ROBBINS GELLER RUDMAN & DOWD LLP - In re VeriFone … · in re verifone holdings, inc. ) master file no. 3:07-cv-06140-emc securities litigation ) class action this document relates

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ROBBINS GELLER RUDMAN & DOWD LLP

CHRISTOPHER P. SEEFER (201197) CHRISTOPHER M. WOOD (254908) Post Montgomery Center One Montgomery Street, Suite 1800 San Francisco, CA 94104 Telephone: 415/288-4545 415/288-4534 (fax) [email protected] cwood@rgrdlaw. corn

— and — PATRICK J. COUGHLIN (111070) RANDI D. BANDMAN (145212) FRANCIS A. DIGIACCO (265625) 655 West Broadway, Suite 1900 San Diego, CA 92101 Telephone: 619/231-1058 619/231-7423 (fax) [email protected] randib@rgrdlaw. corn fdigiacco @rgrdlaw. com

Lead Counsel for Plaintiffs

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

In re VERIFONE HOLDINGS, INC. ) Master File No. 3:07-cv-06140-EMC SECURITIES LITIGATION )

CLASS ACTION

This Document Relates To: ) DECLARATION OF CHRISTOPHER P. SEEFER IN SUPPORT OF LEAD

ALL ACTIONS. ) PLAINTIFF'S MOTION FOR FINAL APPROVAL OF SETTLEMENT AND PLAN OF ALLOCATION FOR SETTLEMENT PROCEEDS, AND APPLICATION FOR AWARD OF ATTORNEYS' FEES AND EXPENSES

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Case3:07-cv-06140-EMC Document323 Filed12/16/13 Page1 of 108

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TABLE OF CONTENTS

Page

I. PRELIMINARY STATEMENT ....................................... .................1 .................................

II. FACTUAL SUMMARY OF LEAD PLAINTIFF'S CLAIMS ........................................... 7

III. LEAD PLAINTIFF AND LEAD COUNSEL HAVE VIGOROUSLY PROSECUTED THIS CASE FOR SIX YEARS ................................................................9

A. Commencement, Consolidation and the Appointment of Lead Plaintiff ................ 9

B. Lead Plaintiff's Investigation and Filing of the Consolidated Complaint and the Court's Granting of Defendants' Motions to Dismiss ..............................10

C. The October 2009 Mediation .................................................................................12

D. The Filing of the Amended Complaints and the Court's Dismissal of the Action with Prejudice ............................................................................................14

E. The Successful Ninth Circuit Appeal ....................................................................17

F. Fact Discovery .......................................................................................................19

G. The March 26, 2013 Mediation and Subsequent Settlement Negotiations ...........22

IV. THE STRENGTHS AND WEAKNESSES OF THE CASE ............................................23

A. Lead Plaintiff Had Developed Strong Claims Against Defendants ......................24

B. Lead Plaintiff Faced Substantial Risks that Could Have Resulted in Dismissal or Substantial Narrowing of Its Claims ................................................26

1. There Were Risks that the Class Period Would Be Shortened and that the Action Would Not Be Certified as a Class Action .......................26

2. There Were Risks that Lead Plaintiff Would Not Be Able to Prove Defendants Knowingly or Recklessly Made False Statements .................28

3. There Were Risks that Lead Plaintiff Would Not Be Able to Prove Causationand Damages ............................................................................. 29

4. There Was a Risk that Further Litigation Would Have Depleted Defendants' Ability to Fund a Settlement and that Defendants Would Not Be Able to Satisfy a Judgment in Lead Plaintiff's Favor.......................................................................................................... 30

V. SETTLEMENT NEGOTIATIONS AND TERMS OF THE SETTLEMENT ................. 31

VI. NOTICE TO MEMBERS OF THE CLASS .....................................................................32

VII. THE PLAN OF ALLOCATION ....................................................................................... 33

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VIII. LEAD COUNSEL'S MOTION FOR ATTORNEYS' FEES AND EXPENSES IS REASONABLE................................................................................................................. 35

A. A Reasonable Percentage of the Fund Recovered Is the Appropriate Method to Use in Awarding Attorneys' Fees in Common Fund Cases ................35

B. Consideration of Relevant Factors Justify an Award of 20% in This Case ..........36

1. The Excellent Settlement Achieved ..........................................................36

2. Objections by Class Members to the Settlement or Requested Fees......... 36

3. The Diligent Prosecution of this Case ....................................................... 36

4. The Complexity of the Litigation's Factual and Legal Questions .............37

5. The Risks of the Litigation and the Contingent Nature of the Representation........................................................................................... 37

IX. COUNSEL FOR LEAD PLAINTIFF SHOULD BE AWARDED ITS EXPENSES.......................................................................................................................39

X. THE ISRAELI LITIGATION ...........................................................................................39

XI . CONCLUSION .................................................................................................................41

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I, CHRISTOPHER P. SEEFER, declare as follows:

1. I am a member of the law firm of Robbins Geller Rudman & Dowd LLP ("Robbins

Geller" or "Lead Counsel"), counsel for Lead Plaintiff National Elevator Industry Pension Fund

("National Elevator" or "Lead Plaintiff') and Court-appointed lead counsel for the Class of investors

on whose behalf this action has been brought. I was actively involved in the prosecution of this

action (hereinafter, the "Litigation"), am familiar with its proceedings and have personal knowledge

of the matters set forth herein based upon my supervision of and participation in the Litigation. 1

2. I submit this declaration in support of Lead Plaintiffs motion, pursuant to Rule 23 of

the Federal Rules of Civil Procedure, for approval of: (a) the settlement on the terms set forth in the

Stipulation, which provides for a cash settlement for the benefit of the Class of $95 million plus any

interest earned (the "Settlement Fund"); (b) the Plan of Allocation of settlement proceeds; and

(c) Lead Counsel's application for an award of attorneys' fees and expenses.

I. PRELIMINARY STATEMENT

3. This is a securities class action brought against VeriFone Systems, Inc., f/k/a

VeriFone Holdings, Inc. ("VeriFone" or the "Company"); Douglas G. Bergeron ("Bergeron"), the

Company's former Chief Executive Officer ("CEO"); and Barry Zwarenstein ("Zwarenstein"), the

Company's former Chief Financial Officer ("CFO"), for violations of § § 10(b), 20(a) and 20A of the

Securities Exchange Act of 1934 ("Exchange Act"), 15 U.S.C. §§78j(b), 78t(a) and 78t-1, and Rule

l Ob-5, 17 C.F.R. §240.1Ob-5, promulgated thereunder. ¶1. 2

4. In the Third Amended Complaint, Lead Plaintiff alleges that defendants violated

§ § 10(b) and 20(a) of the Exchange Act and defrauded Class members by falsely representing

throughout the Class Period that: (a) the Company's April 2006 acquisition of Lipman Electronic

Engineering Ltd. ("Lipman") would — and did — increase gross margins and earnings in 2007;

(b) VeriFone's 1Q07, 2Q07 and 3Q07 financial results were fairly presented in all material respects;

1 Unless otherwise defined herein, capitalized terms have the meanings ascribed to them in the Stipulation of Settlement (the "Stipulation"), filed on August 9, 2013. Dkt. No. 306.

2 All paragraph references (¶ or ¶¶) are to the Revised Third Amended Consolidated Complaint for Violations of the Federal Securities Laws (the "Third Amended Complaint"), filed on September 15, 2010. Dkt. No. 262.

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1 (c) defendants had evaluated the Company's disclosure controls and procedures and concluded they

2 were effective; and (d) the reported increases in 1Q07, 2Q07 and 3Q07 gross margins and earnings

3 were the result of higher-margin wireless revenue, better supply chain efficiencies and better.

4 sourcing of strategic components, procurement synergies and other factors.

5 5. The Third Amended Complaint alleges that the restatement of the Company's 1Q07-

6 3Q07 financial results was an admission that the Company's financial statements were materially

7 false and misleading. ¶¶79-81, 98. It further alleges that defendants knew unsupported and

8 unverified accounting entries were made in each quarter that caused VeriFone to report false

9 financial results in line with guidance and Wall Street analyst expectations. ¶¶101-115. Indeed,

10 defendants wrote in contemporaneous e-mails that the accurate results reflected in multiple internal

11 Flash reports were an "unmitigated disaster" and that the "party would be over big time" if VeriFone

12 reported those results. ¶¶106, 143, 145. When no error could be found with the actual results

13 included in the Flash reports, the Third Amended Complaint alleges that defendants provided the

14 types and dollar amounts of the accounting adjustments needed for VeriFone to report results in line

15 with guidance. ¶¶141-183. The fraudulent accounting adjustments were then made, but they were

16 not supported or verified as required by Company policy. When the Company eventually restated its

17 financial results, it admitted that defendants' misconduct caused VeriFone to overstate 1Q07-3Q07

18 net income by more than $70 million. ¶80.

19 6. Lead Plaintiff alleges that, when the truth about VeriFone's financial condition was

20 disclosed, Class members suffered damages as a result of the decline in the Company's stock price.

21 ¶¶361-372. On December 3, 2007, when the Company first revealed that it would have to restate its

22 1 Q07-3Q07 financial results, the Company's stock price declined 46% (or $22 a share) in one day.

23 ¶367. The Company's stock price declined to $12.50 after additional partial disclosures were made

24 in subsequent months. ¶11368-370. Lead Plaintiff alleges that these disclosures caused hundreds of

25 millions of dollars in damages to the Class. ¶361.

26 7. This action has been vigorously litigated from its commencement in December 2007

27 through the settlement with VeriFone and the individual defendants on the terms set forth in the

28 Stipulation. Defendants are represented by very experienced and formidable securities litigators and

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1 asserted aggressive defenses and expressed their firm belief that the Class could not prevail on any

2 of the claims asserted. The settlement was not achieved until Lead Plaintiff, inter alia: (a) amended

3 the complaint for violation of the federal securities laws three times to include evidence developed

4 through an exhaustive investigation; (b) successfully appealed the dismissal of the case to the Court

5 of Appeals for the Ninth Circuit; (c) began conducting merits discovery, including serving multiple

6 third-party subpoenas and reviewing over 300,000 pages of documents produced by defendants and

7 the U.S. Securities and Exchange Commission ("SEC"); (d) assessed the risks of prevailing on its

8 claims at the summary judgment stage and at trial, including retaining an expert to assess damages

9 questions regarding the disclosures alleged in the Third Amended Complaint; and (e) prepared for

10 and attended two separate mediation sessions.

11 8. The settlement with defendants was negotiated with the assistance of a highly-

12 respected mediator, the Honorable Layn R. Phillips (Ret.), a former federal district court judge.

13 Judge Phillips was selected by the parties, in part, because of his extensive experience in mediating

14 complex securities class actions such as this one. Lead Plaintiff and defendants prepared

15 comprehensive mediation briefs with supporting evidence that was examined by the parties before

16 the March 26, 2013 mediation. During the mediation, the parties discussed the strengths and

17 weaknesses of Lead Plaintiff's claims and the defenses asserted by defendants. The parties did not

18 resolve the case on March 26, 2013 but participated in numerous discussions with Judge Phillips

19 over the next three months and agreed to settle the case in June 2013.

20 9. This settlement is the product of hard-fought negotiation and takes into consideration

21 the significant strengths and risks specific to the case. It was negotiated by experienced counsel for

22 Lead Plaintiff and defendants with a solid understanding of both the strengths and weaknesses of

23 their respective positions.

24 10. Lead Plaintiff and Lead Counsel believe that this settlement represents an excellent

25 result for the Class, especially under the circumstances of this case. In combination, fact discovery,

26 investigation, expert analysis, motion practice and legal research informed Lead Counsel that, while

27 it believed its case was meritorious, it also had certain weaknesses that had to be carefully evaluated

28 in determining which course of action was in the best interests of the Class. As set forth in further

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1 detail below, despite the fact that Lead Plaintiff's allegations and claims were arguably supported by

2 legal authority, expert opinion and the evidence, there were many uncertainties with respect to Lead

3 Plaintiff's ability to prevail on some or all of the claims and alleged damages if the case proceeded to

4 summary judgment or trial. In addition, there were risks to recovery if Lead Plaintiff successfully

5 obtained a judgment.

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11. Proceeding with this Litigation through the summary judgment stage posed a number

7 of real and substantial risks for the Class. Lead Plaintiff would be required to demonstrate to the

8 Court that a genuine issue of material fact existed with regard to each element of its securities fraud

9 claims. There was a substantial risk that the Court would find the evidence proffered by Lead

10 Plaintiff in support of falsity, loss causation and/or scienter did not create a genuine issue of material

11 fact as to some or all of Lead Plaintiff's claims. Even if Lead Plaintiff received a favorable

12 dispositive ruling at the summary judgment stage, defendants would likely attempt to appeal such a

13 ruling, causing months or years of additional delay.

