UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant x☒ Filed by a party other than the Registrant ¨☐
Check the appropriate box:
☐ | Preliminary Proxy Statement | |
☐ | Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | |
☒ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material Pursuant to |
VeriFone Systems, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
☒ | No fee required. | |||
☐ | Fee computed on table below per Exchange Act Rules14a-6(i)(1) and0-11. | |||
1. | Title of each class of securities to which transaction applies:
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2. | Aggregate number of securities to which transaction applies:
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3. | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule0-11 (set forth the amount on which the filing fee is calculated and state how it was determined)
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☐ | Check box if any part of the fee is offset as provided by Exchange Act Rule0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
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4. | Date Filed:
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February 11, 20169, 2017
Dear Fellow Stockholder:
You are cordially invited to attend the 20162017 Annual Meeting of Stockholders of VeriFone Systems, Inc. (“Verifone”). We will hold the meeting on Thursday, March 24, 201623, 2017 at 9:30 a.m., local time, at Verifone’s principal offices located at 88 W. Plumeria Drive, San Jose, CA 95134. We hope that you will be able to attend.
Details of the business to be conducted at the Annual Meeting are provided in the attached Notice of 20162017 Annual Meeting of Stockholders (the “Notice of Annual Meeting”) and Proxy Statement. As a stockholder, you will be asked to vote on a number of important matters. We encourage you to vote on all matters listed in the enclosed Notice of Annual Meeting. The Board of Directors recommends a vote FOR the proposals listed as proposals 1, 2, 3, 4 and 45 in the Notice of Annual Meeting.
WeBoard Oversight.As a Board of Directors, we are pleasedactively engaged in the oversight of Verifone. As directors, each of us makes a commitment to take advantagethe extensive time and rigor required to serve on the Board. During 2016, a number of the U.S. SecuritiesBoard’s discussions focused on the company’s long-term strategy and, Exchange Commission e-proxy rulesin particular, on the company’s goals to both deliver strong financial results and expand its services revenues and offerings. Towards this end, Verifone is investing significantly in next-generation devices that allow companieswill be launched into the market in the upcoming quarters that will support Verifone’s strategy of expanding its services.
Engaging with Stockholders.We continued our focus on stockholder engagement in 2016. We engaged with stockholders representing over 50% of our outstanding shares of common stock with respect to electronically deliver proxy materialsexecutive compensation issues and instituted a number of meaningful changes to theirour compensation programs in response to this stockholder feedback in order to further align our short-term and long-term compensation programs with the views of our stockholders. We are furnishing proxy materialsalso engaged with our stockholders on corporate governance matters. In December 2016, as part of our continuing efforts to reflect corporate governance “best practices,” we adopted a “proxy access” amendment to our bylaws which will enable stockholders primarily via the Internet, which providesmeeting certain requirements to include their own director nominees in our stockholders the information they need while lowering printing and mailing costs and reducing the environmental impact of our Annual Meeting. On or about February 11, 2016, we mailed to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”). The Notice contains instructions on how to access our 2016 Proxy Statement and 2015 Annual Report (the “Annual Report”) over the Internet and vote online or by phone. The Notice also includes instructions on how a stockholder can request, free of charge, a paper copy of our Annual Meeting materials by mail.proxy materials.
Whether or not you plan to attend the Annual Meeting, it is important that your shares be represented and voted at the meeting. In addition to voting in person, stockholders of record may vote via a toll-free telephone number or over the Internet. Stockholders who received a paper copy of the Proxy Statement and Annual Report by mail may also vote by completing, signing and mailing the enclosed proxy card promptly in the return envelope provided.
On behalf of our Board of Directors, thank you for your continued support of Verifone.
Sincerely, | ||
Alex W. (Pete) Hart | ||
Chairman of the Board of Directors |
YOUR VOTE IS IMPORTANT.
PLEASE PROMPTLY SUBMIT YOUR PROXY BY INTERNET, PHONE OR MAIL.
NOTICE OF 20162017 ANNUAL MEETING OF STOCKHOLDERS
Dear Stockholder:
Notice is hereby given that the 20162017 Annual Meeting of Stockholders of VeriFone Systems, Inc. (“Verifone”) will be held on Thursday, March 24, 201623, 2017 at 9:30 a.m., local time, at Verifone’s principal offices located at 88 W. Plumeria Drive, San Jose, CA 95134, to conduct the following items of business:
1. | Election of |
2. | Approval of the |
3. | An advisory vote to approve the compensation of our named executive officers; |
4. | An advisory vote on the frequency of future advisory votes to approve the compensation of our named executive officers; |
5. | Ratification of the selection of Ernst & Young LLP as Verifone’s independent registered public accounting firm for our fiscal year ending October 31, |
Such other business as may properly come before the Annual Meeting and any adjournments or postponements thereof. |
The foregoing business items are described more fully in the Proxy Statement accompanying this Notice of Annual Meeting.
All holders of record of our common stock as of 5:00 p.m. Eastern Standard Time on January 28, 2016,27, 2017, the record date, are entitled to notice of and to vote at this meeting and any adjournments or postponement thereof. A list of stockholders entitled to vote at the Annual Meeting will be available for inspection during the ten days prior to the Annual Meeting, during ordinary business hours, at Verifone’s principal offices located at 88 W. Plumeria Drive, San Jose, CA 95134, as well as at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting in person. To enter the meeting, you will need to provide proof of ownership of Verifone stock as of 5:00 p.m. Eastern Standard Time on January 28, 2016,27, 2017, as well as an acceptable form of personal photo identification. If you hold your shares in your own name, your proof of ownership is your proxy card. If you hold your shares through a broker, trustee or nominee, you must bring either a copy of the voting instruction card provided by your broker or nominee or a recent brokerage statement confirming your ownership as of 5:00 p.m. Eastern Standard Time on January 28, 2016.27, 2017. Any stockholder attending the Annual Meeting may vote in person even if he or she has returned a proxy card.
Whether or not you plan to attend the Annual Meeting, please cast your vote as instructed under “Voting Procedures” in the Proxy Statement as promptly as possible. You may vote over the Internet or by telephone as instructed on the Notice of Internet Availability of Proxy Materials or by mailing in your paper proxy card if you received one. If you did not receive a paper proxy card, you may request a paper proxy card to submit your vote by mail, if you prefer.
By Order of the Board of Directors, | ||||||
Paul Galant | Albert Liu | |||||
Chief Executive Officer | Corporate Secretary |
February 11, 20169, 2017
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MARCH 24, 2016:23, 2017: This Notice of Annual
Meeting, the Proxy Statement and the Annual Report are available on the Internet at www.proxyvote.com.
The Securities and Exchange Commission (“SEC”) has adopted a “Notice and Access” rule that allows companies to deliver a Notice of Internet Availability of Proxy Materials (“Notice of Internet Availability”) to stockholders in lieu of a paper copy of the proxy statement, related materials and the company’s annual report to stockholders.
The Notice of Internet Availability provides instructions as to how stockholders can access the proxy materials online, contains a listing of matters to be considered at the meeting, and sets forth instructions as to how shares can be voted. Shares must be voted either by telephone, online, or by completing and returning a proxy card.Shares cannot be voted by marking, writing on and/or returning the Notice of Internet Availability. Any Notices of Internet Availability that are returned will not be counted as votes. Instructions for requesting a paper copy of the proxy materials are set forth on the Notice of Internet Availability.
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2017 Proxy Statement i |
VERIFONE SYSTEMS, INC.
88 W. PLUMERIA DRIVE
SAN JOSE, CA 95134
PROXY STATEMENT
FOR
20162017 ANNUAL MEETING OF STOCKHOLDERS
General
VeriFone Systems, Inc. (“Verifone,” the “Company,” “we” or “our”) is furnishing this Proxy Statement to the holders of its common stock, par value $0.01 per share, in connection with the solicitation by its Board of Directors of proxies to be voted at its 20162017 Annual Meeting of Stockholders on Thursday, March 24, 201623, 2017 at 9:30 a.m., local time, and at any adjournments or postponements thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting. The Annual Meeting will be held at Verifone’s principal offices located at 88 W. Plumeria Drive, San Jose, CA 95134.
The Notice of Annual Meeting, Proxy Statement and form of proxy are first being provided to our stockholders on or about February 11, 2016.9, 2017.
All stockholders are cordially invited to attend the Annual Meeting in person. To attend the Annual Meeting, you will need to provide proof of ownership of Verifone stock as of 5:00 p.m. Eastern Standard Time on January 28, 2016,27, 2017, as well as an acceptable form of personal photo identification. If you are a registered stockholder,hold your shares in your own name, your proof of ownership is your proxy card. If you are not a stockholder of record but hold your shares through a broker, trustee or nominee, you must bring either a copy of the voting instruction card provided by your broker or nominee or a recent brokerage statement confirming your ownership as of 5:00 p.m. Eastern Standard Time on January 28, 2016.27, 2017.
Notice Regarding the Availability of Proxy Materials
We have adopted the “notice and access” rule of the U.S. Securities and Exchange Commission (the “SEC”). As a result, we furnish proxy materials primarily via the Internet instead of mailing a printed copy of the proxy materials. Stockholders will receive a Notice of Internet Availability of Proxy Materials (the “Notice”“Notice of Internet Availability”) by mail which provides the website and other information on how to access and review the Proxy Statement and proxy materials over the Internet. The Notice of Internet Availability will be mailed on or about February 11, 2016.9, 2017.
As of the date of the mailing of the Notice of Internet Availability, stockholders will be able to access all of the proxy materials over the Internet as instructed in the Notice.Notice of Internet Availability. The proxy materials will be available free of charge. The materials on the site are searchable, readable and printable and the site does not have “cookies” or other tracking devices which identify visitors. The Notice of Internet Availability will provide instructions on how to vote over the Internet or by phone.
If you received a Notice of Internet Availability and would like to receive a printed copy of our proxy materials, free of charge, you should follow the instructions for requesting such materials included in the Notice.Notice of Internet Availability.
Record Date; Voting Rights
Only stockholders of record as of 5:00 p.m. Eastern Standard Time on January 28, 201627, 2017 will be entitled to vote at the Annual Meeting. As of that date, there were 110,162,139111,576,880 shares of our common stock outstanding, each of which is entitled to one vote for each matter to be voted on at the Annual Meeting, held by 8977 stockholders of record. For information regarding security ownership by executive officers and directors and by beneficial owners of more than 5% of Verifone’s common stock, see “Security Ownership of Certain Beneficial Owners and Management.”
2017 Proxy Statement | 1 |
Voting Procedures
If you are a stockholder of record as of the record date, you may vote your shares over the Internet or by telephone by following the instructions set forth on the Notice or the proxy card mailed to you, or by mailing in a completed proxy card. Your shares will be voted at the Annual Meeting in the manner you direct. The Internet voting procedures are designed to authenticate each stockholder’s identity and to allow stockholders to vote their shares and confirm that their voting instructions have been properly recorded. If you vote via the Internet, you do not need to return your proxy card. Stockholders voting via the Internet should understand that there may be costs associated with voting in these manners, such as usage charges from Internet service providers that must be borne by the stockholder.
Votes submitted by mail, telephone or via the Internet must be received by 11:59 p.m., Eastern Daylight Time, on March 23, 2016.22, 2017. Submitting your vote by mail, telephone or via the Internet will not affect your right to vote in person should you decide to attend the Annual Meeting.
If your shares are registered in the name of a bank or brokerage firm, you will receive instructions from your bank or brokerage firm that must be followed in order for the record holder to vote the shares per your instructions. Banks and brokerage firms have a process for their beneficial holders to provide instructions via the Internet or over the phone, as well as instructions for requesting a hard copy of the proxy materials and proxy card.
Quorum
The holders of a majority of the outstanding shares of common stock as of 5:00 p.m. Eastern Standard Time on January 28, 2016,27, 2017, present in person or represented by proxy and entitled to vote, will constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and “brokernon-votes” are treated as present for quorum purposes.
BrokerBroker Non-Votes
Generally, brokernon-votes occur when shares held by a broker, bank, or other nominee in “street name” for a beneficial owner are not voted with respect to a particular proposal because the broker, bank, or other nominee (1) has not received voting instructions from the beneficial owner and (2) lacks discretionary voting power to vote those shares with respect to that particular proposal. “Brokernon-votes” are treated as present for purposes of determining a quorum but are not counted as withheld votes, votes against the matter in question, or as abstentions, nor are they counted in determining the number of votes present for a particular matter.
Under rules of the New York Stock Exchange (“NYSE”), which apply to us, the election of directors (Proposal 1), the approval of the Verifone Amendedamendment and Restated Bonusrestatement of the 2006 Equity Plan (Proposal 2) and, the advisory vote to approve the compensation of our fiscal 20152016 named executive officers (the “NEOs”) (Proposal 3) and the advisory vote on the frequency of future advisory votes to approve the compensation of the NEOs (Proposal 4) are matters on which a broker may not vote without your instructions. Therefore, if you do not provide instructions to the record holder of your shares with respect to these proposals, your shares will not be voted on these “non-routine”“non-routine” matters. The ratification of the appointment of our independent registered public accounting firm (Proposal 4)5) is a routine item under NYSE rules. As a result, brokers who do not receive instructions as to how to vote on that matter generally may vote on that matter in their discretion.
If your shares are held of record by a bank, broker, or other nominee, we urge you to give instructions to your bank, broker, or other nominee as to how you wish your shares to be voted so you may participate in the stockholder voting on these important matters.
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Voting Requirements
The number of votes required to approve each of the proposals that are scheduled to be presented at the meeting is as follows:
Proposal | Required Vote | |||||
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| • A vote of the majority of the votes cast (meaning the number of shares voted “for” a nominee must exceed the number of shares voted “against” such nominee) is required for the election of each director. Abstentions will have no effect on the election of directors. | |||||
• | • The affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote on the matter. Abstentions will have the same effect as a vote “Against” the matter. | |||||
• Advisory vote to approve the compensation of our NEOs. | • The affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote on the matter. Abstentions will have the same effect as a vote “Against” the matter. | |||||
• Advisory vote on the frequency of future advisory votes to approve the compensation of our NEOs. | • For the advisory vote regarding the frequency of future advisory votes to approve the compensation of our NEOs, you may vote “Every Year,” “Every Two Years,” “Every Three Years,” or “Abstain.” If you elect to abstain from voting on this proposal, the abstention will not have any effect on the advisory vote. | |||||
• Ratification of appointment of Ernst & Young LLP as Verifone’s independent registered public accounting firm. | • The affirmative vote of the majority of shares present in person or represented by proxy and entitled to vote on the matter. Abstentions will have the same effect as a vote “Against” the matter. |
Proxy Solicitation
Verifone will pay the costs of soliciting proxies. In addition to the use of mails, proxies may be solicited by personal or telephone conversation, facsimile, electronic communication, posting on Verifone’s website, http://www.verifone.com, and by the directors, officers and employees of Verifone, for which they will not receive additional compensation. Verifone also expects to retain MacKenzie Partners, Inc. to aid in the distribution and solicitation of proxies for an estimated fee of $15,000, plus its reasonable out-of-pocket expenses. Verifone may reimburse brokerage firms and other owners representing beneficial owners of shares for their reasonable expenses in forwarding solicitation materials to such beneficial owners.
Proxies and ballots will be received and tabulated by the inspector of election for the Annual Meeting. The inspector of election will treat shares of common stock represented by a properly signed and returned proxy as present at the meeting for purposes of determining a quorum, whether or not the proxy is marked as casting a vote or abstaining or withholding on any or all matters.
Revocation of Proxies
The shares represented by valid proxies received and not revoked will be voted at the Annual Meeting. If you execute and return the enclosed proxy card but do not give instructions, your shares will be voted as follows: “FOR” the election of all of our director nominees (Proposal 1), “FOR” the approval of the Verifone Amendedamendment and Restated Bonusrestatement of the 2006 Equity Plan (Proposal 2), “FOR” the advisory vote to approve the compensation of our
2017 Proxy Statement | 3 |
NEOs (Proposal 3), “EVERY YEAR” for the advisory vote on the frequency of the future advisory votes to approve the compensation of our NEOs (Proposal 4), “FOR” the ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for our fiscal year ending October 31, 20162017 (Proposal 4)5) and otherwise in accordance with the judgment of the persons voting the proxy on any other matter properly brought before the Annual Meeting and any adjournments or postponements thereof.
A proxy may be revoked at any time before it is voted by (i) delivering a written notice of revocation to our Secretary at c/o VeriFone Systems, Inc., 88 W. Plumeria Drive, San Jose, CA 95134, (ii) subsequently submitting a duly executed proxy bearing a later date than that of the previously submitted proxy (including by submission over the Internet), or (iii) attending the Annual Meeting and voting in person. Attending the Annual Meeting without voting will not revoke your previously submitted proxy.
Stockholder Proposals for the 20172018 Annual Meeting
Our stockholders may submit proposals that they believe should be voted upon at our 20172018 Annual Meeting of Stockholders.
In the event a stockholder wishes to have a proposal considered for presentation at our 20172018 Annual Meeting and included in our proxy statement and form of proxy used in connection with such meeting, the proposal must be forwarded to our Secretary so that it is received no later than October 14, 2016,12, 2017, which is the date 120 calendar days prior to the anniversary of the mailing date of the proxy statement for the 20162017 Annual Meeting. Any such proposal must comply with the requirements of Rule14a-8 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Proxy Access to Include Nominees in our 2018 Proxy Statement. Under our new proxy access bylaw, if a stockholder (or a group of up to 20 stockholders) owning at least 3% of the number of outstanding shares of common stock continuously for at least three years, and meeting the other requirements specified in our bylaws, wishes to include director nominees (up to the greater of two nominees or 20% of the Board) in our proxy statement and form of proxy used in connection with the 2018 Annual Meeting, notice must be received by our Secretary at our principal offices, no later than October 12, 2017, which is the date 120 days prior to the anniversary of the mailing date of the proxy statement for the 2017 Annual Meeting and no earlier than September 12, 2017, which is the date 150 days prior to the anniversary of the mailing date of the proxy statement for the 2017 Annual Meeting. However, in the event that the date of the 2018 Annual Meeting is advanced by more than 30 days, or delayed by more than 30 days from such anniversary date, notice by the stockholder, to be timely, must be so delivered no later than the close of business on the later of the 180th day prior to such meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Any such notice must comply with the requirements set out in our bylaws.
Nominees or Proposals not for Inclusion in our 2018 Proxy Statement.Under our bylaws, if a stockholder, rather than including a proposal in the proxy statement as discussed above, seeks to propose business for consideration at the 20172018 Annual Meeting, notice must be received by our Secretary at our principal offices, no later than December 24, 2016,23, 2017, which is the date 90 days prior to the first anniversary of the 20162017 Annual Meeting and no earlier than November 23, 2017, which is the date 120 days prior to the first anniversary of the 2017 Annual Meeting. However, in the event that the date of the 20172018 Annual Meeting is advanced by more than 30 days, or delayed by more than 60 days from such anniversary date, notice by the stockholder, to be timely, must be so delivered no later than the close of business on the later of the 90th day prior to such meeting or the 10th day following the day on which public announcement of the date of such meeting is first made.made and no earlier than 120 days prior to such annual meeting. Any such notice must comply with the requirements set out in our bylaws.
The mailing address for our Secretary is our principal offices at 88 W. Plumeria Drive, San Jose, CA 95134.
4 | 2017 Proxy Statement |
Director Independence
For a member of our Board to be considered independent under NYSE rules, our Board must determine that the director does not have a material relationship (as described below) with us and/or our consolidated subsidiaries (either directly or as a partner, stockholder, or officer of an organization that has a relationship with any of those entities).
Our Board has undertaken a review of our directors’ independence in accordance with standards that our Board and our Corporate Governance and Nominating Committee have established to assist our Board in making independence determinations. Any relationship listed under the heading “Material Relationships” below will, if present, be deemed material for the purposes of determining director independence. If a director has any relationship that is considered material, the director will not be considered independent. Any relationship listed under the heading “Immaterial Relationships” below will, if present, be considered categorically immaterial for the purpose of determining director independence. Multiple “Immaterial Relationships” will not collectively create a material relationship that would cause the director to not be considered independent. In addition, the fact that a particular relationship is not addressed under the heading “Immaterial Relationships” will not automatically cause a director to not be independent. If a particular relationship is not addressed under the standards established by our Board, our Board will review all of the facts and circumstances of the relationship to determine whether or not the relationship, in our Board’s judgment, is material.
Our Board has determined that Mr. Alspaugh, Ms. Austin, Mr. Hart, Mr. Henske, Ms. Millard, Mr. Raff, Mr. Schwartz and Ms. Thompson are independent under NYSE rules. Former director Wenda Harris Millard, whose Board service ended May 21, 2016, had been determined by our Board to be independent.
Material Relationships
Any of the following shall be considered material relationships that would prevent a director from being determined to be independent:
Auditor Affiliation. The director is a current partner or employee of our internal or external auditor; a member of the director’s immediate family (including the director’s spouse; parents; children; siblings; mothers-, fathers-, brothers-, sisters-, sons- anddaughters-in-law; and anyone who shares the director’s home, other than household employees) is a current employee of such auditor who participates in the firm’s audit, assurance, or tax compliance (but not tax planning) practice or a current partner of such auditor; or the director or an immediate family member of the director was a partner or employee of such a firm and personally worked on our audit within the last five years.
Business Transactions. The director is an employee of another entity that, during any one of the past five years, received payments from us, or made payments to us, for property or services that exceeded the greater of $1 million or 2% of the other entity’s annual consolidated gross revenues, or a member of the director’s immediate family has been an executive officer of another entity that, during any one of the past five years, received payments from us, or made payments to us, for property or services that exceeded the greater of $1 million or 2% of the other entity’s annual consolidated gross revenues.
Employment. The director was our employee at any time during the past five years or a member of the director’s immediate family was one of our executive officers in the prior five years. However, the employment of a director on an interim basis as Chairman of the Board, Chief Executive Officer or other executive officer of Verifone shall not disqualify a director from being considered independent following that employment.
Interlocking Directorships. During the past five years, the director or an immediate family member of the director was employed as an executive officer by another entity where one of our current executive officers served at the same time on the compensation committee (or similar committee) of that company.
Other Compensation. A director or an immediate family member of a director received more than $100,000 per year in direct compensation from us, other than director and committee fees, in the past five years.
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Investment Banking or Consulting Services. A director is a partner or officer of an investment bank or consulting firm that performs substantial services to us on a regular basis.
Immaterial Relationships
The following relationships shall be deemed immaterial and will not be considered for purposes of determining director independence:
Affiliate of Stockholder. A relationship arising solely from a director’s status as an executive officer, principal, equity owner, or employee of an entity that is one of our stockholders.
Certain Business Transactions. A relationship arising solely from a director’s status as an executive officer, employee or equity owner of an entity that has made payments to or received payments from Verifone for property or services shall not be deemed a material relationship or transaction that would cause a director not to be independent so long as the payments made or received during any one of such other entity’s last five fiscal years are not in excess of the greater of $1 million or 2% of such other entity’s annual consolidated gross revenues.
Director Fees.The receipt by a director from us of fees for service as a member of our Board and committees of our Board.
Other Relationships. Any relationship or transaction that is not covered by any of the standards listed above in which the amount involved does not exceed $25,000 in any fiscal year shall not be deemed a material relationship or transaction that would cause a director not to be independent.
Notwithstanding the foregoing, no relationship shall be deemed categorically immaterial as described above to the extent that it is required to be disclosed in SEC filings under Item 404 of the SEC’s RegulationS-K.
Corporate Governance Guidelines
Our Board has adopted Corporate Governance Guidelines that provide the framework within which our Board directs our corporate governance. Our Corporate Governance and Nominating Committee reviews these guidelines annually and recommends changes to our Board for approval as appropriate. Our Corporate Governance Guidelines are available on the Investor Relations section of our website,http://ir.verifone.com, and are available in print to any stockholder who requests it.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics, which is available on the Investor Relations section of our website,http://ir.verifone.com, and is available in print to any stockholder who requests it. The Code of Business Conduct and Ethics applies to all of our employees, officers and directors.directors, unless prohibited by law or union agreement. We will post any amendments to or waivers from a provision of our Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions and that relates to any element of the “code of ethics” definition set forth in Item 406(b) of the SEC’s RegulationS-K athttp://ir.verifone.com.
Director Attendance at Meetings
Although our Board recognizes that scheduling conflicts may occasionally prevent a director from attending a Board or stockholder meeting, our Board expects each director to make every reasonable effort to keep such absences to a minimum. During fiscal 2015,2016, each of our directors attended not less than 75% of the total number
of meetings of our Board and the committees of our Board on which such director served. At the 20152016 Annual Meeting of Stockholders, all of our directors then in office were in attendance. In fiscal 2015,2016, our Board held a total of sevenfive meetings.
Executive Sessions
Non-employee directors meet in executive session without any management directors or employees present at each regularly scheduled Board meeting. The presiding director at these meetings is Mr. Hart, the Chairman of the Board.
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Communications with Directors
Any interested party may direct communications to individual directors, including the Chairman of the Board, a board committee, the independent directors as a group or our Board as a whole, by addressing the communication to the named individual, to the committee, the independent directors as a group or our Board as a whole c/o Secretary, VeriFone Systems, Inc., 88 W. Plumeria Drive, San Jose, CA 95134. Our Secretary or an Assistant Secretary will review all communications so addressed and will relay to the addressee(s) all communications determined to relate to our business, management or governance.
Committees of our Board of Directors
Our Board has an Audit Committee, a Compensation and Leadership Development Committee and a Corporate Governance and Nominating Committee.
Audit Committee
Our Board has a separately-designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. Our Board has adopted an Audit Committee charter, which is available on the Investor Relations section of our website athttp://ir.verifone.com,and is available in print to any stockholder who requests it, and defines our Audit Committee’s duties and responsibilities to include:
Appointment, compensation, retention and oversight of the work of our independent registered public accounting firm;
Pre-approving all audit andnon-audit services provided by our independent registered public accounting firm;
Reviewing the appointment, replacement, reassignment or dismissal of the Chief Audit Executive, who is vested with oversight of and responsibility for our global internal audit activities;
Discussing with our independent registered public accounting firm the overall scope and plans for their audits and regularly reviewing with our independent registered public accounting firm, and discussing with management, and if appropriate, the Chief Audit Executive, any difficulties encountered during the course of the audit work;
Discussing at least annually with the Chief Audit Executive the overall scope and plans for internal audits and any difficulties encountered in the course of internal audits;
Reviewing and discussing the financial statements, including with management and our independent registered public accounting firm;
Reviewing and discussing with management, the internal auditors and our independent registered public accounting firm the assessment of the effectiveness of internal control over financial reporting;
Discussing with appropriate counsel any significant legal, compliance or regulatory matters that may have a material effect on the financial statements or our business;
Reviewing and approving related party transactions;
Reviewing our internal accounting procedures, systems of internal controls, financial statements, our code of conduct and compliance systems with respect to legal and regulatory requirements;
Reviewing the work performed by our internal auditors, including the results and scope of their audits;
Reviewing and approving the services provided by and compensation for our independent registered public accounting firm, including the results and scope of its audits; and
ReviewingDiscussing our policies with respect to risk assessment and approving all related party transactions.risk management.
Our Audit Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of our Audit Committee. Our Audit Committee may, in its discretion, delegate to one or more of its members the authority topre-approve any audit ornon-audit services to be performed by the independent auditors,registered public accounting firm, provided that anypre-approvals made under delegated authority are presented to our Audit Committee at its next scheduled meeting.
In fiscal 2015,2016, our Audit Committee met eight times, and met in executive session without management present at each such meeting. Our Board and our Corporate Governance and Nominating Committee have determined that each member of our Audit Committee is “independent” within the meaning of the rules of both the NYSE and the SEC.
The report of our Audit Committee is included in this Proxy Statement under “Report of the Audit Committee.”
