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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to __________
COMMISSION FILE NUMBER 0-18376
VERIFONE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 99-0206064
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
THREE LAGOON DRIVE, SUITE 400, REDWOOD CITY, CA 94065
(Address of principal executive offices)
(415) 591-6500
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares of the registrant's Common Stock outstanding on
May 6, 1997, was 23,436,640.
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FORM 10-Q
VERIFONE, INC.
INDEX
Page
Number
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 . . . . . . . . . . . 1
Condensed Consolidated Statements of Income
for the Three Months Ended March 31, 1997 and
March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . 2
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1997
and March 31, 1996. . . . . . . . . . . . . . . . . . . . . 3
Notes to Condensed Consolidated
Financial Statements. . . . . . . . . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 19
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VERIFONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
1997 1996
------ -----
(unaudited) (see note below)
Assets
Current assets:
Cash and cash equivalents $ 60,813 $ 47,395
Short-term investments 0 515
Accounts receivable, net 137,974 131,192
Net investment in sales-type leases 12,633 13,450
Inventories 62,326 59,524
Deferred income taxes 11,957 11,079
Prepaid expenses and other current assets 8,718 9,163
-------- --------
Total current assets 294,421 272,318
Net investment in sales-type leases 19,874 19,329
Property and equipment, at cost 128,604 123,486
Less accumulated depreciation
and amortization (62,582) (58,764)
-------- --------
Net property and equipment 66,022 64,722
Other assets, net 47,194 48,611
-------- --------
$427,511 $404,980
-------- --------
-------- --------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable 35,549 31,641
Accrued compensation 11,029 12,612
Other accrued liabilities 23,172 26,790
Income taxes payable 9,879 7,504
Deferred revenue 7,182 9,951
Notes payable and capital leases 65,077 38,581
-------- --------
Total current liabilities 151,888 127,079
Non-current portion of capital leases 266 517
Deferred income taxes 35,916 37,818
Stockholders' equity 239,441 239,566
-------- --------
$427,511 $404,980
-------- --------
-------- --------
Note: The balance sheet at December 31, 1996 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
See notes to condensed consolidated financial statements.
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VERIFONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands,
except per share data)
Three Months Ended
------------------
March 31, 1997 March 31, 1996
-------------- --------------
Net revenues $116,013 $102,927
Costs and expenses:
Cost of revenues 64,199 54,368
Research and development 14,332 12,573
Selling, general and administrative 27,149 27,134
------ ------
Total costs and expenses 105,680 94,075
Income from operations 10,333 8,852
Interest income (expense), net (179) 609
------ ------
Income before income taxes 10,154 9,461
Provision for income taxes 2,945 2,744
------ ------
NET INCOME $7,209 $6,717
------ ------
------ ------
NET INCOME PER SHARE $ 0.30 $ 0.26
------ ------
------ ------
Common and common equivalent shares used in
computing per share amounts 23,868 26,039
------ ------
------ ------
See notes to condensed consolidated financial statements.
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VERIFONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands, unaudited)
Increase (decrease) in cash and cash equivalents
Three Months Ended
------------------------
March 31, March 31,
1997 1996
-------- --------
Cash flows from operating activities:
Net income $7,209 $6,717
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 6,408 5,792
Deferred income taxes (331) (149)
Net increase in receivables,
inventories and prepaid expenses (8,867) 13,098
Net increase in payables, accruals
and other current liabilities (1,687) (2,839)
Other, net (605) (133)
------ ------
Net cash provided by operating activities 2,127 22,486
------ ------
Cash flows from investing activities:
Capital expenditures (5,940) (6,082)
Acquisition of other assets (6,540) (654)
Available-for-sale investments:
Purchases - (41,592)
Maturities 515 268
------ ------
Net cash used for investing activities (11,965) (48,060)
------ ------
Cash flows from financing activities:
Proceeds from notes payable and
capital leases 30,009 2,389
Payments on notes payable and
capital leases (3,764) (2,016)
Proceeds from issuance of common stock 4,329 6,743
Purchase of treasury stock (7,318) (2,443)
------ ------
Net cash provided by financing activities 23,256 4,673
------ ------
Net increase (decrease) in cash and cash
equivalents 13,418 (20,901)
Cash and cash equivalents at beginning
of period 47,395 72,882
------ ------
Cash and cash equivalents at end of period $60,813 $51,981
------ ------
------ ------
See notes to condensed consolidated financial statements.
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VERIFONE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
INTERIM FINANCIAL STATEMENTS
The interim financial information furnished is unaudited. In the opinion of
management, financial statements included in this report reflect all adjustments
(consisting only of normal recurring adjustments) which the Company considers
necessary for a fair presentation of the results of operations for the interim
periods covered. The interim results are not necessarily indicative of the
results to be expected for the entire year.
This financial information should be read in conjunction with the Company's
audited financial statements for the year ended December 31, 1996 filed with the
Company's Annual Report on Form 10-K.
INVENTORIES
Inventories, stated at the lower of cost (first-in, first-out) or market,
consist of (in thousands):
March 31, December 31,
1997 1996
--------- ----------
Raw materials $31,167 $28,992
Work in process 6,955 4,741
Finished goods 24,204 25,791
------ ------
$62,326 $59,524
------ ------
------ ------
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CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
Cash and cash equivalents consist of cash on deposit with banks and highly
liquid investments with a maturity from date of purchase of 90 days or less.
Short-term investments consist of high-quality money market instruments with
original maturities greater than 90 days. Marketable investments include
$10,445,000 and $25,690,000 of cash equivalents, and $0 and $515,000 of
short-term investments at March 31, 1997 and December 31, 1996, respectively.
Available-for-sale securities are carried at fair market value with unrealized
gains or losses, net of tax, included in the Stockholders' Equity section of the
Balance Sheet. The Company had an unrealized gain of $2,000 on its
available-for-sale securities at December 31, 1996.
OTHER ASSETS
Included in other assets is an investment in available-for-sale securities
carried at fair market value of $15,750,000 and $21,939,000 at March 31, 1997
and December 31, 1996, respectively, with unrealized gains or losses, net of
tax, included in the Stockholders' Equity section of the Balance Sheet. The
Company had unrealized gains of $11,750,000 and $17,939,000 on its
available-for-sale securities at March 31, 1997 and December 31, 1996,
respectively.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact is
expected to result in an increase in primary earnings per share for the first
quarter ended March 31, 1997 and March 31, 1996 of $0.01 and $0.01 per share,
respectively. The impact of Statement No. 128 on the calculation of fully
diluted earnings per share for these quarters is not expected to be material.
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SUBSEQUENT EVENTS
On April 22, 1997, the Company entered into a definitive agreement to be
acquired by Hewlett-Packard Company (HP). Under the terms of the agreement,
each share of Company Common Stock will be exchanged for one share of HP common
stock. In accordance with the same conversion ratio, each option to purchase
shares of Company Common Stock will be assumed by HP. Based on the number of
outstanding shares of Company Common Stock on April 21, 1997, it is anticipated
that HP will issue approximately 23.3 million shares of HP Common Stock upon the
closing of the transaction.
The transaction is intended to be a tax-free reorganization and is intended to
be accounted for as a pooling of interests. Consummation of the transaction is
subject to, among other things, approval of the stockholders of the Company.
Upon completion of the transaction, the Company will become a wholly-owned
subsidiary of HP.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All references herein to the "Company" mean VeriFone, Inc. and its consolidated
subsidiaries.
Forward-looking statements in this Management's Discussion and Analysis --
including statements regarding international markets; gross margins; research
and development expenses; selling, general and administrative expenses;
liquidity and cash needs; and the Company's plans and strategies -- are all
based on current expectations, and the Company assumes no obligation to update
this information. Numerous factors could cause actual results to differ from
those described in the forward-looking statements, including the factors set
forth below under the heading "Factors That May Affect Future Results and the
Market Price of the Company's Stock" (which are also discussed in the Company's
Annual Report on Form 10-K for 1996). The Company cautions investors that its
business is subject to significant risks and uncertainties.
Total Company net revenues during the first quarter of 1997 increased 12.7% to
$116.0 million, from $102.9 million during the first quarter of 1996.
The following table sets forth revenues from sales by geographic region and the
percentage change year-over-year for the first quarter:
Revenues
First Quarter of:
(IN MILLIONS) Percentage
1997 1996 Change
---- ---- ------
United States net revenues $73.6 $65.0 13.2%
Europe, Middle East & Africa 17.4 $14.8 17.6
Asia Pacific 14.5 11.7 23.9
Americas 10.5 11.4 (7.9)
---- ---- ------
International net revenues 42.4 37.9 11.9
---- ---- ------
Total Company net revenues $116.0 $102.9 12.7%
----- ----- ----
----- ----- ----
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UNITED STATES OPERATIONS -- The increase in revenues from sales in the United
States during the first quarter of 1997 was due primarily to increased sales in
the petroleum/convenience-store and healthcare and government markets. Revenue
growth in the petroleum/convenience-store market was due primarily to demand for
Ruby SuperSystems sold to major oil companies and OEM resellers, and sold via
distributors -- which resell products to petroleum/convenience-store dealers and
jobbers. Revenue from the healthcare and government markets was due primarily
to increased sales to various states for food stamp programs, fish and game
licensing programs, and Medicaid patient eligibility verification programs.
Revenues from the financial retail market and the multi-lane market declined in
the first quarter of 1997, compared to the first quarter of 1996, due primarily
to reduced demand in these markets.
INTERNATIONAL OPERATIONS -- The increase in revenues from sales outside the
United States during the first quarter of 1997 was due to worldwide demand for
electronic payments and the continued development of new country markets. In
the first quarter of 1997, sales outside the United States represented 36.6% of
net revenues, compared with 36.8% of net revenues in the same period of 1996.
Growth in international sales during the first quarter of 1997 occurred in the
Europe, Middle East and Africa region and the Asia Pacific region. Growth in
the Europe, Middle East and Africa region was due in significant part to sales
in the United Kingdom, Netherlands and Spain. Growth in the Asia Pacific
region was due in significant part to sales in the People's Republic of China,
Australia/New Zealand and Thailand, which offset a decline in sales in Japan.
Sales in the Americas region declined in the first quarter of 1997, compared to
the first quarter of 1996, due primarily to lower demand in Mexico and
Argentina.