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12. There was a substantial risk that ajury would not find that defendants made any false

15 statements in the early portion of the Class Period (August 31, 2006-February 28, 2007) because the

16 restatement of VeriFone's 1Q07-3Q07 results were unrelated to the statements made during that

17 portion of the Class Period. Although Lead Plaintiff believes that the restatement establishes the

18 material falsity of VeriFone's 1Q07-3Q07 financial results, there was a substantial risk that Lead

19 Plaintiff would not be able to prove at trial that defendants acted with the required state of mind —

20 actual knowledge or deliberate recklessness — especially as defendants had vigorously asserted that

21 they had no knowledge of the misconduct alleged. A defendant's state of mind in a securities case is

22 often the most difficult element of proof and one that is rarely supported by direct evidence, such as

23 an admission. There was also a risk that Class members who purchased VeriFone stock after

24 December 3, 2007 — the date VeriFone first reported that it would have to restate its financial results

25 — would not be able to prove reliance because they already knew that VeriFone's 1Q07-3Q07

26 financial results would be restated and that the preliminary estimates of the restatement reported on

27 December 3, 2007 could change.

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13. There was also a substantial risk that Lead Plaintiff would not prevail on some of its

2 I damage theories at summary judgment or trial, which could have significantly reduced or eliminated

3 I damages for portions of the Class, damages related to purchases between August 31, 2006 and

4 I March 1, 2007, and December 3, 2007 and April 1, 2008.

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14. If Lead Plaintiff did prevail on some or all of its claims at trial, there was a substantial

6 risk that a contentious claims process would have led to a smaller recovery, or no recovery at all, for

7 certain Class members whom defendants might try to exclude in order to reduce any judgment.

8 Regardless of the outcome of the claims process, it would likely have required many months or years

9 of delay to adjudicate the attendant issues.

15. Even if Lead Plaintiff survived summary judgment and prevailed on any or all of its

claims at trial and was awarded damages, there was a substantial risk that defendants would file post-

trial motions and, if unsuccessful, file an appeal of any verdict or award. The post-trial motions and

appeals process could take years, during which time the Class would receive no recovery. Further,

any appeal would also create the risk of reversal, in which case the Class would receive nothing after

having prevailed on their claims at trial.

16. Finally, there was a risk that the Class would not be able to recover a judgment

because existing directors' and officers' liability insurance would have been depleted had the case

progressed through trial and appeals and because of uncertainty about VeriFone's current and future

financial condition.

17. These issues and others were carefully considered by Lead Plaintiff and Lead Counsel

in deciding to settle the Litigation for $95 million. On balance, considering all the circumstances

and risks the Settling Parties faced at summary judgment, at trial and after trial, Lead Plaintiff

concluded that settlement on the terms agreed upon was in the best interests of the Class. As stated

in the accompany Declaration of Robert O. Betts, Executive Director of the National Elevator

Industry Pension Fund ("Betts Declaration"), National Elevator authorized Lead Counsel to enter

into the Stipulation after analyzing and evaluating the merits of the case and participating in the

mediation, and it believes the settlement is in the best interests of the Class and represents a very

good recovery that would not have been possible without the diligent efforts of Lead Counsel.

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1 Similarly, Judge Phillips stated in his declaration that the settlement negotiations were extensive and

2 extremely hard fought and that he believes the settlement is fair, reasonable and adequate and should

3 be approved by the Court. See Declaration of Layn R. Phillips in Support of Lead Plaintiff's Motion

4 for Final Approval of Settlement ("Phillips Declaration"), submitted herewith.

5 18. The settlement confers a substantial benefit on the Class and eliminates the significant

6 costs of continued litigation and the risks of an adverse result at summary judgment, trial or appeal.

7 Indeed, assuming that Lead Plaintiff was able to prove the entirety of its case and recover damages

8 from every stock drop alleged in the Third Amended Complaint, the settlement here represents

9 approximately 10.4%-16.4% of Lead Plaintiff's maximum estimated judgment after trial. This rate

10 of recovery is many times larger than the median settlement value of actions with estimated damages

11 between $500 million and $4.9 billion in 2012 (1.1%-1.4%). See Ellen M. Ryan, Laura E. Simmons,

12 Securities Class Action Settlements 2012 Review and Analysis, at 8 (Fig. 8) (Cornerstone Research

13 2013).

14 19. It is respectfully submitted that the settlement should be approved as fair, reasonable

15 and adequate; the Plan of Allocation of settlement proceeds should be approved; and counsel for

16 Lead Plaintiff should be awarded attorneys' fees of 20% of the Settlement Fund, as well as

17 $278,994.44 in expenses. Lead Counsel has prosecuted this action on a wholly contingent basis for

18 more than six years and advanced or incurred substantial litigation expenses. By doing so, Lead

19 Counsel has borne the risk of an unfavorable result. It has not received any compensation for its

20 substantial effort, nor has it been awarded the expenses it seeks.

21 20. The fee application for 20% of the Settlement Fund is fair to both the Class and Lead

22 Counsel and warrants this Court's approval. This fee request is substantially lower than the 25%

23 benchmark for fees in these types of actions in the Ninth Circuit and is entirely justified in light of

24 the substantial benefits conferred on the Class, the risks undertaken, the quality of representation,

25 and the nature and extent of the legal services performed. Moreover, as set forth in the Betts

26 Declaration, the fee was negotiated by Lead Counsel and Lead Plaintiff at the commencement of the

27 Litigation and, pursuant to well established authority, should therefore be afforded a presumption of

28 reasonableness.

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21. Lead Counsel also seeks an award of reasonable and necessary expenses required in

prosecuting the Litigation. Through December 10, 2013, Lead Counsel's expenses total

$278,994.44. The accompanying Declaration of Christopher P. Seefer Filed on Behalf of Robbins

Geller Rudman & Dowd LLP in Support of Application for Award of Attorneys' Fees and Expenses

("Robbins Geller Expense Declaration") details these amounts, which include, among other things:

(a) the fees and expenses of outside investigators and consultants, whose services Lead Counsel

required in the successful prosecution and resolution of this case; (b) photocopying, imaging and

printing thousands of pages of documents; (c) online factual and legal research; and (d) mediation

fees. As illustrated by the discussion herein of Lead Counsel's efforts required to achieve this

settlement, these expenses were both reasonable and necessary to obtain this result.

22. The following is a summary of the nature of the Class' claims, the principal events

that occurred during the course of the Litigation, and the legal services provided by Lead Counsel.

II. FACTUAL SUMMARY OF LEAD PLAINTIFF'S CLAIMS

23. VeriFone designs, manufactures, and sells electronic payment devices that enable

acceptance and processing of electronic and point-of-sale payments for goods and services. ¶1.

Prior to the Class Period, VeriFone announced it was acquiring Lipman; and Bergeron and

Zwarenstein, VeriFone's former CEO and CFO, assured investors the acquisition would be a huge

success and increase the Company's gross margins in 2007. ¶¶67-70, 293-299. Nevertheless, Wall

Street analysts were increasingly concerned that VeriFone's gross margins and earnings would be

negatively impacted by the acquisition because Lipman's sales were in lower-margin international

markets and because Lipman's margins had been declining for years. ¶¶72-78.

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24. During the Class Period, VeriFone reported increases in gross margins and earnings,

which analysts reported were better than expected given the increase in lower-margin international

sales. ¶¶79-97. Bergeron and Zwarenstein told investors they understood the gross margin was the

most important measure of the Company's financial performance — indeed, "the ultimate barometer

of the operational Excellence of this business" — and that they paid very close attention to the gross

margin. ¶68. They also assured investors that VeriFone's management team had "proven

integration experience" and was "extremely operationally focused" and "highly disciplined and

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1 experienced." ¶69. They repeatedly certified under oath to investors that the Company's financial

2 results were fairly presented in all material respects and assured them they had a legitimate basis for

3 those representations because they had designed, maintained, and evaluated the Company's

4 disclosure controls and procedures and concluded they were effective. ¶1179-83. They boasted the

5 better-than-expected gross margins were the results of "supply chain efficiencies in Israel that we

6 never experienced before," "procurement synergies," "better commercial execution," and declines in

7 fixed costs that provided VeriFone with a "structural gross margin advantage" and assured them the

8 reported gross margins were accurate, stating, "we have tremendous transparency, financial

9 transparency into the true cost of manufacturing and all the little nuanced items that roll up into

10 that." ¶1184-92.

11 25. In fact, the Third Amended Complaint alleges that defendants' representations were

12 materially false and misleading and that defendants were deliberately reckless in representing the

13 accuracy of the Company's financial results and the effectiveness of its financial reporting controls.

14 ¶1198-292.

15 26. On December 3, 2007, VeriFone reported that its financial results for 1Q07-3Q07

16 should no longer be relied upon, principally due to errors in accounting related to the valuation of in-

17 transit inventory and allocation of manufacturing and distribution overhead to inventory, each of

18 which caused VeriFone to understate reported costs of net revenues and overstate gross margins and

19 net income. ¶336. VeriFone disclosed its 1Q07-3Q07 financial statements would therefore be

20 restated and the final restatement resulted in reductions to previously reported inventories of

21 approximately $13.3 million, $23.9 million and $40.6 million in 1Q07, 2Q07 and 3Q07, and

22 corresponding reductions to previously reported net income of approximately $4.7 million, $9.7

23 million and $55.8 million. ¶80.

24 27. As alleged in the Third Amended Complaint, VeriFone admitted that the financial

25 statements issued during the Class Period were materially false and misleading and not prepared in

26 accordance with GAAP because VeriFone: (a) recorded millions of dollars of intercompany in-

27 transit inventory that did not exist by making identical manual journal entries for both in-transit

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shipments; (b) double booked millions of dollars of manufacturing and distribution overhead costs to

inventory at former Lipman subsidiaries by making duplicate manual journal entries; (c) failed to

eliminate millions of dollars in intercompany profit in inventory; (d) improperly capitalized

overhead into inventory; (e) failed to write off excess and obsolete inventory; and (f) delayed taking

necessary charges to decrease inventory at former Lipman entities until a subsequent quarter. ¶¶80,

217-228.

28. Defendants' false representations caused the Company's stock to trade at artificially

inflated prices, more than doubling from $23.15 on August 30, 2006 (the day before the Class

Period) to a Class Period high of $50 on October 31, 2007. ¶¶361-365. As Class members

unknowingly purchased shares at these inflated prices, defendants unloaded more than $100 million

of their VeriFone stock. ¶1J302-310. When, beginning on December 3, 2007, defendants revealed

that VeriFone had substantially overstated its financial results in 1Q07, 2Q07 and 3Q07, including

overstating the Company's earnings by as much as 600%, the Company's stock price collapsed,

declining 75% from the Class Period high price of $50 per share to just $12.50 on April 2, 2008.

¶¶366-372.

III. LEAD PLAINTIFF AND LEAD COUNSEL HAVE VIGOROUSLY PROSECUTED THIS CASE FOR SIX YEARS

A. Commencement, Consolidation and the Appointment of Lead Plaintiff

29. This action was filed on December 4, 2007. Dkt. No. 1. Between December 6, 2007

and January 7, 2008, eight additional actions were filed arising out of the same transactions and

occurrences as are at issue here. 3 See Dkt. No. 54. On February 5, 2008, the Court entered a

Stipulation and Order Consolidating Related Cases. Id. The Order consolidated the cases and

3 The nine actions were Eichenholtz v. VeriFone Holdings, Inc., et al., C 07-6140 MHP; Lien v. VeriFone Holdings, Inc., et al., C 07-6195 JSW; Vaughn, et al. v. VeriFone Holdings, Inc., et al., C 07-6197 VRW; Feldman, et al. v. VeriFone Holdings, Inc., et al., C 07-6218 MMC; Cerini v. VeriFone Holdings, Inc., et al., C 07-6228 SC; Westend Capital Management LLC v. VeriFone Holdings, Inc., et al., C 07-6237 MMC; Hill v. VeriFone Holdings, Inc., et al., C 07-6238 MHP; Offutt v. VeriFone Holdings, Inc., et al., C 07-6241 JSW; and Feitel v. VeriFone Holdings, Inc., et al., C 08-0118 CW.

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1 provided that defendants were not required to respond to any complaints until the filing of a

2 I consolidated complaint or the designation of an operative complaint. Id.

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30. On February 4, 2008, six movants, or groups of movants, filed motions to be

4 appointed lead plaintiff and to have their selection of lead counsel approved. See Dkt. No. 124 at 3.

5 In addition to National Elevator, the movants included a group of Israeli institutional investors that

6 purchased their VeriFone shares on the Tel Aviv Stock Exchange. On August 22, 2008, following

7 briefing and a hearing, the Court issued a Memorandum and Order appointing National Elevator as

- Lead Plaintiff and approving its selection of Robbins Geller as Lead Counsel. Dkt. No. 155; see

9 Eichenholtz v. Verifone Holdings, Inc., No. C 07-06140 MHP, 2008 U.S. Dist. LEXIS 64633 (N.D.

10 Cal. Aug. 22, 2008). The Court appointed National Elevator as Lead Plaintiff even though the

11 Israeli institutional investors incurred larger losses on their purchases of VeriFone stock because the

12 Israeli institutional investors were an impermissible grouping of plaintiffs. Id. at *20.

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B. Lead Plaintiff's Investigation and Filing of the Consolidated Complaint and the Court's Granting of Defendants' Motions to

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Dismiss

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31. Following its appointment as Lead Plaintiff, National Elevator and Lead Counsel

continued to investigate the case and prepare a consolidated complaint. The investigation included

the review of all public documents related to VeriFone and Lipman, including press releases,

earnings conference call transcripts, reports filed with the SEC, reports issued by analysts following

the companies, numerous articles in the financial press and postings on message boards. These

documents were gathered and chronologized by Lead Counsel's staff and then reviewed by Lead

Counsel and its in-house forensic accountants. The forensic accountants also prepared financial

trend analyses of VeriFone and assisted in the review of the accounting issues, including the

violations of GAAP evidenced by the restatement of the Company's financial results in 1Q07, 2Q07

and 3Q07.