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Compensation and Leadership Development Committee
Our Board has adopted a Compensation and Leadership Development Committee charter, which is available on the Investor Relations section of our website athttp://ir.verifone.com, and is available in print to any stockholder who requests it, which defines our Compensation and Leadership Development Committee’s purposes and responsibilities to include:
Reviewing and approving corporate goals and objectives relevant to the compensation of our CEO, evaluating our CEO’s performance in light of those goals and objectives and, either as a committee or together with the other independent directors (as directed by our Board), determining and approving our CEO’s compensation level based on this evaluation;
Determining and approvingnon-CEO executive officer compensation, making recommendations to our Board with respect to incentive compensation plans and equity-based plans, including the VeriFone Bonus Plan and the 2006 Equity Incentive Plan, administering these plans, and discharging any responsibilities imposed on our Compensation and Leadership Development Committee by any of these plans;
Approving any new equity-based plan or any material change to an existing plan;plan where stockholder approval has not been obtained;
Overseeing, in consultation with management, regulatory compliance with respect to compensation matters, including overseeing our policies on structuring compensation programs to preserve tax deductibility, and, as and when required, establishing performance goals and certifying that performance goals have been attained for purposes of Section 162(m) of the U.S. Internal Revenue Code (the “IRC”);
Reviewing and approving any severance or similar arrangements proposed to be made to the CEO and any of thenon-CEO executive officers; andofficers, including arrangements for compensation following a change in control of the Company;
Preparing an annual Report of our Compensation and Leadership Development Committee for inclusion in our annual proxy statement.statement;
Annually assessing the risks associated with our compensation programs, policies and practices applicable to employees to determine whether the risks arising from such programs, policies and practices are appropriate or reasonably likely to have a material adverse effect on the Company; and
Overseeing the development and review of succession plans for the CEO’s direct reports and other key executive positions identified by management, periodically reviewing such plans with our Board and overseeing the development of executive leadership of the Company.
Our Compensation and Leadership Development Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to such standing orad hoc subcommittees as it may determine to be necessary or appropriate for the discharge of its responsibilities, as long as the subcommittee contains at least the minimum number of directors necessary to meet any regulatory requirements.
In fiscal 2015,2016, our Compensation and Leadership Development Committee met fivefour times, and met in executive session without management present at each such meeting.
Our Board and our Corporate Governance and Nominating Committee have determined that each member of our Compensation and Leadership Development Committee is ��independent”“independent” within the meaning of the rules of both the NYSE and the SEC.
The annual report of our Compensation and Leadership Development Committee is included in this Proxy Statement under “Report of the Compensation and Leadership Development Committee.”
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Corporate Governance and Nominating Committee
Our Board has adopted a Corporate Governance and Nominating Committee charter, which is available on the Investor Relations section of our website athttp://ir.verifone.comand is available in print to any stockholder who requests it. Our Corporate Governance and Nominating Committee charter defines our Corporate Governance and Nominating Committee’s purposes and responsibilities to include:
Making recommendations to our Board from time to time as to changes that our Corporate Governance and Nominating Committee believes to be desirable as to the size of our Board or any committee thereof;
Identifying individuals believed to be qualified to become Board members, consistent with criteria approved by our Board, and selecting, or recommending to our Board, the nominees to stand for election as directors at the annual meeting of stockholders or, if applicable, at a special meeting of stockholders;
Developing and recommending to our Board standards to be applied in making determinations as to the absence of material relationships between Verifone and a director;
Identifying Board members qualified to fill vacancies on any committee of our Board (including our Corporate Governance and Nominating Committee) and recommending that our Board appoint the identified member or members to the respective committee;
Establishing procedures for our Corporate Governance and Nominating Committee to exercise oversight of the evaluation of our Board;
Reviewing periodically and making recommendations to our Board and management;with respect tonon-employee director compensation;
Developing and recommending to our Board a set of corporate governance principles applicable to Verifone and reviewing those principles at least once a year; and
Assisting management in the preparation of the disclosure in our annual proxy statement regarding the operations of our Corporate Governance and Nominating Committee.Committee;
Recommending ways to enhance communications and relations with our stockholders; and
Reviewing proposals by our stockholders and proposed responses.
Our Corporate Governance and Nominating Committee has not established specific minimum education, experience, or skill requirements for potential members, but, in general, expects that qualified candidates will have high-level managerial experience in a complex and global organization, and will be able to represent the interests of the stockholders as a whole and not just certain special interest groups or constituencies. Our Corporate Governance and Nominating Committee considers each candidate’s judgment, skill, diversity and professional experience with businesses and other organizations of comparable size in the context of the needs of our Board, the interplay of the candidate’s experience with the experience of other Board members, and the extent to which the candidate would be a desirable addition to our Board and any committees of our Board. At this stage of our development, relevant experiences include, among other things, large-company CEO experience, senior management experience in the payments industry, senior-level experience at multi-national companies with oversight over international operations and financial and accounting expertise and executive-level experience relevant to our key strategic initiatives, such as expertise in the payments industry, information technology and enterprise system security, mobile payments,e-commerce, commerce enablement software and media.services. In addition, each candidate is expected to contribute positively to the existing chemistry and collaborative culture among Board members and must have the time and ability to make a constructive contribution to our Board. Our Corporate Governance and Nominating Committee also values work ethic, leadership, problem-solving skills and diversity in selecting nominees to serve on our Board, and is committed to actively seeking out highly qualified individuals to contribute to the diversity of the pool from which Board nominees are chosen. Although our Corporate Governance and Nominating Committee does not have a formal policy on diversity, our Corporate Governance and Nominating Committee broadly construes diversity to mean a variety of opinions, perspectives, expertise, personal and professional experiences and backgrounds (including gender, race and ethnicity), as well as other differentiating characteristics. Our Board and each of the committees of our Board engage in an annual self-evaluation that includes an evaluation of diversity of our Board, and our Corporate Governance and Nominating Committee discusses the value of diversity during its annual review of Board composition.
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Our Corporate Governance and Nominating Committee has generally identified nominees based upon suggestions by directors, management, outside consultants, including third-party search firms, and stockholders. Before considering any nominee, our Corporate Governance and Nominating Committee makes a preliminary determination as to the need for additional members of our Board. If a need is identified, members of our Corporate Governance and Nominating Committee discuss and evaluate possible candidates in detail and suggest individuals to explore in more depth. Once a candidate is identified for further consideration, members of our Corporate Governance and Nominating Committee, as well as other members of our Board and management as appropriate, interview the nominee. After completing this evaluation, our Corporate Governance and Nominating Committee makes a recommendation and refers the nominee to the full Board for consideration. Our Corporate Governance and Nominating Committee will consider candidates recommended by stockholders in the same manner as other candidates. Stockholders may nominate candidates for director in accordance with the advance notice and other procedures contained in our bylaws.
Our Corporate Governance and Nominating Committee may, in its discretion, delegate all or a portion of its duties and responsibilities to a subcommittee of our Corporate Governance and Nominating Committee.
In fiscal 2015,2016, our Corporate Governance and Nominating Committee met fourfive times, and met in executive session without management present at each such meeting.
Our Board and our Corporate Governance and Nominating Committee have determined that each member of our Corporate Governance and Nominating Committee is “independent” within the meaning of the rules of both the NYSE and the SEC.
The annual report of our Corporate Governance and Nominating Committee is included in this Proxy Statement under “Report of the Corporate Governance and Nominating Committee.”
Director Stock Ownership Guidelines
In December 2015, our Board adopted revised stock ownership guidelines for ournon-employee directors to increase their required level of common stock ownership. These revised stock ownership guidelines require eachnon-employee director to own a minimum number of shares of our common stock equal tovalued at four times the director’s annual cash retainer. Anynon-employee director who fails to meet or maintain these ownership requirements by the required time frame will be required to retain all shares of our common stock acquired upon the exercise of stock options or vesting of restricted stock or restricted stock unit (“RSU”) awards, net of shares withheld for taxes and payment of the exercise price, if any, until such ownership guidelines are satisfied. Under these guidelines, unvested restricted stock awards and RSU awards and owned shares of our common stock count toward the ownership level, and non-employee directors have a five year period over which to achieve their target ownership level.
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Board Leadership Structure
Under our current Corporate Governance Guidelines, our Board is free to select its Chairman and our CEO in the manner it considers to be in our best interests at any given point in time. Since 2008 the positions of Chairman of the Board and CEO have been held by separate persons. Our Board believes that this structure is appropriate for us because it allows our CEO to focus his time and energy on leading our key business and strategic initiatives while our Board focuses on oversight of management, overall enterprise risk management and corporate governance. Our Board and its committees meet throughout the year on a set schedule, usually at least once a quarter, and also hold special meetings from time to time. Agendas and topics for Board and committee meetings are developed through discussions between management and members of our Board and its committees. Information and data that are important to the issues to be considered are distributed in advance of each meeting. Board meetings and background materials focus on key strategic, operational, financial, enterprise risk, governance and compliance matters applicable to us, including the following:
Reviewing quarterly our business, operations and performance;
Reviewing progress of strategic initiatives and longer-term strategic and business plans;
Reviewing key product, market, industry and competitive issues;
Reviewing and approving material investments or acquisitions, strategic transactions and other significant transactions that are not in the ordinary course of business;
Overseeing our compliance with legal and regulatory requirements;
Reviewing our financial results;
Overseeing overall insurance structure and policies, including director and officer insurance levels;
Overseeing our enterprise risk management strategy and evaluating our risk exposure and ways to mitigate that risk;
Reviewing our management succession plan for the CEO and other executive officers;
Evaluating the performance of our Board and reviewing and determining the qualifications of directors and mix of expertise and other attributes of directors, including the financial expertise of members of our Audit Committee;
Reviewing and determining the independence of our directors, the appointment of the Chairman of the Board and the selection of Board committee members;
Selecting and approving director nominees; and
Reviewing and approving director compensation, executive compensation and overall compensation plans.
Board’s Role in Risk Oversight
Our Board executes its risk management responsibility directly and through its committees. As set forth in its charter and annual work plan, our Audit Committee has primary responsibility for overseeing our enterprise risk management process. Our Audit Committee receives updates and discusses individual and overall risk areas during its meetings, including financial risk assessments, operations risk management policies, major financial risk exposures, exposures related to compliance with legal and regulatory requirements, and management’s actions to monitor and control such exposures. Our Vice President of Internal Audit reviews with our Audit Committee our annual operational risk assessment results and at least once each quarter the results of internal audits, including the adequacy of internal controls over financial reporting. Our Vice President of Internal Audit and Chief Information Officer report regularly to our Audit Committee on information systems controls, information security and
security. cybersecurity. Throughout each fiscal year, our Audit Committee invites appropriate members of management to its meetings to provide enterprise-level reports relevant to our Audit Committee’s oversight role, including adequacy and effectiveness of management reporting and controls systems used to monitor adherence to policies and approved guidelines, information systems and security over systems and data, treasury, insurance structure and coverage, tax structure and planning, worldwide disaster recovery planning and the overall effectiveness of our operations risk management policies. Our Audit Committee is generally scheduled to meet at least twice a
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quarter, and generally covers one or more areas relevant to its risk oversight role in at least one of these meetings. At least once a quarter our Audit Committee meets with our independent registered public accounting firm separately in executive session. At each meeting, our Audit Committee also reviews with Mr. Liu, who serves as our General Counsel and Chief Compliance Officer any significant compliance matters, including matters raised through internal audit reviews and our alert line.
Our Compensation and Leadership Development Committee monitors the risks associated with our compensation programs, policies and practices with respect to executive compensation and executive recruitment and retention, as well as compensation generally. In establishing and reviewing our executive compensation program, our Compensation and Leadership Development Committee consults with its independent compensation consultant and seeks to structure the program so as to not encourage unnecessary or excessive risk taking. Our executive compensation program utilizes a mix of base salary and short-term and long-term incentive awards designed to align our executives’executive officers’ compensation with our success, particularly with respect to financial performance and increasing stockholder value. Our Compensation and Leadership Development Committee sets the amount of our executives’executive officers’ base salaries at the beginning of each fiscal year. A substantial portion of our executives’executive officers’ annual bonus amounts isopportunities are tied to overall corporate performance and increasing stockholder value. Compensation provided toThe target total direct compensation opportunities of our executivesexecutive officers also includesinclude a substantial portion in the form of long-term equity awards that help align executives’their interests with those of our stockholders over the longer term. In general, cash bonus opportunities may be reduced at the discretion of our discretionCompensation and Leadership Development Committee based on individual performance. Our Compensation and Leadership Development Committee believes that our annual cashbonus opportunities and long-term equity awards provide an effective and appropriate mix of incentives to help ensure our performance is focused on long-term stockholder value creation and do not encourage short-term risk taking at the expense of long-term results. Our Compensation and Leadership Development Committee has concluded that our executive compensation program does not encourage unnecessary or excessive risk. Our Compensation and Leadership Development Committee has also reviewed our compensation programs for employees generally and has concluded these programs do not create risks that are reasonably likely to have a material adverse effect on Verifone.
Our Corporate Governance and Nominating Committee oversees risks related to our overall corporate governance, including development of corporate governance principles applicable to us, evaluation of federal securities laws and regulations with respect to our insider trading policy, development of standards to be applied in making determinations as to the absence of material relationships between us and a director and formal periodic evaluations of our Board and management. Our Corporate Governance and Nominating Committee seeks to align our governance practices with best practices among peer companies and considers recommendations by shareholder advisory organizations with respect to corporate governance.
Reports delivered by all of our committee chairmen on at least a quarterly basis keep our Board abreast of its committees’ risk oversight and other activities.
Majority Voting Provision
Our bylaws and the Corporate Governance Guidelines provide that, in an uncontested election of directors, each director shall be elected by the vote of the majority of the votes cast (meaning the number of shares voted “for” a nominee must exceed the number of shares voted “against” such nominee), and in a contested election, each director shall be elected by a plurality of the votes cast (meaning that the nineeight nominees receiving the highest number of votes “for” will be elected even if any such nominee receives less than a majority of the votes cast). A contested election is defined as an election for which our Corporate Secretary determines that the number of director nominees exceeds the number of directors to be elected as of the date that is ten days preceding the date we first mail our notice of meeting for such meeting to stockholders.
Under our Corporate Governance Guidelines, any nominee in an uncontested election who receives a greater number of “against” votes than “for” votes shall promptly tender his or her resignation following certification of the vote. Our Corporate Governance and Nominating Committee shall consider the resignation offer and shall recommend to our Board the action to be taken. In considering whether to recommend accepting or rejecting the tendered resignation, our Corporate Governance and Nominating Committee will consider all factors that it deems relevant including, but not limited to, any reasons stated by stockholders for their “against” or “withheld” votes for election of the director, the length of service and qualifications of the director, our Corporate
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Governance Guidelines and the director’s overall contributions as a member of our Board. Our Board will consider these and any other factors it deems relevant, as well as our Corporate Governance and Nominating Committee’s recommendation, when deciding whether to accept or reject the tendered resignation. Any director whose resignation is under consideration shall not participate in our Corporate Governance and Nominating Committee deliberation and recommendation or Board deliberation and action regarding whether to accept the resignation. Our Board shall take action within 90 days following certification of the vote, unless a longer period of time is necessary in order to comply with any applicable NYSE or SEC rule or regulation, in which event our Board shall take action as promptly as is practicable while satisfying such requirements. We will promptly disclose the decision and the reasons therefor in a Current Report on Form8-K furnished to the SEC.
Proxy Access
In December 2016, our Board adopted “proxy access” amendments to our bylaws, enabling a stockholder, or a group of up to 20 stockholders, owning 3% or more of the Company’s outstanding common stock continuously for at least three years to nominate and include in our proxy materials director nominees constituting up to two nominees or 20% of our Board, whichever is greater, provided that the stockholder(s) and nominee(s) satisfy the requirements set forth in our bylaws.
Biographical Information Regarding Our Director Nominees
Certain biographical information regarding our director nominees is set forth below. In each individual’s biography we have highlighted specific experience, qualifications, and skills that led our Board to conclude that each individual should serve or continue to serve as a director of our Board. In addition to these specific attributes, all of our director nominees have public company leadership experience, significant expertise in one or more areas of importance to our business and strategy, and have high-level managerial experience in relatively complex organizations or are accustomed to dealing with complex problems. We believe all of our director nominees are individuals of high character and integrity, are able to work well with others, and have sufficient time to devote to the affairs of our company.
Robert W. Alspaugh.Mr. Alspaugh, age 68,69, has served as a director since September 2008. From 2002 to 2006, Mr. Alspaugh served as CEO of KPMG International and from 1998 to 2002, Mr. Alspaugh served as Deputy Chairman and Chief Operating Officer of KPMG’s U.S. Practice. He joined KPMG in the Denver office in 1969 and was elected partner in 1978. In addition to providing more than ten years of service on the management committee and four years on the board of directors of KPMG, Mr. Alspaugh served on the board of KPMG International and was responsible for implementing the strategy of the global organization, which included member firms in 150 countries and more than 100,000 employees. Mr. Alspaugh holds a BBA degree (summa cum laude) in accounting from Baylor University. Mr. Alspaugh is currently a member of the boards of directors of Ball Corp., a supplier of metal and plastic packaging for beverages, food and household products, and of aerospace technologies and services to defense and civilian government agencies, and Autoliv, Inc., a developer, manufacturer and supplier of safety systems to the automotive industry. Mr. Alspaugh also serves on the boards of directors of DSGI Technologies, Inc. and Triton Container International, Ltd., both privately-held companies. Among other skills and qualifications, Mr. Alspaugh brings to our Board substantial global financial management and accounting expertise which is relevant to our business and has led our Board to determine that he is an “audit committee financial expert” as defined by the SEC. Additionally, Mr. Alspaugh’s extensive global management and leadership experience is relevant to his oversight role on our Audit Committee given the global nature of our operations and the related complexities. Mr. Alspaugh serves as the Chairman of our Audit Committee is one of our Audit Committee financial experts and also serves on our Corporate Governance and Nominating Committee. Mr. Alspaugh serves as the chairman of the audit committees of Triton Container, Autoliv and Ball Corp. He also serves on the compliance committee for Autoliv and the finance committee for Ball Corp.
Karen Austin. Ms. Austin, age 54,55, has served as a director since June 17, 2014. Ms. Austin has served as Senior Vice President and Chief Information Officer of Pacific Gas & Electric Company, a natural gas and
electric utilities company headquartered in California, since June 2011. Before joining PG&E, Ms. Austin served as Senior Vice President and President of Consumer Electronics of Sears Holdings Corporation from January 2009 to May 2011 and as its Executive Vice President and Chief Information Officer from March 2005 to January 2009. Ms. Austin joined Kmart Corporation in 1984 and served, before its merger with Sears, Roebuck and Co. in 2005, as its Senior Vice President and Chief Information Officer from April 2002 to March 2005 and Vice President,
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Applications from January 2000 to April 2002. Ms. Austin brings to our Board her strong expertise in information technology, change management, engineering, enterprise system security and technical operations, with extensive experience in retail operations and deep knowledge of technology company operating environments. Such experience and qualifications provide unique and valuable insight on our Board’s oversight of our business strategy, and, in particular, our transformation initiatives. Ms. Austin serves on our Audit Committee and Corporate Governance and Nominating Committee. Ms. Austin holds a B.S. degree in Computer Science from Trine University.
Paul Galant. Mr. Galant, age 48,49, has served as our CEO and a director since October 1, 2013. Prior to joining Verifone, Mr. Galant served as the CEO of Citigroup Inc.’s Enterprise Payments business since 2010. In this role, Mr. Galant oversaw the design, marketing and implementation of globalbusiness-to-consumer andconsumer-to-business digital payments solutions. From 2009 to 2010, Mr. Galant served as CEO of Citi Cards, heading Citigroup’s North American and International Credit Cards business. From 2007 to 2009, Mr. Galant served as CEO of Citi Transaction Services, a division of Citi’s Institutional Clients Group. From 2002 to 2007, Mr. Galant was the Global Head of the Cash Management business, one of the largest processors of payments globally. Mr. Galant joined Citigroup, a multinational financial services corporation, in 2000. Prior to joining Citigroup, Mr. Galant held positions at Donaldson, Lufkin & Jenrette, Smith Barney, and Credit Suisse. Mr. Galant holds a Bachelor’s degree from Cornell University where he graduated a Phillip Merrill Scholar. Mr. Galant currently serves on the board of directors of APX Group Holdings, Inc., a home automation services provider, and Conduent Inc., a business process services provider. Mr. Galant brings to our Board, among other skills and qualifications, leadership and expertise with respect to global payments solutions, broad knowledge of the payments and financial services industries, and leadership and management of complex, global organizations.
Alex W. (Pete) Hart. Mr. Hart, age 75,76, has served as a director since July 2006 and the Chairman of the Board since June, 17, 2014. Mr. Hart has been an independent consultant to the financial services industry since November 1997. From August 1995 to November 1997, he served as CEO and from March 1994 to August 1995 as Executive Vice Chairman of Advanta Corporation, a diversified financial services company. From 1988 to 1994, he was President and CEO of MasterCard International, the worldwide payment service provider. Mr. Hart holds a bachelor degree in social relations from Harvard University. He is currently a member of the board of directors of Mitek Systems, Inc., a mobile video technology company (since December 2010).company. Mr. Hart also serves as a director and member of the compensation committee for Solicore, Inc., a private company that develops and manufactures embedded power solutions. From April 2001 until April 2012, Mr. Hart served as Chairman of the Board and a director of SVB Financial Group. Mr. Hart also previously served on the board of directors and compensation committee of Fair Isaac Corporation, a predictive software company. From February 2001 to November 2015, Mr. Hart also served as a director of Global Payments, Inc., a provider of payment technology services. Among other skills and qualifications, Mr. Hart has been an active participant in the payments and financial services industry for more than 40 years including as senior executive, director and consultant, and further, Mr. Hart’s payments industry experience ranges from executive roles at banks, issuers, acquirers and card associations, all of which provide unique insight into our business operations and strategy. The wide spectrum of Mr. Hart’s business and professional experience within the payments industry strongly complements the attributes of our other directors. Mr. Hart is the Chairman of our Corporate Governance and Nominating Committee. He also serves as the chairman of the compensation committee and as a member of the governance committee of Mitek.
Robert B. Henske. Mr. Henske, age 54,55, has served as a director since January 2005. Mr. Henske isserved as a Senior AdvisorManaging Director at Hellman & Friedman LLC where he served as a Managing Director from July 2007 through 2014, and as a Senior Advisor from 2014 to 2014.2016. From May 2005 until July 2007, he served as Senior Vice President and General Manager of the Consumer Tax Group
of Intuit Inc. He was Intuit’s CFO from January 2003 to September 2005. Prior to joining Intuit, he served as Senior Vice President and CFO of Synopsys, Inc., a supplier of electronic design automation software, from May 2000 until January 2003. From January 1997 to May 2000, Mr. Henske was a partner at Oak Hill Capital Management, a Robert M. Bass Group private equity investment firm. Prior to that he was a Partner at Bain & Company. He holds a B.Sc. degree in Chemical Engineering from Rice University and an M.B.A. (with distinction) in Finance and Strategic Management from The Wharton School at the University of Pennsylvania. Mr. Henske was previously a member of the boards of directors of Applied Systems, Inc., Ellucian (formerly Datatel, Inc.) (as chairman), Associated Materials LLC, Goodman Global, Inc., Activant Solutions (as chairman), Iris Software Ltd. (as chairman), OpenLink Financial (as chairman), SSP Holdings (as chairman), Williams Scotsman, Grove Worldwide, Reliant Building Products and American Savings Bank. In addition to other skills and qualifications, Mr. Henske brings to our Board significant finance and accounting experience through his
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former roles as CFO of large, global companies in the high technology industry. Mr. Henske’s leadership and management experiences, including his service as a director and committee member on the boards of a number of companies, provide valuable insight on dynamics and operation of our Board, particularly in its oversight role. Mr. Henske is Chairman of our Compensation and Leadership Development Committee, serves on our Audit Committee and is one of our Audit Committee financial experts.
Wenda Harris Millard. Ms. Millard, age 61, has served as a director since September 2012. Ms. Millard is President and Chief Operating Officer of MediaLink LLC (“MediaLink”), an advisory firm that provides critical counsel and strategic direction to the media, marketing, advertising, entertainment and technology industries. Ms. Millard joined MediaLink in April 2009. Previously, Ms. Millard served as President of Media for Martha Stewart Living Omnimedia, Inc. from July 2007 to April 2009, and as its Co-CEO from June 2008 to April 2009. From 2001 to 2007, Ms. Millard was Chief Sales Officer of Yahoo! Inc., overseeing the company’s advertising and marketing services. Prior to that, Ms. Millard served in a number of executive positions in publishing, advertising and online media, including as President, Ziff Davis Internet, Inc. and Chief Internet Officer, Ziff Davis; EVP and General Manager, Network/Media of DoubleClick Inc.; President of Standard Rate & Data Service; Senior Vice President and Publisher of Family Circle Magazine for The New York Times Company; and as EVP and Publisher of Adweek Magazines. Ms. Millard holds a B.A. from Trinity College and an M.B.A. from the Harvard Business School. She currently also serves on the board of Millennial Media, Inc., a digital and mobile media advertising business, where she has served as a director since May 2009, and is a member of its compensation committee. Ms. Millard previously served on the boards of True North Communications Inc., a global advertising and communications company (formerly listed on the NYSE under the ticker “TNO” and acquired by The Interpublic Group of Companies in 2001) and Martha Stewart Living Omnimedia. In addition, she is a member of the board of the James Beard Foundation and previously has also served as Chairman of the Internet Advertising Bureau. Among other skills and qualifications, Ms. Millard is a seasoned executive with over thirty years in the publishing, advertising and online world. She is one of the early pioneers of internet advertising with demonstrated ability to drive growth and innovation in advertising and online media, including her contributions at DoubleClick, Ziff Davis, Yahoo! and Martha Stewart Living Omnimedia, which our Board believes is a valuable resource as we continue to expand activities of our payment-enabled media businesses and other strategic initiatives in advertising and digital media. Ms. Millard has served on our Compensation Committee since the date of her appointment to our Board.
Eitan Raff. Mr. Raff, age 74,75, has served as a director since October 2007. Mr. Raff currently serves as a financial consultant to Wolfson Clore Mayer Ltd. and as a senior advisor to Morgan Stanley. Mr. Raff also serves on the board of directors of Alon USA Partners GP, LLC, a Delaware limited liability company that is owned by Alon USA Energy, Inc. and general partner of Alon USA Partners, LP, a Delaware limited partnership that owns and operates a crude oil refinery and markets and distributes petroleum products. Mr. Raff is also on the board of Youth Leading Change, anon-profit association, and previously served as the Accountant General (Treasurer) in the Israeli Ministry of Finance. Mr. Raff holds a B.A. and M.B.A. from the Hebrew University of Jerusalem and, in 2012, received a Doctor Philosophiae Honoris Causa from the Hebrew University of Jerusalem. Mr. Raff currently servesserved on the boards of directors of Israel Corp. Ltd. and a number of privately-held corporations.until 2015. Mr. Raff previously served as chairman of the board of directors of Bank Leumile-Israel B.M., Bank Leumi
USA and Bank Leumi UK plc from 1995 until 2010. Mr. Raff brings to our Board, among other skills and qualifications, extensive andin-depth experience within the financial services industry, as well as global and cultural aspects of operations and business management relevant to our strategic development. Additionally, Mr. Raff provides unique perspectives on corporate governance and administration based on his long tenure with Bank Leumi. Mr. Raff is a member of our Corporate Governance and Nominating Committee. He served until March 2015 on the investment and capital structure committee of Israel Corp. He currently serves onas the Chairman of the audit committee of Alon USA Partners GP, LLC. While serving on the Bank Leumile-Israel B.M. board, Mr. Raff served on a number of committees of the board of directors, including the committees on credit, finance, administration, conflicts of interest and risk management.
Jonathan I. Schwartz. Mr. Schwartz, age 50,51, has served as a director since June 17, 2014. Mr. Schwartz has served as the CEO and President of Care Zone Inc., an Internet service for family caregivers, since April 2010. From 1996 to February 2010, Mr. Schwartz served in various capacities at Sun Microsystems, Inc. prior to its acquisition by Oracle Corporation, including from April 2006 to February 2010 as CEO and a member of the board of directors. Prior to Sun, Mr. Schwartz was the founder, President and CEO of Lighthouse Design, Ltd., which was ultimately acquired by Sun in 1996, and began his career with McKinsey & Company, Inc. Mr. Schwartz serves on our Audit Committee and Compensation and Leadership Development Committee. Mr. Schwartz also serves on the board of directors of Silver Spring Networks, Inc., a provider of smart grid products, and is a member of its compensation committee. Mr. Schwartz brings to our Board proven operational and strategic expertise, with a strong background in technology and solutions. His experience as chief executive officer of a number of high-tech companies, as well as board and committee member of other high-tech public and private companies, provides our Board an important perspective in overseeing our business operations and strategy. Mr. Schwartz holds a B.A. in Mathematics and Economics from Wesleyan University.