The Company plans to continue to expand its global infrastructure with the aim
of increasing market share in established country markets, as well as opening
new country markets. Achievement of these plans is subject to various risks,
including local economic conditions, as discussed below under "Factors That May
Affect Future Results and the Market Price of the Company's Stock."
International growth has increased the Company's exposure to the effects of
foreign currency fluctuations. The Company engages in a foreign currency
management program that is intended to minimize the effects of these
fluctuations. This program includes the use of foreign exchange contracts to
hedge its intercompany balances. The gains and losses on these contracts were
immaterial as the majority of the Company's sales are denominated in U.S.
dollars.
PRODUCT ANALYSIS -- The following table sets forth, by product type, net
revenues and the percentage change year-over-year for the first quarter:
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Net Revenues
First Quarter of:
(IN MILLIONS) Percentage
1997 1996 Change
----- ----- ------
Terminal products $64.4 $56.6 13.8%
Peripheral products* 29.1 27.7 5.1
Chip card products 4.0 3.8 5.3
Software products** 10.8 4.8 125.0
Services 8.3 6.9 20.3
Other*** (0.6) 3.1 (119.4)
----- ----- -----
$116.0 $102.9 12.7%
----- ----- -----
----- ----- -----
* "Peripheral products" includes printers and pin pads.
** "Software products" includes revenue from professional services such
as software customization.
*** "Other" includes certain accessories and other revenue.
The increase in net revenues in the first quarter of 1997, viewed by product
type, generally reflected the overall growth in the Company's net revenues
during the quarter. Growth in software revenues exceeded growth in other
product revenues due primarily to the increase in revenues from terminal
applications and licenses of Omnihost and Internet Commerce products.
Unit shipments of terminal products and chip card products increased 5.5% with
231,000 units shipped in the first quarter of 1997, compared with 219,000 units
shipped in the first quarter of 1996.
GROSS MARGINS (net revenues less cost of revenues) -- Gross margins were 44.7%
and 47.2% in the first quarter of 1997 and 1996, respectively. The decrease in
gross margins was due in part to competitive pricing pressures in the Americas
region. The decrease was also due to other factors, including general
competitive pricing pressures and shifts in the Company's overall business and
product mix. The Company currently expects its gross margins to continue to be
affected by changes in business segment mix, product mix, competition and other
factors, as discussed below under "Factors That May Affect Future Results and
the Market Price of the Company's Stock."
R&D EXPENSES -- Research and development (R&D) expenses increased 14.0% in the
first quarter of 1997 over the same period in 1996, and represented 12.4% of net
revenues in the first quarter of 1997, compared with 12.2% of net revenues for
the same period in 1996. The Company currently expects that, in the long term,
R&D expenses will continue to increase in absolute dollars but may decline as a
percentage of net revenues.
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SG&A EXPENSES -- Selling, general and administrative (SG&A) expenses increased
0.1% in the first quarter of 1997 over the same period in 1996, and represented
23.4% of net revenues in the first quarter of 1997, compared with 26.4% of net
revenues for the same period in 1996.
The Company currently expects to make additional investments in sales and
marketing to further develop established international markets, to introduce
products to new international markets, and to develop additional vertical
markets and distribution channels on a global basis. (Achievement of these
plans is subject to various risks, as discussed below under "Factors That May
Affect Future Results and the Market Price of the Company's Stock.") The
Company also expects that, in the long term, SG&A expenses will continue to
increase in absolute dollars but may decline as a percentage of net revenues.
INTEREST INCOME (EXPENSE) AND OTHER, NET -- Net interest income (expense) and
other, net for the first quarter of 1997 was ($0.2) million compared with net
interest income of $0.6 million for the same period in 1996. The decease for
the first quarter of 1997, compared to the first quarter of 1996, was due
primarily to lower investment balances and higher debt balances as a result of
the repurchase of shares.
TAX RATE -- The Company's combined federal, state and foreign effective income
tax rate was 29.0% for both the first quarter of 1997 and 1996. The combined
tax rate differs from the federal statutory rate primarily because the Company
does not provide for U.S. federal income taxes on the undistributed earnings of
its foreign subsidiaries, which the Company intends to permanently reinvest in
those operations.
NET INCOME -- In the first quarter of 1997, net income increased 7.3% over the
same period in 1996. Earnings per share increased 15.4% to $0.30 in the first
quarter of 1997, compared with $0.26 in the first quarter of 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and short-term investments at March 31, 1997
increased to $60.8 million from $47.9 million at December 31, 1996. The
Company experienced positive cash flow from operations of $2.1 million during
the first quarter of 1997 as a result of net income and depreciation and
amortization, partially offset by increases in inventory and accounts
receivable. The Company used $12.0 million for investing in the first
quarter of 1997, which included the purchase of fixed assets for operations
and the construction of new facilities in Bangalore, India. Cash provided by
financing activities was $23.3 million during the first quarter of 1997,
primarily due to borrowings under notes payable, partially offset by the
repurchase of shares of outstanding Common Stock.
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In the first quarter of 1997, the Company's Board of Directors authorized the
repurchase of up to 200,000 shares of outstanding Common Stock, which was
completed during the quarter for an aggregate purchase price of $7.3 million.
Currently, due to the contemplated pooling of interests (see Subsequent Events
below), the Company does not anticipate repurchasing any additional shares.
At March 31, 1997, the Company's principal sources of liquidity included
$60.8 million in cash, cash equivalents, and short-term investments. The
Company had $50.0 million under an unsecured bank line of credit, all of
which was fully utilized, that expires in August 1997. In connection with
the activities of VeriFone Finance, the Company has non-recourse notes
payable to a financing company due in monthly installments, with interest
rates ranging from 7.93% to 9.32%. These notes mature at various dates
through June 1998 and are secured by all rights to certain leases, including
a security interest in equipment under certain lease agreements and future
minimum lease payments. At March 31, 1997, the Company had $0.9 million
outstanding under these notes. The Company also has $17.0 million and
$3.0 million unsecured lines of credit for foreign exchange transactions
that expire in August 1997 and January 1998, respectively. At March 31, 1997,
$11.1 million and $2.7 million were outstanding under the $17.0 million and
$3.0 million lines of credit, respectively. In addition, at March 31, 1997,
the Company had obligations under capital leases of $0.6 million.
With respect to the $50.0 and $17.0 million unsecured bank lines of credit
mentioned above, during the first quarter of 1997, the Company was not in
compliance with one of the loan covenants requiring that the Company maintain a
specified current asset ratio. The banks have waived this non-compliance on
both lines of credit and amended the loan agreements to reduce the specified
current ratio in the future.
Inventories at March 31, 1997 increased to $62.3 million, compared with
$59.5 million at December 31, 1996.
Net trade accounts receivable at March 31, 1997 increased to $138.0 million from
$131.2 million at December 31, 1996. This increase was due, in part, to
conditions in a number of markets resulting in longer payment terms. Days sales
outstanding were 107 days at March 31, 1997, compared with 95 days at
December 31, 1996.
The Company currently expects to have significant cash needs during 1997 in
connection with various events, including the development of new products and
possible acquisitions. However, the Company currently believes that the
liquidity provided by its ongoing operations, existing cash, cash equivalents,
and short-term investments, as well as the borrowing arrangements described
above (including expected renewals of and substitutes for such arrangements),
will be sufficient to meet its projected cash needs.
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SUBSEQUENT EVENTS
On April 22, 1997, the Company entered into a definitive agreement to be
acquired by Hewlett-Packard Company (HP). Under the terms of the agreement,
each share of Company Common Stock will be exchanged for one share of HP common
stock. In accordance with the same conversion ratio, each option to purchase
shares of Company Common Stock will be assumed by HP. Based on the number of
outstanding shares of Company Common Stock on April 21, 1997, it is anticipated
that HP will issue approximately 23.3 million shares of HP Common Stock upon the
closing of the transaction.
The transaction is intended to be a tax-free reorganization and is intended to
be accounted for as a pooling of interests. Consummation of the transaction is
subject to, among other things, approval of the stockholders of the Company.
Upon completion of the transaction, the Company will become a wholly-owned
subsidiary of HP.
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FACTORS THAT MAY AFFECT THE COMPANY'S FUTURE RESULTS AND THE MARKET PRICE OF THE
COMPANY'S STOCK
The Company's operations are subject to various risks and
uncertainties, many of which are beyond the Company's control. The following
highlights some of these risks.
RISKS RELATED TO THE HEWLETT-PACKARD TRANSACTION
An noted above (see "Subsequent Events"), the Company has entered
into an agreement to be acquired by Hewlett-Packard Company ("HP"). Closing
of this transaction is subject to certain conditions, including approval of
the Company's stockholders. The Company and its business may be adversely
affected by the pendency of the HP transaction as the result of, among other
circumstances (i) the delay or loss of customer orders from customers who may
view the acquisition unfavorably, (ii) increased employee turnover, (iii)
diversion of management time and focus from day-to-day activities, and (iv)
the requirement that certain business actions of the Company receive HP
consent, pursuant to the agreement with HP. In addition, failure of the
transaction to close, whether due to the failure of either party to meet a
closing condition or to the termination of the definitive agreement between
HP and the Company, would have a material adverse effect on the Company,
including on the price of the Company's Common Stock. Furthermore, pending
the closing of the HP transaction, any decrease in the price of HP's Common
Stock will likely have an adverse effect on the Company's stock price.
VARIATIONS IN QUARTERLY RESULTS
The Company's quarterly operating results are subject to various risks
and uncertainties, including risks and uncertainties related to: local economic
conditions; competitive pressures; the composition, timing and size of orders
from and shipments to major customers; variations in product mix and the mix
between leases and sales; variations in product cost; infrastructure costs;
obsolescence of inventory; and other factors as discussed below. Accordingly,
the Company's operating results may vary materially from quarter to quarter.
The Company operates with little backlog and, as a result, net
revenues in any quarter are substantially dependent on the orders booked and
shipped in that quarter. Because the Company's operating expenses are based on
anticipated revenue levels and because a high percentage of the Company's
expenses are relatively fixed, if anticipated shipments in any quarter do not
occur as expected, the Company's operating results may be adversely affected and
fall significantly short of expectations. Any other unanticipated decline in the
growth rate of the Company's net revenues, without a corresponding and timely
reduction in the growth of operating expenses, could also have an adverse effect
on the Company and its future operating results.