32. Lead Counsel and its in-house economic consultants also prepared and analyzed the

stock prices of VeriFone during the Class Period compared to a peer group and an overall market

index, which were used to support the allegations related to loss causation and market efficiency —

allegations that were never contested by defendants.



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33. In addition, Lead Counsel retained an investigative firm that contacted numerous

I former VeriFone employees, who provided information that was included in the consolidated

complaint. Lead Counsel believed these allegations provided additional support for its claims that

defendants had knowingly or recklessly violated the federal securities laws.

34. Lead Counsel and its in-house economic consultants also reviewed documents related

to sales of VeriFone stock during the Class Period by defendants and other VeriFone insiders. The

information from this analysis was included in the consolidated complaint.

35. Lead Counsel also conducted litigation searches related to VeriFone and reviewed

various cases in which VeriFone was a party. Similarly, Lead Counsel made requests to the SEC

under the Freedom of Information Act ("FOIA") after learning that the SEC was conducting an

investigation of VeriFone's restatement. Although the SEC initially denied the FOIA requests

because its investigation had not been concluded, Lead Counsel eventually obtained some

documents from the SEC in 2010 that were included in a subsequently filed complaint.

36. On October 31, 2008, Lead Plaintiff filed the Consolidated Complaint for Violations

of the Federal Securities Laws ("Consolidated Complaint"). Dkt. No. 161. The Consolidated

Complaint sought to recover damages on behalf of persons who purchased the publicly traded

securities of VeriFone between August 31, 2006 and April 1, 2008 and named as defendants

VeriFone; Bergeron, the Company's then-CEO and former Chairman of the Board of Directors

("Board"); Zwarenstein, the Company's former CFO and Executive Vice President ("EVP");

William G. Atkinson ("Atkinson"), the Company's former EVP of Global Marketing and Business

Development; and Craig A. Bondy ("Bondy"), a former VeriFone director. Id. at ¶1.

37. Defendants filed motions to dismiss the Consolidated Complaint on December 31,

2008. Dkt. Nos. 164-171. Defendants VeriFone, Bergeron, Atkinson, and Bondy asserted that while

VeriFone may have restated its financial results, Lead Plaintiff had failed to allege a strong inference

of scienter or that any defendant had engaged in reckless or intentional misconduct. Dkt. No. 164.

In addition, these defendants asserted that Lead Plaintiffs insider-trading allegations were deficient

because they did not adequately plead scienter, the possession of material nonpublic information or

contemporaneous trading by defendants. Id. Defendant Zwarenstein filed a separate motion to


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1 dismiss, contending that Lead Plaintiff had failed to allege a strong inference of scienter as none of

2 the confidential witnesses claimed that he had knowledge of any wrongdoing, any stock sales were

3 made pursuant to a prearranged stock plan, and he did not resign until after he had supervised and

4 signed VeriFone's corrected financial statements. Dkt. No. 168.

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38. Lead Plaintiff filed an opposition to defendants' motions to dismiss on February 20,

6 2009. Dkt. No. 174. Lead Plaintiff contended that the Consolidated Complaint indeed alleged a

7 strong inference of scienter as to all defendants, based on: (a) the Company's restatement;

8 (b) defendants' knowledge of numerous undisclosed problems related to the Lipman integration;

9 (c) post-Class Period admissions that VeriFone's 40% gross margins were unachievable in light of

10 lower-margin international sales; (d) the terminations and resignations of defendants; (e) VeriFone's

11 admission that there were material weaknesses in the Company's financial reporting controls; (f) the

12 false Sarbanes-Oxley certification signed by defendants; and (g) defendants' insider trading and

13 compensation structure. Id.

39. Defendants' reply briefs were filed on March 20, 2009; the Court held a hearing on

defendants' motions to dismiss on April 20, 2009. Dkt. Nos. 182-184, 190.

40. On May 26, 2009, the Court issued a Memorandum and Order granting defendants'

motions to dismiss and concluding that Lead Plaintiff had not alleged a strong inference of scienter

in compliance with the PSLRA as to any of the defendants. Dkt. No. 191. While the Court noted

that VeriFone's accounting department may have been "chaotic and understaffed," the Court found

that none of Lead Plaintiff's allegations individually or in the aggregate supported a strong inference

of scienter: "Plaintiffs have convincingly painted a picture of negligence and ineptitude leading to

massive mistakes and losses by a company. They have not, however, raised an inference of intent or

deliberate recklessness as required by the PSLRA to state a section 10(b) claim." Id. at 15. The

Court allowed Lead Plaintiff leave to amend within 30 days. Id. at 17.

C. The October 2009 Mediation

41. Before Lead Plaintiff was required to file a consolidated amended complaint, the

I parties agreed to stay the case and participate in a mediation with the Honorable William Cahill.

The parties prepared and exchanged mediation statements, and the mediation occurred on October 1,

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2009. Lead Plaintiff explained in the mediation statement and during the mediation that new facts

disclosed in a September 1, 2009 complaint filed against VeriFone and Paul Periolat ("Periolat"), the

Company's former supply chain controller, by the SEC, established, among other things, that

(a) defendants had received internal reports in 1Q07, 2Q07 and 3Q07 showing that VeriFone's gross

margins and earnings were well below the Company's public guidance; (b) defendants described the

gross margins and financial results reflected in the reports as an unmitigated disaster; (c) defendants

laiew accounting adjustments were made so that VeriFone would report results in line with

guidance; (d) the accounting adjustments caused unprecedented increases in inventory when the

Company was focusing on reducing inventory; and (e) the accounting entries were not supported,

verified or publicly disclosed.

42. In addition, Lead Plaintiff explained that it had received new information from

additional former VeriFone employees since the filing of the Consolidated Complaint on October 31,

2008. Those former VeriFone employees stated that there were numerous problems with tracking

inventory, that large amounts of inventory reported on the Company's books did not actually exist

and that other inventory was overstated because the supply chain finance group applied a wild

amount of overhead to inventory. Lead Plaintiff believed that the new facts cured the deficiencies

noted by Judge Patel in her May 26, 2009 Order.

43. Defendants believed the settlement value of the case was extremely low and noted

that the SEC had conducted an exhaustive investigation and then sued VeriFone and Periolat for

books and record violations, but not fraud, and had not sued Bergeron or Zwarenstein at all. Given

their differing views of the case, the parties were unable to resolve the case at the October 1, 2009

mediation. Lead Plaintiff believed that the case could have been settled for a portion of the

approximately $40 million of then-existing directors' and officers' liability insurance; but Lead

Plaintiff was unwilling to settle the case for such an amount and instead chose to continue litigating

the case.

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D. The Filing of the Amended Complaints and the Court's Dismissal of

2 the Action with Prejudice

44. On December 3, 2009, following the unsuccessful mediation efforts by the parties, 3

Lead Plaintiff filed the First Amended Consolidated Complaint for Violations of the Federal 4

Securities Laws ("Amended Complaint"), which, inter alia, amended Lead Plaintiff's scienter 5

allegations with respect to defendants. Dkt. No. 205. Lead Plaintiff included new allegations in the 6

Amended Complaint, including new allegations based on a lawsuit filed by the SEC in September 7

2009 against VeriFone and Periolat. Lead Plaintiff alleged that defendants had received internal 8

"Flash" reports before reporting VeriFone's 1Q07, 2Q07 and 3Q07 financial results that showed 9

VeriFone's financial results, including gross margins, were significantly lower than previously 10

issued public guidance and analyst expectations. In addition, Lead Plaintiff added new allegations 11

that defendants wrote in internal e-mails that the preliminary results included in the Flash reports 12

were an "unmitigated disaster" and, if publicly reported, would be "the end of the party big time." 13

Instead of reporting these results, defendants knew that unsupported and unverified manual 14

accounting entries were made by Periolat that increased inventory and reduced costs of revenue, 15

which, in turn, caused an increase in reported gross margins and earnings. As noted above, the 16

Amended Complaint also included new allegations based on information received from additional 17

former VeriFone employees, including information that large amounts of reported inventory did not 18

exist and that the supply chain finance group was applying a wild amount of overhead to inventory. 19

45. On January 14, 2010, the Court entered a Stipulation and Order allowing for the filing 20

of a Second Amended Complaint in order that Lead Plaintiff could add Periolat as a defendant. Dkt. 21

No. 213. Lead Plaintiff's Second Amended Consolidated Complaint for Violations of the Federal 22

Securities Laws ("Second Amended Complaint") was filed on January 19, 2010. Dkt. No. 214. 23

46. Defendants' motions to dismiss the Second Amended Complaint were filed on March 24

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5, 2010. Dkt. Nos. 224-234. Defendants VeriFone, Bergeron, Atkinson and Bondy contended that:

(a) the settlement of a non-fraud complaint between VeriFone and the SEC undermined any

inference of scienter; (b) new confidential witness allegations were insufficient; (c) Periolat's

scienter was not attributable to any other defendant; (d) the amount and timing of defendants' stock

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1 sales were not unusual; and (e) the Amended Complaint otherwise failed to cure the deficiencies

2 identified by the Court in its prior order granting defendants' motions to dismiss. Dkt. No. 224.

3 Defendant Zwarenstein joined defendants VeriFone, Bergeron, Atkinson and Bondy's motion to

4 dismiss, as well as filing a separate motion to dismiss contending that the SEC's decision not to file

5 fraud-based charges against VeriFone, or any charges against Zwarenstein, defeated a strong

6 inference of scienter. Dkt. No. 228. Zwarenstein also contended that none of the additional

7 confidential witnesses provided any information linking Zwarenstein to any alleged wrongdoing and

8 that the stock sales did not support an inference of scienter. Id. Defendant Periolat filed a separate

9 motion to dismiss reiterating many of the contentions made by VeriFone, Bergeron, Atkinson,

10 Bondy and Zwarenstein, as well as contending that: (i) Periolat did not make, or participate in

11 making, any of the statements alleged to be false and misleading; (ii) the alleged misstatements

12 could not be attributed to Periolat under the doctrine of group pleading; and (iii) Lead Plaintiff failed

13 to plead scheme liability. Dkt. No. 231.

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47. Lead Plaintiff filed oppositions to defendants' motions to dismiss on April 19, 2010.

15 Dkt. Nos. 238-240. Lead Plaintiff contended that: (a) the facts set forth in the SEC complaint alone

16 supported a strong inference of scienter and that the SEC's discretionary decision to not bring fraud

17 claims was irrelevant; (b) the magnitude and simplicity of the fraud, as well as numerous other red

18 flags, supported a strong inference of scienter; and (c) defendants' insider selling and terminations

19 further supported an inference of scienter. Dkt. No. 240. With respect to Periolat, Lead Plaintiff

20 contended that: (i) the Second Amended Complaint alleged a stronger inference of scienter with

21 respect to Periolat's conduct; (ii) the Second Amended Complaint alleged Periolat's primary liability

22 for his role in the preparation of VeriFone's false financial results; and (iii) Periolat was liable under

23 §20(a) as a control person of VeriFone by virtue of his high-level responsibilities. Dkt. No. 238.

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48. Defendants' reply briefs were filed on May 3, 2010; a hearing on defendants' motions

25 to dismiss was held on May 17, 2010. Dkt. Nos. 242-247, 249.

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49. On July 30, 2010, prior to the issuance of an order on defendants' motions to dismiss,

27 Lead Plaintiff filed a Motion for Leave to File Third Amended Consolidated Complaint to Add New

28 Facts from 776 Pages of Transcripts of Testimony Produced by the SEC in response to Lead

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1 Plaintiff's FOIA request ("Motion for Leave to Amend"). Dkt. Nos. 250-253. The Motion for

2 Leave to Amend was based on new facts gleaned from transcripts of testimony of Bergeron,

3 Zwarenstein, and VeriFone Controller Laura Merkl ("Merkl"). Dkt. No. 251. The parties

4 subsequently stipulated to the filing of the Third Amended Complaint; and on August 26, 2010, the

5 Court issued a Memorandum and Order Re: Plaintiffs' Motion for Leave to File Third Amended

6 Complaint. Dkt. No. 256. The Court ordered that Lead Plaintiff's Third Amended Complaint be

7 filed by September 15, 2010 and that limited subsequent briefing was to be completed by November

8 1, 2010. Id.

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50. Pursuant to the Court's Order, Lead Plaintiff's Third Amended Complaint was filed

10 on September 15, 2010. Dkt. No. 262.

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51. On October 5, 2010, defendants filed supplemental briefing directed at the new

12 allegations contained in the Third Amended Complaint. Dkt. Nos. 264-272. VeriFone, Bergeron,

13 Atkinson and Bondy contended that the new allegations drawn from the SEC's deposition transcripts

14 were: (a) substantially similar to the allegations contained in the SEC's non-fraud complaint; (b) not

15 only insufficient to support a strong of scienter but more strongly supported a non-fraudulent

16 inference; and (c) in some instances unrelated to the fraud alleged by Lead Plaintiff. Dkt. No. 264.

17 Zwarenstein contended that none of the new allegations demonstrated his knowledge of any

18 impropriety and noted his instructions to Periolat that any accounting adjustments had to be "GAAP

19 compliant." Dkt. No. 270. Periolat contended that the new allegations showed, at worst, negligence

20 or unreasonable conduct, not fraud, and again asserted that Periolat made no false and misleading

21 statements, sold no stock and had no motive to commit the alleged fraud. Dkt. No. 268.

