and losses resulting from these exposures with losses and gains on the derivative contracts used to hedge them, thereby reducing volatility of earnings or protecting fair values of assets and liabilities. We do not have any leveraged derivatives, nor do we use derivative contracts for speculative purposes. ASC 815 requires the fair value of all derivative instruments, including those embedded in other contracts, be recorded as assets or liabilities in our Consolidated Balance Sheet. The related cash flow impacts of our derivative contracts are reflected as cash flows from operating activities.

Our exposures are primarily related to non-U.S. dollar-denominated revenue in Europe, the U.K., China, Israel, and Australia, and to non-U.S. dollar-denominated operating expenses in Europe, India, Japan, the U.K., China, Israel, and Australia. From time to time we have hedged our operating expense cash flow exposure in Indian rupees. We hedge balance sheet remeasurement exposure associated primarily with Australian dollar, British pound sterling, Israeli shekel, Japanese yen, Chinese renminbi, and Euro-denominated intercompany balances, trade receivables, and other net monetary assets.

By their nature, derivative instruments involve, to varying degrees, elements of market and credit risk. The market risk associated with these instruments resulting from currency exchange movement is expected to offset the market risk of the underlying transactions, assets, and liabilities being hedged. Under our master netting agreements with our foreign currency derivative counter parties, we are allowed to net transactions of the same currency with a single net amount payable by one

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party to the other. The derivatives held by us are not subject to any credit contingent features negotiated with these counter parties. We are not required to pledge cash collateral related to these foreign currency derivatives because, by policy, we deal with counter parties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counter parties.

Cash Flow Hedges

We did not have any foreign currency derivative contracts designated as cash flow hedges as of December 31, 2018. Our foreign currency derivative contracts with a notional amount of $3.9 million and net asset or liability amounts that were immaterial had been designated as cash flow hedges of our Indian rupee operating expense exposure as of December 31, 2017 . The changes in fair value of these contracts are reported as a component of AOCI and reclassified to operating expense in the periods of payment of the hedged operating expenses. Any ineffective portion of the derivative hedging gain or loss, as well as changes in the derivative time value (which is excluded from the assessment of hedge effectiveness), are recognized as a component of interest income and other income (expense), net.

Balance Sheet Hedges

Forward contracts not designated for hedge accounting treatment with notional amounts of $191.8 and $235.5 million as of December 31, 2018 and 2017 , respectively, are used to hedge foreign currency balance sheet exposures. They are not designated for hedge accounting treatment since there is a natural offset for the remeasurement of the underlying foreign currency denominated asset or liability. We recognize changes in the fair value of non-designated derivative instruments in earnings in the period of change. Gains and losses on foreign currency forward contracts used to hedge balance sheet exposures are recognized in interest income and other income (expense), net, in the same period as the remeasurement gain or loss of the related foreign currency denominated assets and liabilities. Forward contracts not designated for hedge accounting treatment consist of hedges of British pound sterling, Israeli shekel, Japanese yen, Chinese renminbi, Australian dollar, and Euro-denominated intercompany balances with notional amounts of $99.2 and $144.5 million as of December 31, 2018 and 2017 , respectively, hedges of British pound sterling, Australian dollar, Israeli shekel, and Euro-denominated trade receivables with notional amounts of $52.2 and $44.4 million as of December 31, 2018 and 2017 , respectively, and hedges of British pounds sterling, Israeli shekel, and Euro-denominated other net monetary assets with notional amounts of $40.4 and $46.6 million as of December 31, 2018 and 2017 , respectively.

Note 12 . Debt

2.25% Convertible Senior Notes Due 2023

In November 2018, we issued $150.0 million aggregate principal amount of 2.25% convertible senior notes due 2023 in a private placement pursuant to Rule 144A of the Securities Act of 1933, as amended. Of the $145.4 million total net proceeds, we used $40.0 million for concurrent stock repurchases. The 2023 Notes are senior unsecured obligations and were issued at par with interest payable semiannually in arrears on May 15 and November 15 of each year, commencing May 15, 2019. The 2023 Notes will mature on November 15, 2023 . The initial conversion rate is 28.0128 shares of common stock per $1,000 principal amount of the 2023 Notes, which is equivalent to an initial conversion price of approximately $35.70 per share of common stock. Upon conversion of the 2023 Notes, holders will receive cash, shares of common stock or a combination thereof, at our election. Our intent is to settle the principal amount of the 2023 Notes in cash upon conversion. If the conversion value exceeds the principal amount, we intend to deliver shares of our common stock for our conversion obligation in excess of the aggregate principal amount. As of December 31, 2018 , none of the conditions allowing holders of the 2023 Notes to convert had been met.

The 2023 Notes are not redeemable prior to November 22, 2021. We may redeem for cash all or any portion of the notes, at our option, on or after November 22, 2021 if the last reported sale price of our common stock has been at least 130% of the

conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day

period (including the last trading day of such period) ending on, and including, the trading day immediately preceding the date on which we provide a redemption notice at a redemption price equal to 100% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

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If we undergo a “fundamental change,” as defined in the indenture governing the 2023 Notes, subject to certain conditions, holders may require us to repurchase for cash all or any portion of their 2023 Notes. The fundamental change repurchase price will be 100% of the principal amount of the 2023 Notes to be repurchased, plus any accrued and unpaid interest up to, but excluding, the fundamental change repurchase date.

Throughout the term of the 2023 Notes, the conversion rate may be adjusted upon the occurrence of certain events. Holders of the 2023 Notes will not receive any cash payment representing accrued and unpaid interest upon conversion. Holders may convert their 2023 Notes only under the following circumstances:


•	if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;


•	during the five business day period after any five consecutive trading day period (“Notes Measurement Period”) in which the trading price per $1,000 principal amount of notes for each trading day of the Note Measurement Period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate on each such trading day;


•	if we call any or all of the notes for redemption at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date;


•	upon the occurrence of specified corporate events;


•	on or after May 15, 2023 until the close of business on the second scheduled trading day immediately preceding the maturity date, holders may convert their notes at any time, regardless of the foregoing circumstances.

We separated the 2023 Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the estimated fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the face value of the 2023 Notes as a whole. The excess of the principal amount of the liability component over its carrying amount (“debt discount”) is amortized as interest expense over the term of the 2023 Notes using the effective interest method with an effective interest rate of 6.75% per annum ( 7.36% inclusive of debt issuance costs). The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

We allocated the total transaction costs incurred in the issuance of the 2023 Notes to the liability and equity components based on their relative values. Issuance costs of $3.7 million attributable to the $122.0 million liability component are being amortized to expense over the term of the Notes, and issuance costs of $0.9 million attributable to the $28.0 million equity component were offset against the equity component in stockholders’ equity. Additionally, we recorded a deferred tax liability of $6.6 million on the debt discount, which is not deductible for tax purposes.

0.75% Convertible Senior Notes Due 2019

In September 2014, we completed a private placement of $345.0 million principal amount of 0.75% convertible senior notes due 2019 in a private placement pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from this offering were $336.3 million , after deducting the initial purchasers’ commissions and the offering expenses. We used $29.4 million of the net proceeds to purchase the Note Hedges and the Warrant transactions described below.

The 2019 Notes are senior unsecured obligations with interest payable semiannually in arrears on March 1 and September 1 of each year, commencing March 1, 2015. The Notes are not callable and will mature on September 1, 2019 , unless previously purchased or converted in accordance with their terms prior to such date. Holders of the 2019 Notes who convert in connection with a “fundamental change,” as defined in the indenture governing the 2019 Notes (“2019 Indenture”), may require us to purchase for cash all or any portion of their Notes at a purchase price equal to 100 percent of the principal amount of the 2019 Notes to be repurchased, plus accrued and unpaid interest, if any.

The initial conversion rate is 18.9667 shares of common stock per $1,000 principal amount of the 2019 Notes, which is equivalent to an initial conversion price of approximately $52.72 per share of common stock. Upon conversion of the Notes, holders will receive cash, shares of common stock or a combination thereof, at our election. Our intent is to settle the principal amount of the 2019 Notes in cash upon conversion. If the conversion value exceeds the principal amount, we intend

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to deliver shares of our common stock for our conversion obligation in excess of the aggregate principal amount. As of December 31, 2018 , none of the conditions allowing holders of the 2019 Notes to convert had been met.

Throughout the term of the 2019 Notes, the conversion rate may be adjusted upon the occurrence of certain events. Holders of the 2019 Notes will not receive any cash payment representing accrued and unpaid interest upon conversion. Holders may convert their 2019 Notes only under the following circumstances:


•	if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price on each applicable trading day;


•	during the Notes Measurement Period in which the “trading price” (as the term is defined in the 2019 Indenture) per $1,000 principal amount of notes for each trading day of such Notes Measurement Period was less than 98% of the product of the last reported stock price on such trading day and the conversion rate on each such trading day;


•	upon the occurrence of specified corporate events; or


•	at any time on or after March 1, 2019 until the close of business on the second scheduled trading day immediately preceding the maturity date.

We separated the 2019 Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the estimated fair value of a similar liability that does not have an associated convertible feature. The carrying amount of the equity component representing the conversion option was determined by deducting the fair value of the liability component from the face value of the 2019 Notes as a whole. The debt discount is amortized as interest expense over the term of the 2019 Notes using the effective interest method with an effective interest rate of 4.98% per annum ( 5.46% inclusive of debt issuance costs). The equity component is not remeasured as long as it continues to meet the conditions for equity classification.

We allocated the total transaction costs incurred in the issuance of the 2019 Notes to the liability and equity components based on their relative values. Issuance costs of $7.0 million attributable to the $281.4 million liability component are being amortized to expense over the term of the 2019 Notes, and issuance costs of $1.6 million attributable to the $63.6 million equity component were offset against the equity component in stockholders’ equity. Additionally, we recorded a deferred tax liability of $23.7 million on the debt discount, which is not deductible for tax purposes.

Our Notes are summarized as follows (in thousands):



	As of December 31,
	2018
2023 Notes
Principal amount	$	150,000
Debt discount, net of amortization	(27,653		)
Debt issuance costs, net of amortization	(3,659		)
Liability component	$	118,688
Equity component	$	28,045
Less: debt issuance costs allocated to equity	(853		)
Tax effects	(6,619		)
Equity component, net	$	20,573

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	As of December 31,
	2018			2017
2019 Notes
Principal amount	$	345,000		$	345,000
Debt discount, net of amortization	(9,366		)	(23,178		)
Debt issuance costs, net of amortization	(1,360		)	(2,865		)
Liability component	$	334,274		$	318,957
Equity component	$	63,643		$	63,643
Less: debt issuance costs allocated to equity	(1,582		)	(1,582		)
Greenshoe option value	568			568
Tax effects	485			485
Equity component, net	$	63,114		$	63,114

Interest expense recognized related to the Notes was as follows (in thousands):



	Year Ended December 31,
2023 Notes	2018
2.25% Coupon	$	281
Amortization of debt issuance costs	52
Amortization of debt discount	392
Interest expense on 2023 Notes	$	725



	Year Ended December 31,
2019 Notes	2018		2017		2016
0.75% coupon	$	2,595	$	2,580	$	2,588
Amortization of debt issuance costs	1,505		1,536		1,350
Amortization of debt discount	13,812		12,937		12,400
Interest expense on 2019 Notes	$	17,912	$	17,053	$	16,338

Note Hedges

We paid an aggregate of $63.9 million for our 2019 Note Hedges in September 2014. The 2019 Note Hedges will expire upon maturity of the 2019 Notes. The 2019 Note Hedges are intended to offset the potential dilution upon conversion and/or offset any cash payments we are required to make in excess of the principal amount upon conversion of the Notes in the event that the market value per share of our common stock, as measured under the terms of the 2019 Note Hedges, is greater than the strike price of the 2019 Note Hedges. The strike price of the 2019 Note Hedges initially corresponds to the conversion price of the 2019 Notes and is subject to anti-dilution adjustments substantially similar to those applicable to the conversion price of the 2019 Notes. The Note 2019 Hedges are separate transactions and are not part of the 2019 Notes. Holders of the 2019 Notes will not have any rights with respect to the Note Hedges.

Warrants

Concurrently with entering into the 2019 Note Hedges, we separately entered into warrant transactions (“Warrants”), whereby we sold warrants to acquire shares of our common stock at a strike price of $68.86 per share. We received aggregate proceeds of $34.5 million from the sale of the Warrants. If the average market value per share of our common stock for the reporting period, as measured under the Warrants, exceeds the strike price of the Warrants, the Warrants will have a dilutive effect on our earnings per share. The Warrants will expire in December 2019 and are separate transactions that are not part of

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the 2019 Notes or the 2019 Note Hedges and are accounted for as a component of additional paid-in capital. Holders of the Notes and Note Hedges will not have any rights with respect to the Warrants.

Revolving Credit Agreement

On January 2, 2019, we entered into a 5 -year $150 million revolving credit agreement with an option for an additional $50 million , subject to certain requirements. Interest is variable with a premium applied to an index rate. The amount of the premium varies based on our net leverage ratio. Interest is due monthly on any borrowings, and a commitment fee is assessed on the portion of the facility that is not utilized. This credit facility is secured by substantially all of our domestic assets and the pledge of 65% of the stock of our foreign subsidiaries. The agreement contains various affirmative and negative covenants, as well as three financial covenants based on leverage and interest coverage ratios.

The issuance cost of $0.8 million incurred on this facility will be recorded in other long-term assets and will be amortized on a straight-line basis over the 5 -year term of this agreement. There were no initial borrowings made under the facility at closing.

Note 13 . Commitments and Contingencies

Contingent Consideration

We are required to make payments to the former stockholders of acquired companies based on the achievement of specified performance targets as more fully explained in Note 8 – Fair Value Measurements .

Purchase Commitments

We subcontract with other companies to manufacture certain of our products. During the normal course of business, our subcontractors procure components based on orders placed by us. If we cancel all or part of our orders, we may still be liable to the subcontractors for the cost of the components they purchased to manufacture our products. We periodically review the potential liability compared to the adequacy of the related allowance. The amount of potential liability was not material as of December 31, 2018 or 2017 .

Lease Commitments

As of December 31, 2018 , we lease certain of our current facilities and vehicles under noncancellable operating lease agreements. We are required to pay property taxes, insurance, and nominal maintenance costs for certain of these facilities and vehicles and any increases over the base year of these expenses on the remainder of our facilities and vehicle leases.

Future minimum lease payments under noncancellable operating leases, including build-to-suit leases, and future minimum sublease receipts, for each of the next five years and thereafter as of December 31, 2018 are as follows (in thousands):



Fiscal Year	Future Minimum Lease Payments		Future Minimum Sublease Receipts
2019	$	6,559	$	351
2020	6,216		60
2021	4,355		—
2022	2,582		—
2023	1,423		—
Thereafter	24,180		—
Total	$	45,315	$	411

Facilities rent expense was $8.4 , $8.1 , and $8.8 million for the years ended December 31, 2018 , 2017 , and 2016 , respectively. Vehicle rent expense was $3.1 , $2.8 , and $2.8 million for the years ended December 31, 2018 , 2017 , and 2016 , respectively.

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Guarantees and Product Warranties

Our Industrial Inkjet printers are generally accompanied by a 13 -month limited warranty, commencing on the installation date, which covers both parts and labor. Our Fiery DFE products limited warranty is generally 12 to 15 months. In accordance with ASC 450-30, an accrual is established when the warranty liability is estimable and probable based on historical experience. A provision for the estimated warranty costs relating to products that have been sold is recorded in cost of revenue upon recognition of revenue and the resulting accrual is reviewed regularly and periodically adjusted to reflect changes in warranty estimates. We have agreed to continue to provide warranty coverage for certain expired FFPS warranties for five years subsequent to the acquisition of the FFPS business.

The changes in product warranty reserve were as follows (in thousands):



	Year Ended December 31,
	2018			2017
Balance at January 1,	$	16,335		$	10,319
Liability assumed upon acquiring FFPS	—			10,362
Provisions, net of releases	10,548			13,487
Settlements	(14,109		)	(17,833		)
Balance at December 31,	$	12,774		$	16,335

Indemnifications

In the normal course of business and in an effort to facilitate the sales of our products, we sometimes indemnify other parties, including customers, lessors, and others. When we indemnify these parties, typically those provisions protect other parties against losses arising from our infringement of third party intellectual property rights or other claims made by third parties arising from the use or distribution of our products. Those provisions often contain various limitations including limits on the amount of protection provided.

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

Legal Proceedings

As of December 31, 2018 , we are subject to the matters discussed below.

MDG Matter

EFI acquired Matan in 2015 from sellers (the “2015 Sellers”) that acquired MDG from other sellers in 2001 (the “2001 Sellers”). The 2001 Sellers have asserted a claim against the 2015 Sellers and Matan asserting that they are entitled to a portion of the 2015 Sellers’ proceeds from EFI’s acquisition. The 2015 Sellers dispute any such claim and have fully indemnified EFI against the 2001 Sellers’ claim.

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Although we are fully indemnified and we do not believe that it is probable that we will incur a loss, it is reasonably possible that we could incur a material loss in this matter. We estimate the range of loss to be between one dollar and $10.1 million . If we incur a loss in this matter, it will be offset by a receivable of an equal amount representing a claim for indemnification against the escrow account established in connection with the Matan acquisition.

Purported Class Action Lawsuit

In August 2017, a putative class action was filed against the Company and its two named executive officers in the United States District Court for the District of New Jersey, captioned Pipitone v. Electronics For Imaging, Inc ., No. 2:17-cv-05992 (D.N.J.) and a first amended complaint was filed in February 2018. The complaint alleged, among other things, that statements by the Company and its officers about the Company’s financial reporting, revenue recognition, internal controls, and disclosure controls and procedures were false or misleading. The complaint sought an unspecified amount of damages, interest, attorneys’ fees, and other costs, on behalf of a putative class of individuals and entities that purchased or otherwise acquired EFI securities from February 22, 2017 through August 3, 2017. On January 31, 2019, the district court dismissed the complaint without prejudice, giving the plaintiffs thirty days to file a second amended complaint that addresses the deficiencies identified in the court’s order.

At this time, we do not believe it is probable that we will incur a material loss in this matter. However, it is reasonably possible that our financial statements could be materially affected by an unfavorable resolution of this matter. Because there is no operative complaint on file as of the date of this filing, we are not in a position to estimate the amount or range of reasonably possible loss that may be incurred.

Shareholder Derivative Lawsuit

In August 2017, a shareholder derivative complaint was filed in the Superior Court of the State of California for the County of Alameda captioned Schiffmiller v. Gecht , No. RG17873197. A First Amended Complaint was filed in April 2018. The complaint makes claims derivatively and on behalf of the Company as nominal defendant against the Company’s named executive officers and directors for alleged breaches of fiduciary duties and unjust enrichment, and alleges, among other things, that statements by the Company and its officers about the Company’s financial reporting, revenue recognition, internal controls, and disclosure controls and procedures were false or misleading. The complaint alleges the Company has suffered damage as a result of the individual defendants’ alleged actions, and seeks an unspecified amount of damages, restitution, and declaratory and other relief. The derivative action has been stayed pending the resolution of the Pipitone class action described above.

At this time, we do not believe it is probable that we will incur a material loss in this matter. However, it is reasonably possible that our financial statements could be materially affected by an unfavorable resolution of this matter. Because this matter has been stayed pending resolution of the Pipitone class action described above, we are not yet in a position to estimate the amount or range of reasonably possible loss that may be incurred.

Other Matters

As of December 31, 2018 , we were subject to various other claims, lawsuits, investigations, and proceedings in addition to the matters discussed above. There is at least a reasonable possibility that additional losses may be incurred in excess of the amounts that we have accrued. However, we believe that these claims are not material to our financial statements or the range of reasonably possible losses is not reasonably estimable. Litigation is inherently unpredictable, and while we believe that we have valid defenses with respect to legal matters pending against us, our financial statements could be materially affected in any particular period by the unfavorable resolution of one or more of these contingencies or because of the diversion of management’s attention and the incurrence of significant expenses.

Note 14 . Stock Repurchase Program

In September 2017, the board of directors approved $125.0 million for our share repurchase program in addition to the $150.0 million previously authorized in November 2015. At that time, $28.8 million remained available for repurchase under the 2015 authorization. The 2017 authorization thereby increased the remaining repurchase authorization to $153.8 million . This authorization commenced on the date of approval and expired December 31, 2018. Under this publicly announced plan, we repurchased 3,726,042 and 2,363,988 shares for an aggregate purchase price of $109.4 and $91.4 million during the years

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ended December 31, 2018 and 2017 , respectively. As of December 31, 2018 , we have completed the $275 million authorized stock repurchase program.

Our employees have the option to surrender shares of common stock to satisfy their tax withholding obligations that arise on the vesting of RSUs and the exercise of stock options. During the years ended December 31, 2018 and 2017 , our employees surrendered 131,008 and 249,363 shares for an aggregate purchase price of $4.1 and $10.5 million , respectively.

Note 15 . Stock-based Compensation and Other Employee Benefits

Equity Incentive Plans

As of December 31, 2018 , we had outstanding equity awards under our 2017 Equity Incentive Plan and our 2009 Stock Plan. No awards may be granted under our 2009 Stock Plan after June 7, 2017. Our primary equity incentive plans are summarized as follows:

2017 Equity Incentive Plan

Our stockholders approved the 2017 Equity Incentive Plan (“2017 Plan”) on June 7, 2017, which includes:


•	1,200,000 shares of our common stock reserved for issuance pursuant to such plan;


•	1,593,660 common stock shares that were available for future grants under the 2009 Equity Incentive Award Plan (“Prior Plan”) immediately prior to termination of authority to grant new awards under the Prior Plan on June 7, 2017;


•	shares subject to stock options granted under the Prior Plan and outstanding as of June 7, 2017, which expire, or for any reason are canceled or terminated, after that date without being exercised; and


•	shares subject to restricted stock unit awards granted under the 2009 Plan that are outstanding and unvested as of June 7, 2017 which are forfeited, terminated, canceled, or otherwise reacquired after that date without having become vested.

The 2017 Plan provides for grants of stock options (both incentive and non-qualified stock options), restricted stock, stock units, stock bonuses, performance stock, stock appreciation rights, performance stock units, phantom stock, dividend equivalent rights or cash awards. Options and awards generally vest over a period of one to four years from the date of grant and generally expire seven to ten years from the date of the grant. The terms of the 2017 Plan provide that an option price shall not be less than 100% of fair value on the date of the grant. Our board of directors may grant a stock bonus or stock unit award under the 2017 Plan in lieu of all or a portion of any cash bonus that a participant would have otherwise received for the related performance period.

The shares of common stock covered by the 2017 Plan may be treasury shares, authorized but unissued shares, or shares purchased in the open market. If an award under the 2017 Plan is forfeited (including a reimbursement of a non-vested award upon a participant’s termination of employment at a price equal to the par value of the common stock subject to the award) or expired, any shares of common stock subject to the award may be used again for new grants under the 2017 Plan.

The 2017 Plan is administered by the Compensation Committee of the Board of Directors (“Committee”). The Committee has the exclusive authority to administer the 2017 Plan, including the power to (i) designate participants under the 2017 Plan, (ii) determine the types of awards granted to participants under the 2017 Plan, the number of such awards, and the number of shares of our common stock that is subject to such awards, (iii) determine and interpret the terms and conditions of any awards under the 2017 Plan, including the vesting schedule, exercise price, whether to settle or accept the payment of any exercise price, in cash, common stock, other awards, or other property, and whether an award may be canceled, forfeited, or surrendered, (iv) prescribe the form of each award agreement, and (v) adopt rules for the administration, interpretation, and application of the 2017 Plan.

Persons eligible to participate in the 2017 Plan include all of our employees, directors, and consultants, as determined by the Committee. There were 2.5 million shares outstanding and 0.6 million shares available for grant under the 2017 Plan as of December 31, 2018 .

2009 Stock Plan

With the adoption of the 2017 Plan, no additional awards may be granted under the 2009 Stock Plan (“2009 Plan”). The 2009 Plan provided for grants of stock options (both incentive and non-qualified stock options), restricted stock awards, stock appreciation rights, performance shares, performance stock units, dividend equivalents, stock payments, deferred stock, RSUs, and performance-based awards. Options and awards generally vest over a period of one to four years from the date of grant and generally expire seven to ten years from the date of the grant. The terms of the 2009 Plan provide that an option price shall not be less than 100% of fair value on the date of the grant. Our board of directors could grant a stock bonus or stock unit award under the 2009 Plan in lieu of all or a portion of any cash bonus that a participant would have otherwise received for the related performance period.

The shares of common stock covered by the 2009 Plan may be treasury shares, authorized but unissued shares, or shares purchased in the open market. If an award under the 2009 Plan is forfeited, terminated, canceled, or otherwise reacquired, any shares of common stock subject to the award may be used again for new grants under the 2017 Plan. There were 0.5 , 1.3 , and 2.4 million shares outstanding under the 2009 Plan as of December 31, 2018 , 2017 , and 2016 , respectively.

Amended and Restated 2000 Employee Stock Purchase Plan

As most recently amended on June 4, 2013, our stockholders approved the Amended and Restated 2000 Employee Stock Purchase Plan that increased the number of shares authorized for issuance pursuant to such plan by 2 million shares. The share increase was intended to ensure that we continue to have a sufficient reserve of common stock available under the ESPP to provide our eligible employees with the opportunity to acquire our common stock through participation in a payroll deduction-based ESPP designed to operate in compliance with Section 423 of the Internal Revenue Code ("IRC"). The ESPP does not provide for an automatic increase in the number of shares reserved for issuance under the ESPP.

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

There were 0.4 million shares issued under the ESPP at an average purchase price of $24.93 during the year ended December 31, 2018 , and there were 0.3 million shares issued at an average price of $35.18 and $32.88 during each of the years ended December 31, 2017 and 2016 , respectively. As of December 31, 2018 , there was $3.1 million of total unrecognized compensation cost related to stock-based compensation arrangements granted under the ESPP, which is expected to be recognized over a period of 1.80 years years. At December 31, 2018 , 2017 , and 2016 , there were 0.5 , 0.9 , and 1.2 million shares, respectively, of our common stock reserved for issuance under the ESPP.

Stock-based Compensation Expense

We measure and recognize compensation expense for all equity awards granted to our employees and directors, including employee stock options, RSUs, and ESPP purchase rights based on the fair value of such awards on the date of grant. We amortize stock-based compensation cost on a graded vesting basis over the vesting period reduced by actual forfeitures, after assessing the probability of achieving the requisite performance criteria with respect to performance-based awards. Stock-based compensation cost is recognized over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. We use the BSM option pricing model to value stock-based compensation for stock options. We value market-based awards using a Monte Carlo valuation model. We value RSUs at the closing market price on the date of grant.

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Stock-based compensation expense is summarized as follows (in thousands):



	For the Years Ended December 31,
Stock-Based Compensation	2018			2017			2016
RSUs	$	39,180		$	21,887		$	28,952
ESPP purchase rights	6,101			4,645			2,795
Employee stock options	—			—			79
Total stock-based compensation	45,281			26,532			31,826
Income tax benefit	(6,465		)	(8,188		)	(10,342		)
Stock-based compensation expense, net of tax	$	38,816		$	18,344		$	21,484

Stock-based compensation is reported in our Consolidated Statements of Operations within the following line items:



	For the Years Ended December 31,
Stock-Based Compensation	2018		2017		2016
Cost of revenue	$	3,770	$	2,561	$	2,784
Research and development	13,037		9,177		8,968
Sales and marketing	8,960		6,583		7,690
General and administrative	19,514		8,211		12,384
Total stock-based compensation	$	45,281	$	26,532	$	31,826

Valuation Assumptions for Stock Options and ESPP Purchases

The BSM model determines the fair value of stock options based on the stock price on the date of grant and assumptions including volatility, expected term, and interest rates. Expected volatility is based on the historical volatility of our stock over a preceding period commensurate with the expected term of the stock option. The expected term is based on management’s consideration of the historical life of the stock options, the vesting period of the stock options granted, and the contractual period of the stock options granted. The risk-free interest rate for the expected term of the stock options is based on the U.S. Treasury yield curve in effect at the time of grant. Expected dividend yield was not considered in the option pricing formula since we do not pay dividends and have no current plans to do so in the future.

Stock options were not granted during the years ended December 31, 2018 , 2017 , and 2016 . The estimated weighted average fair value per share of ESPP purchase rights issued and the assumptions used to estimate fair value for the years ended December 31, 2018 , 2017 , and 2016 are as follows:



	For the Years Ended December 31,
Employee Stock Purchase Plan	2018		2017		2016
Weighted average fair value per share	$	9.28	$	12.09	$	10.69
Expected volatility	37% - 107%		24% - 28%		22% - 32%
Risk-free interest rate	1.6% - 2.7%		0.7% - 1.3%		0.4% - 0.8%
Expected term (in years)	0.5 - 2.0		0.5 - 2.0		0.5 - 2.0

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Stock Option Activity

Stock options outstanding and exercisable, including performance-based and market-based options, as of December 31, 2018,

2017 , and 2016 and activity for each of the years then ended are summarized as follows (in thousands, except weighted average exercise price and remaining contractual term):



Stock Options	Shares		Weighted average exercise price		Weighted average remaining contractual term (years)	Aggregate intrinsic value
Options outstanding as of January 1, 2016	442		$	13.20
Options forfeited and expired	(12	)	10.77
Options exercised	(115	)	11.64
Options outstanding as of December 31, 2016	315		$	13.86	1.46	$	9,480
Options exercised	(165	)	12.45
Options outstanding as of December 31, 2017	150		$	15.43	1.27	$	2,116
Options exercised	(75	)	14.28
Options outstanding as of December 31, 2018	75		$	16.57	0.68	$	617
Options vested and expected to vest as of December 31, 2018	75		$	16.57	0.68	$	617
Options exercisable as of December 31, 2018	75		$	16.57	0.68	$	617

Aggregate stock option intrinsic value represents the difference between the closing price per share of our common stock on the last trading day of the fiscal period and the exercise price of the underlying awards for the options that were in the money at that time. The total intrinsic value of options exercised, determined as of the date of option exercise, was $1.4 , $5.3 , and $3.8 million for the years ended December 31, 2018 , 2017 , and 2016 , respectively. There was no unrecognized compensation cost related to stock options expected to vest as of December 31, 2018 . The weighted average exercise price is $16.57 . The weighted average remaining contractual term of outstanding options is 0.68 years as of December 31, 2018 .

Non-vested RSUs

Non-vested RSUs were awarded to employees under our equity incentive plans. Non-vested RSUs do not have the voting rights of common stock and the shares underlying non-vested RSUs are not considered issued and outstanding. Non-vested RSUs generally vest over a service period of one to four years. The compensation expense incurred for these service-based awards is based on the closing market price of our stock on the date of grant and is amortized on a graded vesting basis over the requisite service period. The weighted average fair value of RSUs granted during the years ended December 31, 2018 , 2017 , and 2016 were $30.93 , $35.89 , and $43.35 , respectively.

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Non-vested RSUs, including performance-based and market-based RSUs, as of December 31, 2018 , 2017 , and 2016 , and activity for each of the years then ended, are summarized as follows (shares in thousands):



Restricted Stock Units	Shares		Weighted average grant date fair value
Non-vested at January 1, 2016	1,814		$	40.53
Restricted stock granted	1,359		43.35
Restricted stock vested	(787	)	38.34
Restricted stock forfeited	(303	)	39.54
Non-vested at December 31, 2016	2,083		$	43.34
Restricted stock granted	1,467		35.89
Restricted stock vested	(761	)	42.74
Restricted stock forfeited	(510	)	41.51
Non-vested at December 31, 2017	2,279		$	39.16
Restricted stock granted	2,048		30.93
Restricted stock vested	(639	)	35.63
Restricted stock forfeited	(767	)	42.63
Non-vested at December 31, 2018	2,921		$	33.25

Vested RSUs

Performance-based RSUs that vested based on annual financial results are expensed over the term of service and when the performance criteria are expected to be met. The grant date fair value of RSUs that vested during the years ended December 31, 2018 , 2017 , and 2016 were $35.63 , $42.74 , and $38.34 , respectively. Aggregate intrinsic value of RSUs vested and expected to vest as of December 31, 2018 was $70.7 million calculated as the closing price per share of our common stock on the last trading day of the fiscal period multiplied by 2.9 million RSUs vested and expected to vest as of December 31, 2018 . RSUs expected to vest represent time-based RSUs unvested and outstanding as of December 31, 2018 , and performance-based RSUs for which the requisite service period has not been rendered, but are expected to vest based on the achievement of performance conditions. There was approximately $35.4 million of unrecognized compensation costs related to RSUs expected to vest as of December 31, 2018 . That cost is expected to be recognized over a weighted average period of 1.0 years.

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Performance-based and Market-based RSUs and Stock Options

Performance-based and market-based RSUs included in the tables above as of December 31, 2018 , 2017 , and 2016 , and activity for each of the years then ended, are summarized below (in thousands):



	Performance-based				Market-based
	RSUs		Stock Options		RSUs
Non-vested at January 1, 2016	920		16		23
Granted	821		—		—
Vested	(226	)	(4	)	—
Forfeited	(250	)	(12	)	—
Non-vested at December 31, 2016	1,265		—		23
Granted	675		—		—
Vested	(284	)	—		—
Forfeited	(447	)	—		—
Non-vested at December 31, 2017	1,209		—		23
Granted	925		—		47
Vested	(20	)	—		—
Forfeited	(648	)	—		—
Non-vested at December 31, 2018	1,466		—		70

Approximately 21% of the non-vested performance-based RSUs at December 31, 2018 subsequently vested during the first quarter of 2019 based on achievement of specified performance criteria related to revenue and non-GAAP operating income targets.

We use the BSM option pricing model to value performance-based awards. We use a Monte Carlo option pricing model to value market-based awards. The estimated grant date fair value per share of performance-based and market-based RSUs granted and the assumptions used to estimate grant date fair value are as follows:



	Performance-Based				Market-Based
	RSUs				RSUs
	Short-term		Long-term
Year ended December 31, 2018 Grants
Grant date fair value per share	$	28.41	$	33.99	$	22.52
Service period (years)	1.0		3.0
Derived service period (years)					1.0
Implied volatility					45.0		%
Risk-free interest rate					3.1		%
Year ended December 31, 2017 Grants
Grant date fair value per share	$	47.18	$	33.43
Service period (years)	1.0		2.0 - 3.0
Year ended December 31, 2016 Grants
Grant date fair value per share	$	39.79	$	45.76
Service period (years)	1.0		2.0 - 3.0

Our performance-based RSUs generally vest when specified performance criteria are met based on bookings, revenue, cash provided by operating activities, non-GAAP operating income, non-GAAP earnings per share, revenue growth compared to

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market comparables, non-GAAP earnings per share growth compared to cash flows from operating activities growth, or other targets during the service period; otherwise, they are forfeited. Non-GAAP operating income is defined as operating income determined in accordance with GAAP, adjusted to remove the impact of certain expenses as defined in Unaudited Non-GAAP Financial Information. Non-GAAP earnings per share is defined as net income (loss) determined in accordance with GAAP, adjusted to remove the impact of certain expenses, and the related tax effects, divided by the weighted average number of common shares and dilutive potential common shares outstanding during the period as more fully defined in Note 2 – Earnings Per Share of Notes to Consolidated Financial Statements.

The grant date fair value per share determined in accordance with the BSM valuation model is being amortized over the service period of the performance-based awards. The probability of achieving the awards was determined based on review of the actual results achieved thus far by each business unit compared with the operating plan during the pertinent service period as well as the overall strength of the business unit. Stock-based compensation expense was adjusted based on this probability assessment. As actual results are achieved during the service period, the probability assessment is updated and stock-based compensation expense adjusted accordingly. Our stock compensation expense could change significantly in future periods if our probability assessments change significantly.

Market-based awards that were granted in prior periods vest when our average closing stock price exceeds defined multiples of the closing stock price for 60 - 90 consecutive trading days. If these multiples were not achieved by the expiration date, the awards are forfeited. The grant date fair value is being amortized over the average derived service period of the awards. The average derived period and total fair value were determined using a Monte Carlo valuation model based on our assumptions, which include a risk-free interest rate and implied volatility.

Employee 401(k) Plan

We sponsor a 401(k) Savings Plan (“401(k) Plan”) that provides retirement and incidental benefits for our U.S. employees. Employees may contribute from 1% to 75% of their annual compensation to the 401(k) Plan, limited to a maximum annual amount as set periodically by the IRS. We match 50% of U.S. employee contributions, up to a maximum of the first 4% of the employee’s compensation contributed to the plan, subject to IRS limitations. All matching contributions vest over four years starting with the hire date of the individual employee. Our matching contributions to the 401(k) Plan totaled $2.4 , $2.3 , and $2.2 million during the years ended December 31, 2018 , 2017 , and 2016 , respectively. The employees’ contributions and our contributions are invested in mutual funds managed by a fund manager, or in self-directed retirement plans.

Note 16 . Restructuring and Other

During the years ended December 31, 2018 , 2017 , and 2016 , we continued to analyze and re-align our cost structure following our business acquisitions. These charges primarily relate to integrating recently acquired businesses, consolidating facilities, eliminating redundancies, and lowering our operating expense run rate. Restructuring and other consists primarily of restructuring, severance, short-term retention costs, facility downsizing and relocation, and acquisition integration expenses. Our restructuring and other plans are accounted for in accordance with ASC 420, ASC 712, and ASC 820.

Restructuring and other costs for the years ended December 31, 2018 , 2017 , and 2016 were $13.6 , $7.6 , and $6.7 million , respectively. Restructuring and other costs included severance costs of $7.5 , $4.7 , and $4.1 million related to head count reductions of 148 , 144 , and 128 for the years ended December 31, 2018 , 2017 , and 2016 , respectively. Severance costs include severance payments, related employee benefits, outplacement fees, recruiting, and employee relocation costs.

Facilities relocation and downsizing expenses for the years ended December 31, 2018 , 2017 , and 2016 were $1.7 , $0.6 , and $0.5 million , respectively. Facilities restructuring and other expenses are primarily related to the relocation of certain manufacturing and administrative locations to consolidate, streamline, or improve operations. Integration expenses for the years ended December 31, 2018 , 2017 , and 2016 of $4.3 , $2.3 , and $2.1 million , respectively, represented costs to integrate our business acquisitions.