Jane J. Thompson. Ms. Thompson, age 64,65, has served as a director since March 2014. She is the founder and CEO of Jane J. Thompson Financial Services LLC, a management consulting firm advising businesses focused on payments and serving the financial services needs of mass-market consumers (including large corporations, top management consulting firms, private equity firms andstart-ups). From May 2002 to June 2011, Ms. Thompson served as President of Walmart Financial Services, a division ofWal-Mart Stores, Inc. that provides money services, products and solutions to Walmart customers. Previously, she led the Sears Credit, Sears Home Services, and Sears Online groups within Sears, Roebuck & Company, and was a partner with McKinsey & Company, Inc. advising consumer companies. Ms. Thompson serves on our Compensation and Leadership Development Committee and our Corporate Governance and Nominating Committee. Ms. Thompson also serves on the board of directors of Blackhawk Network Holdings, a prepaid payment network company, and its compensation committee; on the board of directors of On Deck Capital, Inc., an online lender to small businesses, and its risk management and audit committees; and on the board of directors of Navient Corporation, a loan management, servicing and asset management company, and its auditcompensation and finance/operations committees; and on the board of directors of Fresh Market, Inc., a specialty food retailer, and its audit and nominating committees. From 1995 to 1999, she served on the board of directors of ConAgra Foods, Inc., a packaged food company, and its audit committee.committee, and from 2012 to 2016 she served on the board of directors of Fresh Market, Inc., a specialty food retailer, and its audit and nominating committees. Ms. Thompson brings to our board of directors extensive management experience leading multi-billion dollar organizations in the financial services, home services, retail ande-commerce industries, with expertise in the evolving relationship between retailers and
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consumers, as well as experience driving strategy and growth for large corporations. Ms. Thompson received a Master’s in Business Administration from Harvard Business School, where she was a Baker Scholar, and a Bachelor’s of Business Administration (summa cum laude) in Marketing from the University of Cincinnati.
There are no family relationships among any director nominees or executive officers of Verifone.
Committee Membership
The table below summarizes membership information for each of our Board committees:
Director |
Committee |
and Leadership Committee |
|
Nominating Committee | ||||
Robert W. Alspaugh | — | |||||||
Karen Austin | — | |||||||
Alex W. (Pete) Hart | — | — | ||||||
Robert B. Henske | — | |||||||
Wenda Harris | — | — | ||||||
Eitan Raff | — | — | ||||||
Jonathan I. Schwartz | — | |||||||
Jane J. | — |
✓ = Member
(1) | Ms. Millard resigned as a member of our Board and Compensation and Leadership Development Committee, effective May 21, 2016. |
(2) | Ms. Thompson joined the Corporate Governance and Nominating Committee, effective September 2016. |
ü= Member
Audit Committee Financial Expert
Our Board has determined that each of Robert W. Alspaugh and Robert B. Henske is qualified as an Audit Committee financial expert within the meaning of SEC regulations. In making this determination, our Board considered the following qualifications: (a) understanding of United States generally accepted accounting principles (“GAAP”) and financial statements; (b) ability to assess the general application of GAAP to accounting for estimates, accruals and reserves; (c) experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be raised by our financial statements, or experience actively supervising persons engaged in these activities; (d) understanding of internal control over financial reporting; and (e) understanding of Audit Committee functions.
Director Compensation
Our Corporate Governance and Nominating Committee regularly reviews the compensation of the ournon-employee directors against peer group data and pay practices. During fiscal 2015, the compensation policy and levels for our Board remained the same as have been in place since March 2012. directors.
16 | 2017 Proxy Statement |
Eachnon-employee director was entitled to receive an annual cash retainer and a meeting attendance fee for service on our Board and Board committees during fiscal 20152016 as follows:
Annual cash retainer | $ | 55,000 | ||
Chairman of the Board cash retainer(1) | $ | 100,000 | ||
Annual committee chair cash retainers: | ||||
Audit Committee | $ | 20,000 | ||
Compensation Committee | $ | 10,000 | ||
Corporate Governance and Nominating Committee | $ | 10,000 | ||
Board and committee meeting in-person attendance fee | $ | 1,500 | ||
Board and committee meeting telephonic attendance fee | $ | 1,500 |
Annual cash retainer | $ | 70,000 | ||
Chairman of the Board cash retainer(1) | $ | 100,000 | ||
Annual committee chair cash retainers(2): | ||||
Audit Committee | $ | 20,000 | ||
Compensation and Leadership Development Committee | $ | 10,000 | ||
Corporate Governance and Nominating Committee | $ | 10,000 | ||
Annual committee member cash retainers: | ||||
Audit Committee | $ | 14,000 | ||
Compensation and Leadership Development Committee | $ | 10,000 | ||
Corporate Governance and Nominating Committee | $ | 8,000 |
(1) | The Chairman of the Board cash retainer is |
(2) | The committee chair cash retainers are in addition to the committee member cash retainers. |
If our Board and/or a standing Board committee requires a greater than typical number of meetings in a given year, thenon-employee directors will be compensated an additional $2,000 per meeting. For this purpose, a “greater than typical number of meetings” is defined as greater than 10 meetings in a given year for both our Board or our Audit Committee or greater than eight meetings in a given year for both our Compensation and Leadership Development Committee or our Corporate Governance and Nominating Committee. From time to time, our Board may establishnon-standing, limited purpose committees. Retainer and meeting fees for these committees are determined on a case by case basis.
In addition, eachnon-employee director is entitled to receive an annual equity award consistingin the form of an RSU award for shares of our common stock options and RSUs, each with a target value of $75,000 (for a total annual equity award of $150,000),$165,000, with such awards granted following the election of directors at each annual meeting. The grant date of these equity awards is the first trading day in the month following our annual meeting and the exercise price of the stock option grants is the closing price of our common stock on the grant date.meeting. The number of shares of our common stock subject to the stock optionsRSU award is determined based on the Black-Scholes-Merton fair value as of the date of grant and the number60-calendar-day average closing price of shares of our common stock subject to the RSUs is determined based on the 60-calendar-day average closing stock price as of the date of grant, in each case rounded up to the nearest 500 shares.whole share. The annual equity awards vest in full on the first anniversary of the grant date. Stock options have a term of seven years.
The following table sets forth a summary of the compensation paid to and earned by our non-employee directors for services in fiscal 2015:
Fiscal 2015 Director Compensation Table
Name | Cash Fees | Option Awards(1),(2) | Stock Awards(1),(3) | All Other Compensation | Total | |||||||||||||||
Robert W. Alspaugh | $ | 102,000 | $ | 73,924 | $ | 69,160 | $ | — | $ | 245,084 | ||||||||||
Karen Austin | $ | 80,500 | $ | 73,924 | $ | 69,160 | $ | — | $ | 223,584 | ||||||||||
Alex W. (Pete) Hart | $ | 180,000 | $ | 73,924 | $ | 69,160 | $ | — | $ | 323,084 | ||||||||||
Robert B. Henske | $ | 93,500 | $ | 73,924 | $ | 69,160 | $ | — | $ | 236,584 | ||||||||||
Wenda Harris Millard | $ | 68,500 | $ | 73,924 | $ | 69,160 | $ | — | $ | 211,584 | ||||||||||
Eitan Raff | $ | 70,000 | $ | 73,924 | $ | 69,160 | $ | — | $ | 213,084 | ||||||||||
Jonathan I. Schwartz | $ | 82,000 | $ | 73,924 | $ | 69,160 | $ | — | $ | 225,084 | ||||||||||
Jane J. Thompson | $ | 71,500 | $ | 73,924 | $ | 69,160 | $ | — | $ | 214,584 |
In December 2015, our Board and our Corporate Governance and Nominating Committee conducted a periodic review of the compensation of the non-employee directors, which included an evaluation of peer group pay practices. Following that review, and upon recommendation of our Corporate Governance and Nominating Committee, our Board approved the following changes to the compensation arrangements of our non-employee directors, effective November 1, 2015:
an increase in the annual cash retainer from $55,000 to $70,000;
an increase in the target value of equity awards from $150,000 to $165,000, such that each then incumbent non-employee director will be entitled to receive an annual equity award in the form of an RSU award for shares of our common stock with a target value of $165,000; and
the replacement of meeting fees with an annual committee service retainer of $14,000 for Audit Committee members, $10,000 for Compensation Committee members and $8,000 for Corporate Governance and Nominating Committee members; provided that if our Board and/or a standing Board committee requires a greater than typical number of meetings in a given year, the non-employee directors will be compensated an additional $2,000 per meeting. For this purpose, a “greater than typical number of meetings” is defined as greater than 10 meetings in a given year for either our Board or our Audit Committee or greater than 8 meetings in a given year for either our Compensation Committee or our Corporate Governance and Nominating Committee.
The Board also adopted the VeriFone Systems, Inc. Director Deferred Compensation Plan effective January 1, 2016, to permit ournon-employee directors to convert all or a portion (in 25% increments) of their annual cash retainer and committee cash retainers into fully vested deferred stock units.units (“DSUs”). For each such payment of fully vested stock units,DSUs, the number of stock units credited to an electing director is determined by dividing the product of the applicable percentage of the cash retainer payment elected to be converted and the applicable cash retainer payment by the closing price of shares of our common stock on the last trading day prior to the date the cash retainer payment would otherwise have been paid. The plan also permits ournon-employee directors to defer all or a portion (in 25% increments) of their annual grant of RSUs,RSU awards, subject to satisfaction of any applicable vesting conditions. Amounts under the plan are generally payable between the second and tenth anniversaries of grant for the deferred amounts (or earlier for death, disability or separation from service) based on the participating director’s deferral election.
2017 Proxy Statement | 17 |
The following table sets forth a summary of the compensation paid to and earned by ournon-employee directors for services in fiscal 2016:
Fiscal 2016 Director Compensation Table
Name | Cash Fees | Option Awards | Stock Awards(1),(2),(3) | All Other Compensation | Total | |||||||||||||||
Robert W. Alspaugh | $ | 112,000 | $ | — | $ | 184,879 | $ | — | $ | 296,879 | ||||||||||
Karen Austin(4) | $ | 15,333 | $ | — | $ | 239,706 | $ | — | $ | 255,039 | ||||||||||
Alex W. (Pete) Hart | $ | 188,000 | $ | — | $ | 184,879 | $ | — | $ | 372,879 | ||||||||||
Robert B. Henske | $ | 104,000 | $ | — | $ | 184,879 | $ | — | $ | 288,879 | ||||||||||
Wenda Harris Millard(5) | $ | 60,000 | $ | — | $ | 184,879 | $ | — | $ | 244,879 | ||||||||||
Eitan Raff | $ | 78,000 | $ | — | $ | 184,879 | $ | — | $ | 262,879 | ||||||||||
Jonathan I. Schwartz | $ | 94,000 | $ | — | $ | 184,879 | $ | — | $ | 278,879 | ||||||||||
Jane J. Thompson | $ | 81,000 | $ | — | $ | 184,879 | $ | — | $ | 265,879 |
(1) | During fiscal 2016, eachnon-employee director who was a director after the close of our Annual Meeting of Stockholders on March 24, 2016 was granted an RSU award that could be settled for 6,556 shares of our common stock. Amounts shown in these columns reflect the aggregate fair value of each award as of the grant date of such award computed in accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 718 and do not reflect whether the recipient has actually realized a financial benefit from the awards. Pursuant to SEC rules, the amounts reported exclude the impact of estimated forfeitures related to service-based vesting conditions. For information on the assumptions used for the calculation of the grant date fair value of these awards, see Note 4,Employee Benefit Plans, in the Notes to Consolidated Financial Statements included in our Annual Report on Form10-K filed with the SEC for the fiscal year ended October 31, 2016. |
(2) | As of October 31, 2016, the aggregate number of shares of our common stock subject to outstanding stock options held by each of ournon-employee directors was as follows: Mr. Alspaugh, 34,500; Ms. Austin, 11,000; Mr. Hart, 34,500; Mr. Henske, 34,500; Mr. Raff, 29,000; Mr. Schwartz, 11,000; and Ms. Thompson, 12,500. |
(3) | As of October 31, 2016, the aggregate number of shares of our common stock for which outstanding RSU awards held by each of ournon-employee directors could be settled upon vesting was as follows: Mr. Alspaugh, 17,056; Ms. Austin, 9,036; Mr. Hart, 6,556; Mr. Henske, 13,556; Mr. Raff, 6,556; Mr. Schwartz, 6,556; and Ms. Thompson, 6,556. |
(4) | Stock awards column reflects annual RSU awards of $184,879 and a portion of her cash retainer ($54,826) converted to stock units pursuant to the VeriFone Systems, Inc. Director Deferred Compensation Plan. |
(5) | Ms. Millard resigned as a member of our Board and Compensation and Leadership Development Committee, effective May 21, 2016. |
18 | 2017 Proxy Statement |
Our executive officers are elected annually by our Board and serve at the discretion of our Board. Our current executive officers and their ages as of February 11, 20169, 2017 are as follows:
Name | Age | Position | ||||
| ||||||
Vin D’Agostino | Executive Vice President, | |||||
| Chief | |||||
Albert Liu | Executive Vice President, Corporate Development & General Counsel | |||||
Glen Robson | Executive Vice President, | |||||
Marc Rothman | Executive Vice President and Chief Financial Officer |
Alok Bhanot.Biographical information for Mr. Bhanot has served as our Executive Vice President, Engineering and Chief Technology Officer since December 2, 2013. Prior to joining Verifone, from June 2013 to November 2013, Mr. Bhanot served as an advisor of Walmart Labs, a unit of Walmart Global e-Commerce, and, from February 2011 to June 2013, as the founder and CEO of Inkiru, Inc., a provider of business intelligence/analytics technology, before it was acquired by Walmart in June 2013. Prior to that, from July 2010 to January 2011, Mr. Bhanot served as the Chief Technology Officer for Rent The Runway, Inc., a company that sells and rents women’s fashion products online, and, from April 2009 to June 2010, EVP for Cooliris, Inc., a software developer of photo viewing applications. From May 2007 to March 2009, Mr. Bhanot served as Vice President, Risk Technology of PayPal and, from January 2006 to March 2009, Vice President, Corporate Architecture of eBay, Inc. Before joining eBay, Inc., from January 2000 to March 2002, Mr. Bhanot served as the Chief Technology Officer of Gradience, Inc., a market data analytics provider. Mr. Bhanot graduated from University of Roorkee (Indian Institute of Technology) with a Bachelor’s degree in Mechanical Engineering.Galant is set forth above.
Vin D’Agostino. Mr. D’Agostino has served as our Executive Vice President, Verifone Services since December 2015. Mr. D’Agostino joined Verifone in January 20142014. As Executive Vice President and has served in various management positions, playing an integral role in driving the growth ofChief Strategy Officer, Mr. D’Agostino is responsible for developing, communicating and executing Verifone’s servicesstrategy with our CEO, as well as in setting Verifone’ssustaining corporate strategy and in ourstrategic initiatives. Additionally, Mr. D’Agostino leads business development activities.activities related to large-scale partnerships. Prior to joining Verifone, Mr. D’Agostino was at JP Morgan Chase since 1985. In his most recent role there, he was responsible for the payment business’ enterprise strategy, corporate development activities and the Payment Steering Committee. Prior to these roles, he held various leadership positions in finance, product management, and operations management at JP Morgan Chase. Mr. D’Agostino holds a Bachelor of Science degree and MBA in Finance from St. John’s University.
Biographical information for Mr. Galant is set forth above.
Albert Liu. Mr. Liu serves as our Executive Vice President, Corporate Development and General Counsel. Mr. Liu joined Verifone in October 2008, as Senior Vice President, General Counsel and Corporate Secretary, and was named EVP,Executive Vice President, Corporate Development in August 2011. In his capacity Mr. Liu is responsible for overseeing corporate development, legal and management of our China business. He also serves as Chief Compliance Officer.the Company’s corporate secretary and chief compliance officer. Prior to joining Verifone, he was Vice President, Legal and Corporate Development, and Company Secretary for NETGEAR, Inc., a provider of networking solutions, since October 2004. Mr. Liu also previously served as General Counsel, Director of Human Resources and Secretary of Turnstone Systems, Inc., a supplier of digital subscriber line testing equipment and General Counsel and Secretary for Yipes Enterprise Services, a provider of Ethernet connectivity services. Mr. Liu began practicing law with the firm of Sullivan & Cromwell in New York, advising clients on all aspects of corporate and securities law, leading public and private securities offerings, and negotiating and finalizing venture capital investments and contracts.Cromwell. Before entering the legal field, he was a software engineer at Tandem Computers. He holds dual degrees in Computer Science and Political Science from Stanford University, and a J.D. (magna(magna cum laude)laude) from the University of California, Hastings College of the Law. He is a member of the State Bar of California.
Glen Robson.Mr. Robson has served as our Executive Vice President, Verifone SystemsGlobal Head of Solutions since January 2015. Mr. Robson is responsible for delivering innovative solutions built around world-class security products, payment and commerce solutions, differentiated value-added services, and a groundbreaking portfolio of payment systems. Mr. Robson is responsible for overseeing our global engineering, product management and marketing organizations. Prior to joining Verifone, Mr. Robson spent 10 years with Dell, Inc. leadingas a leader in its engineering organizations,
organization, has served as General Manager and Vice President for Dell’s SMB and Consumer Product Group and most recently as Chief Technology Officer for Dell’s ClientClient’s Product Group. Prior to Dell, Mr. Robson held various engineering management positions at Sun Microsystems. Mr. Robson holds a Bachelor of Arts in Public Policy from the University of Northumbria and a MasterMasters of Science in Computer Science from the University of Kent.
Marc Rothman. Mr. Rothman has served as our Executive Vice President and Chief Financial Officer since February 2013. Mr. Rothman oversees our finance, information technology and real estate organizations. Prior to joining Verifone, Mr. Rothman served as the CFO of Motorola Mobility, Inc., where he oversaw global financial strategy, financial analysis and reporting, regulatory financial compliance, restructuring activities, and mergers and acquisitions, including his leadership inleading Motorola Mobility’sspin-off transaction from its former parent company, Motorola, Inc., as well as the sale of the company to Google in May 2012. At Motorola, he also held a number of senior finance leadership positions across the company, including serving as chief financial officer in several of its business segments (Public Safety, Networks and Enterprise, and Mobile Devices). Mr. Rothman joined Motorola,
2017 Proxy Statement | 19 |
Inc. through the acquisition of General Instrument in 2000, and at that time he was vice president and corporate controller. He began his career at Deloitte & Touche LLP. Mr. Rothman is a Certified Public Accountant (inactive) in the State of California and graduated from Stockton University (formerly Richard Stockton College)College with a Bachelor’s degree in Business.
20 | 2017 Proxy Statement |
COMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis (“CD&A”) describes our executive compensation program and discusses the compensation for our fiscal 20152016 named executive officers (“NEOs”(our “NEOs”). Our fiscal 20152016 NEOs are:
Paul Galant, our Chief Executive Officer (our “CEO”)
Marc Rothman, our Executive Vice President and Chief Financial Officer
Alok Bhanot,Vin D’Agostino, our Executive Vice President, Engineering and Chief TechnologyStrategy Officer
Albert Liu, our Executive Vice President, Corporate Development &and General Counsel
Glen Robson, our Executive Vice President, Verifone SystemsGlobal Head of Solutions
Alok Bhanot, our former Executive Vice President, Engineering and Chief Technology Officer, who resigned from the Company effective August 15, 2016
Overview
We are a global leader in secure electronic payment solutions atIn this CD&A, we begin by outlining our interaction with stockholders related to our executive compensation program, and the point of sale (“POS”). For over 30 years,many changes we have designed, manufactured, marketedmade in response to their feedback during fiscal 2016. We also provide highlights of our business performance in 2016, which serve as critical context for the compensation decisions made under our executive compensation program. Second, we review the structure of our executive compensation program and suppliedour philosophy of aligning pay with performance, supported by recent compensation outcomes demonstrating how strongly our program aligns realized pay with performance. Third, we provide the decisions made about compensation for our NEOs for fiscal 2016. Finally, we provide supplementary information on several aspects of our program.
Stockholder Advisory Vote on Executive Compensation and Stockholder Outreach
At our 2016 Annual Meeting of Stockholders, we conducted a broad rangenon-binding stockholder advisory vote on the fiscal 2015 compensation of innovative payment solutions and complementary services that enable secure electronic payment transactions and value-added services at the POS. Our solutions and services enable merchants to address their payment acceptance complexities, enrichnamed executive officers (commonly known as a“Say-on-Pay” vote). Approximately forty-four percent of the interaction between merchant and consumers, and increase merchant revenues.votes were voted in favor of our named executive officer compensation.
In response to the stockholder vote, we reached out to stockholders representing over 50% of our outstanding shares of common stock to obtain feedback on our executive compensation practices to assist our Board in better understanding our stockholders’ views and determining whether changes to our executive compensation program were warranted. Members of management, including our CEO and CFO, investor relations, legal and human resources participated inin-person and telephonic discussions with stockholders in the spring and fall of 2016. The feedback from these discussions was collected and communicated to our Board and the Compensation and Leadership Development Committee (the “Committee”).
Based on the feedback from our stockholders, the Board and the Committee took the following actions described below:
WHAT WE HEARD | HOW WE HAVE RESPONDED | |||
Retain focus on alignment of pay with performance and long-term stockholder interests | • Long-term performance-based equity awards will generally continue to comprise at least 50% of each NEO’s total equity award value. | |||
Too much discretion in annual cash incentive program | • Beginning in fiscal 2016, we have eliminated the potential for subjective upwards discretion in the form of qualitative adjustments of up to 20% that previously could increase short-term incentive payouts. • Beginning in fiscal 2017, we have replaced the individual performance portion of the short-term incentive plans with objective, quantitative corporate strategic goals that will be established at the beginning of each fiscal year. |
2017 Proxy Statement | 21 |
Place a cap on “relative TSR” performance-based restricted stock unit awards in the event of negative TSR performance | • Beginning in fiscal 2017, we have placed a cap on the payout of our performance-based restricted stock unit awards (which are earned based on relative TSR) at target, in the event of negative absolute TSR performance over the three-year performance period. | |||
Consider linking long-term performance awards to additional objective financial metrics | • Our stockholders had a variety of opinions about metrics for our performance-based restricted stock unit awards(“P-RSU”) with some favoring the current total stockholder return metric and others favoring the use of the total stockholder return metric in combination with additional objective financial metrics. • The Board discussed the advantages and disadvantages of expanding the number of metrics that may be used in theP-RSU metrics from just total stockholder return (TSR), as suggested by some stockholders. For fiscal 2017, the Board determined to retain TSR as the sole metric, as a continued focus on TSR is appropriate given the Company’s current position and industry fundamentals. The Board also noted that a significant number of stockholders supported the alignment between stockholder returns and executive compensation created byP-RSUs focused on TSR. In addition, those stockholders who requested adding additional objective financial metrics also largely supported the current relative TSR metric. • The Board also noted the use of objective financial metrics with respect to short-term incentive awards. • The Board will continue to solicit and consider stockholder feedback on this topic and continue to evaluate whether further changes are appropriate in light of the Company’s strategic goals. | |||
Cap on NEO cash and equity compensation | • Beginning in fiscal 2016, we adopted a limit, or “cap,” on the maximum payout of any short-term incentive award of 200% of an executive officer’s target short-term incentive compensation opportunity. • We set a maximum payout level for theP-RSU awards at 150% of target. We have also imposed a limit, or “cap,” on the dollar amount that may be paid out for suchP-RSU awards equal to four times the grant date fair value of any such award. | |||
NEO compensation based on grant date values was perceived as too large in relation to performance | • Our program strongly aligns realized compensation and performance: • Over 80% of total compensation to our named executive officers is variable pay that is at risk. • Short-term incentive targets are set on the basis of challenging but realizable goals with minimum thresholds of achievement required for any payout. • At least 50% of the value of the long-term incentive is in the form ofTSR-basedP-RSU awards whose vesting is determined on the basis of our performance over a three-year period. |
22 | 2017 Proxy Statement |
• Recent compensation outcomes demonstrate how our program effectively aligns realized compensation against our performance: • No short-term incentive compensation was paid to any NEO or executive in fiscal 2016 due to the Company not achieving the threshold for theNon-GAAP EPS established in the short-term incentive plan. • The upfrontP-RSU award grant in the target amount of 200,000 shares granted to our CEO as part of hisnew-hire award in 2013 delivered no shares upon vesting in 2016. • Based on our share-price performance through October 31, 2016, theP-RSU awards granted to our NEOs in 2015 and 2016 would not have been earned assuming measurement through that date. |
We value the insights gained from our discussions with our stockholders and find them to be critically important as the Committee considers and adopts policies affecting our executive compensation program and governance. We will continue to consider the outcome of futureSay-on-Pay votes, as well as feedback received through our stockholder engagement activities, to understand their views on our executive compensation philosophy, program, policies and practices, when making compensation decisions for our executive officers. We also engaged with our stockholders on various corporate governance matters. In December 2016, as part of our continuing efforts to reflect corporate governance best practices, we adopted a “proxy access” amendment to our bylaws which will enable stockholders meeting certain requirements to include their own director nominees in our proxy materials.
Consistent with the recommendation of our Board at this Annual Meeting regarding Proposal 4 on the frequency of futureSay-on-Pay votes and the preference of our stockholders as reflected in the advisory vote on the frequency of futureSay-on-Pay votes conducted at our 2011 Annual Meeting of Stockholders (commonly known as a“Say-When-on-Pay” vote), our Board has adopted a policy providing for annualSay-on-Pay votes to approve the compensation of the named executive officers. Accordingly, it is expected that the nextSay-on-Pay vote will take place at our 2018 Annual Meeting of Stockholders. In continuing to have an annual policy, our Board will review the outcome of Proposal 4.
Fiscal 2016 Business Highlights—Executing our Long-Term Strategy
The following business highlights contain critical context for the executive compensation awarded in fiscal 2015,2016. In fiscal 2016, we continued to make significant progress on our broad multi-year transformation initiative to realignof our business, which initiative was launched when our CEO, Mr. Galant, joined us in October 2013. Since Mr. Galant joined us, we have shifted our business strategy from that of primarily a hardware provider of traditional electronic payment terminals to that of a payment and commerce services provider. We believe that this multi-year transformation to a payment and commerce services provider is our most critical mission. Mr. Galant and our management team have made crucial steps toward this mission by embarking on a company-wide restructuring, overhauling our business strategy, improving our product development process and introducing several new products, improving our supply chain and recruiting key employees across our business lines. At the same time, althoughAs part of this transformation, we seek to help our clients navigate current market forces such as:
acceleration away from cash to electronic payments;
proliferation of POS solutions;
increasing complexity of consumer payments;
convergence of payments and commerce; and
growing expectations for omni-channel experiences.
2017 Proxy Statement | 23 |
Although we experienced significant currency headwindsa decline in our revenue andearnings-per-share in fiscal 2016 after a record year with respect to revenue in fiscal 2015, we strengthenedbegan our financial and operational performance while undertakingmost comprehensive product update in over a significant expansion to take advantagedecade, which will launch a new set of global opportunities for our products and services. In addition, onover the product side,upcoming year that we believe will enable us to significantly enhance the services offerings that we provide our product and services roadmap is our most robust in at least the past decade.
clients. We believe that, under our CEO’s leadership, our management team has made significant stridesprogress in positioning us for a critical role in the future evolution and growth of our industry. ConsistentAt the same time, in response to stockholder outreach and feedback in fiscal 2016, we have enhanced our compensation structure to ensure it is robust and rigorous and that our compensation award decisions, as well as any value ultimately realized by our NEOs, is closely tied to our performance. We believe that the results of this compensation structure in fiscal 2016 demonstrate this rigor and alignment with this belief, we note that, fromstockholder interests, as illustrated in the time Mr. Galant joined us on October 1, 2013 through October 31, 2015, the end of fiscal 2015, the market price of our common stock has increased from $23.00 per share to $30.14 per share, resulting in total stockholder return of 31% during that period.
Fiscal 2015 Business Highlightsnext section.