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52. On November 1, 2010, Lead Plaintiff filed supplemental briefing in opposition to

defendants' motions to dismiss. Dkt. No. 273. Lead Plaintiffs briefing asserted the new allegations

contained in the Third Amended Complaint demonstrated that: (a) it was unreasonable for Bergeron

and Zwarenstein to believe that VeriFone could meet Wall Street expectations when they knew that

gross margins was declining months before the end of 1 Q07; (b) defendants closely monitored and

directed Periolat's accounting manipulations without ever questioning his adjustments; (c) Periolat

participated in VeriFone's false financial reporting, establishing his individual liability and



1I VeriFone's corporate scienter; and (d) defendants' attempts to create factual disputes were improper

I in the context of a motion to dismiss. Id.

53. On March 8, 2011, the Court issued a Memorandum and Order Re: Defendants'

Motion to Dismiss Plaintiffs' Third Amended Complaint. Dkt. No. 275. The Court found that,

notwithstanding the new allegations contained in the Third Amended Complaint, Lead Plaintiff had

still failed to allege a strong inference of scienter as to any of the defendants. As to Periolat, the

Court held that: (a) his historically accurate projections might have supported his belief that his

manual journal entries were accurate; (b) his termination from VeriFone did not support an inference

of scienter; (c) the SEC's failure to charge him with fraud detracted from an inference of scienter;

(d) Periolat's actions were not attributable to VeriFone; (e) Periolat did not make any false and

misleading statements; and (f) Lead Plaintiff had failed to adequate plead a scheme to defraud. Id. at

10-16. With respect to Zwarenstein, the Court found that the most plausible inference to be drawn

from Lead Plaintiff's allegations was that Zwarenstein was trying to "determine why the preliminary

report was not in line with forecasts," not commit accounting fraud. Id. at 17. The Court stated that

VeriFone's lack of internal controls did not support a strong inference of scienter as to Zwarenstein

and that neither the confidential witnesses cited in the Third Amended Complaint nor the testimony

transcripts supported an inference that Zwarenstein was aware that Periolat's adjustments were

improper. The Court concluded that Lead Plaintiff had failed to state a claim against Bergeron for

the same reasons, as well as finding that Bergeron's stock sales did not provide an inference of

scienter. Id. at 25-27. Finally, the Court found that Lead Plaintiff's allegations with respect to

Bondy and Atkinson, which mostly related to allegedly suspicious stock sales, "does not suggest

scienter." Id. at 27. The Court therefore granted defendants' motions to dismiss with prejudice and

entered judgment the same day. Dkt. Nos. 275-276.

E. The Successful Ninth Circuit Appeal

54. On April 5, 2011, Lead Plaintiff timely filed its Notice of Appeal (Dkt. No. 282);

Lead Plaintiff's Opening Brief was filed on July 28, 2011. 11-15860, App. Dkt. No. 23.

55. Lead Plaintiff, which only appealed the District Court's dismissal of its claims against

I defendants VeriFone, Bergeron and Zwarenstein, argued that the Court erred by analyzing the facts

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1 alleged regarding scienter in isolation instead of collectively and that, had the Court correctly

2 analyzed the facts alleged, it would have found Lead Plaintiff's allegations sufficient. Lead Plaintiff

3 further contended that the Court erred by drawing inferences in defendants' favor instead of Lead

4 Plaintiff's and that the SEC's decision not to bring fraud charges against defendants was irrelevant as

5 to whether a strong inference of scienter had been pled. Lead Plaintiff also contended that the Court

6 erred in requiring that Lead Plaintiff's control-person claims be alleged with particularity and that

7 Lead Plaintiff's insider-trading claims were sufficiently alleged.

8 56. Defendants' answering briefs were filed on September 28, 2011. App. Dkt. Nos. 33-

9 34. VeriFone and Bergeron asserted that the District Court's scienter analysis, considered

10 individually or holistically, was correct. VeriFone and Bergeron asserted that the District Court's

11 conclusions were strongly supported by the allegations based on the SEC complaint and SEC

12 transcripts and that none of the other allegations in the Third Amended Complaint — confidential

13 witness allegations, VeriFone's restatement, Bergeron stock sales and Sarbanes-Oxley certifications

14 — supported an inference of scienter. VeriFone and Bergeron also contended that Periolat's mental

15 state was not attributable to defendants and that the District Court properly dismissed Lead

16 Plaintiff's control-person and insider-trading claims. Zwarenstein asserted that the District Court's

17 analysis was correct and that, at best, Lead Plaintiff had alleged a mistake on Periolat's part and not

18 any kind of fraud by Zwarenstein. Zwarenstein contended that Lead Plaintiff pled no facts showing

19 he was aware that Periolat's adjustments were incorrect and no facts showing that Zwarenstein

20 instructed Periolat to make false accounting entries and that Lead Plaintiff's remaining allegations

21 were insufficient to support an inference of scienter as to Zwarenstein.

22 57. Lead Plaintiff's reply brief was filed on October 31, 2011; and oral argument was

23 held on May 17, 2012. App. Dkt. Nos. 44, 50.

24 58. On December 21, 2012, the Ninth Circuit issued an Opinion reversing the District

25 Court's dismissal. Nat'l Elevator Industry Pension Fund v. VeriFone Holdings, Inc., 704 F.3d 694

26 (9th Cir. 2012). Rejecting the District Court's conclusion, the Ninth Circuit concluded that Lead

27 Plaintiff's Third Amended Complaint adequately pled scienter as to defendants VeriFone, Bergeron

28 and Zwarenstein, the only defendants whose dismissal Lead Plaintiff appealed. The Ninth Circuit



1 held that the District Court erred in its "undue discounting of the claims and the conclusion that an

2 inference of deliberate recklessness was not warranted." Id. at 703. The Court went on to hold that

3 "{although VeriFone, Bergeron, and Zwarenstein attack individual allegations in isolation, they

4 cannot overcome the overwhelming inference drawn from a holistic view." Id. at 710. While the

5 Third Amended Complaint might not have "establish[ed] or create[d] a strong inference that anyone

6 at VeriFone, including Periolat, actually knew that the manual adjustments were improper .. .

7 [r]ecklessly turning a `blind eye' to impropriety is equally culpable conduct under Rule l Ob-5." Id.

8 at 708. The Court also reversed the District Court's dismissal of Lead Plaintiff's insider-trading

9 claims while affirming the District Court's dismissal of Lead Plaintiff's control-person claims. Id. at

10 711.

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59. On January 4, 2013, defendants VeriFone and Bergeron, joined by Zwarenstein, filed

12 a petition for rehearing en banc. App. Dkt. Nos. 59-60. Defendants contended that the panel's

13 decision: (a) improperly applied a "deliberate recklessness" standard that was more akin to

14 negligence than "intentional or knowing misconduct;" and (b) ignored multiple exculpatory facts

15 "that supported an alternative innocent explanation."

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60. On January 30, 2013, the Ninth Circuit denied defendants' petition for rehearing.

17 App. Dkt. No. 61. The Ninth Circuit's Mandate was issued on February 8, 2013. App. Dkt. No. 62.

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61. On March 4, 2013, the Ninth Circuit's Mandate was entered by the District Court,

19 and, in light of Chief District Judge Patel's retirement, the case was reassigned to District Judge

20 Edward M. Chen. Dkt. Nos. 287-289.

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F. Fact Discovery

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62. Following the Ninth Circuit's Orders reversing the District Court's dismissal and

denying defendants' petition for rehearing en banc, Lead Plaintiff immediately began fact discovery.

On February 26, 2013, the parties held a conference pursuant to Federal Rule of Civil Procedure

26(f). During the conference, the parties discussed: (a) a schedule for the completion of discovery;

(b) a schedule for class certification briefing; and (c) whether discovery costs could be minimized

through production of documents that had already been collected and provided to other parties, such

as the SEC.



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63. Following the Rule 26 conference, on February 27, 2013, Lead Plaintiff served its

First Set of Requests for Production of Documents to Defendants.

64. Lead Plaintiff's requests for production sought the production of a substantial number

of documents from defendants that would be necessary for Lead Plaintiff to prove its claims. Lead

Plaintiff's requests included: (a) documents concerning the preparation of VeriFone's earnings

announcements, financial reports and quarterly earnings conference calls; (b) documents concerning

internal and governmental investigations; (c) documents concerning the resignation or termination of

VeriFone executives and employees; (d) documents concerning executive compensation;

(e) documents concerning VeriFone's accounting policies and auditing procedures and practices;

(f) documents concerning VeriFone's acquisition of Lipman and expected future results;

(g) documents concerning VeriFone's disclosure controls and procedures; (h) documents concerning

VeriFone's Board meetings, committee meetings and management meetings; and (i) documents

concerning communications with Wall Street analysts and shareholders, among other topics.

65. In addition to the discovery served on defendants, on February 27, 2013, Lead

Plaintiff served subpoenas on several third parties: Deloitte & Touche LLP ("D&T"), Ernst & Young

LLP ("E&Y"), KPMG LLP ("KPMG"), Navigant Consulting, Inc. ("Navigant"), Periolat, Simpson

Thacher & Bartlett LLP ("Simpson Thacher"), and the SEC.

66. Lead Plaintiff's subpoenas to D&T, E&Y, and KPMG called for the production of

documents related to: (a) audit workpapers; (b) communications with government agencies; (c) the

Lipman acquisition; (d) the internal investigation performed by VeriFone's Audit Committee; and

(e) the restatement.

67. Lead Plaintiff's subpoena to Navigant called for the production of documents

concerning Navigant's: (a) work related to the Lipman acquisition; (b) involvement in the Audit

Committee investigation; and (c) communications with government agencies.

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68. Lead Plaintiffs subpoena to Simpson Thacher sought documents related to: (a) the

2 Audit Committee investigation; (b) VeriFone's restatement of its financial results; and

3 (c) communications with government agencies. 4

69. Lead Plaintiff's subpoena to Periolat called for the production of documents and 5 6 communications concerning his involvement in the alleged fraud and the Lipman acquisition, as well

7 as the SEC's investigation of him and VeriFone.

8 70. Lead Plaintiffs subpoena to the SEC called for the production of documents and

9 communications between defendants and the SEC related to the SEC's investigation of VeriFone's

10 accounting practices.

11 71. On March 11, 2013, VeriFone began responding to Lead Plaintiff's discovery by

12 producing certain documents responsive to Lead Plaintiffs discovery requests. These documents

13 14 included the transcripts and exhibits of the SEC's depositions of over a dozen VeriFone employees,

15 including defendant Bergeron; defendant Zwarenstein; and Merkl, VeriFone's controller during the

16 alleged fraud, as well as VeriFone's outside auditors. These documents also included over 20,000

17 Excel spreadsheets reflecting accounting and financial results analysis related to VeriFone and the

18 Lipman acquisition.

19 72. On April 11, 2013, the SEC also produced documents in response to Lead Plaintiffs

20 subpoena. The documents produced by the SEC included deposition transcripts of the individual

21 22 defendants and other critical VeriFone employees, as well as two of VeriFone's independent auditors

23 at E&Y. Lead Counsel reviewed the following transcripts of testimony taken by the SEC, as well as

24 extensive exhibits utilized in connection with such testimony: Keith Arden Schaal, Jr., Senior

25 Financial Analyst, Supply Chain Operations; Leslie Baker, Financial Analyst II; Douglas Bergeron,

26 CEO; Brian Dowd, Assistant Controller; David Gilford, Vice President of Financial Planning; 27 1

Patrick McGivern, Senior Vice President, Global Supply Chain; David Martin, Vice President of 28 1



1 Taxes; Sagit Manor, Lipman Corporate Controller; Rachel Tran, Financial Analyst; Betsy Runyan,

2 E&Y Senior Manager; Merkl, Corporate Controller; Zwarenstein, CFO; and Dane Wall, E&Y

3 Partner.

4 73. Ultimately, Lead Plaintiff received and reviewed well over 300,000 pages of

5 6 documents in response to its document requests and subpoenas. In fact, this page count is much

7 higher, considering that over 20,000 pages are placeholders for native Excel files containing

8 hundreds of pages. Lead Counsel spent over 400 hours reviewing the documents produced for

9 evidence to support its claims. Lead Counsel used sophisticated electronic discovery databases and

10 targeted search terms, as well as a physical hands-on review of certain portions of the productions in

11 reviewing the documents produced. Further, because of the complex accounting aspects of Lead 12

Plaintiff's allegations, Lead Counsel's forensic accountants spent considerable time reviewing and 13 14 analyzing VeriFone's records related to its acquisition of Lipman and the restatement.

15 G. The March 26, 2013 Mediation and Subsequent Settlement

Negotiations 16

74. In February 2013, the parties agreed to participate in another mediation after Lead

17 Plaintiff had time to receive and review documents produced by defendants, the SEC and other third 18

parties. Lead Plaintiff prepared a comprehensive mediation statement that explained how the

19 evidence received and reviewed to date supported Lead Plaintiff's allegations that defendants 20

knowingly or recklessly made materially false and misleading statements about VeriFone's financial 21

results in 1Q07, 2Q07 and 3Q07. 22

75. The parties engaged in a full day of mediation with the Honorable Layn R. Phillips 23

I (Ret.), a former federal district court judge, but were unable to resolve the case. However, the 24

I parties continued to negotiate with the assistance of Judge Phillips; and the parties accepted the 25

mediator's recommendation to settle the case for $95 million on June 17, 2013. 26

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76. The parties negotiated the settlement on an informed basis and with a thorough

understanding of the merits and value of Lead Plaintiff's claims and the defenses asserted by

defendants, in part, from Lead Plaintiff's investigatory efforts and discovery.