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Restructuring and other reserve activities are summarized as follows (in thousands):



	Year Ended December 31,
	2018			2017
Reserve balance at January 1	$	2,452		$	1,824
Restructuring charges	8,323			5,136
Other charges	5,259			2,424
Non-cash restructuring and other	(975		)	(264		)
Cash payments	(13,088		)	(6,668		)
Reserve balance at December 31	$	1,971		$	2,452

Note 17 . Income Taxes

The components of income (loss) before income taxes are as follows (in thousands):



	Year Ended December 31,
	2018			2017			2016
U.S.	$	(64,810	)	$	(27,926	)	$	8,254
Foreign	65,931			40,056			30,394
Total income before income taxes	$	1,121		$	12,130		$	38,648

The provision for (benefit from) income taxes is summarized as follows (in thousands):



	Year Ended December 31,
	2018			2017			2016
Current:
U.S. Federal	$	(376	)	$	6,897		$	(7,593	)
State	(9		)	(2,926		)	662
Foreign	13,858			14,751			11,721
Total current	13,473			18,722			4,790
Deferred:
U.S. Federal	(1,671		)	15,304			(4,276		)
State	(1,259		)	732			(567		)
Foreign	(8,451		)	(7,283		)	(6,248		)
Total deferred	(11,381		)	8,753			(11,091		)
Provision for (benefit from) income taxes	$	2,092		$	27,475		$	(6,301	)

123

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

The reconciliation of the income tax provision (benefit) computed at the federal statutory rate to the actual tax provision (benefit) is as follows (in thousands):



	Year Ended December 31,
Rate Reconciliation	2018					2017					2016
Tax provision at federal statutory rate	$	235		21.0	%	$	4,246		35.0	%	$	13,527		35.0	%
State income taxes, net of federal benefit	(1,002		)	(89.4	)%	(1,426		)	(11.8	)%	62			0.2	%
Research and development credits	(1,511		)	(134.8	)%	(1,508		)	(12.4	)%	(2,627		)	(6.8	)%
Effect of foreign operations	2,923			260.7	%	(1,344		)	(11.1	)%	(3,320		)	(8.5	)%
Deemed repatriation transition tax	(831		)	(74.2	)%	16,976			139.8	%	—			—	%
Provision for remeasuring deferred tax balances	(343		)	(30.6	)%	10,450			86.1	%	—			—	%
Reduction in accrual for estimated potential tax assessments	(2,047		)	(182.5	)%	(1,676		)	(13.7	)%	(15,404		)	(39.9	)%
Non-deductible stock-based compensation	3,940			351.5	%	1,249			10.3	%	1,288			3.3	%
Domestic manufacturing deduction	—			—	%	—			—	%	(831		)	(2.2	)%
Acquisition and integration costs	285			25.4	%	168			1.4	%	(103		)	(0.2	)%
Meals and entertainment	497			44.3	%	500			4.1	%	475			1.2	%
Other	(54		)	(4.8	)%	(160		)	(1.3	)%	632			1.6	%
Provision for (benefit from) income taxes	$	2,092		186.6	%	$	27,475		226.4	%	$	(6,301	)	(16.3	)%

On December 22, 2017, the 2017 Tax Act was enacted by the U.S. government. The 2017 Tax Act made broad and complex changes to the U.S. tax code that impacted the years ended December 31, 2018 and 2017, including, but not limited to the deemed repatriation transition tax and the remeasurement of U.S. deferred tax assets and liabilities as a result of the reduction of the U.S. corporate rate from 35% to 21% . The enactment of the 2017 Tax Act required companies, under ASC 740, to recognize the effects of changes in tax law and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted. The effects of these changes in tax law were recorded as a component of our tax provision, regardless of the category of pre-tax income or loss to which the deferred taxes relate.

The SEC issued SAB 118, which allowed us to record a provisional estimate of the income tax effects of the 2017 Tax Act in the period in which we could make a reasonable estimate of its effects. We recorded a $27.5 million tax charge in the year ended December 31, 2017 as a provisional estimate. This includes an estimated charge of $17.0 million related to the deemed repatriation transition tax, which was comprised of a gross transition tax of $27.0 million offset by foreign tax credits of $10.0 million . In addition, we recorded a $10.5 million charge related to the remeasurement of U.S. deferred tax assets and liabilities. We applied the guidance in SAB 118 when accounting for the enactment-date effects of the Act in 2017 and throughout 2018. As of December 31, 2017, we had not completed our accounting for all of the enactment-date income tax effects of the Act under ASC 740, Income Taxes. In 2018, we recorded a cumulative adjustment of $1.2 million benefit to the $27.5 million recorded in 2017 as a result of the filing of our 2017 US federal and state tax returns. As of December 31, 2018, we have now completed our accounting for all of the enactment-date income tax effects of the Act.

The 2017 Tax Act also created a minimum tax on certain foreign earnings, also known as the GILTI provision, commencing in the year ending December 31, 2018. In 2018, we recorded a net charge of $4.7 million (GILTI inclusion less GILTI foreign tax credits) for the full year impact. In addition, we have made an accounting policy election to record GILTI as a period expense and not record deferred tax assets associated with GILTI.

124

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) are as follows (in thousands):



	As of December 31,
Deferred Taxes	2018			2017
Tax credit carryforwards	$	67,346		$	62,096
Net operating loss carryforwards	10,823			9,066
Reserves and accruals not currently deductible for tax purposes	8,957			8,785
Stock-based compensation	6,004			3,432
Other	2,519			6,472
Gross deferred tax assets	95,649			89,851
Depreciation and amortization	(5,493		)	(11,075		)
Convertible Debt	(7,375		)	161
Gross deferred tax liabilities	(12,868		)	(10,914		)
Deferred tax valuation allowance	(47,102		)	(45,506		)
Net deferred tax assets	$	35,679		$	33,431

We have $11.4 million federal ( $47.6 million for state tax purposes) and $37.7 million federal ( $39.6 million for state tax purposes) of loss and credit carryforwards as of December 31, 2018 . A majority of these federal and state losses and credits will expire between 2022 and 2027 . A significant portion of these net operating loss and credit carryforwards relate to recent acquisitions. Utilization of these loss and credit carryforwards will be subject to an annual limitation under the IRC. During the year ended December 31, 2018, we recorded $6.6 million of net deferred tax liabilities upon the issuance of the 2023 Notes.

In accordance with ASU 2016-09, which was adopted in the second quarter of 2016, we recorded $2.2 million of deferred tax assets related to excess tax benefits for federal research and development income tax credits not previously benefited and $0.6 million of deferred tax assets for the tax benefit on the cumulative effect adjustment associated with the change in accounting for RSU forfeitures.

We assess the likelihood that our deferred tax assets will be recovered from future taxable income by considering both positive and negative evidence relating to their recoverability. If we believe that recovery of these deferred tax assets is not more likely than not, we establish a valuation allowance. Significant judgment is required in determining any valuation allowance recorded against deferred tax assets. In assessing the need for a valuation allowance, we considered all available evidence, including recent operating results, projections of future taxable income, our ability to utilize loss and credit carryforwards, and the feasibility of tax planning strategies. Other than valuation allowances on deferred tax assets related to California, Luxembourg, Israel, Netherlands, Turkey and the Optitex business unit that are not likely to be realized based on the size of the net operating loss and research and development credits being generated, we have determined that it is more likely than not that we will realize the benefit related to all other deferred tax assets. To the extent we increase a valuation allowance, we will include an expense within the tax benefit in the Consolidated Statement of Operations in the period in which such determination is made.

125

Electronics For Imaging, Inc.

Notes to Consolidated Financial Statements – (Continued)

A reconciliation of the change in the gross unrecognized tax benefits is as follows (in thousands):



Reconciliation of Unrecognized Tax Benefits	Federal, State, and Foreign Tax			Accrued Interest and Penalties			Gross Unrecognized Income Tax Benefits
Balance as of December 31, 2015	$	46,090		$	532		$	46,622
Additions for tax positions of prior years	1,826			234			2,060
Additions for tax positions related to 2016	3,925			—			3,925
Reductions due to lapse of applicable statute of limitations	(16,483		)	(230		)	(16,713		)
Balance as of December 31, 2016	$	35,358		$	536		$	35,894
Additions for tax positions of prior years	1,720			327			2,047
Additions for tax positions related to 2017	4,492			—			4,492
Reductions due to lapse of applicable statute of limitations	(4,065		)	(177		)	(4,242		)
Balance as of December 31, 2017	$	37,505		$	686		$	38,191
Reductions for tax positions of prior years	(1,027		)	390			(637		)
Additions for tax positions related to 2018	3,579			—			3,579
Reductions due to lapse of applicable statute of limitations	(4,454		)	(213		)	(4,667		)
Balance as of December 31, 2018	$	35,603		$	863		$	36,466

As of December 31, 2018 , 2017 , and 2016 , gross unrecognized benefits that would affect the effective tax rate if recognized were $31.7 , $33.9 , and $32.0 million , respectively, offset by deferred tax benefits of $0.4 , $0.4 , and $1.1 million related to the federal tax effect of state income taxes for the same periods. Over the next twelve months, our existing tax positions will continue to generate increased liabilities for unrecognized tax benefits. It is reasonably possible that our gross unrecognized tax benefits will decrease up to $6.5 million in the next twelve months. These adjustments, if recognized, would positively impact our effective tax rate, and would be recognized as additional tax benefits in our Consolidated Statements of Operations.

In accordance with ASU 2013-11, we recorded $16.5 million of gross unrecognized tax benefits as an offset to deferred tax assets as of December 31, 2018 , and the remaining $15.2 million has been recorded as noncurrent income taxes payable.

We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2018 , 2017 , and 2016 , we have accrued $0.9 , $0.7 , and $0.5 million , respectively, for potential payments of interest and penalties.

We are subject to examination by the Internal Revenue Service (“IRS”) for the 2015 - 2017 tax years, state tax jurisdictions for the 2014 - 2017 tax years, the Netherlands tax authority for the 2014 - 2017 tax years, the Spanish tax authority for the 2014 - 2017 tax years, the Israel tax authority for the 2015 - 2017 tax years, and the Italian tax authority for the 2014 - 2017 tax years.

126

SUPPLEMENTARY DATA

Unaudited Quarterly Consolidated Financial Information

The following table presents our operating results for each of the quarters in the years ended December 31, 2018 and 2017 . The information for each of these quarters is unaudited, but has been prepared on the same basis as our audited consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K. In the opinion of management, all necessary adjustments have been included that are required to state fairly our unaudited quarterly results when read in conjunction with our audited consolidated financial statements and the notes thereto. These operating results are not necessarily indicative of the results for any future period.



	Year Ended December 31, 2018
(in thousands except per share data)	Q1			Q2		Q3		Q4
Revenue	$	239,866		$	261,072	$	257,134	$	256,949
Gross profit	119,107			128,588		125,519		125,359
Income from operations	(2,065		)	13,644		2,115		5,992
Net income (loss)	(3,595		)	3,768		1,920		(3,064		)
Net income (loss) per basic common share	$	(0.08	)	$	0.08	$	0.04	$	(0.07	)
Net income (loss) per diluted common share	$	(0.08	)	$	0.08	$	0.04	$	(0.07	)
	Year Ended December 31, 2017
(in thousands except per share data)	Q1			Q2		Q3		Q4
Revenue	$	228,691		$	247,047	$	248,359	$	269,163
Gross profit	123,530			127,252		127,458		128,216
Income from operations	8,143			7,991		7,397		4,016
Net income (loss)	4,787			2,759		3,454		(26,345		)
Net income (loss) per basic common share	$	0.10		$	0.06	$	0.07	$	(0.58	)
Net income (loss) per diluted common share	$	0.10		$	0.06	$	0.07	$	(0.58	)

Item 9: Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A: Controls and Procedures


(a)	Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as this term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to provide reasonable assurance that information required to be disclosed by

us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2018. Our internal control over financial reporting is the process designed by and under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of our financial statements for external reporting in accordance with accounting principles generally accepted in the United States of America. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and

127

procedures. The design of any disclosure controls and procedures is also based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2018 at a reasonable assurance level.


(b)	Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on our assessment using those criteria, we have concluded that our internal control over financial reporting was effective as of December 31, 2018.


(c)	Changes in Internal Control Over Financial Reporting

As of December 31, 2018, our testing of both the design and operating effectiveness of new and redesigned controls was completed, and we have concluded that the following material weaknesses existing as of December 31, 2017 have been remediated:


1.	Our internal controls were not designed effectively to ensure that operational changes, which may impact revenue recognition, were appropriately and timely evaluated to determine the accounting impact.


2.	We did not sufficiently staff, with appropriate levels of experience and training, to allow for the adequate monitoring and timely communication of operational changes, including those which may impact revenue recognition on an ongoing basis.

Our internal control over excess and obsolete finished goods printer inventory reserves at our Italian manufacturing subsidiary was not designed effectively to conduct a sufficiently precise evaluation of the classification, condition, and salability of each printer and the cost accounting department was not staffed sufficiently to mitigate limitations relating to these reserves in the ERP system used solely at this subsidiary.

Except for the changes described above, there were no changes in our internal control over financial reporting identified in our evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the three months ended December 31, 2018 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


(d)	Important Considerations

The effectiveness of our disclosure controls and procedures and our internal control over financial reporting is subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.

128

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Electronics For Imaging, Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Electronics For Imaging, Inc. and subsidiaries (the “Company”) as of December 31, 2018 , based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018 , based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2018 , of the Company and our report dated February 27, 2019 , expressed an unqualified opinion on those consolidated financial statements and included an explanatory paragraph related to the Company's change in method of accounting for revenue in fiscal year 2018 due to the adoption of the new revenue standard.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ Deloitte & Touche LLP

San Jose, California

February 27, 2019

129

Item 9B: Other Information

None.

PART III

Item 10: Directors, Executive Officers and Corporate Governance

Information regarding our directors is incorporated by reference from the information contained under the caption “Election of Directors” in our Proxy Statement for our 2019 Annual Meeting of Stockholders (the “2019 Proxy Statement”).

Information regarding our current executive officers is incorporated by reference from information contained under the caption “Executive Officers” in our 2019 Proxy Statement. Information regarding Section 16 reporting compliance is incorporated by reference from information contained under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in our 2019 Proxy Statement. Information regarding the Audit Committee of our Board of Directors and information regarding an Audit Committee financial expert is incorporated by reference from information contained under the caption “Meetings and Committees of the Board of Directors” in our 2019 Proxy Statement.

Information regarding our code of ethics is incorporated by reference from information contained under the caption “Meetings and Committees of the Board of Directors” in our 2019 Proxy Statement. Information regarding our implementation of procedures for stockholder nominations to our Board of Directors is incorporated by reference from information contained under the caption “Meetings and Committees of the Board of Directors” in our 2019 Proxy Statement.

We intend to disclose any amendment to our code of ethics, or waiver from, certain provisions of our code of ethics as applicable for our directors and executive officers, including our principal executive officer, principal financial and accounting officer, chief accounting officer and controller, or persons performing similar functions, by posting such information on our website at www.efi.com.

Item 11: Executive Compensation

The information required by this item is incorporated by reference from the information contained under the captions “Compensation Discussion and Analysis” and “Executive Compensation” in our 2019 Proxy Statement.

Item 12: Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Other than information regarding securities authorized for issuance under equity compensation plans, which is set forth below, the information required by this item is incorporated by reference from the information contained under the caption “Security Ownership” in our 2019 Proxy Statement.

130

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth information as of December 31, 2018 concerning securities that are authorized under equity compensation plans:



Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column 1)
Equity compensation plans approved by stockholders	2,996,224	$	16.57	⁽¹⁾	1,145,016	⁽²⁾
Equity compensation plans not approved by stockholders	—	—			—
Total	2,996,224	$	16.57		1,145,016


⁽¹⁾	Calculated without taking into account 2,921,224 RSUs that will become issuable as those units vest, without any cash consideration or other payment required for such shares.


⁽²⁾	Includes 522,698 shares available under the ESPP.

Item 13: Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated by reference from the information contained under the caption “Certain Relationships and Related Transactions, and Director Independence” in our 2019 Proxy Statement.

Item 14: Principal Accountant Fees and Services

The information required by this item is incorporated by reference from the information contained under the caption “Principal Accountant Fees and Services” in our 2019 Proxy Statement.

PART IV

131

Item 15: Exhibits and Financial Statement Schedules


(a)	Documents Filed as Part of this Report

(1) Index to Financial Statements

The Financial Statements required by this item are submitted in Item 8 of this Annual Report on Form 10-K as follows:



	Page
Report of Independent Registered Public Accounting Firm	70
Consolidated Balance Sheets as of December 31, 2018 and 2017	71
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017, and 2016	72
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2018, 2017, and 2016	73
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018, 2017, and 2016	74
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017, and 2016	75
Notes to Consolidated Financial Statements	76
Unaudited Quarterly Consolidated Financial Information	127

(2) Financial Statement Schedule



Schedule II – Valuation and Qualifying Accounts	135

(All other schedules are omitted because of the absence of conditions under which they are required or because the necessary information is provided in the consolidated financial statements or notes thereto in Item 8 of this Annual Report on Form 10-K.)

(3) Exhibits



Exhibit No.		Description

3.1		Amended and Restated Certificate of Incorporation ⁽¹⁾

3.2		Amended and Restated By-Laws of Electronics For Imaging, Inc., (as amended August 12, 2009) ⁽²⁾

4.1		Specimen Common Stock Certificate of the Company ^(3) (P)

4.2		Indenture (including Form of Notes) with respect to the Company’s 0.75% Convertible Senior Notes due 2019, dated as of September 9, 2014, between the Company and U.S. Bank National Association, as trustee ⁽⁴⁾

4.3		First Supplemental Indenture Dated as of November 5, 2018 to Indenture Dated as of September 9, 2014 by and between Electronics For Imaging, Inc., as Issuer, and U.S. National Bank Association, as Trustee ⁽⁵⁾

4.4		Indenture (including Form of Notes) with respect to the Company’s 2.25% Convertible Senior Notes due 2023, dated as of November 30, 2018, between Electronics For Imaging. Inc., as Issuer, and U.S. Bank National Association, as Trustee ⁽⁶⁾

10.1		Agreement dated December 6, 2000, by and between Adobe Systems Incorporated and the Company ⁽⁷⁾

10.2*		Electronics For Imaging, Inc. 2017 Equity Incentive Plan ⁽⁸⁾

10.3*		Electronics For Imaging, Inc. 2017 Equity Incentive Plan Restricted Stock Unit Award Agreement and Performance Stock Unit Award Agreement ⁽⁹⁾

10.4*		Form of Indemnification Agreement ^(10) (P)

10.5*		Form of Indemnity Agreement ⁽¹¹⁾

10.6+		OEM Distribution and License Agreement dated September 19, 2005 by and among Adobe Systems Incorporated, Adobe Systems Software Ireland Limited and the Company, as amended by Amendment No. 1 dated as of October 1, 2005 ⁽¹²⁾

10.7+		Amendment No. 2 to OEM Distribution and License Agreement by and among Adobe Systems Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of October 1, 2005 ⁽¹³⁾

132



10.8+		Amendment No. 4 to OEM Distribution and License Agreement by and among Adobe Systems Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of January 1, 2006 ⁽¹⁴⁾

10.9		Purchase and Sale Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee, dated April 19, 2013 ⁽¹⁵⁾

10.10		Lease Agreement between Electronics for Imaging, Inc. and John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee, dated April 19, 2013 ⁽¹⁶⁾

10.11*		EFI Section 16 2018 Bonus Program ⁽¹⁷⁾

10.12*		Employment Agreement Effective January 27, 2014 by and between the Company and Guy Gecht ⁽¹⁸⁾

10.13*		Employment Agreement Effective April 22, 2015 by and between the Company and Marc Olin ⁽¹⁹⁾

10.14		Form of Call Option Confirmation relating to the Company’s 0.75% Convertible Senior Notes due 2019 ⁽²⁰⁾

10.15		Form of Warrant Confirmation relating to the Company’s 0.75% Convertible Senior Notes due 2019 ⁽²¹⁾

10.16		Amendment No. 12 to OEM Distribution and License Agreement by and among Adobe Systems Incorporated, Adobe Systems Software Ireland Limited and the Company, effective as of January 19, 2018 ⁽²²⁾

10.17		Termination Agreement dated July 27, 2018 by and between Electronics for Imaging, Inc. and between John Arrillaga Survivor’s Trust, represented by John Arrillaga, Trustee, and Richard T. Peery Separate Property Trust, represented by Richard T. Peery, Trustee ⁽²³⁾

10.18*		Executive Employment Agreement Dated as of October 4, 2018 by and between Electronics For Imaging, Inc. and William D. Muir, Jr. ⁽²⁴⁾

10.19*		Amendment Dated October 15, 2018 to Employment Agreement Dated as of April 22, 2015 by and between Electronics For Imaging, Inc. and Marc Olin ⁽²⁵⁾

10.20*		Transition Agreement Dated October 15, 2018 by and between Electronics For Imaging, Inc. and Guy Gecht ⁽²⁶⁾

10.21*		Amendment Dated November 5, 2018 to Transition Agreement Dated October 12, 2018 by and between Electronics for Imaging, Inc. and Guy Gecht ⁽²⁷⁾

10.22		Credit Agreement Dated as of January 2, 2019 among Electronics For Imaging, Inc. and Citibank, N.A., as Administrative Agent, Citibank, N.A., as Sole Lead Arranger and Sole Bookrunner, and Bank Of The West, as Syndication Agent

21		List of Subsidiaries

23.1		Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm

24.1		Power of Attorney (see signature page of this Annual Report on Form 10-K)

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

______________________

133



(P)	Paper exhibit
*	Management contracts or compensatory plan or arrangement
+	The Company has received confidential treatment with respect to portions of these documents
(1)	Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 (File No. 18805) and incorporated herein by reference.
(2)	Filed as an exhibit to the Company’s Current report on Form 8-K filed on August 17, 2009 (File No. 18805) and incorporated herein by reference.
(3) (P)	Filed as an exhibit to the Company’s Registration Statement on Form S-1 (No. 33-50966) and incorporated herein by reference.
(4)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 9, 2014 (File No. 18805) and incorporated herein by reference.
(5)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on November 6, 2018 (File No. 18805) and incorporated herein by reference.
(6)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on December 3, 2018 (File No. 18805) and incorporated herein by reference.
(7)	Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 18805) and incorporated herein by reference.
(8)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on June 13, 2017 (File No. 18805) and incorporated herein by reference.
(9)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017. (File No. 18805) and incorporated herein by reference.
(10) (P)	Filed as an exhibit to the Company’s Registration Statement on Form S-1 (No. 33-50966) and incorporated herein by reference.
(11)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on August 17, 2009 (File No. 18805) and incorporated herein by reference.
(12)	Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. (File No. 18805) and incorporated herein by reference.
(13)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005. (File No. 18805) and incorporated herein by reference.
(14)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. (File No. 18805) and incorporated herein by reference.
(15)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. (File No. 18805) and incorporated herein by reference.
(16)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q filed on June 30, 2013 (File No. 000-18805) and incorporated herein by reference.
(17)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018. (File No. 18805) and incorporated herein by reference.
(18)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on January 28, 2014 (File No. 000-18805) and incorporated herein by reference.
(19)	Filed as an exhibit to the Company’s Annual Report on Form 10-K filed for the year ended December 31, 2015 (File No. 000-18805) and incorporated herein by reference.
(20)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 9, 2014 (File No. 000-18805) and incorporated herein by reference.
(21)	Filed as an exhibit to the Company’s Current Report on Form 8-K filed on September 9, 2014 (File No. 000-18805) and incorporated herein by reference.
(22)	Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 (File No. 18805) and incorporated herein by reference.
(23)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the year ended September 30, 2018 (File No. 18805) and incorporated herein by reference.
(24)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the year ended September 30, 2018 (File No. 18805) and incorporated herein by reference.
(25)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the year ended September 30, 2018 (File No. 18805) and incorporated herein by reference.
(26)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the year ended September 30, 2018 (File No. 18805) and incorporated herein by reference.
(27)	Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the year ended September 30, 2018 (File No. 18805) and incorporated herein by reference.

(b) List of Exhibits

See Item 15(a).

134

Item 16: Form 10-K Summary

None.

ELECTRONICS FOR IMAGING, INC.

Schedule II

Valuation and Qualifying Accounts (in thousands)



	Balance at Beginning of Period		Charged to Revenue and Expenses		Charged to (from) Other Accounts		Deductions			Balance at End of Period
As of December 31, 2018
Allowance for bad debts and sales-related allowances	$	32,236	$	7,034	$	—	$	(7,005	)	$	32,265
As of December 31, 2017
Allowance for bad debts and sales-related allowances	23,330		12,416		—		(3,510		)	32,236
As of December 31, 2016
Allowance for bad debts and sales-related allowances	21,993		10,678		—		(9,341		)	23,330

135

SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



		ELECTRONICS FOR IMAGING, INC.

Date:	February 27, 2019	/s/ William Muir, Jr.
		William Muir, Jr.
		Chief Executive Officer
		(Principal Executive Officer)

Date:	February 27, 2019	/s/ Marc Olin
		Marc Olin
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature appears below constitutes and appoints William Muir and Marc Olin jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to the Form 10-K Annual Report and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.




Signature	Title	Date
/s/ WILLIAM MUIR, JR.	Chief Executive Officer, Director (Principal Executive Officer)	2/27/2019
William Muir, Jr.
/s/ MARC OLIN	Chief Financial Officer (Principal Financial and Accounting Officer)	2/27/2019
Marc Olin
/s/ GUY GECHT	Director	2/27/2019
Guy Gecht
/s/ ERIC BROWN	Director	2/27/2019
Eric Brown
/s/ GILL COGAN	Director	2/27/2019
Gill Cogan
/s/ THOMAS GEORGENS	Director	2/27/2019
Thomas Georgens
/s/ RICHARD A. KASHNOW	Director	2/27/2019
Richard A. Kashnow
/s/ DAN MAYDAN	Director	2/27/2019
Dan Maydan
/s/ JANICE DURBIN CHAFFIN	Director	2/27/2019
Janice Durbin Chaffin

EXECUTION VERSION

CREDIT AGREEMENT

dated as of

January 2, 2019

among

ELECTRONICS FOR IMAGING, INC.,

The other Loan Parties Party Hereto,

The Lenders Party Hereto,

and

CITIBANK, N.A.,

as Administrative Agent

____________

CITIBANK, N.A.,

as Sole Lead Arranger and Sole Bookrunner

BANK OF THE WEST,

as Syndication Agent

TABLE OF CONTENTS



		Page

ARTICLE I	DEFINITIONS	1

Section 1.01	Defined Terms	1
Section 1.02	Classification of Loans and Borrowings	28
Section 1.03	Terms Generally	28
Section 1.04	Accounting Terms; GAAP	29
Section 1.05	Status of Obligations	29
Section 1.06	Financial Ratios	29
Section 1.07	Limited Liability Companies	30

ARTICLE II	THE CREDITS	30

Section 2.01	Commitments	30
Section 2.02	Loans and Borrowings	30
Section 2.03	Requests for Borrowings	31
Section 2.04	Swingline Loans	31
Section 2.05	[Section intentionally omitted]	33
Section 2.06	Letters of Credit	33
Section 2.07	Funding of Borrowings	38
Section 2.08	Interest Elections	38
Section 2.09	Termination and Reduction of Commitments	39
Section 2.10	Repayment of Loans; Evidence of Debt	40
Section 2.11	Prepayment of Loans	41
Section 2.12	Fees	41
Section 2.13	Interest	42
Section 2.14	Alternate Rate of Interest; Illegality	43
Section 2.15	Increased Costs	44
Section 2.16	Break Funding Payments	45
Section 2.17	Withholding of Taxes; Gross-Up	46
Section 2.18	Payments Generally; Allocation of Proceeds; Sharing of Setoffs	49
Section 2.19	Mitigation Obligations; Replacement of Lenders	51
Section 2.20	Defaulting Lenders	52
Section 2.21	Returned Payments	54
Section 2.22	Incremental Term Loans	54
Section 2.23	Increase of Commitments	56
Section 2.24	Banking Services and Swap Agreements	57
Section 2.25	Amend and Extend Transactions	58

ARTICLE III	REPRESENTATIONS AND WARRANTIES	59

Section 3.01	Organization; Powers	59
Section 3.02	Authorization; Enforceability	59
Section 3.03	Governmental Approvals; No Conflicts	59
Section 3.04	Financial Condition; No Material Adverse Change	60
Section 3.05	Properties	60
Section 3.06	Litigation and Environmental Matters	60
Section 3.07	Compliance with Laws and Agreements; No Default	60
Section 3.08	Investment Company Status	61



Section 3.09	Taxes	61
Section 3.10	ERISA	61
Section 3.11	Disclosure	61
Section 3.12	Capitalization and Subsidiaries	62
Section 3.13	Security Interest in Collateral	62
Section 3.14	Federal Reserve Regulations	62
Section 3.15	Anti-Corruption Laws and Sanctions; USA Patriot Act	62
Section 3.16	Not an EEA Financial Institution	63
Section 3.17	Solvency	63

ARTICLE IV	CONDITIONS	63

Section 4.01	Conditions to Initial Loans	63
Section 4.02	Each Credit Event	65

ARTICLE V	AFFIRMATIVE COVENANTS	65

Section 5.01	Financial Statements and Other Information	66
Section 5.02	Notices of Material Events	67
Section 5.03	Existence; Conduct of Business	68
Section 5.04	Payment of Taxes	68
Section 5.05	Maintenance of Properties; Insurance; Casualty and Condemnation	68
Section 5.06	Books and Records; Inspection Rights	68
Section 5.07	Compliance with Laws	69
Section 5.08	Use of Proceeds	69
Section 5.09	Additional Collateral; Further Assurances	69
Section 5.10	Anti-Corruption Laws and Sanctions	71
Section 5.11	Compliance with Environmental Laws	71
Section 5.12	Intellectual Property	71

ARTICLE VI	NEGATIVE COVENANTS	71

Section 6.01	Indebtedness	71
Section 6.02	Liens	74
Section 6.03	Fundamental Changes	75
Section 6.04	Investments, Loans, Advances, Guarantees and Acquisitions	76
Section 6.05	Asset Dispositions; Sale and Leaseback Transactions	77
Section 6.06	Swap Agreements	79
Section 6.07	Restricted Payments; Prepayments of Junior Debt	79
Section 6.08	Transactions with Affiliates	80
Section 6.09	Restrictive Agreements	80
Section 6.10	Amendment of Material Documents	81
Section 6.11	Financial Covenants	81

ARTICLE VII	EVENTS OF DEFAULT	81

ARTICLE VIII	THE ADMINISTRATIVE AGENT	84

Section 8.01	Appointment	84
Section 8.02	Rights as a Lender	84
Section 8.03	Duties and Obligations	84
Section 8.04	Reliance	85
Section 8.05	Actions through Sub-Agents	85
Section 8.06	Resignation	86

iii



Section 8.07	Non-Reliance	86
Section 8.08	Not Partners or Co-Venturers; Administrative Agent as Representative of the Secured Parties	87
Section 8.09	Lenders Not Subject to ERISA	87

ARTICLE IX	MISCELLANEOUS	87

Section 9.01	Notices	87
Section 9.02	Waivers; Amendments	89
Section 9.03	Expenses; Indemnity; Damage Waiver	92
Section 9.04	Successors and Assigns	94
Section 9.05	Survival	97
Section 9.06	Counterparts; Integration; Effectiveness; Electronic Execution	97
Section 9.07	Severability	98
Section 9.08	Right of Setoff	98
Section 9.09	Governing Law; Jurisdiction; Consent to Service of Process	98
Section 9.10	WAIVER OF JURY TRIAL	99
Section 9.11	Headings	99
Section 9.12	Confidentiality	99
Section 9.13	Several Obligations; Nonreliance; Violation of Law	100
Section 9.14	USA PATRIOT Act	100
Section 9.15	Disclosure	101
Section 9.16	Appointment for Perfection	101
Section 9.17	Interest Rate Limitation	101
Section 9.18	No Advisory or Fiduciary Responsibility	101
Section 9.19	Acknowledgement and Consent to Bail-In of EEA Financial Institutions	102

ARTICLE X	LOAN GUARANTY	102

Section 10.01	Guaranty	102
Section 10.02	Guaranty of Payment	102
Section 10.03	No Discharge or Diminishment of Loan Guaranty	103
Section 10.04	Defenses Waived	103
Section 10.05	Rights of Subrogation	104
Section 10.06	Reinstatement; Stay of Acceleration	104
Section 10.07	Information	104
Section 10.08	Termination	104
Section 10.09	Taxes	105
Section 10.10	Maximum Liability	105
Section 10.11	Contribution	105
Section 10.12	Liability Cumulative	106
Section 10.13	Keepwell	106

SCHEDULES :

Commitment Schedule



Schedule 3.12	—	Capitalization and Subsidiaries
Schedule 5.09	—	Post-Closing Deliverables
Schedule 6.01	—	Existing Indebtedness
Schedule 6.02	—	Existing Liens
Schedule 6.04	—	Existing Investments
Schedule 6.08	—	Transactions with Affiliates
Schedule 6.09	—	Restrictive Agreements

EXHIBITS :

Exhibit A	—	Form of Assignment and Assumption
Exhibit B	—	Form of Compliance Certificate
Exhibit C	—	Joinder Agreement
Exhibit D	—	Form of Solvency Certificate
Exhibit E - 1	—	U.S. Tax Certificate (For Foreign Lenders that are not Partnerships for U.S. Federal Income Tax Purposes)
Exhibit E - 2	—	U.S. Tax Certificate (For Foreign Participants that are not Partnerships for U.S. Federal Income Tax Purposes)
Exhibit E - 3	—	U.S. Tax Certificate (For Foreign Participants that are Partnerships for U.S. Federal Income Tax Purposes)
Exhibit E - 4	—	U.S. Tax Certificate (For Foreign Lenders that are Partnerships for U.S. Federal Income Tax Purposes)
Exhibit F	—	Form of Borrowing Request
Exhibit G	—	Form of Notice of Continuation/Conversion
Exhibit H	—	Form of Swingline Request

THIS CREDIT AGREEMENT, dated as of January 2, 2019 (as it may be amended, restated, amended and restated or otherwise modified from time to time, this “ Agreement ”), among ELECTRONICS FOR IMAGING, INC., as the Borrower, the other Loan Parties party hereto from time to time, the Lenders party hereto from time to time, the Issuing Banks party hereto from time to time, and CITIBANK, N.A., as the Administrative Agent.

The parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.01 Defined Terms . As used in this Agreement, the following terms have the meanings specified below:

“ 2019 Convertible Notes ” means those certain convertible notes issued pursuant to the 2019 Convertible Notes Documentation in an aggregate principal amount equal to $345 million.

“ 2019 Convertible Notes Documentation ” means a collective reference to (a) that certain Indenture, dated as of September 9, 2014, by and among the Borrower and the trustee party thereto and (b) that certain Purchase Agreement, dated as of September 3, 2014, by and among the Borrower and the initial purchasers party thereto.

“ 2023 Convertible Notes ” means those certain convertible notes issued pursuant to the 2023 Convertible Notes Documentation in an aggregate principal amount equal to $150 million.

“ 2023 Convertible Notes Documentation ” means a collective reference to (a) that certain Indenture, dated as of November 30, 2018, by and among the Borrower and the trustee party thereto and (b) that certain Purchase Agreement, dated as of November 27, 2018, by and among the Borrower and the initial purchasers party thereto.

“ ABR ”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“ Accounting Firm ” means Deloitte & Touche LLP, or any other independent registered public accounting firm of nationally recognized standing.

“ Acquisition ” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business or division of a Person, (b) the acquisition of in excess of 50% of the Equity Interests of any Person, or otherwise causing any Person to become a Subsidiary, or (c) a merger, amalgamation or consolidation or any other combination with another Person (other than a Person that is a Subsidiary); provided , that the Borrower or the applicable Subsidiary of the Borrower is the surviving entity.

“ Additional Incremental Term Loan Lender ” has the meaning assigned to such term in Section 2.22(a)(ii) .

“ Additional Lender ” has the meaning assigned to such term in Section 2.23(a)(ii) .

“ Adjusted LIBO Rate ” means, with respect to any Eurodollar Borrowing for any Interest Period or for any ABR Borrowing, an interest rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate; provided , that if the Adjusted LIBO Rate is less than zero, it shall be deemed to be zero for purposes of this Agreement.

“ Administrative Agent ” means Citibank, N.A., in its capacity as administrative agent for the Lenders hereunder.

“ Administrative Questionnaire ” means an administrative questionnaire in a form supplied by the Administrative Agent.

“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the specified Person.

“ Aggregate Credit Exposure ” means, at any time, the aggregate Credit Exposure of all the Lenders at such time.

“ Agreement ” has the meaning assigned to such term in the introductory paragraph.

“ Alternate Base Rate ” means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus ½ of 1% and (c) the Adjusted LIBO Rate for a one month Interest Period on such day (or if such day is not a Business Day, the immediately preceding Business Day) plus 1%; provided , that, for the avoidance of doubt, the Adjusted LIBO Rate for any day shall be based on the rate appearing on the Reuters Screen LIBOR01 Page (or on any successor or substitute page) at approximately 11:00 a.m. London time on such day (without any rounding). Any change in the Alternate Base Rate due to a change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate shall be effective from and including the effective date of such change in the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBO Rate, respectively. If the Alternate Base Rate is being used as an alternate rate of interest pursuant to Section 2.14 hereof, then the Alternate Base Rate shall be the greater of clause (a) and (b) above and shall be determined without reference to clause (c) above. In the event that that the Alternate Base Rate is less than zero, it shall be deemed to be zero for purposes of this Agreement.

“ Anti-Corruption Laws ” means all laws, rules, and regulations of any jurisdiction applicable to the Borrower or its Subsidiaries from time to time concerning or relating to (a) bribery and/or corruption and (b) terrorism financing and/or money laundering.

“ Applicable Percentage ” means, with respect to any Lender, (a) with respect to Loans and LC Exposure, a percentage equal to a fraction the numerator of which is such Lender’s Commitment and the denominator of which is the aggregate Commitment of all Lenders (if the Commitments have terminated or expired, the Applicable Percentages shall be determined based upon such Lender’s share of the Aggregate Credit Exposure at that time); provided , that in the case of Section 2.20 when a Defaulting Lender shall exist, any such Defaulting Lender’s Commitment shall be disregarded in the calculation, and (b) with respect to the Aggregate Credit Exposure, a percentage based upon its share of the Aggregate Credit Exposure and the unused Commitments; provided , that in the case of Section 2.20 when a Defaulting Lender shall exist, any such Defaulting Lender’s Commitment shall be disregarded in the calculation.

“ Applicable Rate ” means, for any day, with respect to any ABR Loan or Eurodollar Loan, or with respect to the commitment fees or letter of credit fees payable hereunder, as the case may be, the applicable rate per annum set forth below under the caption “Applicable Rate for Eurodollar Loans”, “Applicable Rate

for ABL Loans” or “Commitment Fee Rate”, as the case may be, based upon the Borrower’s Total Net Leverage Ratio as of the most recent determination date; provided , that until the delivery to the Administrative Agent, pursuant to Section 5.01 , of the Borrower’s consolidated financial information for the Borrower’s first fiscal quarter ending after the Effective Date, the “Applicable Rate” shall be the applicable rate per annum set forth below in Level III:



Level	Total Net Leverage Ratio	Applicable Rate for Eurodollar Loans	Applicable Rate for ABR Loans	Commitment Fee Rate
Level I	≤ 0.75 to 1.00	1.125%	0.125%	0.150%
Level II	> 0.75 to 1.00 but < 1.50 to 1.00	1.250%	0.250%	0.175%
Level III	> 1.50 to 1.00 but ≤ 2.50 to 1.00	1.375%	0.375%	0.200%
Level IV	> 2.50 to 1.00 but < 3.00 to 1.00	1.625%	0.625%	0.225%
Level V	> 3.00 to 1.00	1.875%	0.875%	0.25%

For purposes of the foregoing, (a) the Applicable Rate shall be determined as of the end of each fiscal quarter of the Borrower based upon the Borrower’s annual or quarterly consolidated financial statements delivered pursuant to Section 5.01 and (b) each change in the Applicable Rate resulting from a change in the Total Net Leverage Ratio shall be effective three Business Days after the date of delivery to the Administrative Agent of such consolidated financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change; provided , that the Total Net Leverage Ratio shall be deemed to be in Level V for the period commencing three Business Days after the Borrower fails to deliver the annual or quarterly consolidated financial statements required to be delivered by it pursuant to Section 5.01 , and ending on the date which is three Business Days after such statements or certificates are actually delivered.

“ Approved Fund ” means any Person (other than a natural person) that is engaged in making, purchasing, holding or investing in bank loans and similar extensions of credit in the ordinary course of its business and that is administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“ Assignment and Assumption ” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04 ), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent and the Borrower.

“ Available Commitment ” means, at any time, the aggregate Commitments of all Lenders then in effect minus the Aggregate Credit Exposure at such time.

“ Availability Period ” means the period from and including the Effective Date to but excluding the earlier of the Maturity Date and the date of termination of the Commitments.

“ Bail-In Action ” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

“ Bail-In Legislation ” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time which is described in the EU Bail-In Legislation Schedule.

“ Banking Services ” means each and any of the following bank services provided to any Loan Party or any Subsidiary by any Lender or any of its Affiliates: (a) credit cards for commercial customers (including, without limitation, “commercial credit cards” and purchasing cards) or for corporate purposes, (b) stored value cards, (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, return items, overdrafts and interstate depository network services), (d) documentary services and foreign currency exchange services and (e) any arrangement or services similar to, or for the purpose of effectuating, any of the foregoing.