The Company aims to prudently control its operating expenses. However,
there is no assurance that, in the event of any revenue, gross margin or other
shortfall in a quarter, the Company will be able to control expenses
sufficiently to meet profitability objectives for the quarter.
Compounding these risks is the fact that a substantial portion of the
Company's net revenues in each quarter generally results from shipments during
the latter part of the quarter. For
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this and other reasons, the Company may not learn of shortfalls in revenues,
earnings or other financial results relative to expectations until very late in
a quarter. Any such shortfall could have an immediate and significant adverse
effect on the trading price of the Company's Common Stock.
The Company's business may be characterized as showing a pattern -- in
that, historically, net revenues during the first calendar quarter of a year
have generally been less than net revenues during the fourth quarter of the
preceding year.
CHANGES IN GROSS MARGINS
Certain of the Company's net revenues are derived from products and
markets -- such as international and government markets -- which typically have
lower gross margins compared to other products and markets, due to higher costs
and/or lower prices associated with the lower gross margin products and markets.
The Company currently expects that its net revenues from international markets
will continue to increase as a percentage of total net revenues, and its net
revenues from government markets may increase. In addition, the Company is
currently experiencing pricing pressures due to a number of factors, including
competitive conditions and consolidation within certain groups of customers. To
the extent that these factors continue, the Company's gross margins would
decline, which would adversely affect the Company and its future operating
results.
Downward pressure on the Company's gross margins may be mitigated by
other factors, such as a reduction in product costs and/or an increased
percentage of net revenues from higher gross margin products, such as software.
The Company is aiming to reduce its product costs and to increase its percentage
of net revenues from software. However, there is no assurance that these efforts
will be successful.
NEW MARKETS AND PRODUCTS
The Company is entering new markets, including the Internet commerce
market and the consumer smart card market. At present, these new markets are
relatively small and rapidly changing, and the development of these markets
depends in significant part on the widespread adoption of new technologies by
financial institutions, merchants and consumers, the emergence of industry
standards, and other factors. There is no assurance that these markets will
develop as expected by the Company. If these markets do not develop as expected
by the Company, or the Company's strategies for these markets are unsuccessful,
or the Company fails to successfully and timely develop and introduce products
suitable for these markets, the Company and its future operating results may be
adversely affected.
The Company is developing a number of products for these new markets --
including a number of Internet commerce and consumer products. There is no
assurance that these development efforts will be successful or that, if
successfully developed, these products will achieve commercial success.
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Similarly, in connection with entering these new markets, the Company
has entered into or expects to enter into relationships with a number of
companies in these markets, including Microsoft, Netscape, Oracle and others.
These relationships may not develop as expected by the Company, and thus, the
expected benefits from the relationships may not be obtained.
GROWTH DEPENDENCIES
In general, the Company's future growth is dependent on the Company's
ability to successfully and timely enhance existing products, develop and
introduce new products, establish new distribution channels, develop
affiliations with leading market participants in order to facilitate product
development and distribution, and certify its existing and new products with
service providers, telephone companies and others. The failure to achieve these
and other objectives could limit future growth and have an adverse effect on the
Company and its future operating results.
On a related note, the pressure to develop and enhance products, and
to establish and expand markets, may cause the Company's research and
development expenses and selling, general and administrative expenses to
increase substantially, which could also have an adverse effect on the Company
and its future operating results.
ACQUISITIONS
The Company may acquire or make substantial investments in other
businesses in the future. Any such acquisition or investment would entail
various risks, including: the difficulty of assimilating the operations and
personnel of the acquired business; the potential disruption of the Company's
ongoing business; and generally, the potential inability of the Company to
obtain the desired financial and strategic benefits from the acquisition or
investment. These factors could have a material adverse effect on the Company
and its future operating results. Future acquisitions and investments by the
Company could also result in substantial cash expenditures, potentially dilutive
issuances of equity securities, the incurrence of additional debt and contingent
liabilities, and amortization expenses related to goodwill and other intangible
assets, which could adversely affect the Company and its future operating
results.
INTERNATIONAL OPERATIONS
The Company's international operations, including international sales
and manufacturing, have grown substantially, and thus, the Company is
increasingly affected by the risks associated with international operations.
Such risks include: managing an organization spread over various countries;
fluctuations in currency exchange rates (as discussed further below); the burden
of complying with international laws and other regulatory and product
certification requirements, and changes in such laws and requirements; tariffs
and other trade barriers; import and export controls; international staffing and
employment issues; political and economic instability; and longer payment cycles
in certain countries. The Company's manufacturing facilities outside of the
United States, which are in Taiwan and the People's Republic of China, are
subject to particular risks
15
<PAGE>
relating to political developments and trade barriers. The inability to
effectively manage these and other risks could adversely affect the Company and
its future operating results.
The majority of the Company's international sales are denominated in
United States currency. An increase in the value of the United States dollar
relative to foreign currencies could make the Company's products sold
internationally less competitive. The Company has offices in a number of foreign
countries, the operating expenses of which are also subject to the effects of
fluctuations in foreign currency exchange rates. Although the Company engages in
hedging transactions which may partially offset the effects of fluctuations in
foreign currency exchange rates, financial exposure may nonetheless result
primarily due to the timing of transactions and movement of exchange rates.
COMPETITION
The various markets in which the Company operates are becoming
increasingly competitive as a number of other companies are developing and
selling products which compete with the Company's products in these markets.
Certain of these competitors have significantly more financial and technical
resources than the Company. The Company faces additional competitive factors in
foreign countries, including preferences for national vendors, and difficulties
in obtaining necessary certifications and in meeting the requirements of
government policies. These competitive factors may result in, among other
things, price discounts by the Company and sales lost by the Company to
competitors, which may adversely affect the Company and its future operating
results.
THIRD-PARTY DISTRIBUTORS
The Company uses various channels to market and distribute its
products, including direct sales to end-users and sales to end-users via
third-party distributors. Third-party distributors are a substantial channel
for distribution internationally and are increasingly becoming a substantial
channel for distribution in the United States. Accordingly, the Company's
ability to market and distribute its products depends in significant part on
its relationship with third-party distributors, as well as the performance and
financial condition of these distributors. In the event that the Company's
relationship with its distributors deteriorates, or the performance or financial
condition of the distributors becomes unsatisfactory, the Company and its future
operating results could be adversely affected.
SOLE SUPPLIERS
The Company is currently dependent on single suppliers for certain
product components, including mask-programmed microcontrollers, various printer
mechanisms, display devices, certain integrated circuits, and certain magnetic
parts. The failure of any such supplier to continue to provide these components
to the Company could result in significant manufacturing delays that could
adversely affect the Company and its future operating results.
16
<PAGE>
EXCESS OR OBSOLETE INVENTORY
Managing the Company's inventory of components and finished products
is a complex task. A number of factors -- including the need to maintain a
significant inventory of certain components which are in short supply or which
must be purchased in bulk to obtain favorable pricing, the general
unpredictability of demand for specific products, and customer requests for
quick delivery schedules -- may result in the Company maintaining excess
inventory. Other factors -- including changes in market demand and technology --
may cause inventory to become obsolete. Any excess or obsolete inventory could
result in price reductions and inventory write-downs, which in turn could
adversely affect the Company and its operating results.
SECURITY FEATURES OF PRODUCTS
Most of the Company's products are used to process payment
transactions, and thus, the security features of the products are important. In
general, the Company's products are designed to comply with industry practices
relating to security in payment transactions. However, no security feature,
whether or not an industry practice, is infallible. In the event of a
significant breach of the security features in the Company's products, the
Company and its future operating results could be adversely affected.
PROPRIETARY TECHNOLOGY
The Company seeks to establish and protect the proprietary aspects of
its products by relying on applicable patent, copyright, trademark and trade
secret laws and on confidentiality, licensing and other contractual
arrangements. Notwithstanding the Company's efforts to protect its proprietary
rights, it may be possible for unauthorized third parties to copy certain
portions of the Company's products or to reverse engineer or obtain and use
technology that the Company regards as proprietary. In addition, the laws of
certain countries do not protect the Company's proprietary rights to the same
extent as do the laws of the United States. Accordingly, there can be no
assurance that the Company will be able to protect its proprietary technology
against unauthorized third party copying or use, which could adversely affect
the Company's competitive position.
The Company from time to time receives notices from third parties
claiming that the Company's products infringe such parties' proprietary rights.
Regardless of its merit, any such claim can be time-consuming, result in costly
litigation and require the Company to enter into royalty and licensing
agreements. Such royalty or licensing agreements may not be offered or may not
be available on terms acceptable to the Company. If a successful claim is made
against the Company and the Company fails to develop or license a substitute
technology, the Company and its future operating results could be adversely
affected.
17
<PAGE>
HIRING AND RETENTION OF EMPLOYEES
The Company's continued growth and success depends to a significant
extent on the continued service of senior management and other key employees and
the hiring of new qualified employees. Competition for highly skilled business,
technical, marketing and other personnel is intense, particularly in the strong
economic cycle currently prevailing for high technology companies. The loss of
one or more key employees or the Company's inability to attract additional
qualified employees or retain other employees could have an adverse effect on
the Company and its future operating results. In addition, the Company may
experience increased compensation costs in order to compete for skilled
employees.
REGULATORY REQUIREMENTS
The Company's operations are subject to various laws, regulations,
governmental policies and product certification requirements worldwide. Changes
in such laws, regulations, policies or requirements could affect the demand for
the Company's products or result in the need to modify products, which may
involve substantial costs or delays in sales and could have an adverse effect on
the Company and its future operating results.
SEISMIC RISKS
The Company's manufacturing and distribution facilities, as well as a
portion of the Company's research and development, sales and administrative
functions, are located near major earthquake faults. In the event of a major
earthquake, the Company and its future operating results could be adversely
affected.
STOCK MARKET FLUCTUATIONS
In recent years, the stock market in general, and the market for
technology stocks in particular, including the Company's Common Stock, have
experienced extreme price fluctuations. The market price of the Company's Common
Stock may be significantly affected by various factors such as: quarterly
variations in the Company's operating results; changes in revenue growth rates
for the Company as a whole or for specific geographic areas, business units or
products; changes in earnings estimates by market analysts; the announcement of
new products or product enhancements by the Company or its competitors;
speculation in the press or analyst community; and general market conditions or
market conditions specific to particular industries. There can be no assurance
that the market price of the Company's Common Stock will not experience
significant fluctuations in the future.