77. As noted above, Lead Plaintiff, through its counsel, conducted an extensive

investigation of the claims asserted in the Litigation. This investigation began prior to the filing of

the initial complaints with a review of all relevant public information, including public statements,

filings with the SEC, regulatory filings and reports, as well as securities analysts' reports, advisories

and media reports about defendants, VeriFone's business, and the market for payment processing

solutions.

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78. Counsel's investigatory and confirmatory efforts continued throughout the course of

11 the Litigation. For example, on January 13, 2010, while discovery was stayed pursuant to the

12 PSLRA, Lead Plaintiff submitted FOIA requests to the SEC seeking production of documents

13 related to the SEC's investigation of VeriFone and its subsequent lawsuit filed in September 2009.

14 After negotiations with the SEC, between July 7 and 15, 2010, the SEC produced transcripts of

15 testimony taken in connection with SEC's investigation of VeriFone — specifically, the testimony

16 transcripts of defendant Bergeron, defendant Zwarenstein and Merkl, VeriFone's Controller. These

17 transcripts provided additional evidence that allowed Lead Plaintiff to meet its demanding burden of

18 pleading scienter with particularity in accordance with the PSLRA.

19

79. Lead Plaintiff secured the production of these deposition transcripts notwithstanding

20 the fact that the SEC routinely refuses to produce similar documents in response to FOIA requests,

21 purportedly on the basis of SEC confidentiality rules, and notwithstanding defendants' vehement,

22 but ultimately futile, objections that the SEC's production of the transcripts to Lead Plaintiff was

23 ~ improper.

24 IV. THE STRENGTHS AND WEAKNESSES OF THE CASE

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80. Based on the review of publicly available documents, information and testimony

obtained through Lead Plaintiff's investigation, discussions with experts and fact discovery

conducted in the Litigation, counsel believe that Lead Plaintiffs and the Class' claims have merit

and are supported by substantial evidence. However, counsel also recognize that Lead Plaintiff and

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the Class would have faced significant risks and hurdles (as described below) if the Litigation

continued. Lead Plaintiff and its counsel carefully weighed these risks during the pendency of the

I Litigation and during the course of the settlement discussions with defendants.

A. Lead Plaintiff Had Developed Strong Claims Against Defendants

81. Lead Plaintiff believed it had developed, and would continue to develop, strong

I claims against defendants.

82. It was essentially undisputed that VeriFone reported materially false and misleading

financial results in 1Q07-3Q07 as those results were subsequently restated. However, as noted in

Lead Plaintiff's Response to the Court's September 5, 2013 Order Re Supplemental Briefing, some

courts have rejected the claim that a restatement conclusively establishes the material falsity of the

originally reported financial results. Dkt. No. 309 at 15. In each of the restated quarters,

unsupported and unverified accounting entries were made that caused VeriFone to report false

financial results in line with guidance and Wall Street analyst expectations. Indeed, defendants

wrote in contemporaneous e-mails that the accurate results reflected in multiple internal reports were

an "unmitigated disaster" and that if VeriFone reported those results, the "party would be over big

time." When no error could be found with the actual results included in the preliminary Flash

reports, defendants discussed the precise dollar amount of accounting adjustments needed for

VeriFone to report results in line with guidance. The accounting adjustments were then made, but

they were not supported or verified as required by Company policy. When the Company eventually

restated its financial results, it admitted that these adjustments caused VeriFone to overstate 1Q07-

3Q07 net income by more than $70 million.

83. Thus, the primary issue with respect to the March 1, 2007 to December 2, 2007

portion of the Class Period was scienter. Lead Plaintiff believed that it would be able to develop

evidence establishing that defendants either intentionally directed Periolat, the Company's former

supply chain controller, to make the improper journal entries that enabled VeriFone to report false

financial results or were deliberately reckless in accepting the unsupported and unverified journal

entries for three consecutive quarters when multiple preliminary internal reports showed the

Company's actual results were an "unmitigated disaster."

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84. The evidence showed that, one week after each quarter closed, Bergeron and

Zwarenstein received reports showing that VeriFone's gross margin was only 40%-42%, far lower

than the 47%-48% public guidance. Bergeron and Zwarenstein did not accept these lower results

and suggested the accounting "adjustments" that Periolat needed to "come up with" to "get to" the

number they wanted to report. E.g., ¶¶150,175-176, 179. Bergeron and Zwarenstein were involved

in Periolat's efforts — at times, suggesting specific items and amounts to "adjust" — to hit the number

they wanted to report. E.g., ¶¶152, 154, 162, 164,176-177, 179-181. During each quarter, Periolat

made manual journal entries that increased gross margin and earnings per share (`BPS") to the

precise level included in VeriFone guidance. E.g., ¶11160-163, 167, 169-170.

85. Lead Plaintiff's claims were supported by e-mails, telephone calls, meetings and

personal discussions among Bergeron, Zwarenstein and Periolat during the Class Period regarding

the accounting adjustments. Indeed, discovery showed that defendants' deceptive financial

manipulations were part of a culture and philosophy at VeriFone that valued short-term results and

beating Wall Street expectations over truth, accuracy and proper accounting. As one of

Zwarenstein's e-mails to a subordinate bluntly put it: "we always get to our number." ¶130.

86. Moreover, in reversing the District Court, the Ninth Circuit noted the strength of Lead

Plaintiff's allegations, concluding that defendants' alleged conduct defied common sense.

It defies common sense that for three straight quarters following a merger, when preliminary reports came in substantially below expectations and the acquired company had lower margins, the correct "adjustments" to flash reports also happened to be the precise amounts Zwarenstein and Bergeron had identified as necessary to hit earnings targets. Yet Periolat's adjustments consistently matched the figures Zwarenstein and Bergeron gave him. In the face of repeated such adjustments, the company cannot simply close its eyes with a sigh of relief.

I VeriFone, 704 F.3d at 709.

87. Therefore, Lead Plaintiff believed that its claims against defendants for the March 1,

2007 to December 2, 2007 portion of the Class Period were strong and that it had a good chance of

prevailing on these claims at trial.

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1

B. Lead Plaintiff Faced Substantial Risks that Could Have Resulted in Dismissal or Substantial Narrowing of Its Claims

2 88. Nevertheless, there were significant litigation risks and obstacles that Lead Plaintiff

3 had to overcome to obtain and enforce a judgment against defendants, and they were important

4 considerations in Lead Plaintiff's determination to settle the action.

5 1. There Were Risks that the Class Period Would Be Shortened and that

6

the Action Would Not Be Certified as a Class Action

7

89. There was a risk that the Class Period would have been shortened, or portions of Lead

8 Plaintiff's claims dismissed, if Lead Plaintiff failed to prove falsity or reliance with respect to the

9 entire Class Period.

10

90. For example, Lead Plaintiff alleges that VeriFone's 1Q07, 2Q07 and 3 Q07 financial

11 statements were materially false and misleading and that VeriFone's restatement was an admission

12 of falsity with respect to such statements. ¶¶79-99. However, Lead Plaintiff also alleges that

13 defendants made false statements in 2006 concerning the financial benefits of the Lipman merger

14 and the gross margin increases, synergies and "supply chain efficiencies" derived as a result. ¶¶293-

15 301.

16

91. There was a risk that Lead Plaintiff would be unable to prove falsity and scienter with

17 respect to the alleged misstatements prior to March 2007. VeriFone did not restate its financial

18 results for this period, and defendants would have argued that their statements regarding projected

19 margins were not false or misleading and were forward-looking statements (and therefore actionable

20 only if actual knowledge of falsity could be proven) and that their statements about the Lipman

21 integration were mere immaterial puffery (and therefore not actionable).

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92. Similarly, there was a risk that Class members who purchased VeriFone stock after

December 3, 2007 would not be able to prove reliance. On December 3, 2007, VeriFone issued a

press release announcing that it would be restating its financial results for 1Q07, 2Q07 and 3Q07 and

provided a preliminary estimate of the restatement. ¶¶32, 336. In response, the Company's stock

price declined 46% from $48.03 on Friday, November 30, 2007 to $26.03 on Monday, December 3,

2007, compared to a 0.6% decline in both the S&P 500 and VeriFone's peer group. Id. Lead

Plaintiff alleged that the whole truth regarding the alleged fraud was not revealed to the market until

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April 1, 2008, when VeriFone disclosed that the restatement would be larger than the initial estimate.

¶¶336-344. Nevertheless, there was a risk that Class members who purchased VeriFone stock after

the December 3, 2007 restatement announcement would not be able to prove reliance because they

knew VeriFone's 1Q07-3 Q07 financial results would be restated and that the preliminary estimate of

the restatement provided on December 3, 2007 could change.

93. As set forth in the Unopposed Motion for Preliminary Approval of Class Action

I Settlement ("Motion"), the Plan of Allocation was specifically tailored to account for these risks.

Dkt. No. 307 (Motion) at 9-10; Dkt. No. 307-1 (Ex. A-1) at 6-11.

94. Further, there was a risk that a change in precedent regarding class certification would

make it substantially more difficult for Lead Plaintiff to prove the action should be certified as a

class action or continue to be maintained as a class action if it was certified. Defendants would have

been free to challenge class certification at any time during the Litigation pursuant to Rule

23(c)(1)(C) or to appeal any class certification decision pursuant to Rule 23(f).

95. Specifically, in Amgen Inc. v. Conn. Ret. Plans & Trust Funds, - U.S. , 133 S.

Ct. 1184, 1204 (2013), Justice Alito, in his concurring opinion, questioned whether the rebuttable

fraud-on-the-market presumption articulated by the Supreme Court in Basic Inc. v. Levinson, 485

U.S. 224 (1988), which substantially underpins class certification of securities class actions, should

be reconsidered. "[M]ore recent evidence suggests that the presumption may rest on a faulty

economic premise .... In light of this development, reconsideration of the Basic presumption may

be appropriate." Amgen, 133 S. Ct. at 1204; see also Barbara Black, Behavioral Economics and

Investor Protection Conference: Essay: Behavioral Economics and Investor Protection: Reasonable

Investors, Efficient Markets, 44 Loy. U. Chi. L.J. 1493, 1503 (2013) ("[I]t is likely that challenges to

the fraud-on-the-market presumption on the basis of behavioral finance will continue. "). On

November 15, 2013, the United States Supreme Court granted certiorari in Halliburton Co. v. Erica

P. John Fund, Inc. (13-317) to address this issue. The settlement ensures that the Class will receive

a certain and prompt recovery in the face of possible changes to the law regarding class certification.

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2. There Were Risks that Lead Plaintiff Would Not Be Able to Prove Defendants Knowingly or Recklessly Made False Statements

2

96. There was a substantial risk that Lead Plaintiff would not be able to meet its burden to 3

present evidence to establish defendants' scienter, which is an inherently challenging task. At the 4

time the settlement was reached, Lead Counsel had reviewed over 62,000 documents and files 5

produced by VeriFone in response to Lead Plaintiff's discovery requests, as well as over 4,000 pages 6

of documents produced by the SEC. The documents produced by the SEC included deposition 7

transcripts of the individual defendants and other critical VeriFone employees, as well as two of 8

VeriFone's independent auditors at E&Y. 9

97. Lead Counsel's review of the documents and deposition testimony showed that there 10

would be significant risks in establishing defendants' scienter. While there was never any dispute 11

that Periolat made the manual journal entries that caused VeriFone to report false financial results 12

that were subsequently restated, there was evidence that Periolat (and defendants Bergeron and 13

Zwarenstein) believed the manual journal entries were proper. No one interviewed by the SEC 14

testified that Periolat (or Bergeron and Zwarenstein) knew the journal entries were improper. 15

VeriFone's auditors at E&Y testified that Periolat believed the journal entries were accurate and that 16

Periolat presented the errors to E&Y during the audit process, claiming that no one else was involved 17

in the errors. Specifically, an E&Y auditor testified that E&Y reviewed some of the manual journal 18

entries, asked Periolat to explain them and was satisfied with Periolat's responses and that Periolat 19

seemed very on top of inventory and never showed any confusion or hesitation on inventory issues. 20

The E&Y auditor also testified that Periolat did not fault anyone else for the erroneous journal 21

entries during the "mea culpa" call Periolat had with E&Y the Monday after Thanksgiving in 2007 22

when the errors were confirmed. Moreover, Periolat is not a defendant and arguably did not make 23

any of the statements alleged to be false and misleading in the Third Amended Complaint. 24

98. Lead Plaintiff had to prove that defendants Bergeron and Zwarenstein "knew his or 25

her statements were false, or was consciously reckless as to their truth or falsity. " VeriFone, 704 26

F.3d at 702 (citation omitted). There was a risk that a jury might conclude that defendants did 27

nothing wrong whatsoever or that their conduct, while perhaps grossly negligent, did not rise to the I:



I level of fraud. In addition, Lead Plaintiff would be required to prove all the remaining elements of

~ its claims, including presenting evidence on complex accounting and damages issues, which would

almost certainly devolve into a "battle of the experts" with an inherently uncertain outcome.

99. While Lead Plaintiff alleged §20(a) control-person claims against Bergeron and

Zwarenstein on the basis that they controlled Periolat's actions, the Ninth Circuit affirmed the

~ District Court's dismissal of Lead Plaintiff's §20(a) claims, reversing only the dismissal of the

§ 10(b) claims. VeriFone, 704 F.3d at 711.

100. Lead Plaintiff was also mindful that the SEC conducted an extensive investigation of

the central allegations in this case and declined to bring any fraud-related charges against VeriFone

or any of its employees and no charges at all against Bergeron or Zwarenstein.