“ Banking Services Obligations ” means any and all obligations of the Loan Parties or any Subsidiary, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services, but excluding any Swap Agreement Obligations.

“ Bankruptcy Event ” means, with respect to any Person, such Person becomes the subject of a bankruptcy or insolvency proceeding, or has had a receiver, conservator, trustee, administrator, custodian, assignee for the benefit of creditors or similar Person charged with the reorganization or liquidation of its business appointed for it, or, in the good faith determination of the Administrative Agent, has taken any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any such proceeding or appointment.

“ Beneficial Owner ” means, with respect to any U.S. Federal withholding Tax, the beneficial owner, for U.S. Federal income tax purposes, to whom such Tax relates.

“ Beneficial Ownership Certification ” means a certification regarding beneficial ownership as required by the Beneficial Ownership Regulation.

“ Beneficial Ownership Regulation ” means 31 C.F.R. § 1010.230.

“ Benefit Plan ” means any of (a) an “employee benefit plan” (as defined in ERISA) that is subject to Title I of ERISA, (b) a “plan” as defined in Section 4975 of the Code or (c) any Person whose assets include (for purposes of ERISA Section 3(42) or otherwise for purposes of Title I of ERISA or Section 4975 of the Code) the assets of any such “employee benefit plan” or “plan”.

“ Billing Statement ” has the meaning assigned to such term in Section 2.18(g) .

“ Board ” means the Board of Governors of the Federal Reserve System of the United States of America.

“ Borrower ” means Electronics For Imaging, Inc., a Delaware corporation.

“ Borrowing ” means (a) Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect or (b) a Swingline Loan.

“ Borrowing Request ” means a request by the Borrower for a Borrowing in accordance with Section 2.03 .

“ Business Day ” means any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed; provided , that, when used in connection with a Eurodollar Loan, the term “ Business Day ” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“ Capital Lease Obligations ” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP, it being understood that solely with respect to any change in GAAP on or after January 1, 2019 with respect to the accounting for leases as either operating leases or capital leases, any lease that at the time it is entered into is not (or would not be) a capital lease under GAAP as in effect without such change shall not be treated as a capital lease notwithstanding any such later change in GAAP.

“ Cash Equivalents ” means:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within one year from the date of acquisition thereof;

(b) investments in commercial paper maturing within one (1) year from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody’s;

(c) investments in certificates of deposit, bankers’ acceptances and time deposits maturing within one (1) year from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500 million;

(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above;

(e) money market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody’s and (iii) have portfolio assets of at least $5 billion;

(f) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one (1) year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either S&P or Moody’s; and

(g) short term investments similar to the foregoing made by Foreign Subsidiaries of the Borrower consistent with the Borrower’s investment guidelines as approved from time to time by the Borrower’s board of directors.

“ CFC ” means a “controlled foreign corporation” as defined in Section 957 of the Code.

“ Change in Control ” means (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Securities Exchange Act of 1934 and the rules of the SEC thereunder as in effect on the date hereof) of Equity Interests representing more than 35% of the aggregate ordinary voting power represented by the issued and outstanding Equity Interests of the Borrower, (b) the occupation of a majority of the seats (other than vacant seats) on the board of directors of the Borrower by Persons who were neither (i) nominated or approved by the board of directors of the Borrower nor (ii) appointed by directors so nominated or (c) the occurrence of any “change of control” or similar event with respect to (i) any Convertible Notes and/or (ii) any Material Indebtedness.

“ Change in Law ” means the occurrence after the date of this Agreement (or, with respect to any Lender, such later date on which such Lender becomes a party to this Agreement) of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty; (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority; or (c) compliance by any Lender or any Issuing Bank (or, for purposes of Section 2.15(b) , by any lending office of such Lender or by such Lender’s or such Issuing Bank’s holding company, if any) with any request, guideline, requirement or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement; provided , that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof, and (y) all requests, rules, guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted, issued or implemented.

“ Charges ” has the meaning assigned to such term in Section 9.17 .

“ Citi ” means Citibank, N.A., a national banking association, in its individual capacity, and its successors.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Collateral ” has the meaning given to “Collateral” in the Security Agreement.

“ Collateral Documents ” means, collectively, the Security Agreement and any other documents granting a Lien upon the Collateral as security for payment of the Secured Obligations.

“ Commitment ” means, with respect to each Lender, the commitment, if any, of such Lender to make Loans and to acquire participations in Letters of Credit and Swingline Loans hereunder, expressed as an amount representing the maximum possible aggregate amount of such Lender’s Credit Exposure hereunder, as such commitment may be reduced or increased from time to time pursuant to (a) Section 2.09, 2.22 or 2.23 and (b) assignments by or to such Lender pursuant to Section 9.04 . The initial amount of each Lender’s Commitment is set forth on the Commitment Schedule , or in the Assignment and Assumption pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders’ Commitments as of the Effective Date is $150 million.

“ Commitment Increase ” has the meaning assigned to such term in Section 2.23(a) .

“ Commitment Schedule ” means the Schedule attached hereto identified as such.

“ Commodity Exchange Act ” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

“ Communications ” has the meaning assigned to such term in Section 9.01(d) .

“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.

“ Convertible Notes ” means a collective reference to (a) the 2019 Convertible Notes, (b) the 2023 Convertible Notes and (c) any refinancing of either of the foregoing to the extent permitted by Section 6.01(f) .

“ Credit Exposure ” means, with respect to any Lender at any time, the sum of the outstanding principal amount of such Lender’s Loans (including any Swingline Loans) and its LC Exposure at such time.

“ Credit Party ” means the Administrative Agent, any Issuing Bank, any Swingline Lender or any Lender.

“ Default ” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“ Defaulting Lender ” means any Lender that (a) has failed, within two Business Days of the date required to be funded or paid, to (i) fund all or any portion of its Loans, (ii) fund all or any portion of its participations in Letters of Credit or Swingline Loans or (iii) pay over to any Credit Party any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swingline Loans), unless, in the case of clause (i) above, such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s good faith determination that one or more conditions precedent to funding (specifically identified and including the particular Default, if any, in such writing) has not been satisfied, (b) has notified the Borrower or any Credit Party in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that one or more conditions precedent (specifically identified and including the particular Default, if any, in such writing) to funding a Loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, acting in good faith, to provide a certification in writing to the Administrative Agent and the Borrower from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans and participations in then outstanding Letters of Credit and Swingline Loans under this Agreement; provided , that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon such receipt by the Administrative Agent and the Borrower of such certification in form and substance satisfactory to the Administrative Agent and the Borrower, (d) has become (or whose direct or indirect parent company has become) the subject of a Bankruptcy Event or Bail-In Action; provided , that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (a) through (e) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.20(f) ) upon delivery of written notice of such determination to the Borrower, each Issuing Bank, each Swingline Lender and each Lender.

“ Disposition ” or “ Dispose ” means the sale, transfer, license, lease or other disposition of any property by any Person (or the granting of any option or other right to do any of the foregoing), including any sale, assignment, transfer or other disposal, with or without recourse, of any notes or accounts receivable or any rights and claims associated therewith.

“ Disqualified Competitor ” has the meaning assigned to such term in the definition of “Ineligible Institution”.

“ dollars ” or “ $ ” refers to lawful money of the United States of America.

“ Domestic Subsidiary ” means any Subsidiary of any Borrower organized under the laws of any state of the United States of America or the District of Columbia or any entity disregarded for U.S. tax purposes wholly owned by any Borrower or a Domestic Subsidiary.

“ EBITDA ” means, for any period, the sum of:

(a) Net Income for such period; plus

(b) without duplication and, other than in the case of clause (xvi) , to the extent deducted in determining Net Income for such period, the sum of:

(i) Interest Expense for such period;

(ii) federal, state, local and foreign income tax expense for such period;

(iii) all amounts attributable to depreciation and amortization expense for such period;

(iv) amortization of intangibles (including, but not limited to, goodwill) for such period;

(v) any extraordinary non-cash charges, expenses or losses for such period;

(vi) non-cash compensation expenses, including as a result of any grant of equity or options to employees, officers, directors or contractors;

(vii) costs and expenses incurred on or prior to the Effective Date with respect to the Transactions;

(viii) expenses, charges and losses incurred in such period and which are reimbursed in cash during such period by Persons (other than the Borrower and its Subsidiaries) so long as such payments were not added in determining Net Income for such period;

(ix) fees, costs and expenses directly incurred during such period in connection with any of the following which are attempted, whether or not consummated: any Permitted Acquisition and any related debt or equity offering undertaken in connection therewith (in respect of which all or substantially all of the proceeds are intended to be used to pay the cash consideration for such Permitted Acquisition);

(x) non-cash purchase accounting adjustments made during such period;

(xi) all proceeds of business interruption insurance received during such period;

(xii) unrealized losses on financial derivatives recognized in such period in accordance with SFAS No. 133;

(xiii) any write-off or amortization made in such period of deferred financing costs or any write-down of assets or asset value carried on the balance sheet of the Borrower or any of its Subsidiaries;

(xiv) (A) any one-time restructuring charges incurred during such period (determined in accordance with GAAP) and (B) any other cash restructuring charges, business optimization costs, facilities reallocation costs or similar charges, losses, costs and, expenses, in an amount not exceed $10 million in the aggregate in any fiscal year in the case of this clause (B) ;

(xv) any extraordinary, unusual or nonrecurring losses, expenses and charges, including severance expense, litigation settlement costs, and lease termination costs; provided , that the aggregate amount added back pursuant to this clause (xv) for any Reference Period when taken together with any amounts added back pursuant to clause (xvi) for such Reference Period shall not exceed 15% of EBITDA for such Reference Period (prior to giving effect to such addbacks);

(xvi) expected cost savings, operating expense reductions and “run-rate” synergies (collectively “ Run Rate Amounts ”) related to a Permitted Acquisition, permitted Investment, restructuring, or permitted Disposition of assets, which are identifiable and projected in good faith by Borrower to result from specified actions with respect to which substantial steps have been, will be, or are expected to be, taken within twelve (12) months after the closing thereof; provided , that (A) the Administrative Agent shall have received a reasonably detailed statement or schedule of such Run Rate Amounts, (B) such amounts are reasonably identifiable, reasonably attributable to the actions specified and reasonably anticipated to result from such actions and (C) the benefits resulting therefrom are anticipated by the Borrower to be realized within twelve (12) months after the closing of the relevant transaction; and provided , further , that the aggregate amount added back pursuant to this clause (xvi) for any Reference Period when taken together with any amounts added back pursuant to clause (xv) for such Reference Period shall not exceed 15% of EBITDA for such Reference Period (prior to giving effect to such addbacks); and

(xvii) any other non-cash charges (but excluding any non-cash charge in respect of an item that was included in Net Income in a prior period); minus

(c) without duplication and to the extent included in Net Income, (i) any cash payments made during such period in respect of non-cash charges described in clause (b)(xvii) taken in a prior period and (ii) any extraordinary gains and any non-cash items of income for such period;

all calculated for the Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP. For the purposes of calculating EBITDA for any period of four consecutive fiscal quarters (each, a “ Reference Period ”), (i) if at any time during such Reference Period the Borrower or any Subsidiary shall have made any sale, transfer, or disposition of property, EBITDA for such Reference Period shall be reduced by an amount equal to the EBITDA (if positive) attributable to the property that is the subject of such sale, transfer, or disposition, as applicable, for such Reference Period or increased by an amount equal to the EBITDA (if negative) attributable thereto for such Reference Period, and (ii) if during such Reference Period the Borrower or any of its Subsidiaries shall have made a Permitted Acquisition, EBITDA for such Reference Period shall be calculated after giving effect thereto on a pro forma basis as if such Permitted Acquisition occurred on the first day of such Reference Period.

“ ECP ” means an “eligible contract participant” as defined in Section 1(a)(18) of the Commodity Exchange Act or any regulations promulgated thereunder and the applicable rules issued by the Commodity Futures Trading Commission and/or the SEC.

“ EEA Financial Institution ” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition and is subject to the supervision of an EEA Resolution Authority, or (c) any financial institution established in an EEA Member Country which is a Subsidiary of an institution described in clause (a) or (b) of this definition and is subject to consolidated supervision of an EEA Resolution Authority with its parent.

“ EEA Member Country ” means any of the member states of the European Union, Iceland, Liechtenstein and Norway.

“ EEA Resolution Authority ” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

“ Effective Date ” means January 2, 2019.

“ Electronic Signature ” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a Person with the intent to sign, authenticate or accept such contract or record.

“ Electronic System ” means any electronic system, including e-mail, e-fax, Intralinks ^® , ClearPar ^® , Debt Domain, Syndtrak and any other Internet or extranet-based site, whether such electronic system is owned, operated or hosted by the Administrative Agent and the Issuing Banks and any of its respective Related Parties or any other Person, providing for access to data protected by passcodes or other security system.

“ Environmental Laws ” means all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated, or entered into by any Governmental Authority, relating in any way to the protection of the environment, the preservation or reclamation of natural resources, the management, Release or threatened Release of any Hazardous Material or to employee health and safety matters.

“ Environmental Liability ” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), of the Borrower or any Subsidiary directly or indirectly resulting from or based upon (a) any violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) any exposure to any Hazardous Materials, (d) the Release or threatened Release of any Hazardous Materials or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“ Equity Interests ” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any of the foregoing.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ ERISA Affiliate ” means any trade or business (whether or not incorporated) that, together with the Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code.

“ ERISA Event ” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30‑day notice period is waived); (b) the failure to make any “minimum required contribution” (as defined in Section 430(a) of the Code) with respect to any Plan, at the time and in the amount provided for in Section 430 of the Code; (c) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan (other than a standard termination to which Section 4041(b) of ERISA applies); (e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan administrator of any notice relating to an intention to terminate any Plan or Plans in a distress termination described in Section 4041(c) of ERISA or to appoint a trustee to administer any Plan; (f) the incurrence by the Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by the Borrower or any ERISA Affiliate of any notice concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“ EU Bail-In Legislation Schedule ” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor person), as in effect from time to time.

“ Eurodollar ”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

“ Event of Default ” has the meaning assigned to such term in Article VII .

“ Exchange Amount ” has the meaning assigned to such term in Section 4.01(m) .

“ Excluded Swap Obligation ” means, with respect to any Loan Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Loan Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Loan Guarantor’s failure for any reason to constitute an ECP at the time the Guarantee of such Loan Guarantor or the grant of such security interest becomes or would become effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.

“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (i) imposed as a result of such Recipient being a resident of, being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Taxes (or any political subdivision thereof) or (ii) that are Other Connection Taxes; (b) in the case of a Lender, U.S. withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan, Note, Letter of Credit, Commitment or other Loan Document pursuant to

a law in effect on the date on which (i) such Lender acquires such interest in the Loan, Note, Letter of Credit or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.19(b) ) or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 2.17 , an amount that was due and payable, but not yet paid to (A) such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan or Commitment or (B) such Lender immediately before it changed its lending office; (c) Taxes attributable to such Recipient’s failure to comply with Section 2.17(f) ; and (d) any U.S. Federal withholding Taxes imposed under FATCA.

“ Extended Commitment ” means the Commitments, the maturity of which shall have been extended pursuant to Section 2.25 .

“ Extended Loans ” means any Loans made pursuant to the Extended Commitments.

“ Extension ” has the meaning assigned to such term in Section 2.25(a) .

“ Extension Amendment ” means an amendment to this Agreement (which may, at the option of the Administrative Agent and Borrower, be in the form of an amendment and restatement of this Agreement) among the Loan Parties, the applicable extending Lenders, the Administrative Agent and, to the extent required by Section 2.25 , the Issuing Bank implementing an Extension in accordance with Section 2.25 .

“ Extension Offer ” has the meaning assigned to such term in Section 2.25(a) .

“ FATCA ” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreement entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreements entered into in connection with the implementation of such sections of the Code and any fiscal or regulatory legislation, rules or practices adopted pursuant to such intergovernmental agreement.

“ Federal Funds Effective Rate ” means, for any day, the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“ Fee Letter ” means that certain Fee Letter, dated as of November 11, 2018, by and among the Borrower and the Administrative Agent, as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.

“ Financial Covenants ” means the covenants set forth in Section 6.11 .

“ Financial Officer ” means the chief financial officer, president, principal accounting officer, treasurer, controller or officer of equivalent duties of the Borrower.

“ Foreign Lender ” means any Lender that is not a “United States person” as defined in Section 7701(a)(30) of the Code.

“ Foreign Pension Plan ” means any plan, fund (including any superannuation fund) or other similar program established or maintained outside the United States by the Borrower or any one or more of its Subsidiaries primarily for the benefit of employees of the Borrower or such Subsidiaries residing outside

the United States, which plan, fund or other similar program provides, or results in, retirement income, a deferral of income in contemplation of retirement or payments to be made upon termination of employment, and which plan is not subject to ERISA or the Code.

“ Foreign Subsidiary ” means any Subsidiary of the Borrower that is not a Domestic Subsidiary.

“ Foreign Subsidiary Holding Company ” means any Domestic Subsidiary whose sole assets are Equity Interests in one or more Foreign Subsidiaries that are CFCs, and whose material activities are limited to those relating to such ownership.

“ Funded Indebtedness ” means, with respect to any Person and without duplication, (i) all Indebtedness of such Person of the types referred to in clauses (a) , (b) , (c) , (d) (other than the portion thereof consisting of contingent or unliquidated earn-outs), (g) and (j) of the definition of “Indebtedness” in this Section 1.01 , (ii) all Indebtedness of others of the type referred to in clause (i) of this definition secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) a Lien on, or payable out of the proceeds of production from, any property or asset of such Person, whether or not the obligations secured thereby have been assumed by such Person and (iii) all Guarantees of such Person with respect to Indebtedness of others of the type referred to in clause (i) of this definition (the amount thereof, in the case of the foregoing clauses (ii) and (iii) , being deemed to be the amount required to be set forth on the most recent consolidated balance sheet of the Borrower and its Subsidiaries in accordance with GAAP); provided , that, for the avoidance of doubt, any convertible Indebtedness (including with respect to the Convertible Notes) shall be determined based on the face amount thereof. The Funded Indebtedness of any Person shall include the Funded Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Funded Indebtedness provide that such Person is not liable therefor.

“ GAAP ” means generally accepted accounting principles in the United States of America.

“ Governmental Authority ” means the government of the United States of America, any other nation or any political subdivision of any of the foregoing, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“ Guarantee ” of or by any Person (the “ guarantor ”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided , that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business.

“ Guaranteed Obligations ” has the meaning assigned to such term in Section 10.01 .

“ Hazardous Materials ” means: (a) any substance, material, or waste that is included within the definitions of “hazardous substances,” “hazardous materials,” “hazardous waste,” “toxic substances,” “toxic

materials,” “toxic waste,” or words of similar import in any Environmental Law; (b) those substances listed as hazardous substances by the United States Department of Transportation (or any successor agency) (49 C.F.R. 172.101 and amendments thereto) or by the Environmental Protection Agency (or any successor agency) (40 C.F.R. Part 302 and amendments thereto); and (c) any substance, material, or waste that is petroleum, petroleum-related, or a petroleum by-product, asbestos or asbestos-containing material, polychlorinated biphenyls, flammable, explosive, radioactive, freon gas or radon.

“ Immaterial Subsidiary ” means any Subsidiary of the Borrower’s that, as of the date of determination, does not have (a) assets (when combined with the assets of all other Immaterial Subsidiaries, after eliminating intercompany obligations) in excess of 10.00% of the Borrower’s total assets or (b) revenues for the applicable Reference Period (when combined with revenues of all Immaterial Subsidiaries, after eliminating intercompany obligations) in excess of 10.00% of revenues of the Borrower for the applicable Reference Period; provided , that, as of the date of determination, no Immaterial Subsidiary shall have (x) assets in excess of 5.00% of the Borrower’s total assets or (y) revenues for the applicable Reference Period in excess of 5.00% of revenues of the Borrower for the applicable Reference Period.

“ Impacted Interest Period ” has the meaning assigned to such term in the definition of “LIBO Rate”.

“ Increasing Lender ” has the meaning assigned to such term in Section 2.23(a)(i) .

“ Incremental Equivalent Debt ” means Indebtedness in respect of one or more series of senior secured term loans or notes issued in a public offering, Rule 144A or other private placement or customary bridge facility in respect of the foregoing, unsecured or secured by the Collateral on a pari passu basis or junior lien basis with the Liens securing the Obligations; provided , that the foregoing shall not permit any pari passu term loans with shall instead only be permitted pursuant to Section 2.22 of this Agreement; and provided , further , that the incurrence or issuance of such Incremental Equivalent Debt shall be subject to the following conditions:

(a) each of the conditions set forth in Section 2.22(b) shall have been satisfied (and the Borrower shall provide a certification to the Administrative Agent as to such satisfaction of such conditions);

(b) such Incremental Equivalent Debt shall not be borrowed by any Person that is not the Borrower and will not be guaranteed by any Person that is not a Loan Guarantor;

(c) any security agreements relating to such Incremental Equivalent Debt shall be no more burdensome to the Borrower, taken as a whole, than the Collateral Documents;

(d) such Incremental Equivalent Debt, if secured, shall be secured by the Collateral on a pari passu or junior basis with the Liens securing the Obligations and shall be subject to intercreditor arrangements which are reasonably satisfactory to the Administrative Agent;

(e) the final maturity of any other Incremental Equivalent Debt shall be no earlier than the Maturity Date in effect at the time of the incurrence, issuance or obtainment of such Indebtedness;

(f) the terms of such Indebtedness (i) do not provide for any mandatory prepayment, repurchase, redemption or sinking fund obligations prior to the Maturity Date (or, in the case of junior or unsecured debt, ninety-one (91) days thereafter) in effect at the time of the incurrence or issuance of such Indebtedness (other than customary prepayments, repurchases or redemptions or offers to prepay, redeem or repurchase or mandatory prepayments upon a change of control, asset sale or casualty or condemnation event, and customary acceleration rights after an event of default) and (ii) have a weighted average life to maturity that

is no shorter than the then-longest remaining weighted average life to maturity of any of the Incremental Term Loans outstanding at the time of incurrence or issuance; and

(g) the terms and conditions of such Indebtedness (other than pricing, premiums and optional prepayment or optional redemption provisions) are, when taken as a whole (i) substantially identical to or (ii) not materially more favorable to the lenders or holders providing such Indebtedness than those applicable to this Agreement or other provisions applicable only to periods after the Maturity Date in effect at the time of incurrence, issuance or obtainment of such Indebtedness, in each case, as determined in good faith by the Borrower.

“ Incremental Term Loan Amendment ” has the meaning assigned to such term in Section 2.22(a)(iii) .

“ Incremental Term Loan Commitments ” has the meaning assigned to such term in Section 2.22(a) .

“ Incremental Term Loan Commitment Date ” has the meaning assigned to such term in Section 2.22(a)(i) .

“ Incremental Term Loan Facility ” has the meaning assigned to such term in Section 2.22(a) .

“ Incremental Term Loan Lender ” has the meaning assigned to such term in Section 2.22(a)(i) .

“ Incremental Term Loan Notice ” has the meaning assigned to such term in Section 2.22(a)(i) .

“ Indebtedness ” of any Person means, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person, (d) all obligations of such Person in respect of the deferred purchase price of property or services (excluding current accounts payable incurred in the ordinary course of business), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty, (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances, (j) obligations under any liquidated earn-out, (k) any other Off-Balance Sheet Liability and (l) any obligations with respect to any Swap Agreements to the extent required to be reflected as a liability on a balance sheet of such Person under GAAP. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

“ Indemnified Taxes ” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by, or on account of any obligation of any Loan Party under any Loan Document and (b) to the extent not otherwise described in clause (a) above, Other Taxes.

“ Indemnitee ” has the meaning assigned to such term in Section 9.03(b) .

“ Ineligible Institution ” means a (a) natural person, (b) a Defaulting Lender, (c) holding company, investment vehicle or trust for, or owned and operated for the primary benefit of, a natural person or relative(s)

thereof; provided , that, such holding company, investment vehicle or trust shall not constitute an Ineligible Institution if it (x) has not been established for the primary purpose of acquiring any Loans or Commitments, (y) is managed by a professional advisor, who is not such natural person or a relative thereof, having significant experience in the business of making or purchasing commercial loans, and (z) has assets greater than $25 million and a significant part of its activities consist of making or purchasing commercial loans and similar extensions of credit in the ordinary course of its business, (d) any Person that is an actual competitor of the Borrower or any of its Subsidiaries or and any Affiliate of any such Person (other than bona fide debt funds, investment vehicles or fixed income investors that are engaged in making or purchasing commercial loans, bonds or similar extensions of credit in the ordinary course of business), in each case, to the extent identified by the Borrower in writing to the Administrative Agent (each a “ Disqualified Competitor ”); provided , that notwithstanding anything herein to the contrary in no event shall any such identification apply retroactively to disqualify any Person who has previously acquired an assignment in accordance with the terms of this Agreement, or (e) a Loan Party or a Subsidiary or other Affiliate of a Loan Party. Notwithstanding the foregoing, each of the parties hereto acknowledges and agrees that the Administrative Agent (x) shall have no duties or responsibilities for monitoring or enforcing prohibitions on assignments or participations to Disqualified Competitors or otherwise ( provided , that the Administrative Agent shall promptly make the list of Disqualified Competitors and any modifications or additions thereto available to the Lenders reasonably promptly upon its receipt thereof) and (y) shall have no liability in respect thereof. Following any such identification in writing by or on behalf of the Borrower pursuant to clause (d) above, the Disqualified Competitor list shall be promptly updated to reflect such written identification, and made available by the Administrative Agent to the Lenders to the extent any such Lender has requested a copy thereof.

“ Information ” has the meaning assigned to such term in Section 9.12 .

“ Interest Coverage Ratio ” means, at any date, the ratio of (a) EBITDA to (b) Interest Expense, all calculated for the period of four consecutive fiscal quarters ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter most recently ended prior to such date).

“ Interest Election Request ” means a request by the Borrower to convert or continue a Borrowing in accordance with Section 2.08 .

“ Interest Expense ” means, with reference to any period, total interest expense (including that attributable to Capital Lease Obligations) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers’ acceptance financing and realized gains and losses under Swap Agreements in respect of interest rates to the extent such gains or losses are allocable to such period in accordance with GAAP), calculated on a consolidated basis for the Borrower and its Subsidiaries for such period in accordance with GAAP; provided , that Interest Expense shall not include any interest attributed to the Convertible Notes (x) by virtue of the right to convert such Convertible Notes into Equity Interests and (y) to the extent such interest is not payable in cash at any time.

“ Interest Payment Date ” means (a) with respect to any ABR Loan (including any Swingline Loan), the first Business Day of each January, April, July and October and the Maturity Date and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period and the Maturity Date.

“ Interest Period ” means with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one,

three or six months, as the Borrower may elect; provided , that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day, (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period and (iii) no Interest Period may extend beyond the Maturity Date. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“ Interpolated Rate ” means, at any time, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBO Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate is available) that is shorter than the Impacted Interest Period and (b) the LIBO Screen Rate for the shortest period (for which the LIBO Screen Rate is available) that exceeds the Impacted Interest Period, in each case, at such time.

“ Investment ” has the meaning assigned to such term in Section 6.04 .

“ IRS ” means the United States Internal Revenue Service.

“ Issuing Banks ” means, individually and collectively as the context may require, (a) Citi, in its capacity as an issuer of Letters of Credit hereunder, and its successors in such capacity, and (b) and any other Lender from time to time designated by the Borrower as an Issuing Bank, with the consent of such Lender and the Administrative Agent and such Lender’s successors in such capacity. Any Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “Issuing Bank” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate. At any time there is more than one Issuing Bank, all singular references to the Issuing Bank shall mean any Issuing Bank, either Issuing Bank, each Issuing Bank, the Issuing Bank that has issued the applicable Letter of Credit, or both (or all) Issuing Banks, as the context may require.

“ Joinder Agreement ” has the meaning assigned to such term in Section 5.09 .

“ Junior Debt ” means (a) any Indebtedness of any Loan Party or any of its Subsidiaries that is secured on a junior lien basis, (b) any Subordinated Indebtedness, (c) any Incremental Equivalent Debt to the extent such Incremental Equivalent Debt is not secured on a pari passu basis, any Indebtedness issued or incurred pursuant to Section 6.01(t) and/or (d) any Indebtedness which refinances any of the foregoing to the extent permitted by Section 6.01 .

“ LC Disbursement ” means a payment made by any Issuing Bank pursuant to a Letter of Credit.

“ LC Exposure ” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time, plus (b) the aggregate amount of all LC Disbursements relating to Letters of Credit that have not yet been reimbursed by or on behalf of the Borrower at such time. The LC Exposure of any Lender at any time shall be its Applicable Percentage of the total LC Exposure at such time.

“ Lead Arranger ” means Citibank, N.A..

“ Lenders ” means the Persons listed on the Commitment Schedule and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption. Unless the context otherwise requires, the term “Lenders” includes the Issuing Banks and the Swingline Lenders.

“ Letter of Credit ” means the letters of credit issued pursuant to this Agreement, and the term “Letter of Credit” means any one of them or each of them singularly, as the context may require.

“ LIBO Rate ” means, with respect to any Eurodollar Borrowing for any applicable Interest Period or for any ABR Borrowing,

(a) the rate per annum equal to the offered rate that appears on the Reuters Screen LIBOR01 (or any successor thereto) for deposits in Dollars (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period; or

(b) if the rate referenced in the preceding clause (a)(i) does not appear on such page or service or such page or service shall not be available, the rate per annum equal to the rate reasonably determined by the Administrative Agent to be the offered rate on such other page or other service that displays an average ICE Benchmark Administration London Interbank Offered Rate for deposits in Dollars offered in the London interbank market (for delivery on the first day of such Interest Period) with a term equivalent to such Interest Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Interest Period.

Notwithstanding the above, to the extent that “LIBO Rate” or “Adjusted LIBO Rate” is used in connection with an ABR Borrowing, such rate shall be determined as modified by the definition of Alternate Base Rate.

“ LIBOR Successor Rate ” has the meaning assigned to such term in Section 2.14(a) .

“ LIBOR Successor Rate Conforming Changes ” means, with respect to any proposed LIBOR Successor Rate, any conforming changes to the definition of Applicable Rate, Interest Period, timing and frequency of determining rates and making payments of interest and other administrative matters as may be appropriate, in the discretion of the Administrative Agent, to reflect the adoption of such LIBOR Successor Rate and to permit the administration thereof by the Administrative Agent in a manner substantially consistent with market practice (or, if the Administrative Agent determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such LIBOR Successor Rate exists, in such other manner of administration as the Administrative Agent determines in consultation with the Borrower).

“ Lien ” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“ Loan Documents ” means, collectively, this Agreement, the Notes, any Letter of Credit applications, the Collateral Documents, the Loan Guaranty, the Fee Letter and all other agreements, instruments, documents and certificates identified in Section 4.01 executed and delivered by a Loan Party to, or in favor of, the Administrative Agent or any Lenders and including all other pledges, powers of attorney, consents, assignments, contracts, notices, letter of credit agreements and all other written matter whether heretofore, now or hereafter executed by or on behalf of any Loan Party, or any employee of any Loan Party, and delivered

to the Administrative Agent or any Lender in connection with this Agreement or the transactions contemplated hereby. Any reference in this Agreement or any other Loan Document to a Loan Document shall include all appendices, exhibits or schedules thereto, and all amendments, restatements, supplements or other modifications thereto, and shall refer to the Agreement or such Loan Document as the same may be in effect at any and all times such reference becomes operative.

“ Loan Guarantor ” means (a) each of the Borrower’s wholly-owned Material Domestic Subsidiaries and (b) with respect to Secured Obligations owed by any other Loan Party or other Subsidiary, the Borrower; provided , that subject to any administrative requirements of the Administrative Agent, the Borrower may elect to add additional domestic Subsidiaries as Loan Guarantors so long as each such added Loan Guarantor complies with Section 5.09 of this Agreement as if it were a newly acquired wholly-owned Material Domestic Subsidiary at the time of such designation.

“ Loan Guaranty ” means Article X of this Agreement.

“ Loan Parties ” means, collectively, the Borrower, each Loan Guarantor and any other Person who becomes a party to this Agreement pursuant to a Joinder Agreement and each of their successors and assigns, and the term “Loan Party” means any one of them or all of them individually, as the context may require.

“ Loans ” means the loans and advances made by the Lenders pursuant to this Agreement, including Revolving Credit Loans and Swingline Loans.

“ Material Adverse Effect ” means a material adverse effect on (a) the business, assets, operations, or condition, financial or otherwise, of the Borrower and its Subsidiaries taken as a whole, (b) the ability of the Loan Parties, taken as a whole, to perform any of their material obligations under the Loan Documents, (c) any material portion of the Collateral, or the Administrative Agent’s Liens (on behalf of itself and the Lenders) on any material portion of the Collateral or the priority of such Liens (in each case subject to Permitted Liens), or (d) the rights of or benefits available to the Administrative Agent, the Issuing Banks or the Lenders under the Loan Documents.

“ Material Contract ” means and includes any contractual obligation of any Loan Party the failure to comply with which, or the termination (without contemporaneous replacement) of which, could reasonably be expected to have a Material Adverse Effect.

“ Material Domestic Subsidiary ” means any Domestic Subsidiary of the Borrower that is not an Immaterial Subsidiary or a Foreign Subsidiary Holding Company (but only so long as treating such Foreign Subsidiary Holding Company as a Material Domestic Subsidiary would trigger adverse tax consequences pursuant to Section 956 of the Code or otherwise).

“ Material Foreign Subsidiary ” means any Foreign Subsidiary of the Borrower that is not an Immaterial Subsidiary.

“ Material Indebtedness ” means any Indebtedness (other than the Loans and Letters of Credit), or any obligations under Swap Agreements, of any one or more of the Borrower and its Subsidiaries in an aggregate principal amount exceeding $10 million. For purposes of determining Material Indebtedness, the aggregate principal amount of “obligations” of the Borrower or any Subsidiary in respect of any Swap Agreement at any time shall be the aggregate amount that the Borrower or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time and after giving effect to any rights available under applicable laws or agreements with regard to collateral, netting, setoff or similar rights.

“ Maturity Date ” means the earliest to occur of (a) the Revolving Credit Termination Date, (b) any earlier date on which the Commitments are reduced to zero or otherwise terminated pursuant to the terms hereof and (c) the date that the Loans, if any, are declared due and payable pursuant to Article VII hereof; provided , that individual Lenders may elect to extend the Maturity Date applicable to their Loans and Commitments pursuant to the terms and conditions of Section 2.22 .

“ Moody’s ” means Moody’s Investors Service, Inc.

“ MUFG Synthetic Lease ” means that certain synthetic lease transaction dated as of August 26, 2016, by and among the Borrower and MUFG Americas Capital Leasing & Finance, LLC (formerly Bank of Tokyo – Mitsubishi UFJ Leasing & Finance LLC) and/or its affiliate for a manufacturing and warehouse facility.

“ Multiemployer Plan ” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“ Net Income ” means, for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP; provided , that there shall be excluded from such net income (to the extent otherwise included therein), without duplication: (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any contractual obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary (it being understood, for the avoidance of doubt, that earnings that remain undistributed due to adverse tax consequences shall not be included in this clause (c) solely by virtue of such adverse tax consequences).

“ Netted Unrestricted Cash and Cash Equivalents ” means any Unrestricted Cash and Cash Equivalents of the Borrower and its Domestic Subsidiaries in an amount not to exceed the sum of (a) $100 million, plus (b) at any time prior to the maturity date of the existing 2019 Convertible Notes, the Exchange Amount (less (i) any amount thereof used to repay or repurchase the 2019 Convertible Notes and (ii) any Credit Exposure outstanding at such time).

“ Non-Consenting Lender ” has the meaning assigned to such term in Section 9.02(d) .

“ Note ” and “ Notes ” have the meanings assigned to such terms in Section 2.10(e) .

“ Notice of Increase ” has the meaning assigned to such term in Section 2.23(a)(i) .

“ Obligated Party ” has the meaning assigned to such term in Section 10.02 .

“ Obligations ” means all unpaid principal of and accrued and unpaid interest on the Loans, all LC Exposure, all accrued and unpaid fees and all expenses, reimbursements, indemnities and other obligations and indebtedness (including interest and fees accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), obligations and liabilities of any of the Borrower and its Subsidiaries to any of the Lenders, the Administrative Agent, any Issuing Bank or any indemnified party, individually or collectively, existing on the Effective Date or arising thereafter, direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, arising by contract, operation of law or otherwise, arising or incurred under this Agreement or any of the other Loan Documents or in respect of any of the Loans made

or reimbursement or other obligations incurred or any of the Letters of Credit or other instruments at any time evidencing any thereof.

“ OFAC ” means the Office of Foreign Assets Control of the United States Department of the Treasury.

“ Off-Balance Sheet Liability ” of a Person means (a) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person (other than (i) any customary repurchase obligations resulting from a breach of representations and warranties, covenants, servicing obligations and indemnities under a securitization facility or (ii) any Permitted Receivables Facility), (b) any indebtedness, liability or obligation under any so-called “synthetic lease” transaction entered into by such Person, or (c) any indebtedness, liability or obligation arising with respect to any other transaction which is the functional equivalent of or takes the place of borrowing but which does not constitute a liability on the balance sheets of such Person (other than operating leases) but does constitute an off-balance sheet liability under GAAP.

“ Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Taxes (other than a connection solely arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to, or enforced, any Loan Document, or sold or assigned an interest in any Loan, Letter of Credit or any Loan Document).

“ Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.19 ).

“ Parent ” means, with respect to any Lender, any Person as to which such Lender is, directly or indirectly, a subsidiary.

“ Participant ” has the meaning assigned to such term in Section 9.04(c) .

“ Participant Register ” has the meaning assigned to such term in Section 9.04(c) .

“ Payment in Full ” means as of any date of determination, that: (a) the entire amount of principal of and interest due on the Loans, and all other amounts of fees, payments and other obligations due under this Agreement, the other Loan Documents and the Notes are indefeasibly paid in full in cash (other than contingent indemnification obligations and reimbursement obligations in respect of which no claim for payment has yet been asserted by the Person entitled thereto, and any Banking Services Obligations not then due and owing); (b) the commitments to lend under this Agreement have been terminated; (c) there are no outstanding Letters of Credit (other than Letters of Credit that have been cash collateralized in accordance with the requirements of this Agreement or other arrangements acceptable to the Issuing Bank); (d) there are no outstanding Swap Agreement Obligations (or arrangements with respect thereto have been implemented which are acceptable to the relevant counterparty); and (e) all Obligations (other than contingent indemnification obligations and reimbursement obligations in respect of which no claim for payment has yet been asserted by the Person entitled thereto, and any Banking Services Obligations not then due and owing) have been paid in full in cash.

“ PBGC ” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“ Permitted Acquisition ” means any Acquisition in which each of the following conditions is satisfied:

(a) the Person or business or assets which is the subject of such Acquisition is in a similar related or complementary line of business as those of the Borrower and its Subsidiaries on the Effective Date;

(b) all governmental, corporate and material third-party approvals and consents necessary in connection with such Acquisition shall have been obtained and be in full force and effect;

(c) if acquiring a Person, unless such Person is contemporaneously merged with and into the Borrower or a Subsidiary of the Borrower, such Person becomes a wholly owned direct or indirect Subsidiary of the Borrower and, simultaneously with such Acquisition, a Loan Party to the extent required by Section 5.09 , with such Person’s Equity Interests being pledged as Collateral to the extent required by Section 5.09 ;

(d) such Acquisition shall be consummated in accordance with the terms of the purchase or acquisition agreement executed in connection therewith and with all other material agreements, instruments and documents implementing such Acquisition and in compliance with applicable law and regulatory approvals;

(e) no Default or Event of Default shall have occurred and be continuing or would result therefrom;

(f) after giving effect to such Acquisition (including the incurrence, assumption or acquisition of any Indebtedness in connection therewith) the Borrower will be in pro forma compliance with the Financial Covenants;

(g) the aggregate cash purchase price for all Permitted Acquisitions of any Persons which do not become Loan Guarantors (together with the aggregate amount of investments, loans or advances described in Sections 6.04(c) and (d) ) shall not exceed $75 million in the aggregate; and

(h) at least five days prior to the consummation of such Acquisition, the Borrower shall have delivered a notice to the Administrative Agent and the Lenders setting forth the calculations demonstrating compliance with clause (f) of this definition.