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 10.1 - Amended and Restated Incentive Stock Option Plan
Exhibit 10.2 - Amended and Restated 1987 Supplemental Stock
Option Plan
Exhibit 10.3 - Amended and Restated 1992 Non-Employee Stock
Option Plan
Exhibit 10.4 - Amended and Restated Employee Stock Purchase Plan
Exhibit 10.5 - 1997 Restricted Phantom Stock Plan
Exhibit 11.1 - Statement of Computation of Earnings per Share
19
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VERIFONE, INC.
(Registrant)
By: /s/ Joseph M. Zaelit
--------------------------------
Joseph M. Zaelit
Senior Vice President, Finance
and Administration, and Chief
Financial Officer (Authorized
Officer and Principal
Financial Officer)
Date: May 9 , 1997
20
<PAGE>
VERIFONE, INC.
AMENDED AND RESTATED
INCENTIVE STOCK OPTION PLAN
---------------------------
Adopted by Board of Directors in November, 1985
Approved by the Stockholders in November, 1985
Amended by Board of Directors in May, 1987
Approved by the Stockholders on April 18, 1988
Amended by Board of Directors on April 30, 1990
Approved by the Stockholders on June 22, 1990
Amended by Board of Directors on February 13, 1992
Approved by the Stockholders on April 23, 1992
Amended by Board of Directors on March 15, 1995
Approved by the Stockholders on May 5, 1995
Amended by Board of Directors on January 18, 1996
Approved by the Stockholders on May 10, 1996
Amended by Board of Directors on January 23, 1997
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which selected key
employees of VeriFone, Inc. (the "Company") and its Affiliates, as defined in
subparagraph 1(b), may be given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now holding key positions, to secure and retain the services of persons
capable of filling such positions, and to provide incentives for such persons to
exert maximum efforts for the success of the Company.
(d) The Company intends that the options issued under the Plan be
incentive stock options as that term is used in Section 422 of the Code.
<PAGE>
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted options; when and how the option shall be
granted; the provisions of each option granted (which need not be identical),
including the time or times during the term of each option within which all or
portions of such option may be exercised; and the number of shares for which an
option shall be granted to each such person.
(2) To construe and interpret the Plan and options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any option agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(3) To amend the Plan or an Option as provided in paragraph 10.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"), all
of the members of which Committee may be "non-employee directors," as defined by
the provisions of subparagraph 2(d), and may also be, in the discretion of the
Board, outside directors as defined in Section 162(m) of the Code. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board and
references to the Board herein shall be construed as references to the
Committee. The Board may abolish the Committee at any time and revest in the
Board the administration of the Plan. Notwithstanding anything in this
paragraph 2 to the contrary, the Board may delegate to a committee of one or
more members of the Board the authority to grant options to eligible persons who
(i) are not then subject to Section 16 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and (ii) are either (A) not persons
expected to be subject to Section 162(m) of the code ("Section 162(m)") at the
time of recognition of income from such Option or (B) not persons with respect
to whom the Company desires to comply with Section 162(m).
<PAGE>
(d) The term "non-employee director," as used in the Plan, shall mean a
member of the Company's Board of Directors who either (i) is not a current
employee or officer of the Company or its parent or subsidiary, does not receive
compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any other capacity other
than as a member of the Board (except for an amount as to which disclosure would
not be required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship as to which disclosure would be required under Item 404(b)
of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 9 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
either the Plan or the Company's 1987 Supplemental Stock Option Plan shall not
exceed in the aggregate Eight Million Five Hundred Fifteen Thousand (8,515,000)
shares of the Company's common stock. The aggregate number of shares as to
which options may be granted under the Plan shall be reduced to reflect the
number of shares of the Company's common stock which has been sold under, or may
be sold pursuant to outstanding options granted under the Company's 1987 Amended
and Restated Supplemental Stock Option Plan to the same extent as if such sales
had been made or options had been granted pursuant to this Plan. If any option
granted under the Plan shall for any reason expire or otherwise terminate
without having been exercised in full, the stock not purchased under such option
shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
(c) An option may be granted to an eligible person under the Plan only if
the aggregate fair market value (determined at the time the option is granted)
of the stock with respect to which incentive stock options are exercisable for
the first time by such optionee during any calendar year under all incentive
stock option plans of the Company and its Affiliates does not exceed one hundred
thousand dollars ($100,000). Should it be determined that an option granted
under the Plan exceeds such maximum for any reason other than the failure of a
good faith attempt to value the stock subject to the option, such option shall
be considered a nonstatutory stock option to the extent, but only to the extent,
of such excess; provided, however, that should it be determined that an entire
option or any portion thereof does not qualify for treatment as an incentive
stock option by reason of exceeding such maximum, such option or the applicable
portion shall be considered a nonstatutory stock option.
(d) Subject to the provisions of paragraph 9 relating to adjustments upon
changes in stock, no employee shall be eligible, during any twelve (12) month
period, to be granted options under the Plan to purchase in excess of 750,000
shares of common stock of the Company. The total number of shares as to which
options may be granted to an employee under this paragraph 3(d) shall be reduced
to reflect the total number of shares as to which
<PAGE>
options have been granted, during the same twelve (12) month period, under the
Company's 1987 Amended and Restated Supplemental Stock Option Plan.
4. ELIGIBILITY.
(a) Options may be granted only to key employees (including officers)
of the Company or its Affiliates. A director of the Company shall not be
eligible for the benefits of the Plan unless such director is also a key
employee (including an officer) of the Company or any Affiliate.
(b) A director shall in no event be eligible for the benefits of the Plan
unless and until such director is expressly declared eligible to participate in
the Plan by action of the Board.
(c) No person shall be eligible for the grant of an option under the Plan
if, at the time of grant, such person owns (or is deemed to own pursuant to the
attribution rules of Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates unless the option price is at least one
hundred ten percent (110%) of the fair market value of such stock at the date of
grant and the term of the option does not exceed five (5) years from the date of
grant.
5. OPTION PROVISIONS.
Each option shall be in such form and shall contain such terms and
conditions as the Board or the Committee shall deem appropriate. The provisions
of separate options need not be identical, but each option shall include
(through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The term of any option shall not be greater than ten (10) years from
the date it was granted.
(b) The exercise price of each option shall be not less than one hundred
percent (100%) of the fair market value of the stock subject to the option on
the date the option is granted. Notwithstanding the foregoing, an option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) The purchase price of stock acquired pursuant to an option shall be
paid, to the extent permitted by applicable statutes and regulations, either (i)
in cash at the time the option is exercised, or (ii) at the discretion of the
Board or the Committee, either at the time of grant of the option (A) by
delivery to the Company of other common stock of the Company, (B) according to a
deferred payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other common stock of the Company) with
the person to whom the option is granted or to whom the option is transferred
<PAGE>
pursuant to subparagraph 5(d), or (C) in any other form of legal consideration
that may be acceptable to the Board or Committee in their discretion.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) An option shall not be transferable except by will or by the laws of
descent and distribution, and shall be exercisable during the lifetime of the
person to whom the option is granted only by such person. The person to whom an
option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the person to whom the option is granted, shall thereafter be entitled
to exercise the option.
(e) The total number of shares of stock subject to an option may, but need
not, be allotted in periodic installments (which may, but need not, be equal).
From time to time during each of such installment periods, the option may be
exercised with respect to some or all of the shares allotted to that period,
and/or with respect to some or all of the shares allotted to any prior period as
to which the option was not fully exercised. During the remainder of the term
of the option (if its term extends beyond the end of the installment periods),
the option may be exercised from time to time with respect to any shares then
remaining subject to the option. The option may be subject to such other terms
and conditions on the time or times when it may be exercised (which may be based
on performance or other criteria) as the Board may deem appropriate. The
provisions of this subparagraph 5(e) are subject to any option provisions
governing the minimum number of shares as to which an option may be exercised.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 5(d), as a condition of exercising any such
option: (1) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the option; and (2) to give
written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the option for such person's own account and not
with any present intention of selling or otherwise distributing the stock.
These requirements, and any assurances given pursuant to such requirements,
shall be inoperative if (i) the issuance of the shares upon the exercise of the
option has been registered under a then currently effective registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
or (ii), as to any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the circumstances under
the then applicable securities laws. The Company may require the holder of the
option to provide such other representations, written assurances or information
which the Company shall determine is necessary, desirable or appropriate to
<PAGE>
comply with applicable securities and other laws as a condition of granting an
option to such person or permitting such person to exercise the option. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including but
not limited to, legends restricting the transfer of the stock.
(g) An option shall terminate three (3) months after termination of the
optionee's service with the Company or an Affiliate, whether as an employee,
consultant or member of the Board ("Service"), unless (i) the termination of
Service of the optionee is due to such person's permanent and total disability,
within the meaning of Section 22(e)(3) of the Code, in which case the option
may, but need not, provide that it may be exercised at any time within one (1)
year following such termination of Service; or (ii) the optionee dies while in
the employ of the Company or an Affiliate, or within not more than three (3)
months after termination of such Service, in which case the option may, but need
not, provide that it may be exercised at any time within eighteen (18) months
following the death of the optionee by the person or persons to whom the
optionee's rights under such option pass by will or by the laws of descent and
distribution; or (iii) the option by its terms specifies either (a) that it
shall terminate sooner than three (3) months after termination of the optionee's
Service, or (b) that it may be exercised more than three (3) months after
termination of the optionee's Service with the Company or an Affiliate. This
subparagraph 5(g) shall not be construed to extend the term of any option or to
permit anyone to exercise the option after expiration of its term, nor shall it
be construed to increase the number of shares as to which any option is
exercisable from the amount exercisable on the date of termination of the
optionee's Service.
(h) The option may, but need not, include a provision whereby the optionee
may elect at any time during the term of his or her Service with the Company or
any Affiliate to exercise the option as to any part or all of the shares subject
to the option prior to the stated vesting date of the option or of any
installment or installments specified in the option. Any shares so purchased
from any unvested installment or option may be subject to a repurchase right in
favor of the Company or to any other restriction the Board or the Committee
determines to be appropriate.
(i) To the extent provided in the terms of an Option Agreement, an
optionee may satisfy any federal, state, or local tax withholding obligation
relating to the exercise of such option by any of the following means or by a
combination of such means: (i) tendering a cash payment, (ii) authorizing the
Company to withhold from the shares of common stock otherwise issuable to the
optionee as a result of the exercise of the option or (iii) delivering to the
Company owned and unencumbered shares of the common stock of the Company.
6. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
<PAGE>
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority that counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options unless and until such authority is obtained.
7. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
8. MISCELLANEOUS.
(a) The Board or the Committee shall have the power to accelerate the time
during which an option may be exercised, or the time during which an option or
any portion thereof will vest pursuant to subparagraph 5(e), notwithstanding the
provisions in the option stating the time during which it may be exercised or
the time during which it will vest.
(b) Neither an optionee nor any person to whom an option is transferred
under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(c) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the shareholders of the
Company provided for in the bylaws of the Company.
(d) Nothing in the Plan or any instrument executed or option granted
pursuant thereto shall confer upon any eligible employee, consultant or optionee
any right to continue in the employ of the Company or any Affiliate or shall
affect the right of the Company or any Affiliate to terminate the employment of
any eligible employee or optionee with or without cause, or to terminate the
relationship of any consultant subject to the terms of that consultant's
agreement with the Company or Affiliate to which such Consultant is providing
services.
9. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock
<PAGE>
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan and outstanding options will be appropriately adjusted in the
type of security and maximum number of shares subject to the Plan, the maximum
number of shares subject to option that can be granted to any single person
under subparagraph 3(d), and the type of security and number of shares and price
per share of stock subject to outstanding options. Such adjustments shall be
made by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company or
sale of all or substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation; (3) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, then, at the sole discretion of the Board and to the extent permitted
by applicable law: (i) any surviving corporation shall assume any options
outstanding under the Plan or shall substitute similar options for those
outstanding under the Plan, or (ii) the time during which such options may be
exercised shall be accelerated and the options terminated if not exercised prior
to such event, or (iii) such options shall continue in full force and effect.
10. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 9 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the vote of a
majority of the outstanding shares of the Company entitled to vote, or by the
written consent of the holders of the outstanding shares of the Company entitled
to vote to the extent necessary under applicable laws to obtain incentive stock
option treatment under Section 422 of the Code, within twelve (12) months before
or after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for options under the Plan;
(ii) Modify the requirements as to eligibility for participation in the
Plan to the extent such modification requires stockholder approval in order for
the Plan to satisfy the requirements of Section 422 of the Code; or
(iii) Otherwise modify the Plan to the extent such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code.
<PAGE>
The Board may, in its discretion, submit any other amendment to the Plan
for stockholder approval.
(b) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee incentive stock
options and/or to bring the Plan and/or options granted under it into compliance
therewith.
(c) Rights and obligations under any option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
(d) The Board at any time, and from time to time, may amend the terms of
any one or more options; provided, however, that the rights and obligations
under any option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
11. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on December 31, 2005. No options
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
12. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the vote of the holders of a majority of the outstanding shares of
the Company entitled to vote, or by the written consent of the holders of the
outstanding shares of the Company entitled to vote to the extent necessary under
applicable laws to obtain incentive stock option treatment under Section 422 of
the Code.
<PAGE>
EXHIBIT 10.2
VERIFONE, INC
AMENDED AND RESTATED
1987 SUPPLEMENTAL STOCK OPTION PLAN
Adopted by Board of Directors in May, 1987
Approved by the Stockholders on April 18, 1988
Amended by Board of Directors on April 30, 1990
Approved by the Stockholder on June 22, 1990
Amended by Board of Directors on February 13, 1992
Approved by the Stockholders on April 23, 1992
Amended by Board of Directors on March 15, 1995
Approved by the Stockholders on May 5, 1995
Amended by Board of Directors on January 18, 1996
Approved by the Stockholders on May 10, 1996
Amended by Board of Directors on January 23, 1997
1. PURPOSE
(a) The purpose of the Plan is to provide a means by which selected
employees, directors and consultants of VeriFone, Inc. (the "Company") and its
Affiliates, as defined in subparagraph 1(b), may be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue code of 1986, as amended
from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now employed by or serving as consultants or directors to the Company,
to secure and retain the services of new employees/persons capable of filling
such positions, and to provide incentives for such persons to exert maximum
efforts for the success of the Company.
(d) The Company intends that the options issued under the Plan not be
incentive stock options as that term is used in Section 422 of the Code.
<PAGE>
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted options; when and how the option shall be
granted; the provisions of each option granted (which need not be identical),
including the time or times during the term of each option within which all or
portions of such option may be exercised; and the number of shares for which an
option shall be granted to each such person.
(ii) To construe and interpret the Plan and options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any option agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(iii) To amend the Plan or an Option as provided in paragraph 10.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"), all
of the members of which Committee may "non-employee directors," as defined by
the provisions of subparagraph 2(d), and may also be, in the discretion of the
Board, outside directors as defined in Section 162(m) of the Code. If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board and
references to the Board herein shall be construed as references to the
Committee. The Board may abolish the Committee at any time and revest in the
Board the administration of the Plan. Notwithstanding anything in this
paragraph 2 to the contrary, the Board may delegate to a committee of one or
more members of the Board the authority to grant options to eligible persons who
(i) are not then subject to Section 16 under the Securities Exchange Act of
1934, as amended (the "Exchange Act") and (ii) are either (A) not persons
expected to be subject to Section 162(m) of the code ("Section 162(m)") at the
time of recognition of income from such Option or (B) not persons with respect
to whom the Company desires to comply with Section 162(m).
<PAGE>
(d) The term "non-employee director," as used in the Plan, shall mean a
member of the Company's Board of Directors who either (i) is not a current
employee or officer of the Company or its parent or subsidiary, does not receive
compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any other capacity other
than as a member of the Board (except for an amount as to which disclosure would
not be required under Item 404(a) of Regulation S-K, and is not engaged in a
business relationship as to which disclosure would be required under Item 404(b)
of Regulation S-K; or (ii) is otherwise considered a "non-employee director" for
purposes of Rule 16b-3.
3. SHARES SUBJECT TO THE PLAN
(a) Subject to the provisions of paragraph 9 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
either the Plan or the Company's Amended and Restated Incentive Stock Option
Plan shall not exceed in the aggregate Eight Million Five Hundred Fifteen
Thousand (8,515,000) shares of the Company's common stock. The aggregate number
of shares as to which options may be granted under the Plan shall be reduced to
reflect the number of shares of the Company's common stock which has been sold
under, or may be sold pursuant to outstanding options granted under the
Company's Amended and Restated Incentive Stock Option Plan to the same extent as
if such sales had been made or option had been granted pursuant to this Plan. If
any option granted under the Plan shall for any reason expire or otherwise
terminate without having been exercised in full, the stock not purchased under
such option shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
(c) Subject to the provisions of paragraph 9 relating to adjustments upon
changes in stock, no employee shall be eligible, during any twelve (12) month
period, to be granted options under the Plan to purchase in excess of 750,000
shares of common stock of the Company. The total number of shares as to which
options may be granted to an employee under this paragraph 3(c) shall be reduced
to reflect the total number of shares as to which options have been granted,
during the same twelve (12) month period, under the Company's Amended and
Restated Incentive Stock Option Plan.
4. ELIGIBILITY
(a) Options may be granted only to employees (including officers) of,
directors of or consultants to the Company or its Affiliates.
(b) A director shall in no event be eligible for the benefits of the Plan
unless and until such director is expressly declared eligible to participate in
the Plan by action of the Board.
<PAGE>
5. OPTION PROVISIONS
Each option shall be in such form and shall contain such terms and
conditions as the Board or the Committee shall deem appropriate. The provisions
of separate options need not be identical, but each option shall include
(through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The term of any option shall not be greater than ten (10) years from
the date it was granted. Notwithstanding the foregoing, an option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such option is granted pursuant to assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(b) The exercise price of each option shall be not less the fair market
value of the stock subject to the option on the date the option is granted.
(c) The purchase price of stock acquired pursuant to an option shall be
paid, to the extent permitted by applicable statutes and regulations, either (i)
in cash at the time the option is exercised, or (ii) at the discretion of the
Board or the Committee, either at the time of grant or exercise of the option
(A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the option is granted or to whom the option is
transferred pursuant to subparagraph 5(d), or (C) in any other form of legal
consideration that may be acceptable to the Board or the Committee in their
discretion.
In the case of any deferred payment arrangement, any interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) An option shall only be transferable by the optionee upon such terms
and conditions as are set forth in the option agreement for such option, as the
Board or the Committee shall determine in its discretion. The person to whom an
option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the person to whom the option is granted, shall thereafter be entitled
to exercise the option.
(e) The total number of shares of stock subject to an option may, but need
not, be allotted in periodic installments (which may, but need not, be equal).
From time to time during each of such installment periods, the option may be
exercised with respect to some or all of the shares allotted to that period,
and/or with respect to some or all of the shares allotted to any prior period as
to which the option was not fully exercised. During the remainder of the term of
the option (if its term extends beyond the end of the installment periods), the
option may be exercised from time to time with respect to any shares then
remaining subject
<PAGE>
to the option. The option may be subject to such other terms and conditions on
the time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subparagraph 5(e) are subject to any option provisions governing the minimum
number of shares as to which an option may be exercised.
(f) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 5(d), as a condition of exercising any such
option: (1) to give written assurances satisfactory to the Company as to the
optionee's knowledge and experience in financial and business matters and/or to
employ a purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters that he or she
is capable of evaluating, alone or together with the purchaser representative,
the merits and risks of exercising the option; and (2) to give written
assurances satisfactory to the Company stating that such person is acquiring the
stock subject to the option for such person's own account and not with any
present intention of selling or otherwise distributing the stock. These
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise of the option
has been registered under a then currently effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), or (ii), as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the holder of the
option to provide such other representations, written assurances or information
which the Company shall determine is necessary, desirable or appropriate to
comply with applicable securities and other laws as a condition of granting an
option to such person or permitting such person to exercise the option. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including but
not limited to, legends restricting the transfer of the stock.