3. There Were Risks that Lead Plaintiff Would Not Be Able to Prove Causation and Damages

101. Even if Lead Plaintiff and Lead Counsel were successful in proving that defendants

were deliberately reckless in making false and misleading statements about VeriFone's financial

results, there was a risk that causation and damages could not be proven. As explained above and in

the Motion, there were risks that the Class Period would be shortened and that no class would be

certified if there were a change in the law. Further, defendants disputed Lead Plaintiff's damage

estimates, including the methodology. These issues would have been subject to competing expert

testimony, and there was a risk that the Court or a jury would agree with defendants' expert.

102. Finally, even if Lead Plaintiff and Lead Counsel defeated defendants' motion for

summary judgment and the jury found that defendants had violated §10(b) and agreed with Lead

Plaintiff's expert's damage estimate, there was the risk that defendants could successfully appeal;

and, as explained in Lead Plaintiff's Response to the Court's September 5, 2013 Order Re

Supplemental Briefing, the actual judgment would likely be less than aggregate damages because of

offsetting gains and not all Class members submitting claim forms. Dkt. No. 309 at 9-13.

103. Assuming Lead Plaintiff prevailed on some or all of its claims at trial, the litigation

would be far from over. Defendants would likely insist on a lengthy and adversarial claims process,

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1 which could take years and require significant time and expense from all parties, including absent

2 I Class members.

3

4. There Was a Risk that Further Litigation Would Have Depleted Defendants' Ability to Fund a Settlement and that Defendants Would

4

Not Be Able to Satisfy a Judgment in Lead Plaintiff's Favor

5

104. In addition to the factors described above, Lead Plaintiff and Lead Counsel concluded

6 that there was a significant risk that further litigation, potentially up to and including trial and

7 inevitable appeals, would diminish defendants' ability to fund a settlement or judgment.

8

105. As set forth in VeriFone's September 6, 2013 Form 10-Q, approximately $34 million

9 of insurance coverage is being contributed to the settlement, with the remainder of the $95 million

10 settlement being paid by the Company. Thus, the settlement is much higher than the amount that

11 Lead Plaintiff believed it could have received during the October 2009 mediation. Further litigation

12 would have continued to diminish the Company's available insurance, and there is little doubt that,

13 had the case proceeded to trial and any subsequent appeal, such coverage would have been entirely

14 exhausted.

15

106. In addition, while VeriFone does not appear to be in imminent danger of declaring

16 bankruptcy, its precarious financial condition is deteriorating. Over the last 18 months, VeriFone's

17 stock price has declined by over 50%, and the Company has reported $48.4 million of net losses in

18 the first three quarters of FYI3. 4 Although the Company currently reports that it has $1.3 billion of

19 capital, its tangible capital is just $78.8 million because VeriFone reports $1.2 billion of goodwill, an

20 intangible asset whose value is uncertain. In addition, only $309.3 million of the Company's assets

21 as of July 31, 2013 are cash and cash equivalents. VeriFone was also recently sued for securities

22 fraud after reporting earnings that were drastically below forecasts, causing the Company's stock to

23 drop 43% and causing hundreds of millions of dollars in losses to a different class of shareholders.

24 See Sanders v. VeriFone Sys., Inc, et al., Case No. 5:13-cv-01038-EJD (N.D. Cal.). A consolidated

25 complaint is due to be filed in that action on December 16, 2013.

26

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28 4 VeriFone's fiscal year ends on October 31.



107. The Company's current financial condition and uncertainty about VeriFone's future

financial condition indicate there is a risk it could not afford to pay a judgment should Lead Plaintiff

prevail at trial. Indeed, there is a risk that VeriFone would declare bankruptcy if Lead Plaintiff

obtained a judgment, which would result in Lead Plaintiff and the Class obtaining a judgment that

they could not collect. In short, Lead Counsel carefully considered VeriFone's deteriorating

financial condition and the risks that less money would be available to fund a settlement if the

Litigation continued in determining that a settlement providing a substantial and certain recovery at

this time was in the best interests of the Class.

V. SETTLEMENT NEGOTIATIONS AND TERMS OF THE SETTLEMENT

108. On March 26, 2013, the parties attended an all-day mediation with the Honorable

Layn R. Phillips (Ret.) in Newport Beach, California. Prior to the mediation, on March 18, 2013, the

parties submitted mediation statements to Judge Phillips, as well as providing them to all other

parties. Lead Plaintiff submitted a 30-page comprehensive mediation statement, as well as numerous

exhibits (primarily documents and transcripts obtained in discovery), which set forth Lead Plaintiff s

view of the case and position on recoverable damages. Lead Plaintiffs damages estimates were

supported by an expert report and analysis that was conducted at substantial expense. According to

Lead Counsel's records, Lead Plaintiffs damages expert expended 171.5 hours creating numerous

highly detailed and sophisticated damages analyses, which analyzed potential damages caused by the

alleged misconduct throughout the Class Period, including damages attributable to each of the

corrective disclosures alleged in the Third Amended Complaint. Lead Plaintiffs damages expert

also expended 47.5 hours assisting counsel in preparing the Plan of Allocation of the settlement

proceeds in this action based on those damages analyses, as well as the Third Amended Complaint's

allegations. While the parties participated in good faith in the March 26, 2013 mediation, no

agreement was reached.

109. Over the next three months, the parties and Judge Phillips engaged in numerous

conference calls and other communications in furtherance of their settlement efforts. Ultimately,

Judge Phillips made a mediator's recommendation, which was separately accepted by the parties and

resulted in the settlement discussed herein.

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110. Patrick J. Coughlin and Christopher P. Seefer led the settlement negotiations for Lead

2 Plaintiff and the Class. Messrs. Coughlin and Seefer have decades of experience in the prosecution

3 and resolution of complex class actions. Brendan Cullen of Sullivan & Cromwell LLP led the

4 defense team and similarly shares unquestionable credentials.

5

111. Lead Counsel is actively engaged in complex civil litigation, particularly the litigation

6 of securities class actions. We believe that counsel's experience and reputation as attorneys who

7 will indefatigably litigate a meritorious case through trial and the subsequent appeals process put

8 Lead Plaintiff in as strong a position as possible during the settlement negotiations with defendants.

9

112. The settlement is the result of extensive arm's-length negotiations. Counsel believe

10 that the compromise embodied by the Stipulation represents a successful resolution of a complex and

11 risky class action in an area of law riddled with challenges and uncertainties. Lead Plaintiff and

12 Judge Phillips also believe the settlement is fair, reasonable and adequate and should be approved by

13 the Court. See Betts Declaration and Phillips Declaration, submitted herewith.

14 VI. NOTICE TO MEMBERS OF THE CLASS

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113. On October 16, 2013, the Court granted preliminary approval of the settlement, as

I well as the form and manner of notice of the settlement to be sent to the Class ("Notice Order").

Dkt. No. 320.

114. The Court certified a class, for settlement purposes only, defined as:

all Persons who purchased VeriFone Publicly Traded Securities between August 31, 2006 and April 1, 2008 on any domestic or foreign exchange or otherwise, excluding all Defendants, VeriFone's former and current officers and directors and their families and affiliates. Also excluded from the Class are those Persons who validly and timely request exclusion from the Class.

115. As directed by the Notice Order, the Notice of Proposed Settlement of Class Action

("Notice") and Proof of Claim and Release form ("Proof of Claim") were mailed to all identified

Class members beginning on October 30,2013. The Notice explains the Litigation, the settlement,

the Plan of Allocation of settlement proceeds, the fee and expense request and the rights and options

of Class members. As of December 11, 2013, Notices and Proofs of Claim had been mailed to over

95,000 potential Class members. See ¶¶3-10 of the accompanying Declaration of Carole K.

Sylvester Re A) Mailing of the Notice of Proposed Settlement of Class Action and the Proof of

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1 Claim and Release Form, B) Publication of the Summary Notice, and C) Internet Posting ("Sylvester

2 I Decl. ")

3

116. The Summary Notice, in the form approved by the Court, was published in Investor's

4 Business Daily, and over the Business Wire on November 5, 2013, and in Globes on November 6,

5 2013. Sylvester Decl., ¶15. The Summary Notice also provided information about the settlement

6 and how to obtain a copy of the Notice.

7

117. In addition, the Notice, Proof of Claim, Stipulation, and Notice Order were posted on

8 the Claims Administrator's website. Sylvester Decl., ¶12. Pursuant to the Court's instructions, the

9 Claims Administrator's website also allows Class members to request a calculation of their estimated

10 recovery. Id., ¶13. Furthermore, Class members are able to use the website to file a claim as well,

11 thereby reducing the time and expense required to participate in the settlement. Id., ¶14.

12 VII. THE PLAN OF ALLOCATION

13

118. Upon approval of the Stipulation by the Court and entry of a judgment, and upon

14 satisfaction of the other conditions to the settlement, the Settlement Fund will pay for certain

15 administrative expenses, including the cost of providing notice to the Class; the cost of publishing

16 notice; payment of taxes assessed against the Settlement Fund; costs associated with the processing

17 of claims submitted; and Lead Counsel's approved fees and expenses. The balance of the Settlement

18 Fund (the "Net Settlement Fund") will be distributed to Class members who submit valid and timely

19 Proofs of Claim.

20

119. Pursuant to the Notice Order and as set forth in the Notice, all Class members who

21 wish to participate in the distribution of the Net Settlement Fund must submit a valid Proof of Claim

22 postmarked on or before January 29, 2014. The Net Settlement Fund shall be distributed according

23 to the Plan of Allocation, which is set forth in detail in the Notice.

24

120. If approved, the Plan of Allocation will govern how the proceeds of the Net

25 Settlement Fund will be distributed among Class members who submit timely and valid Proofs of

26 Claim. As explained in the Notice, the Plan of Allocation apportions the recovery among eligible

27 Class members based on the timing of purchases and sales of VeriFone common stock and options.

28



1

121. The Plan of Allocation was developed with the assistance of Lead Plaintiff's damages

2 expert and reflects an assessment of the damages that may have been recovered had liability been

3 I successfully established at trial.

4

122. The Plan of Allocation was tailored to account for the litigation risks specific to this

5 I action. As explained in the Motion and Plan of Allocation, the distribution per share for Class

6 members who purchased on or between August 31, 2006 through March 1, 2007 and between

7 December 3, 2007 through April 1, 2008 are reduced by 50% because the claims of those Class

8 members are harder to prove than the claims of Class members who purchased between March 2,

9 2007 through December 2, 2007. Dkt. No. 307 (Motion) at 9-10; Dkt. No. 307-1 (Ex. A-1) at 6-11.

10 Lead Plaintiff and Lead Counsel believe the claims of Class members who purchased between

11 March 2, 2007 through December 2, 2007 were stronger than the claims of other Class members

12 because these Class members made their purchases after the Company reported financial results that

13 were subsequently restated and before VeriFone publicly disclosed the need to restate its financial

14 results. Thus, unlike Class members who purchased between August 31, 2006 through March 1,

15 2007, these Class members could conclusively prove that they purchased VeriFone securities after

16 the Company had reported materially false and misleading financial results and after defendants

17 falsely represented those financial results were fairly stated. In addition, unlike Class members who

18 purchased between December 3, 2007 through April 1, 2008, these Class members did not purchase

19 VeriFone securities after VeriFone publicly disclosed it would be restating its financial results.

20 Therefore, they did not know about the falsely reported financial results when they purchased their

21 VeriFone securities.

22

123. The Plan of Allocation is not preferential to Lead Plaintiff because Lead Plaintiff and

23 Class members who purchased VeriFone stock between August 31, 2006 and March 1, 2007 and

24 between December 3, 2007 and April 1, 2008 will receive a lower recovery under the Plan of

25 Allocation than they would have received had the litigation risks not been factored into the Plan of

26 Allocation. See Dkt. No. 307 (Motion) at 10.

27

124. Lead Plaintiff and Lead Counsel believe the Plan of Allocation is fair and reasonable

28 and should be approved by the Court.

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1 VIII. LEAD COUNSEL'S MOTION FOR ATTORNEYS' FEES AND EXPENSES IS REASONABLE

2 A. A Reasonable Percentage of the Fund Recovered Is the Appropriate

3 Method to Use in Awarding Attorneys' Fees in Common Fund Cases

4 125. For Lead Counsel's significant efforts on behalf of the Class, Lead Counsel is

5 applying for compensation from the Settlement Fund on a percentage basis. The percentage method

6 is the appropriate method of fee recovery because, among other things, it aligns the lawyers' interest

7 in being paid a fair fee with the interest of the Class in achieving the maximum recovery in the

8 shortest amount of time required under the circumstances, is supported by public policy, has been

9 recognized as appropriate by the Supreme Court for cases of this nature and represents the

10 overwhelming trend in common fund actions in most circuits, including the Ninth Circuit.

11 126. The fee application is being submitted by Lead Counsel with the prior approval of

12 Lead Plaintiff, and the fees for which Lead Counsel is now applying were negotiated prior to the

13 commencement of this action and are reflected in the retainer agreement entered into between Lead

14 Plaintiff and Lead Counsel. As set forth in the accompanying Motion for Award of Attorneys' Fees

15 and Expenses and Memorandum of Points and Authorities in Support Thereof ("Fee

16 Memorandum"), a 20% fee is a fair and reasonable attorneys' fee percentage request in common

17 fund cases such as this and is substantially below the 25% benchmark fee award for securities class

18 actions in this Circuit.