Mr. GalantGalant’s and our management team’s efforts enabled Verifone to achieve the following business highlights in fiscal 2015 (please see Appendix A for a reconciliation of non-GAAP net-income per diluted share, free cash flow and other non-GAAP measures):2016:
Record consolidatedStrongTop-Line Results. Consolidated total net revenues of approximately $2.0 billion, as compared to $1.87 billion for the prior fiscal year, up 7% year over year (up 16% on a constant currency basis);billion;
Strong Cash Flow.Net income per diluted sharecash provided by operating activities of $0.68, as compared to a net loss per share$194 million and free cash flow of $0.34 in fiscal 2014;$88 million;
Non-GAAP net income per diluted shareNew Product Launches.Continued the rollout of $1.83, as comparedour next-generation product lines to $1.51support our transition to a payment and services provider, including launches of Engage, Carbon and mPOS solutions in fiscal 2014, up 21% year over year;
Operating cash flow of $249.3 million, representing an increase of 25% from $199.1 million in fiscal 2014;new markets and segments;
Free cash flowModest Strategic Acquisitions.Completed acquisitions of $142.9 million, comparedInterCard and AJB Software Design to $114.1 million for fiscal 2014;expand our services business;
A partnership with Visa’s Cybersource platform that will enable merchants to offer their customers a more streamlined, secure purchase experience across both digital and face-to-face commerce environments;
A number of product achievements, including the launch of Payment-as-a-Service in 17 countries and the launch of our Engage products and e-Series mobile products; and
Our $200 million share repurchase program, which was our first share repurchase program and return of capital to stockholders.
Highlighted below are our Non-GAAP net revenues and Non-GAAP diluted earnings per share, or EPS, during the eight quarters since Mr. Galant joined us in October 2013:
The following are our GAAP net revenues and GAAP EPS for the same performance periods ($ in millions, except per share information).
Q1 FY14 | Q2 FY14 | Q3 FY14 | Q4 FY14 | Q1 FY15 | Q2 FY15 | Q3 FY15 | Q4 FY15 | |||||||||||||||||||||||||
GAAP net revenues | $ | 436 | $ | 466 | $ | 476 | $ | 491 | $ | 486 | $ | 490 | $ | 510 | $ | 514 | ||||||||||||||||
GAAP EPS | $ | (0.15 | ) | $ | (0.22 | ) | $ | (0.26 | ) | $ | 0.27 | $ | 0.12 | $ | 0.15 | $ | 0.08 | $ | 0.33 |
Please see Appendix A for a reconciliation of (1) non-GAAP net revenues to GAAP net revenues; and (2) non-GAAP net income to GAAP net income (loss) and non-GAAP EPS to GAAP EPS for each of the above periods.
We believe that the performance of our executives is a critical part of our executing successfully on our overall transformation, restructuring and strategic plan. Key measures of our financial and operational performance include Non-GAAP net revenues and Non-GAAP EPS. Accordingly, both financial measures, along with performance goals designed to incentivize long-term consistent achievement against net revenues and EPS goals, were key measures of our executives’ performance for fiscal year 2014 and 2015.
Redesign of Executive Compensation Program
Consistent with the launch of our transformation initiative, starting in fiscal 2014 we have substantially redesigned our executive compensation program to better align our executive officers’ target total direct compensation opportunities with our ability to achieve and sustain long-term stock price growth.
Fiscal 2014 and 2015 Changes
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Fiscal 2016 Changesnon-GAAP financial measure, to net cash provided by operating activities.
Our Compensation Committee has also made the following changes to our executive compensation program which will be effective in fiscal 2016:
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Stockholder Advisory Vote on Executive Compensation
At our 2015 Annual Meeting of Stockholders, we conducted a non-binding stockholder advisory vote on the fiscal 2014 compensation of the named executive officers (commonly known as a “Say-on-Pay” vote). Our stockholders approved the fiscal 2014 compensation of the named executive officers with approximately 83% of
the votes cast in favor of the proposal (an increase from 79.2% for fiscal 2013). We believe that this result demonstrates that our stockholders are generally supportive of our executive compensation program and the changes we have made over the past eighteen months.
As our Compensation Committee has reviewed our executive compensation policies and practices since that vote, it has been mindful of the strong support our stockholders have expressed for our approach to executive compensation. As a result, following our annual review of our executive compensation philosophy, our Compensation Committee decided to retain our general approach to executive compensation. Upon consideration of the vote results and feedback from discussions with our stockholders (as described below), our Compensation Committee made the following enhancements to our executive compensation program:
Adopted a maximum payout under our short-term incentive compensation awards of 200% of target; and
Reduced the maximum payout level for performance-based equity awards to 150% of target and adopted a limit, or “cap,” on the dollar amount that may be paid out for such performance-based equity awards.
We value the insights gained from our discussions with our stockholders and find them to be helpful as our Compensation Committee considers and adopts policies affecting our executive compensation program. We value the opinions of our stockholders and will continue to consider the outcome of future Say-on-Pay votes, as well as feedback received through our stockholder engagement activities and throughout the year to understand their views on our executive compensation philosophy, policies, and practices, when making compensation decisions for our executive officers.
Consistent with the recommendation of our Board and the preference of our stockholders as reflected in the advisory vote on the frequency of future Say-on-Pay votes conducted at our 2011 Annual Meeting of Stockholders (commonly known as a “Say-When-on-Pay” vote), our Board has adopted a policy providing for annual Say-on-Pay votes on the compensation of the named executive officers. Accordingly, following the Annual Meeting of Stockholders to which this Proxy Statement relates, the next Say-on-Pay vote will take place at our 2017 Annual Meeting of Stockholders. Further, following the Annual Meeting of Stockholders to which this Proxy Statement relates, the next Say-When-on-Pay vote will also take place at our 2017 Annual Meeting of Stockholders.
Executive Compensation Program
Objectives
We believe that highly talented, dedicated, and results-oriented management is critical to our growth and long-term success. Our executive compensation program, which is subject to the oversight of our Board and our Compensationthe Committee, is designed to:
Align our NEOs’executive officers’ interests with long-term stockholder value by providing for a significant portion of management’s compensation in the form of long-term incentive awards, such as stock options, RSUs, and other stock-based awards, with a combination of time-based and performance-based vesting schedules, the value of which depends upon the performance of our common stock;
Tie each NEO’sexecutive officer’s compensation to our success during the most recent fiscal year, measured in large part by our financial and operational performance, using targets that are aligned with our business strategy and operational plan as approved by our Board, and any variations in stockholder value during that period;
Tie a portion of each NEO’s compensation to that executive’s individual performance in supporting our company-wide goals and strategic initiatives for the fiscal year as outlined by our Board, in order to encourage and reflect individual contributions to our overall performance by rewarding individual achievement;
Attract, motivate, and retain management talent of high quality in an intensely competitive market; and
Ensure that each NEO’sexecutive officer’s compensation is at appropriate and competitive levels relative to each other and to senior executives at companies that we have identified as peer group companies, or other appropriate surveyed companies, including certain of our competitors; andcompetitors.
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Structure,
Executive Compensation Elements
Element | Description | Considerations and Rationale | Clawback and Forfeiture Provisions | |||
Base Salary | • Fixed annual cash amount • Paid periodically throughout the year | • Provides a competitive fixed rate of pay recognizing different levels of responsibility and performance | — | |||
Short-Term Incentive Compensation (“SIP”) | • Variable annual performance-based cash incentive awards (“SIP”) • The maximum level of payout is 200% of target | • Incentivizes achievement of important short-term corporate and financial objectives as reflected in our annual plan | ✓ | |||
Long-Term Incentive Compensation (“LTI”) | ||||||
Time-based | • Restricted stock unit awards with time-based vesting | • Realizable compensation based upon the intrinsic value of our stock which vests over time. Retains executives through vesting over a multi-year period • Ties a substantial amount of an executive’s overall compensation to our long-term performance | ✓ | |||
Performance- based | • Performance restricted stock unit awards(P-RSU) based on achievement of shareholder return compared to the S&P North American Technology Sector Index, measured over a three-year performance period. • If our company TSR falls below the 25th percentile for the three year measurement period, then there would be no payout on the awards. The maximum payout level for theP-RSU awards is 150% of target for achievement of 75th percentile or greater performance for the three year performance period. | • Motivates executives and rewards the achievement of superior TSR performance over a three-year performance period • Ties a substantial amount of an executive officer’s overall compensation to our relative long-term stock performance | ✓ |
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The foregoing elements combine to promote the extent deemed practicablecompensation objectives that we have outlined above. The Committee believes that a mix of both short-term cash incentives and long-term equity incentives are appropriate byto implement our overall compensation program. The percentage that these elements represent of compensation granted in fiscal 2016 to our CEO and our other NEOs is reflected below:
2016 NEO Compensation Mix
The Committee considers long-term equity awards as the bonuses paidmost effective component of our executive compensation program for attracting and retaining executive talent, and incentivizing long-term performance that aligns with the interests of our stockholders. Accordingly, in setting executive compensation, the Committee has generally allocated executive compensation opportunities heavily toward long-term equity awards. Moreover, in any particular performance period, assuming strong company and/or individual performance, the Committee may use equity awards for retention purposes or to incentivize performance in cases where the NEOs to be tax deductible to us as “qualified performance-based compensation” under Section 162(m)nature of an executive’s future performance goals merits a higher award commensurate with higher target achievements for the IRC.
Implementing Our Objectivesperformance period.
Our CompensationThe Committee evaluates base salaries and short-term and long-term incentive awards as tools to provide the appropriate incentives to meet our compensation objectives both individually and in the aggregate for the NEOs. Our CompensationThe Committee is also cognizant of the importance of investing in executive talent to help achieve our corporate strategies and goals, particularly during times of corporate transformation. We believe the most important indicator of whether our compensation objectives are being met is whether we have structured our compensation elements to incentivize delivery of superior performance, particularly with respect to our financial performance and strategic initiatives, as well as long-term growth and profitability, and overall stockholder return. We also seek to ensure that our compensation program incentivizes our executives to perform in line with or above our expectations and to continue their careers with us.
Executive Compensation Policies and Practices
We endeavor to maintain sound governance standards consistent with our executive compensation policies and practices. Our CompensationThe Committee evaluates our executive compensation program on a regular basis to ensure that it is consistent with our short-term and long-term goals. The following policies and practices were in effect during fiscal 2015:2016:
• | Direct Communication with Board of Directors.We provide a direct line of communication for our stockholders with our Board, as described under “Director Independence and Corporate Governance—Communications with Directors” above. |
Independent Compensation and Leadership Development Committee.Our Compensation The Committee is comprised solely of independent directors.
Independent Compensation and Leadership Development Committee Advisors. Our CompensationThe Committee engaged its own compensation consultant to assist with its fiscal 20152016 compensation responsibilities. This consultant performed no consulting or other services for us during fiscal 2015.2016.
Annual Executive Compensation Review. Our CompensationThe Committee conducts an annual review and approval of our compensation strategy, including a review of our compensation peer group used for comparative purposes.
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Executive Compensation Policies and Practices. Our compensation philosophy and related corporate governance policies and practices are complemented by several specific compensation practices that are designed to align our executive compensation with long-term stockholder interests, including the following:
• | Annual Stockholder Advisory Vote to Approve Named Executive Officer Compensation.We provide our stockholders with an annualnon-binding advisory vote to approve the compensation of our |
• | No Material Perquisites. We do not provide material perquisites to our |
• | No Excise TaxGross-ups. We do not provide excise taxgross-up payments in connection with executive severance or change |
• | “Double-Trigger”Change-of-Control Arrangements. Allchange-of-control payments and benefits are based on a “double-trigger” arrangement (that is,they require both achange-of-control of the Companyplusa qualifying termination of employment before payments and benefits are paid) |
• | Stock Ownership Guidelines.We require our CEO, CFO and other executive officers to own a minimum number of shares of our common stock valued at five, four or three times annual base salary, respectively. We maintain stock ownership guidelines for our NEOs, as further described in “Executive Stock Ownership Guidelines” |
• | Compensation Recovery Policy.We maintain a compensation recovery |
• | Hedging and Pledging Prohibited. We prohibit our employees, including our NEOs, and ournon-employee directors from hedging or pledging our |
• | No Stock Option Repricings. We do not reprice outstanding stock options (where the exercise price is below the then-current market price of our common stock) without stockholder approval. |
Executive Compensation Elements
Each compensation element is structured to recognize individual performance and intended to incentivize both short- and long-term performance. Our compensation program consists of the following short-term and long-term elements:
Short-term elements
Base salary;
Variable annual performance-based cash incentive awards; and
Benefits and perquisites.
Long-term elements
Equity awards with time-based vesting; and
Equity awards that are earned based on achievement of performance targets over a long-term measurement period. Our Compensation Committee has adopted a policy that provides that generally one-half of the value of an executive’s equity awards shall be performance-based, subject to individually negotiated contractual arrangements with newly hired executives.
The foregoing elements combine to promote the compensation objectives that we have outlined above. Our Compensation Committee believes that a mix of both short-term cash incentives and long-term equity incentives are appropriate to implement our overall compensation program.
Within our executive compensation program, our Compensation Committee considers long-term equity awards as the most effective component of our executive compensation program for attracting and retaining executive talent, and incentivizing long-term performance that aligns with the interests of our stockholders. Accordingly, in setting executive compensation, our Compensation Committee has generally allocated executive compensation opportunities more heavily toward long-term equity awards rather than cash compensation. Moreover, in any particular performance period, assuming strong company and/or individual performance, our Compensation Committee may use equity awards for retention purposes or to incentivize performance in cases where the nature of an executive’s future performance goals merits a higher award commensurate with higher target achievements for the performance period.
Executive Compensation Highlights
Over the past three years, we have made significant changes to our senior management team, including the appointment of Mr. Rothman as our Chief Financial Officer in February 2013, Mr. Galant as our CEO in October 2013, Mr. Bhanot as our Executive Vice President, Engineering and Chief Technology Officer in December 2013, and, most recently, the appointment of Mr. Robson as our Executive Vice President, Verifone Systems in January 2015. In hiring these individuals, our Board sought new executive talent with substantial strategic experience in the financial technology industry and technical expertise relevant to our systems and solutions, and also executives with demonstrated leadership and success at organizations with greater scale or complexity than ours in order to position ourselves for growth.
For fiscal 2015, our Compensation Committee took the following key compensation actions with respect to the compensation of our NEOs:
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• |
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• | Long-term Incentive Compensation |
• | Performance-based Equity Awards.Consistent with the foregoing policy in |
• | Payout Limits for Performance-based Equity Awards.The maximum payout level for theP-RSU awards is 150% of target. We have also imposed a limit, or “cap,” on the dollar amount that may be paid out for suchP-RSU awards equal to four times the grant date fair value of |
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• | Additional Cap on Performance-based Equity Awards.As discussed above, beginning in fiscal 2017, no incremental payouts will be made under our P-RSU awards above target unless we achieve a positive absolute TSR. |
• | Peer group selection methodology.We use a formula-based approach, based on objective, quantitative criteria, for selecting companies for our |
Compensation Terms with Fiscal 2015 NEOs
Our current arrangements with our NEOs relate in part to terms that we negotiated with each NEO when he was hired. The pay levels and awards reflected in the employment arrangements for these executives were a result of extensive negotiations with the executives, taking into account the totality of the circumstances and the competitiveness in our industry for executive talent. While our Compensation Committee references our executive compensation program and policies in negotiating compensation for new executives, our Compensation Committee also places significant weight on each candidate’s specific qualifications, other competitive opportunities available to the candidate, the candidate’s current compensation package, including value of any compensation forfeited in leaving a position to join Verifone, and the initial compensation packages of individuals in similar leadership positions at our peer group companies, companies that compete with us for executive talent (including companies with organizations and operations of greater complexity or larger scale than ours), and other companies in our industry based on information provided by our Compensation Committee’s compensation consultant. For example, our Compensation Committee may agree to a cash or equity bonus award upon an executive’s employment start date, or may provide for minimum bonus payouts for specified periods, to replace or “make whole” compensation foregone by an executive in order to accept employment with us. Our Compensation Committee also gives significant consideration to each candidate’s intended role and responsibilities, including the criticality of his or her role to our ability to successfully execute on our business and transformation plan.
Negotiated terms at the time of hire are intended to be specific only to the new hire compensation for the executive. Ongoing compensation will be determined based on performance and the principles of our executive compensation program. On an ongoing basis, our Compensation Committee would continue to give significant
weight to an executive’s experience, background and demonstrated leadership, particularly at companies of greater complexity or larger scale of operations than ours, in evaluating whether an executive’s total compensation is competitive and sufficient to retain an executive. For more information on the compensation terms provided to our NEOs, see the discussion under “Employment Agreements and Offer Letters” below.
Determination of Compensation
Role of our Compensation and Leadership Development Committee in Determination of Executive Compensation
Our CompensationThe Committee reviews our executive compensation program, policies and practices annually. Our CompensationThe Committee analyzes all existing elements of compensation (including base salary, annual cash incentive awards and long-term incentive compensation) for each executive officer and considers, among other things, the retention value of the long-term equity awards and overall competitiveness of the program. In evaluating the competitiveness of our executive compensation program and setting executive compensation levels, our Compensation Committee compares each compensation element separately, and in total, to compensation at the peer group companies or other surveyed companies where peer group information is not available for a particular position. Our Compensationofficer. The Committee evaluates each component of our compensation program to provide the appropriate incentives to meet our compensation objectives both individually and in the aggregate.
In determining the compensation of each executive officer, including each NEO, our Compensationthe Committee considers the following factors:
The contribution, expertise and experience of the NEO and theexecutive officer;
The scope and importance of the NEO’ssuch executive officer’s responsibilities;
PeerCompetitive market data, based on peer group company data, competitive market data and other analyses prepared by our Compensationthe Committee’s compensation consultant, as described below;
Whether the short-short-term and long-term elements of the compensation package, in absolute as well as relative terms, assure that appropriate recognition, incentives and retention value are maintained;
Our stock price performance over a multi-year period compared against relevant market indices;
Our financial performance during the fiscal year as measured against projections of our financial performance approved by our Board at the beginning of the fiscal year, including projections in respect ofnon-GAAP net revenues,non-GAAP EPS and free cash flow;
The compensation package received by our NEOthe executive officer in prior fiscal years;
The compensation package of the individual NEOsexecutive officer as compared with each other as well as our other officers; and
With respect to our NEOsexecutive officers other than theour CEO, the recommendation of our CEO based on his subjective evaluation of the individual’s performance.
The Committee’s goal in its deliberations is to award compensation that is reasonable in relation to the objectives of our executive compensation program when all elements of potential compensation are considered. The Committee uses the compensation data and market trends described below as an important factor in setting the compensation of our executive officers. This data is one of a number of factors in the Committee’s decisions regarding compensation and pay practices, and it generally uses such data and trends as a reference point rather than as a strict benchmarking tool in making decisions as to whether the contributions and responsibilities of each NEO are properly reflected in his or her compensation. Where an executive officer’s role with Verifone comprises more than one function or area of responsibility, the Committee consults with its compensation consultant to evaluate additional data and recommendations in adjusting such executive officer’s compensation to reflect his or her role.
As part of its annual process to set executive compensation, the Committee considers a number of factors and data points relevant to each executive officer, including competitive compensation levels for each compensation element based on peer group companies and competitive market data. Assessments are made on anexecutive-by-executive basis, with consideration of the size and complexity of each executive officer’s business unit or function, as well as their individual roles and responsibilities. The Committee places substantial weight on whether the compensation will incentivize superior performance as well as on the overall competitiveness and retention value
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of an executive officer’s compensation. With respect to executive officers other than the CEO, the Committee also places substantial weight on performance reviews measuring objective standards of such executive officers that are made by the CEO. The Committee evaluates the competitiveness within our industry for executive talent of the caliber that we desire and also gives consideration to organizational factors that may impact retention of our executives. Several of our recent management changes have included the addition of executive officers with extensive executive leadership experience and a level of expertise at organizations that are larger in scale and complexity than ours and our peer group companies. The Committee takes into consideration the value to Verifone of such individual’s experience and level of expertise in setting compensation.
Our current arrangements with our NEOs relate in part to terms that we negotiated with each NEO when he was hired. The pay levels and awards reflected in the employment arrangements for these executive officers were a result of extensive negotiations with each of them, taking into account the totality of the circumstances and the competitiveness in our industry for executive talent. Negotiated terms at the time of hire are intended to be specific only to the new hire compensation for the executive officer. Ongoing compensation will be determined based on performance and the principles of our executive compensation program. On an ongoing basis, the Committee would continue to give significant weight to an executive’s experience, background and demonstrated leadership in evaluating whether an executive’s total compensation is competitive and sufficient to retain an executive. For more information on the compensation terms provided to our NEOs, see the discussion under “Employment Agreements and Offer Letters” below.
Role of Compensation Consultant
Our CompensationThe Committee retains and consults with a compensation consultant on overall compensation program strategy and the competitiveness of our executive compensation program, and considers the input of the compensation consultant in making compensation decisions. Our CompensationThe Committee also considers information from its compensation consultant regarding the compensation levels of companies within our industry and other industries that compete for the same talent. We also subscribe to third-party compensation survey and advisory services that allow us and our Compensationthe Committee to access reports and compensation survey data for comparative purposes. In determining compensation policies and practices for our NEOs, our Compensationthe Committee also considers the executive compensation policies periodically published by the major proxy advisory firms.
Neither we nor our Compensationthe Committee has maintained any long-term contractual relationship with any compensation consultant, but in recent years our Compensationthe Committee has retained Compensia, a national compensation consulting firm, to provide relevant competitive market data and compensation advisory services in connection with its review and determination of compensation for our NEOs. NeitherDuring fiscal 2016, neither Compensia nor any of its affiliates provided any services to us other than the services provided to our Compensationthe Committee. During fiscal 2015, our Compensation2016, the Committee conducted an independence evaluation of Compensia pursuant to SEC rules and the NYSE listing standards, including a consideration of any potential conflict of interests, prior to its engagement of Compensia and concluded that Compensia was independent. Compensia reports directly to our Compensationthe Committee and may be terminated or replaced at any time at our Compensationthe Committee’s sole discretion.
Competitive Data
Our CompensationThe Committee considers compensation-related market and peer group company data, as well as additional survey data in making executive compensation decisions. PeerOur peer group companies consistconsists of companies that are likely to compete with us for business and/or for executive talent, and were selected using a formula-based“formula-based” approach. TheNear the end of fiscal 2016, we adjusted the formula for peer company selection in fiscal 2016 to more closely match the approach used at that time by Institutional Shareholder Services. This formula-based approach identifies companies with the following company characteristics:
Principal business generally in high-technology;
Comparable in market capitalization (using companies with four-tenths to four times our amounts)market capitalization);
Comparable in revenues (using companies withone-half to two times our amounts)annual revenues);
Comparable in terms of market capitalization as a multiple of revenue (using companies with a multiple of one to four times revenue); and
Having an annual revenue growth exceeding 5%.
The criteria used for the selection of peer group companies and competitive market data are intended to enable comparisons to companies with whom we compete for business and/or executive talent. Based on the components of our formula, our
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Our formula-based approach also seeks to maintaindevelop a peer group that places us at approximately the average of the range of market capitalization and revenue of our peer group companies.
Verifone’s position as compared to the companies in the peer group based on market capitalization and revenues is set forth below:
The following companies made up the peer group companies for fiscal 2015,2016, with changes from fiscal 20142015 resulting fromin six companies being added (Cree, Inc., EchoStar Corporation, Sapient Corporation, Take-Two Interactive Software, Inc., Trimble Navigation, Ltd. and ViaSat Inc.) or removed (Belden Inc., Blackhawk Network Holdings, Inc., CoreLogic, Inc., Cypress Semiconductor Corporation, SunPower Corporation and Synaptics, Inc.) and six companies being removed (Cree, Inc., EchoStar Corporation, Sapient Corporation,Take-Two Interactive Software, Inc., Trimble Navigation, Ltd. and ViaSat Inc.) based on the application of the formula-based approach and either meeting or no longer meeting the criteria:approach:
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Cadence Design Systems, Inc. | Cardtronics, Inc. | Ciena Corporation | ||
CoreLogic, Inc. | Cypress Semiconductor Corporation | Euronet Worldwide, Inc. | ||
Genpact Limited | Global Payments Inc. | MAXIMUS, Inc. | ||
Microsemi Corporation | NeuStar, Inc. | SunPower Corporation | ||
Synaptics, Inc. | Synopsys, Inc. | Teradyne, Inc. | ||
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| Vantiv | |||
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Where additional market data is needed for the evaluation of compensation for our executives,executive officers, including when there is insufficient peer company information available, our Compensationthe Committee uses compensation survey data for companies generally with the same characteristics noted above, and that are likely to compete with us for executive talent. For fiscal 2015,2016, additional competitive market data was provided from the Radford Global Technology Compensation Survey of companies with annual revenues in the range of $1.0 billion to $3.0 billion.
Compensation Committee Evaluation of Competitive Data
InformationThe competitive data reviewed by our Compensationthe Committee includes analyses of base salary, total cash compensation, long-term incentive value and total direct compensation of our peer group companies and additional competitive market data prepared by its compensation consultant. In preparing for its annual review of executive compensation, our Compensationthe Committee seeks advice from its compensation consultant with respect to the individual elements of executive compensation, as well as the competitiveness of our executive compensation program compared to the peer group companies and competitive market data, and taking into account any changes to the competitive environment for executive talent in our markets. In evaluating executive compensation and our executive compensation program, our Compensationthe Committee takes into account our 1-yearone-year and 3-yearthree-year financial performance based on parameters such as net revenues, operating income trend, net income trend, market capitalization growth and TSR, compared to ourthe peer group companies and competitive market data.
Our Compensation Committee’s goal in its deliberations is to award compensation that is reasonable in relation to the objectives of our compensation program when all elements of potential compensation are considered. Our Compensation Committee uses the compensation data and market trends described above as an important factor in setting executive compensation. This data is one of a number of factors in our Compensation Committee’s decisions regarding compensation and pay practices, and it generally uses such data and trends as a reference point rather than as a strict benchmarking tool in making decisions as to whether the contributions and responsibilities of each NEO are properly reflected in his or her compensation. Where an executive’s role with Verifone comprises more than one function or area of responsibility, our Compensation Committee consults with its compensation consultant to evaluate additional data and recommendations in adjusting such executive’s compensation to reflect his or her role.
As part of its annual process to set executive compensation, our Compensation Committee considers a number of factors and data points relevant to each executive, including competitive compensation levels for each compensation element based on peer group companies and competitive market data. Assessments are made on an executive-by-executive basis, with consideration of the size and complexity of each executive’s business unit or function, as well as their individual roles and responsibilities. Our Compensation Committee places substantial weight on whether the compensation will incentivize superior performance as well as on the overall competitiveness and retention value of an executive’s compensation. Our Compensation Committee evaluates the competitiveness within our industry for executive talent of the caliber that we desire and also gives consideration to organizational factors that may impact retention of our executives. Several of our recent management changes have included the addition of executives with extensive executive leadership experience and a level of expertise at organizations that are larger in scale and complexity than ours and our peer group companies. Our Compensation Committee takes into consideration the value to Verifone of such executive’s experience and level of expertise in setting compensation. In addition, for certain periods, an executive’s compensation may be based on specific negotiations at the time such executive was hired.
Role of CEO in Determining Executive Compensation for NEOs
Our CEO completes an annual performance evaluation with each of our executive officers, including each of the other NEOs, and provides recommendations to our Compensationthe Committee with respect to the determination of compensation for our NEOs;their
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compensation; however, our CEO does not make a recommendation as to his own compensation. While our Compensationthe Committee uses this information and values our CEO’s recommendations, it ultimately exercises its own judgment in setting each NEO’s compensation. Our CEO was not present at any Compensation Committee discussions regarding his own compensation.
Employment-Related Agreements with the NEOs
We may enter into arrangementswritten agreements with one or more of our executivesexecutive officers related to specific employment or compensation terms. Our CompensationThe Committee makes the determination as to the terms and conditions of our arrangementsagreements with our executives.executive officers. In general, our Compensationthe Committee considers whether an agreement is necessary to
obtain a measure of assurance as to the executive’sexecutive officer’s continued employment in light of prevailing market competition for the particular position held by the NEOindividual and the importance of the particular position to our operations and strategic plan, or if our Compensationthe Committee determines that an employment agreement is necessary and appropriate to attract, motivate, and retain executive talent in light of market conditions, the prior experience of the executive,individual, or our practices with respect to other similarly situated employees.