(g) An option shall terminate three (3) months after termination of the
optionee's service with the Company or an Affiliate whether as an employee,
consultant or member of the Board ("Service"), unless (i) the termination of
Service of the optionee is due to such person's permanent and total disability,
within the meaning of Section 422(e)(3) of the Code, in which case the option
may, but need not, provide that it may be exercised at any time within one (1)
year following such termination of Service; or (ii) the optionee dies while in
the employ of the Company or an Affiliate, or within not more than three (3)
months after termination of such Service, in which case the option may, but need
not, provide that it may be exercised at any time within eighteen (18) months
following the death of the optionee by the person or persons to whom the
optionee's rights under such option pass by will or by the laws of descent and
distribution; or (iii) the option by its terms specifies either (a) that it
shall terminate sooner than three (3) months after termination of the optionee's
Service, or (b) that it may be exercised more than three (3) months after
termination of the optionee's Service with the Company or an Affiliate. This
subparagraph 5(g) shall not be construed to extend the term of any option or to
permit anyone to exercise the option after expiration of its term, nor
<PAGE>
shall it be construed to increase the number of shares as to which any option is
exercisable from the amount exercisable on the date of termination of the
optionee's Service.
(h) The option may, but need not, include a provision whereby the optionee
may elect at any time during the term of his or her Service with the Company or
any Affiliate to exercise the option as to any part or all of the shares subject
to the option prior to the stated vesting date of the option or of any
installment or installments specified in the option. Any shares so purchased
from any unvested installment or option may be subject to a repurchase right in
favor of the Company or to any other restriction the Board or the Committee
determines to be appropriate.
(i) To the extent provided in the terms of an Option Agreement, an
optionee may satisfy any federal, state, or local tax withholding obligation
relating to the exercise of such option by any of the following means or by a
combination of such means: (i) tendering a cash payment, (ii) authorizing the
Company to withhold from the shares of common stock otherwise issuable to the
optionee as a result of the exercise of the option or (iii) delivering to the
Company owned and unencumbered shares of the common stock of the Company.
6. COVENANTS OF THE COMPANY
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options unless and until such authority is obtained.
7. USE OF PROCEEDS FROM STOCK
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
8. MISCELLANEOUS
(a) The Board or the Committee shall have the power to accelerate the time
during which an option may be exercised or the time during which an option or
any portion thereof will vest pursuant to subparagraph 5(e), notwithstanding the
provisions in the option stating the time during which it may be exercised or
the time during which it will vest.
<PAGE>
(b) Neither an optionee nor any person to whom an option is transferred
under subparagraph 5(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
(c) Throughout the term of any option granted pursuant to the Plan, the
Company shall make available to the holder of such option, not later than one
hundred twenty (120) days after the close of each of the Company's fiscal years
during the option term, upon request, such financial and other information
regarding the Company as comprises the annual report to the shareholders of the
Company provided for in the bylaws of the Company.
(d) Nothing in the Plan or any instrument executed or option granted
pursuant thereto shall confer upon any eligible employee, consultant or optionee
any right to continue in the employ of the Company or any Affiliate or shall
affect the right of the Company or any Affiliate to terminate the employment of
any eligible person or optionee with or without cause, or to terminate the
relationship of any consultant subject to the terms of that consultant's
agreement with the Company or Affiliate to which such Consultant is providing
services.
9. ADJUSTMENTS UPON CHANGES IN STOCK
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding options will
be appropriately adjusted in the type of security and maximum number of shares
subject to the Plan the maximum number of shares subject to option that may be
granted to any single person under subparagraph 3(c), and the type of security
and number of shares and price per share of stock subject to outstanding
options. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company or
sale of all or substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation; (3) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, then, at the sole discretion of the Board and to the extent permitted
by applicable law: (i) any surviving corporation shall assume any options
outstanding under the Plan or shall substitute similar options for those
outstanding under the Plan, or (ii) the time during
<PAGE>
which such options may be exercised shall be accelerated and the option
terminated if not exercised prior to such event, or (iii) such options shall
continue in full force and effect.
10. AMENDMENT OF THE PLAN AND OPTIONS
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 9 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the vote of a
majority of the outstanding shares of the Company entitled to vote, or by the
written consent of the holders of the outstanding shares of the Company entitled
to vote to the extent necessary under applicable laws to obtain incentive stock
option treatment under Section 422 of the Code, within twelve (12) months before
or after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for options under the
Plan;
(ii) Modify the requirements as to eligibility for participation in
the Plan to the extent such modification requires stockholder approval in order
for the Plan to satisfy the requirements of Section 422 of the Code; or
(iii) Otherwise modify the Plan to the extent such modification
requires stockholder approval in order for the Plan to satisfy the requirements
of Section 422 of the Code.
(b) The Board may, in its discretion, submit any other amendment to the
Plan for stockholder approval.
(c) Rights and obligations under any option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom the option was granted.
(d) The Board at any time, and from time to time, may amend the terms of
any one or more options; provided, however, that the rights and obligations
under any option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
11. TERMINATION OR SUSPENSION OF THE PLAN
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on December 31, 2005. No options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
<PAGE>
12. EFFECTIVE DATE OF PLAN
The Plan shall become effective as determined by the Board, but no options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the vote or written consent of the holders of a majority of the
outstanding shares of the Company entitled to vote.
<PAGE>
EXHIBIT 10.3
VERIFONE, INC.
AMENDED AND RESTATED
1992 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
Adopted by the Board of Directors on November 16, 1992
Approved by the Stockholders on April 22, 1993
Amended by the Board of Directors on October 19, 1995
Approved by the Stockholders on May 10, 1996
Amended by the Board of Directors on January 23, 1997
1. PURPOSE.
(a) The purpose of the 1992 Non-Employee Directors' Stock Option Plan (the
"Plan") is to provide a means by which each director of VeriFone, Inc., a
Delaware corporation (the "Company"), who is not otherwise an employee of the
Company or of any Affiliate of the Company (each such person being hereafter
referred to as a "Non-Employee Director") will be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of
persons now serving as Non-Employee Directors of the Company, to secure and
retain the services of persons capable of serving in such capacity, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the options issued under the Plan not be
incentive stock options as that term is used in Section 422 of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board") unless and until the Board delegates administration to a
committee, as provided in subparagraph 2(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To construe and interpret the Plan and options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the
<PAGE>
exercise of this power, may correct any defect, omission or inconsistency in the
Plan or in any option agreement, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.
(2) To amend the Plan and options as provided in paragraph 11.
(3) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to options granted under
the Plan shall not exceed in the aggregate four hundred ninety thousand
(490,000) shares of the Company's Common Stock. If any option granted under the
Plan shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not purchased under such option shall revert to and
again become available for issuance pursuant to exercises of options granted
under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. ELIGIBILITY.
Options shall be granted only to Non-Employee Directors of the Company.
5. NON-DISCRETIONARY GRANTS.
(a) Each person who is, on the date of approval of the Plan by the Board
(the "Adoption Date"), a Non-Employee Director of the Company shall, upon the
Adoption Date and upon each third anniversary date thereafter (each, a "Grant
Date"), be granted an option to purchase twenty thousand (20,000) shares of
Common Stock of the Company pursuant to the terms and conditions set forth
herein.
(b) Each person who is, after the Adoption Date, elected for the first
time to be a Non-Employee Director of the Company shall, upon the date of his or
her initial election to be a Non-Employee Director by the Board or stockholders
of the Company and upon each third anniversary of such date thereafter (each, a
"Grant Date"), be granted an option to
<PAGE>
purchase twenty thousand (20,000) shares of Common Stock of the Company on the
terms and conditions set forth herein.
(c) Each person who, having previously been a Director who is not a Non-
Employee Director, becomes a Non-Employee Director of the Company shall, upon
the date he or she becomes a Non-Employee Director and upon each third
anniversary of such date thereafter (a "Grant Date"), be granted an option to
purchase twenty thousand (20,000) shares of Common Stock of the Company on the
terms and conditions set forth herein.
6. OPTION PROVISIONS.
Each option shall contain the following terms and conditions:
(a) No option shall be exercisable after the expiration of ten (10) years
from the date it was granted.
(b) The exercise price of each option shall be one hundred percent (100%)
of the fair market value on the Grant Date of the stock subject to such option.
Notwithstanding the foregoing, an option may be granted with an exercise price
lower than that set forth in the preceding sentence if such option is granted
pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(c) The purchase price of stock acquired pursuant to an option shall be
paid, to the extent permitted by applicable statutes and regulations, either
(1) in cash at the time the option is exercised, or (2) by delivery to the
Company of shares of the Company's Common Stock that have been held for the
requisite period necessary to avoid a charge to the Company's reported earnings
and valued at the fair market value on the date of exercise, or (3) by a
combination of such methods of payment.
An option shall only be transferable by the optionee upon such terms and
conditions as are set forth in the option agreement for such option, as the
Board or the Committee shall determine in its discretion. The person to whom an
option is granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the person to whom the option is granted, shall thereafter be entitled
to exercise the option.
(d) An option shall vest with respect to each optionee in thirty-six (36)
equal monthly installments commencing on the date one month after the Grant Date
of the option, provided that the optionee has, during the entire period prior to
such vesting date, continuously served as a Non-Employee Director or as an
employee of or consultant to the Company or any Affiliate of the Company,
whereupon such option shall become fully exercisable in accordance with its
terms with respect to that portion of the shares represented by that
installment.
(e) The Company may require any optionee, or any person to whom an option
is transferred under subparagraph 6(d), as a condition of exercising any such
option: (1) to give
<PAGE>
written assurances satisfactory to the Company as to the optionee's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters, and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the option; and (2) to give written assurances satisfactory
to the Company stating that such person is acquiring the stock subject to the
option for such person's own account and not with any present intention of
selling or otherwise distributing the stock. These requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise of the option has been registered under
a then-currently-effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), or (ii), as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then-applicable
securities laws.
(f) Notwithstanding anything to the contrary contained herein, an option
may not be exercised unless the shares issuable upon exercise of such option are
then registered under the Securities Act or, if such shares are not then so
registered, the Company has determined that such exercise and issuance would be
exempt from the registration requirements of the Securities Act.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the options granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the options granted under the
Plan; provided, however, that this undertaking shall not require the Company to
register under the Securities Act either the Plan, any option granted under the
Plan, or any stock issued or issuable pursuant to any such option. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such options.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to options granted under the Plan
shall constitute general funds of the Company.
9. MISCELLANEOUS.
(a) Neither an optionee nor any person to whom an option is transferred
under subparagraph 6(d) shall be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to such option unless
and until such person has satisfied all requirements for exercise of the option
pursuant to its terms.