“ Permitted Encumbrances ” means:

(a) Liens imposed by law for taxes that are not yet due or are being contested in compliance with Section 5.04 ;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 60 days or are being contested in compliance with Section 5.04 ;

(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;

(d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business;

(e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (k) of Article VII ;

(f) easements, covenants, conditions, zoning restrictions, rights-of-way, minor defects or other irregularities in title and/or similar encumbrances on real property imposed by law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Borrower or any Subsidiary;

(g) Liens on any interest or title of a lessor in property leased by the Borrower or any Subsidiary; and

(h) non-exclusive leases, licenses, subleases or sublicenses (including with respect to intellectual property and software) granted to others in the ordinary course of business and not interfering in any material respect with the business of the Borrower and its Subsidiaries, taken as a whole, and any interest or title of a lessor, sublessor or licensor under any lease, sublease or license, as applicable;

provided , that the term “Permitted Encumbrances” shall not include any Lien securing Indebtedness.

“ Permitted Liens ” means all Liens permitted under Section 6.02 .

“ Permitted Receivables Facilities ” means Receivables Facilities entered into with one or more Lenders (or Affiliates of Lenders) in an aggregate face amount not to exceed $12.5 million, which is on customary market terms as determined in good faith by the Borrower and certified to the Administrative Agent with a copy of the documentation relating thereto.

“ Person ” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“ Plan ” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“ Prime Rate ” means the rate of interest per annum publicly announced from time to time by Citibank, N.A. as its prime rate in effect at its principal offices in New York City. Each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective.

“ Prohibited Transaction ” means the occurrence of a “prohibited transaction” within the meaning of Section 4975(c) of the Code or Section 406 of ERISA for which there was no exemption under Section 4975(d).

“ Projections ” has the meaning assigned to such term in Section 5.01(d) .

“ Qualified ECP Guarantor ” means, in respect of any Swap Obligation, each Loan Party that has total assets exceeding $10 million at the time the relevant Loan Guaranty or grant of the relevant security interest becomes or would become effective with respect to such Swap Obligation or such other person as constitutes an ECP and can cause another person to qualify as an ECP at such time by entering into a keepwell under Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

“ Recipient ” means, as applicable, (a) the Administrative Agent, (b) any Lender and (c) any Issuing Bank, or any combination thereof (as the context requires).

“ Receivables Assets ” means any accounts receivable owed to the Borrower or any Loan Party (whether now existing or arising or acquired in the future) arising in the ordinary course of business from

the sale of goods or services or pursuant to any other contractual right, all collateral securing such accounts receivable, all contracts and contract rights and all guarantees or other obligations in respect of such accounts receivable, all proceeds of such accounts receivable and other assets (including contract rights) which are of the type customarily transferred or in respect of which security interests are customarily granted in connection with securitizations of accounts receivable and which, in each case, are sold, conveyed, assigned or otherwise transferred or in which a security interest is granted by the Borrower or any other Loan Party to a Person that is not a Subsidiary of the Borrower.

“ Receivables Facilities ” means any one or more receivables financing facilities, receivables purchase and sale agreements, factoring agreements or other similar agreements pursuant to which the Borrower or any other Loan Party sells, conveys, assigns, grants an interest in or otherwise transfers Receivables Assets to a Person that is not a Subsidiary of the Borrower.

“ Reference Period ” has the meaning assigned to such term in the definition of “EBITDA”.

“ Register ” has the meaning assigned to such term in Section 9.04(b)(iv) .

“ Related Parties ” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“ Related Indemnitee Parties ” means with respect to any specified Indemnitee, such Indemnitee’s controlled Affiliates and the respective officers, directors, employees, advisors, agents or other representatives of such Indemnitee or such Indemnitee’s controlled Affiliates acting at the direction of such Indemnitee.

“ Release ” means any releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, migrating, disposing or dumping of any substance into the environment.

“ Requested Increase Date ” has the meaning assigned to such term in Section 2.23(a)(i) .

“ Requested Incremental Term Loan Date ” has the meaning assigned to such term in Section 2.22(a)(i) .

“ Required Lenders ” means, at any time, Lenders (other than Defaulting Lenders) having Credit Exposure and unused Commitments representing more than 50% of the sum of the total Credit Exposure and unused Commitments at such time.

“ Requirement of Law ” means, with respect to any Person, (a) the charter, articles or certificate of organization or incorporation and bylaws or operating, management or partnership agreement, or other organizational or governing documents of such Person and (b) any statute, law (including common law), treaty, rule, regulation, code, ordinance, order, decree, writ, judgment, injunction or determination of any arbitrator or court or other Governmental Authority (including Environmental Laws), in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

“ Restricted Payment ” means any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Borrower or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests in the Borrower or any option, warrant or other right to acquire any such Equity Interests in the Borrower. Notwithstanding the foregoing, no delivery of common stock of the Borrower with respect to the Convertible Notes shall constitute a Restricted Payment; provided , that any other delivery, payment or distribution in respect of such

Convertible Notes (other than, for the avoidance of doubt, any regularly scheduled interest payments) shall constitute a Restricted Payment.

“ Revolving Credit Loan ” means a Loan made pursuant to Section 2.02 .

“ Revolving Credit Termination Date ” means the earlier of (a) the fifth anniversary of the Effective Date (the “ Stated Termination Date ”), and (b) 91 days prior to the maturity date of the 2023 Convertible Notes, if in the case of this clause (b) , the principal amount of New Convertible Notes that have not been (i) redeemed, (ii) converted into equity in accordance with the 2023 Convertible Notes Documentation, (iii) defeased or satisfied and discharged, or (iv) refinanced in full with indebtedness with a maturity date at least 91 days after the Stated Termination Date, exceeds $50 million

“ Run Rate Amounts ” has the meaning assigned to such term in the definition of “EBITDA”.

“ S&P ” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business.

“ Sanctioned Country ” means, at any time, a country or territory which is the subject or target of any Sanctions.

“ Sanctioned Person ” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the OFAC, the U.S. Department of State or by the United Nations Security Council, the European Union or any EU member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person majority-owned or controlled by any such Person or Persons described in the foregoing clause (a) or (b) .

“ Sanctions ” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by OFAC or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

“ SEC ” means the Securities and Exchange Commission or any Governmental Authority succeeding to any or all of the functions of the Securities and Exchange Commission.

“ Secured Obligations ” means all Obligations, together with all (a) Banking Services Obligations and (b) Swap Agreement Obligations owing to any Person that, at the time of entering into such arrangement with a Loan Party or any Subsidiary, was the Administrative Agent, a Lender or an Affiliate thereof, in each case, with respect to such Swap Agreement Obligations, to the extent designated by the Borrower in a written statement (including by way of email) to the Administrative Agent as constituting Secured Obligations (such Swap Agreement Obligations, “ Secured Swap Agreement Obligations ”); provided , however , that the definition of “Secured Obligations” shall not create any guarantee by any Guarantor of (or grant of security interest by any Guarantor to support, as applicable) any Excluded Swap Obligations of such Guarantor for purposes of determining any obligations of any Guarantor.

“ Secured Parties ” means the Administrative Agent, each Lender, each Issuing Bank, each Swingline Lender and each other provider of Secured Obligations as permitted pursuant to the definition thereof.

“ Secured Swap Agreement Obligations ” has the meaning assigned to such term in the definition of “Secured Obligations”.

“ Security Agreement ” means that certain Pledge and Security Agreement, dated as of the date hereof, among the Borrower, each Subsidiary of the Borrower party thereto from time to time, and the Administrative Agent, for the benefit of the Administrative Agent, the Lenders and the other Secured Parties, and any other pledge or security agreement entered into, after the date of this Agreement by any Loan Party (as required by this Agreement or any other Loan Document), as the same may be amended, restated, amended and restated, supplemented or otherwise modified from time to time.

“ Senior Secured Net Leverage Ratio ” means, as of any date, the ratio of (a) Total Funded Indebtedness which is secured by a Lien on any assets of the Borrower or its Subsidiaries on such date, less the Netted Unrestricted Cash and Cash Equivalents to (b) EBITDA for the period of four consecutive fiscal quarters ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter most recently ended prior to such date).

“ Specified Event of Default ” means an Event of Default under clauses (a) , (b) , (h) , (i) or (j) of Article VII .

“ Statutory Reserve Rate ” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurodollar funding (currently referred to as “Eurodollar Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D of the Board. Eurodollar Loans shall be deemed to constitute eurodollar funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D of the Board or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“ Subordinated Indebtedness ” means any Indebtedness of the Borrower or any Subsidiary that is expressly subordinated in right of payment to the Obligations.

“ subsidiary ” means, with respect to any Person (the “ parent ”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held by the parent, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more subsidiaries of the parent or by the parent and one or more subsidiaries of the parent.

“ Subsidiary ” means any direct or indirect subsidiary of the Borrower or a Loan Party, as applicable.

“ Swap Agreement ” means any agreement with respect to any swap, forward, spot, future, credit default or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided , that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Swap Agreement.

“ Swap Agreement Obligations ” means any and all obligations of the Loan Parties or any Subsidiary, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor), under (a) any and all Swap Agreements permitted hereunder with a Person that, at the time of entering into such Swap Agreement, is the Administrative Agent, a Lender or an Affiliate of a Lender, and (b) any and all cancellations, buy backs, reversals, terminations or assignments of any such Swap Agreement transaction.

“ Swap Obligation ” means, with respect to any Loan Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act or any rules or regulations promulgated thereunder.

“ Swingline Commitment ” with respect to Citi, $10 million or such lesser amount as agreed upon by the Borrower and Citi, and with respect to any other Lender that becomes a Swingline Lender, an amount to be agreed upon by the Borrower and such Lender, with the consent of the Administrative Agent; provided , that an aggregate amount of all such Swingline Commitments shall not exceed $10 million.

“ Swingline Exposure ” means, at any time, the aggregate principal amount of all Swingline Loans outstanding at such time. The Swingline Exposure of any Swingline Lender at any time shall be the sum of (a) its Applicable Percentage of the total Swingline Exposure at such time other than with respect to any Swingline Loans made by such Swingline Lender in its capacity as the Swingline Lender and (b) the principal amount of all Swingline Loans made by such Swingline Lender in its capacity as the Swingline Lender outstanding at such time ( less the amount of participations funded by the other Lenders in such Swingline Loans).

“ Swingline Lenders ” individually and collectively as the context may require, (a) Citi in its capacity as a lender of Swingline Loans hereunder and (b) and any other Lender from time to time designated by the Borrower as a Swingline Lender, with the consent of such Lender and the Administrative Agent and such Lender’s successors in such capacity.

“ Swingline Loan ” means a Loan made pursuant to Section 2.04 .

“ Taxes ” means any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“ Total Funded Indebtedness ” means, at any date, the aggregate principal amount of all Funded Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis in accordance with GAAP; provided , that Total Funded Indebtedness shall not include any Indebtedness relating to the MUFG Synthetic Lease to the extent such obligations are cash collateralized and provided , further , that for purposes of calculating the Total Net Leverage Ratio to determine the Applicable Rate only, Total Funded Indebtedness shall not include Indebtedness of Subsidiaries which are not Domestic Subsidiaries up to an aggregate amount of $25 million.

“ Total Net Leverage Ratio ” means, as of any date, the ratio of (a) Total Funded Indebtedness on such date, less the Netted Unrestricted Cash and Cash Equivalents to (b) EBITDA for the period of four consecutive fiscal quarters ended on such date (or, if such date is not the last day of a fiscal quarter, ended on the last day of the fiscal quarter most recently ended prior to such date).

“ Transactions ” means the execution, delivery and performance by the Borrower of this Agreement, the borrowing of Loans and other credit extensions, the use of the proceeds thereof and the issuance of Letters of Credit hereunder.

“ Type ”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“ UCC ” means the Uniform Commercial Code as in effect from time to time in the State of New York or any other state the laws of which are required to be applied in connection with the issue of perfection of security interests.

“ Unliquidated Obligations ” means, at any time, any Secured Obligations (or portion thereof) that are contingent in nature or unliquidated at such time, including any Secured Obligation that is: (i) an obligation to reimburse a bank for drawings not yet made under a letter of credit issued by it; (ii) any other obligation (including any guarantee) that is contingent in nature at such time; or (iii) an obligation to provide collateral to secure any of the foregoing types of obligations.

“ Unrestricted Cash and Cash Equivalents ” means, at any date, the cash and Cash Equivalents of the Loan Parties that are (or would be) included on the balance sheet of the Borrower as of such day which are not identified on the balance sheet of the Loan Parties as “restricted” in accordance with GAAP and which are free and clear of all Liens (other than non-consensual liens and liens in favor of the Secured Parties pursuant to the Collateral Documents to secure the Secured Obligations, in each case, permitted under Section 6.02).

“ U.S. Person ” means a United States person as defined in section 7701(a)(30) of the Code.

“ U.S. Tax Compliance Certificate ” has the meaning assigned to such term in Section 2.17(f)(ii) (B)(3).

“ USA PATRIOT Act ” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.

“ Withdrawal Liability ” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“ Withholding Agent ” means the Borrower, any Loan Party, the Administrative Agent, and any other withholding agent as applicable.

“ Write-Down and Conversion Powers ” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

SECTION 1.02 Classification of Loans and Borrowings . For purposes of this Agreement, Loans may be classified and referred to by Type ( e.g ., a “Eurodollar Loan”).

SECTION 1.03 Terms Generally . The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “law” shall be construed as referring to all statutes, rules, regulations, codes and other laws (including official rulings and interpretations thereunder having the force of law or with which affected Persons customarily comply) and all judgments, orders and decrees of all Governmental Authorities. The word “will” shall be construed to have the same

meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, amended and restated, supplemented, refinanced, replaced, or otherwise modified (subject to any restrictions on such amendments, restatements, amendment and restatement, supplements, refinancings, replacements, or modifications set forth herein), (b) any definition of or reference to any statute, rule or regulation shall be construed as referring thereto as from time to time amended, supplemented or otherwise modified (including by succession of comparable successor laws), (c) any reference herein to any Person shall be construed to include such Person’s successors and assigns (subject to any restrictions on assignments set forth herein) and, in the case of any Governmental Authority, any other Governmental Authority that shall have succeeded to any or all functions thereof, (d) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, (e) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement, (f) any reference in any definition to the phrase “at any time” or “for any period” shall refer to the same time or period for all calculations or determinations within such definition, and (g) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

SECTION 1.04 Accounting Terms; GAAP . Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided , that, if after the Effective Date there occurs any change in GAAP or in the application thereof on the operation of any provision hereof and the Borrower notifies the Administrative Agent that the Borrower requests an amendment to any provision hereof to eliminate the effect of such change in GAAP or in the application thereof (or if the Administrative Agent notifies the Borrower that the Required Lenders request an amendment to any provision hereof for such purpose), regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

SECTION 1.05 Status of Obligations . In the event that the Borrower or any other Loan Party shall at any time issue or have outstanding any Subordinated Indebtedness, the Borrower shall take or cause such other Loan Party to take all such actions as shall be necessary to cause the Secured Obligations to constitute senior indebtedness (however denominated) in respect of such Subordinated Indebtedness and to enable the Administrative Agent and the Lenders to have and exercise any payment blockage or other remedies available or potentially available to holders of senior indebtedness under the terms of such Subordinated Indebtedness. Without limiting the foregoing, the Secured Obligations are hereby designated as “senior indebtedness” and as “designated senior indebtedness” and words of similar import under and in respect of any indenture or other agreement or instrument under which such Subordinated Indebtedness is outstanding and are further given all such other designations as shall be required under the terms of any such Subordinated Indebtedness in order that the Lenders may have and exercise any payment blockage or other remedies available or potentially available to holders of senior indebtedness under the terms of such Subordinated Indebtedness.

SECTION 1.06 Financial Ratios . Any financial ratios required to be maintained by any Loan Party pursuant to this Agreement shall be calculated by dividing the appropriate component by the other component, carrying the result to one place more than the number of places by which such ratio is expressed herein and rounding the result up or down to the nearest number (with a rounding-up if there is no nearest number).

SECTION 1.07 Limited Liability Companies . Any reference herein to a merger, transfer, consolidation, amalgamation, assignment, sale, disposition or transfer, or similar term, shall be deemed to apply to a division of or by a limited liability company, limited partnership or trust, or an allocation of assets to a series of a limited liability company, limited partnership or trust (or the unwinding of such a division or allocation), as if it were a merger, transfer, amalgamation, consolidation, assignment, sale or transfer, or similar term, as applicable, to, of or with a separate Person. Any series of a limited liability company, limited partnership or trust and any entity surviving or resulting from the division of a limited liability company, limited partnership or trust shall constitute a separate Person hereunder (and each series of a limited liability company or entity surviving or resulting from the division of any limited liability company that is a Loan Party, Subsidiary, joint venture or any other like term shall also constitute such a Person or entity).

ARTICLE II

THE CREDITS

SECTION 2.01 Commitments . Subject to the terms and conditions set forth herein, each Lender severally agrees to make Loans to the Borrower from time to time during the Availability Period in an aggregate principal amount that will not result in such Lender’s Credit Exposure exceeding such Lender’s Commitment. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Loans.

SECTION 2.02 Loans and Borrowings .

(a) Each Loan (other than a Swingline Loan) shall be made as part of a Borrowing consisting of Loans of the same Type made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided , that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required. Any Swingline Loan shall be made in accordance with the procedures set forth in Section 2.04 below.

(b) Subject to Section 2.14 , each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Swingline Loan shall be an ABR Loan. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan (and in the case of an Affiliate, the provisions of Sections 2.14 , 2.15 , 2.16 and 2.17 shall apply to such Affiliate to the same extent as to such Lender); provided , that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

(c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $1 million. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $100,000 and not less than $1 million; provided , that an ABR Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.06(e) . Each Swingline Loan shall be in an amount that is an integral multiple of $100,000 and not less than $1 million. Borrowings of more than

one Type may be outstanding at the same time; provided , that there shall not at any time be more than a total of eight (8) Eurodollar Borrowings outstanding.

(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date.

SECTION 2.03 Requests for Borrowings . To request a Borrowing, the Borrower shall notify the Administrative Agent of such request either in writing (delivered by hand or fax) in substantially the form of Exhibit F and signed by the Borrower or by telephone (such request a “ Borrowing Request ”) (a) in the case of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 1:00 p.m., New York City time, on the date of the proposed Borrowing; provided , that any such notice of an ABR Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.06(e) may be given not later than 11:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery, fax or e-mail to the Administrative Agent of a written Borrowing Request in a form approved by the Administrative Agent and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.01 :

(i) the aggregate amount of the requested Borrowing and a breakdown of the separate wires comprising such Borrowing;

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period.”

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section 2.03 , the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04 Swingline Loans.

(a) Subject to the terms and conditions set forth herein, from time to time during the Availability Period, each Swingline Lender may, but shall have no obligation to, make Swingline Loans to the Borrower in an aggregate principal amount at any time outstanding that will not result in (i) the aggregate principal amount of outstanding Swingline Loans made by such Swingline Lender exceeding such Swingline Lender’s Swingline Commitment or (ii) such Swingline Lender’s Credit Exposure exceeding its Commitment; provided , that a Swingline Lender shall not be required to make a Swingline Loan to refinance an outstanding Swingline Loan. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Swingline Loans.

(b) To request a Swingline Loan, the Borrower shall notify the Administrative Agent of such request either in writing (delivered by hand or fax) in substantially the form of Exhibit H and signed by the Borrower or by telephone (such request a “ Swingline Request ”), not later than 2:00 p.m., New York City time, on the day of a proposed Swingline Loan. Each such notice shall be irrevocable and shall specify the requested date (which shall be a Business Day) and amount of the requested Swingline Loan. The Administrative Agent will promptly advise each Swingline Lender of any such notice received from the Borrower. Each Swingline Lender shall make its ratable portion of the requested Swingline Loan (such ratable portion to be calculated based upon such Swingline Lender’s Commitment to the total Commitments of all of the Swingline Lenders) available to the Borrower by means of a credit to an account of the Borrower with the Administrative Agent designated for such purpose (or, in the case of a Swingline Loan made to finance the reimbursement of an LC Disbursement as provided in Section 2.06(e) , by remittance to the Issuing Bank) by 1:00 p.m., New York City time, on the requested date of such Swingline Loan.

(c) The failure of any Swingline Lender to make its ratable portion of a Swingline Loan shall not relieve any other Swingline Lender of its obligation hereunder to make its ratable portion of such Swingline Loan on the date of such Swingline Loan, but no Swingline Lender shall be responsible for the failure of any other Swingline Lender to make the ratable portion of a Swingline Loan to be made by such other Swingline Lender on the date of any Swingline Loan.

(d) Any Swingline Lender may by written notice given to the Administrative Agent require the Lenders to acquire participations in all or a portion of its Swingline Loans outstanding. Such notice shall specify the aggregate amount of Swingline Loans in which Lenders will participate. Promptly upon receipt of such notice, the Administrative Agent will give notice thereof to each Lender, specifying in such notice such Lender’s applicable percentage of such Swingline Loans. Each Lender hereby absolutely and unconditionally agrees, promptly upon receipt of such notice from the Administrative Agent (and in any event, if such notice is received by 12:00 noon, New York City time, on a Business Day no later than 4:00 p.m. New York City time on such Business Day and if received after 12:00 noon, New York City time, on a Business Day shall mean no later than 12:00 noon New York City time on the immediately succeeding Business Day), to pay to the Administrative Agent, for the account of such Swingline Lenders, such Lender’s applicable percentage of such Swingline Loans. Each Lender acknowledges and agrees that its obligation to acquire participations in Swingline Loans pursuant to this paragraph is absolute and unconditional and shall not be affected by any circumstance whatsoever, including the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever. Each Lender shall comply with its obligation under this paragraph by wire transfer of immediately available funds, in the same manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis, to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to such Swingline Lenders the amounts so received by it from the Lenders. The Administrative Agent shall notify the Borrower of any participations in any Swingline Loan acquired pursuant to this paragraph, and thereafter payments in respect of such Swingline Loan shall be made to the Administrative Agent and not to such Swingline Lenders. Any amounts received by a Swingline Lender from the Borrower (or other party on behalf of the Borrower) in respect of a Swingline Loan after receipt by such Swingline Lender of the proceeds of a sale of participations therein shall be promptly remitted to the Administrative Agent; any such amounts received by the Administrative Agent shall be promptly remitted by the Administrative Agent to the Lenders that shall have made their payments pursuant to this paragraph and to such Swingline Lenders, as their interests may appear; provided , that any such payment so remitted shall be repaid to such Swingline Lender or to the Administrative Agent, as applicable, if and to the extent such payment is required to be refunded to the Borrower for any reason. The purchase of participations in a Swingline Loan pursuant to this paragraph shall not relieve the Borrower of any default in the payment thereof.

(e) Any Swingline Lender may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Swingline Lender and the successor Swingline Lender. The Administrative Agent shall notify the Lenders of any such replacement of a Swingline Lender. At the time any such replacement shall become effective, the Borrower shall pay all unpaid interest accrued for the account of the replaced Swingline Lender pursuant to Section 2.13(a) . From and after the effective date of any such replacement, (x) the successor Swingline Lender shall have all the rights and obligations of the replaced Swingline Lender under this Agreement with respect to Swingline Loans made thereafter and (y) references herein to the term “Swingline Lender” shall be deemed to refer to such successor or to any previous Swingline Lender, or to such successor and all previous Swingline Lenders, as the context shall require. After the replacement of a Swingline Lender hereunder, the replaced Swingline Lender shall remain a party hereto and shall continue to have all the rights and obligations of a Swingline Lender under this Agreement with respect to Swingline Loans made by it prior to its replacement, but shall not be required to make additional Swingline Loans.

(f) Subject to the appointment and acceptance of a successor Swingline Lender, any Swingline Lender may resign as a Swingline Lender at any time upon 30 days’ prior written notice to the Administrative Agent, the Borrower and the Lenders, in which case, such Swingline Lender shall be replaced in accordance with Section 2.04(e) above.

SECTION 2.05 [Section intentionally omitted].

SECTION 2.06 Letters of Credit .

(a) General . Subject to the terms and conditions set forth herein, the Borrower may request the issuance of (and the Issuing Bank shall issue) Letters of Credit denominated in dollars as the applicant thereof for the support of its or its Subsidiaries’ obligations in a form reasonably acceptable to the applicable Issuing Bank, at any time and from time to time during the Availability Period. In the event of any inconsistency between the terms and conditions of this Agreement and the terms and conditions of any form of letter of credit application or other agreement submitted by the Borrower to, or entered into by the Borrower with, any Issuing Bank relating to any Letter of Credit, the terms and conditions of this Agreement shall control. The Borrower unconditionally and irrevocably agrees that, in connection with any Letter of Credit issued for the support of any Subsidiary’s obligations as provided in the first sentence of this clause (a) , the Borrower will be fully responsible for the reimbursement of LC Disbursements in accordance with the terms hereof, the payment of interest thereon and the payment of fees due under Section 2.12(b) to the same extent as if it were the sole account party in respect of such Letter of Credit (the Borrower hereby irrevocably waiving any defenses that might otherwise be available to it as a guarantor or surety of the obligations of such Subsidiary that is an account party in respect of any such Letter of Credit). Notwithstanding anything herein to the contrary, the Issuing Bank shall have no obligation hereunder to issue, and shall not issue, any Letter of Credit (i) the proceeds of which would be made available to any Person (A) to fund any activity or business of or with any Sanctioned Person, or in any country or territory that, at the time of such funding, is the subject of any Sanctions, in either such case, in violation of any such Sanctions or (B) in any manner that would result in a violation of any Sanctions by any party to this Agreement, (ii) if any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank from issuing such Letter of Credit, or any Requirement of Law relating to the Issuing Bank or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over the Issuing Bank shall prohibit, or request that the Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon the Issuing Bank with respect to such Letter of Credit any restriction, reserve or capital requirement (for which the Issuing Bank is not

otherwise compensated hereunder) not in effect on the Effective Date, or shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which was not applicable on the Effective Date and which the Issuing Bank in good faith deems material to it, or (iii) if the issuance of such Letter of Credit would violate one or more policies of the Issuing Bank applicable to letters of credit generally; provided , that, notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements or directives thereunder or issued in connection therewith or in the implementation thereof, and (y) all requests, rules, guidelines, requirements or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed not to be in effect on the Effective Date for purposes of clause (ii) above, regardless of the date enacted, adopted, issued or implemented

(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions . To request the issuance of a Letter of Credit (or the amendment, renewal or extension of an outstanding Letter of Credit), the Borrower shall hand deliver or fax (or transmit by electronic communication, if arrangements for doing so have been approved by the applicable Issuing Bank) to the applicable Issuing Bank and the Administrative Agent (reasonably in advance of, but in any event no less than three Business Days prior to the requested date of issuance, amendment, renewal or extension) a notice requesting the issuance of a Letter of Credit, or identifying the Letter of Credit to be amended, renewed or extended, and specifying the date of issuance, amendment, renewal or extension (which shall be a Business Day), the date on which such Letter of Credit is to expire (which shall comply with clause (c) of this Section 2.06 ) and whether such Letter of Credit shall contain automatic extension or renewal provisions, the amount of such Letter of Credit, the name and address of the beneficiary thereof and such other information as shall be necessary to prepare, amend, renew or extend such Letter of Credit. If requested by the applicable Issuing Bank, the Borrower also shall submit a letter of credit application on such Issuing Bank’s standard form in connection with any request for a Letter of Credit. A Letter of Credit shall be issued, amended, renewed or extended only if (and upon issuance, amendment, renewal or extension of each Letter of Credit the Borrower shall be deemed to represent and warrant that), after giving effect to such issuance, amendment, renewal or extension (i) the LC Exposure shall not exceed $25 million and (ii) the Aggregate Credit Exposure shall not exceed the aggregate Commitments of all Lenders.

(c) Expiration Date . Each Letter of Credit shall expire (or be subject to termination or non-renewal by notice from the applicable Issuing Bank to the beneficiary thereof) at or prior to the close of business on the earlier of (i) the date one year after the date of the issuance of such Letter of Credit (or, in the case of any one-time renewal or extension thereof, including, without limitation, any automatic renewal provision, one year after such renewal or extension) and (ii) the date that is five Business Days prior to the Maturity Date; provided, that, upon the Borrower’s request, any such Letter of Credit which is issued in the final year prior the Maturity Date may have an expiry date which is up to one year after the Maturity Date if, at least five Business Days prior to the Maturity Date, the Borrower (A) deposits with the Administrative Agent cash collateral in an amount equal to 105% of the amount of the LC Exposure as of such date plus accrued and unpaid interest thereon or (B) provides a backup standby letter of credit, in each case, reasonably satisfactory to the relevant Issuing Bank. Each Letter of Credit with automatic extension or renewal provisions shall, subject to the right of the respective Issuing Bank to terminate such automatic renewal in accordance with the terms of such Letter of Credit upon the occurrence of an Event of Default, be automatically renewed for a successive one-year period on each anniversary of the date of the issuance of such Letter of Credit, until cancelled by the Borrower by notice to the applicable Issuing Bank in accordance with the terms of such Letter of Credit agreed upon at the time such Letter of Credit is issued; provided , that such Letter of Credit shall expire at or prior to the close of business on the date that is five Business Days prior to the Maturity Date if not earlier cancelled.

(d) Participations . By the issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing the amount thereof) and without any further action on the part of the applicable Issuing Bank or the Lenders, such Issuing Bank hereby grants to each Lender, and each Lender hereby acquires from such Issuing Bank, a participation in such Letter of Credit equal to such Lender’s Applicable Percentage of the aggregate amount available to be drawn under such Letter of Credit. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of such Issuing Bank, such Lender’s Applicable Percentage of each LC Disbursement made by such Issuing Bank and not reimbursed by the Borrower on the date due as provided in clause (e) of this Section 2.06 , or of any reimbursement payment required to be refunded to the Borrower for any reason. Each Lender acknowledges and agrees that its obligation to acquire participations pursuant to this paragraph in respect of Letters of Credit is absolute and unconditional and shall not be affected by any circumstance whatsoever, including any amendment, renewal or extension of any Letter of Credit or the occurrence and continuance of a Default or reduction or termination of the Commitments, and that each such payment shall be made without any offset, abatement, withholding or reduction whatsoever.

(e) Reimbursement . If an Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit, the Borrower shall reimburse such LC Disbursement by paying to the Administrative Agent an amount equal to such LC Disbursement not later than 12:00 noon, New York City time, on the Business Day immediately following the day that the Borrower receives such notice, if such notice is not received prior to such time on the day of receipt; provided , that, if such LC Disbursement is not less than $500,000, the Borrower may, subject to the conditions to borrowing set forth herein, request in accordance with Section 2.03 or 2.04 that such payment be financed with an ABR Borrowing or Swingline Loan in an equivalent amount and, to the extent so financed, the Borrower’s obligation to make such payment shall be discharged and replaced by the resulting ABR Borrowing or Swingline Loan. If the Borrower fails to make such payment when due, the Administrative Agent shall notify each Lender of the applicable LC Disbursement, the payment then due from the Borrower in respect thereof and such Lender’s Applicable Percentage thereof. Promptly following receipt of such notice, each Lender shall pay to the Administrative Agent its Applicable Percentage of the payment then due from the Borrower, in the same manner as provided in Section 2.07 with respect to Loans made by such Lender (and Section 2.07 shall apply, mutatis mutandis , to the payment obligations of the Lenders), and the Administrative Agent shall promptly pay to the applicable Issuing Bank the amounts so received by it from the Lenders. Promptly following receipt by the Administrative Agent of any payment from the Borrower pursuant to this paragraph, the Administrative Agent shall distribute such payment to the applicable Issuing Bank or, to the extent that Lenders have made payments pursuant to this paragraph to reimburse such Issuing Bank, then to such Lenders and such Issuing Bank as their interests may appear. Any payment made by a Lender pursuant to this paragraph to reimburse any Issuing Bank for any LC Disbursement (other than the funding of ABR Loans or a Swingline Loan as contemplated above) shall not constitute a Loan and shall not relieve the Borrower of its obligation to reimburse such LC Disbursement.

(f) Obligations Absolute . The Borrower’s obligation to reimburse LC Disbursements as provided in clause (e) of this Section 2.06 shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement under any and all circumstances whatsoever and irrespective of (i) any lack of validity or enforceability of any Letter of Credit or this Agreement, or any term or provision therein, (ii) any draft or other document presented under a Letter of Credit proving to be forged, fraudulent or invalid in any respect or any statement therein being untrue or inaccurate in any respect, (iii) payment by an Issuing Bank under a Letter of Credit against presentation of a draft or other document that does not comply with the terms of such Letter of Credit, or (iv) any other event or circumstance whatsoever, whether or not similar to any of the foregoing, that might, but for the provisions of this Section 2.06 , constitute a legal or equitable discharge of, or provide a right of setoff against, the Borrower’s obligations hereunder. Neither the Administrative Agent, the Lenders nor any Issuing Bank, nor any of their Related

Parties, shall have any liability or responsibility by reason of or in connection with the issuance or transfer of any Letter of Credit or any payment or failure to make any payment thereunder (irrespective of any of the circumstances referred to in the preceding sentence), or any error, omission, interruption, loss or delay in transmission or delivery of any draft, notice or other communication under or relating to any Letter of Credit (including any document required to make a drawing thereunder), any error in interpretation of technical terms or any consequence arising from causes beyond the control of any Issuing Bank; provided , that the foregoing shall not be construed to excuse any Issuing Bank from liability to the Borrower to the extent of any direct damages (as opposed to special, indirect, consequential or punitive damages, claims in respect of which are hereby waived by the Borrower to the extent permitted by applicable law) suffered by the Borrower that are caused by such Issuing Bank’s failure to exercise care when determining whether drafts and other documents presented under a Letter of Credit comply with the terms thereof. The parties hereto expressly agree that, in the absence of gross negligence or willful misconduct on the part of an Issuing Bank (as finally determined by a court of competent jurisdiction), such Issuing Bank shall be deemed to have exercised care in each such determination. In furtherance of the foregoing and without limiting the generality thereof, the parties agree that, with respect to documents presented which appear on their face to be in substantial compliance with the terms of a Letter of Credit, an Issuing Bank may, in its sole discretion, either accept and make payment upon such documents without responsibility for further investigation, regardless of any notice or information to the contrary, or refuse to accept and make payment upon such documents if such documents are not in strict compliance with the terms of such Letter of Credit.

(g) Disbursement Procedures . The applicable Issuing Bank shall, promptly following its receipt thereof, examine all documents purporting to represent a demand for payment under a Letter of Credit. Such Issuing Bank shall promptly notify the Administrative Agent and the Borrower in writing of such demand for payment and whether such Issuing Bank has made or will make an LC Disbursement thereunder; provided , that any failure to give or delay in giving such notice shall not relieve the Borrower of its obligation to reimburse such Issuing Bank and the Lenders with respect to any such LC Disbursement.

(h) Interim Interest . If an Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall reimburse such LC Disbursement in full on the date such LC Disbursement is made, the unpaid amount thereof shall bear interest, for each day from and including the date such LC Disbursement is made to but excluding the date that the Borrower reimburses such LC Disbursement, at the rate per annum then applicable to ABR Loans and such interest shall be payable on the date when such reimbursement is due; provided , that, if the Borrower fails to reimburse such LC Disbursement when due pursuant to clause (e) of this Section 2.06 , then Section 2.13(c) shall apply. Interest accrued pursuant to this paragraph shall be for the account of the applicable Issuing Bank, except that interest accrued on and after the date of payment by any Lender pursuant to clause (e) of this Section 2.06 to reimburse such Issuing Bank shall be for the account of such Lender to the extent of such payment.

(i) Replacement of an Issuing Bank . An Issuing Bank may be replaced at any time by written agreement among the Borrower, the Administrative Agent, the replaced Issuing Bank and the successor Issuing Bank. The Administrative Agent shall notify the Lenders of any such replacement of an Issuing Bank. At the time any such replacement shall become effective, the Borrower shall pay all unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.12(b) . From and after the effective date of any such replacement, (i) the successor Issuing Bank shall have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit to be issued thereafter and (ii) references herein to the term “Issuing Bank” shall be deemed to refer to such successor or to any previous Issuing Bank, or to such successor and all previous Issuing Banks, as the context shall require. After the replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto and shall continue to have all the rights and obligations of an Issuing Bank under this Agreement with respect to Letters of Credit then

outstanding and issued by it prior to such replacement, but shall not be required to issue additional Letters of Credit.

(j) Cash Collateralization . If any Event of Default shall occur and be continuing, on the Business Day that the Borrower receives notice from the Administrative Agent or the Required Lenders (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure representing greater than 50% of the aggregate LC Exposure) demanding the deposit of cash collateral pursuant to this paragraph, the Borrower shall deposit in an account with the Administrative Agent, in the name of the Administrative Agent and for the benefit of the Lenders (the “ LC Collateral Account ”), an amount in cash equal to 105% of the amount of the LC Exposure as of such date plus accrued and unpaid interest thereon; provided , that the obligation to deposit such cash collateral shall become effective immediately, and such deposit shall become immediately due and payable, without demand or other notice of any kind, upon the occurrence of any Event of Default with respect to the Borrower described in clause (h) or (i) of Article VII . Such deposit shall be held by the Administrative Agent as collateral for the payment and performance of the Secured Obligations. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over the LC Collateral Account and the Borrower hereby grants the Administrative Agent a security interest in the LC Collateral Account. Other than any interest earned on the investment of such deposits, which investments shall be made at the option and sole discretion of the Administrative Agent and at the Borrower’s risk and expense, such deposits shall not bear interest. Interest or profits, if any, on such investments shall accumulate in the LC Collateral Account. Moneys in the LC Collateral Account shall be applied by the Administrative Agent to reimburse the Issuing Banks for LC Disbursements for which it has not been reimbursed and, to the extent not so applied, shall be held for the satisfaction of the reimbursement obligations of the Borrower for the LC Exposure at such time or, if the maturity of the Loans has been accelerated (but subject to the consent of Lenders with LC Exposure representing greater than 50% of the aggregate LC Exposure), be applied to satisfy other Secured Obligations. If the Borrower is required to provide an amount of cash collateral hereunder as a result of the occurrence of an Event of Default, such amount (to the extent not applied as aforesaid) shall be returned to the Borrower within three Business Days after all such Defaults have been cured or waived.

(k) Issuing Bank Reports to the Administrative Agent . Unless otherwise agreed by the Administrative Agent, each Issuing Bank shall, in addition to its notification obligations set forth elsewhere in this Section 2.06 , report in writing to the Administrative Agent (i) periodic activity (for such period or recurrent periods as shall be requested by the Administrative Agent) in respect of Letters of Credit issued by such Issuing Bank, including all issuances, extensions, amendments and renewals, all expirations and cancelations and all disbursements and reimbursements, (ii) reasonably prior to the time that such Issuing Bank issues, amends, renews or extends any Letter of Credit, the date of such issuance, amendment, renewal or extension, and the stated amount of the Letters of Credit issued, amended, renewed or extended by it and outstanding after giving effect to such issuance, amendment, renewal or extension (and whether the amounts thereof shall have changed), (iii) on each Business Day on which such Issuing Bank makes any LC Disbursement, the date and amount of such LC Disbursement, (iv) on any Business Day on which the Borrower fails to reimburse an LC Disbursement required to be reimbursed to such Issuing Bank on such day, the date of such failure and the amount of such LC Disbursement, and (v) on any other Business Day, such other information as the Administrative Agent shall reasonably request as to the Letters of Credit issued by such Issuing Bank.

(l) LC Exposure Determination . For all purposes of this Agreement, the amount of a Letter of Credit that, by its terms or the terms of any document related thereto, provides for one or more automatic increases in the stated amount thereof shall be deemed to be the maximum stated amount of such Letter of

Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at the time of determination.

