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EFI Announces Completion of Stock Option Investigation and Remedial Actions6/29/2007
FOSTER CITY, Calif. --June 29, 2007 -- Electronics For Imaging, Inc. ("EFI") (Nasdaq:EFII) today announced the completion of the independent investigation by a special committee of its board of directors into its historical stock option practices, and the remedial actions it is taking in response to the findings and recommendations of the special committee.
The Investigation and its Findings
The special committee investigation focused on EFI's stock option practices from EFI's initial public offering on October 2, 1992 through 2006. During that period, EFI granted options on 867 separate dates. The investigation commenced on October 23, 2006. The special committee was assisted by independent counsel and forensic accountants. During the course of the investigation, 46 interviews of current and former directors, officers, employees, and advisors to EFI were conducted, and approximately 4.5 million pages of documents were reviewed. The special committee held more than 30 meetings over the last eight months.
Based on its investigation, the special committee concluded, among other things, that EFI lacks contemporaneous evidence supporting a substantial number of the recorded option grant dates. The affected grants include grants to (1) newly-hired employees, (2) employees joining EFI in connection with one or more acquisitions, and (3) existing employees, officers, and directors.
Prior to mid-1999, grants to new and current non-officer employees were approved by the members of the compensation committee of the board of directors. By written action dated June 30, 1999, the board created a stock option committee to approve such non-officer grants, and nominated EFI's then-current chief executive officer as its sole member. Following the resignation of the former chief executive officer, EFI's current chief executive officer, Guy Gecht, assumed this responsibility effective January 1, 2000.
Option grants to officers and directors were generally approved by the compensation committee, often by unanimous written consent, coordinated and memorialized by EFI's officers and employees.
The special committee found that grants to newly-hired employees, dated April 1994 through October 2003, were typically priced with an effective date coinciding with an historical low stock price for a given period. These pricing practices were generally described in the employee offer letters prepared by EFI. In some cases, employees received grants with an effective date prior to their start date with EFI. Further, EFI appears to have applied its then-current new hire pricing policy to options issued in connection with at least one acquisition.
The special committee found that a substantial number of the grants to existing officers, directors, and employees were priced on dates coinciding with the low EFI stock price for the month, and, in some instances, the quarter. Information collected during the investigation suggests that, prior to 2004, many such option grants were priced with the benefit of a look back at historical stock prices, with such look back ranging up to several weeks. The special committee concluded that work pertaining to, among other things, the allocation of certain options granted from 1994 through 2005 was not commenced and/or finalized until after the option grant dates recorded in EFI's books.