<PAGE>
(b) Nothing in the Plan or in any instrument executed pursuant thereto
shall confer upon any Non-Employee Director any right to continue in the service
of the Company or any Affiliate or shall affect any right of the Company, its
Board or stockholders or any Affiliate to remove any Non-Employee Director as
provided in the Company's By-Laws and the provisions of the General Corporation
Law of the State of Delaware.
(c) No Non-Employee Director, individually or as a member of a group, and
no beneficiary or other person claiming under or through him, shall have any
right, title or interest in or to any option reserved for the purposes of the
Plan except as to such shares of Common Stock, if any, as shall have been
reserved for him pursuant to an option granted to him.
(d) In connection with each option made pursuant to the Plan, it shall be
a condition precedent to the Company's obligation to issue or transfer shares to
a Non-Employee Director, or an affiliate of such Non-Employee Director, or to
evidence the removal of any restrictions on transfer, that such Non-Employee
Director make arrangements satisfactory to the Company to insure that the amount
of any federal or other withholding tax required to be withheld with respect to
such sale or transfer, or such removal or lapse, is made available to the
Company for timely payment of such tax.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding options will
be appropriately adjusted in the type of security and maximum number of shares
subject to the Plan and the type of security and number of shares and price per
share of stock subject to outstanding options. Such adjustments shall be made
by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company or a
sale of all or substantially all of the assets of the Company; (2) a merger or
consolidation in which the Company is not the surviving corporation; (3) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, then, (i) the time during which such options may be exercised shall
be accelerated to immediately prior to such event and (ii) either (A) any
surviving corporation shall assume any options outstanding under the Plan or
shall substitute similar options for those
<PAGE>
outstanding under the Plan, or (B) the options shall be terminated if not
exercised prior to such event.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
Except as provided in paragraph 10 relating to adjustments upon changes in
stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for options under the
Plan; or
(2) Modify the requirements as to eligibility for participation in
the Plan.
(b) Rights and obligations under any option granted before any amendment
of the Plan shall not be impaired by such amendment of the Plan unless (i) the
Company requests the consent of the person to whom the option was granted and
(ii) such person consents in writing.
(c) The Board at any time, and from time to time, may amend the terms of
any one or more options; provided, however, that the rights and obligations
under any option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on November 15, 2002. No options
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any option granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the option was granted.
13. EFFECTIVE DATE OF PLAN; CONDITIONS OF EXERCISE.
(a) The Plan shall become effective upon adoption by the Board of
Directors, but no options granted under the Plan or any amendment thereto shall
be exercised or exercisable until the Plan or such amendment is approved by the
stockholders of the Company in accordance with applicable law.
<PAGE>
EXHIBIT 10.4
VERIFONE, INC.
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
Adopted by the Board of Directors on January 25, 1990
Approved by the Stockholders June 22, 1990
Amended by the Board of Directors on March 21, 1994
Approved by the Stockholders May 11, 1994
Amended and Restated by the Board of Directors on January 23, 1997
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which employees
of VeriFone, Inc., a Delaware corporation (the "Company"), and its Affiliates,
as defined in subparagraph 1(b), which are designated as provided in
subparagraph 2(b), may be given an opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f), respectively, of the Internal Revenue Code of 1986,
as amended (the "Code").
(c) The Company, by means of the Plan, seeks to retain the services
of its employees, to secure and retain the services of new employees, and to
provide incentives for such persons to exert maximum efforts for the success of
the Company.
(d) The Company intends that the rights to purchase stock of the
Company granted under the Plan be considered options issued under an "employee
stock purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the
"Board") of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
<PAGE>
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to rights granted
under the Plan shall not exceed in the aggregate one million four hundred eighty
thousand (1,480,000) shares of the Company's $.01 par value common stock (the
"Common Stock"). If any right granted under the Plan shall for any reason
terminate without having been exercised, the Common Stock not purchased under
such right shall again become available for the Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate. If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements
<PAGE>
or notices delivered hereunder: (1) each agreement or notice delivered by that
employee will be deemed to apply to all of his or her rights under the Plan, and
(2) a right with a lower exercise price (or an earlier-granted right, if two
rights have identical exercise prices), will be exercised to the fullest
possible extent before a right with a higher exercise price (or a later-granted
right, if two rights have identical exercise prices) will be exercised. The
provisions of separate Offerings need not be identical, but each Offering shall
include (through incorporation of the provisions of this Plan by reference in
the Offering or otherwise) the substance of the provisions contained in
paragraphs 5 through 8, inclusive.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan, unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan, unless, on the Offering Date, such employee's customary employment with
the Company or such Affiliate is at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that, each person who,
during the course of an Offering, first becomes an eligible employee of the
Company or designated Affiliate will, on a date or dates specified in the
Offering which coincides with the day on which such person becomes an eligible
employee or occurs thereafter, receive a right under that Offering, which right
shall thereafter be deemed to be a part of that Offering. Such right shall have
the same characteristics as any rights originally granted under that Offering,
as described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the Purchase Period (as defined below) for such right
shall begin on its Offering Date and end coincident with the end of such
Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Purchase Period (as defined below) for such Offering, he or she will
not receive any right under that Offering.
<PAGE>
(c) No employee shall be eligible for the grant of any rights under
the Plan if, immediately after any such rights are granted, such employee owns
stock possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any Affiliate. For purposes
of this subparagraph 5(c), the rules of Section 424(d) of the Code shall apply
in determining the stock ownership of any employee, and stock which such
employee may purchase under all outstanding rights and options shall be treated
as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if
such rights, together with any other rights granted under "employee stock
purchase plans" of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such employee's rights to purchase stock of
the Company or any Affiliate to accrue at a rate which exceeds twenty-five
thousand dollars ($25,000) of fair market value of such stock (determined at the
time such rights are granted) for each calendar year in which such rights are
outstanding at any time.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an
Offering made under the Plan, shall be granted the right to purchase the number
of shares of Common Stock of the Company purchasable with up to fifteen percent
(15%) of such employee's Earnings (as defined in Section 7(a)) during the period
which begins on the Offering Date (or such later date as the Board determines
for a particular Offering) and ends on the date stated in the Offering, which
date shall be no more than twenty-seven (27) months after the Offering Date (the
"Purchase Period"). In connection with each Offering made under this Plan, the
Board or the Committee shall specify a maximum number of shares which may be
purchased by any employee as well as a maximum aggregate number of shares which
may be purchased by all eligible employees pursuant to such Offering. In
addition, in connection with each Offering which contains more than one Exercise
Date (as defined in the Offering), the Board or the Committee may specify a
maximum aggregate number of shares which may be purchased by all eligible
employees on any given Exercise Date under the Offering. If the aggregate
purchase of shares upon exercise of rights granted under the Offering would
exceed any such maximum aggregate number, the Board or the Committee shall make
a pro rata allocation of the shares available in as nearly a uniform manner as
shall be practicable and as it shall deem to be equitable.
(b) The purchase price of stock acquired pursuant to rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the stock on the Exercise Date.
<PAGE>
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in an Offering by
delivering a participation agreement to the Company within the time specified in
the Offering, in such form as the Company provides. Each such agreement shall
authorize payroll deductions of up to fifteen percent (15%) of such employee's
Earnings during the Purchase Period. "Earnings" is defined as the total
compensation paid to an employee, including all salary, wages (including amounts
elected to be deferred by the employee, that would otherwise have been paid,
under any cash or deferred arrangement established by the Company), overtime
pay, commissions, bonuses, and other remuneration paid directly to the employee,
but excluding profit sharing, the cost of employee benefits paid for by the
Company, education or tuition reimbursements, imputed income arising under any
Company group insurance or benefit program, traveling expenses, business and
moving expense reimbursements, income received in connection with stock options,
contributions made by the Company under any employee benefit plan, and similar
items of compensation, and such other inclusions and exclusions as shall be
determined by the Board from time to time with respect to one or more Offerings.
The payroll deductions made for each participant shall be credited to an account
for such participant under the Plan and shall be deposited with the general
funds of the Company. A participant may reduce, increase or begin such payroll
deductions after the beginning of any Purchase Period only as provided for in
the Offering. A participant may make additional payments into his or her
account only if specifically provided for in the Offering and only if the
participant has not had the maximum amount withheld during the Purchase Period.
(b) At any time during a Purchase Period a participant may terminate
his or her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Purchase Period. Upon such withdrawal from the Offering by a participant, the
Company shall distribute to such participant all of his or her accumulated
payroll deductions (reduced to the extent, if any, such deductions have been
used to acquire stock for the participant) under the Offering, without interest,
and such participant's interest in that Offering shall be automatically
terminated. A participant's withdrawal from an Offering will have no effect
upon such participant's eligibility to participate in any other Offerings under
the Plan but such participant will be required to deliver a new participation
agreement in order to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating employee's employment
with the Company or an Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
<PAGE>
(d) Rights granted under the Plan shall not be transferable, and
shall be exercisable only by the person to whom such rights are granted.
8. EXERCISE.
(a) On each exercise date, as defined in the relevant Offering (an
"Exercise Date"), each participant's accumulated payroll deductions (without any
increase for interest) will be applied to the purchase of whole shares of stock
of the Company, up to the maximum number of shares permitted pursuant to the
terms of the Plan and the applicable Offering, at the purchase price specified
in the Offering. No fractional shares shall be issued upon the exercise of
rights granted under the Plan. The amount, if any, of accumulated payroll
deductions remaining in each participant's account after the purchase of shares
which is less than the amount required to purchase one share of stock on the
final Exercise Date of an Offering shall be held in each such participant's
account for the purchase of shares under the next Offering under the Plan,
unless such participant withdraws from such next Offering, as provided in
subparagraph 7(b), or is no longer eligible to be granted rights under the Plan,
as provided in paragraph 5, in which case such amount shall be distributed to
the participant after said final Exercise Date, without interest. The amount,
if any, of accumulated payroll deductions remaining in any participant's account
after the purchase of shares which is equal to the amount required to purchase
whole shares of stock on the final Exercise Date of an Offering shall be
distributed in full to the participant after such Exercise Date, without
interest.
(b) No rights granted under the Plan may be exercised to any extent
unless the Plan (including rights granted thereunder) is covered by an effective
registration statement pursuant to the Securities Act of 1933, as amended (the
"Securities Act"). If on an Exercise Date of any Offering hereunder the Plan is
not so registered, no rights granted under the Plan or any Offering shall be
exercised on said Exercise Date and all payroll deductions accumulated during
the purchase period (reduced to the extent, if any, such deductions have been
used to acquire stock) shall be distributed to the participants, without
interest.