SECTION 2.07 Funding of Borrowings .

(a) Each Lender shall make each Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 2:00 p.m., New York City time, to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders in an amount equal to such Lender’s Applicable Percentage; provided , that Swingline Loans shall be made as provided in Section 2.04 . The Administrative Agent will make such Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account of the Borrower maintained with the Administrative Agent and designated by the Borrower in the applicable Borrowing Request; provided , that ABR Loans made to finance the reimbursement of an LC Disbursement as provided in Section 2.06(e) shall be remitted by the Administrative Agent to the Issuing Banks.

(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of any Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of such Borrowing, the Administrative Agent may assume that such Lender has made such share available on such date in accordance with clause (a) of this Section 2.07 and may, in reliance upon such assumption, make available to the Borrower a corresponding amount. In such event, if a Lender has not in fact made its share of the applicable Borrowing available to the Administrative Agent, then the applicable Lender and the Borrower severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrower to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrower, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in such Borrowing.

SECTION 2.08 Interest Elections .

(a) Each Borrowing initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section 2.08 . The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. This section shall not apply to Swingline Borrowings, which may not be converted or continued.

(b) To make an election pursuant to this Section 2.08 , the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be

irrevocable and shall be confirmed promptly by hand delivery, fax or e-mail to the Administrative Agent of a written Interest Election Request in substantially the form of Exhibit G and signed by the Borrower.

(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02 :

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

SECTION 2.09 Termination and Reduction of Commitments .

(a) Unless previously terminated or extended pursuant to the terms and conditions hereof, all Commitments shall terminate on the Maturity Date.

(b) The Borrower may at any time, without (subject to Section 2.16 ) premium or penalty, terminate the Commitments upon (i) the payment in full of all outstanding Loans (including any Swingline Loans), together with accrued and unpaid interest thereon and on any Letters of Credit, (ii) the cancellation and return of all outstanding Letters of Credit (or alternatively, with respect to each such Letter of Credit, the furnishing to the Administrative Agent of a cash deposit (or at the discretion of the Administrative Agent a backup standby letter of credit satisfactory to the Administrative Agent and the applicable Issuing Bank) in an amount equal to 105% of the LC Exposure as of such date), (iii) the payment in full of the accrued and

unpaid fees, and (iv) the payment in full of all reimbursable expenses and other Obligations together with accrued and unpaid interest thereon.

(c) The Borrower may from time to time, without (subject to Section 2.16 ) premium or penalty, reduce the Commitments; provided , that (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1 million and not less than $5 million, and (ii) the Borrower shall not reduce the Commitments if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.11 , the Aggregate Credit Exposure would exceed the aggregate Commitments of all Lenders.

(d) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under clause (b) or (c) of this Section 2.09 at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section 2.09 shall be irrevocable; provided , that a notice of termination of the Commitments delivered by the Borrower may state that such notice is conditioned upon the effectiveness of other credit facilities or events, in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments shall be permanent. Each reduction of the Commitments shall be made ratably among the Lenders in accordance with their respective Commitments.

SECTION 2.10 Repayment of Loans; Evidence of Debt .

(a) The Borrower hereby unconditionally promises to pay (i) to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Maturity Date and (ii) to the Administrative Agent for the account of the Swingline Lenders the then unpaid principal amount of each Swingline Loan on the earlier of the Maturity Date and the date that is five Business Days after such Swingline Loan is made; provided , that on each date that a Borrowing is made, the Borrower shall repay all Swingline Loans then outstanding and the proceeds of any such Borrowing shall be applied by the Administrative Agent to repay any Swingline Loans than outstanding.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, if any, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d) The entries made in the accounts maintained pursuant to clause (b) or (c) of this Section 2.10 shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided , that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement; provided , further , that in the event of a conflict between the entries made in the accounts maintained pursuant to clause (b) or (c) of this Section 2.10 and the Register, the Register shall govern.

(e) Any Lender may request that Loans made by it be evidenced by a promissory note (each a “ Note ” and, collectively, the “ Notes ”). In such event, the Borrower shall prepare, execute and deliver to

such Lender a Note payable to such Lender and its registered assigns and in a form approved by the Administrative Agent. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 9.04 ) be represented by one or more Notes in such form payable to such payee and its registered assigns.

SECTION 2.11 Prepayment of Loans .

(a) The Borrower shall have the right at any time and from time to time, without (subject to Section 2.16 ) premium or penalty, to prepay any Borrowing in whole or in part, subject to prior notice in accordance with clause (c) of this Section 2.11 .

(b) In the event and on such occasion that the Aggregate Credit Exposure exceeds the aggregate Commitments of all Lenders, the Borrower shall prepay the Loans (including any Swingline Loans) and/or cash collateralize the LC Exposure (in accordance with Section 2.06(j)) in an aggregate amount equal to such excess.

(c) The Borrower shall notify the Administrative Agent (and, in the case of prepayment of Swingline Loans, the Swingline Lenders) in writing of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 12:00 noon, New York City time, three Business Days before the date of prepayment, (ii) in the case of prepayment of an ABR Borrowing, not later than 12:00 noon, New York City time, one Business Day before the date of prepayment or (iii) in the case of prepayment of a Swingline Loan, not later than 1:00 p.m., New York City time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided , that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.09 , then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.09 . Promptly following receipt of any such notice relating to a Borrowing, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an amount that would be permitted in the case of an advance of a Borrowing of the same Type as provided in Section 2.02 . Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.13 .

SECTION 2.12 Fees .

(a) The Borrower agrees to pay to the Administrative Agent for the account of each Lender (other than a Defaulting Lender, subject to Section 2.20 ) a commitment fee, which shall accrue at the Commitment Fee Rate set forth in the definition of Applicable Rate on the average daily amount of the Available Commitment of such Lender during the period from and including the Effective Date to but excluding the date on which the Commitments terminate; provided , however , that for purposes of this clause (a) any Swingline Loan shall not be considered when calculating the amount of the Available Commitment. Accrued commitment fees shall be payable in arrears on the first Business Day of each January, April, July and October and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof. All commitment fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed.

(b) The Borrower agrees to pay (i) to the Administrative Agent for the account of each Lender (other than a Defaulting Lender, subject to Section 2.20 ) a participation fee with respect to its participations in Letters of Credit, which shall accrue at the same Applicable Rate used to determine the interest rate

applicable to Eurodollar Loans on the average daily amount of such Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date on which such Lender’s Commitment terminates and the date on which such Lender ceases to have any LC Exposure, and (ii) to the applicable Issuing Bank a fronting fee, which shall accrue at the rate of 0.25% per annum on the average daily amount of each applicable Letter of Credit (excluding any portion thereof attributable to unreimbursed LC Disbursements) during the period from and including the Effective Date to but excluding the later of the date of termination of the Commitments and the date on which there ceases to be any LC Exposure, as well as the applicable Issuing Bank’s standard fees with respect to the issuance, amendment, renewal or extension of any Letter of Credit or processing of drawings thereunder. Participation fees and fronting fees accrued through and including the last day of each calendar quarter shall be payable on the first Business Day of each of each January, April, July and October following such last day, commencing on the first such date to occur after the Effective Date; provided , that all such fees shall be payable on the date on which the Commitments terminate and any such fees accruing after the date on which the Commitments terminate shall be payable on demand. Any other fees payable to any Issuing Bank pursuant to this paragraph shall be payable within ten days after demand. All participation fees and fronting fees shall be computed on the basis of a year of 360 days and shall be payable for the actual number of days elapsed.

(c) The Borrower agrees to pay to the Administrative Agent, for its own account, and to any Lender, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent or such Lender.

(d) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to an Issuing Bank, in the case of fees payable to it) for distribution, in the case of commitment fees and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances.

SECTION 2.13 Interest .

(a) The Loans comprising each ABR Borrowing (including each Swingline Loan) shall bear interest at the Alternate Base Rate plus the Applicable Rate.

(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Rate.

(c) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section 2.13 or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in clause (a) of this Section 2.13 .

(d) Accrued interest on each Loan (for ABR Loans, accrued through the last day of the prior calendar quarter) shall be payable in arrears on each Interest Payment Date for such Loan and upon termination of the Commitments; provided , that (i) interest accrued pursuant to clause (c) of this Section 2.13 shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan (other than a prepayment of an ABR Loan prior to the end of the Availability Period), accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion

of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion.

(e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

SECTION 2.14 Alternate Rate of Interest; Illegality .

(a) If prior to the commencement of any Interest Period for a Eurodollar Borrowing the Administrative Agent determines (which determination shall be conclusive absent manifest error), or the Required Lenders notify the Administrative Agent (with a copy to the Borrower) that the Required Lenders have determined that:

(i) adequate and reasonable means do not exist for ascertaining the LIBO Rate or Adjusted LIBO Rate, as applicable, for any requested Interest Period, including, without limitation, because the LIBO Rate is not available or published on a current basis and such circumstances are unlikely to be temporary;

(ii) the supervisor for the administrator of the LIBO Rate or a Governmental Authority having jurisdiction over the Administrative Agent has made a public statement identifying a specific date after which the LIBO Rate shall no longer be made available, or used for determining the interest rate of loans; or

(iii) a rate other than the LIBO Rate has become a widely recognized benchmark rate for newly originated loans in Dollars in the U.S. market,

then, after such determination by the Administrative Agent or receipt by the Administrative Agent of such notice, as applicable, the Administrative Agent and the Borrower may amend this Agreement to replace the LIBO Rate with an alternate benchmark rate (including any mathematical or other adjustments to the benchmark (if any) incorporated therein) that has been broadly accepted by the syndicated loan market in the United States in lieu of the LIBO Rate (any such proposed rate, a “ LIBOR Successor Rate ”), together with any proposed LIBOR Successor Rate Conforming Changes and adjustments to account for (x) the effects of the transition from the LIBOR Rate to the replacement index and (y) yield- or risk-based differences between the LIBOR Rate and the replacement index and, notwithstanding anything to the contrary in Section 9.02 , any such amendment shall become effective at 5:00 p.m. (New York time) on the fifth Business Day after the Administrative Agent shall have posted such proposed amendment to all Lenders and the Borrower unless, prior to such time, Lenders comprising the Required Lenders have delivered to the Administrative Agent notice that such Required Lenders do not accept such amendment.

If no LIBOR Successor Rate has been determined and the circumstances under clause (i) above exist, the obligation of the Lenders to make or maintain Eurodollar Loans shall be suspended, (to the extent of the affected Eurodollar Loans or Interest Periods). Upon receipt of such notice, the Borrower may revoke any pending request for a Eurodollar Borrowing of, conversion to or continuation of Eurodollar Loans (to the extent of the affected Eurodollar Loans or Interest Periods) or, failing that, will be deemed to have converted such request into a request for an ABR Borrowing in the amount specified therein.

(b) If after the date hereof, the adoption of any applicable law, or any change in any applicable law (whether adopted before or after the Effective Date), or any change in interpretation or administration thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender with any directive (whether or not having the force of law) of any such authority, central bank or comparable agency, shall make it unlawful or impossible for any Lender to make, maintain or fund its portion of Eurodollar Loans, such Lender shall so notify the Administrative Agent, and the Administrative Agent shall forthwith give notice thereof to the other Lenders and the Borrower. Before giving any notice to the Administrative Agent pursuant to this Section 2.14(b) , such Lender shall designate a different lending office if such designation will avoid the need for giving such notice and will not, in the sole reasonable judgment of such Lender, be otherwise materially disadvantageous to such Lender. Upon receipt of such notice, notwithstanding anything contained in Article II , the Borrower shall repay in full the then outstanding principal amount of such Lender’s portion of each affected Eurodollar Loan, together with accrued interest thereon, on either (i) the last day of the then current Interest Period applicable to such affected Eurodollar Loans if such Lender may lawfully continue to maintain and fund its portion of such Eurodollar Loan to such day or (ii) immediately if such Lender may not lawfully continue to fund and maintain its portion of such affected Eurodollar Loans to such day. Concurrently with repaying such portion of each affected Eurodollar Loan, the Borrower may borrow an ABR Loan from such Lender, whether or not it would have been entitled to effect such borrowing and such Lender shall make such Loan, if so requested, in an amount such that the outstanding principal amount of the affected Loan made by such Lender shall equal the outstanding principal amount of such Loan immediately prior to such repayment. The obligation of such Lender to make Eurodollar Loans is suspended only until such time as it is once more possible and legal for such Lender to fund and maintain Eurodollar Loans.

SECTION 2.15 Increased Costs .

(a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, liquidity or similar requirement (including any compulsory loan requirement, insurance charge or other assessment) against assets of, deposits with or for the account of, or credit extended by, any Lender (except any such reserve requirement reflected in the Adjusted LIBO Rate) or any Issuing Bank;

(ii) impose on any Lender or any Issuing Bank or the London interbank market any other condition, cost or expense affecting this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit or participation therein; or

(iii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes and (B) Excluded Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto;

and the result of any of the foregoing shall be to increase the cost to such Lender or such other Recipient of making, continuing, converting into or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to increase the cost to such Lender or such Issuing Bank of participating in, issuing or maintaining any Letter of Credit or to reduce the amount of any sum received or receivable by such Lender or such Issuing Bank hereunder (whether of principal, interest or otherwise), then the Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank, as the case may be, for such additional costs incurred or reduction suffered.

(b) If any Lender or any Issuing Bank determines that any Change in Law regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence of this Agreement or the Loans made by, or participations in Letters of Credit held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy or liquidity), then from time to time the Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.

(c) A certificate of a Lender or the applicable Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as the case may be, as specified in clause (a) or (b) of this Section 2.15 shall be delivered to the Borrower and shall be conclusive absent manifest error. The Borrower shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten days after receipt thereof.

(d) Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to clauses (a) , (b) and (c) of this Section 2.15 shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation; provided , that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to this Section 2.15 for any increased costs or reductions incurred more than 90 days prior to the date that such Lender or such Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 90-day period referred to above shall be extended to include the period of retroactive effect thereof.

SECTION 2.16 Break Funding Payments . In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Eurodollar Loan on the date specified in any notice delivered pursuant hereto (regardless of whether such notice may be revoked under Section 2.09(d) and is revoked in accordance therewith), or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrower pursuant to Section 2.19 , then, in any such event, the Borrower shall compensate each Lender for the loss, cost and expense attributable to such event (which shall not include any loss of margin or Applicable Rate). In the case of a Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest (as reasonably determined by such Lender) which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the eurodollar market. A certificate of any Lender setting forth, in reasonable detail, any amount or amounts that such Lender is entitled to receive pursuant to this Section 2.16 shall be delivered to the Borrower and shall be conclusive absent manifest error. The

Borrower shall pay such Lender the amount shown as due on any such certificate within ten days after receipt thereof.

SECTION 2.17 Withholding of Taxes; Gross-Up .

(a) Payments Free of Taxes . Any and all payments by or on account of any obligation of any Loan Party under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable withholding agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by such Loan Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 2.17 ) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

(b) Payment of Other Taxes by the Loan Parties . The Loan Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for, Other Taxes.

(c) Evidence of Payment . As soon as practicable after any payment of Taxes by any Loan Party to a Governmental Authority pursuant to this Section 2.17 , such Loan Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

(d) Indemnification by the Loan Parties . The Loan Parties shall jointly and severally indemnify each Recipient, within ten days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.17 ) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

(e) Indemnification by the Lenders . Each Lender shall severally indemnify the Administrative Agent, within ten days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 9.04(c) relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to

such Lender under any Loan Document or otherwise payable by the Administrative Agent to such Lender from any other source against any amount due to the Administrative Agent under this clause (e) .

(f) Status of Lenders .

(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times prescribed by applicable law and at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation prescribed by applicable law or as reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 2.17(f)(ii)(A) , (ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender; provided , that in such case the Lender shall indemnify the Borrower and the Administrative Agent from any and all liabilities arising therefrom.

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person,

(A) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. Federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:

(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN or W-8BEN-E, as applicable establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN or W-8BEN-E, as applicable, establishing an exemption from, or reduction of, U.S. Federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2) in the case of a Foreign Lender claiming that its extension of credit will generate U.S. effectively connected income, executed originals of IRS Form W-8ECI;

(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit E-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “ U.S. Tax Compliance Certificate ”) and (y) executed originals of IRS Form W-8BEN or W-8BEN-E, as applicable; or

(4) to the extent a Foreign Lender is not the Beneficial Owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BEN-E, as applicable, a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-2 or Exhibit E-3 , IRS Form W-9, and/or other certification documents from each Beneficial Owner, as applicable; provided , that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit E-4 on behalf of each such direct and indirect partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. Federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Loan Document would be subject to U.S. Federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D) , “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(g) Treatment of Certain Refunds . If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.17 (including by the payment of additional amounts pursuant to this Section 2.17 ), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 2.17 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this clause (g) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this clause (g) , in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this clause (g) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts giving rise to such refund had never been paid. This clause (g) shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person or to require any indemnified party to apply for a refund.

(h) Survival . Each party’s obligations under this Section 2.17 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

(i) Defined Terms . For purposes of this Section 2.17 , the term “Lender” includes any Issuing Bank and the term “applicable law” includes FATCA.

SECTION 2.18 Payments Generally; Allocation of Proceeds; Sharing of Setoffs .

(a) The Borrower shall make each payment required to be made by it hereunder (whether of principal, interest, fees or reimbursement of LC Disbursements, or of amounts payable under Section 2.15 , 2.16 or 2.17 , or otherwise) prior to 1:00 p.m., New York City time, on the date when due, in immediately available funds, without setoff or counterclaim. Any amounts received after such time on any date may, in the discretion of the Administrative Agent, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent to one or more accounts as it may designate to the Borrower in writing from time to time, except payments to be made directly to an Issuing Bank or Swingline Lender as expressly provided herein and except that payments pursuant to Sections 2.15 , 2.16 , 2.17 and 9.03 shall be made directly to the Persons entitled thereto. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments hereunder shall be made in dollars.

(b) Any proceeds of Collateral received by the Administrative Agent (i) not constituting a specific payment of principal, interest, fees or other sum payable under the Loan Documents (which shall be applied as specified by the Borrower), or (ii) after an Event of Default has occurred and is continuing, shall be applied ratably first , to pay any fees, indemnities, or expense reimbursements including amounts then due to the Administrative Agent and the Issuing Banks from the Borrower (other than in connection with Banking Services Obligations or Swap Agreement Obligations), second , to pay any fees or expense reimbursements then due to the Lenders from the Borrower (other than in connection with Banking Services Obligations or Swap Agreement Obligations), third , to pay interest then due and payable on the Loans ratably, fourth , to prepay principal on the Loans and unreimbursed LC Disbursements, fifth , to pay an amount to the Administrative Agent equal to one hundred five percent (105%) of the aggregate undrawn face amount of all outstanding Letters of Credit, to be held as cash collateral for such Obligations, sixth , to the payment of any amounts owing with respect to Banking Services Obligations and Secured Swap Agreement Obligations and seventh , to the payment of any other Secured Obligation due to the Administrative Agent or any Lender by the Borrower. Notwithstanding the foregoing, amounts received from any Loan Party shall not be applied to any Excluded Swap Obligation of such Loan Party. Notwithstanding anything to the contrary contained in this Agreement, unless so directed by the Borrower, or unless a Default is in existence, neither the Administrative Agent nor any Lender shall apply any payment which it receives to any Eurodollar Loan, except (a) on the expiration date of the Interest Period applicable to any such Eurodollar Loan or (b) in the event, and only to the extent, that there are no outstanding ABR Loans and, in any such event, the Borrower shall pay the break funding payment required in accordance with Section 2.16 . The Administrative Agent and the Lenders shall have the continuing and exclusive right to apply and reverse and reapply any and all such proceeds and payments to any portion of the Secured Obligations.

Notwithstanding the foregoing, Obligations arising under Banking Services Obligations or Swap Agreement Obligations shall be excluded from the application described above and paid in clause sixth if the Administrative Agent has not received written notice thereof in accordance with the definition of Secured Obligations, together with such supporting documentation as the Administrative Agent may have reasonably requested from the applicable provider of such Banking Services or Swap Agreements.

(c) At the election of the Borrower but subject to the conditions set forth in Section 4.02 , all payments of principal, interest, LC Disbursements, fees, premiums, reimbursable expenses (including, without limitation, all reimbursement for fees, costs and expenses pursuant to Section 9.03 ), and other sums payable under the Loan Documents, may be paid from the proceeds of Borrowings made hereunder whether made following a request by the Borrower pursuant to Section 2.03 or a deemed request as provided in this Section 2.18 or may be deducted from any deposit account of the Borrower maintained with the Administrative Agent.

(d) If any Lender shall, by exercising any right of setoff or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans or participations in LC Disbursements or Swingline Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and participations in LC Disbursements and Swingline Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans and participations in LC Disbursements and Swingline Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans and participations in LC Disbursements and Swingline Loans; provided , that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to (x) any payment made

by the Borrower pursuant to and in accordance with the express terms of this Agreement (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in LC Disbursements to any assignee or participant, other than to the Borrower or any Subsidiary (as to which the provisions of this paragraph shall apply) or (z) the implementation of any Extension Offer accepted by the Required Lenders. The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation.

(e) Unless the Administrative Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders or any Issuing Bank hereunder that the Borrower will not make such payment, the Administrative Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or the Issuing Banks, as the case may be, the amount due. In such event, if the Borrower has not in fact made such payment, then each of the Lenders or the Issuing Banks, as the case may be, severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender or such Issuing Bank with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(f) If any Lender shall fail to make any payment required to be made by it hereunder, then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), (i) apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations hereunder until all such unsatisfied obligations are fully paid and/or (ii) hold any such amounts in a segregated account as cash collateral for, and apply any such amounts to, any future funding obligations of such Lender hereunder; application of amounts pursuant to (i) and (ii) above shall be made in such order as may be determined by the Administrative Agent in its discretion.

(g) The Administrative Agent may from time to time provide the Borrower with billing statements or invoices with respect to any of the Secured Obligations (the “ Billing Statements ”). The Administrative Agent is under no duty or obligation to provide Billing Statements, which, if provided, will be solely for the Borrower’s convenience. The Billing Statements may contain estimates of the amounts owed during the relevant billing period, whether of principal, interest, fees or other Secured Obligations. If the Borrower pays the full amount indicated on a Billing Statement on or before the due date indicated on such Billing Statement, the Borrower shall not be in default; provided , that acceptance by the Administrative Agent, on behalf of the Lenders, of any payment that is less than the payment due at that time shall not constitute a waiver of the Administrative Agent’s or the Lenders’ right to receive payment in full at another time.

SECTION 2.19 Mitigation Obligations; Replacement of Lenders .

(a) If any Lender requests compensation under Section 2.15 , or if the Borrower or the Loan Guarantors are required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.17 or 10.09 , then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the

judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.15 , 2.17 or 10.09 , as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable and documented out-of-pocket costs and expenses incurred by any Lender in connection with any such designation or assignment).

(b) If (i) any Lender requests compensation under Section 2.15 , (ii) any Lender fails to consent to a requested amendment, waiver or modification to any Loan Document in which Required Lenders have already consented to such amendment, waiver or modification but the consent of each Lender (or each Lender directly affected thereby, as applicable) is required with respect thereto, (iii) the Borrower or the Loan Guarantors are required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender) pursuant to Section 2.17 or Section 10.09 , or (iv) any Lender becomes a Defaulting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04 ), all its interests, rights (other than its existing rights to payments pursuant to Section 2.15 or 2.17 ) and obligations under this Agreement and other Loan Documents to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided , that (A) the Borrower shall have received the prior written consent of the Administrative Agent (and if a Commitment is being assigned, the Issuing Banks and Swingline Lenders), which consent shall not unreasonably be withheld, (B) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements and Swingline Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts) and (C) in the case of any such assignment resulting from a claim for compensation under Section 2.15 or payments required to be made pursuant to Sections 2.17 or 10.09 , such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

SECTION 2.20 Defaulting Lenders . Notwithstanding any provision of this Agreement to the contrary, if any Lender becomes a Defaulting Lender, then the following provisions shall apply for so long as such Lender is a Defaulting Lender:

(a) fees shall cease to accrue on the unfunded portion of the Commitment of such Defaulting Lender pursuant to Section 2.12(a) ;

(b) such Defaulting Lender shall not have the right to vote on any issue on which voting is required (other than to the extent expressly provided in Section 9.02(b) ) and the Commitment and Credit Exposure of such Defaulting Lender shall not be included in determining whether all Lenders or the Required Lenders have taken or may take any action hereunder (including any consent to any amendment, waiver or other modification pursuant to Section 9.02 ) or under any other Loan Document; provided , that, except as otherwise provided in Section 9.02 , this clause (b) shall not apply to the vote of a Defaulting Lender in the case of an amendment, waiver or other modification requiring the consent of such Lender or each Lender directly affected thereby;

(i) all or any part of such Swingline Exposure and/or such LC Exposure of such Defaulting Lender (other than the portion of such Swingline Exposure referred to in clause (b) of the definition of such term) shall be reallocated among the non-Defaulting Lenders in accordance with their respective Applicable Percentages but only to the extent that the sum of all non-Defaulting Lenders’ Credit Exposures plus such Defaulting Lender’s Swingline Exposure and/or LC Exposure does not exceed the total of all non-Defaulting Lenders’ Commitments; and

(ii) if the reallocation described in clause (i) above cannot, or can only partially, be effected, the Borrower shall within one Business Day following notice by the Administrative Agent (x) first, prepay such Swingline Exposure and (y) second, cash collateralize for the benefit of the Issuing Banks only the Borrower’s obligations corresponding to such Defaulting Lender’s LC Exposure (after giving effect to any partial reallocation pursuant to clause (i) above) in accordance with the procedures set forth in Section 2.06(j) for so long as such LC Exposure is outstanding;

(iii) if the Borrower cash collateralizes any portion of such Defaulting Lender’s LC Exposure pursuant to this Section 2.20(c) , the Borrower shall not be required to pay any fees to such Defaulting Lender pursuant to Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure during the period such Defaulting Lender’s LC Exposure is cash collateralized;

(iv) if the LC Exposure of the non-Defaulting Lenders is reallocated pursuant to Section 2.20(c) , then the fees payable to the Lenders pursuant to Section 2.12(a) and Section 2.12(b) shall be adjusted in accordance with such non-Defaulting Lenders’ Applicable Percentages; or

(v) if all or any portion of such Defaulting Lender’s LC Exposure is neither cash collateralized nor reallocated pursuant to Section 2.20(c) , then, without prejudice to any rights or remedies of any Issuing Bank or any other Lender hereunder, all facility fees that otherwise would have been payable to such Defaulting Lender (solely with respect to the portion of such Defaulting Lender’s Commitment that was utilized by such LC Exposure) and letter of credit fees payable under Section 2.12(b) with respect to such Defaulting Lender’s LC Exposure shall be payable to the Issuing Banks until such LC Exposure is cash collateralized and/or reallocated;

(d) so long as such Lender is a Defaulting Lender, no Swingline Lender shall be required to fund any Swingline Loan and no Issuing Bank shall be required to issue or increase any Letter of Credit, unless it is reasonably satisfied that the related exposure and the Defaulting Lender’s then outstanding LC Exposure will be 100% covered by the Commitments of the non-Defaulting Lenders and/or cash collateral will be provided by the Borrower in accordance with Section 2.20(c) , and Swingline Exposure related to any such newly made Swingline Loan or LC Exposure related to any such newly issued or increased Letter of Credit shall be allocated among non-Defaulting Lenders in a manner consistent with Section 2.20(c)(i) (and such Defaulting Lender shall not participate therein);

(e) if (i) a Bankruptcy Event with respect to a Parent of any Lender shall occur following the date hereof and for so long as such event shall continue or (ii) any Swingline Lender or Issuing Bank has a good faith belief that any Lender has defaulted in fulfilling its obligations under one or more other agreements in which such Lender commits to extend credit, no Swingline Lender shall be required to fund any Swingline Loan and no such Issuing Bank shall be required to issue or increase any Letter of Credit unless such Swingline Lender or Issuing Bank shall have entered into arrangements with the Borrower or such Lender, reasonably satisfactory to such Swingline Lender or Issuing Bank, as the case may be, to defease any risk to it in respect of such Lender hereunder; and

(f) in the event and on the date that each of the Administrative Agent, the Borrower, each Swingline Lender and each Issuing Bank agrees that a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, then the LC Exposure of the other Lenders shall be readjusted to reflect the inclusion of such Lender’s Commitment and on such date such Lender shall purchase at par such of the Loans of the other Lenders (other than Swingline Loans) as the Administrative Agent shall determine may be necessary in order for such Lender to hold such Loans in accordance with its Applicable Percentage.

Nothing contained herein shall be deemed to be a release of any claims of the Administrative Agent or the Borrower against any Defaulting Lender for its breach of any of its obligations under this Agreement.

SECTION 2.21 Returned Payments . If after receipt of any payment which is applied to the payment of all or any part of the Obligations (including a payment effected through exercise of a right of setoff), the Administrative Agent or any Lender is for any reason compelled to surrender such payment or proceeds to any Person because such payment or application of proceeds is invalidated, declared fraudulent, set aside, determined to be void or voidable as a preference, impermissible setoff, or a diversion of trust funds, or for any other reason (including pursuant to any settlement entered into by the Administrative Agent or such Lender in its discretion), then the Obligations or part thereof intended to be satisfied shall be revived and continued and this Agreement shall continue in full force as if such payment or proceeds had not been received by the Administrative Agent or such Lender. The provisions of this Section 2.21 shall be and remain effective notwithstanding any contrary action which may have been taken by the Administrative Agent or any Lender in reliance upon such payment or application of proceeds. The provisions of this Section 2.21 shall survive the termination of this Agreement.

SECTION 2.22 Incremental Term Loans .

(a) The Borrower shall have the right at any time after the Effective Date to request one or more tranches of term loans (each an “ Incremental Term Loan Facility ”; and the commitments with in respect thereof the “ Incremental Term Loan Commitments ”) in accordance with the following provisions and subject to the following conditions:

(i) The Borrower shall give the Administrative Agent, which shall promptly deliver a copy thereof to each of the Lenders, at least ten Business Days’ prior written notice (an “ Incremental Term Loan Notice ”) of any such requested increase specifying the aggregate amount of such Incremental Term Loan Facility, which shall be at least $10 million, the requested date of such Incremental Term Loan Facility (the “ Requested Incremental Term Loan Date ”) and the date by which the Lenders wishing to participate in the Incremental Term Loan Facility must commit (the “ Incremental Term Loan Commitment Date ”). Each Lender that is willing in its sole discretion to participate in such requested Incremental Term Loan Facility (each an “ Incremental Term Loan Lender ”) shall give written notice to the Administrative Agent on or prior to the Incremental Term Loan Commitment Date of the amount by which it is willing to commitment.

(ii) Promptly following each Incremental Term Loan Commitment Date, the Administrative Agent shall notify the Borrower as to the amount, if any, by which the Lenders are willing to participate in the requested Incremental Term Loan Facility. In addition, the Borrower may extend offers to one or more Eligible Assignees, each of which must be reasonably satisfactory to the Administrative Agent (such consent not to be unreasonably withheld, conditioned or delayed) to participate in any portion of the requested Incremental Term Loan Facility; provided , however ,

that the Incremental Term Loan Commitment of each such Eligible Assignee shall be in an amount of not less than $1 million or an integral multiple of $1 million in excess thereof. Any such Eligible Assignee that agrees to acquire an Incremental Term Loan Commitment pursuant hereto is herein called an “ Additional Incremental Term Loan Lender ”.

(iii) Incremental Term Loan Commitments shall become effective under this Agreement pursuant to an amendment (an “ Incremental Term Loan Amendment ”) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Lender agreeing to provide such Term Loan Commitments, if any, each Additional Term Lender, if any, and the Administrative Agent pursuant to Section 9.02(f) hereof. The Incremental Term Loan Amendment may, without need for the consent of any other Lenders, affect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to affect the provisions of this Section 2.22 .

(iv) Any Incremental Term Loan Facility shall be ratably secured with the Loans, (ii) any Incremental Term Loan Facility shall not mature earlier than the Maturity Date nor have amortization of greater than 10.0% of the original principal amount of such Incremental Term Loan Facility per year, (iii) the Applicable Rate relating to any Incremental Term Loan Facility shall be determined by the Borrower and the Lenders providing such Incremental Term Loan Facility and (iv) any Incremental Term Loan Facility shall otherwise be on terms and pursuant to documentation to be determined by the Borrower and the Persons willing to provide such Incremental Term Loan Facility; provided , that to the extent such terms and documentation are not consistent with the then existing Commitments or Incremental Term Loan Commitments (other than with respect to pricing, amortization, call protection and maturity) they shall be reasonably satisfactory to the Administrative Agent (it being agreed that Incremental Term Loan Facilities may contain customary mandatory prepayments, voting rights and prepayment premiums).

(v) The Borrower will use the proceeds of the Incremental Term Loan Facility for any purpose not prohibited by this Agreement.

(vi) No Lender shall be obligated to provide any Incremental Term Loan Facility, unless it so agrees.

(b) Anything in this Section 2.22 to the contrary notwithstanding, no Incremental Term Loan Facility pursuant to this Section 2.22 shall be effective unless:

(i) as of the date of the relevant Incremental Term Loan Notice and on the relevant Requested Incremental Term Loan Date and after giving effect to such increase, (x) no Default or Event of Default shall have occurred and be continuing and (y) the condition set forth in Section 4.02(a) shall be required to be satisfied;

(ii) to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of (A) customary legal opinions, board resolutions and officers’ certificates consistent with the documentation delivered on the Effective Date (conformed as appropriate) other than changes to such legal opinions resulting from a change in law, change in fact or change to counsel’s form of opinion reasonably satisfactory to the Administrative Agent and (B) any reaffirmation or similar documentation as reasonably requested by the Administrative Agent in order to ensure that such Incremental Term Loan Lender or Additional Incremental Term Loan Lender is provided with the benefit of the applicable Loan Documents;

(iii) after giving effect to any such Incremental Term Loan Facility, the aggregate principal amount of all such Incremental Term Loan Facilities, Commitment Increases and Incremental Equivalent Debt incurred or issued since the Effective Date shall not exceed $50 million; and

(iv) after giving effect to any such Incremental Term Loan Facility, the Borrower shall be in pro forma compliance with the Financial Covenants.

(c) Notwithstanding anything to the contrary set forth herein, it is agreed and understood that any Incremental Term Loan Amendment may contain provisions relating to (i) acquisitions or investments permitted thereunder, the consummation of which is not conditioned on the availability of, or on the obtaining of, third party financing, such that the conditions precedent for the funding of the relevant Incremental Term Loan Facility are more limited than provided herein and (ii) any extension of the maturity date of such Incremental Term Loan Facility, in each case, as agreed among the parties thereto and solely with the consent of the Lenders providing such Incremental Term Loan Facility.

SECTION 2.23 Increase of Commitments .

(a) The Borrower shall have the right at any time after the Effective Date to request that the aggregate Commitments hereunder be increased (a “ Commitment Increase ”) in accordance with the following provisions and subject to the following conditions:

(i) The Borrower shall give the Administrative Agent, which shall promptly deliver a copy thereof to each of the Lenders, at least ten Business Days’ prior written notice (a “ Notice of Increase ”) of any such requested increase specifying the aggregate amount by which the Commitments are to be increased, which shall be at least $5 million, the requested date of increase (the “ Requested Increase Date ”) and the date by which the Lenders wishing to participate in the Commitment Increase must commit to an increase in the amount of their respective Credit Commitments (the “ Commitment Date ”). Each Lender that is willing in its sole discretion to participate in such requested Commitment Increase (each an “ Increasing Lender ”) shall give written notice to the Administrative Agent on or prior to the Commitment Date of the amount by which it is willing to increase its Commitment.

(ii) Promptly following each Commitment Date, the Administrative Agent shall notify the Borrower as to the amount, if any, by which the Lenders are willing to participate in the requested Commitment Increase. In addition, the Borrower may extend offers to one or more Eligible Assignees, each of which must be reasonably satisfactory to the Administrative Agent, (such consent not to be unreasonably withheld) to participate in any portion of the requested Commitment Increase; provided , however , that the Commitment of each such Eligible Assignee shall be in an amount of not less than $1 million or an integral multiple of $1 million in excess thereof. Any such Eligible Assignee that agrees to acquire a Commitment pursuant hereto is herein called an “ Additional Lender ”.

(iii) Effective on the Requested Increase Date, subject to the terms and conditions hereof, (x) the Commitment Schedule shall be deemed to be amended to reflect the increases contemplated hereby, (y) the Commitment of each Increasing Lender shall be increased by an amount determined by the Administrative Agent and the Borrower (but in no event greater than the amount by which such Lender is willing to increase its Commitment), and (z) each Additional Lender shall enter into an agreement in form and substance reasonably satisfactory to the Borrower and the Administrative

Agent pursuant to which it shall undertake, as of such Requested Increase Date, a new Commitment in an amount determined by the Administrative Agent and the Borrower (but in no event greater than the amount by which such Lender is willing to participate in the requested Commitment Increase), and such Additional Lender shall thereupon be deemed to be a Lender for all purposes of this Agreement.

(iv) If on the Requested Increase Date there are any Loans outstanding hereunder, the Borrower shall borrow from all or certain of the Lenders and/or prepay Loans of all or certain of the Lenders such that, after giving effect thereto, the Loans (including, without limitation, the Types and Interest Periods thereof) and such participations shall be held by the Lenders (including for such purposes the Increasing Lenders and the Additional Lenders) ratably in accordance with their respective Commitments. On and after each Increase Date, the ratable share of each Lender’s participation in Letters of Credit and Loans from draws under Letters of Credit shall be calculated after giving effect to each such Commitment Increase.

(b) Anything in this Section 2.23 to the contrary notwithstanding, no increase in the aggregate Commitments hereunder pursuant to this Section 2.23 shall be effective unless:

(i) as of the date of the relevant Notice of Increase and on the relevant Requested Increase Date and after giving effect to such increase, (x) no Default or Event of Default shall have occurred and be continuing and (y) the condition set forth in Section 4.02(a) shall be required to be satisfied;

(ii) to the extent reasonably requested by the Administrative Agent, receipt by the Administrative Agent of (A) customary legal opinions, board resolutions and officers’ certificates consistent with the documentation delivered on the Effective Date (conformed as appropriate) other than changes to such legal opinions resulting from a change in law, change in fact or change to counsel’s form of opinion reasonably satisfactory to the Administrative Agent and (B) any reaffirmation or similar documentation as reasonably requested by the Administrative Agent in order to ensure that such Increasing Lender or Additional Lender is provided with the benefit of the applicable Loan Documents;

(iii) after giving effect to such Commitment Increases, the principal aggregate amount of all such Incremental Term Loan Facilities, Commitment Increases and Incremental Equivalent Debt incurred or issued since the Effective Date shall not exceed $50 million; and

(iv) after giving effect to any such Commitment Increase, the Borrower shall be in pro forma compliance with the Financial Covenants and the Borrower shall have delivered to the Administrative Agent reasonably detailed calculations demonstrating such compliance.

SECTION 2.24 Banking Services and Swap Agreements . Each Lender or Affiliate thereof providing Banking Services for, or having Swap Agreements with, the Borrower or any of its Subsidiaries shall deliver to the Administrative Agent, promptly after entering into such Banking Services or Swap Agreements, written notice thereof, in each case, to the extent such Banking Services or Swap Agreements relate to Secured Obligations. In furtherance of that requirement, each such Lender or Affiliate thereof shall furnish the Administrative Agent, from time to time promptly upon a request therefor, a summary of the amounts due or to become due in respect of such Banking Services Obligations and Swap Agreement Obligations that constitute Secured Obligations, together with such supporting documentation as the Administrative Agent may have reasonably requested from the applicable provider of such Banking Services

or Swap Agreement. The most recent information provided to the Administrative Agent shall be used in determining which tier of the waterfall, contained in Section 2.18(b) , such Banking Services Obligations and/or Swap Agreement Obligations will be placed.