19 127. In addition, Lead Counsel's aggregate "lodestar" — the number of hours worked

20 multiplied by the applicable hourly rate — in this case is $4,395,407.25. The 20% fee requested

21 represents a multiplier of 4.3 of counsel's time —within the range of multipliers that are approved in

22 similar cases.

23 128. As more fully set forth in the Fee Memorandum, Lead Counsel believes that the fee

24 request is reasonable given the excellent recovery obtained for the benefit of the Class, the risks of

25 litigation, the contingent nature of counsel's representation, the complexity of the legal and factual

26 questions at issue, and the extensive efforts of counsel for Lead Plaintiff.

27 129. Moreover, Lead Plaintiff has approved the 20% fee request. In the post-PSLRA era,

28 the support of the Court-appointed Lead Plaintiff is a significant consideration in setting a fair fee.



1

B. Consideration of Relevant Factors Justify an Award of 20% in This Case

2 1. The Excellent Settlement Achieved

3 130. The $95 million cash settlement here provides an immediate and certain benefit to the

4 Class. This favorable settlement was achieved as a result of the extensive prosecutorial and

5 investigative efforts of Lead Counsel, contentious motion practice, aggressive appellate advocacy

6 and tenacious settlement negotiations, as detailed herein. As a result of this settlement, thousands of

7 Class members will benefit and receive compensation for their losses and avoid the very real risk of

8 no recovery in the absence of a settlement.

counsel for Lead Plaintiff will seek an award of attorneys' fees of 20% of the Settlement Fund and

expenses up to a maximum of $360,000. Pursuant to this Court's Notice Order, all objections must

be filed no later than December 30, 2013. Not a single objection has been received to date, although

the deadline to object has not yet passed. This factor is relevant to a determination of the

reasonableness of the fee request, especially in today's environment of increased shareholder

activism in securities class action litigation.

3. The Diligent Prosecution of this Case

132. A 20% fee is also warranted in light of the extensive efforts on the part of Lead

Counsel, as outlined above, that were required to produce this settlement. Counsel for Lead Plaintiff

devoted significant resources to the case, inter alia, conducting formal and informal discovery;

mastering the relevant facts and dynamics of VeriFone's business; drafting complaints, as well as

comprehensive memoranda of law in connection with the motions to dismiss; successfully appealing

the District Court's dismissal of the action; propounding discovery requests to defendants and third

parties; reviewing hundreds of thousands of pages of documents and transcripts produced by

defendants and the SEC; formulating strategy; working with experts and other consultants in order to

make effective arguments on the merits and to conduct meaningful settlement discussions; and

otherwise preparing this case for trial.

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2. Objections by Class Members to the Settlement or Requested Fees

131. The Notice mailed to Class members and available on the internet explains that


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4. The Complexity of the Litigation's Factual and Legal Questions

2 133. Courts have recognized that the novelty and difficulty of the issues in a case are

3 significant factors to be considered in making a fee award. As demonstrated by the discussion above

4 of the contested issues in the Litigation, had this settlement not been reached, the complex factual

5 and legal questions at issue would continue to be the subject of substantial analysis and dispute.

6 Numerous complex issues would be involved in proving liability, including whether all of

V/ defendants' statements were material; whether defendants had a duty to disclose; whether defendants

8 acted with scienter; whether the alleged false statements and omissions were the legal cause of Lead

9 Plaintiff's and the Class' damages; whether VeriFone's common stock traded at artificially inflated

10 prices; and whether Lead Plaintiff and the Class suffered damages and, if they did, the amount

11 thereof.

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5. The Risks of the Litigation and the Contingent Nature of the

13

Representation

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134. A determination of a fair fee must include consideration of the contingent nature of

15 I the fee, the financial burden carried by counsel, and the difficulties that were overcome in obtaining

16 the settlement.

17

135. This Litigation was undertaken by Lead Counsel on a wholly contingent basis. From

18 the outset, Lead Counsel understood that it was embarking on a complex, expensive and lengthy

19 litigation with no guarantee of ever being compensated for the investment of time and money the

1.17 case would require. In undertaking that responsibility, Lead Counsel was obligated to assure that

211 sufficient attorney resources were dedicated to the prosecution of the Litigation and that funds were

22 available to compensate staff and to pay for the considerable expenses a case such as this entails.

23

136. Because of the nature of a contingent practice where cases are predominantly "big

24 cases" lasting several years, not only do contingent litigation firms have to pay regular overhead, but

25 they also have to advance the expenses of the litigation. With it often taking years for these cases to

26 conclude, the financial burden on contingent counsel is far greater than on a firm that is paid on an

27 ongoing basis.

28



1

137. As discussed above, this case had significant risks concerning liability, causation, and

2 damages. Lead Plaintiff's success was by no means assured, as both sides claimed the evidence

3 supported their assertions. Success hinged on Lead Plaintiff's ability to win challenging arguments

4 on every element of the causes of action. Were this settlement not achieved, Lead Plaintiff faced

5 years of costly and risky litigation against defendants, with ultimate success far from certain.

6

138. There was no guarantee that Lead Plaintiff would succeed in convincing the Court or

7 a jury that the statements made by defendants during the Class Period were false; or, if such

8 statements were found to be false, that they were material; or if they were false and material, that

9 they were made with scienter; or that there were substantial damages. Indeed, defendants have

10 adamantly denied liability and are represented by some of the most capable defense counsel in this

11 District.

12

139. There are numerous cases where plaintiffs' counsel in contingent cases such as this,

13 after the expenditure of thousands of hours, have received no compensation. We are aware of many

14 hard-fought lawsuits where, because of the discovery of facts unknown when the case was

15 commenced, changes in the law during the pendency of the case or a decision of a judge or jury

16 following a trial on the merits, excellent professional efforts of members of the plaintiffs' bar

17 produced no fee for counsel.

18

140. Courts have repeatedly held that it is in the public interest to have experienced and

19 able counsel enforce the securities laws and regulations pertaining to public companies. Vigorous

20 private enforcement of the federal securities laws can only occur if private plaintiffs can obtain

21 parity in representation with that available to large corporate interests. If this important public

22 policy is to be carried out, the courts must award fees that will adequately compensate private

23 plaintiffs' counsel, taking into account the enormous risks undertaken with a clear view of the

24 economics of a securities class action.

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1 IX. COUNSEL FOR LEAD PLAINTIFF SHOULD BE AWARDED ITS EXPENSES

2 141. The award of expenses to counsel who create a common fund is appropriate. Lead

3 Counsel's litigation expenses total $278,994.44. A breakdown of the aggregate expenses by

4 category is contained in the accompanying Robbins Geller Expense Declaration.

5 142. The Notice mailed to Class members states that Lead Counsel intends to apply for an

6 I award of expenses up to $360,000. As with Lead Counsel's fee request, not a single objection has

7 I been raised to this request, although the deadline to object has not yet passed.

8 I X. THE ISRAELI LITIGATION

9 143. After this case was originally filed in December 2007, on January 27, 2008, a

10 complaint was filed against VeriFone in Israel on behalf of persons who purchased VeriFone stock

11 on the Tel Aviv Stock Exchange between March 7, 2007 and December 2, 2007. That case has been

12 stayed by agreement of the parties pending resolution of this case. In addition, the Israeli District

13 ~ Court has ruled twice — on August 25, 2011 and September 11, 2008 — that U.S. law will apply in the

14 Israeli action should the stay be lifted. A copy of the rulings are attached as Exs. A and B.

15 144. In 2010, Gil Ron, one of the lawyers representing the plaintiff in the Israeli action,

16 asked Lead Counsel to confirm in writing that the U.S. class action did not cover purchasers of

17 VeriFone stock on the Tel Aviv Stock Exchange. Lead Counsel did not provide the requested

18 confirmation and responded on November 17, 2010 that the law was still developing after the

19 Supreme Court's decision in Morrison v. Nat'l Austl. Bank Ltd, _ U.S. , 130 S. Ct. 2869

20 (2010). A copy of the e mail communications between Mr. Ron and Lead Counsel is attached as Ex.

21 C.

22 I 145. On January 9, 2013, shortly after the Ninth Circuit's December 21, 2012 reversal of

23 I the U.S. District Court's dismissal of this case, the parties in the Israeli action participated in a

24 I hearing before the Israeli Supreme Court and agreed that the Israeli action would continue to be

25 stayed until the resolution of the class action in the United States and that persons who purchased

26 stock on the Tel Aviv Stock Exchange between March 7, 2007 and December 2, 2007 would be

27

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included in the class action in the United States. A copy of the January 9, 2013 hearing transcript is

I included as Ex. D.

146. On February 10, 2013, the Israeli Supreme Court approved a j oint Notice submitted

by the parties on February 4, 2013 that continued the stay of the Israeli class action and stated that

persons who purchased stock on the Tel Aviv Stock Exchange between March 7, 2007 and

December 2, 2007 would be included in the class action in the United States. In the joint Notice,

counsel for plaintiff stated that VeriFone should not wait until the class was certified in the U.S.

action to notify the U.S. District Court that persons who purchased stock on the Tel Aviv Stock

Exchange between March 7, 2007 and December 2, 2007 would be included in the class action in the

United States. However, counsel for plaintiff agreed to the Notice and did not contact Lead Counsel.

A copy of the February 4, 2013 Notice is included as Ex. E.

147. Despite the foregoing, on November 7, 2013, Mr. Ron sent a letter to Lead Counsel in

which he stated that the settlement of this action was substantively unfair to persons who purchased

VeriFone shares on the Tel Aviv Stock Exchange and that he would move to intervene and object to

the settlement unless purchasers on the Tel Aviv Stock Exchange received a preferential allocation

and Mr. Ron and others received fees and expenses. Mr. Ron claimed that this action did not cover

purchasers of VeriFone stock on the Tel Aviv Stock Exchange but did not mention his previous

communications with Lead Counsel or his seeking and receiving assurance from the Israeli Supreme

Court that purchasers of VeriFone stock on the Tel Aviv Stock Exchange were included in this

action. Mr. Ron also claimed that purchasers of VeriFone stock on the Tel Aviv Stock Exchange

were entitled to a preferential allocation because they did not have to prove scienter but conceded

that the Israeli District Court had ruled otherwise on two separate occasions. A copy of the

November 7, 2013 letter is attached as Ex. F.

148. Lead Counsel responded on November 20, 2013; explained to Mr. Ron why his

contentions were both factually and legally incorrect; and informed Mr. Ron that Lead Counsel did

not believe purchasers of VeriFone stock on the Tel Aviv Stock Exchange were entitled to a

preferential allocation or that Mr. Ron was entitled to fees but agreed to file any fee request Mr. Ron

wished to submit. A copy of the November 20, 2013 letter is included as Ex. G. Mr. Ron sent

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1 another letter on November 24, 2013, to which Lead Counsel responded on November 26, 2013.

2 Copies of the letters are attached as Exs. H and I.

3

149. Mr. Ron has not intervened in this action or filed an objection, but Lead Counsel

4 wanted to bring the potential objection by Mr. Ron to the Court's attention.

5 XI. CONCLUSION

6

For all of the foregoing reasons, Lead Counsel respectfully requests that the Court approve

7 the settlement and the Plan of Allocation of settlement proceeds and award Lead Counsel fees of

8 20% of the Settlement Fund plus $278,994.44 in expenses, plus the interest earned thereon at the

9 same rate and for the same period as that earned on the Settlement Fund until paid.

10

I declare under penalty of perjury that the foregoing is true and correct. I executed this

11 Declaration at San Francisco, California on December 16, 2013.

12

s/ Christopher P. Seefer CHRISTOPHER P. SEEFER

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EXHIBIT A


Translated, from the Hebrew Rina Ne'eman Hebrew Language Services, Inc.

[Emblem of the State of Israel]

The Central District Court

Public File 3912-01-08

September 11, 2008 Stern v. Verifone Holding, Inc.

Before The Honorable Chief Judge Hila Gerstel

The Petitioner

Verifone Holdings, Inc.

V.

The Respondent

David Stern

Ruling

The subject of this ruling is the "applicable law" in the instant case, and this is in the framework of a motion to strike the action in limine, or alternately, to dismiss the action in limine, as well as the petition that was filed by the Respondent for the certification of the action as a class action and, alternately, for a stay of proceedings within the framework thereof (hereinafter- "the Petition").

1. Background :

(a) The Petitioner is a foreign company incorporated pursuant to the laws of the State of Delaware in the United States and its business is the development of solutions and systems for secure electronic payments. The Petitioner's shares are traded on the New York Stock Exchange and on the Tel Aviv Stock Exchange and the Respondent is one of the purchasers of its shares. On January 27, 2008, the Respondent filed a Petition to Certify the Action as a Class Action against the Petitioner for damages caused to the public of those who purchased the Petitioner's shares, due to a mistake contained in three of its financial reports that were published by it in the past year. Due to this mistake, there was a collapse in the value of the Petitioner's shares that continued until the date of the filing of the Petition. The Respondent is complaining that for a period of eight months until the discovery of the mistake, the stock was traded at a

4-A

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Public File 3912-01-08 September 11, 2008 Stern v. Verifone Holding, Inc.

rate higher than its true price, which caused those who wished to purchase it to pay an amount higher than the actual price.

(b) The Petitioner has not yet filed its response to the certification of the action as a class action, however, on March 31, 2008, it filed a motion to strike or to dismiss the action in lirnine or alternately, to stay the proceedings within the framework thereof. On April 30, 2008, the response of the Respondent to this petition was filed, along with the reply of the Petitioner on May 18, 2008. In a hearing that was held before me on May 25, 2008, the Parties agreed that the question of the applicable law would be decided first. The parties were permitted to submit supplementary arguments in this regard and as they have been submitted, the time has arrived to render a decision.