9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the
Company shall keep available at all times the number of shares of stock required
to satisfy such rights.
(b) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the rights granted under the
Plan. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such rights unless and until such authority is obtained.
<PAGE>
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the
Plan shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any
of the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until certificates representing such shares shall have
been issued.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company
or sale of all or substantially all of the Company's assets; (2) a merger or
consolidation in which the Company is not the surviving corporation; (3) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Company entitled to vote are
exchanged, then, as determined by the Board in its sole discretion (i) any
surviving corporation may assume outstanding rights or substitute similar rights
for those under the Plan, (ii) such rights may continue in full force and
effect, or (iii) participants' accumulated payroll deductions may be used to
purchase Common Stock immediately prior to the transaction described above and
the participants' rights under the ongoing Offering terminated.
13. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
<PAGE>
(i) Increase the number of shares reserved for rights under the Plan;
(ii) Modify the provisions as to eligibility for participation
in the Plan (to the extent such modification requires stockholder approval in
order for the Plan to obtain employee stock purchase plan treatment under
Section 423 of the Code); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment
of the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate upon the issuance of all of the
shares of Common Stock reserved under the Plan. No rights may be granted under
the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom such rights were granted.
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
rights granted under the Plan shall be exercised to allow the issuance of more
than one million shares of Common Stock (as adjusted pursuant to paragraph 12)
under the Plan unless and until the Plan has been approved by the stockholders
of the Company.
<PAGE>
EXHIBIT 10.5
VERIFONE, INC.
1997 RESTRICTED PHANTOM STOCK PLAN
1. PURPOSE.
To attract and maintain key employees who are and will be providing
services to the Company, the Company desires to establish a compensatory plan
for grants of restricted phantom stock in which participants will have the
opportunity to receive cash incentive compensation based on the value of the
Company's common stock.
2. DEFINITIONS.
The following words and phrases as used herein shall have the following
meanings, unless a different meaning is plainly required by the context:
(a) "CHANGE IN CONTROL" means: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is not the surviving
corporation; (3) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise; or (4) any other capital
reorganization in which more than fifty percent (50%) of the shares of the
Company entitled to vote are exchanged.
(b) "COMPANY" means VeriFone, Inc.
(c) "COMPENSATION COMMITTEE" means the Compensation Committee of the Board
of Directors of the Company.
(d) "COMMON STOCK" means the Company's shares of common stock.
(e) "EMPLOYEE" means any person employed by the Company and its
subsidiaries.
(f) "PARTICIPANT" means an Employee who has received a Restricted Phantom
Grant.
(g) "PLAN" means this 1997 Restricted Phantom Stock Plan.
(h) "RESTRICTED PHANTOM STOCK AGREEMENT" means an agreement evidencing the
terms of a Restricted Phantom Stock Grant under the Plan.
<PAGE>
(i) "RESTRICTED PHANTOM STOCK GRANT" means a grant of Shares of Restricted
Phantom Stock under the Plan.
(j) "SHARE OF RESTRICTED PHANTOM STOCK" means a single unit of value based
on the value of a share of Common Stock.
3. ADMINISTRATION.
The Plan shall be administered by the Compensation Committee. Subject to
the provisions of the Plan, the Compensation Committee shall have exclusive
power to select the Employees to receive Restricted Phantom Stock Grants, to
determine the number of Shares of Restricted Phantom Stock subject to each
Restricted Phantom Stock Grant, the time or times of Restricted Phantom Stock
Grants, and the vesting and redemption conditions of Restricted Phantom Stock
Grants. In addition, the Compensation Committee shall have authority to
interpret the Plan, establish and revise rules and regulations relating to the
Plan and make any other determination in connection with the administration of
the Plan. All decisions and determinations by the Compensation Committee and
any action taken by it in respect of the Plan and within the powers granted to
it herein shall be conclusive and binding on all persons', including
Participants', interests.
4. ELIGIBILITY AND AWARD OF RESTRICTED PHANTOM STOCK GRANTS.
All Employees shall be eligible for Restricted Phantom Stock Grants.
Restricted Phantom Stock Grants shall be credited to a bookkeeping account to be
maintained for the Employee receiving the grant. An Employee may receive more
than one Restricted Phantom Stock Grant under the Plan.
5. VESTING OF RESTRICTED PHANTOM STOCK GRANTS.
The Compensation Committee shall determine the manner in which Shares of
Restricted Phantom Stock subject to each Restricted Phantom Stock Grant shall
become vested (i.e., become redeemable). The vesting provisions of individual
Restricted Phantom Stock Grants may vary. The Compensation Committee may
determine to accelerate the vesting date(s) for an outstanding Restricted
Phantom Stock Grant.
6. REDEMPTION OF RESTRICTED PHANTOM STOCK GRANTS.
Awards under the Plan shall be in the form of Restricted Phantom Stock
Grants, which will entitle the holder to receive from the Company, upon
redemption, the number of shares of Common Stock equal to the number of Shares
of Restricted Phantom Stock redeemed as soon as reasonably practicable following
the redemption date.
<PAGE>
7. NONASSIGNABILITY OF RESTRICTED PHANTOM STOCK GRANTS.
No Restricted Phantom Stock Grant under the Plan shall be assignable or
transferable in any manner by a Participant. During the lifetime of a
Participant, Restricted Phantom Stock Grants held by such Participant shall be
redeemed only by such Participant or his or her guardian or legal
representative. To the extent provided in a Restricted Phantom Stock Agreement,
a Participant may designate a beneficiary who may redeem the Participant's
Restricted Phantom Stock Grants following the Participant's death.
8. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the capital structure of the Company in a
transaction not involving the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, stock dividend,
dividend in property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate structure or
otherwise), shares of the Company's common stock and Shares of Restricted
Phantom Stock subject to the Plan and outstanding Restricted Phantom Stock
Grants will be appropriately adjusted in class, number and value. The issuance
of equity securities of the Company in order to raise additional financial
capital shall not be treated as a change which shall trigger the adjustments
provided for under this subsection 8(A).
(b) In the event of a Change in Control, (i) any surviving corporation
shall assume any Restricted Phantom Stock Grants outstanding under the Plan or
shall substitute similar rights for those outstanding under the Plan, or (ii)
such Restricted Phantom Stock Grants shall continue in full force and effect.
In the event any surviving corporation refuses to assume such Restricted Phantom
Stock Grants, or to substitute similar rights for those outstanding under the
Plan, then such Restricted Phantom Stock Grants shall be immediately redeemed
prior to such event.
9. MISCELLANEOUS PROVISIONS.
(a) No Employee or other person shall have any claim or right to
Restricted Phantom Stock Grants under the Plan. The Plan shall not confer upon
any Employee or Participant any right with respect to continuation of employment
by the Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment at any time.
(b) The Compensation Committee may cancel Restricted Phantom Stock Grants
with the written consent of the Participant who holds such Restricted Phantom
Stock Grants, and, upon any such cancellation, all rights of Participant in
respect of such canceled Restricted Phantom Stock Grants shall terminate and
such canceled Restricted Phantom Stock Grants shall be available for further
grant under the Plan. In addition, the Compensation Committee may modify, amend
or terminate the Plan at any time, and amend the terms of one or more Restricted
Phantom Stock Grants at any time, except that no such
<PAGE>
action shall impair any rights or obligations theretofore granted under the Plan
without the holder's written consent.
(c) The Plan shall not be funded, the Company shall not be required to
segregate any funds representing the value of Restricted Phantom Stock Grants,
and nothing in the Plan shall be construed as providing for such segregation. A
Participant's rights to amounts received upon the redemption of Restricted
Phantom Stock Grants under the Plan shall be those of an unsecured general
creditor of the Company. The liability for payment upon the redemption of a
Restricted Phantom Stock Grant is a liability of the Company alone and is not a
liability of any officer, director, shareholder, or affiliate of the Company.
(d) No Participant or successor in interest shall be deemed to be a
shareholder of the Company or have any right to receive any securities of the
Company by virtue of having received a Restricted Phantom Stock Grant prior to
the redemption of such Restricted Phantom Stock Grant.
(e) The Company may require any person awarded a Restricted Phantom Stock
Grant, or any person to whom a Restricted Phantom Stock Grant is transferred by
will or the laws of descent and distribution, as a condition to receipt of such
Restricted Phantom Stock Grant or the receipt of shares of Common Stock upon
redemption, (i) to give written assurances satisfactory to the Company as to the
person's knowledge and experience in financial and business matters; and (ii) to
give written assurances satisfactory to the Company stating that such person is
accepting the Common Stock upon redemption for such person's own account and not
with any present intention of selling or otherwise distributing the Common
Stock. These requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of shares of Common Stock
upon redemption of Restricted Phantom Stock Awards has been registered under a
then currently effective registration statement under the Securities Act of
1933, as amended (the "Securities Act"), or (ii) as to any particular
requirement, a determination is made by counsel for the Company that such
requirement need not be met in the circumstances under the then applicable
securities laws. The Company may require any person holding a Restricted Phantom
Stock Grant to provide such other representations, written assurances or
information which the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to comply
with applicable securities laws, including, but not limited to, legends
restricting the transfer of the Common Stock.
10. EFFECTIVE DATE.
The Plan shall be effective on the date approved by the Compensation
Committee.
<PAGE>
EXHIBIT 11.1
SHARES USED IN EARNINGS PER SHARE COMPUTATION
(unaudited, in thousands)
Three Months Ended
------------------
March 31, March 31,
1997 1996
-------- --------
Primary
Average shares outstanding 23,324 25,100
Net effect of dilutive stock options-
based on the treasury stock method
using average market price 544 939
------ ------
Total 23,868 26,039
------ ------
------ ------
Net Income $7,209 $6,717
----- -----
----- -----
Per share amount $0.30 $0.26
---- ----
---- ----
Fully diluted
Average shares outstanding 23,324 25,100
Net effect of dilutive stock options-
based on the treasury stock method
using the year-end market price, if
higher than average market price 545 1,115
----- -----
Total 23,869 26,215
------ ------
------ ------
Net Income $7,209 $6,717
----- -----
----- -----
Per share amount $0.30 $0.26
---- ----
---- ----
21