SECTION 2.25 Amend and Extend Transactions .

(a) The Borrower may, by written notice to the Administrative Agent from time to time, request an extension (each, an “ Extension ”) of the Maturity Date to the extended maturity date specified in such notice. Such notice shall (i) set forth the amount of Commitments that will be subject to the Extension (which request shall be in minimum increments of $1 million and a minimum amount of $5 million), and (ii) set forth the date on which such Extension is requested to become effective (which shall be not less than ten Business Days nor more than 60 days after the date of such Extension notice (or such longer or shorter periods as the Administrative Agent shall agree in its sole discretion)). The Lenders shall be offered (an “ Extension Offer ”) an opportunity to participate in such Extension on a pro rata basis and on the same terms and conditions as each other Lender pursuant to procedures established by, or reasonably acceptable to, the Administrative Agent and Borrower. If the aggregate principal amount of Commitments in respect of which Lenders shall have accepted the relevant Extension Offer shall exceed the maximum aggregate principal amount of Commitments subject to the Extension Offer as set forth in the Extension notice, then the Commitments of the Lenders shall be extended ratably up to such maximum amount based on the respective principal amounts with respect to which such Lenders have accepted such Extension Offer. Notwithstanding anything to the contrary in this Agreement, any individual Lender’s agreement to extend its Commitments, in whole or in part, pursuant to this Section 2.25 shall be in such Lender’s sole discretion.

(b) The following shall be conditions precedent to the effectiveness of any Extension: (i) no Default or Event of Default shall have occurred and be continuing immediately prior to and immediately after giving effect to such Extension, (ii) the representations and warranties set forth in Article III and in each other Loan Document shall be deemed to be made and shall be true and correct in all material respects on and as of the effective date of such Extension, (iii) each relevant Issuing Bank shall have consented to any Extension of the Commitments, to the extent that such Extension provides for the issuance or extension of Letters of Credit at any time during the extended period and (iv) the terms of such Extended Commitments shall comply with clause (c) of this Section 2.25 .

(c) The terms of each Extension shall be determined by the Borrower and the applicable extending Lenders and set forth in an Extension Amendment; provided , that (i) the final maturity date of any Extended Commitment shall be no earlier than the Maturity Date, (ii) there shall be no scheduled amortization of the loans or reductions of commitments under any Extended Commitments, (iii) the Extended Loans will rank pari passu in right of payment and security with the existing Loans and the borrower, guarantors and collateral of the Extended Commitments shall be the same as the borrower, Guarantors and Collateral with respect to the existing Loans, (iv) the interest rate margin and any fees applicable to any Extended Commitment (and the Extended Loans thereunder) shall be determined by Borrower and the applicable extending Lenders, (v) borrowing and prepayment of Extended Loans, or reductions of Extended Commitments, and participation in Letters of Credit, shall be on a pro rata basis with the other Loans or Commitments (other than upon the maturity of the non-extended Loans and Commitments) and (vi) the terms of the Extended Commitments shall be substantially identical to the terms set forth herein (other than upon the maturity of the non-extended Loans and Commitments).

(d) In connection with any Extension, the Borrower, the Administrative Agent and each applicable extending Lender shall execute and deliver to the Administrative Agent an Extension Amendment

and such other documentation as the Administrative Agent shall reasonably specify to evidence the Extension. The Administrative Agent shall promptly notify each Lender as to the effectiveness of each Extension. Any Extension Amendment may, without the consent of any other Lender, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent and the Borrower, to implement the terms of any such Extension, including any amendments necessary to establish Extended Commitments as tranche of Commitments and such other technical amendments as may be necessary or appropriate in the reasonable opinion of the Administrative Agent and the Borrower in connection with the establishment of such new tranche (including to preserve the pro rata treatment of the extended and non-extended tranches and to provide for the reallocation of Credit Exposure upon the expiration or termination of the commitments under any tranche), in each case on terms consistent with this Section 2.25 .

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each Loan Party represents and warrants to the Lenders that:

SECTION 3.01 Organization; Powers . Each of the Loan Parties and each of its Subsidiaries is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has all requisite power and authority to carry on its business as now conducted and, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required.

SECTION 3.02 Authorization; Enforceability . The Transactions are within each Loan Party’s corporate or limited liability company powers, as the case may be, and have been duly authorized by all necessary corporate or limited liability company and, if required, stockholder or member action. Each Loan Document to which each Loan Party is a party has been duly executed and delivered by such Loan Party and constitutes a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03 Governmental Approvals; No Conflicts . The Transactions (a) do not, on the part of any Loan Party or any of its Subsidiaries, require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect and except for filings necessary to perfect Liens created pursuant to the Loan Documents, (b) will not violate any Requirement of Law applicable to any Loan Party or any of its Subsidiaries or any order of any Governmental Authority, (c) will not violate or result in a default under, or give rise to a right to require any payment to be made by any Loan Party or any of its Subsidiaries under, (i) any indenture or loan agreement, in each case, evidencing Indebtedness in excess of $1 million, (ii) any Swap Agreement or (iii) any other material agreement, in each case which is binding upon any Loan Party or any of its Subsidiaries or its assets, and (d) will not result in the creation or imposition of any Lien on any asset of any Loan Party or any of its Subsidiaries, except Liens created pursuant to the Loan Documents, except, solely in the case of clauses (a) , (b) or (c)(iii) hereof, as could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.04 Financial Condition; No Material Adverse Change .

(a) The Borrower has heretofore furnished to the Lenders its consolidated balance sheet and statements of income, stockholders equity and cash flows (i) as of and for the fiscal year ended December 31, 2017, reported on by the Accounting Firm and (ii) as of and for the fiscal quarter and the portion of the fiscal year ending September 30, 2018. Such financial statements present fairly, in all material respects, the financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as of such dates and for such periods in accordance with GAAP, subject to year-end audit adjustments and the absence of footnotes in the case of the statements referred to in clause (ii) above.

(b) No event, change or condition has occurred that has had, or could reasonably be expected to have, a Material Adverse Effect, since December 31, 2017.

SECTION 3.05 Properties .

(a) Each of the Loan Parties and its Subsidiaries has good title to, or valid leasehold interests in, all its real and personal property, subject to Permitted Liens and except for defects in title that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

(b) Each of the Loan Parties and its Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by the Loan Parties and its Subsidiaries does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.06 Litigation and Environmental Matters .

(a) There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of any Loan Party, threatened against or affecting the Loan Parties or any of its Subsidiaries (i) that could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (ii) that involve this Agreement or the Transactions.

(b) No Loan Party nor any of its Subsidiaries (i) has failed to comply with any Environmental Law or to obtain, maintain or comply with any permit, license or other approval required under any Environmental Law, (ii) has become subject to any Environmental Liability, (iii) has received notice of any claim with respect to any Environmental Liability or (iv) knows of any basis for any Environmental Liability that, in each case, individually in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

SECTION 3.07 Compliance with Laws and Agreements; No Default .

(a) Each Loan Party and its Subsidiaries is in compliance with all Requirements of Law applicable to it or its property and all indentures, agreements and other instruments binding upon it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

(b) No Default has occurred and is continuing.

SECTION 3.08 Investment Company Status . No Loan Party nor any of its Subsidiaries is an “investment company” as defined in, or subject to regulation under the Investment Company Act of 1940.

SECTION 3.09 Taxes . Each Loan Party and its Subsidiaries has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all Taxes, assessments, claims, governmental charges that required to have been paid by it, except (a) Taxes that are being contested in good faith by appropriate proceedings and for which such Loan Party or such Subsidiary, as applicable, has set aside on its books adequate reserves in accordance with GAAP or (b) to the extent that the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.10 ERISA .

(a) No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. Except as could not reasonably be expected to result in a Material Adverse Effect, with respect to each Plan, the “funding target,” as defined in Section 430(d)(1) of the Code, with respect to such Plan, does not exceed the fair market value of all such Plan’s assets, as determined pursuant to Section 430(g) of the Code, all determined as of the then-most recent valuation date for such Plan using the actuarial assumptions used to determine the Plan’s “funding target attainment” percentage as defined in Section 430(d) of the Code.

(b) The Borrower represents and warrants as of the Effective Date that the Borrower is not and will not be using “plan assets” (within the meaning of 29 CFR § 2510.3-101, as modified by Section 3(42) of ERISA) of one or more Benefit Plans in connection with the Loans, the Letters of Credit or the Commitments.

(c) Except as could not reasonably be expected to result in a Material Adverse Effect, (i) each Foreign Pension Plan has been maintained in compliance with its terms and with the requirements of any and all applicable laws, statutes, rules, regulations and orders and has been maintained, where required, in good standing with applicable regulatory authorities; (ii) all contributions required to be made with respect to a Foreign Pension Plan have been timely made; (iii) neither the Borrower nor any of its Subsidiaries has incurred any obligation in connection with the termination of, or withdrawal from, any Foreign Pension Plan; and (iv) the present value of the accrued benefit liabilities (whether or not vested) under each Foreign Pension Plan, determined as of the end of the Borrowers’ most recently ended fiscal year on the basis of actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such Foreign Pension Plan allocable to such benefit liabilities.

SECTION 3.11 Disclosure .

(a) The Borrower has disclosed to the Lenders all agreements, instruments and corporate or other restrictions to which it or any Subsidiary is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other written information (other than any projected financial information or other forward-looking information or information of a general economic or general industry specific nature) furnished by or on behalf of any Loan Party to the Administrative Agent or any Lender in connection with the negotiation of this Agreement or any other Loan Document (as modified or supplemented by other information so furnished) contains any material misstatement of fact or omits to state any material fact

necessary to make the statements therein (taken as a whole), in the light of the circumstances under which they were made, not materially misleading; provided , that, with respect to projected financial information or other forward-looking information or information of a general economic or general industry specific nature, the Borrower represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time (it being understood that any such information may differ from actual results and such differences may be material).

(b) As of the Effective Date, the information included in the Beneficial Ownership Certification is true, complete and correct in all respects.

SECTION 3.12 Capitalization and Subsidiaries . Schedule 3.12 sets forth, as of the date hereof, (a) a correct and complete list of the name and relationship to the Borrower of each and all of the Borrower’s Subsidiaries, (b) the type of entity and jurisdiction of organization of the Borrower and each of its Subsidiaries, and (c) which of the Borrower’s Subsidiaries are Material Domestic Subsidiaries and Material Foreign Subsidiaries. All of the issued and outstanding Equity Interests owned by any Loan Party has been (to the extent such concepts are relevant with respect to such ownership interests) duly authorized and issued and is fully paid and non‑assessable.

SECTION 3.13 Security Interest in Collateral . The provisions of this Agreement and the other Loan Documents create legal and valid Liens on all of the Collateral in favor of the Administrative Agent, for the benefit of the Secured Parties, and, upon filing a UCC financing statement in the Loan Parties’ applicable jurisdiction of organization such Liens, will constitute perfected and continuing Liens on the Collateral in which a security interest can be perfected by filing a UCC financing statement, securing the Secured Obligations, enforceable against the applicable Loan Party and all third parties, and having priority over all other Liens on the Collateral except in the case of (a) Permitted Liens, to the extent any such Permitted Liens would have priority over the Liens in favor of the Administrative Agent pursuant to any applicable law or agreement, and (b) Liens perfected only by possession (including possession of any certificate of title), to the extent the Administrative Agent has not obtained or does not maintain possession of such Collateral.

SECTION 3.14 Federal Reserve Regulations . No part of the proceeds of any Loan or Letter of Credit has been used or will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.

SECTION 3.15 Anti-Corruption Laws and Sanctions; USA Patriot Act .

(a) Each Loan Party has implemented and maintains in effect policies and procedures designed to ensure compliance by such Loan Party, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and such Loan Party, its Subsidiaries and their respective officers and employees and, to the knowledge of such Loan Party, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) any Loan Party, any Subsidiary or, to the knowledge of any such Loan Party or Subsidiary, any of their respective directors, officers or employees, or (b) to the knowledge of any such Loan Party or Subsidiary, any agent of such Loan Party or any Subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing or Letter of Credit, use

of proceeds, Transaction or other transaction contemplated by this Agreement or the other Loan Documents will violate Anti-Corruption Laws or applicable Sanctions.

(b) Each Loan Party is in compliance, in all material respects, with the USA PATRIOT Act.

SECTION 3.16 Not an EEA Financial Institution . No Loan Party is an EEA Financial Institution.

SECTION 3.17 Solvency . (a) The fair value of the assets of the Loan Parties, taken as a whole, at a fair valuation, exceeds their debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Loan Parties, taken as a whole, is greater than the amount that will be required to pay the probable liability of their debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Loan Parties will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Loan Parties, taken as a whole, will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted after the Effective Date.

ARTICLE IV

CONDITIONS

SECTION 4.01 Conditions to Initial Loans . The obligations of the Lenders to make Loans and of the Issuing Banks to issue Letters of Credit hereunder shall not become effective until each of the following conditions is satisfied (or waived in accordance with Section 9.02 ):

(a) Credit Agreement and Other Loan Documents . The Administrative Agent (or its counsel) shall have received (i) from each party hereto either (A) a counterpart of this Agreement signed on behalf of such party or (B) written evidence satisfactory to the Administrative Agent (which may include fax or other electronic transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement and (ii) duly executed copies of any other Loan Documents to be entered into as of the date hereof and such other certificates, documents, instruments and agreements as the Administrative Agent shall reasonably request in connection with the transactions contemplated by this Agreement and the other Loan Documents, including any Notes requested by a Lender pursuant to Section 2.10 payable to the order of each such requesting Lender and a written opinion of the Loan Parties’ counsel, addressed to the Administrative Agent, the Issuing Banks and the Lenders and in form and substance reasonably satisfactory to the Administrative Agent.

(b) Financial Statements and Projections . The Lenders shall have received (i) audited consolidated financial statements of the Borrower for the two most recent fiscal years ended prior to the Effective Date as to which such financial statements are available, (ii) unaudited interim consolidated financial statements of the Borrower for each quarterly period ended subsequent to the date of the latest financial statements delivered pursuant to clause (i) of this paragraph as to which such financial statements are available and (iii) reasonably satisfactory financial statement projections (which shall include balance sheet, income and cash flow statement projections) through and including the Borrower’s 2022 fiscal year.

(c) Closing Certificates . The Administrative Agent shall have received (i) a certificate of each Loan Party, dated the Effective Date and executed by its Secretary or Assistant Secretary, which shall (A) certify the resolutions of its board of directors, members or other body authorizing the execution, delivery and performance of the Loan Documents to which it is a party, (B) identify by name and title and bear the signatures of the Financial Officers and any other officers of such Loan Party authorized to sign the Loan Documents to which it is a party, and (C) contain appropriate attachments, including the certificate or articles of incorporation or organization of each Loan Party certified by the relevant authority of the jurisdiction of organization of such Loan Party and a true and correct copy of its by‑laws or operating, management or partnership agreement, and (ii) a long form good standing certificate for each Loan Party from its jurisdiction of organization.

(d) No Default Certificate . The Administrative Agent shall have received a certificate, signed by the chief financial officer of the Borrower on the initial Borrowing date (i) stating that no Default has occurred and is continuing and (ii) stating that the representations and warranties contained in Article III are true and correct in all material respects as of such date except that (a) to the extent that such representations and warranties specifically refer to an earlier date, such representations and warranties shall be true and correct in all material respects as of such earlier date and (b) any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects.

(e) Fees . The Lenders and the Administrative Agent shall have received all fees required to be paid on or before the Effective Date, and all expenses (including the reasonable fees and expenses of outside legal counsel) for which invoices have been presented no later than two Business Days prior to the Effective Date (or a shorter period as reasonably agreed to by the Borrower).

(f) Lien Searches . The Administrative Agent shall have received the results of a recent customary lien search, and such search shall reveal no liens on any of the assets of the Loan Parties except for liens permitted by Section 6.02 or discharged on or prior to the Effective Date pursuant to a pay-off letter or other documentation reasonably satisfactory to the Administrative Agent.

(g) Reserved .

(h) Filings, Registrations and Recordings . Each document (including any Uniform Commercial Code financing statement) required by the Collateral Documents or under law or reasonably requested by the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Secured Parties, a perfected Lien on the Collateral described therein (but only to the extent required therein), prior and superior in right to any other Person (other than with respect to Liens expressly permitted by Section 6.02 ), shall be in proper form for filing, registration or recordation.

(i) Insurance . The Administrative Agent shall have received evidence of insurance coverage in form, scope, and substance reasonably satisfactory to the Administrative Agent and otherwise in compliance with the terms of Section 5.05 and Section 4.10 of the Security Agreement.

(j) Solvency . The Administrative Agent shall have received a solvency certificate from a Financial Officer substantially in the form attached hereto as Exhibit D .

(k) Tax Withholding . The Administrative Agent shall have received a properly completed and signed IRS Form W-8 or W-9, as applicable, for each Loan Party.

(l) USA PATRIOT Act, Etc .

(i) At least five Business Days prior to the Effective Date, the Borrower and each of the other Loan Parties shall have provided to the Administrative Agent or the Lenders the documentation and other information theretofore requested in writing by the Administrative Agent or the Lenders at least seven Business Days prior to the Effective Date that is required by regulatory authorities under applicable “know your customer” and anti-money-laundering rules and regulations, including the USA PATRIOT Act.

(ii) At least five days prior to the Effective Date, if the Borrower qualifies as a “legal entity customer” under the Beneficial Ownership Regulation, the Borrower shall deliver a Beneficial Ownership Certification to each Lender who requests the same.

(m) Notes . The Borrower shall have issued the 2023 Convertible Notes and shall have received the net proceeds of the issuance of such 2023 Convertible Notes (the amount of such proceeds being the “ Exchange Amount ”).

The Administrative Agent shall notify the Borrower, the Lenders and the Issuing Banks of the Effective Date, and such notice shall be conclusive and binding.

SECTION 4.02 Each Credit Event . The obligation of each Lender to make any Loan, and of the Issuing Banks to issue or increase any Letter of Credit, is subject to the satisfaction of the following conditions:

(a) The representations and warranties of the Borrower set forth in this Agreement shall be true and correct in all material respects on and as of the date of such Loan or the date of issuance or increase of such Letter of Credit, as applicable, except that (i) to the extent that such representations and warranties specifically refer to an earlier date, such representations and warranties shall be true and correct in all material respects as of such earlier date, (ii) any representation and warranty that is qualified as to “materiality” or “Material Adverse Effect” shall be true and correct in all respects.

(b) At the time of and immediately after giving effect to such Loan or the issuance or increase of such Letter of Credit, as applicable, no Default shall have occurred and be continuing.

(c) The Borrower shall have delivered a completed Borrowing Request or application for a Letter of Credit, as applicable.

Each Loan and each issuance or increase of a Letter of Credit shall be deemed to constitute a representation and warranty by the Borrower on the date thereof as to the matters specified in clauses (a) and (b) of this Section 4.02 .

ARTICLE V

AFFIRMATIVE COVENANTS

Until Payment in Full has occurred, each Loan Party executing this Agreement covenants and agrees, jointly and severally with all of the Loan Parties, with the Lenders that:

SECTION 5.01 Financial Statements and Other Information . The Borrower will furnish to the Administrative Agent and each Lender:

(a) within 90 days after the end of each fiscal year of the Borrower, (i) its audited consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all reported on by the Accounting Firm (without a “going concern” or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, and (ii) unaudited consolidating balance sheets and related statements of operations, stockholders’ equity and cash flows as of the end of and for such year, certified by one of the Borrower’s Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidating basis in accordance with GAAP;

(b) within 45 days after the end of each of the first three fiscal quarters of each fiscal year of the Borrower, its consolidated balance sheet and related statements of operations, stockholders’ equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of the fiscal year, setting forth in each case in comparative form the figures for the corresponding period or periods of (or, in the case of the balance sheet, as of the end of) the previous fiscal year, all certified by one of its Financial Officers as presenting fairly in all material respects the financial condition and results of operations of the Borrower and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes;

(c) concurrently with any delivery of financial statements under clause (a) or (b) above, a certificate of a Financial Officer of the Borrower in substantially the form of Exhibit B (i) certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth reasonably detailed calculations demonstrating compliance with the Financial Covenants and compliance with Sections 6.04(c) and (d) , (iii) stating whether any change in GAAP or in the application thereof has occurred since the later of December 31, 2017 and the end date of the financial statements most recently delivered pursuant to Section 5.01(a) and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate and (iv) containing any other information reasonably requested by the Administrative Agent;

(d) as soon as available, but in any event within 60 days after the start of each fiscal year of the Borrower, a copy of the plan and forecast (including a projected consolidated balance sheet, income statement and funds flow statement) of the Borrower for each quarter of such fiscal year (the “ Projections ”) in form reasonably satisfactory to the Administrative Agent;

(e) promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by the Borrower or any Subsidiary with the SEC, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed by the Borrower to its shareholders generally, as the case may be; and

(f) promptly following any request therefor, (i) such other information regarding the operations, business affairs and financial condition of the Borrower or any Subsidiary, or compliance with the terms of this Agreement, as the Administrative Agent may reasonably request, on behalf of itself or any Lender hereunder; or (ii) information and documentation reasonably requested by the Administrative Agent or any

Lender for purposes of compliance with applicable “know your customer” requirements under the USA PATRIOT Act or other applicable anti-money laundering laws.

Notwithstanding anything to the contrary in this Section 5.01 , (x) the Borrower shall be deemed to have complied with the terms of Sections 5.01(a) and (b) , as applicable, with respect to the financial statements required to be delivered pursuant thereto if the Borrower delivers to the Administrative Agent and the Lenders, within the same time frame required under the Securities Act and the rules and regulations of the SEC its annual report on Form 10-K for the applicable fiscal year or its quarterly report in Form 10-Q for the applicable fiscal quarter, respectively, that it has filed with the SEC, and (y) any documents required to be delivered pursuant to Sections 5.01(a) , (b) and (f) shall be deemed to have been delivered on the date on which the Borrower provides notice to the Administrative Agent that such information has been posted on the Borrower’s website on the Internet (with such notice containing the link thereto), or posted on Borrower’s behalf on IntraLinks/‌IntraAgency or another relevant website, if any, to which each Lender and the Administrative Agent have access (whether a commercial, third-party website or whether sponsored by the Administrative Agent).

SECTION 5.02 Notices of Material Events . The Borrower will furnish to the Administrative Agent and each Lender prompt written notice of the following:

(a) the occurrence of any Default;

(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Borrower or any Affiliate thereof that could reasonably be expected to result in a Material Adverse Effect;

(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in liability of the Borrower and its Subsidiaries in an aggregate amount exceeding $5 million;

(d) the occurrence and nature of any Prohibited Transaction with respect to any Plan, or a transaction the IRS or Department of Labor or any other Governmental Authority is reviewing to determine whether a material Prohibited Transaction might have occurred, in either case, that could reasonably be expected to result in a Material Adverse Effect;

(e) receipt by the Borrower of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor;

(f) Borrower's intention to terminate or withdraw from any Plan;

(g) any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Borrower’s property in excess of an aggregate of $1 million;

(h) within five Business Days (or such longer period as the Administrative Agent may agree) after the occurrence thereof, any Loan Party entering into a Swap Agreement or an amendment to a Swap Agreement, in each case, to the extent such Swap Agreement relates to Secured Swap Obligations, together with copies of all agreements evidencing such Swap Agreement or amendment;

(i) any material notice provided to the holders of any Convertible Notes along with a copy of such notice;

(j) notice of any material breach or termination of any Material Contract; and

(k) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section 5.02 (other than clause (g) above) shall be accompanied by a statement of a Financial Officer or other executive officer of the Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03 Existence; Conduct of Business . Each Loan Party will, and will cause each Subsidiary to, (a) do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and the rights, qualifications, licenses, permits, franchises, governmental authorizations, intellectual property rights, licenses and permits material to the conduct of its business, except to the extent the failure to do so could reasonably be expected to result in a Material Adverse Effect; provided , that the foregoing shall not prohibit any merger, consolidation, liquidation or dissolution permitted under Section 6.03 .

SECTION 5.04 Payment of Taxes . Each Loan Party will, and will cause each Subsidiary to pay or discharge all material Taxes, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) such Loan Party or such Subsidiary has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.05 Maintenance of Properties; Insurance; Casualty and Condemnation .

(a) Each Loan Party will, and will cause each Subsidiary to, (i) keep and maintain all property material to the conduct of its business, taken as a whole, in good working order and condition, ordinary wear and tear and casualty or condemnation excepted, in all material respects, and (ii) maintain, with financially sound and reputable insurance companies, insurance in such amounts and against such risks as are customarily maintained by companies engaged in the same or similar businesses operating in the same or similar locations; provided , that each Loan Party may self-insure to the same extent as other companies of a similar size engaged in similar businesses and owning similar properties in the same general areas in which the Loan Parties operate and to the extent consistent with prudent business practice.

(b) The Borrower will furnish to the Administrative Agent and the Lenders prompt written notice of any casualty or other insured damage to any material portion of the Collateral or the commencement of any action or proceeding for the taking of any material portion of the Collateral or interest therein under power of eminent domain or by condemnation or similar proceeding.

SECTION 5.06 Books and Records; Inspection Rights . Each Loan Party will, and will cause each Subsidiary to, (i) keep proper books of record and account in which full, true and correct entries are made of all dealings and transactions in relation to its business and activities in all material respects and (ii) permit any representatives designated by the Administrative Agent or any Lender (including employees of the Administrative Agent, such Lender or any consultants, accountants, lawyers, appraisers and field examiners retained by the Administrative Agent), upon reasonable prior notice to visit and inspect its

properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, all at such reasonable times during normal business hours and as often as reasonably requested; provided , that the Borrower shall not be required to reimburse the Administrative Agent or any Lender for the cost of more than one such visit during any year, except during the occurrence and continuation of an Event of Default. The Loan Parties acknowledge that the Administrative Agent, after exercising its rights of inspection, may prepare and distribute to the Lenders certain reports pertaining to the Loan Parties’ assets for internal use by the Administrative Agent and the Lenders. Notwithstanding anything to the contrary in this Section 5.06 , neither the Borrower nor any other Loan Party will be required to disclose, permit the inspection, examination or making copies or abstracts of, or discussion of, any document, information or other matter in respect of which disclosure to the Administrative Agent or any Lender (or their respective representatives or contractors) is prohibited by applicable law or any binding agreement (not entered into in contemplation of any request for disclosure or otherwise to evade the disclosure requirements contained in this Section 5.06 ), or is subject to attorney client privilege or that constitutes attorney work product (in each case, as determined in good faith by legal counsel to any Loan Party and not in contemplation of any request for disclosure or otherwise to evade the disclosure requirements contained in this Section 5.06 ); it being understood that the Borrower shall use its commercially reasonable efforts to communicate any requested information in a way that would not violate the applicable law or agreement or waive the applicable privilege.

SECTION 5.07 Compliance with Laws . Each Loan Party will, and will cause each Subsidiary to, comply with all Requirements of Law applicable to it or its property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.08 Use of Proceeds .

(a) The proceeds of the Loans will be used for working capital and general corporate purposes including Permitted Acquisitions. No part of the proceeds of any Loan and no Letter of Credit will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.

(b) The Borrower will not request any Borrowing or Letter of Credit, and the Borrower shall not use, and shall procure that its Subsidiaries and its and their respective directors, officers, employees and agents shall not use, the proceeds of any Borrowing or Letter of Credit (a) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any joint venture partner or Person in violation of any Anti-Corruption Laws, (b) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person, or in any Sanctioned Country or (c) in any manner that would result in the violation of any Sanctions applicable to any party hereto.

SECTION 5.09 Additional Collateral; Further Assurances .

(a) Subject to applicable law, the Borrower and each other Loan Party shall cause each of its wholly-owned Material Domestic Subsidiaries formed or acquired on or after the date of this Agreement in accordance with the terms of this Agreement and each Subsidiary which hereafter becomes a Material Domestic Subsidiary, in each case, to become a Loan Party, within 30 days (or such later date as the Administrative Agent may agree) after the date of such formation or acquisition (or after the date on which such Subsidiary becomes a Material Domestic Subsidiary, as applicable), by executing the Joinder Agreement

set forth as Exhibit C hereto (the “ Joinder Agreement ”). Upon execution and delivery thereof, each such Person shall automatically become a Loan Guarantor hereunder and thereupon shall have all of the rights, benefits, duties, and obligations in such capacity under the Loan Documents.

(b) Subject to applicable law, the Borrower and other Loan Party shall cause each of its wholly-owned Material Domestic Subsidiaries formed or acquired after the date of this Agreement in accordance with the terms of this Agreement and each Subsidiary who hereafter becomes a Material Domestic Subsidiary, in each case, within 30 days (or such later date as the Administrative Agent may agree) after the date of such formation or acquisition (or after the date on which such Subsidiary becomes a Material Domestic Subsidiary, as applicable) to execute a joinder to the Security Agreement, pursuant to which such Material Domestic Subsidiary shall grant Liens to the Administrative Agent, for the benefit of the Administrative Agent and the Lenders, in any property of such Loan Party which constitutes Collateral.

(c) Subject to the foregoing clauses (a) and (b) , the Borrower and each other Material Domestic Subsidiary will cause (i) 100% of the issued and outstanding Equity Interests of each of its Domestic Subsidiaries, other than a Domestic Subsidiary that is a Foreign Subsidiary Holding Company, and (ii) 65% of the issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) and 100% of the issued and outstanding Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) in each Foreign Subsidiary that is a CFC (including any Subsidiary that becomes a CFC after the Effective Date) and each Foreign Subsidiary Holding Company directly owned by the Borrower or any Material Domestic Subsidiary to be subject at all times to a first priority, perfected Lien in favor of the Administrative Agent pursuant to the terms and conditions of the Loan Documents or other security documents as the Administrative Agent shall reasonably request; provided, that if the pledge of a greater percentage of voting equity of any Foreign Subsidiary or Foreign Subsidiary Holding Company will no longer trigger adverse tax consequences pursuant to Section 956 of the Code or otherwise, then each such Foreign Subsidiary or Foreign Subsidiary Holding Company shall be treated as a Domestic Subsidiary for purposes of this Section 5.09(c) . Notwithstanding anything to the contrary contained herein or in any other Loan Document, no Loan or other Obligation of a Loan Party under any Loan Document shall be deemed to be (i) guaranteed by a Foreign Subsidiary that is a CFC, or guaranteed by a Subsidiary of a Foreign Subsidiary that is a CFC or Foreign Subsidiary Holding Company; (ii) secured by any assets of a Foreign Subsidiary that is a CFC, Foreign Subsidiary Holding Company or a Subsidiary of a Foreign Subsidiary that is a CFC or a Foreign Subsidiary Holding Company (including any Equity Interests in a Foreign Subsidiary that is a CFC or Foreign Subsidiary Holding Company held directly or indirectly by a Foreign Subsidiary that is a CFC or Foreign Subsidiary Holding Company); or (iii) secured by a pledge or other security interest in excess of 65% of the issued and outstanding Equity Interests entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2) (and 100% of the issued and outstanding Equity Interests not entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) of a Foreign Subsidiary that is a CFC or Foreign Subsidiary Holding Company unless any of the guarantees or security interests described in (i) through (iii) will no longer trigger adverse tax consequences pursuant to Section 956 of the Code.

(d) Without limiting the foregoing, each Loan Party will, and will cause each Subsidiary to, execute and deliver, or cause to be executed and delivered, to the Administrative Agent such documents, agreements and instruments, and will take or cause to be taken such further actions (including the filing and recording of financing statements and other documents and such other actions or deliveries of the type required by Section 4.01 , as applicable), which may be required by law or which the Administrative Agent may, from time to time, reasonably request to carry out the terms and conditions of this Agreement and the other Loan Documents and, to the extent required by the Security Agreement, to ensure perfection and priority of the Liens created or intended to be created by the Collateral Documents, all at the expense of the Loan Parties.

(e) As promptly as practicable, and in any event within the time periods after the Effective Date specified in Schedule 5.09 (or such later date as the Administrative Agent reasonably agrees to in writing), the Borrower shall deliver, or cause to be delivered, the documents or take the actions specified on Schedule 5.09 .

SECTION 5.10 Anti-Corruption Laws and Sanctions . Each Loan Party shall implement and maintain in effect policies and procedures designed to ensure compliance by such Loan Party, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.

SECTION 5.11 Compliance with Environmental Laws . Each Loan Party shall comply with all Environmental Laws applicable to its operations and properties; and obtain and renew all material authorizations and permits required pursuant to Environmental Law for its operations and properties, in each case in accordance with Environmental Laws, except, in each case, to the extent failure to do so could not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

SECTION 5.12 Intellectual Property . Each Loan Party shall maintain adequate licenses, patents, patent applications, copyrights, service marks, trademarks, trademark applications, tradestyles and trade names to continue its business as heretofore conducted by it or as hereafter conducted by it unless the failure to maintain any of the foregoing could not reasonably be expected to have a Material Adverse Effect on such Loan Party.

ARTICLE VI

NEGATIVE COVENANTS

Until Payment in Full has occurred, the Loan Parties covenant and agree, jointly and severally, with the Lenders that:

SECTION 6.01 Indebtedness . No Loan Party will, nor will it permit any Subsidiary to, create, incur or suffer to exist any Indebtedness, except:

(a) the Secured Obligations;

(b) (i) Indebtedness existing on the date hereof; provided , that any such Indebtedness having a principal amount in excess of $1.0 million shall be set forth on Schedule 6.01 ; and provided , further , that the aggregate principal amount of any Indebtedness existing on the date hereof and not set forth on Schedule 6.01 shall not exceed $10.0 million and (ii) extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount thereof;

(c) Indebtedness of the Borrower to any Subsidiary and of any Subsidiary to the Borrower or any other Subsidiary; provided , that (i) Indebtedness of any Subsidiary that is not a Loan Party to the Borrower or to any Subsidiary that is a Loan Party shall be subject to Section 6.04 and (ii) Indebtedness of the Borrower to any Subsidiary and Indebtedness of any Subsidiary that is a Loan Party to any Subsidiary that is not a

Loan Party shall be subordinated to the Secured Obligations on terms reasonably satisfactory to the Administrative Agent;

(d) Guarantees by the Borrower of Indebtedness of any Subsidiary and by any Subsidiary of Indebtedness of the Borrower or any other Subsidiary; provided , that (i) the Indebtedness so Guaranteed is permitted by this Section 6.01 , (ii) Guarantees by the Borrower or any Subsidiary that is a Loan Party of Indebtedness of any Subsidiary that is not a Loan Party shall be subject to Section 6.04 and (iii) Guarantees permitted under this clause (d) shall be subordinated to the Obligations on the same terms as the Indebtedness so Guaranteed is subordinated to the Obligations;

(e) Indebtedness of the Borrower or any Subsidiary incurred to finance the acquisition, construction or improvement of any fixed or capital assets (whether or not constituting purchase money Indebtedness), including Capital Lease Obligations and any Indebtedness assumed in connection with the acquisition (including by way of any Permitted Acquisition) of any such assets or secured by a Lien on any such assets prior to the acquisition thereof, and extensions, renewals and replacements of any such Indebtedness in accordance with clause (f) hereof; provided , that, (i) such Indebtedness is incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement and (ii) the aggregate principal amount of Indebtedness permitted by this clause (e) (including any refinancing thereof permitted by clause (f) ) shall not exceed $10 million at any time outstanding;

(f) Indebtedness which represents an extension, refinancing, or renewal of any of the Indebtedness described in clauses (b) , (e) or (s) hereof or of the MUFG Synthetic Lease; provided , that, (i) the aggregate principal amount of such Indebtedness does not exceed the principal amount of such Indebtedness being refinanced plus the amount of any interest, premiums or penalties required to be paid plus fees and expenses associated therewith, (ii) any Liens securing such Indebtedness are not extended to any additional property of any Loan Party, (iii) no Loan Party that is not originally obligated (or required to become obligated) with respect to repayment of such Indebtedness is required to become obligated with respect thereto, (iv) such extension, refinancing or renewal does not result in a shortening of the average weighted maturity of the Indebtedness so extended, refinanced or renewed, (v) the terms of any such extension, refinancing, or renewal (other than pricing, premiums and optional prepayment or optional redemption provisions) are not materially less favorable to the obligor thereunder than the original terms of such Indebtedness, taken as a whole, and (vi) if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of payment to the Secured Obligations, then the terms and conditions of the refinancing, renewal, or extension Indebtedness must include subordination terms and conditions that are at least as favorable to the Administrative Agent and the Lenders as those that were applicable to the refinanced, renewed, or extended Indebtedness;

(g) Indebtedness owed to any Person providing workers’ compensation, health, disability or other employee benefits or property, casualty or liability insurance, pursuant to reimbursement or indemnification obligations to such person, in each case, incurred in the ordinary course of business;

(h) Indebtedness of the Borrower or any Subsidiary in respect of performance bonds, bid bonds, appeal bonds, surety bonds and similar obligations, in each case provided in the ordinary course of business;

(i) Indebtedness or Guarantees of the Borrower or any Subsidiary in connection with any Swap Agreement permitted under Section 6.06 ;

(j) Indebtedness arising from customary agreements providing for indemnification, adjustment of purchase price, earnout, deferred purchase price or similar obligations in connection with acquisitions or dispositions of any business or assets by or of the Borrower or any Subsidiary permitted hereunder;

(k) Judgments entered against the Borrower or any Subsidiary to the extent not constituting an Event of Default;

(l) Indebtedness or Guarantees incurred in the ordinary course of business in connection with cash pooling, netting and cash management arrangements consisting of overdrafts or similar arrangements; provided , that any such Indebtedness does not consist of Indebtedness for borrowed money and is owed to the financial institutions providing such arrangements and such Indebtedness is extinguished within five Business Days following the Borrower or any Subsidiary becoming aware of the incurrence thereof;

(m) Indebtedness of Foreign Subsidiaries; provided , that the aggregate outstanding principal amount of such Indebtedness shall not exceed $30 million (or the equivalent thereof outstanding at such time) at any time;

(n) Indebtedness owed to sellers constituting consideration for Permitted Acquisitions;

(o) Indebtedness of a Person or Indebtedness attaching to assets of a Person that, in either case, becomes a Subsidiary or Indebtedness attaching to assets that are acquired by Borrower or any of its Subsidiaries, in each case as the result of a Permitted Acquisition; provided , that (i) such Indebtedness existed at the time such Person became a Subsidiary or at the time such assets were acquired and, in each case, was not created in anticipation thereof and (ii) (x) such Indebtedness incurred in connection with any single Permitted Acquisition shall not exceed $5.0 million and (y) the aggregate amount of such Indebtedness permitted to be incurred shall under this clause (o) not exceed $15.0 million;

(p) Indebtedness of the Borrower or any Subsidiary in connection with any Guarantees given by them, or any letters of credit or bank guarantees issued by any bank or financial institution, in favor of any Governmental Authority to secure the payment of Taxes owed by the Borrower or any Subsidiary to such Governmental Authorities;

(q) Indebtedness of the Borrower or any Subsidiary owed to sublessees in respect of security deposits or advances held by the Borrower or any Subsidiary in connection with the subletting sublessees of any leasehold interests of the Borrower or any Subsidiary;

(r) Incremental Equivalent Debt; provided , that the aggregate principal amount of all such Indebtedness, together with the principal amount of all Incremental Term Facilities and Commitment Increases shall not exceed $50 million;

(s) Indebtedness in respect of the Convertible Notes;

(t) unsecured Indebtedness of the Borrower or any Loan Party; provided , that (i) after giving effect to the incurrence thereof, the Total Net Leverage Ratio on a pro forma basis is not more than 3.50 to 1.00, (ii) the final maturity of any such unsecured Indebtedness shall be no earlier than 90 days following the latest Maturity Date at the time of incurrence, (iii) such Indebtedness shall not be guaranteed by any Person that is not a Loan Guarantor, (iv) such Indebtedness shall not include any amortization and (v) the terms and conditions of such Indebtedness (other than pricing, premiums and optional prepayment or optional redemption provisions) are, when taken as a whole (A) substantially identical to or (B) not materially more favorable to the lenders or holders providing such Indebtedness than those applicable to this Agreement or other provisions applicable only to periods after the Maturity Date in effect at the time of incurrence, issuance or obtainment of such Indebtedness, in each case, as determined in good faith by the Borrower;

(u) obligations under sale and leaseback transactions permitted by Section 6.05(b) ;

(v) Indebtedness of a Subsidiary in connection with a mortgage financing of property located in Italy; provided , that the aggregate principal amount of Indebtedness permitted by this clause (v) shall not exceed $35 million at any time outstanding;

(w) Indebtedness in respect of Permitted Receivables Facilities in an aggregate principal amount not exceeding $12.5 million at any time outstanding; and

(x) other Indebtedness in an aggregate principal amount not exceeding $50 million at any time outstanding.