Only one of our NEOs, Mr. Robson, joined the Company during fiscal 2015. Mr. Robson’s employment agreement is highlighted below. Employment agreements and offer letters for otherour NEOs are summarized in the section “Employment Agreements and Offer Letters” below.
Fiscal 2016 Executive Compensation Decisions
Summary of 2016 Executive Compensation Actions
Over the past four years, we have made significant changes to our senior management team, including the appointment of Mr. Robson
Rothman as our Chief Financial Officer in February 2013, Mr. Galant as our CEO in October 2013, Mr. D’Agostino as our Chief Strategy Officer in December 2013, and, most recently, the appointment of Mr. Robson joined us as EVP, Verifoneour Executive Vice President, Global Head of Solutions in January 2015. In setting his compensation, key considerations in addition to peer group company data points included Mr. Robson’s compensation at his then-currenthiring these individuals, our Board sought new executive positiontalent with substantial experience aligned with our transformation and strategy, such as Chief Technology Officer for Dell’s Client Product Group and his extensive experience as an innovator for new products and technologies. In addition to setting an initial annual base salary and target annual cash bonus opportunity, Mr. Robson’s offer letter included the following negotiated provisions:
Sign-On Bonus. A sign-on bonus of $1,600,000 payable within ten business days of his employment start date of January 19, 2015, subject to (i) return of the full bonus in the event he resigns without good reason or if his employment is terminated for cause (in each case as such terms are defined in our Executive Severance Policy) on or before the second anniversary of his employment commencement date;financial technology industry and (ii) return of $1,000,000 of the bonus if such resignation or termination for cause occurs after the second anniversary but before the third anniversary of his employment commencement date.
Long-Term Incentive Equity Awards. An initial RSU award with a grant date fair market value of $3,000,000, 50% of which will cliff vest on the first anniversary of the date of grant (which anniversary will occur on February 2, 2016) and 50% of which will cliff vest on the second anniversary of the date of grant.
Relocation expenses. Reimbursement of reasonable relocation and temporary housing expenses (not to exceed six months) up to $150,000, for his relocationtechnical expertise relevant to our corporate headquarters in California. Such reimbursement does not include a gross up for any associated income taxes.
Severancesystems and Change of Control. Certain severance paymentssolutions. They also sought executives with demonstrated leadership and benefits as described under “Potential Payments Upon Terminationsuccess at organizations with greater scale or Change of Control—Severance Arrangements” below.
Mr. Robson’s initial compensation package also includes terms which were intended as one-time “make-whole” components and were designed to be competitive with the terms of his compensation at Dell. Our Compensation Committee does not consider such compensation components to be typical of our compensation program or philosophy and are not components in our Compensation Committee’s ongoing executive compensation decisions, but rather were appropriatecomplexity than ours in order to recruitposition ourselves for growth.
For fiscal 2016, the Committee took the following key compensation actions with respect to the compensation of our NEOs:
• | Base Salaries—Maintained their fiscal 2016 base salaries at their fiscal 2015 levels, with no raises since at least fiscal 2013 other than for Mr. D’Agostino, whose base salary was increased by $40,000 to reflect his promotion from Senior Vice President to Executive Vice President and his expanded role. Base salaries for all NEOs other than Mr. Bhanot, who resigned in fiscal 2016, have continued at the same level for fiscal 2017. |
• | Short-Term Incentive Compensation—Mr. Galant’s short-term incentive compensation target for fiscal 2016 was increased by $200,000 from $1,200,000 to $1,400,000. Given the multi-year transformation, emphasis on the importance of achieving objective, critical short-term goals associated with our transformation plans, the decision to keep Mr. Galant’s base salary flat since his hiring in order to focus on“at-risk” rather than “fixed” compensation and in order to retain Mr. Galant, the Board increased Mr. Galant’s target opportunity by $200,000. Messrs. Rothman, D’Agostino, Liu, Robson and Bhanot maintained their short-term cash incentive target for fiscal 2016 at the fiscal 2015 level. The individual performance component was also eliminated in fiscal 2017. |
• | Long-Term Incentive Compensation—Granted long-term incentive compensation opportunities in the form of performance-based and time-based restricted stock unit awards. TheP-RSU awards are to be earned based on our total stockholder return performance compared to the total stockholder return of the S&P North American Technology Sector Index measured over a three-year performance period. The equity awards were granted with a grant date fair value of $4,976,693 to our CEO and in amounts ranging from a grant date fair value of $894,774 to $1,739,814 to our other NEOs. |
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OurPay-for-Performance Philosophy in Action
Despite our management team’s focus on key strategic and financial goals and the progress outlined in the previous section, we did not meet thenon-GAAP EPS threshold for our short-term incentive plan, as set by the Committee. As a result, each NEO and our EVP, Verifone Solutions.
In addition, the relative TSR metric in ourP-RSU fell short of the performance targets and thresholds set by the Committee. As illustrated in the table below, the realizable compensation for our CEO over the last three fiscal years (2014-2016) is significantly less than the total compensation amounts disclosed in the Fiscal 2015 Executive2016 Summary Compensation Table and demonstrates an effective“pay-for-performance” when we have not performed to our expectations.
(1) | “Granted Pay Opportunity” equals the sum of, for all of the three prior fiscal years: (i) base salary, (ii) target value of short-term cash incentives granted and bonus earned, and (iii) the grant date fair-value of long-term incentive awards in fiscal 2015 and 2016. Mr. Galant was not granted a long-term incentive award in fiscal 2014. |
(2) | “Realizable Pay” equals the sum of, for all of the three prior fiscal years: (i) actual base salary paid, (ii) actual short-term cash incentives and bonus earned, (iii) an assumed realizable value of long-term incentive awards forP-RSU awards granted during the three prior fiscal years based on the methodolgy described below, (iv) the value as of their vesting date of time-based awards granted in fiscal 2015 and 2016 that vested prior to October 31, 2016, and (v) an assumed realizable value for unvested time-based long-term incentive awards granted in fiscal 2015 and 2016 based on the fair market value of our common stock on October 31, 2016 of $15.48. Mr. Galant was not granted a long-term incentive award in fiscal 2014. Under the terms of ourP-RSU awards, no shares will be delivered if our total stockholder return compared to the total stockholder return of the S&P North American Technology Sector Index, measured over a three-yearP-RSU period, is below the 25th percentile on a stack-ranked basis. We have assumed that neither of theP-RSU |
32 | 2017 Proxy Statement |
awards granted to our CEO in fiscal year 2015 and 2016 will vest based on the closing market stock price of $15.48 as of October 31, 2016 in light of our stock price performance as compared against the S&P North American Technology Sector Index from the respective dates these awards were granted through October 31, 2016. The values ultimately realized on theseP-RSU awards will depend on our share price as of the end of the three-year performance periods for these awards. |
Detailed Review of Compensation Decisions
Base Salary
Our CompensationThe Committee reviewed the base salary for our NEOs at the beginning of fiscal 20152016 and decided to maintain the same annual base salary for fiscal 20152016 as for fiscal years 2014 and 20132015 for Messrs. Galant, Rothman, Liu, Robson and Liu.Bhanot. Mr. Bhanot joined usD’Agostino’s base salary was increased by $40,000 in December 2013fiscal 2016 to reflect his promotion from Senior Vice President to Executive Vice President and his annualexpanded role, increased responsibilities and appropriate compensation for that role relative to external and internal benchmarks. The base salary for 2015 was maintainedsalaries of Messrs. Galant, Rothman, Liu, Robson and Bhanot have remained flat since at the same level as forleast fiscal 2014. Mr. Robson joined us in January 2015 and his annual base salary for fiscal 2015 was determined in arm’s-length negotiation with him.2013. The following table sets forth the annual base salaries for fiscal 20152016 for our NEOs:
NEOs | Fiscal 2015 | |||
Paul Galant | $ | 800,000 | ||
Marc Rothman | $ | 450,000 | ||
Alok Bhanot | $ | 400,000 | ||
Albert Liu | $ | 400,000 | ||
Glen Robson | $ | 450,000 |
NEOs | Fiscal 2016 | |||
Paul Galant | $800,000 | |||
Marc Rothman | $450,000 | |||
Vin D’Agostino | $400,000 | |||
Albert Liu | $400,000 | |||
Glen Robson | $450,000 | |||
Alok Bhanot | $400,000 |
Base salaries (for all but Mr. Bhanot, who resigned) have continued at the same level for fiscal 2017.
Short-Term Incentive Compensation
Our CompensationThe Committee uses the short-term incentive compensation opportunitiesplan to incentivize achievement of certain short-term corporate objectives as reflected in our annual operating plan. The performance measures and related target levels are established at the beginning of each fiscal year based on our annual operating plan as approved by our Board at that time and are generally set at the higher end of the range ofor above our planned growth.announced guidance. On an individual basis, each NEO is given a set of performance objectives that are aligned with our annual operating plan, strategic goals, and transformation initiatives, which are set out in the form of a “scorecard.” The fiscal 20152016 corporate financial performance objectives, a detailed summary of each NEO’s fiscal 2015 scorecard performance objectives and our actual achievement versus such objectives are discussed in further detail below under “Fiscal 20152016 Short-Term Incentive Compensation.”
In selecting the performance measures and related target levels for our short-term incentive compensation opportunities, our Compensationthe Committee balances the consideration of the likelihood of achieving such performance objectives with the effectiveness of such objectives in incentivizing our NEOs’ performance, consistent with similar considerations when management prepares our annual operating plans. Our CompensationThe Committee aims to set company-wide financial performance target levels that are expected to be attainable with meaningful effort. On a year-over-year basis, we typically plan for a certain growth rate in each of the financial performance measures when setting the related target levels, after taking into account growth opportunities, strategic initiatives and market position as well as any countervailing considerations. Therefore, in general, unless there are unusual or unexpected factors affecting our business in general, our key markets or a key business unit or region, or if an NEO fails to adequately execute on planned initiatives, it is probable, though not certain, that the target levels will be achieved with meaningful effort. It is important to our Compensationthe Committee that the achievement of these target levels is subject to a certain level of risk, including the risk that there will be no payout as a result of failure to meet the threshold requirement.
For fiscal 2015, the2016, our NEOs’ short-term incentive compensation opportunity consisted of an annual cash bonus target. Consistent with our compensation philosophy, 75% of that opportunity iswas to be determined based onpre-established company-wide performance measures, consisting of corporate financial performance metrics. The other 25% weight isof that opportunity was based on achievement of individual performance objectives based on each
2017 Proxy Statement | 33 |
NEO’s individual scorecard metrics. In fiscal 2016, we eliminated the 20% discretionary adjustment component with respect to our NEOs’ short-term incentive compensation opportunity. Each NEO’s short-term incentive compensation bonus was based on the actual percentage achievement for each financial performance measure and the individual scorecard, subject to the calculation methodology and adjustment described below. The maximum short-term incentive bonus attainable for each individual based on both the company-wide performance measures and the individual performance objectives is further capped at two hundred percent (200%)200% of the individual’s short-term incentive compensation opportunity.
Fiscal 20152016 Cash Bonus Target
NEOs | Fiscal 2016 | |||
Paul Galant | $ | 1,400,000 | ||
Marc Rothman | $ | 450,000 | ||
Vin D’Agostino | $ | 400,000 | ||
Albert Liu | $ | 400,000 | ||
Glen Robson | $ | 450,000 | ||
Alok Bhanot | $ | 500,000 |
Fiscal 2016 Performance Measures for Short-Term Incentive Plan
Company Financial Performance Measures
Our CompensationThe Committee views our overall financial performance as the most important factor in determining an NEO’s short-term incentive compensation. For fiscal 2015, our Compensation2016, the Committee selectednon-GAAP net revenues,non-GAAP EPS and free cash flow, which directly supported our fiscal 20152016 business priorities as the company financial performance measures. Seventy-five percent of each NEO’s annual short-term incentive bonus target for fiscal 2015 is based on the achievement of company financial performance measures. Our CompensationThe Committee also determined that we musthad to achieve at least 80% of thepre-established target level for both thenon-GAAP net revenues andnon-GAAP EPS measures (before applying the decelerator/accelerator factor described below) in order for there to be a bonus payout. Failure to meet this threshold level for either goal results in no bonus payout. The effect of these thresholds can be seen in the fiscal 2016 actual incentive payment result. In addition, the maximum payout under each performance measure was capped at 200%. The relative weighting among these three performance measures for fiscal 2015 were revised to place2016 reflects a heavier weightfocus on revenues to emphasize the importance of revenue attainment and growth to the value of Verifone. All fiscal 20152016 financial measure target levels were set higher than the actual results achieved for the same measures in fiscal 2014.2015 and at or above our announced guidance near the beginning of the fiscal year.
1.Non-GAAP net revenues (weighted 40%)
We consider growth in revenues to be an essential component of our long-term success and viability. We usenon-GAAP net revenues in addition to our GAAP revenues to evaluate our overall performance. For fiscal 2015, 2016,non-GAAP net revenues were calculated by adding back to our GAAP net revenues the fair value decrease (step-down) in deferred services revenues at acquisition from acquired entities. We refer to this measure as “non-GAAP“non-GAAP net revenues” in reporting our financial results in current reports on Form8-K.Please see Appendix A for a reconciliation of ournon-GAAP net revenues to our GAAP net revenues for fiscal 2015.2016.
For purposes of calculating the performance achievement for ournon-GAAP net revenue, our Compensationthe Committee applied a decelerator/accelerator factor that provided for every percentage point that we underachieved or overachieved versus thepre-established target level for fiscal 2015,2016, the deemed achievement percentage for this measure would be reduced or increased by five percentage points. For example, if we achieved 99% of the target level fornon-GAAP net revenues, for the purposes of the short-term incentive compensation we will be deemed to have achieved 95% of this measure. Similarly, if we achieved 101% of the target level of this measure, we will be deemed to have achieved 105% of this measure.
34 | 2017 Proxy Statement |
2.Non-GAAP EPS (weighted 25%)
We consider growth innon-GAAP EPS to be an indicator of our ability to generate returns on our operations and fund future growth. We use this performance measure to evaluate our performance and compare our current results with those for prior periods, as well as with the results of other companies in our industry. Thisnon-GAAP performance measure has also been used by investment analysts to evaluate our performance. For fiscal 2015, 2016,non-GAAP EPS was calculated by excluding the following GAAP items from GAAP net income (loss) as reported: amortization of step-down in deferred services revenue at acquisition; amortization of purchased intangible assets; other merger, acquisition, and divestiture related expenses; restructuring charges; stock-based compensation; cost of debt refinancing; certain other charges and income that we believe may limit the comparability of our ongoing operations with prior and future periods, such as litigation settlement and loss contingency expense; certain costs incurred in connection with senior executive management changes, such as separation payments,non-compete arrangement fees, legal fees and recruiter fees; and the income tax effect ofnon-GAAP exclusions. For this purpose,non-GAAP diluted shares include additional shares fornon-GAAP purposes in periods where we havenon-GAAP net income and a GAAP net loss. We refer to this measure as “non-GAAP“non-GAAP net income per diluted share” in reporting our financial results in current reports on Form8-K.Please see Appendix A for a reconciliation of ournon-GAAP net income (loss) to our GAAP net income (loss) and ournon-GAAP EPS to GAAP EPS for fiscal 2015.2016.
As withnon-GAAP net revenues, for purposes of calculating the incentive bonusperformance achievement for this performance measure, our Compensationnon-GAAP EPS, the Committee applied a decelerator/accelerator factor that provided for every percentage point that the companywe underachieved or overachieved versus thepre-established target level for fiscal 2015,2016, the deemed achievement percentage for this measure would be reduced or increased by five percentage points. For example, if we achieved 99% of the target level fornon-GAAP EPS, for the purposes of the short-term incentive compensation we will be deemed to have achieved 95% of this measure. Similarly, if we achieved 101% of the target level of this measure, we will be deemed to have achieved 105% of this measure.
3. Free cash flow (weighted 10%)
Free cash flow is anon-GAAP financial measure. We determine free cash flow as net cash provided by operating activities less capital expenditures, in each case as determined in accordance with GAAP. Management believes free cash flow is a useful measure of liquidity and an additional basis for assessing our ability to fund our activities, including the financing of acquisitions, debt service and repurchases of our common stock.Please see Appendix A for a reconciliation of our free cash flow to our GAAP net cash provided by operating activities for fiscal 2015.2016.
4. Individual Performance Measures (weighted 25%)
Our Compensation Committee recognizes that it is important to reward individual contributions measured based on performance goals set for each NEO that reflect our overall business strategy as well as achievement of individualized strategic and financial goals and other particular areas of importance for the functions or business units managed by each NEO. AFor fiscal 2016, a portion of each NEO’s short-term incentive compensation iswas based on attainment ofpre-established individual performance objectives set at the beginning of the year. For fiscal 2015,2016, individual performance objectives were established using a scorecard system,“scorecard” system. The scorecards have a maximum of five high-level goals, related to achieving our strategic plan and annual business plan, and linked to the overall financial metrics. Within each NEO’s scorecard incorporatedhigh-level goal, critical elements are identified and include either a clear performance goalsmetric that is linked to further our overall transformation and strategic initiativesprimary corporate metrics, or measurable milestones for the fiscal year.delivery of critical large-scale initiatives. Our CEO’s scorecard incorporatesincorporated performance goals measured at a company-wide level and each other NEO’s scorecard setsset out performance goals tied to his or her business unit or functional group.
Twenty-five percent (25%) The targets for these metrics and milestones are agreed at the beginning of each NEO’s annual short-term incentive bonus opportunity forthe fiscal 2015 was based on the achievement of individual scorecard performance measures. Our CEO reviewed and set the scorecard measures for each executive who was a direct report, including Messrs. Rothman, Bhanot, Liu and Robson.year. Our CEO’s scorecard measures were set based on the corporate scorecard approved by our Board. Each NEO’sBoard, and our CEO reviewed and set the scorecard was also reviewed with our Compensation Committee prior to being finalized. The maximum individual performance objectivesmeasures for each NEO were further capped at two hundred percent (200%)executive officer who was a direct report, including Messrs. Rothman, D’Agostino, Liu, Robson and Bhanot. At the end of the NEO’syear, the CEO evaluates actual results on these scorecard metrics and key milestones, and merges them into an aggregate score for individual performance measures, or fifty percent (50%) of the NEO’s annual short-term incentive bonus target.
scorecard performance. After the end of the fiscal year, our Compensationthe Committee met with our CEO to review whether our CEOhe had achieved thepre-established performance objectives in his scorecard and to provide him with an opportunity to present what he believed were his significant contributions to the Company for the fiscal year. Our CompensationThe Committee also reviewed the individual scorecard of each other NEO with our CEO. In determining the overall individual performance of each NEO (other thanof the CEO), our Compensationother NEOs, the Committee placed substantial weight on our CEO’s recommendations and subsequent discussions with him.
2017 Proxy Statement | 35 |
Qualitative Adjustment underFiscal 2016 Short-Term Incentive Plan (capped at +/- 20%)
Although our Compensation Committee believes that the bulk of the short-term incentive bonus should be based on objective measures of our financial performance and individual performance as described above, it also believes that in certain circumstances subjective performance elements can be important in determining our NEOs’ short-term incentive compensation. Under our short-term incentive plan, a portion of an NEO’s bonus may be awarded based on an evaluation of a number of qualitative factors with respect to an NEO’s individual performance that are not identified on the individual scorecard, including development of his or her team at an executive level, leadership, succession planning, compliance culture, tone from the top, overall staff
communications and management and the effect of on performance of factors outside the NEO’s control such as foreign exchange currency fluctuations. This performance assessment is evaluated subjectively and may result in a qualitative adjustment upward or downward by up to 20% of an NEO’s bonus achievement, subject to an overall cap on the short term incentive compensation of 200% of the NEO’s target.
Fiscal 2015 Short-Term Incentive CompensationResults
The short-term incentive compensation performance measures and related target levels and actual short-term incentive awards for fiscal 20152016 are summarized in the table below, followed by a discussion of each NEO’s achievements underlying the awards.below.
Performance Metrics—Fiscal 2015 | Paul Galant | Marc Rothman | Alok Bhanot | Albert Liu | Glen Robson(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Target | Actual | % Achievement w/applied accelerator or decelerator(1) | Weight | Target | Award | Target | Award | Target | Award | Target | Award | Target | Award | |||||||||||||||||||||||||||||||||||||||||||
Financial & Corp. Performance Metrics (in millions, except per share numbers and percentages)(1) |
| 75% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-GAAP net revenues | $ | 2,030 | $ | 2,001 | 92.97 | % | 40% | $ | 480,000 | $ | 446,000 | $ | 180,000 | $ | 167,000 | $ | 200,000 | $ | 186,000 | $ | 160,000 | $ | 149,000 | $ | 180,000 | $ | 132,200 | |||||||||||||||||||||||||||||
Non-GAAP EPS | $ | 1.87 | $ | 1.83 | 89.30 | % | 25% | $ | 300,000 | $ | 268,000 | $ | 112,500 | $ | 100,250 | $ | 125,000 | $ | 112,000 | $ | 100,000 | $ | 89,000 | $ | 112,500 | $ | 79,000 | |||||||||||||||||||||||||||||
Free cash flow | $ | 150 | $ | 143 | 95.16 | % | 10% | $ | 120,000 | $ | 114,000 | $ | 45,000 | $ | 43,000 | $ | 50,000 | $ | 47,000 | $ | 40,000 | $ | 38,000 | $ | 45,000 | $ | 34,000 | |||||||||||||||||||||||||||||
Individual Scorecard Metrics |
| 25% | $ | 300,000 | $ | 600,000 | $ | 112,500 | $ | 169,000 | $ | 125,000 | $ | 156,250 | $ | 100,000 | $ | 150,000 | $ | 112,500 | $ | 89,675 | ||||||||||||||||||||||||||||||||||
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Subtotal |
| 100% | $ | 1,200,000 | $ | 1,428,000 | $ | 450,000 | $ | 479,250 | $ | 500,000 | $ | 501,250 | $ | 400,000 | $ | 426,000 | $ | 450,000 | $ | 334,875 | ||||||||||||||||||||||||||||||||||
Qualitative Adjustments (+/- 20%) |
| $ | 285,600 | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||||||||||||||||||||||||
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Total |
| $ | 1,713,600 | $ | 479,250 | $ | 501,250 | $ | 426,000 | $ | 334,875 | |||||||||||||||||||||||||||||||||||||||||||||
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Performance Metrics—Fiscal 2016 | Paul Galant | Marc Rothman | Vin D’Agostino | Albert Liu | Glen Robson | Alok Bhanot(2) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Target | Actual | % Achievement(1) | Weight | Target | Award | Target | Award | Target | Award | Target | Award | Target | Award | Target | Award | |||||||||||||||||||||||||||||||||||||||||||||||||
Financial and Corp. Performance Metrics (in millions, except per share numbers and percentages)(1)(3) |
| 75% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-GAAP net revenues | $ | 2,167 | $ | 2,006 | 92.6% | 40% | $ | 560,000 | $ | — | $ | 180,000 | $ | — | $ | 144,000 | $ | — | $ | 160,000 | $ | — | $ | 180,000 | $ | — | $ | 200,000 | $ | — | ||||||||||||||||||||||||||||||||||
Non-GAAP EPS | $ | 2.24 | $ | 1.66 | 74.1% | 25% | $ | 350,000 | $ | — | $ | 112,500 | $ | — | $ | 90,000 | $ | — | $ | 100,000 | $ | — | $ | 112,500 | $ | — | $ | 125,000 | $ | — | ||||||||||||||||||||||||||||||||||
Free cash flow | $ | 175 | $ | 88 | 50% | 10% | $ | 140,000 | $ | — | $ | 45,000 | $ | — | $ | 36,000 | $ | — | $ | 40,000 | $ | — | $ | 45,000 | $ | — | $ | 50,000 | $ | — | ||||||||||||||||||||||||||||||||||
Individual Scorecard Metrics |
| 25% | $ | 350,000 | $ | — | $ | 112,500 | $ | — | $ | 90,000 | $ | — | $ | 100,000 | $ | — | $ | 112,500 | $ | — | $ | 125,000 | $ | — | ||||||||||||||||||||||||||||||||||||||
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Total |
| 100% | $ | 1,400,000 | $ | — | $ | 450,000 | $ | — | $ | 360,000 | $ | — | $ | 400,000 | $ | — | $ | 450,000 | $ | — | $ | 500,000 | $ | — | ||||||||||||||||||||||||||||||||||||||
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(1) | The achievement percentages indicated in the table above fornon-GAAP net revenues andnon-GAAP EPS reflect the |
(2) | Alok Bhanot resigned during fiscal 2016 and |
(3) | See Appendix A to this Proxy Statement for a reconciliation of ournon-GAAP financial performance measures to our GAAP financial performance measures for fiscal |
Short-Term Incentive Plan Achievements
Because we attainedfailed to attain the threshold performance levelslevel for both non-GAAP net revenues and non-GAAP EPS for fiscal 2015, each2016, no annual cash bonus payments were made to any NEO also received a payout based on achievement of his individual performance scorecard goals.or any other executive for fiscal 2016.
Mr. Galant
As discussed above, Mr. Galant’s individual performance was evaluated on a company-wide basis.
As also discussed above, 75% of the weight of the incentive plan is placed on achievement of corporate financial objectives, based on the Compensation Committee-approved formula and targets set at the beginning of the year. The results are laid out in the table above.
For fiscal 2015, our Compensation Committee determined that Mr. Galant significantly exceeded his individual performance measures and our Compensation Committee’s performance expectations on an overall basis.
Our Compensation Committee determined that Mr. Galant significantly exceeded expectations based on its evaluation of Mr. Galant’s individual performance objectives under our short-term incentive compensation plan. Key achievements, included developing and leading key elements of our corporate strategy with a focus on our mission to transform to a payment and commerce services provider, continued significant improvements to executive leadership talent, successfully rebuilding and growing key client relationships, driving improvements in our product roadmap, restructuring the organization to better serve client needs and gain efficiencies, and improvements in overall employee engagement. Mr. Galant’s performance achievement reflected his management of our executive team’s achievement of our corporate strategy and goals, including our restructuring, transformation and recruiting initiatives. Under Mr. Galant’s leadership, we exceeded $2 billion in annual revenues in fiscal 2015 for the first time in the Company’s thirty plus years of operations. We also increased operating cash flow to $249.3 million, free cash flow to $142.9 million and non-GAAP net-income per diluted share to $1.83. Since joining us as our CEO in October 2013, Mr. Galant has successfully built and developed a strong executive management organization, including creating executive development opportunities and a scorecard process to effectively manage executive achievement against corporate goals. He also led the executive team in a number of product and client management initiatives. Mr. Galant also successfully led our transformation toward a one Verifone culture with a focus on clients, operational excellence and effective staff communications and processes, including enhancing our operational and governance infrastructure and materially increasing the overall global employee engagement score as measured by our annual employee survey. Our Compensation Committee also considered the 31% total return in our stock price from October 1, 2013 when Mr. Galant became our CEO through the end of fiscal 2015.
After considering Mr. Galant’s individual performance, our Compensation Committee gave him an individual scorecard level of 200% and further applied a qualitative increase of 20% under the incentive plan to his short-term incentive compensation payout. When combined with the Company achievement level with respect to the financial performance measures described above, Mr. Galant earned a short-term incentive compensation payout equal to 143% of his target award opportunity.
Mr. Rothman
Mr. Rothman’s fiscal 2015 individual performance achievements included:
taking a broad leadership role in developing and executing our plans for transformation, restructuring and operational efficiencies;
establishing global finance shared services support centers;
meeting or exceeding the pre-established targets for the cash conversion cycle, capital expenditure budget and foreign funds repatriation through more disciplined cash management of the Company;
establishing the Company’s first ever stock repurchase program and return of capital to stockholders;
reducing net debt and improving the Company’s credit rating; and
co-leading the Company’s enterprise risk management function.
Mr. Rothman also successfully managed key enhancements to our organization infrastructure through changes in our finance, IT and administrative organizations, processes and systems, including the implementation of Salesforce.com, Oracle R12, Planview and Payroll systems. After considering Mr. Rothman’s individual performance achievements for the year, our Compensation Committee gave him an individual scorecard level of 150%. Taken together with the Company’s achievement level with respect to the financial performance measures described above, Mr. Rothman earned a short-term incentive compensation payout equal to 107% of his target award opportunity.