SECTION 6.02 Liens . No Loan Party will, nor will it permit any Subsidiary to, create, incur, assume or permit to exist any Lien on any property or asset now owned or hereafter acquired by it, or assign or sell any income or revenues (including accounts receivable) or rights in respect of any thereof, except:

(a) Liens created pursuant to any Loan Document;

(b) Permitted Encumbrances;

(c) any Lien on any property or asset of the Borrower or any Subsidiary existing on the date hereof and set forth in Schedule 6.02 ; provided , that (i) such Lien shall not apply to any other property or asset of the Borrower or such Subsidiary and (ii) such Lien shall secure only those obligations which it secures on the date hereof and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

(d) any Lien existing on any property or asset prior to the acquisition thereof (including by way of any Permitted Acquisition) by the Borrower or any Subsidiary or existing on any property or asset of any Person that becomes a Subsidiary after the Effective Date prior to the time such Person becomes a Subsidiary; provided, that (i) such Lien is not created in contemplation of or in connection with such acquisition or such Person becoming a Subsidiary, as the case may be, (ii) such Lien shall not apply to any other property or assets of the Borrower or any Subsidiary and (iii) such Lien shall secure only those obligations which it secures on the date of such acquisition or the date such Person becomes a Subsidiary, as the case may be and extensions, renewals and replacements thereof that do not increase the outstanding principal amount thereof;

(e) Liens on fixed or capital assets acquired, constructed or improved by the Borrower or any Subsidiary; provided, that (i) such security interests secure Indebtedness permitted by clause (e) of Section 6.01 , (ii) such security interests and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 110% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Borrower or Subsidiary;

(f) Liens of a collecting bank arising in the ordinary course of business under Section 4‑208 of the Uniform Commercial Code in effect in the relevant jurisdiction covering only the items being collected upon;

(g) Liens granted by a Foreign Subsidiary in respect of Indebtedness for which no Loan Party is liable;

(h) Liens arising by operation of law under Article 2 of the Uniform Commercial Code in favor of a reclaiming seller of goods or buyer of goods;

(i) broker’s Liens, bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by the Borrower or any Subsidiary, in each case, granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, including any such Liens or rights of setoff securing amounts owing in the ordinary course of business to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements;

(j) licenses, sub-licenses and other similar encumbrances incurred in the ordinary course of business that do not materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any Subsidiary;

(k) Liens on assets of Foreign Subsidiaries to secure Indebtedness of such Foreign Subsidiaries permitted under Section 6.01(m) ;

(l) Liens on cash or Cash Equivalents constituting earnest money deposits made by the Borrower or any Subsidiary in connection with any letter of intent or purchase agreement for a Permitted Acquisition;

(m) Liens on the Collateral securing in respect of Incremental Equivalent Debt;

(n) Liens under sale and leaseback transactions permitted by Section 6.05(b) ; provided , that no such Lien shall extend to or cover any property other than the property subject to such sale and leaseback transaction;

(o) Liens on the underlying real property that is the subject of the mortgage financing permitted pursuant to Section 6.01(v) ;

(p) Liens in favor of a Person that is not a Subsidiary of the Borrower on Receivables Assets which are the subject of any Permitted Receivables Facility solely to secure obligations owing to such Person under such Permitted Receivables Facility; and

(q) other Liens in an aggregate amount not exceeding $5 million at any time outstanding.

SECTION 6.03 Fundamental Changes .

(a) No Loan Party will, nor will it permit any Subsidiary to, merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets, or all or substantially all of the stock of any of its Subsidiaries (in each case, whether now owned or hereafter acquired), or liquidate or dissolve, except that, if at the time thereof and immediately after giving effect thereto no Event of Default shall have occurred and be continuing (i) any Subsidiary of the Borrower may merge into the Borrower in a transaction in which the Borrower is the surviving corporation, (ii) any Subsidiary may merge into any Loan Party in a transaction in which the surviving entity is a Loan Party, (iii) any Person may merge into any Loan Party or any of its Subsidiaries in connection with a Permitted Acquisition so long as, in the case of a merger involving any Loan Party, such Loan Party is the surviving entity (or the surviving entity becomes a Loan Party in accordance with this Agreement), (iv) any Subsidiary may sell, transfer, lease or otherwise dispose of its assets to the Borrower or to another Subsidiary, (v) any Subsidiary that is not a

Loan Party may merge into any other Subsidiary that is not a Loan Party and (vi) any Subsidiary that is not a Loan Party may liquidate or dissolve if the Loan Party or Subsidiary that is not a Loan Party which owns such Subsidiary determines in good faith that such liquidation or dissolution is in the best interests of such Loan Party or Subsidiary that is not a Loan Party, as applicable, and is not materially disadvantageous to the Lenders; provided , that any such merger involving a Person that is not a wholly owned Subsidiary immediately prior to such merger shall not be permitted unless also permitted by Section 6.04 .

Notwithstanding anything to the contrary in the foregoing, each Loan Party and each of its Subsidiaries shall be permitted to enter into an agreement to effect any transaction of merger or consolidation that is not otherwise permitted under this Section 6.03 at a future time; provided , that such agreement shall be conditioned on (i) obtaining requisite approvals permitting the respective transaction (and any related financing or other transactions) in accordance with the requirements of Section 9.02 or (ii) Payment in Full; provided , further , that such agreement shall (x) not contain any provision imposing fees or damages on any Loan Party or its Subsidiary for failure to meet the conditions set forth above and (y) contain termination provisions which will provide for the termination of the agreement within a reasonable time if the conditions described in the preceding proviso have not been satisfied by such time.

(b) No Loan Party will, nor will it permit any of its Subsidiaries to, engage to any material extent in any business other than businesses of the type conducted by the Borrower and its Subsidiaries on the date of execution of this Agreement and businesses which are, in the good faith judgment of the Borrower, similar, complementary or substantially related thereto or are reasonable extensions thereof.

SECTION 6.04 Investments, Loans, Advances, Guarantees and Acquisitions . No Loan Party will, nor will it permit any Subsidiary to, purchase, hold or acquire (including pursuant to any merger with any Person that was not a Loan Party and a wholly owned Subsidiary prior to such merger) any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit (collectively, an “ Investment ”), except:

(a) investments in cash and Cash Equivalents;

(b) investments in existence on the date of this Agreement and described in Schedule 6.04 ;

(c) investments by the Borrower and its Subsidiaries in the capital stock of their respective Subsidiaries; provided , that the aggregate amount of investments (together with the aggregate amount of loans and advances described in Section 6.04(d) and amounts described in clause (g) of the definition of “Permitted Acquisition”), as of any date of determination, made by the Borrower or the other Loan Parties in the capital stock of their respective Subsidiaries who are not Loan Parties does not at any time exceed an amount equal to $75 million (with the amount of any such investments being the original cost of such investment, less all repayments, returns, dividends and distributions, in each case received in cash in respect of such investment and less all liabilities effectively assumed by a person other than any Loan Party or any Subsidiary thereof in connection with the sale of any such investment);

(d) loans or advances made by the Borrower or any of its Subsidiaries to the Borrower or any other Subsidiary; provided , that the aggregate amount of loans and advances (together with the aggregate amount of investments described in Section 6.04(c) and amounts described in clause (g) of the definition of “Permitted Acquisition”) made by the Borrower or the other Loan Parties to Subsidiaries who are not Loan Parties that are at any time outstanding does not, as of any date of determination, exceed an amount equal to $75 million;

(e) Guarantees constituting Indebtedness permitted by Section 6.01 and guarantees of ordinary course commercial obligations not constituting Indebtedness;

(f) Permitted Acquisitions;

(g) loans and advances to employees of the Borrower or any Subsidiaries in the ordinary course of business (including for travel, entertainment and relocation expenses and to finance the purchase of Equity Interests of the Borrower) in an aggregate amount for the Borrower and its Subsidiaries not to exceed $5 million at any time outstanding;

(h) investments received in connection with the bankruptcy or reorganization of any Person or in settlement of obligations of, or disputes with, any Person arising in the ordinary course of business;

(i) Swap Agreements permitted by Section 6.06 ;

(j) investments consisting of extensions of credit in the nature of accounts receivable or notes receivable arising from the grant of trade credit in the ordinary course of business;

(k) investments made in joint ventures in an aggregate outstanding amount not to exceed $5 million;

(l) to the extent constituting investments, performance guarantees of obligations of the Borrower’s Subsidiaries in the ordinary course of business;

(m) other Investments by the Borrower or any of its Subsidiaries; provided that the Total Net Leverage Ratio for the most recently ended four quarter period for which financial statements have been (or were required to be) delivered to the Administrative Agent is less than 3.00 to 1.00; and

(n) in addition to investments otherwise expressly permitted by this Section 6.04 , investments, loans and advances by the Borrower or any of its Subsidiaries in an aggregate amount (valued at cost) not to exceed $50 million during the term of this Agreement.

SECTION 6.05 Asset Dispositions; Sale and Leaseback Transactions .

(a) No Loan Party will, nor will it permit any Subsidiary to, make any Disposition except:

(i) Dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business;

(ii) Dispositions (including non-exclusive licenses) of inventory in the ordinary course of business;

(iii) Dispositions of equipment or real property to the extent that (A) such property is exchanged for credit against the purchase price of similar replacement property or (B) the proceeds of such Disposition are reasonably promptly applied to the purchase price of such replacement property;

(iv) Dispositions of property by Borrower to any Subsidiary and by any Subsidiary to Borrower or any other Subsidiary; provided , that if such property is subject to any Lien under any Collateral Document prior to any such Disposition, such property shall remain subject to valid and perfected Liens under the Collateral Documents after such Disposition;

(v) Dispositions permitted by Sections 6.03 , 6.04 , 6.05(b) , 6.07 and 6.08 ;

(vi) Dispositions of overdue accounts receivable solely in connection with the collection or compromise thereof;

(vii) Dispositions pursuant to operating leases (not in connection with any sale and leaseback transactions or other Capital Lease Obligations) entered into in the ordinary course of business;

(viii) Dispositions of property and assets subject to condemnation and casualty events;

(ix) Dispositions of cash and Cash Equivalents;

(x) Dispositions required by the MUFG Synthetic Lease, including any extension, replacement or refinancing thereof, to the extent substantially consistent with the MUFG Synthetic Lease;

(xi) Dispositions of Receivables Assets which are the subject of any Permitted Receivables Facility as required by such Permitted Receivables Facility;

(xii) Dispositions in the ordinary course of business of sales-type lease receivables and related assets generated in connection with the leasing of products to customers of the Borrower and its Subsidiaries; and

(xiii) Dispositions by Borrower and any Subsidiary not otherwise permitted under this Section 6.05(a) ; provided , that (A) at the time of such Disposition, no Default shall exist or would result from such Disposition, (B) the aggregate fair market value of all property Disposed of in reliance on this subclause (xiii) in any fiscal year (or in the case of any Disposition for which the fair market value cannot reasonably be determined, the aggregate purchase price therefor) shall not exceed $15 million; provided , that any unused portion of such amount may be carried forward to the following fiscal year and (C) the aggregate fair market value of all property Disposed of in reliance on this subclause (xiii) (or in the case of any Disposition for which the fair market value cannot reasonably be determined, the aggregate purchase price therefor) shall not exceed $50 million;

provided , however , that any Disposition pursuant to Section 6.05(a)(i) through (a)(iii) , Section 6.05(a)(v) (except insofar as it relates to any transaction solely between the Borrower and any Subsidiary or Section 6.07 ), Section 6.05(a)(vi) (except to the extent determined by the applicable Person making such Disposition in good faith to be appropriate in accordance with its usual practice), Section 6.05(a)(vii) , Section 6.05(a)(xi) and Section 6.05(a)(xiii) shall be for fair market value (or, in respect of Section 6.05(a)(xiii) ,

where the fair market value cannot reasonably be determined, such disposition shall otherwise be in accordance with the terms of Section 6.05(a)(xiii) );

(b) No Loan Party will, nor will it permit any Subsidiary to, enter into any arrangement, directly or indirectly, whereby it shall sell or transfer any owned property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property sold or transferred, except for (i) any such sale of any newly acquired fixed or capital assets by the Borrower or any Subsidiary that is made for cash consideration in an amount not less than the purchase price of such fixed or capital asset and is consummated within 90 days after the completion of the acquisition or construction of such fixed or capital asset as reasonably determined by the Borrower in good faith or (ii) arrangements with respect to real property having an aggregate value of not more than $10 million, at any one time under all such arrangements.

SECTION 6.06 Swap Agreements . No Loan Party will, nor will it permit any Subsidiary to, enter into any Swap Agreement, except (a) Swap Agreements entered into to hedge or mitigate risks (including foreign currency exchange risks) to which the Borrower or any Subsidiary has actual or reasonably anticipated exposure (other than those in respect of Equity Interests of the Borrower or any of its Subsidiaries), and (b) Swap Agreements entered into in order to effectively cap, collar or exchange interest rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or any Subsidiary.

SECTION 6.07 Restricted Payments; Prepayments of Junior Debt .

(a) No Loan Party will, nor will it permit any Subsidiary to, declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, or incur any obligation (contingent or otherwise) to do so, except:

(i) (A) the Borrower may declare and pay dividends with respect to its common stock payable solely in additional shares of its common stock, and, with respect to its preferred stock, payable solely in additional shares of such preferred stock or in shares of its common stock, and (B) Subsidiaries may declare and pay dividends ratably with respect to their Equity Interests;

(ii) Restricted Payments paid in cash to shareholders of the Borrower, so long as (A) no Event of Default has occurred and is continuing or would result therefrom and (B) the Total Net Leverage Ratio for the most recently ended four quarter period for which financial statements have been (or were required to be) delivered to the Administrative Agent is less than 2.50 to 1.00;

(iii) issuances of Equity Interests to sellers of Permitted Acquisitions in satisfaction of obligations of the type described in Section 6.01(j) ;

(iv) the Borrower may repurchase, redeem, retire or otherwise acquire for value Equity Interests (including any stock appreciation rights in respect thereof) of the Borrower from current or former employees or directors; provided , that the aggregate annual cash payments in respect of such repurchases, redemptions, retirements and acquisitions shall not exceed $10 million; and

(v) Restricted Payments made in cash to the holders of any Convertible Notes, at redemption of such Convertible Notes not to exceed the original aggregate principal amount of such Convertible Notes.

(b) No Loan Party will, nor will it permit any Subsidiary to, make or agree to pay or make, directly or indirectly, any payment or other distribution (whether in cash, securities or other property) of or in respect of principal of or interest on any Junior Debt, or any payment or other distribution (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any Junior Debt, except:

(i) payment of regularly scheduled interest as and when due in respect of any Junior Debt permitted under Section 6.01 ;

(ii) refinancings of any Junior Debt to the extent permitted by Section 6.01 ; and

(iii) prepayments of any Junior Debt, so long as (A) no Event of Default has occurred and is continuing or would result therefrom and (B) the Total Net Leverage Ratio for the most recently ended four quarter period for which financial statements have been (or were required to be) delivered to the Administrative Agent is less than 2.50 to 1.00.

SECTION 6.08 Transactions with Affiliates . No Loan Party will, nor will it permit any Subsidiary to, sell, lease or otherwise transfer any property or assets to, or purchase, lease or otherwise acquire any property or assets from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) transactions that (i) are in the ordinary course of business and (ii) are at prices and on terms and conditions not less favorable to such Loan Party or such Subsidiary than could be obtained on an arm’s-length basis from unrelated third parties, (b) transactions between or among the Borrower and any Subsidiary not involving any other Affiliate, (c) any Restricted Payment permitted by Section 6.07 , (d) reasonable and customary director, officer and employee compensation (including bonuses) and other benefits (including retirement, health, stock option and other benefit plans), indemnification arrangements, (e) severance and reimbursement of costs paid to members of the board of directors of any Loan Party or any of its Subsidiaries and (f) transactions described in Schedule 6.08 .

SECTION 6.09 Restrictive Agreements . No Loan Party will, nor will it permit any Subsidiary to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of such Loan Party or any of its Subsidiaries to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock or to make or repay loans or advances to the Borrower or any other Subsidiary or to Guarantee Indebtedness of the Borrower or any other Subsidiary; except for: (i) such encumbrances or restrictions existing under or by reason of applicable law or any Loan Document; (ii) restrictions and conditions existing on the date hereof identified on Schedule 6.09 (but not including any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition); (iii) customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary or other property pending such sale, provided such restrictions and conditions apply only to the Subsidiary or other property that is to be sold and such sale is permitted hereunder; (iv) restrictions or conditions imposed by any agreement relating to secured Indebtedness permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Indebtedness; (v) customary provisions in leases and other contracts restricting the assignment thereof; (vi) customary restrictions contained in any software licenses; (vii) without affecting the Loan Parties’ obligations under

Section 5.09 , customary provisions in the organizational documents of a Person or asset sale or stock sale agreements or similar agreements which restrict the transfer of ownership in such Person; (viii) in the case of any joint venture permitted hereunder with a Person that is not a Loan Party, restrictions in such Person’s organizational documents or pursuant to any joint venture agreement or stockholders agreement solely to the extent of the Equity Interests of or property held in the subject joint venture; (ix) restrictions imposed by any holder of a Lien permitted by Section 6.02 restricting the transfer of the property subject thereto; (x) without affecting the Loan Parties’ obligations under Section 5.09 , any agreement in effect at the time a Person becomes a Subsidiary of the Borrower (including any amendments thereto that are otherwise permitted by the Loan Documents and that are no more materially restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing), so long as such agreement was not entered into in connection with or in contemplation of such person becoming a Subsidiary of Borrower and imposes restrictions only on such Person and its assets; (xi) restrictions on cash or other deposits required by suppliers or landlords under contracts entered into in the ordinary course of business; (xii) without affecting the Loan Parties’ obligations under Section 5.09 , restrictions imposed solely on Foreign Subsidiaries pursuant to any Swap Agreement entered into by the Borrower or any Subsidiary and permitted pursuant to Section 6.06 ; (xiii) customary restrictions or conditions pursuant to any Indebtedness incurred pursuant to Section 6.01(t) ; or (xiv) customary restrictions or conditions pursuant to any Permitted Receivables Facility.

SECTION 6.10 Amendment of Material Documents . No Loan Party will, nor will it permit any Subsidiary (a) to, amend, modify or waive any of its rights under its certificate of incorporation, by-laws, operating, management or partnership agreement or other organizational documents, (b) to voluntarily amend, voluntarily modify or waive any provision of any documentation relating to any Convertible Notes or (c) the provisions of any Junior Debt, in each case, to the extent any such amendment, modification or waiver would be materially adverse to the Lenders.

SECTION 6.11 Financial Covenants .

(a) Senior Secured Net Leverage Ratio . The Loan Parties will not permit the Senior Secured Net Leverage Ratio, determined for the four consecutive fiscal quarter period ending on the last day of each fiscal quarter, to be more than 3.00 to 1.00.

(b) Total Net Leverage Ratio . The Loan Parties will not permit the Total Net Leverage Ratio, determined for the four consecutive fiscal quarter period ending on the last day of each fiscal quarter, to be more than 4.00 to 1.00.

(c) Interest Coverage Ratio . The Loan Parties will not permit the Interest Coverage Ratio, determined for the four consecutive fiscal quarter period ending on the last day of each fiscal quarter, to be less than 3.00 to 1.00.

ARTICLE VII

EVENTS OF DEFAULT

If any of the following events (each an “ Event of Default ”) shall occur and be continuing:

(a) the Borrower shall fail to pay any principal of any Loan or any reimbursement obligation in respect of any LC Disbursement when and as the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b) the Borrower shall fail to pay any interest on any Loan or any fee or any other amount (other than an amount referred to in clause (a) of this Article VII ) payable under this Agreement, when and as the same shall become due and payable, and such failure shall continue unremedied for a period of five Business Days;

(c) any representation or warranty made or deemed made by or on behalf of any Loan Party or any Subsidiary in or in connection with this Agreement or any Loan Document or any amendment or modification thereof or waiver thereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with this Agreement or any Loan Document or any amendment or modification thereof or waiver thereunder, shall prove to have been materially incorrect when made or deemed made (unless, in the case of any such representation and warranty made pursuant to Section 3.13 of this Agreement or Section 3.1 of the Security Agreement, such misstatement was made with respect to Collateral having a book value not exceeding $1 million);

(d) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in Section 5.02(a) , 5.03 (with respect to maintaining a Loan Party’s existence), 5.08 , 5.09(a) or 5.09(b) or in Article VI ;

(e) any Loan Party shall fail to observe or perform any covenant, condition or agreement contained in this Agreement (other than those which constitute a default under another Section of this Article VII ), and such failure shall continue unremedied for a period of 30 days after the earlier of any Loan Party’s knowledge of such breach or notice thereof from the Administrative Agent (which notice will be given at the request of any Lender) if such breach relates to terms or provisions of any other Section of this Agreement;

(f) any Loan Party or any Subsidiary shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable;

(g) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (with or without the giving of notice, the lapse of time or both) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided , that this clause (g) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness;

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of a Loan Party or any Material Foreign Subsidiary or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or any Material Foreign Subsidiary or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days (or 90 days in the case of any Material Foreign Subsidiary) or an order or decree approving or ordering any of the foregoing shall be entered;

(i) any Loan Party or any Material Foreign Subsidiary shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article VII , (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for such Loan Party or Material Foreign Subsidiary or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(j) any Loan Party or any Subsidiary of any Loan Party shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(k) one or more judgments for the payment of money in an aggregate amount in excess of $10 million (not paid or fully covered by insurance company as to which the relevant insurance company has acknowledged coverage) shall be rendered against any Loan Party, any Subsidiary of any Loan Party or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of any Loan Party or any Subsidiary of any Loan Party to enforce any such judgment;

(l) an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in aggregate liability of the Borrower and its Subsidiaries in excess of $10 million;

(m) a Change in Control shall occur;

(n) the occurrence of any “default”, as defined in any Loan Document (other than this Agreement) or the breach of any of the terms or provisions of any Loan Document (other than this Agreement), which default or breach continues beyond any period of grace therein provided;

(o) the Loan Guaranty shall fail to remain in full force or effect or any action shall be taken to discontinue or to assert the invalidity or unenforceability of the Loan Guaranty or any Loan Guarantor shall deny that it has any further liability under the Loan Guaranty to which it is a party, or shall give notice to such effect;

(p) (i) any Collateral Document shall for any reason fail to create a valid and perfected first priority security interest in any Collateral purported to be covered thereby (other than with respect to Collateral collectively having a book value not exceeding $2.5 million), except (A) as permitted by the terms of any Collateral Document or other Loan Document or (B) as a result of the Administrative Agent’s failure to (1) maintain possession of any stock certificates, promissory notes or other instruments delivered to it under the Collateral Documents, or (2) file Uniform Commercial Code continuation statements, (ii) any material provision of any Collateral Document shall fail to remain in full force or effect or (iii) any action shall be taken to discontinue or to assert the invalidity or unenforceability of any Collateral Document; or

(q) any material provision of any Loan Document for any reason ceases to be valid, binding and enforceable in accordance with its terms (or any Loan Party shall challenge the enforceability of any Loan Document or shall assert in writing, or engage in any action or inaction based on any such assertion, that any provision of any of the Loan Documents has ceased to be or otherwise is not valid, binding and enforceable in accordance with its terms);

then, and in every such event (other than an event with respect to the Borrower described in clause (h) or (i) of this Article VII ), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrower, take either or both of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; and in case of any event with respect to the Borrower described in clause (h) or (i) of this Article VII , the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrower accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. Upon the occurrence and the continuance of an Event of Default, the Administrative Agent may, and at the request of the Required Lenders shall, exercise any rights and remedies provided to the Administrative Agent under the Loan Documents or at law or equity, including all remedies provided under the UCC.

ARTICLE VIII

THE ADMINISTRATIVE AGENT

SECTION 8.01 Appointment . Each of the Lenders, on behalf of itself and any of its Affiliates that are Secured Parties and the Issuing Banks hereby irrevocably appoints the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf, including execution of the other Loan Documents, and to exercise such powers as are delegated to the Administrative Agent by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. In addition, to the extent required under the laws of any jurisdiction other than the U.S., each of the Lenders and the Issuing Bank hereby grants to the Administrative Agent any required powers of attorney to execute any Collateral Document governed by the laws of such jurisdiction on such Lender’s or Issuing Bank’s behalf. The provisions of this Article VIII are solely for the benefit of the Administrative Agent and the Lenders (including the Issuing Bank), and the Loan Parties shall not have rights as a third party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” as used herein or in any other Loan Documents (or any similar term) with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

SECTION 8.02 Rights as a Lender . The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with the Loan Parties or any Subsidiary of a Loan Party or other Affiliate thereof as if it were not the Administrative Agent hereunder.

SECTION 8.03 Duties and Obligations . The Administrative Agent shall not have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the

foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that the Administrative Agent is required to exercise in writing as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02 ), and (c) except as expressly set forth in the Loan Documents, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to any Loan Party or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent or any of its Affiliates in any capacity. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02 ) or in the absence of its own gross negligence or willful misconduct as determined by a final nonappealable judgment of a court of competent jurisdiction. The Administrative Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Administrative Agent by the Borrower or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection with any Loan Document, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, (v) the creation, perfection or priority of Liens on the Collateral or the existence of the Collateral, or (vi) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent. None of the Lenders or other Persons identified on the facing page or signature pages of this Agreement as a “syndication agent,” “documentation agent,” “lead arranger,” “bookrunner” or other similar term shall have any right, power, obligation, liability, responsibility or duty under this Agreement other than those applicable to all Lenders as such. Without limiting the foregoing, none of the Lenders or other Persons so identified shall have or be deemed to have any fiduciary relationship with any Lender. Each Lender acknowledges that it has not relied, and will not rely, on any of the Lenders or other Persons so identified in deciding to enter into this Agreement or in taking or not taking action hereunder.

SECTION 8.04 Reliance . The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

SECTION 8.05 Actions through Sub-Agents . The Administrative Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

SECTION 8.06 Resignation . Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders, the Issuing Banks and the Borrower. Upon any such resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and the Issuing Banks, appoint a successor Administrative Agent which shall be a commercial bank or an Affiliate of any such bank. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor, unless otherwise agreed by the Borrower and such successor. Notwithstanding the foregoing, in the event no successor Administrative Agent shall have been so appointed and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its intent to resign, the retiring Administrative Agent may give notice of the effectiveness of its resignation to the Lenders, the Issuing Banks and the Borrower, whereupon, on the date of effectiveness of such resignation stated in such notice, (a) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents; provided , that, solely for purposes of maintaining any security interest granted to the Administrative Agent under any Collateral Document for the benefit of the Secured Parties, the retiring Administrative Agent shall continue to be vested with such security interest as collateral agent for the benefit of the Secured Parties and, in the case of any Collateral in the possession of the Administrative Agent, shall continue to hold such Collateral, in each case until such time as a successor Administrative Agent is appointed and accepts such appointment in accordance with this paragraph (it being understood and agreed that the retiring Administrative Agent shall have no duty or obligation to take any further action under any Collateral Document, including any action required to maintain the perfection of any such security interest), and (b) the Required Lenders shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent; provided , that (i) all payments required to be made hereunder or under any other Loan Document to the Administrative Agent for the account of any Person other than the Administrative Agent shall be made directly to such Person and (ii) all notices and other communications required or contemplated to be given or made to the Administrative Agent shall also directly be given or made to each Lender and each Issuing Bank. Following the effectiveness of the Administrative Agent’s resignation from its capacity as such, the provisions of this Article VIII , Section 2.17(d) and Section 9.03 , as well as any exculpatory, reimbursement and indemnification provisions set forth in any other Loan Document, shall continue in effect for the benefit of such retiring Administrative Agent, its sub‑agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent and in respect of the matters referred to in the proviso under clause (a) above.

SECTION 8.07 Non-Reliance . Each Lender acknowledges and agrees that the extensions of credit made hereunder are commercial loans and letters of credit and not investments in a business enterprise or securities. Each Lender further represents that it is engaged in making, acquiring or holding commercial loans in the ordinary course of its business and has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement as a Lender, and to make, acquire or hold Loans hereunder. Each Lender shall, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information (which may contain material, non-public information within the meaning of the United States securities laws concerning the

Borrower and its Affiliates) as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document, any related agreement or any document furnished hereunder or thereunder and in deciding whether or to the extent to which it will continue as a Lender or assign or otherwise transfer its rights, interests and obligations hereunder.

SECTION 8.08 Not Partners or Co-Venturers; Administrative Agent as Representative of the Secured Parties .

(a) The Lenders are not partners or co-venturers, and no Lender shall be liable for the acts or omissions of, or (except as otherwise set forth herein in case of the Administrative Agent) authorized to act for, any other Lender. The Administrative Agent shall have the exclusive right on behalf of the Lenders to enforce the payment of the principal of and interest on any Loan after the date such principal or interest has become due and payable pursuant to the terms of this Agreement.

(b) In its capacity, the Administrative Agent is a “representative” of the Secured Parties within the meaning of the term “secured party” as defined in the New York Uniform Commercial Code. Each Lender (and other Secured Party by its acceptance of the benefits of the Loan Documents) authorizes the Administrative Agent to enter into each of the Collateral Documents to which it is a party and to take all action contemplated by such documents. Each Lender (and other Secured Party by its acceptance of the benefits of the Loan Documents) agrees that no Secured Party (other than the Administrative Agent) shall have the right individually to seek to realize upon the security granted by any Collateral Document, it being understood and agreed that such rights and remedies may be exercised solely by the Administrative Agent for the benefit of the Secured Parties upon the terms of the Collateral Documents. In the event that any Collateral is hereafter pledged by any Person as collateral security for the Secured Obligations, the Administrative Agent is hereby authorized, and hereby granted a power of attorney, to execute and deliver on behalf of the Secured Parties any Loan Documents necessary or appropriate to grant and perfect a Lien on such Collateral in favor of the Administrative Agent on behalf of the Secured Parties.

SECTION 8.09 Lenders Not Subject to ERISA . Each Lender as of the Effective Date represents and warrants to the Administrative Agent, the Lead Arranger and their respective Affiliates, and not, for the avoidance of doubt, for the benefit of the Borrower or any other Loan Party, that such Lender is not and will not be (a) an employee benefit plan subject to Title I of ERISA, (b) a plan or account subject to Section 4975 of the Code; (c) an entity deemed to hold “plan assets” of any such plans or accounts for purposes of ERISA or the Code; or (d) a “governmental plan” within the meaning of ERISA.

ARTICLE IX

MISCELLANEOUS

SECTION 9.01 Notices .

(a) Except in the case of notices and other communications expressly permitted to be given by telephone or Electronic Systems (and subject in each case to clause (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax, as follows:

(i) if to any Loan Party, to the Borrower at:

Electronics for Imaging, Inc.
6750 Dumbarton Circle

Fremont, CA 94555
Attention: General Counsel
E-mail Address: StrategicRelations@efi.com
Fax Number: (650) 357-3907

with a copy to:

O’Melveny & Myers LLP
Times Square Tower
7 Times Square
New York, New York 10036
Attention: Sung Pak
E-mail Address: spak@omm.com

Fax Number: (212) 326-2061

(ii) if to the Administrative Agent or to Citi, in its capacity as Issuing Bank or Swingline Lender, to Citibank, N.A. at:

Citibank, N.A.
1 Sansome St., 22nd Floor
San Francisco, CA 94104
Attention: Jim Haack
E-mail Address: james.haack@citi.com

with a copy to:

Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10036
Attention: Daniel S. Dokos
E-mail Address: Daniel.Dokos@weil.com
Fax Number: (212) 310-8007

(iii) if to any other Lender, to it at its address or fax number set forth in its Administrative Questionnaire.

All such notices and other communications (i) sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received, (ii) sent by fax shall be deemed to have been given when sent; provided , that if not given during normal business hours of the recipient, such notice or communication shall be deemed to have been given at the opening of business on the next Business Day for the recipient or (iii) delivered through Electronic Systems to the extent provided in clause (b) below shall be effective as provided in such clause (b) .

(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by Electronic Systems pursuant to procedures approved by the Administrative Agent; provided , that the foregoing shall not apply to notices pursuant to Article II or to compliance and no Event of Default certificates

delivered pursuant to Section 5.01(d) unless otherwise agreed by the Administrative Agent and the applicable Lender. Each of the Administrative Agent and the Borrower (on behalf of the Loan Parties) may, in its discretion, agree to accept notices and other communications to it hereunder by Electronic Systems pursuant to procedures approved by it; provided , that approval of such procedures may be limited to particular notices or communications. Unless the Administrative Agent otherwise proscribes, such notices and other communications (i) sent to an e-mail address shall be deemed received upon the sender’s receipt of an acknowledgement from the intended recipient (such as by the “return receipt requested” function, as available, return e-mail or other written acknowledgement); provided , that if not given during the normal business hours of the recipient, such notice or communication shall be deemed to have been given at the opening of business on the next Business Day for the recipient, and (ii) posted to an Internet or intranet website shall be deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (b)(i) of notification that such notice or communication is available and identifying the website address therefor; provided , that, for both clauses (i) and (ii) above, if such notice, e-mail or other communication is not sent during the normal business hours of the recipient, such notice or communication shall be deemed to have been sent at the opening of business on the next Business Day of the recipient.

(c) Any party hereto may change its address, fax number or e-mail address for notices and other communications hereunder by notice to the other parties hereto.

(d) Electronic Systems .

(i) Each Loan Party agrees that the Administrative Agent may, but shall not be obligated to, make Communications (as defined below) available to the Issuing Bank and the other Lenders by posting the Communications on Debt Domain, Intralinks, Syndtrak, ClearPar or a substantially similar Electronic System.

(ii) Any Electronic System used by the Administrative Agent is provided “as is” and “as available.” The Agent Parties (as defined below) do not warrant the adequacy of such Electronic Systems and expressly disclaim liability for errors or omissions in the Communications. No warranty of any kind, express, implied or statutory, including any warranty of merchantability, fitness for a particular purpose, non-infringement of third-party rights or freedom from viruses or other code defects, is made by any Agent Party in connection with the Communications or any Electronic System. In no event shall the Administrative Agent or any of its Related Parties (collectively, the “ Agent Parties ”) have any liability to the Borrower or the other Loan Parties, any Lender, the Issuing Bank or any other Person or entity for damages of any kind, including direct or indirect, special, incidental or consequential damages, losses or expenses (whether in tort, contract or otherwise) arising out of the Borrower’s, any Loan Party’s, or the Administrative Agent’s transmission of communications through an Electronic System. “ Communications ” means, collectively, any notice, demand, communication, information, document or other material provided by or on behalf of any Loan Party pursuant to any Loan Document or the transactions contemplated therein which is distributed by the Administrative Agent, any Lender or the Issuing Bank by means of electronic communications pursuant to this Section 9.01 , including through an Electronic System.

SECTION 9.02 Waivers; Amendments .

(a) No failure or delay by the Administrative Agent, any Swingline Lender, any Issuing Bank or any Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or

the exercise of any other right or power. The rights and remedies of the Administrative Agent, any Swingline Lender, the Issuing Banks and the Lenders hereunder and under any other Loan Document are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by clause (b) of this Section 9.02 , and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan (including any Swingline Loan) or issuance of a Letter of Credit shall not be construed as a waiver of any Default, regardless of whether the Administrative Agent, any Lender or any Issuing Bank may have had notice or knowledge of such Default at the time.

(b) Except as provided in Section 2.22 and Section 2.23 (with respect to any commitment increase), neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except (i) in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or, (ii) in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by the Administrative Agent and the Loan Party or Loan Parties that are parties thereto, with the consent of the Required Lenders; provided , that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender (including any such Lender that is a Defaulting Lender), (ii) reduce or forgive the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce or forgive any interest or fees payable hereunder, without the written consent of each Lender (including any such Lender that is a Defaulting Lender) directly affected thereby, (iii) postpone any scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any date for the payment of any interest, fees or other Obligations payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender (including any such Lender that is a Defaulting Lender) directly affected thereby, (iv) change Section 2.18(b) or (d) in a manner that would alter the manner in which payments are shared, without the written consent of each Lender (other than any Defaulting Lender), (v) change any of the provisions of this Section 9.02 or the definition of “Required Lenders” or any other provision of any Loan Document specifying the number or percentage of Lenders required to waive, amend or modify any rights thereunder or make any determination or grant any consent thereunder, without the written consent of each Lender (other than any Defaulting Lender) directly affected thereby, (vi) change Section 2.20 , without the consent of each Lender (other than any Defaulting Lender), (vii) release any Loan Guarantor from its obligation under its Loan Guaranty (except as otherwise expressly permitted herein or in the other Loan Documents), without the written consent of each Lender (other than any Defaulting Lender) or (viii) except as provided in clauses (d) and (e) of this Section 9.02 or in any Collateral Document, release all or substantially all of the Collateral, without the written consent of each Lender, in each case, without the written consent of each Lender; provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent, Swingline Lenders or the Issuing Banks hereunder without the prior written consent of the Administrative Agent, Swingline Lenders or the Issuing Banks, as the case may be (it being understood that any change to Section 2.20 shall require the consent of the Administrative Agent and the Issuing Banks). The Administrative Agent may also amend the Commitment Schedule to reflect assignments entered into pursuant to Section 9.04

(c) The Lenders hereby irrevocably authorize the Administrative Agent, at its option and in its sole discretion, to release any Liens granted to the Administrative Agent by the Loan Parties on any Collateral (i) upon the termination of the all Commitments, payment and satisfaction in full in cash of all Secured Obligations (other than Unliquidated Obligations), and the cash collateralization of all Unliquidated Obligations in a manner satisfactory to each affected Lender, (ii) automatically with respect to any Receivables Assets which are the subject of any Permitted Receivables Facility, (iii) constituting property being sold or disposed of if the Loan Party disposing of such property certifies to the Administrative Agent

that the sale or disposition is made in compliance with the terms of this Agreement (and the Administrative Agent may rely conclusively on any such certificate, without further inquiry), and to the extent that the property being sold or disposed of constitutes 100% of the Equity Interest of a Subsidiary, the Administrative Agent is authorized to release any Loan Guaranty provided by such Subsidiary, (iv) constituting property leased to a Loan Party under a lease which has expired or been terminated in a transaction permitted under this Agreement, or (v) as required to effect any sale or other disposition of such Collateral in connection with any exercise of remedies of the Administrative Agent and the Lenders pursuant to Article VII . Except as provided in the preceding sentence, the Administrative Agent will not release any Liens on Collateral without the prior written authorization of the Required Lenders; provided , that the Administrative Agent may, in its discretion, release its Liens on Collateral valued in the aggregate not in excess of $1 million during any calendar year without the prior written authorization of the Required Lenders (it being agreed that the Administrative Agent may rely conclusively on one or more certificates of the Borrower as to the value of any Collateral to be so released, without further inquiry). Any such release shall not in any manner discharge, affect, or impair the Obligations or any Liens (other than those expressly being released) upon (or obligations of the Loan Parties in respect of) all interests retained by the Loan Parties, including the proceeds of any sale, all of which shall continue to constitute part of the Collateral. Any execution and delivery by the Administrative Agent of documents in connection with any such release shall be without recourse to or warranty by the Administrative Agent.

(d) If, in connection with any proposed amendment, waiver or consent requiring the consent of “each Lender” or “each Lender affected thereby,” the consent of the Required Lenders is obtained, but the consent of other necessary Lenders is not obtained (any such Lender whose consent is necessary but has not been obtained being referred to herein as a “ Non-Consenting Lender ”), then the Borrower may elect to replace a Non-Consenting Lender as a Lender party to this Agreement; provided , that, concurrently with such replacement, (i) another bank or other entity which is reasonably satisfactory to the Borrower, the Administrative Agent and the Issuing Bank shall agree, as of such date, to purchase for cash the Loans and other Obligations due to the Non-Consenting Lender pursuant to an Assignment and Assumption and to become a Lender for all purposes under this Agreement and to assume all obligations of the Non-Consenting Lender to be terminated as of such date and to comply with the requirements of clause (b) of Section 9.04 , and (ii) the Borrower shall pay to such Non-Consenting Lender in same day funds on the day of such replacement (1) all interest, fees and other amounts then accrued but unpaid to such Non-Consenting Lender by the Borrower hereunder to and including the date of termination, including without limitation payments due to such Non-Consenting Lender under Sections 2.15 and 2.17 , and (2) an amount, if any, equal to the payment which would have been due to such Lender on the day of such replacement under Section 2.16 had the Loans of such Non-Consenting Lender been prepaid on such date rather than sold to the replacement Lender.

(e) Notwithstanding anything to the contrary herein the Administrative Agent may, with the consent of the Borrower only, amend, modify or supplement this Agreement or any of the other Loan Documents to cure any ambiguity, omission, mistake, defect or inconsistency. A copy of any such amendment, modification or supplement shall be promptly delivered by the Administrative Agent to each Lender.

(f) In addition, notwithstanding the foregoing, this Agreement, including this Section 9.02 , and the other Loan Documents may be amended (or amended and restated) pursuant to Section 2.22 to add any Incremental Term Loan Facility to this Agreement and (a) to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement (including the rights of the Incremental Term Loan Lenders to share ratably in prepayments pursuant to Section 2.11 ), the Security Agreement and the other Loan Documents with the Loans and the accrued interest and fees in respect thereof, (b) to include appropriately the Lenders holding such credit

facility in any determination of the Required Lenders and (c) to amend other provisions of the Loan Documents so that the Incremental Term Loan Facility is appropriately incorporated (including this Section 9.02 ).

SECTION 9.03 Expenses; Indemnity; Damage Waiver .

(a) The Borrower shall pay (i) all reasonable and documented out‑of‑pocket expenses incurred by the Administrative Agent, the Lead Arranger and their respective Affiliates, including the reasonable fees, charges and disbursements of one outside counsel and one local counsel in each relevant jurisdiction for the Administrative Agent and Lead Arranger (and, solely in the case of an actual or perceived conflict of interest, one additional counsel (and, if reasonably necessary, one firm of local counsel in each relevant jurisdiction) and any other counsel retained with the Borrower’s consent, such consent not to be unreasonably withheld or delayed), in connection with the syndication and distribution (including, without limitation, via the internet or through an Electronic System) of the credit facilities provided for herein, the preparation and administration of the Loan Documents or any amendments, modifications or waivers of the provisions of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable and documented out-of-pocket expenses incurred by any Issuing Bank in connection with the issuance, amendment, renewal or extension of any Letter of Credit or any demand for payment thereunder and (iii) all documented out-of-pocket expenses incurred by the Administrative Agent, Swingline Lenders, any Issuing Bank or any Lender, including the fees, charges and disbursements of any outside counsel for the Administrative Agent, Swingline Lenders, any Issuing Bank or any Lender, in connection with the enforcement, collection or protection of its rights in connection with the Loan Documents, including its rights under this Section 9.03 , or in connection with the Loans made or Letters of Credit issued hereunder, including all such out-of‑pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit. Expenses being reimbursed by the Borrower under this Section 9.03 include, without limiting the generality of the foregoing, costs and expenses incurred in connection with:

(i) taxes, fees and other charges for (A) lien searches and (B) filing financing statements and continuations, and other actions to perfect, protect, and continue the Administrative Agent’s Liens;

(ii) sums paid or incurred to take any action required of any Loan Party under the Loan Documents that such Loan Party fails to pay or take; and

(iii) forwarding loan proceeds, collecting checks and other items of payment, and costs and expenses of preserving and protecting the Collateral.

All of the foregoing costs and expenses may be charged to the Borrower as Loans or to another deposit account, all as described in Section 2.18(c) .

(b) The Borrower shall indemnify the Administrative Agent, Swingline Lenders, each Issuing Bank and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “ Indemnitee ”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, penalties, liabilities and related expenses (except for taxes, which shall be covered by Sections 2.17 and 10.09 ), including the fees, charges and disbursements of one counsel for all Indemnitees (and, if reasonably necessary, a single local counsel for all Indemnitees taken as a whole in each relevant jurisdiction and, solely in the case of an actual or perceived conflict of interest, one additional counsel (and, if reasonably necessary, one firm of local counsel in each relevant jurisdiction) to each group of affected Indemnitees similarly situated

taken as a whole and any other counsel retained with the Borrower’s consent, such consent not to be unreasonably withheld or delayed), incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of the Loan Documents or any agreement or instrument contemplated thereby, the performance by the parties hereto of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated hereby, (ii) any Loan (including any Swingline Loan) or Letter of Credit or the use of the proceeds therefrom (including any refusal by any Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or Release of Hazardous Materials on or from any property owned or operated by the Borrower or any of its Subsidiaries, or any Environmental Liability related in any way to the Borrower or any of its Subsidiaries, (iv) the failure of the Borrower to deliver to the Administrative Agent the required receipts or other required documentary evidence with respect to a payment made by the Borrower for Indemnified Taxes or Other Taxes pursuant to Section 2.17 , or (v) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided , that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, penalties, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or any Related Indemnitee Party of such Indemnitee, (y) result from a claim brought by the Borrower or any of its Subsidiaries against an Indemnitee or any Related Indemnitee Party of such Indemnitee for material breach of such Indemnitee’s express obligations hereunder or under any other Loan Document, if the Borrower or such Subsidiary has obtained a final and non-appealable judgment by a court of competent jurisdiction in its favor on such claim as determined by a court of competent jurisdiction or (z) result from any dispute solely among Indemnitees and does not involve any act or omission by any Loan Party or any of their Subsidiaries (other than claims against the Administrative Agent, Swingline Lenders and Issuing Banks in their respective capacities as such).

(c) To the extent that the Borrower fails to pay any amount required to be paid by it to the Administrative Agent or any Issuing Bank under clause (a) or (b) of this Section 9.03 , each Lender severally agrees to pay to the Administrative Agent or such Issuing Bank, as the case may be, such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided , that the unreimbursed expense or indemnified loss, claim, damage, penalty, liability or related expense, as the case may be, was incurred by or asserted against the Administrative Agent or such Issuing Bank in its capacity as such.

(d) To the extent permitted by applicable law, no Loan Party shall assert, and each hereby waives, any claim against any Indemnitee for any damages arising from the use by unintended recipients of information or other materials obtained through telecommunications, electronic or other information transmission systems (including the Internet), except as determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or any Related Indemnitee Party of such Indemnitee.

(e) No Indemnitee nor any Loan Party shall be liable on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement, any other Loan Document, or any agreement or instrument contemplated hereby or thereby, the Transactions, any Loan (including any Swingline Loan) or Letter of Credit or the use of the proceeds thereof; provided , that nothing in this clause (e) shall relieve any Loan Party of any obligation it may have to indemnify an Indemnitee against special, indirect, consequential or punitive damages asserted against such Indemnitee by a third party.

(f) All amounts due under this Section 9.03 shall be payable promptly after written demand therefor.

SECTION 9.04 Successors and Assigns .

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any Affiliate of an Issuing Bank that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section 9.04 . Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby (including any Affiliate of an Issuing Bank that issues any Letter of Credit), Participants (to the extent provided in clause (c) of this Section 9.04 ) and, to the extent expressly contemplated hereby, the Related Parties of each of the Administrative Agent, Swingline Lenders, the Issuing Banks and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) (i) Subject to the conditions set forth in clause (b)(ii) below, any Lender may assign to one or more Persons (other than an Ineligible Institution) all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

(A) the Borrower; provided , that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within ten Business Days after having received notice thereof, and provided further that no consent of the Borrower shall be required for an assignment to a Lender, an Affiliate of a Lender, an Approved Fund or, if a Specified Event of Default has occurred and is continuing, any other assignee;

(B) the Administrative Agent;

(D) the Issuing Banks.

(ii) Assignments shall be subject to the following additional conditions:

(A) except in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender’s Commitment or Loans (including any Swingline Loans), the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $5 million unless each of the Borrower and the Administrative Agent otherwise consent; provided , that no such consent of the Borrower shall be required if a Specified Event of Default has occurred and is continuing;

(B) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement;

(C) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500 and the tax forms required by Section 2.17(f) ; provided , however, that the Administrative Agent may, in its sole discretion, elect to waive such processing and recordation fee in the case of any assignment; and

(D) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire in which the assignee designates one or more credit contacts to whom all syndicate-level information (which may contain material non-public information about the Borrower, the Loan Parties and their Related Parties or their respective securities) will be made available and who may receive such information in accordance with the assignee’s compliance procedures and applicable laws, including Federal and state securities laws.

(iii) Subject to acceptance and recording thereof pursuant to clause (b)(iv) of this Section 9.04 , from and after the effective date specified in each Assignment and Assumption (A) the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement and (B) the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.15 , 2.16 , 2.17 and 9.03 ). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 9.04 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with clause (c) of this Section 9.04 .

(iv) The Administrative Agent, acting for this purpose as a non-fiduciary agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitment of, and principal amount of interest on the Loans and LC Disbursements owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Banks and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrower, the Issuing Banks and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(v) Upon its receipt of (x) a duly completed Assignment and Assumption executed by an assigning Lender and an assignee or (y) to the extent applicable, an agreement incorporating an Assignment and Assumption by reference pursuant to any applicable electronic platform as to which the Administrative Agent and the parties to the Assignment and Assumption are participants, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee and tax forms referred to in clause (b) of this Section 9.04 and any written consent to such assignment required by clause (b) of this Section 9.04 , the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register; provided , that if either the assigning Lender or the assignee shall have failed to make any payment required to be made by it pursuant to Section 2.05 , 2.06(d) or (e) , 2.07(b) , 2.18(d) or 9.03(c) , the Administrative Agent shall have no obligation to accept such

Assignment and Assumption and record the information therein in the Register unless and until such payment shall have been made in full, together with all accrued interest thereon. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(c) Any Lender may, without the consent of the Borrower, the Administrative Agent, any Issuing Bank of the Swingline Lenders, sell participations to one or more banks or other entities (a “ Participant ”) other than an Ineligible Institution in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans (including any Swingline Loans) owing to it); provided , that (A) such Lender’s obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (C) the Borrower, the Administrative Agent, the Swingline Lenders, the Issuing Banks and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and (D) such Lender shall have provided the Borrower with prior written notice of any such participation. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided , that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) that affects such Participant. Subject to clause (c)(ii) of this Section 9.04 , the Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.15 , 2.16 and 2.17 (subject to the requirements and limitations therein, including the requirements under Section 2.17(f) (it being understood that the documentation required under Section 2.17(f) shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to clause (b) of this Section 9.04 . To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to the provisions of Sections 2.18 and 2.19 as if it were an assignee under clause (b) of this Section 9.04 ; and shall not be entitled to receive any greater payment under Section 2.15 or 2.17 , with respect to any participation, than its participating Lender would have been entitled to receive, except (i) to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation or (ii) such participating Lender failed to deliver the tax forms required by Section 2.17(f) .

Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.19(b) with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.18(c) as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under this Agreement or any other Loan Document (the “ Participant Register ”); provided , that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans, Letters of Credit or its other obligations under any Loan Document) to any Person (other than the Borrower to the extent required in clause (D) of the proviso to clause (c) above) except to the extent that such disclosure is necessary to establish that such Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement

notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

(d) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section 9.04 shall not apply to any such pledge or assignment of a security interest; provided , that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

SECTION 9.05 Survival . All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans and issuance of any Letters of Credit, regardless of any investigation made by any such other party or on its behalf and notwithstanding that the Administrative Agent, any Issuing Bank or any Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid or any Letter of Credit is outstanding and so long as the Commitments have not expired or terminated. The provisions of Sections 2.15 , 2.16 , 2.17 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Letters of Credit and the Commitments or the termination of this Agreement or any other Loan Document or any provision hereof or thereof.

SECTION 9.06 Counterparts; Integration; Effectiveness; Electronic Execution .

(a) This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Administrative Agent constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01 , this Agreement shall become effective when it shall have been executed by the Administrative Agent and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.

(b) Delivery of an executed counterpart of a signature page of this Agreement by telecopy, emailed .pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement. The words “execution,” “signed,” “signature,” “delivery,” and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby or thereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce

Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

SECTION 9.07 Severability . Any provision of any Loan Document held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions thereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

SECTION 9.08 Right of Setoff . If an Event of Default shall have occurred and be continuing, each Lender and each of its Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender or Affiliate to or for the credit or the account of the Borrower or such Loan Guarantor against any of and all the Secured Obligations held by such Lender, irrespective of whether or not such Lender shall have made any demand under the Loan Documents and although such obligations may be unmatured. The applicable Lender shall notify the Borrower and the Administrative Agent of such setoff or application; provided , that any failure to give or any delay in giving such notice shall not affect the validity of any such setoff or application under this Section 9.08 . The rights of each Lender under this Section 9.08 are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

SECTION 9.09 Governing Law; Jurisdiction; Consent to Service of Process .

(a) The Loan Documents (other than those containing a contrary express choice of law provision) shall be governed by and construed in accordance with the laws of the State of New York.

(b) Each Loan Party hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any U.S. Federal or New York State court sitting in New York, New York in any action or proceeding arising out of or relating to any Loan Documents, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party hereto agrees that the Administrative Agent and the Secured Parties retain the right to bring proceedings against any Loan Party in the courts of any other jurisdiction solely in connection with the exercise of any rights under any Collateral Document. Nothing in this Agreement or any other Loan Document shall affect any right that the Administrative Agent, any Issuing Bank or any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction.

(c) Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in clause (b) of this Section 9.09 . Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01 . Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

SECTION 9.10 WAIVER OF JURY TRIAL . EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, OTHER AGENT (INCLUDING ANY ATTORNEY) OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10 .

SECTION 9.11 Headings . Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12 Confidentiality . Each of the Administrative Agent, the Issuing Banks and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ respective officers, directors, employees, legal counsel, independent auditors and other experts or agents who need to know such information in connection with the transactions contemplated hereby and are informed of the confidential nature of such information, (b) upon the request or demand of any regulatory authority having jurisdiction over it or any of its Affiliates (in which case (except with respect to any audit or examination conducted by bank accountants or any bank or other regulatory authority exercising examination or regulatory authority), it, to the extent practicable and permitted by law, rule or regulation, agrees to inform the Borrower promptly thereof), (c) pursuant to the order of any court or administrative agency, in any pending legal, judicial or administrative proceeding or as otherwise required by applicable law or regulation or as requested by a governmental authority (in which case (except with respect to any audit or examination conducted by bank accountants or any bank or other regulatory authority exercising examination or regulatory authority), it, to the extent practicable and permitted by law, rule or regulation, agrees to inform the Borrower promptly thereof), (d) to any other party to this Agreement, (e) in connection with the exercise of any remedies under this Agreement or any other Loan Document or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section 9.12 or otherwise reasonably acceptable to the Borrower, to (i) any assignee of or Participant in, or any prospective assignee of or Participant in, any of its rights or obligations under this Agreement (and any of their respective advisors) or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to the Loan Parties and their obligations, (g) with the consent of the Borrower, (h) to holders of Equity Interests in the Borrower, (i) to the extent that such information is independently developed by it or its Affiliates, in each case, so long as not based on information obtained in a manner that would otherwise violate this Section 9.12 , (j) for purposes of establishing a “due diligence” defense, (k) to ratings agencies or (l) to the extent such Information (i) becomes publicly available other

than as a result of a breach of this Section 9.12 or (ii) becomes available to the Administrative Agent, any Issuing Bank or any Lender on a non-confidential basis from a source other than the Borrower. For the purposes of this Section 9.12 , “ Information ” means all information received from the Borrower relating to the Borrower or their business, other than any such information that is available to the Administrative Agent, any Issuing Bank or any Lender on a non-confidential basis prior to disclosure by the Borrower; provided , that, in the case of information received from the Borrower after the date hereof, such information is clearly identified at the time of delivery as confidential. Any Person required to maintain the confidentiality of Information as provided in this Section 9.12 shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

EACH LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN SECTION 9.12 FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC INFORMATION CONCERNING THE BORROWER AND ITS AFFILIATES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES REGARDING THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

ALL INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED BY THE BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER, THE LOAN PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES. ACCORDINGLY, EACH LENDER REPRESENTS TO THE BORROWER AND THE ADMINISTRATIVE AGENT THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT WHO MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION IN ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW, INCLUDING FEDERAL AND STATE SECURITIES LAWS.

SECTION 9.13 Several Obligations; Nonreliance; Violation of Law . The respective obligations of the Lenders hereunder are several and not joint and the failure of any Lender to make any Loan or perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. Each Lender hereby represents that it is not relying on or looking to any margin stock (as defined in Regulation U of the Board) for the repayment of the Borrowings provided for herein. Anything contained in this Agreement to the contrary notwithstanding, no Issuing Bank nor any Lender shall be obligated to extend credit to the Borrower in violation of any Requirement of Law.

SECTION 9.14 USA PATRIOT Act . Each Lender that is subject to the requirements of the USA PATRIOT Act hereby notifies each Loan Party that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record information that identifies such Loan Party, which information includes the name and address of such Loan Party and other information that will allow such Lender to identify such Loan Party in accordance with the USA PATRIOT Act.

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SECTION 9.15 Disclosure . Each Loan Party, each Lender and the Issuing Bank hereby acknowledges and agrees that the Administrative Agent and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with any of the Loan Parties and their respective Affiliates.

SECTION 9.16 Appointment for Perfection . Each Lender hereby appoints each other Lender as its agent for the purpose of perfecting Liens, for the benefit of the Administrative Agent and the other Secured Parties, in assets which, in accordance with Article 9 of the UCC or any other applicable law can be perfected only by possession or control. Should any Lender (other than the Administrative Agent) obtain possession or control of any such Collateral, such Lender shall notify the Administrative Agent thereof, and, promptly upon the Administrative Agent’s request therefor shall deliver such Collateral to the Administrative Agent or otherwise deal with such Collateral in accordance with the Administrative Agent’s instructions.

SECTION 9.17 Interest Rate Limitation . Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “ Charges ”), shall exceed the maximum lawful rate (the “ Maximum Rate ”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section 9.17 shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

SECTION 9.18 No Advisory or Fiduciary Responsibility . In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Loan Document), the Borrower acknowledges and agrees that: (i) (A) the arranging and other services regarding this Agreement provided by the Lenders are arm’s-length commercial transactions between the Borrower and its Affiliates, on the one hand, and the Lenders and their Affiliates, on the other hand, (B) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Loan Documents; (ii) (A) each of the Lenders and their Affiliates is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower or any of its Affiliates, or any other Person and (B) no Lender or any of its Affiliates has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except, in the case of a Lender, those obligations expressly set forth herein and in the other Loan Documents; and (iii) each of the Lenders and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and no Lender or any of its Affiliates has any obligation to disclose any of such interests to the Borrower or its Affiliates. To the fullest extent permitted by law, the Borrower hereby waives and releases any claims that it may have against each of the Lenders and their Affiliates with respect to any breach or alleged breach of agency or fiduciary duty in connection with any aspect of any transaction contemplated hereby.

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SECTION 9.19 Acknowledgement and Consent to Bail-In of EEA Financial Institutions . Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any Lender that is an EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured (all such liabilities, the “ Covered Liabilities ”), may be subject to the Write-Down and Conversion Powers and agrees and consents to, and acknowledges and agrees to be bound by:

(a) the application of any Write-Down and Conversion Powers to any such Covered Liability arising hereunder which may be payable to it by any Lender that is an EEA Financial Institution; and

(b) the effects of any Bail-In Action on any such Covered Liability, including, if applicable:

(i) A reduction in full or in part or cancellation of any such Covered Liability;

(ii) A conversion of all, or a portion of, such Covered Liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such Covered Liability under this Agreement or any other Loan Document; or

(iii) The variation of the terms of such Covered Liability in connection with the exercise of the Write-Down and Conversion Powers.

ARTICLE X

LOAN GUARANTY

SECTION 10.01 Guaranty . Each Loan Guarantor (other than those that have delivered a separate Guaranty) hereby agrees that it is jointly and severally liable for, and, as a primary obligor and not merely as surety, absolutely, unconditionally and irrevocably guarantees to the Secured Parties, the prompt payment when due, whether at stated maturity, upon acceleration or otherwise, and at all times thereafter, of the Secured Obligations and all costs and expenses including, without limitation, all court costs and attorneys’ and paralegals’ fees and expenses paid or incurred by the Administrative Agent, the Issuing Banks and the Lenders in endeavoring to collect all or any part of the Secured Obligations from, or in prosecuting any action against, the Borrower, any Loan Guarantor or any other guarantor of all or any part of the Secured Obligations (such costs and expenses, together with the Secured Obligations, collectively the “ Guaranteed Obligations ”; provided , however , that the definition of “Guaranteed Obligations” shall not create any guarantee by any Loan Guarantor of (or grant of security interest by any Loan Guarantor to support, as applicable) any Excluded Swap Obligations of such Loan Guarantor for purposes of determining any obligations of any Loan Guarantor). Each Loan Guarantor further agrees that the Guaranteed Obligations may be extended or renewed in whole or in part without notice to or further assent from it, and that it remains bound upon its guarantee notwithstanding any such extension or renewal. All terms of this Loan Guaranty apply to and may be enforced by or on behalf of any domestic or foreign branch or Affiliate of any Lender that extended any portion of the Guaranteed Obligations.

SECTION 10.02 Guaranty of Payment . This Loan Guaranty is a guaranty of payment and not of collection. Each Loan Guarantor waives any right to require the Administrative Agent, any Issuing Bank

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or any Lender to sue the Borrower, any Loan Guarantor, any other guarantor, or any other Person obligated for all or any part of the Guaranteed Obligations (each, an “ Obligated Party ”), or otherwise to enforce its payment against any collateral securing all or any part of the Guaranteed Obligations.

SECTION 10.03 No Discharge or Diminishment of Loan Guaranty .

(a) Except as otherwise provided for herein, to the fullest extent permitted by applicable law, the obligations of each Loan Guarantor hereunder are unconditional and absolute and not subject to any reduction, limitation, impairment or termination for any reason (other than the indefeasible payment in full in cash of the Guaranteed Obligations (other than Unliquidated Obligations), and the cash collateralization of all Unliquidated Obligations in a manner satisfactory to each affected Lender), including: (i) any claim of waiver, release, extension, renewal, settlement, surrender, alteration, or compromise of any of the Guaranteed Obligations, by operation of law or otherwise; (ii) any change in the corporate existence, structure or ownership of the Borrower or any other Obligated Party liable for any of the Guaranteed Obligations; (iii) any insolvency, bankruptcy, reorganization or other similar proceeding affecting any Obligated Party, or their assets or any resulting release or discharge of any obligation of any Obligated Party; or (iv) the existence of any claim, setoff or other rights which any Loan Guarantor may have at any time against any Obligated Party, the Administrative Agent, any Issuing Bank, any Lender, or any other Person, whether in connection herewith or in any unrelated transactions.

(b) To the fullest extent permitted by applicable law, the obligations of each Loan Guarantor hereunder are not subject to any defense or setoff, counterclaim, recoupment, or termination whatsoever by reason of the invalidity, illegality, or unenforceability of any of the Guaranteed Obligations or otherwise, or any provision of applicable law or regulation purporting to prohibit payment by any Obligated Party, of the Guaranteed Obligations or any part thereof.

(c) Further, to the fullest extent permitted by applicable law, the obligations of any Loan Guarantor hereunder are not discharged or impaired or otherwise affected by: (i) the failure of the Administrative Agent, any Issuing Bank or any Lender to assert any claim or demand or to enforce any remedy with respect to all or any part of the Guaranteed Obligations; (ii) any waiver or modification of or supplement to any provision of any agreement relating to the Guaranteed Obligations; (iii) any release, non-perfection, or invalidity of any indirect or direct security for the obligations of the Borrower for all or any part of the Guaranteed Obligations or any obligations of any other Obligated Party liable for any of the Guaranteed Obligations; (iv) any action or failure to act by the Administrative Agent, any Issuing Bank or any Lender with respect to any collateral securing any part of the Guaranteed Obligations; or (v) any default, failure or delay, willful or otherwise, in the payment or performance of any of the Guaranteed Obligations, or any other circumstance, act, omission or delay that might in any manner or to any extent vary the risk of such Loan Guarantor or that would otherwise operate as a discharge of any Loan Guarantor as a matter of law or equity (other than the indefeasible payment in full in cash of the Guaranteed Obligations).

SECTION 10.04 Defenses Waived . To the fullest extent permitted by applicable law, each Loan Guarantor hereby waives any defense based on or arising out of any defense of the Borrower or any Loan Guarantor or the unenforceability of all or any part of the Guaranteed Obligations from any cause, or the cessation from any cause of the liability of the Borrower, any Loan Guarantor or any other Obligated Party, other than the indefeasible payment in full in cash of the Guaranteed Obligations. Without limiting the generality of the foregoing, each Loan Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and, to the fullest extent permitted by law, any notice not provided for herein, as well as any requirement that at any time any action be taken by any Person against any Obligated Party, or any other

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Person. Each Loan Guarantor confirms that it is not a surety under any state law and shall not raise any such law as a defense to its obligations hereunder. The Administrative Agent may, at its election, foreclose on any Collateral held by it by one or more judicial or nonjudicial sales, accept an assignment of any such Collateral in lieu of foreclosure or otherwise act or fail to act with respect to any collateral securing all or a part of the Guaranteed Obligations, compromise or adjust any part of the Guaranteed Obligations, make any other accommodation with any Obligated Party or exercise any other right or remedy available to it against any Obligated Party, without affecting or impairing in any way the liability of such Loan Guarantor under this Loan Guaranty except to the extent the Guaranteed Obligations have been fully and indefeasibly paid in cash. To the fullest extent permitted by applicable law, each Loan Guarantor waives any defense arising out of any such election even though that election may operate, pursuant to applicable law, to impair or extinguish any right of reimbursement or subrogation or other right or remedy of any Loan Guarantor against any Obligated Party or any security.

SECTION 10.05 Rights of Subrogation . No Loan Guarantor will assert any right, claim or cause of action, including, without limitation, a claim of subrogation, contribution or indemnification that it has against any Obligated Party, or any collateral, until the Loan Parties and the Loan Guarantors have fully performed all their obligations to the Administrative Agent, the Issuing Banks and the Lenders.

SECTION 10.06 Reinstatement; Stay of Acceleration . If at any time any payment of any portion of the Guaranteed Obligations (including a payment effected through exercise of a right of setoff) is rescinded or must otherwise be restored or returned upon the insolvency, bankruptcy, or reorganization of the Borrower or otherwise (including pursuant to any settlement entered into by a Secured Party in its discretion), each Loan Guarantor’s obligations under this Loan Guaranty with respect to that payment shall be reinstated at such time as though the payment had not been made and whether or not the Administrative Agent, the Issuing Banks and the Lenders are in possession of this Loan Guaranty. If acceleration of the time for payment of any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of any agreement relating to the Guaranteed Obligations shall nonetheless be payable by the Loan Guarantors forthwith on demand by the Administrative Agent.

SECTION 10.07 Information . Each Loan Guarantor assumes all responsibility for being and keeping itself informed of the Borrower’s financial condition and assets, and of all other circumstances bearing upon the risk of nonpayment of the Guaranteed Obligations and the nature, scope and extent of the risks that each Loan Guarantor assumes and incurs under this Loan Guaranty, and agrees that neither the Administrative Agent nor any Issuing Bank nor any Lender shall have any duty to advise any Loan Guarantor of information known to it regarding those circumstances or risks.

SECTION 10.08 Termination . Each of the Lenders and the Issuing Bank may continue to make loans or extend credit to the Borrower based on this Loan Guaranty until five days after it receives written notice of termination from any Loan Guarantor. Notwithstanding receipt of any such notice, each Loan Guarantor will continue to be liable to the Lenders for any Guaranteed Obligations created, assumed or committed to prior to the fifth day after receipt of the notice, and all subsequent renewals, extensions, modifications and amendments with respect to, or substitutions for, all or any part of the Guaranteed Obligations. Nothing in this Section 10.08 shall be deemed to constitute a waiver of, or eliminate, limit, reduce or otherwise impair any rights or remedies the Administrative Agent or any Lender may have in

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respect of, any Default or Event of Default that shall exist under clause (o) of Article VII hereof as a result of any such notice of termination.

SECTION 10.09 Taxes . Each payment of the Guaranteed Obligations will be made by each Loan Guarantor without withholding for any Taxes, unless such withholding is required by law. If any Loan Guarantor determines, in its sole discretion exercised in good faith, that it is so required to withhold Taxes, then such Loan Guarantor may so withhold and shall timely pay the full amount of withheld Taxes to the relevant Governmental Authority in accordance with applicable law. If such Taxes are Indemnified Taxes, then the amount payable by such Loan Guarantor shall be increased as necessary so that, net of such withholding (including such withholding applicable to additional amounts payable under this Section 10.09 ), the Administrative Agent, Lender or Issuing Bank (as the case may be) receives the amount it would have received had no such withholding been made.

SECTION 10.10 Maximum Liability . Notwithstanding any other provision of this Loan Guaranty, the amount guaranteed by each Loan Guarantor hereunder shall be limited to the extent, if any, required so that its obligations hereunder shall not be subject to avoidance under Section 548 of the Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar statute or common law. In determining the limitations, if any, on the amount of any Loan Guarantor’s obligations hereunder pursuant to the preceding sentence, it is the intention of the parties hereto that any rights of subrogation, indemnification or contribution which such Loan Guarantor may have under this Loan Guaranty, any other agreement or applicable law shall be taken into account.

SECTION 10.11 Contribution .

(a) To the extent that any Loan Guarantor shall make a payment under this Loan Guaranty (a “ Guarantor Payment ”) which, taking into account all other Guarantor Payments then previously or concurrently made by any other Loan Guarantor, exceeds the amount which otherwise would have been paid by or attributable to such Loan Guarantor if each Loan Guarantor had paid the aggregate Guaranteed Obligations satisfied by such Guarantor Payment in the same proportion as such Loan Guarantor’s “Allocable Amount” (as defined below) (as determined immediately prior to such Guarantor Payment) bore to the aggregate Allocable Amounts of each of the Loan Guarantors as determined immediately prior to the making of such Guarantor Payment, then, following indefeasible payment in full in cash of the Guarantor Payment and the Guaranteed Obligations (other than Unliquidated Obligations that have not yet arisen), and all Commitments and Letters of Credit have terminated or expired or, in the case of all Letters of Credit, are fully collateralized on terms reasonably acceptable to the Administrative Agent and the Issuing Bank, and this Agreement, the Swap Agreement Obligations and the Banking Services Obligations have terminated, such Loan Guarantor shall be entitled to receive contribution and indemnification payments from, and be reimbursed by, each other Loan Guarantor for the amount of such excess, pro rata based upon their respective Allocable Amounts in effect immediately prior to such Guarantor Payment.

(b) As of any date of determination, the “Allocable Amount” of any Loan Guarantor shall be equal to the excess of the fair saleable value of the property of such Loan Guarantor over the total liabilities of such Loan Guarantor (including the maximum amount reasonably expected to become due in respect of contingent liabilities, calculated, without duplication, assuming each other Loan Guarantor that is also liable for such contingent liability pays its ratable share thereof), giving effect to all payments made by other Loan Guarantors as of such date in a manner to maximize the amount of such contributions.

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(c) This Section 10.11 is intended only to define the relative rights of the Loan Guarantors, and nothing set forth in this Section 10.11 is intended to or shall impair the obligations of the Loan Guarantors, jointly and severally, to pay any amounts as and when the same shall become due and payable in accordance with the terms of this Loan Guaranty.

(d) The parties hereto acknowledge that the rights of contribution and indemnification hereunder shall constitute assets of the Loan Guarantor or Loan Guarantors to which such contribution and indemnification is owing.

(e) The rights of the indemnifying Loan Guarantors against other Loan Guarantors under this Section 10.11 shall be exercisable upon the full and indefeasible payment of the Guaranteed Obligations in cash (other than Unliquidated Obligations that have not yet arisen) and the termination or expiry (or, in the case of all Letters of Credit, full cash collateralization), on terms reasonably acceptable to the Administrative Agent and the Issuing Bank, of the Commitments and all Letters of Credit issued hereunder and the termination of this Agreement, the Swap Agreement Obligations and the Banking Services Obligations.

SECTION 10.12 Liability Cumulative . The liability of each Loan Party as a Loan Guarantor under this Article X is in addition to and shall be cumulative with all liabilities of each Loan Party to the Administrative Agent, the Issuing Banks and the Lenders under this Agreement and the other Loan Documents to which such Loan Party is a party or in respect of any obligations or liabilities of the other Loan Parties, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary.

SECTION 10.13 Keepwell . Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Loan Party or Loan Guarantor to honor all of its obligations under this Loan Guaranty in respect of a Swap Obligation ( provided , however , that each Qualified ECP Guarantor shall only be liable under this Section 10.13 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 10.13 or otherwise under this Loan Guaranty, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). Except as otherwise provided herein, the obligations of each Qualified ECP Guarantor under this Section 10.13 shall remain in full force and effect until the termination of all Swap Obligations. Each Qualified ECP Guarantor intends that this Section 10.13 constitute, and this Section 10.13 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Loan Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

[Signature Pages Follow.]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective authorized officers as of the day and year first above written.



	BORROWER:


	ELECTRONICS FOR IMAGING, INC. , a Delaware corporation


	By:
		Name:
		Title:

S IGNATURE P AGE TO E LECTRONICS FOR I MAGING C REDIT A GREEMENT



	CITIBANK, N.A. , individually as a Lender, as Administrative Agent, Swingline Lender and an Issuing Bank


	By:
		Name:
		Title:

S IGNATURE P AGE TO E LECTRONICS FOR I MAGING C REDIT A GREEMENT



	BANK OF THE WEST , individually as a Lender


	By:
		Name:
		Title:

S IGNATURE P AGE TO E LECTRONICS FOR I MAGING C REDIT A GREEMENT



	WELLS FARGO BANK, NATIONAL ASSOCIATION , individually as a Lender


	By:
		Name:
		Title:

S IGNATURE P AGE TO E LECTRONICS FOR I MAGING C REDIT A GREEMENT



	FIRST NATION AL BANK OF PENNSYLVANIA, individually as a L ender


	By:
		Name:
		Title:

S IGNATURE P AGE TO E LECTRONICS FOR I MAGING C REDIT A GREEMENT



	PNC BANK, NATIONAL ASSOCIATION, individually as a Lender


	By:
		Name:
		Title:

S IGNATURE P AGE TO E LECTRONICS FOR I MAGING C REDIT A GREEMENT

COMMITMENT SCHEDULE



Lender	Total Commitment
Citibank, N.A.	$450,000,000
Bank of the West	$40,000,000
Wells Fargo Bank, National Association	$30,000,000
First National Bank of Pennsylvania	$17,500,000
PNC Bank, National Association	$17,500,000
Total	$150,000,000

Exhibit 21

Electronics For Imaging, Inc.

Subsidiaries List



Name of organization		Jurisdiction of Incorporation
UNITED STATES
EFI CorrSoft LLC		California
Jetrion LLC		Michigan
Optitex USA Inc.		Delaware
CRC Information Systems, Inc.		Michigan
Generation Digital Solutions Inc.		New York
Escada Systems Inc.		Delaware

FOREIGN
Electronics for Imaging Australia Pty Ltd		Australia
EFI Belgium BVBA		Belgium
Metrics Sistemas de Informação e Serviços Comércio Ltda.		Brazil
EFI (Canada), Inc.		Canada
EFI International		Cayman Islands
EFI Cretaprint		China
EFI Cretaprint (Shanghai Branch)		China
EFI Shanghai Representative Office		China
Electronics for Imaging (France) SARL		France
alphagraph team GmbH		Germany
Electronics for Imaging GmbH		Germany
Electronics for Imaging Hong Kong Limited		Hong Kong
Optitex Asia limited		Hong Kong
EFI Hungary Trading LLC		Hungary
Electronics for Imaging India Private Limited		India
Optitex India Private Limited		India
EFI Ireland Imaging Solutions Investment Company Limited		Ireland
Online Print Marketing LTD		Ireland
Electronics for Imaging Israel (2007) Ltd		Israel
EFI Print Israel Ltd.		Israel
Matan Digital Printers (2001) Ltd.		Israel
OptiTex Ltd.		Israel
Electronics for Imaging Italia S.r.l		Italy
Reggiani Macchine S.P.A.		Italy
EFI K.K.		Japan
Electronics for Imaging Japan YK		Japan
Electronics FOR Imaging Korea Co., Ltd.		Korea
Electronics for Imaging (Luxembourg) S.à r.l.		Luxembourg
Cretaprint Mexico, S. de R.L., de C.V.		Mexico
EFI Sales Mexico, S.A. de C.V.		Mexico
Electronics for Imaging B.V.		The Netherlands
Reggiani Holland B.V.		The Netherlands
EFI New Zealand Limited		New Zealand
Electronics for Imaging Spolka Z Ograniczona Odpowiedzialnoscia		Poland

Exhibit 21

Electronics For Imaging, Inc.

Subsidiaries List



Electronics for Imaging Pte Ltd		Singapore
EFI-Cretaprint Development, S.L.		Spain
EFI Cretaprint, S.L.		Spain
Electronics for Imaging Sweden AB		Sweden
Electronics for Imaging Holding GmbH		Switzerland
Reggiani Makina		Turkey
Electronics for Imaging United Golflane Limited Radius Solutions Limited		United Kingdom
Prism Group Holdings Limited		United Kingdom
Rialco Limited		United Kingdom
Escada Innovation Ltd. Escada Systems Limited		England & Wales
Escada Systems (Europe) Ltd.		England & Wales
Shuttleworth Business Systems Limited		England & Wales

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-136511, 333-147288, 333-148197, 333-149503, 333-156915, 333-160529, 333-176180, 333-190319, and 333-220559 on Form S-8 of our reports dated February 27, 2019 , relating to the consolidated financial statements and financial statement schedule of Electronics For Imaging, Inc. and subsidiaries (the “Company”) (which report expresses an unqualified opinion and includes an explanatory paragraph related to the Company’s change in method of accounting for revenue from contracts with customers in fiscal year 2018 due to the adoption of the new revenue standard) and the effectiveness of the Company’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of the Company for the year ended December 31, 2018.

/s/ DELOITTE & TOUCHE LLP

San Jose, California

February 27, 2019

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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

I, William Muir, certify that:


1.	I have reviewed this Annual Report on Form 10-K of Electronics For Imaging, Inc.;


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


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


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


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


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


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


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


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


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


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



Date:	February 27, 2019	/s/ William Muir, Jr.
		William Muir, Jr.
		Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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

I, Marc Olin, certify that:

I have reviewed this Annual Report on Form 10-K of Electronics For Imaging, Inc.;


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


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


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


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


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


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


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


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


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


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



Date:	February 27, 2019	/s/ Marc Olin
		Marc Olin
		Chief Financial Officer

Exhibit 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER & CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

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

(i) the accompanying Annual Report on Form 10-K of the Company for the year ended December 31, 2018 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

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



Date:	February 27, 2019	/s/ William Muir, Jr.
		William Muir, Jr.
		Chief Executive Officer

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



Date:	February 27, 2019	/s/ Marc Olin
		Marc Olin
		Chief Financial Officer