Mr. Bhanot
Mr. Bhanot’s fiscal 2015 individual performance achievements included:
the successful development and delivery of key new product lines, including our next generation Engage line of payment solutions;
improving product development cycle time;
generating engineering operating efficiencies and reinvesting in new product development; and
implementing a people platform for the global engineering organization resulting in increased employee engagement.
Mr. Bhanot also completed key staffing upgrades and hires in functions critical to our strategy. After considering Mr. Bhanot’s individual performance achievements for the year, our Compensation Committee gave him an individual scorecard level of 125%. Taken together with the Company’s achievement level with respect to the financial performance measures described above, Mr. Bhanot earned a short-term incentive compensation payout equal to 100% of his target award opportunity.
Mr. Liu
Mr. Liu’s fiscal 2015 individual performance achievements included:
serving as the interim General Manager of our China business and driving its strategic restructuring;
executing and integrating our acquisitions during the year;
resolving major pending litigation matters;
continuing enhancements to our corporate governance and compliance functions; and
co-leading the Company’s enterprise risk management function.
After considering Mr. Liu’s individual performance achievements for the year, our Compensation Committee gave him an individual scorecard level of 150%. Taken together with the Company’s achievement level with respect to the financial performance measures described above, Mr. Liu earned a short-term incentive compensation payout equal to 107% of his target award opportunity.
Mr. Robson
Mr. Robson’s fiscal 2015 individual performance achievements included:
successfully executing key product launches, including our next generation Engage line of payment solutions and our mobile and cloud point of sale products;
helping to create a product roadmap for commerce enablement devices;
significantly restructuring the systems solutions product management team; and
recruiting a new global head of marketing to improve our outbound product marketing capabilities.
After considering Mr. Robson’s individual performance achievements for the year, our Compensation Committee gave him an individual scorecard level of 100%. Taken together with the Company’s achievement level with respect to the financial performance measures described above, Mr. Robson earned a short-term incentive compensation payout equal to 94% of the pro-rated target award opportunity.
Long-Term Incentive Compensation
Our CompensationThe Committee determines, on an annual basis, whether to provide long-term incentive compensation in the form of equity awards to our executive officers, including our NEOs, subject to anypre-existing contractual obligations. Our CompensationThe Committee believes that equity awards encourage a strong ownership stake in the Company and align the interests of our NEOs with those of our stockholders. In addition, these equity awards are intended to serve as incentives for our NEOs to remain with us, continue performance at levels consistent with our corporate objectives and tie a substantial amount of their overall target total direct compensation to our long-term stock performance and profitability. As a result, our executive compensation program generally has been weighted more toward long-term incentive compensation rather than cash compensation.
Use of Performance-Based Equity AwardsAward Mix. Our Compensation
Typically, the Committee believes that a significant portion of thegrants equity awards granted to our NEOs shouldin the form of RSU awards that may be performance-based. Consequently, performance-based equity awards have generally comprised at least 50% of each NEO’s total equity award value. Our Board and Compensation Committee have adopted a formal policy that provides that generally at least half of the long-term incentive compensation opportunities granted to our executive officers should be subject to performance-based vesting requirements with the remainder to be subject to time-based vesting requirements, subject to any pre-existing contractual obligations.
Performance-based equity awards are earned upon the achievement of one or more pre-established performance measures and related target levels over a multi-year performance period. For the performance-based equity awards granted to our NEOs in fiscal 2015, our Compensation Committee selected total stockholder return relative to the S&P North American Technology Sector Index, measured over a three-year performance period, as the performance objective. Thesettled for shares of our common stock subjectand/or options to such award will be earned at the end of the three-year performance period based on our actual percentile achievement on a stack-ranked basis, subject to a minimum achievement threshold at the 25th percentile, below which there would be no payout, and a maximum payout of 200% for achievement at the 100th percentile. In selecting a relative performance measure, our Compensation Committee was cognizant of the possibility of a payout in the face of declining performance, but balanced such concern with its use of absolute performance measures in our short-term incentive compensation plan and its belief that this design would enable us to provide our NEOs with a competitive compensation opportunity. In addition, our Compensation Committee believes that a benchmark against an industry performance index is appropriate to control for factors, such as overall economic conditions, that are outside of our NEOs’ control.
Beginning in fiscal 2016, our performance based equity awards will have a maximum payout of 150% for achievement at the 75th percentile or above and will be subject to a maximum payout cap equal to four times the grant date fair market value.
Types of Equity Awards. Equity awards may be in the form of stock options or RSU awards. For RSU awards, upon vesting,purchase shares of our common stock are deliverable on a one-for-one basis. Awards in the form of stockstock. Stock options offer our NEOs the right to purchase the stated number of shares of our common stock at an exercise price per share determined on the date of grant. Stock options have value only to the extent the price of our shares on the date of exercise exceeds the applicable exercise price. The exercise price is the fair market value of our common stock based on the stock closing price, as traded on the NYSE, on the grant date. Stock option awards have a term of seven years from the date of grant. For RSU awards, upon vesting, shares of our common stock are deliverable on aone-for-one basis.
The Committee believes that a significant portion of the equity awards granted to our executive officers, including our NEOs, should be performance-based. Consequently,P-RSU awards have generally comprised at least 50% of each NEO’s total equity award value, with the remainder to be subject to time-based vesting requirements, subject to anypre-existing contractual obligations. In fiscal 2016, 60% of our CEO’s long-term incentive compensation consisted ofP-RSU awards.
P-RSU awards are earned upon the achievement of one or morepre-established performance measures and related target levels over a multi-year performance period. For the performance-based equity awards granted to our NEOs in fiscal 2016, the Committee selected total stockholder return relative to the S&P North American Technology Sector Index, measured over a three-year performance period, as the performance objective. The shares of our common stock subject to such award will be earned at the end of the three-year performance period based on our actual percentile achievement on a stack-ranked basis, subject to a minimum achievement
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threshold at the 25th percentile, below which there would be no payout, and a maximum payout of 150% for achievement at the 75th percentile or above. In addition, beginning in fiscal 2017, if our absolute level of total shareholder return is negative, then the payout of ourP-RSU awards will be capped at 100% regardless of our percentile achievement. OurP-RSU awards are also subject to a maximum payout cap (calculated as of the awards’ earnout date) equal to four times the grant date fair market value. In selecting a relative performance measure, the Committee believes that a benchmark against an industry performance index is appropriate to control for factors, such as overall economic conditions, that are outside of our NEOs’ control.
Changes to Long-Term Incentive Compensation beginning in Fiscal 2017. Beginning in fiscal 2017, ourP-RSU awards will be subject to a maximum payout cap of 100% if the total stockholder return over the three-year performance period is negative. The Committee believes it is important to limit long-term compensation in the event our total stockholder return over a performance period is negative. The Committee believes that the introduction of a payout cap at target in the event of a negative total shareholder return over the performance period of aP-RSU award ensures that payouts received by our NEOs remain appropriately aligned to the total shareholder return realized by our stockholders, balanced with an earning opportunity to meet the retention objectives during our multi-year transformation.
Accounting Considerations. All equity awards are accounted for in accordance with FASB ASC Topic 718,Share-Based Payment. Our CompensationThe Committee consideredconsiders the stock-based compensation charges that would be recorded for accountingfinancial reporting purposes for the grants of stock options and RSU awards granted to our NEOs as part of its evaluation of our long-term incentive compensation. However, our Compensation Committee did not use such consideration as a primary factor in designing our long-term incentive compensation in light of the fact that these items do not directly relate to the achievement of our compensation objectives.
Equity Grant Practice.Practices. Equity awards, including annual awards and awards for new hires, are generally approved by our Compensationthe Committee only during one of its scheduled quarterly meetings. OurGenerally, our executive officers generally receiveare considered for equity awards on an annual basis, which are generally approved by our Compensationthe Committee at its meeting in the first quarter of a fiscal year. In general, our Compensationthe Committee places significant weight on a value-based approach for equity awards and, as noted above, weights executive compensation more heavily toward long-term incentive compensation.
Fiscal 20152016 Equity Awards
As outlined above, the Committee believes that equity awards encourage a strong ownership stake in the Company and align the interests of our NEOs with those of our stockholders. In addition, these equity awards are intended to serve as incentives for our NEOs to remain with us, continue performance at levels consistent with our corporate objectives and tie a substantial amount of their overall target total direct compensation to our long-term stock performance and profitability. In determining the fiscal 20152016 equity awards for our NEOs, our Compensationthe Committee took into consideration the compensation mix specified in our program design, competitive market data, peer group data, each NEO’s individual performance and growth potential, the scope and impact of their role relative to our strategy, and the retention value of his unvested equity awards. Our Compensation Committee also took into account the fact that Messrs. Galant, Rothman, Bhanot and Liu did not receive equity awards in fiscal 2014.reward.
In January 2015,2016, each of our NEOs employed at that time was granted a performance-based RSU award and a time-based RSU award. The performance-based restricted stock unitP-RSU awards were granted with a measurement target based on our company TSR relative to the S&P North American Technology Sector Index, measured over a three-year performance period. Such awards referred to as TSR Shares, are earned at the end of the three-year performance period with payout scaled at actual percentile achievement on a stack-ranked basis, subject to a minimum achievement threshold at the 25th percentile below which there would be no payout, and a maximum payout of 200%150% for achievement at or above the 10075th percentile. Based on our company TSR as of the end of fiscal year 2015 being below the 25th percentile, there would beThere is no payout on such awards as ofif the end of fiscal 2015 if such awards were measured for the period from the time of their grant through October 31, 2015.minimum achievement threshold is not met. This further highlights that when the Company does not perform above the 25th percentile of the S&P North American Technology Sector Index, the NEOs will not realize any consideration under the TSRsP-RSU awards and that realized compensation of the NEOs will ultimately be significantly impacted by the Company’s relative stock price performance. The restricted stock unit awards granted with four-year time-based vesting vest as to 25% of the grant approximately one year after the grant date and as to the remainder in equal quarterly installments over the following three years.
Mr. Robson joined us in January 2015, and his equity compensation reflects the equity awards that were negotiated with him as part of his hiring process. His equity awards are summarized under “Employment Agreements and Offer Letters” below. As discussed under“Overview,” while our Compensation Committee follows our executive compensation policies in determining compensation packages for executive hires, the compensation for each executive hire is negotiated on an individual basis based on our Compensation Committee’s evaluation of a candidate’s specific circumstances and credentials as well as the executive role sought to be filled, and may not be reflective of our ongoing executive compensation practices.
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The following table sets forth the fiscal 2015 equity awards granted to our NEOs including the factors considered by our Compensation Committee in setting each such award:fiscal 2016 were as follows:
Named Executive | Performance- Based Restricted Stock Unit Award (Shares) | Restricted Stock Unit Award with Time- Based Vesting (Shares) | Performance- Based Restricted Stock Unit Award (Shares) | Restricted Stock Unit Award with Time- Based Vesting (Shares) | ||||||||||||
Paul Galant | 77,000 | 57,800 | 108,187 | 71,001 | ||||||||||||
Marc Rothman | 24,050 | 24,050 | 28,850 | 28,401 | ||||||||||||
Alok Bhanot | 24,050 | 24,050 | 30,653 | 30,176 | ||||||||||||
Albert Liu | 24,050 | 24,050 | 29,301 | 28,844 | ||||||||||||
Glen Robson | — | 84,000 | 31,555 | 31,063 | ||||||||||||
Vin D’Agostino | 16,228 | 15,976 |
|
In addition, we provide other benefits to our executive officers, including our NEOs. These benefits include medical, dental, and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, accidental death and dismemberment insurance, and basic life insurance coverage. Our NEOs in the United States generally receive the same health and welfare benefits as our other exempt employees.
We design our employee benefits programs to be affordable and competitive in relation to the market, as well as compliant with applicable laws and practices. We adjust our employee benefits programs as needed based upon regular monitoring of applicable laws and practices and the competitive market.
Perquisites and Other Personal Benefits
We provide limited perquisites and other personal benefits to our NEOs as described in this section and in the Fiscal 2016 Summary Compensation Table when we believe it is appropriate to assist an individual in the performance of his or her duties and for recruitment and retention purposes. With the exception of these items, we do not provide perquisites or other personal benefits to our NEOs other than standard 401(k), health and welfare benefits available to all employees.NEOs.
We provide Mr. Galantour CEO with certain fringe benefits, including storage expenses and travel reimbursement in connection with business and personal travel. We provide Mr. Rothman with certain benefits consisting of housing near our corporate offices and reimbursement of commuting expenses between Mr. Rothman’s residence in San Diego, California and our corporate offices in San Jose, California, in each case without a taxgross-up. We provided Mr. Robson with certain relocation benefits, including moving and housing expenses, in connection with his relocation to our headquarter offices in San Jose, California.
Additional Details of our Compensation Policies, Practices and Awards
Executive Stock Ownership Guidelinesand Holding Requirements Policy
In March 2014, as part of the modifications made to our executive compensation program, our Board amended theWe maintain stock ownership guidelines that apply toas approved by our CEO and members of our management committee to increase the stock ownership levelsBoard that apply to our CEO, CFO and other members of our management committee (whether or not they are a direct report to our CEO). These amendments require our CEO to own a minimum number of shares of our common stock valued at five times his annual base salary, our CFO to own a minimum number of shares of our common stock valued at four times his annual base salary and the other members of our management committeeNEOs to own a minimum number of shares of our common stock valued at three times his or her annual base salary.
Under these amended guidelines, unvested restricted stock awards and RSU awards and owned shares of our common stock count toward satisfying the ownership level. Executive officers appointed prior to the effectiveness of the original guidelines in March 2010 had until March 17, 2015, the fifth year anniversary of the original effective date of the policy, to achieve the relevant stock ownership levels. An executive officer who was appointed after the adoption of the guidelines has five years from his or her first appointment to comply with the
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guidelines. Executive officers who subsequently get promoted to a higher level must achieve their previous target shares within the initial five-year period, but will have until five years from the date of their promotion to achieve
the incremental ownership requirement. Any executive officer who fails to meet or maintain these ownership requirements by the required time frame will be required to retain all shares of our common stock acquired upon exercise of stock options or vesting of restricted stock or RSUs,RSU awards, net of shares withheld for taxes or to pay the exercise price, until such ownership guidelines are attained. Executive stock ownership is reviewed quarterly by the Compensation Committee. AllAs of October 31, 2016, all executive officers who have reached the five-year required time frame for compliance have been and are currently compliant with the executive ownership guidelines.
Adjustment or Recovery of Awards; ClawbackCompensation Recovery (Clawback) Policy
Our CompensationThe Committee has adopted a compensation recovery (“clawback”) policy which provides that in the event of a financial restatement, any incentive-based compensation in the form of cash awards paid to an executive officer (which includes all NEOs) in the three-year period preceding the restatement that would not have been paid to such executive officer based on the restated financial results shallwill be returned to the Company. Such return may be in the form of: (1) a cash payment to the Company; (2) an agreement to withhold an appropriate amount from the executive officer’s base salary over a 12 month period; (3) the reduction of future incentive-based compensation payouts; and/or (4) cancellation of unvested equity awards, as may be agreed between Verifone and such executive officer. Further, all forms of incentive-based compensation (cash and equity) paid or awarded to an executive officer (which includes all NEOs) in the three fiscal years preceding any fraud or gross misconduct shallwill be returned to Verifone in the event such executive officer is deemeddetermined by our Board (in its sole discretion) to have committed such fraud or gross misconduct, with the terms of such return to be set by our Board in its sole discretion. Although waivers of the clawbackcompensation recovery policy may be made at our Board’s sole discretion, our Board anticipateswe anticipate waiver would occur only on a rare and exceptional basis.
Our CompensationThe Committee intends to evaluate this policy at such time as the SEC adopts final rules implementing the requirements of Section 954 of the Dodd-Frank Act.
Policy Prohibiting Derivative Transactions and Pledging or Hedging
In accordance with our insider trading policy, we do not permit any employee, including theany executive officers,officer, or anynon-employee director to enter into derivative transactions on our securities (including short-sales, market options, or other transactions on derivatives of our securities) or to pledge our securities.
Tax ConsiderationsPost-Employment Compensation Arrangements
Section 162(m) of the IRC places a limit on the tax deduction for compensation in excess of $1 million paid to certain “covered employees” of a publicly held corporation. “Covered employees” generally refers to the corporation’s chief executive officer and its next three most highly compensated executive officers (other than the corporation’s chief financial officer) in the year that the compensation is paid. This limitation does not apply to compensation that is considered “qualified performance-based compensation” under the rules of Section 162(m). Our CompensationThe Committee believes that it is in our best interests and the best interests of our stockholders to preserve the deductibility of compensation by structuring compensation elements for covered employees in compliance with Section 162(m) where practicable. The VeriFone Bonus Plan may provide for performance based awards within the meaning of Section 162(m) and our Compensation Committee intends to grant awards under the Bonus Plan that are performance-based within the meaning of Section 162(m). However, our Compensation Committee retains the flexibility to provide certain severance payments and has in the past provided (including during fiscal 2015), for awards that are not deductible for purposes of Section 162(m).
Post-Employment Compensation Arrangements
Severance Arrangements
We have entered into and expect that we will continuebenefits to enter into severance arrangements with our executive officers, including our NEOs, in the NEOs,event of a“change-in-control” of Verifone, to both retain talent and maintain a stable management team leading up to, and during, a change in control event. The Committee also believes that it is in our best interests to provide certain severance payments and benefits should we terminate their employmentto our executive officers, including our NEOs in certain circumstances. Consistentconnection with market practice, such severance arrangements, which our Compensation Committee believes helps us to retain talent and maintain leadership stability, are designed to
provide specified payments and benefits in the event of a “qualifying termination”termination of employment” (generally defined to mean a termination of employment by us other than for cause or a termination by the executive officer for good reason). Our severance arrangements with our executive officers are typically individually negotiated, in some circumstances at the time of his or her hire.
In determining the terms and scope of these arrangements, our Compensation Committee considers (i) similar arrangementssituations not involving a change in place at our peer companies as described above under“Determination of Compensation—Role of Compensation Consultants” and“—Competitive Data”; (ii) market practices and trends as provided to our Compensation Committee by its compensation consultant; (iii) the extent that such arrangements would contribute to our executive compensation program objectives, including the retention value of such arrangements in light of the competitiveness for executive talent in our industry; and (iv) the overall terms of any employment arrangements with each executive officer. In the case of newly recruited executive officers, our Compensation Committee also considers the terms of the candidate’s then-current compensation package.
Executive Severance Policy
In September 2013, our Compensation Committee approved and we adopted the Executive Severance Policy, which applies to certain executive officers, including Messrs. Rothman, Bhanot, Liu and Robson. Our Compensation Committee believes that it is beneficial to implement a consistent set of severance terms for our executive officerscontrol, to provide specificity and certainty, both for our executive officers and us, as it will not only promote executive retention and provide leadership stability, but also enable us to develop our business plans with more clarity as to executive retention costs.
Our post-employment compensation arrangements with our executive officers, including our NEOs, are generally implemented through our Executive Severance Plan, as described in greater detail below. We also have entered into severance arrangements with certain of our executive officers (typically in connection with their hire), including Mr. Galant and Mr. Rothman through their employment agreement and offer letter, respectively.
Executive Severance Plan
On September 18, 2016, our previous Executive Severance Policy expired in accordance with its terms. Effective September 19, 2016, the Committee approved, and we adopted, the Executive Severance Plan. The Executive Severance Plan provides severance benefits to employees designated as participants by the Committee upon certain qualifying terminations and also specifies the treatment of performance-based equity
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awards granted after September 19, 2016 upon a change in control of Verifone. All payments and other benefits under the Executive Severance Plan are subject to the participant’s execution of a release and compliance with certainnon-competition,non-solicitation, confidentiality andnon-disparagement covenants. The Executive Severance Plan will terminate on October 31, 2020. All of the NEOs participate in the Executive Severance Plan, but Mr. Galant participates on a more limited basis due to his individual arrangements. The Executive Severance Plan only applies to Mr. Galant with respect to the change in control treatment of his performance-based equity awards.
Non-Change in Control Severance Benefits
Under the terms of the Executive Severance Plan, during any period of time that is not a period beginning three months prior to and extending 12 months after a change in control of Verifone (a “CIC Protection Period”), in the event of a termination of a participant’s employment by us other than for “cause” or by the participant for “good reason” (in each case, as defined in the Executive Severance Plan), the participant will be entitled to receive (i) a lump sum cash payment equal to 12 months’ base salary; and (ii) 12 months’ health and life insurance benefits continuation coverage, subject to certain exceptions (“Benefits Continuation Coverage”), each as described in the Executive Severance Plan.
In addition, Mr. Galant’s employment agreement provides for certain severance benefits upon a qualifying termination. These terms are described in greater detail under “Potential Payments Upon Termination or Change in Control” below.
Change in Control Severance Benefits
Under the terms of the Executive Severance Plan, in the event of a termination of a participant’s employment during a CIC Protection Period by us other than for “cause” or by the participant for “good reason” (in each case, as defined in the Executive Severance Plan), the participant will be entitled to receive (i) a lump sum cash payment equal to 12 months’ base salary; (ii) a lump sum cash payment equal to the participant’s target annual cash bonus for the year in which his or her termination occurs; and (iii) Benefits Continuation Coverage, all as described in the Executive Severance Plan.
In addition, the employment agreement we have entered into with Mr. Galant includes terms that provide for certain severance payments and benefits upon a qualifying termination of employment in connection take takes place during a CIC Protection Period. These terms are described in greater detail under “Potential Payments Upon Termination or Change in Control” below.
We do not provide taxgross-ups or other reimbursements for potential excise or other taxes on any payments or benefits that are paid in connection with a change in control event.
Treatment of Equity Award AgreementsAwards Upon a Change in Control
Acceleration of Equity Awards upon a CIC Termination
Our long-term incentive equity awards granted in fiscal 2013, 2014 and 2015 to certain NEOs, and our Executive Severance Plan, provide for accelerationfull vesting of vestingall outstanding and unvested equity-based awards in the event of an involuntary or constructivea qualifying termination of employment. Our Compensationduring a CIC Protection Period. The Committee believes that these benefits are consistent with general competitive practices and that they help maximize executive retention, which is one of our objectives in making thethese awards.
Treatment of Performance-Based Equity Awards upon a Change in Control
The Executive Severance Plan also provides for the treatment of outstanding performance-based equity awards upon a change in control, unless the relevant award agreement provides for alternative treatment. Upon a change in control, each outstanding performance-based equity award held by a participant (including each NEO) that was granted after September 19, 2016 will be deemed earned at the actual performance level as of the date of the change in control with respect to all open performance periods. As specified in the Executive Severance Plan, apro rata portion of the earned award will be payable upon the change in control, based on the number of days elapsed from the beginning of the performance period to the change in control; the remainder of the award will continue to be subject to time-based vesting following the change in control in accordance with the original performance period (subject to the double-trigger protection described above).
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ChangeIncome Tax Considerations
Section 162(m) of Control Severancethe IRC places a limit on the tax deduction for compensation in excess of $1 million paid to certain “covered employees” of a publicly held corporation. “Covered employees” generally refers to the company’s chief executive officer and its next three most highly compensated executive officers (other than the chief financial officer) in the year that the compensation is paid. This limitation does not apply to compensation that is considered “qualified performance-based compensation” under the rules of Section 162(m).
Our CompensationThe Committee generally seeks to qualify the performance-based incentive compensation paid or awarded to the NEOs for the “performance-based compensation” exemption from the deductibility limit of Section 162(m) to the extent that we determine it to be in the best interests of Verifone and our stockholders. In addition, in approving the amount and form of compensation for the NEOs, the Committee considers all elements of our cost of providing such compensation, including the potential impact of Section 162(m).
However, the Committee believes that it is in our best interests to provide certain severance payments and benefits to our executive officers in the event of a “change-of-control” of the Company, in orderimportant to retain talentthe flexibility to motivate superior performance through plans and maintain a stable management team leading up to, and during, a change of control.
Under our change of control provisions, severance payments and accelerated vesting of outstanding equity awards are subject to a “double-trigger,” arrangements, meaning that such payments and benefits are only provided if a qualifying termination of employment occurs within the applicable change of control period (defined to start three months before the change of control event and ending 12 months after the change of control event, except in limited instances for certain executive officers where the change of control period was set to end 18 months after the change of control event). In each case a change of control event is defined as the occurrence of any of the following: (i) any person becoming the beneficial owner of 50% (except in limited instances where the threshold was set to 40%) or more of the total voting power of the Company’s then outstanding securities, (ii) upon the consummation of a merger, consolidation or similar transaction involving the Company (subject to certain customary exceptions), (iii) certain changes to the composition of our board of directors as specified in the 2006 Plan, (iv) our stockholders’ approval of a plan of liquidation or dissolution of the Company, or (v) the sale of all or substantiallydo not satisfy all of the Company’s assetsconditions of an exemption from Section 162(m). The Committee believes that the benefit to a non-affiliate.
We do not provideVerifone from these awards outweighs the potential benefit of ensuring the tax gross-ups for potential excise or other taxes on any payments or benefits that are paid in connection with a change of control event.
The material termsdeductibility of the severance arrangements withremuneration realized by the NEOs from these awards. Accordingly, from time to time, the Executive Severance Policy and the change of control severance terms, as well as any payments and benefits thatCommittee may, be provided toin its judgment, approve compensation for the NEOs under their respective equity award agreementsthat does not comply with an exemption from the deductibility limit when it believes that such compensation is in connection with a terminationthe best interests of their employment or a change of control of the Company are described below in “Potential Payments Upon Termination or Change of Control.”
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information regarding compensation of our NEOs for fiscal 2016, 2015 2014 and 2013.
Summary Compensation Table2014.
Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(3) | Option Awards ($)(2)(3) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Comp Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||
Paul Galant(4) | 2015 | 800,000 | — | 6,095,840 | — | 1,713,600 | — | 18,583 | 8,628,023 | |||||||||||||||||||||||||||
CEO | 2014 | 800,000 | 500,000 | — | — | 1,390,135 | — | 393,030 | 3,083,165 | |||||||||||||||||||||||||||
2013 | 66,667 | 2,250,000 | 13,352,000 | 4,713,350 | — | — | 46,866 | 20,428,883 | ||||||||||||||||||||||||||||
Marc Rothman(5) | 2015 | 450,000 | — | 2,127,944 | — | 479,250 | — | 71,974 | 3,129,168 | |||||||||||||||||||||||||||
EVP and CFO | 2014 | 450,000 | — | — | — | 532,550 | — | 67,993 | 1,050,543 | |||||||||||||||||||||||||||
2013 | 336,057 | — | 5,235,291 | — | 263,591 | — | 45,498 | 5,880,437 | ||||||||||||||||||||||||||||
Alok Bhanot(6) | 2015 | 400,000 | — | 2,127,944 | — | 501,250 | — | 15,140 | 3,044,334 | |||||||||||||||||||||||||||
EVP, Engineering and Chief Technology Officer | 2014 | 366,667 | — | 2,413,202 | 2,708,384 | 689,275 | — | 14,565 | 6,192,093 | |||||||||||||||||||||||||||
2013 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Albert Liu(7) | 2015 | 400,000 | — | 2,127,944 | — | 426,000 | — | 16,307 | 2,970,251 | |||||||||||||||||||||||||||
EVP Corporate Development & General Counsel | 2014 | 400,000 | — | — | — | 483,420 | — | 14,417 | 897,837 | |||||||||||||||||||||||||||
2013 | 386,875 | — | 4,333,084 | — | 234,303 | — | 7,537 | 4,961,799 | ||||||||||||||||||||||||||||
Glen Robson(8) | 2015 | 450,000 | 1,600,000 | 2,635,920 | — | 334,875 | — | 40,972 | 5,061,767 | |||||||||||||||||||||||||||
EVP, Terminal Solutions | 2014 | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
2013 | — | — | — | — | — | — | — | — |
Fiscal Year | Salary ($) | Bonus ($) | Stock Awards ($)(1)(3) | Option Awards ($)(2)(3) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Comp Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||||||||||||
Paul Galant(4) CEO | 2016 | 800,000 | — | 4,976,693 | — | — | — | 165,018 | 5,941,711 | |||||||||||||||||||||||||||
2015 | 800,000 | — | 6,095,840 | — | 1,713,600 | — | 18,583 | 8,628,023 | ||||||||||||||||||||||||||||
2014 | 800,000 | 500,000 | — | — | 1,390,135 | — | 393,030 | 3,083,165 | ||||||||||||||||||||||||||||
Marc Rothman(5) EVP and CFO | 2016 | 450,000 | — | 1,590,694 | — | — | — | 67,223 | 2,107,917 | |||||||||||||||||||||||||||
2015 | 450,000 | — | 2,127,944 | — | 479,250 | — | 71,974 | 3,129,168 | ||||||||||||||||||||||||||||
2014 | 450,000 | — | — | — | 532,550 | — | 67,993 | 1,050,543 | ||||||||||||||||||||||||||||
Alok Bhanot(6) Former EVP, Engineering and Chief Technology Officer | 2016 | 327,436 | — | 1,690,108 | — | — | — | 17,208 | 2,034,752 | |||||||||||||||||||||||||||
2015 | 400,000 | — | 2,127,944 | — | 501,250 | — | 15,140 | 3,044,334 | ||||||||||||||||||||||||||||
2014 | 366,667 | — | 2,413,202 | 2,708,384 | 689,275 | — | 14,565 | 6,192,093 | ||||||||||||||||||||||||||||
Albert Liu(7) EVP Corporate Development & General Counsel | 2016 | 400,000 | 1,615,534 | — | — | 18,502 | 2,034,036 | |||||||||||||||||||||||||||||
2015 | 400,000 | — | 2,127,944 | — | 426,000 | — | 16,307 | 2,970,251 | ||||||||||||||||||||||||||||
2014 | 400,000 | — | — | — | 483,420 | — | 14,417 | 897,837 | ||||||||||||||||||||||||||||
Glen Robson(8) EVP, Global Head of Solutions | 2016 | 450,000 | — | 1,739,814 | — | — | — | 17,912 | 2,207,726 | |||||||||||||||||||||||||||
2015 | 354,807 | 1,600,000 | 2,635,920 | — | 334,875 | — | 40,972 | 4,966,574 | ||||||||||||||||||||||||||||
Vin D’Agostino(9) EVP, Chief Strategy Officer | 2016 | 393,333 | — | 894,774 | — | — | — | 19,039 | 1,307,146 | |||||||||||||||||||||||||||
2015 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
2014 | — | — | — | — | — | — | — | — |
(1) | Amounts shown reflect the total fair value of the stock awards at the date of grant, also referred to as grant date fair value, as computed in accordance with FASB ASC Topic 718. These amounts reflect the accounting expense to be recorded for the award and do not reflect the actual value that may be recognized by an NEO or whether the NEO has actually realized a financial benefit from the awards (such as by vesting in an RSU award). The |
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be as follows: $6,476,706 for Mr. Galant; $1,990,700 for Mr. Rothman; $2,115,111 for Mr. Bhanot; $2,021,792 for Mr. Liu; $2,177,324 for Mr. Robson; and $1,119,776 for Mr. D’Agostino. |
(2) | Amounts shown reflect the aggregate grant date fair value of stock |
(3) | For additional information on the equity |
(4) | NoNon-Equity Incentive Plan Compensation was paid to Mr. Galant in fiscal 2016 in light of our financial performance. Fiscal 2015Non-Equity Incentive Plan Compensation amount represents a performance-based cash bonus |
(5) | NoNon-Equity Incentive Plan Compensation was paid to Mr. Rothman in fiscal 2016 in light of our financial performance. Fiscal 2015Non-Equity |
component earned at 110%. Fiscal |
(6) | Mr. Bhanot resigned in fiscal 2016 and did not receive anyNon-Equity Incentive Plan Compensation. Fiscal 2015Non-Equity Incentive Plan Compensation amount represents a performance-based cash bonus |
(7) | NoNon-Equity Incentive Plan Compensation was paid to Mr. Liu in fiscal 2016 in light of our Company’s financial performance. Fiscal 2015Non-Equity Incentive Plan Compensation amount represents a performance-based cash bonus |
(8) | NoNon-Equity Incentive Plan Compensation was paid to Mr. Robson in fiscal 2016 in light of our financial performance. Fiscal 2015Non-Equity Plan Compensation amount represents a prorated performance-based cash bonus of |
(9) | Mr. D’Agostino became an NEO in fiscal 2016. NoNon-Equity Incentive Plan Compensation was paid to Mr. D’Agostino in fiscal 2016 in light of our financial performance. Fiscal 2016 All Other Compensation amount includes $13,990 of company 401(k) plan matching contribution, $1,140 of life insurance premiums and $3,909 of other perquisites. |
42 | 2017 Proxy Statement |
Fiscal 20152016 Grants of Plan-Based Awards Table
The following table sets forth information with respect to grants of plan-based awards in fiscal 20152016 to our NEOs, including cash awards and equity awards. The equity awards granted to the NEOs in fiscal 20152016 were granted under our 2006 Equity Plan.
Name | Grant Date | Board Approval Date | Estimated Possible Payouts Under Non- Equity Incentive Plan Awards(1) | Estimated Possible Payout Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh.) | Grant Date Fair Value of Stock and Option Awards ($)(2) | ||||||||||||||||||||||||||||||||||||||||
Thres- hold ($) | Target ($) | Maximum ($) | Thres- hold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||
Paul Galant | — | — | — | 1,200,000 | 2,400,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
CEO | 1/2/2015 | (3) | 12/16/2014 | — | — | — | 38,500 | 77,000 | 154,000 | — | — | — | 3,937,010 | |||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 12/16/2014 | — | — | — | — | — | — | 57,800 | — | — | 2,158,830 | ||||||||||||||||||||||||||||||||||||
Marc Rothman | — | — | — | 450,000 | 900,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
EVP and CFO | 1/2/2015 | (3) | 12/16/2014 | — | — | — | 12,025 | 24,050 | 48,100 | — | — | — | 1,229,677 | |||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 12/16/2014 | — | — | — | — | — | — | 24,050 | — | — | 898,268 | ||||||||||||||||||||||||||||||||||||
Alok Bhanot | — | — | — | 500,000 | 1,000,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
EVP, Engineering and Chief Technology Officer | 1/2/2015 | (3) | 12/16/2014 | — | — | — | 12,025 | 24,050 | 48,100 | — | — | — | 1,229,677 | |||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 12/16/2014 | — | — | — | — | — | — | 24,050 | — | — | 898,268 | ||||||||||||||||||||||||||||||||||||
Albert Liu | — | — | — | 400,000 | 800,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
EVP Corporate Development & General Counsel | 1/2/2015 | (3) | 12/16/2014 | — | — | — | 12,025 | 24,050 | 48,100 | — | — | — | 1,229,677 | |||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 12/16/2014 | — | — | — | — | — | — | 24,050 | — | — | 898,268 | ||||||||||||||||||||||||||||||||||||
Glen Robson | — | — | — | 356,150 | 712,300 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
EVP, Terminal Solutions | 2/2/2015 | (5) | 12/16/2014 | — | — | — | — | — | — | 84,000 | — | — | 2,635,920 | |||||||||||||||||||||||||||||||||||
Name | Grant Date | Board Approval Date | Estimated Possible Payouts Under Non- Equity Incentive Plan Awards(1) | Estimated Possible Payout Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise or Base Price of Option Awards ($/Sh.) | Grant Date Fair Value of Stock and Option Awards ($)(2) | ||||||||||||||||||||||||||||||||||||||||
Thres- ($) | Target ($) | Maximum ($) | Thres- hold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||
Paul Galant(3)(4) CEO | — | — | — | 1,400,000 | 2,800,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | — | — | — | 54,094 | 108,187 | 162,281 | — | — | — | 3,000,026 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | — | — | — | — | — | — | 71,001 | — | — | 1,976,668 | |||||||||||||||||||||||||||||||||||||
Marc Rothman(3)(4) EVP and CFO | — | — | — | 450,000 | 900,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | — | — | — | 14,425 | 28,850 | 43,275 | — | — | — | 800,011 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | — | — | — | — | — | — | 28,401 | — | — | 790,684 | |||||||||||||||||||||||||||||||||||||
Alok Bhanot(3)(4) Former EVP, Engineering and Chief Technology Officer | — | — | — | 500,000 | 1,000,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | — | — | — | 15,327 | 30,653 | 45,980 | — | — | — | 850,008 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | — | — | — | — | — | — | 30,176 | — | — | 840,100 | |||||||||||||||||||||||||||||||||||||
Albert Liu(3)(4) EVP Corporate Development & General Counsel | — | — | — | 400,000 | 800,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | — | — | — | 14,651 | 29,301 | 43,952 | — | — | — | 812,517 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | — | — | — | — | — | — | 28,844 | — | — | 803,017 | |||||||||||||||||||||||||||||||||||||
Glen Robson(3)(4) EVP, Global Head of Solutions | — | — | — | 450,000 | 900,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | — | — | — | 15,778 | 31,555 | 47,333 | — | — | 875,020 | ||||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | 31,063 | 864,794 | |||||||||||||||||||||||||||||||||||||||||||||
Vin D’Agostino(3)(4) EVP, Chief Strategy Officer | — | — | — | 400,000 | 800,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | — | — | — | 8,114 | 16,228 | 24,342 | — | — | 450,002 | ||||||||||||||||||||||||||||||||||||||
1/4/2016 | 12/15/2015 | 15,976 | 444,772 |
(1) | Amounts shown in these columns represent the range of possible cash payouts for each NEO under our short-term incentive awards. The threshold, or minimum, amount for each of the NEOs is zero for fiscal |
(2) | Reflects the grant date fair value of each |
(3) | Shares subject to award will cliff vest three years from the grant date (on January |
(4) | Shares subject to award vest as to 1/4 of the shares on January |
2017 Proxy Statement | 43 |
Employment Agreements and Offer Letters
Mr. Galant
Mr. Galant has served as our CEO from October 1, 2013. In connection with his appointment as our CEO, we entered into an employment agreement with him, which set Mr. Galant’shis base salary and target annual cash bonus opportunity at levels consistent with that of our former CEO. In addition, our employment agreement with Mr. Galant included the following additional negotiated provisions with respect to currently outstanding, unvested awards and benefits:
Initial Long-Term Incentive Equity Awards. In addition to a restricted stock award in the amount of 300,000 shares of our common stock that has now vested, prior to 2015, Mr. Galant received the following initial equity grants as part ofawards pursuant to his employment agreement:
An initial stock option grant to purchase 500,000 shares of our common stock (with a grant date fair value of approximately $4.7 million) with time-based vesting over four years (with 25% vesting on the first anniversary of the date of grant and the remainder vesting in equal quarterly installments thereafter).
An initial RSU grant inaward with a target amount of 200,000 shares of our common stock (with a grant date fair value of approximately $6.5 million) (the “Upfront TSR Shares”), with a payout opportunity ranging from 0% to 200% of the target number of shares, based on the level of achievement of our TSR relative to the companies in the S&P North American Technology Sector Index over a 3-yearthree-year performance period. Because our TSR relative to the companies in the S&P North American Technology Sector Index failed to achieve the required threshold at the end of the3-year performance period, Mr. Galant received no Upfront TSR Shares.
The amount of regular annual awards is as determined by our Compensationthe Committee in accordance with our executive compensation program and practices, which includes consideration of our and Mr. Galant’s performance, compensation analyses prepared by our Compensationthe Committee’s independent compensation consultant and competitiveness against peer group compensation.other factors as determined by the Committee.
Severance and Change ofin Control. Mr. Galant’s employment agreement also provides for certain severance payments and benefits, including payments in the event of a change in control of Verifone as described under “Potential Payments Upon Termination or Change ofin Control—Severance Arrangements” below.
Mr. Robson
Mr. Robson joined us as Executive Vice President, Global Head of Solutions in January 2015. In setting his compensation, the key factors considered by the Committee included a competitive market compensation analysis, Mr. Robson’s compensation at his then-current executive position as Chief Technology Officer for Dell’s Client Product Group and his extensive experience as an innovator for new products and technologies. In addition to setting an initial annual base salary and target annual cash bonus opportunity, Mr. Robson’s offer letter included the following negotiated provisions:
Sign-On Bonus. Asign-on bonus of $1,600,000 payable within ten business days of his employment start date of January 19, 2015, subject to return of $1 million of the bonus if such resignation or termination of employment for cause occurs after the second anniversary but before the third anniversary of his employment commencement date.
Long-Term Incentive Equity Awards. An initial RSU award with a grant date fair value of $3 million, 50% of which cliff vested on the first anniversary of the date of grant (which anniversary occurred on February 2, 2016) and 50% of which cliff vested on the second anniversary of the date of grant (February 2, 2017).
Severance and Change in Control. Certain severance payments and benefits as described under “Potential Payments Upon Termination or Change in Control—Severance Arrangements” below.
Mr. Robson’ssign-on bonus and initial RSU grant included terms that were intended asone-time “make-whole” components and were designed to be competitive with the terms of his compensation at Dell. The Committee does not consider such compensation components to be typical of our compensation program or philosophy and, accordingly, does not take such components into consideration when making ongoing compensation decisions for Mr. Robson, but rather were appropriate to encourage him to join Verifone.
44 | 2017 Proxy Statement |
Mr. Rothman
Mr. Rothman joined us as EVPExecutive Vice President and CFOChief Financial Officer effective February 4, 2013. Apart fromIn addition to setting forth an initial annual base salary of $450,000, target annual cash bonus opportunity of $350,000 and a proposed equity awards grantedaward recommendation with a grant date fair value of $3 million (which was approved in fiscal 2013,2013), Mr. Rothman’s offer letter included the following additional negotiated provisions:
Commuting and Housing Expenses. Under the terms of Mr. Rothman’shis offer letter, we reimburse Mr. Rothman for commuting expenses between his primary residence in San Diego, California and our offices in San Jose, California on a weekly basis and certain housing costs near our San Jose offices. Such reimbursement does not include a gross up or other reimbursement for any associated income taxes.
Severance and Change ofin Control. Mr. Rothman’s offer letter provides for certain severance payments and benefits as described under “Potential Payments Upon Termination or Change ofin Control—Severance Arrangements” below.
Mr. Bhanot
Mr. Bhanot joined us as EVP,Executive Vice President, Engineering and Chief Technology Officer in December 2013. In setting Mr. Bhanot’s compensation, key considerations in addition to peer group company data points included Mr. Bhanot’s background and technical experience in the areas that were critical for the role we sought to fill and the importance of the R&D executive role as part of our transformation initiatives. Apart from setting forth an initial annual base salary and target annual cash bonus opportunity, Mr. Bhanot’s offer letter included the following additional negotiated provisions with respect to currently outstanding, unvested awards and benefits:
Initial Annual Bonus. Under the terms of Mr. Bhanot’shis offer letter, Mr. Bhanot is eligible for ana target annual targetcash bonus opportunity of $500,000.
Long-Term Incentive Equity Awards. Mr. Bhanot’s offer letter provides for:
an initial equity award equally split between RSUs anda stock option awards,and an RSU award, the final installment (with a grant date value of $1,500,000) of which vested on December 2, 2014; and
an equity award with a grant date value of $1,500,000 equally split between RSUs and stock option awards, 25% of which cliff vested on December 2, 2015 and 6.25% of which will vest each quarter thereafter.
Mr. Bhanot resigned from the Company effective August 15, 2016. Accordingly, he forfeited the remaining unvested portion of such RSUs and stock option awards.
Mr. RobsonD’Agostino
Mr. Robson’sD’Agostino joined us as Senior Vice President, Global Business Development in January 2014. In setting his compensation, the key factors considered by the Committee included a competitive market compensation analysis, Mr. D’Agostino’s background and technical experience in the areas that were critical for the role we sought to fill and the importance of the business development executive role as part of our transformation initiatives. In addition to setting forth an initial annual base salary of $360,000 and target annual cash bonus opportunity of $240,000, Mr. D’Agostino’s offer letter is described above inincluded the CD&A.following additional negotiated provisions with respect to outstanding, unvested awards and benefits:
Long-Term Incentive Equity Awards. Mr. D’Agostino’s offer letter provides for an initial equity award with a grant date value of $750,000 equally split between a stock option and an RSU award, 25% of which vested on February 3, 2015 and 6.25% of which will vest each quarter thereafter.
2017 Proxy Statement | 45 |
Fiscal 2016 Outstanding Equity Awards at Fiscal 2015 Year-End Table
The following table provides information about unexercised options, stock awards that hashave not vested and other equity incentive plan awards that have not vested for each of the NEOs as of October 31, 2015.2016.
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||
Name | Option/ Award Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have not Vested (#) | Market Value of Shares or Units of Stock That Have not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have not Vested ($) (1) | ||||||||||||||||||||||||||||
Paul Galant | 10/1/2013 | (2) | 250,000 | 250,000 | 23.00 | 10/1/2020 | ||||||||||||||||||||||||||||||||
CEO | 10/1/2013 | (3) | 400,000 | 12,056,000 | ||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 38,500 | 1,160,390 | |||||||||||||||||||||||||||||||||||
1/2/2015 | (5) | 57,800 | 1,742,092 | |||||||||||||||||||||||||||||||||||
Marc Rothman | 4/1/2013 | (6) | 15,038 | 453,245 | ||||||||||||||||||||||||||||||||||
EVP and CFO | 7/1/2013 | (7) | 43,357 | 1,306,780 | ||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 12,025 | 362,434 | |||||||||||||||||||||||||||||||||||
1/2/2015 | (5) | 24,050 | 724,867 | |||||||||||||||||||||||||||||||||||
Alok Bhanot | 12/2/2013 | (8) | 176,500 | 25.20 | 12/2/2020 | |||||||||||||||||||||||||||||||||
EVP, Engineering and Chief Technology Officer | 12/2/2013 | (9) | 88,200 | 25.20 | 12/2/2020 | |||||||||||||||||||||||||||||||||
12/2/2013 | (9) | 31,900 | 961,466 | |||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 12,025 | 362,434 | |||||||||||||||||||||||||||||||||||
1/2/2015 | (5) | 24,050 | 724,867 | |||||||||||||||||||||||||||||||||||
Albert Liu | 1/3/2012 | (10) | 48,093 | 3,207 | 36.46 | 1/3/2019 | ||||||||||||||||||||||||||||||||
EVP, Corporate Development & General Counsel | 1/3/2012 | (11) | 51,300 | 36.46 | 1/3/2019 | |||||||||||||||||||||||||||||||||
1/2/2013 | (12) | 7,688 | 231,716 | |||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 12,025 | 362,434 | |||||||||||||||||||||||||||||||||||
1/2/2015 | (5) | 24,050 | 724,867 | |||||||||||||||||||||||||||||||||||
Glen Robson | 2/2/2015 | (13) | 84,000 | 2,531,760 | ||||||||||||||||||||||||||||||||||
EVP, Verifone Systems | ||||||||||||||||||||||||||||||||||||||
Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||
Name | Option/ Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Number of (#) | Market Value of Shares or Units of Stock That Have not Vested ($)(1) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or (#) | Equity Incentive Plan Awards: Market or Payout Value of Other ($)(1) | ||||||||||||||||||||||||||||||
Paul Galant | 10/1/2013 | (2) | 375,000 | 125,000 | 125,000 | 23.00 | 10/1/2020 | |||||||||||||||||||||||||||||||||
1/2/2015 | (3) | 38,500 | 595,980 | |||||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 32,513 | 503,301 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | (13) | 54,094 | 837,375 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | (14) | 71,001 | 1,099,095 | |||||||||||||||||||||||||||||||||||||
Marc Rothman EVP and CFO | 4/1/2013 | (5) | 5,013 | 77,601 | ||||||||||||||||||||||||||||||||||||
7/1/2013 | (6) | 18,582 | 287,649 | |||||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 13,528 | 209,413 | |||||||||||||||||||||||||||||||||||||
1/2/2015 | (3) | 12,025 | 186,147 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | (13) | 14,425 | 223,299 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | (14) | 28,401 | 439,647 | |||||||||||||||||||||||||||||||||||||
Alok Bhanot Former EVP, | 12/2/2013 | (7) | 176,500 | 25.20 | 12/2/2020 | |||||||||||||||||||||||||||||||||||
12/2/2013 | (8) | 33,075 | 25.20 | 12/2/2020 | ||||||||||||||||||||||||||||||||||||
Albert Liu EVP, Corporate | 1/3/2012 | (9) | 51,300 | 36.46 | 1/3/2019 | |||||||||||||||||||||||||||||||||||
1/3/2012 | (10) | 51,300 | 36.46 | 1/3/2019 | ||||||||||||||||||||||||||||||||||||
1/2/2013 | (11) | 1,538 | 23,808 | |||||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 13,528 | 209,413 | |||||||||||||||||||||||||||||||||||||
1/2/2015 | (3) | 12,025 | 186,147 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | (13) | 14,651 | 226,797 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | (14) | 28,844 | 446,505 | |||||||||||||||||||||||||||||||||||||
Glen Robson EVP, Global Head of | 2/2/2015 | (12) | 42,000 | 650,160 | ||||||||||||||||||||||||||||||||||||
1/4/2016 | (13) | 15,778 | 244,243 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | (14) | 31,063 | 480,855 | |||||||||||||||||||||||||||||||||||||
Vin D’Agostino EVP, Chief Strategy | 2/3/2014 | (15) | 21,750 | 13,050 | 13,050 | 27.27 | 2/3/2021 | |||||||||||||||||||||||||||||||||
2/3/2014 | (15) | 5,288 | 81,858 | |||||||||||||||||||||||||||||||||||||
1/2/2015 | (4) | 3,882 | 60,093 | |||||||||||||||||||||||||||||||||||||
1/2/2015 | (3) | 3,450 | 53,406 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | (14) | 15,976 | 247,308 | |||||||||||||||||||||||||||||||||||||
1/4/2016 | (13) | 8,114 | 125,605 |
(1) | Market value of units of stock that have not vested is computed by multiplying (i) |
(2) | Shares subject to award vested as to 1/4 of the shares on October 1, 2014 and 1/16 of the shares each quarter thereafter. |
|
Awards are shown at threshold payout. Whether these awards will be earned at the level shown, a different level or at all depends on performance againstpre-established metrics over a three-year performance period. Shares subject to award will cliff vest three years from the grant date (on January 2, 2018), if we achieve a certain level of TSR relative to the S&P North American Technology Sector Index over the performance period. For purposes of the grant, TSR will be calculated on a stack-ranked basis using a60-trading day average closing price immediately preceding the beginning and end of the performance period. Payout shall be at target for TSR at the 50th percentile, scaling for performance above and below the 50th percentile (e.g., 60th percentile ranking results in payout at 120% of target). The threshold for any payout under the grant is the 25th percentile (i.e., no shares of common stock will be awarded for performance below the 25th percentile) and the maximum payout is 200% of target at the 100th percentile. |
Shares subject to award vest as to 1/4 of the shares on January 2, 2016 and 1/16 of shares each quarter thereafter. |
46 | 2017 Proxy Statement |
(5) | Shares subject to award vested as to 1/4 of the shares on April 1, 2014 and 1/16 of the shares each quarter thereafter. |
Shares subject to award vested as to 1/4 of the shares on July 1, 2014 and 1/16 of the shares each quarter thereafter. |
Shares subject to award vested as to 1/2 of the shares on December 2, 2013 and as to the remaining 1/2 of the shares on December 2, 2014. |
Shares subject to award vested as to 1/4 of the shares on December 2, 2015 and 1/16 of shares each quarter thereafter. |
Shares subject to award vested as to 1/4 of the shares on January 3, 2013 and 1/16 of shares each quarter thereafter. |
Shares subject to award cliff vested on January 3, 2013. |
Shares subject to award vested as to 1/4 of the shares on January 2, 2014 and 1/16 of shares each quarter thereafter. |
Shares subject to award vested as to 1/2 of the shares on February 2, 2016 and 1/2 of the shares on February 2, 2017. |
(13) | Awards are shown at threshold payout. Whether these awards will be earned at the level shown, a different level or at all depends on performance againstpre-established metrics over a three-year performance period. Shares subject to award will cliff vest three years from the grant date (on January 4, 2019), if we achieve a certain level of TSR relative to the S&P North American Technology Sector Index over the performance period. For purposes of the grant, TSR will be calculated on a stack-ranked basis using a60-trading day average closing price immediately preceding the beginning and end of the performance period. Payout shall be at target for TSR at the 50th percentile, scaling for performance between the 25th and the 75th percentile (e.g., 60th percentile ranking results in payout at 120% of target). The threshold for any payout under the grant is the 25th percentile (i.e., no shares of common stock will be awarded for performance below the 25th percentile) and the maximum payout is 150% of target at the 75th percentile or above. |
(14) | Shares subject to award vest as to 1/4 of the shares on January 4, 2017 and 1/16 of shares each quarter thereafter. |
(15) | Shares subject to award vested as to 1/4 of the shares on February 3, 2015 and 1/16 of shares each quarter thereafter. |
Fiscal 20152016 Option Exercises and Stock Vested Table
The following table presents information concerning the aggregate number of shares of our common stock for which options were exercised during fiscal 20152016 for each of the NEOs. In addition, the table presents information on shares of our common stock that were acquired upon the vesting of stock awards during fiscal 20152016 for each of the NEOs on an aggregated basis.
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise | Value Realized on Exercise ($)(1) | Number of Shares Acquired on Vesting | Value Realized on Vesting ($)(2) | ||||||||||||
Paul Galant | — | $ | — | — | $ | — | ||||||||||
CEO | ||||||||||||||||
Marc Rothman | — | $ | — | 105,300 | $ | 3,443,995 | ||||||||||
EVP and CFO | ||||||||||||||||
Alok Bhanot | — | $ | — | 31,950 | $ | 1,120,806 | ||||||||||
EVP, Engineering and Chief Technology Officer | ||||||||||||||||
Albert Liu | 79,688 | $ | 1,935,482 | 76,650 | $ | 2,488,986 | ||||||||||
EVP, Corporate Development & General Counsel | ||||||||||||||||
Glen Robson | — | $ | — | — | $ | — | ||||||||||
EVP, Terminal Solutions |
Option Awards | Stock Awards | |||||||||||||||
Name | Number of Shares Acquired on Exercise | Value Realized on Exercise ($) | Number of Shares Acquired on Vesting | Value Realized on Vesting ($)(1) | ||||||||||||
Paul Galant CEO | — | $ | — | 25,287 | $ | 625,239 | ||||||||||
Marc Rothman EVP and CFO | — | $ | — | 45,322 | $ | 1,047,790 | ||||||||||
Alok Bhanot Former EVP, Engineering and Chief Technology Officer | — | $ | — | 20,981 | $ | 562,669 | ||||||||||
Albert Liu EVP, Corporate Development & General Counsel | — | $ | — | 16,672 | $ | 397,867 | ||||||||||
Glen Robson EVP, Global Head of Solutions | — | $ | — | 42,000 | $ | 943,320 | ||||||||||
Vin D’Agostino EVP, Chief Strategy Officer | — | $ | — | 6,543 | $ | 164,167 |
(1) |
The value realized on the shares acquired is the fair market value of the shares on the date of vesting, which |
Potential Payments Upon Termination or Change ofin Control
This section describes the payments and benefits that may become payable to the NEOs in connection with a termination of their employment with Verifone and/or a change ofin control of Verifone under arrangements in effect as of October 31, 2015.2016. Under our change in control provisions, severance payments and accelerated vesting of outstanding equity awards (as described below) are subject to “double-trigger” arrangements, meaning that such payments and benefits are only provided if a qualifying termination of employment occur in connection with a change in control. In each case a change in control event is defined as the occurrence of any of the following: (i) any person becoming the beneficial owner of 50% (except in limited instances where the threshold
2017 Proxy Statement | 47 |
was set to 40%) or more of the total voting power of the Company’s then outstanding securities, (ii) upon the consummation of a merger, consolidation or similar transaction involving the Company (subject to certain customary exceptions), (iii) certain changes to the composition of our board of directors as specified in the 2006 Equity Plan, (iv) our stockholders’ approval of a plan of liquidation or dissolution of the Company, or (v) the sale of all or substantially all of the Company’s assets to anon-affiliate.
Severance Arrangements
Our NEOs participate in the Executive Severance Plan, under which they are eligible to receive certain benefits upon a qualifying termination, including in connection with a change in control, as described under “Post-Employment Compensation Arrangements” above. Mr. Galant became our CEO effective October 1, 2013, and Mr. Rothman became our EVPare also party to an employment agreement and CFO effective February 4, 2013. In connection with their appointments, we entered intooffer letter, respectively, that include certain severance terms, with them in their respective employment agreement or offer letter, as applicable.described below.
Mr. Galant
Our employment agreement with Mr. Galant provides severance and change ofin control severance benefits to Mr. Galant. The conditions that would constitute a change ofin control event are generally consistent with those described under “Post-Employment Compensation Arrangements” above.
In the event that we terminate Mr. Galant’s employment without Cause (as defined in Mr. Galant’s employment agreement), Mr. Galant will be entitled to the following: (i) any unpaid accrued salary or earned but unpaid annual bonus (“Accrued Compensation”) and a lump sum cash severance payment equal to the sum of his annual base salary then in effect and his actual annual bonus for the preceding fiscal year; (ii) for twenty-four months following his date of termination of employment, we will promptly reimburse him for COBRA premiums and will permit him to continue to participate in our life insurance plan on the same basis as he participated in it as of immediately prior to his termination of employment, subject to certain exceptions (collectively, “Benefit Continuation”); and (iii) accelerated vesting of any outstanding equity awards that would have otherwise vested
on or before the first anniversary of the date of his termination of employment, provided that any portion of any unvested Upfront TSR Shares that would have time-based vested, if such time-based vesting was monthly rather than 3-year cliff vesting, on or before the first anniversary of such termination of employment based on achievement of the TSR hurdle, shall so vest and shall be paid as soon as practicable following determination of the achievement of the TSR hurdle.employment.
If we terminate Mr. Galant’s employment without Cause (as defined in Mr. Galant’s employment agreement) or if he terminates his employment for Good Reason (as defined in Mr. Galant’s employment agreement) within three months prior to (in the event that his employment is terminated at the request of a third party acquiror) or within twelve months after a change in control (the “Change ofin Control Protection Period”), (i) we will pay Mr. Galant the Accrued Compensation and a lump sum cash severance payment equal to 2 times the sum of his annual base salary then in effect and his target annual bonus, (ii) Mr. Galant will be entitled to receive Benefit Continuation and (iii) Mr. Galant will receive accelerated vesting in full of all outstanding equity awards.
Our obligations to provide the severance benefits described above (other than payment of Accrued Compensation) are subject to Mr. Galant executing a release in favor of us and compliance with certainnon-competition,non-solicitation andnon-disparagement covenants.
If we terminate Mr. Galant’s employment for Cause, he terminates his employment without Good Reason, or his employment terminates due to death or Disability (as defined in Mr. Galant’s employment agreement), we will promptly pay or provide (i) his Accrued Compensation, except that any earned but unpaid annual bonus shall be forfeited in the event of termination for Cause, (ii) any benefits that are required, or to which he is entitled, under any of our employee benefit plans or contracts or arrangements with us, and (iii) any other payments or benefits required to be paid to him in accordance with applicable law. In addition, in the event his employment terminates due to death or Disability, we will pay him or his estate, as applicable, (i) apro-rata annual bonus at target for the fiscal year during which his death or Disability occurs, which shall be paid within sixty days following the date of termination of his employment and (ii) provide him with the same vesting benefits as in the case of a termination without Cause not in the Change ofin Control Protection Period.
Mr. Galant is not eligible for benefits under the Executive Severance Plan other than with respect to the treatment of his performance awards granted after September 19, 2016 in connection with a change in control.
Mr. Rothman
Our offer letter with Mr. Rothman includes certain severance terms. If we terminate Mr. Rothman’s employment without Cause (as defined in Mr. Rothman’s offer letter) or if Mr. Rothman terminates his
48 | 2017 Proxy Statement |
employment for Good Reason (as defined in Mr. Rothman’s offer letter), then we will pay Mr. Rothman, within ten days following the date of termination, a sum equal to the total of: (i) his base salary through the date of termination and any bonuses that have become payable and have not been paid or deferred; (ii) any accrued vacation pay and compensation previously deferred, other than pursuant to atax-qualified plan; (iii) any amounts due under any plan or program in accordance with their terms; and (iv) alump-sum cash payment equal to his annual base salary during thesix-month period immediately prior to the date of termination. In connection with a qualifying termination, we must also provide Mr. Rothman with continuing medical, insurance and related benefits for six months following the date of such termination.
Mr. Rothman’s offer letter was executed prior to the adoption of the Executive Severance Policy.Plan. Accordingly, although Mr. Rothman is eligible to participate in the Executive Severance Policy,Plan, to the extent his offer letter provides for more favorable severance terms, his severance benefits are calculated based on the terms of his offer letter.
Executive Severance Policy
On September 19, 2013, we adopted an Executive Severance Policy which is applicable to certain of our executive officers including Messrs. Rothman, Bhanot, Liu and Robson and has a term of three years (subject to
extension of up to one year if there is a change of control (as defined in the policy) during the last twelve months of the term). The Executive Severance Policy provides that, in case of a termination by the Company without Cause (as defined in the policy), an executive covered under the policy will receive a lump sum cash payment equal to his or her base salary; 12 months’ medical, dental, vision and life insurance continuation/COBRA coverage, subject to adjustment if alternate employment is obtained; and accelerated vesting of any unvested portion of the equity awards to the extent provided in the applicable equity award agreements. In the event of a termination by Verifone without Cause or for Good Reason (as defined in the policy) in connection with a change in control, such executives will also get full time-based acceleration of vesting of any unvested portion of the equity awards.
“Cause” generally means (i) a conviction of a felony or any crime or offense lesser than a felony involving dishonesty, disloyalty or fraud with respect to Verifone or any related entity or any of their respective properties or assets; (ii) gross negligence or willful misconduct that has caused demonstrable and serious injury to Verifone or a related entity, monetary or otherwise; (iii) willful refusal to perform or substantial disregard of duties properly assigned; (iv) breach of duty of loyalty to Verifone or a related entity or any act of fraud or dishonesty with respect to Verifone or a related entity; (v) the engagement in insider trading; (vi) breach of Verifone’s ethics policy; (vii) engagement in accounting improprieties as determined by our Board in its discretion; (viii) failure or refusal to cooperate with governmental investigations involving Verifone or (ix) the disqualification or bar by any governmental or self-regulatory authority from serving as an officer of Verifone or any related entity. “Good reason” generally means the occurrence of one or more of the following, without the employee’s written consent, and which circumstances are not remedied by Verifone within 30 days of receipt of notice: (i) the assignment to the employee of substantial duties that are materially inconsistent with the employee’s title, position, authority, duties work location or responsibilities or any other action which results in a material diminution or material adverse change in the employee’s title, position, authority, duties, work location or responsibilities; (ii) a material reduction in the employee’s aggregate rate of annual base salary or target annual bonus; or the failure to obtain the assumption of Verifone’s obligations under the severance arrangements by any successor.
Under the Executive Severance Policy, all benefits are subject to the executive executing a final, non-revocable general release in a form acceptable to Verifone, non-compete and non-solicit provisions covering a period of one year following the date of termination and non-disparagement provisions.
As discussed above, although Mr. Rothman is eligible to participate in the Executive Severance Policy, to the extent his offer letter provides for more favorable severance terms, his severance benefits will be calculated based on the terms of his offer letter.
Equity Award Agreements
Our equity awards made in fiscal years 2012 through 20152016 to the NEOs, and the Executive Severance Plan provide for acceleration of vesting in the event of an involuntary or constructive termination three months prior to or twelve months following a change ofin control. Mr. Bhanot’s new-hire equity award agreements provide for 12 months’ acceleration of vesting in the event he is terminated by Verifone without Cause (as defined in the relevant grant agreements) or if Mr. Bhanot resigns for Good Reason (as defined in the relevant grant agreements). Mr. Galant’s equity award agreements relating to his performance-based TSR grants also provide that, in the event such executive is terminated by Verifone without Cause (as defined in the relevant grant agreement), any unvested portion of such awards that would have time-based vested, if such time-based vesting was monthly rather than 3-year cliff vesting, on or before the first anniversary of such termination of employment, based on our TSR achievement, shall so vest and shall be paid as soon as practicable following determination of our TSR achievement.
The tables below outlinesummarize the potential payments and benefits payable to each NEO in the event of involuntary termination, before and after a change ofin control, as if such event had occurred as of October 31, 2015.
Involuntary Termination without Cause or Constructive Involuntary Termination for Good Reason
Name | Cash Severance | Continuation of Benefits | Intrinsic Value of Unvested Stock Awards(1) | Intrinsic Value of Unvested Options(2) | Cash Severance | Continuation of Benefits | Intrinsic Value of Unvested Stock Awards(1) | Intrinsic Value of Unvested Options(2) | ||||||||||||||||||||||||
Paul Galant(3) | $ | 2,190,135 | $ | 47,200 | $ | 6,790,150 | $ | 892,500 | $ | 800,000 | $ | 54,290 | $ | 704,541 | $ | — | ||||||||||||||||
Marc Rothman(4) | $ | 450,000 | $ | 23,600 | $ | — | $ | — | $ | 450,000 | $ | 27,145 | $ | — | $ | — | ||||||||||||||||
Alok Bhanot(5) | $ | 400,000 | $ | 3,012 | $ | 420,634 | $ | 190,620 | ||||||||||||||||||||||||
Vin D’Agostino(5) | $ | 400,000 | $ | 27,145 | $ | 54,567 | $ | — | ||||||||||||||||||||||||
Albert Liu(6) | $ | 400,000 | $ | 23,330 | $ | — | $ | — | $ | 400,000 | $ | 26,866 | $ | — | $ | — | ||||||||||||||||
Glen Robson(7) | $ | 450,000 | $ | 23,600 | $ | — | $ | — | $ | 450,000 | $ | 27,145 | $ | — | $ | — |
2017 Proxy Statement | 49 |
Involuntary Termination without Cause or Constructive Involuntary Termination for Good Reason Following a Change ofin Control
Name | Cash Severance | Continuation of Benefits | Intrinsic Value of Unvested Stock Awards(1) | Intrinsic Value of Unvested Options(2) | ||||||||||||
Paul Galant(3) | $ | 4,000,000 | $ | 47,200 | $ | 10,090,872 | $ | 1,785,000 | ||||||||
Marc Rothman(4) | $ | 450,000 | $ | 23,600 | $ | 3,209,759 | $ | — | ||||||||
Alok Bhanot(5) | $ | 400,000 | $ | 3,012 | $ | 2,411,200 | $ | 435,708 | ||||||||
Albert Liu(6) | $ | 400,000 | $ | 23,330 | $ | 1,681,450 | $ | — | ||||||||
Glen Robson(7) | $ | 450,000 | $ | 23,600 | $ | 2,531,760 | $ | — |
Name | Cash Severance | Continuation of Benefits | Intrinsic Value of Unvested Stock Awards(1) | Intrinsic Value of Unvested Options(2) | ||||||||||||
Paul Galant(3) | $ | 4,400,000 | $ | 54,290 | $ | 1,602,397 | $ | — | ||||||||
Marc Rothman(4) | $ | 900,000 | $ | 27,145 | $ | 1,014,312 | $ | — | ||||||||
Vin D’Agostino(5) | $ | 800,000 | $ | 27,145 | $ | 389,260 | $ | — | ||||||||
Albert Liu(6) | $ | 800,000 | $ | 26,866 | $ | 679,727 | $ | — | ||||||||
Glen Robson(7) | $ | 900,000 | $ | 27,145 | $ | 1,131,015 | $ | — |
(1) | The intrinsic value is calculated by taking the product of (a) |
(2) | Based on the closing market price of our common stock as of October 31, |
(3) | The amounts contained in the tables above for Mr. Galant are based on the terms of Mr. Galant’s employment agreement. |
Awards for Mr. Galant would total |
(4) | In the event of |
50 | 2017 Proxy Statement |
(5) | In the event of an involuntary or constructive termination of employment, Mr. D’Agostino is entitled under the Executive Severance |
(6) | In the event of an involuntary or constructive termination of employment, Mr. Liu is entitled under the Executive Severance |
(7) | In the event of an involuntary or constructive termination of employment, Mr. Robson is entitled under the Executive Severance |
2017 Proxy Statement | 51 |
REPORT OF THE COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE
The Compensation and Leadership Development Committee of Verifone (the “Compensation and Leadership Development Committee”) consists exclusively of independent directors. Verifone’s Board of Directors and its Corporate Governance and Nominating Committee have determined that each member of the Compensation and Leadership Development Committee is “independent” within the meaning of the rules of both the NYSE and the SEC.
The general purpose of the Compensation and Leadership Development Committee is to (1)(i) review and approve corporate goals and objectives relating to the compensation of Verifone’s CEO, evaluate the CEO’s performance in light of those goals and objectives and, either as a committee or together with the other independent directors (as directed by the Board), determine and approve the CEO’s compensation level based on this evaluation, and (2)(ii) review and approvenon-CEO executive officer compensation, incentive compensation plans, and equity-based plans amongand (iii) overseenon-CEO executive succession planning as well as executive leadership development.
In December 2016, the Compensation and Leadership Development Committee reviewed with management both the long-term and emergency succession plans for the members of the management committee of Verifone, other things. Verifone’sthan the CEO, whose succession plans were reviewed by the full Board of DirectorsDirectors.
In September 2016 and December 2016, the Compensation and Leadership Development Committee reviewed the Compensation and Leadership Development Committee’s charter to determine whether any changes to the charter were deemed necessary or desirable by the Compensation and Leadership Development Committee. After completing this review, the Compensation and Leadership Development Committee recommended amendments to the Board with respect to overseeing the development and review of succession plans for the CEO’s direct reports and other key executive positions identified by management and overseeing the development of executive leadership.
The Compensation and Leadership Development Committee also conducted an evaluation of its Corporate Governance and Nominating Committee have determinedown performance that each memberincluded an evaluation of its performance compared with the requirements of the charter of the Compensation Committee is “independent” within the meaning of the rules of both the NYSE and the SEC.
Leadership Development Committee. During fiscal 2015,2016, the Compensation and Leadership Development Committee performed all of its duties and responsibilities under the Compensation and Leadership Development Committee’s charter. Additionally, as part of its responsibilities, the Compensation and Leadership Development Committee reviewed the section of this Proxy Statement entitled “Compensation Discussion and Analysis” (CD&A), as prepared by management of Verifone, and discussed the CD&A with management of Verifone. Based on its review and discussions, the Compensation and Leadership Development Committee recommended to the Board of Directors that the CD&A be included in this Proxy Statement.
COMPENSATION AND LEADERSHIP DEVELOPMENT COMMITTEE |
Robert B. Henske, Chairman |
Jonathan I. Schwartz |
Jane J. Thompson |
Robert B. Henske, Chairman
52 | 2017 Proxy Statement |
Wenda Harris Millard
Jonathan I. Schwartz
Jane J. Thompson
REPORT OF THE CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
The primary purposes of the Corporate Governance and Nominating Committee are to (i) identify individuals qualified to become members of the Board of Directors, (ii) develop and recommend to the Board standards to be applied in making determinations as to the absence of material relationships between Verifone and a director, (iii) develop and recommend to the Board a set of corporate governance principles and (iv) assist management in the preparation of disclosure in this Proxy Statement regarding the operations of the Corporate Governance and Nominating Committee.
The Board has determined, upon the recommendation of the Corporate Governance and Nominating Committee, that Mr. Alspaugh, Ms. Austin, Mr. Hart, Mr. Henske, Ms. Millard (who resigned from our Board and Compensation and Leadership Development Committee, effective May 21, 2016), Mr. Raff, Mr. Schwartz and Ms. Thompson were “independent” within the meaning of the rules of the NYSE and the SEC. The Corporate Governance and Nominating Committee currently consists of Mr. Alspaugh, Ms. Austin, Mr. Hart, as chairman, Mr. Raff and Mr. Raff.Ms. Thompson. The Board has determined that each member of the Corporate Governance and Nominating Committee is “independent” within the meaning of the rules of the NYSE and the SEC.
On an ongoing basis during fiscal 2015,2016, the Corporate Governance and Nominating Committee evaluated potential candidates for positions on the Board and its committees, in each case in accordance with the criteria set forth in Verifone’s Corporate Governance Guidelines. The Corporate Governance and Nominating Committee approved and recommended to the Board of Directors the nineeight director nominees currently standing for election at the Annual Meeting.
Over the course of fiscal 2015, the Corporate Governance and Nominating Committee reviewed with management both the long-term and emergency succession plans for the Chief Executive Officer and other key employees.
As part of its duties, in September 2015,2016, the Corporate Governance and Nominating Committee reviewed the Corporate Governance and Nominating Committee’s charter and Verifone’s Corporate Governance Guidelines to determine whether any changes to the charter or the guidelines were deemed necessary or desirable by the Corporate Governance and Nominating Committee. After completing this review, the Corporate Governance and Nominating Committee recommended amendments to the Board, that no amendmentsincluding with respect to these documents were needed to be made at that time.director stock ownership guidelines, communications between interested parties and directors, the appointment of a lead independent director in the event the Chairman of the Board and CEO positions are combined and the description of the Corporate Governance and Nominating Committee’s purposes.
The Corporate Governance and Nominating Committee also conducted an evaluation of its own performance that included an evaluation of its performance compared with the requirements of the charter of the Corporate Governance and Nominating Committee. During fiscal 2015,2016, the Corporate Governance and Nominating Committee performed all of its duties and responsibilities under the Corporate Governance and Nominating Committee Charter.
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE |
Alex W. (Pete) Hart, Chairman |
Robert W. Alspaugh |
Karen Austin |
Eitan Raff |
Jane Thompson |
The purpose of the Audit Committee of Verifone is to assist the Board of Directors in fulfilling its oversight responsibility to the stockholders, potential stockholders, the investment community, and others relating to: (i) the integrity of Verifone’s financial statements; (ii) Verifone’s compliance with legal and regulatory requirements; (iii) Verifone’s independent registered public accounting firm’s qualifications and independence; (iv) the performance of Verifone’s internal audit function and independent registered public accounting firm; (v) the retention of Verifone’s independent registered public accounting firm; and (vi) the preparation of this report.
The Board of Directors has determined, upon the recommendation of the Corporate Governance and Nominating Committee, that each member of the Audit Committee is “independent” within the meaning of the rules of the NYSE and the SEC. The Audit Committee currently consists of Mr. Alspaugh, as chairman, Ms. Austin, Mr. Henske and Mr. Schwartz. The Board of Directors has designated each of Mr. Alspaugh and Mr. Henske as an “Audit Committee financial expert” within the meaning of applicable SEC rules.
As set forth in the Audit Committee charter, management is responsible for the preparation, presentation, and integrity of Verifone’s financial statements, for the appropriateness of the accounting principles and reporting policies that are used by Verifone and for implementing and maintaining internal control over financial reporting. The independent registered public accounting firm is responsible for auditing Verifone’s financial statements and for reviewing Verifone’s unaudited interim financial statements.
In fulfilling their responsibilities, it is recognized that members of the Audit Committee are not full-time employees of Verifone and are not, and do not represent themselves to be, performing the functions of auditors or accountants. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct “field work” or other types of auditing or accounting reviews or procedures or to set auditor independence standards. Members of the Audit Committee necessarily rely on the information provided to them by management and the independent registered public accounting firm. Accordingly, the Audit Committee’s considerations and discussions referred to below do not assure that the audit of Verifone’s financial statements has been carried out in accordance with generally accepted accounting principles or that Verifone’s auditors are in fact “independent.”
In the performance of its oversight function, the Audit Committee has considered and discussed the audited financial statements with management and the independent registered public accounting firm. The Audit Committee has also discussed with the independent registered public accounting firm the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board (“PCAOB”), which include, among other items, matters related to the conduct of the audit of the Company’s financial statements. In addition, the Audit Committee has discussed with the independent registered public accounting firm the auditors’ independence from Verifone and its management, including the matters in the written disclosures and letter required by applicable requirements of the PCAOB, a copy of which the Audit Committee has received. Allnon-audit services performed by the registered public accounting firm must be specificallypre-approved by the Audit Committee or a member thereof.
In reliance on the reviews and discussions referred to above, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above and in the Audit Committee charter, the Audit Committee recommended to the Board the inclusion of the audited financial statements in Verifone’s Annual Report on Form10-K for the fiscal year ended October 31, 2016, as filed with the Securities and Exchange Commission.
AUDIT COMMITTEE |
Robert W. Alspaugh, Chairman |
Karen Austin |
Robert B. Henske |
Jonathan I. Schwartz |
54 | 2017 Proxy Statement |
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of October 31, 2016 regarding securities issued under our equity compensation plans that were in effect during fiscal 2016.
Plan Category | Number of Securities to be Issued Upon | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | |||||||||
Equity compensation plans approved by security holders(1) | 6,237,060 | $30.16 | (2) | 8,059,375 | (3) | |||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||||
|
|
|
|
|
| |||||||
Total | 6,237,060 | $30.16 | (2) | 8,059,375 | (3) | |||||||
|
|
|
|
|
|
(1) | This reflects equity awards issued under the 2006 Equity Plan. This information also includes securities issuable pursuant to the Hypercom 2000 Broad-Based Stock Incentive Plan, HypercomNon-Employee Director Plan, and Hypercom Long-Term Incentive Plan as a result of our acquisition of Hypercom Corporation on August 4, 2011. As of October 31,
2006
|
(2) | The weighted-average exercise price does not include the effect of |
(3) | Represents shares remaining available for future issuance under our 2006 Equity Plan as of October 31, |
2006 Equity Plan
Our 2006 Equity Plan is the only plan under which we currently grant equity awards. Our 2006 Equity Plan permits grants of stock options, stock appreciation rights, restricted stock awards, RSU awards, performance share and share unit awards, dividend equivalent rights and other stock awards. Awards may be granted to ournon-employee directors, executive officers, and employees and other individuals performing services for us. The plan authorizes the issuance of an aggregate of 40,522,075 shares of our common stock. For purposes of determining the number of shares issuable under the 2006 Equity Plan, any shares granted as stock options or stock appreciation rights are counted as one share for each share so granted; any RSU awards granted prior to June 29, 2011 are counted as 1.75 shares for every RSU award granted; and any RSU awards granted on and after June 29, 2011 are counted as 2.00 shares for every RSU award granted. As of October 31, 2016, there were a total of 2,859,080 options outstanding at a weighted-average exercise price of $30.16 per share. As of October 31, 2016, there were 3,377,980 RSUs outstanding. For further information on our equity compensation plan, see Note 4,Employee Benefit Plans of Notes to Consolidated Financial Statements included in our Annual Report on Form10-K filed with the SEC on December 27, 2016.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information concerning the beneficial ownership of the shares of our common stock as of January 28, 2016 (the “Measurement Date”), by:
2017 Proxy Statement |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents information concerning the beneficial ownership of the shares of our common stock as of January 27, 2017 (the “Measurement Date”), by:
each person we know to be the beneficial owner of 5% or more of our outstanding shares of common stock;
each of the NEOs;
each current director; and
all of our current executive officers and directors as a group.
Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power over securities. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe that each stockholder identified in the table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder. Percentage of beneficial ownership is based on 111,576,880 shares of common stock outstanding as of January 27, 2017. Shares of common stock subject to options that are currently exercisable or exercisable within 60 days of the Measurement Date, and shares of RSUs which are scheduled to be released within 60 days of the Measurement Date are considered outstanding and beneficially owned by the person holding the options or RSUs for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless indicated below, the address of each individual listed below is c/o VeriFone Systems, Inc., 88 W. Plumeria Drive, San Jose, California 95134.
Shares Beneficially Owned | ||||||||
Name and Address of Beneficial Owner | Number | Percent of Class | ||||||
BlackRock, Inc.(1) | 14,462,932 | 13.0 | % | |||||
Jackson Square Partners, LLC(2) | 11,047,556 | 9.9 | % | |||||
The Vanguard Group Inc.(3) | 7,595,265 | 6.8 | % | |||||
Paul Galant(4) | 591,275 | * | ||||||
Vin D’Agostino(5) | 37,185 | * | ||||||
Albert Liu(6) | 217,219 | * | ||||||
Glen Robson(7) | 72,467 | * | ||||||
Marc Rothman | 146,675 | * | ||||||
Robert W. Alspaugh(8) | 43,500 | * | ||||||
Karen Austin(9) | 15,000 | * | ||||||
Alex W. (Pete) Hart(10) | 79,376 | * | ||||||
Robert B. Henske(11) | 64,000 | * | ||||||
Eitan Raff(12) | 40,000 | * | ||||||
Jonathan I. Schwartz(13) | 15,000 | * | ||||||
Jane J. Thompson(14) | 17,000 | * | ||||||
All current directors and executive officers as a group (12 persons)** | 1,338,697 | 1.2 | % |
* | Less than 1%. |
** | Total includes shares beneficially owned by our current executive officers. |
(1) | The address of BlackRock, Inc. (“BlackRock”) is 40 East 52nd Street, New York, NY 10022. BlackRock, along with certain of its subsidiaries, has the sole power to vote or direct the vote of 14,072,832 shares and the sole power to dispose or direct the disposition of 14,462,932 shares of common stock. This information is based solely upon a Schedule 13G/A filed by BlackRock on January 17, 2017 for beneficial ownership as of December 31, 2016. |
(2) | The address of Jackson Square Partners, LLC (“Jackson Square”) is 101 California Street, Suite 3750, San Francisco, CA 94111. Jackson Square has the sole power to vote 3,204,893 shares of common stock, shared |
56 | 2017 Proxy Statement |
power to vote or to direct the vote of 4,401,519 shares of common stock and sole power to dispose or to direct the disposition of 11,047,556 shares of common stock. This information is based solely upon a Schedule 13G/A filed by Jackson Square on March 10, 2016 for beneficial ownership as of February 29, 2016. |
(3) | The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. The Vanguard Group, Inc. (“Vanguard”) has the sole power to dispose or direct the disposition of 7,511,710 shares of common stock. Vanguard has shared power to dispose or direct the disposition of 83,555 shares of common stock, sole power to vote or direct the vote of 84,155 shares of common stock and shared power to vote or to direct the vote of 6,200 shares of common stock. This information is based solely upon a Schedule 13G/A filed by Vanguard on February 11, 2016 for beneficial ownership as of December 31, 2015. |
(4) | Beneficial ownership information includes 185,025 shares held by Mr. Galant directly. In addition, shares listed as beneficially owned by Mr. Galant include 406,250 shares issuable upon the exercise of options that are exercisable or will become exercisable within 60 days after the Measurement Date. |
(5) | Beneficial ownership information includes 10,203 shares held by Mr. D’Agostino directly. In addition, shares listed as beneficially owned by Mr. D’Agostino include 26,100 shares issuable upon the exercise of options that are exercisable or will become exercisable within 60 days after the Measurement Date. The shares listed as beneficially owned by Mr. D’Agostino also include 882 RSUs that are subject to be released or will be released within 60 days |
(6) | Beneficial ownership information includes 114,619 shares held by Mr. Liu directly. In addition, shares listed as beneficially owned by Mr. Liu consist of 102,600 shares issuable upon the |
Shares Beneficially Owned | ||||||||
Name and Address of Beneficial Owner | Number | Percent of Class | ||||||
FMR LLC(1) | 8,343,160 | 7.6 | % | |||||
BlackRock, Inc.(2) | 7,117,216 | 6.5 | % | |||||
Jackson Square Partners, LLC(3) | 6,898,441 | 6.3 | % | |||||
The Vanguard Group Inc.(4) | 6,661,824 | 6.0 | % | |||||
Manning & Napier Advisors, LLC(5) | 6,428,893 | 5.8 | % | |||||
Paul Galant(6) | 447,620 | * | ||||||
Marc Rothman | 124,164 | * | ||||||
Alok Bhanot(7) | 232,647 | * | ||||||
Albert Liu(8) | 189,024 | * | ||||||
Glen Robson(9) | 42,000 | * | ||||||
Robert W. Alspaugh(10) | 44,250 | * | ||||||
Karen Austin(11) | 7,500 | * | ||||||
Alex W. (Pete) Hart(12) | 71,876 | * | ||||||
Robert B. Henske(13) | 53,000 | * | ||||||
Wenda Harris Millard(14) | 20,000 | * | ||||||
Eitan Raff(15) | 36,625 | * | ||||||
Jonathan I. Schwartz(16) | 7,500 | * | ||||||
Jane J. Thompson(17) | 9,500 | * | ||||||
All current directors and executive officers as a group (14 persons)** | 1,308,698 | 1.2 | % |