2. The Petitioner's Arguments

(a) In its Motion for in limine dismissal, the Petitioner raises various arguments and devotes substantial space to the fact that there are 16 parallel actions pending against it in the United States (some of them class actions and some of them derivative actions), that are based upon the same factual basis, which includes the interest of the class alleged in this action in full and which deals with the same cause of action and the same requested remedy. All of the class actions and three of the derivative actions were filed prior to the filing of this action. Therefore, had this action been filed together with the actions that were filed in the United States before the same forum, the Respondent's action would have had to be stricken or joined with the other actions. The Petitioner emphasizes that under the circumstances no harm will be caused to the alleged class as a result of the in limine striking of the action. Similarly, in view of the fact that the parties, the causes of action and the remedies in this action and in the actions being litigated in the United States are identical, the decision of the Court in the United States in the parallel actions is likely to constitute res, judicata with respect to the instant action.

(b) With respect to the issue for my disposition in this Decision, the Petitioner argues that the foreign law should be applied because most of the factual, economic and legal nexuses of the Petitioner are with the United States as

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shall be detailed below: The Petitioner is incorporated in the United States, the center of its activity is in the United States, that is where its company headquarters are located and the vast majority of its executives reside, its financial center is in the United States, the New York Stock Exchange is where the value of its shares which is the focus of this action, most of the Petitioner's shares are traded in the New York Exchange and not on the Tel Aviv Stock Exchange, its financial reports were prepared and certified in the United States, subject to the securities laws that are in effect there, most of the shareholders are not residents of Israel and their reasonable expectations are that the laws of the United States will apply to the actions against the Petitioner,

(c) The Petitioner further notes that the "double registration" arrangement that has been set forth in the Securities Law, 5728-1968 (hereinafter — "the Securities Law") and which applies to her, provides that corporations whose securities are registered for trade on foreign stock exchanges may be registered for trade on the Tel Aviv Stock Exchange as well, while making use of the disclosure documents that were prepared for the foreign market as a full substitution for the disclosure documents that Israeli law requires for the purpose of offering securities to the public and for fulfilling the obligations of ongoing reporting. Therefore, corporations to which the "double registration" arrangement applies, including the Petitioner, are exempt from the reporting obligation pursuant to Israeli law and are obligated to file reports pursuant to the foreign law, and in any event the laws of reporting that have been set forth in the Securities Law do not apply to them.

3. The Respondent's Arguments

(a) The cause of action arises as to each purchaser of the Petitioner's shares on the Tel Aviv Stock Exchange during the period in which they were traded according to a high rate that stemmed from the mistake in the financial reports. The Securities Law establishes a right of one harmed as a result of the inclusion of a misleading detail in the on-going report and allows the receipt of compensation for the damage. The action deals with shares that were traded on the Tel Aviv Stock Exchange and the Israeli law is applicable to the Petitioner's reports that were filed in Israel. The only thing set forth in the Securities Law regarding foreign corporations is

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simply an easing of the technical requirements that allow foreign corporations to submit in Israel the same reports that were filed outside of Israel, but in no way has it been established that the Israeli law does not apply to it.

(b) From an examination of the majority of the nexuses, it appears that most of them connect the instant conflict to Israel: The action was filed due to the purchase of shares that was carried out on the Stock Exchange in Israel, the erroneous representation regarding the results of the activity of the Petitioner was made in Israel, the financial statements of the Petitioner were published in Israel, the alleged damage occurred on a stock exchange in Israel and the Respondent is an Israeli citizen. Similarly, the reasonable expectation of the Parties, as well as the interest of the Israeli legal system, are that a dispute with regard to a stock purchase that was made on the stock exchange in Israel will be litigated before the court in Israel. And finally, considerations of efficiency also do not bar handling the proceeding in Israel according to the Israeli law where the Petitioner does not point out how litigating the case here will be difficult for it.

(c) Additionally, the actions that were filed against the Petitioner in the United States deal with completely different causes of action, for they deal with actions for deceit and negligence on the part of the Petitioner and its managers whereas the instant action deals with statutory liability for a misleading detail in the on-going report and it contains no element of deceit. Similarly, there is no identity between the parties in the proceeding in the United States and in the instant Action, for indeed the Respondent does not presume to represent the Petitioner's shareholders who purchased its shares on the New York Stock Exchange and, as opposed to this, none of the motions to certify class actions that were filed in the United States related to the Petitioner's shares that were purchased on the stock

• exchange in Israel. It seems, therefore, that the American court would exclude from the class in the class action being litigated before it the shareowners who purchased their shares in Israel. In addition, there is no identity on the side of the respondents in the proceeding in the United States and in this action and even the procedural rules are substantially different. In view of this, the Respondent is of the opinion that the

•

Petitioner has not proved why, under the circumstances, the foreign law should be applied to the Action.

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4. The Petitioner's Reply

(a) The actions pending against it in the United States are based upon the same alleged defect, on the same set of factual circumstances and the same remedy is requested in them. The Petitioner repeats its arguments regarding the arrangement of the "double registration", which is based, according to it, upon reliance on the foreign law and the recognition that it constitutes a full substitution for the Israeli law as also applying to the responsibility of the company traded in Israel in the framework of the double registration arrangement with regard to everything connected with the reports that it prepared in accordance with the foreign law. Therefore, no separation should be made between the law that sets forth the reporting obligation, the foreign law, and the law that sets forth the liability for a violation of these reporting obligations.

(b) In our matter, the financial reports were prepared in the United States, pursuant to the American law, were published initially in the United States and this is due to the company being incorporated according to the laws of the United States and its shares being traded for many years on the New York Stock Exchange. On the other hand, the publication of the reports in Israel was a republication of the same reports that had already been published in the United States, Similarly, it was clarified to the Petitioner's shareholders that the corporations laws of the State of Delaware in the United States apply to the company.

(c) Finally, in view of the existence of parallel proceedings pending against the Petitioner in the United States, since the parallel actions in the United States fully include the interest of the alleged class in this action, and as opposed to the opinion of the Respondent, the court in the United States is not expected to exclude from the alleged class in the parallel proceedings the shareholders who purchased their shares in Israel, it should be ruled that the applicable law in the Action is the American law.

S. The Parties' Supplementary Arguments

(a) The Respondent argues that the Israeli legislature adopted the requirements of the foreign law only with respect to the specific point

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according to which a foreign corporation whose securities are also traded on stock exchanges outside of Israel is not required to file two kinds of reports but rather it is sufficient for it to file in Israel the reports that it files with the other stock exchange. Beyond this limited applicability of the foreign law, there is no other place where it can be relied upon. The Respondent continues to argue that the Israeli legislature did not leave the responsibility of the foreign corporation with respect to its reports in the hands of the foreign law, as the Petitioner asserts.

(b) In its response to the supplementary argument on the part of the Respondent, the Petitioner asserts that the American law is the applicable law regarding its liability due to the content of its reports, including its liability for the defect alleged in the Respondent's Action. According to the Petitioner, the Securities Law does not deal at all with the law applicable to the subject of liability and instead the answer to the question of the applicable law is to be found in the rules of the private international law and the provisions of the arrangement of the double registration.

6. Discussion and Decision

After having considered all of the arguments of the Parties, I am of the opinion that the applicable law in the instant case is the American law and not the Israeli law and I shall explain why:

(a) The courts are asked, with ever increasing frequency, to hand down rulings in legal disputes in which a foreign element is involved, that is to say disputes in which not all of its nexuses are local. Such mixed disputes present before the courts that are adjudicating them the question of which system among all of the "competing" legal systems should apply in the instant case. This question of choice of the law is likely to arise whenever there is a reasonable possibility that the forum will need to avail itself of any foreign law in its ruling on the matter that is before it

(b) In the matter before us, the question to be decided is which legal system among the competing systems should be applied to the instant action - will this be the Israeli legal system, in other words the local law, or rather the American legal system, in other words the foreign law, in view of the

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fact that the arrangement of the "double registration" (hereinafter — "the double registration arrangement"), which shall be explained below, applies to the Petitioner, an arrangement whose nature has not yet been subject to a judicial determination with respect to the aspects that are relevant to this motion.

(c) The double registration arrangement was set forth in the framework of the Securities (Amendment No. 21) Law, 5760-2000, Chapter E-3 (hereinafter — "the Law"). The arrangement provides that companies whose securities are registered for trade on certain stock exchanges abroad as enumerated in the law can also register them for trading on the stock exchange in Israel. The arrangement creates a special track for registration and the disclosure of documents, according to which the companies to which the arrangement applies are required to file a report pursuant to the law applicable to the stock exchange abroad on which they are traded, and are exempt from filing additional documents according to the Israeli law. The companies to which the arrangement is applicable are "outer" companies — that were incorporated in Israel and are traded on the stock exchange abroad, as well as foreign companies — that were incorporated abroad, are registered on stock exchanges abroad and wish to be registered on the stock exchange in Israel (Section 351 of the law). The double registration arrangement was initially applied fully only to companies that were registered for trade on the large stock exchanges in the United States as set forth in the Second Appendix to the law, and in 2005 the arrangement was expanded to include two additional stock exchanges — the secondary list in the NASDAQ and the London Stock Exchange.

(d) The "double registration" arrangement was enacted on the background of the crisis in the Israeli capital market, a market that was of limited size and was characterized by increasingly declining tradability. The Brodet Commission, which examined the question of whether the registration for trade and reporting [requirements] of Israeli companies registered for trade abroad should be eased, was of the opinion that the double registration of securities for trading on two markets simultaneously would constitute, alongside the rehabilitation of the Israeli market, an advantage for the companies that would do so, where, at the base of the Commission's recommendation was the assumption, inter alia, that the American law creates a sufficient apparatus for the protection of the interest of the

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investing public (Moti Yamin and Amir Wasserman, Corporations and Securities, Halakhot Publishing Ltd., p. 359, 360 (2006). On the basis of the Brodet Commission recommendation the arrangement that expresses a unilateral recognition of the foreign regulatory bodies was adopted (Amir Licht, "Double Registration of Securities" 32(3) Mishpatim 561, 590 (2001).

(e) The normative framework set forth in Chapter E-3 of the law and the Securities (Periodic and Immediate Reports of Foreign Corporation) Regulations, 5761-2001 (hereinafter — "the Regulations") that were promulgated pursuant to it, create a picture according to which the foreign law is the one that applies to companies traded in the framework of the double registration both from a technical and a substantive perspective.

(f) The term of the "foreign law", which is discussed in the provisions of Chapter E-3 and the regulations promulgated by virtue thereof, is defined in Section 1 of the law:

"The law that applies to a foreign corporation due to the registration of its securities for trading on a stock exchange abroad, including the rules of such stock exchange abroad" (the emphases are mine H.G.)

(g) We see that the legislature did not leave an opening for interpretation regarding the question of the applicability, but rather provided, in an unequivocal manner, that the foreign law is the law that is applicable to the foreign companies. And if this is what has been determined regarding companies that incorporated in Israel, a fortiori, foreign companies that are traded abroad and in Israel in accordance with the double registration arrangement, and that were incorporated in an foreign country and their reports were prepared according to the foreign law, the law of the country in which they incorporated will apply to them and this is the law that defines their responsibility and liability.

(h) As stated, in the provisions of the law and the regulations promulgated pursuant to it, the applicability of the foreign law is expressed both from a technical perspective with respect to the reporting duty as well as from a substantive perspective regarding the overall responsibility of the

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company to the investing public. From a technical perspective, the regulations provide that the reports that the companies are required to file shall be prepared according to the foreign law and shall constitute a substitute for reporting pursuant to the Israeli law, where it will be possible to file in Israel copies of the reports that were made, as stated, solely according to the foreign law.

(i) From a substantive perspective, it may be learned from the language of the provisions of Chapter E-3 that the legislature saw responsibility of the company towards the investors as arising by virtue of the foreign law, and I shall explain what I mean.

(j) Section 35r of the law as well as Section 35s of the law set forth the conditions of the addition, or alternatively the removal, of a stock exchange abroad, as to which the double registration arrangement shall apply, to the Third Appendix.

Thus, Section 35r of the law provides:

"The Minister of Finance may ... set forth in the Third Appendix a stock exchange abroad ... if he found that its rules ... adequately insure the interests of the investing public in Israel."

It may be learned from this condition, with respect to the preservation of the rules of the foreign law as to the investing public for the purpose of the inclusion of a foreign stock exchange in the arrangement, that the legislature regards the foreign law as the law that shall apply in the case of violations of the provisions of Chapter E-3 of the law, as the law that shall protect the investors when necessary and from which the responsibility towards the investors stems.

(k) Moreover, Section 35x(a) of the law authorizes the Securities Authority to go to the body entrusted with the regulation or enforcement of the foreign law, prior to going to the corporation itself

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"A foreign corporation shall provide to the Authority in writing.., information and documents in connection with the details included in the registration document or required pursuant to the foreign law. The Authority or an employee that it authorized for such purpose, may apply to the body entrusted with the regulation or enforcement of the foreign law prior to applying to the foreign corporation."

From the language of the section it transpires that the Authority has discretionary power to intervene after consultation with the foreign commission. This approach of preference for the foreign regulatory, and especially the American regulatory over its Israeli counterpart, indeed is expressed in the annual report of the Securities Authority itself for 2007:

... "It shall be noted that as a rule, the provisions of the Securities Law apply to reports pursuant to Chapter E-3 both in the civil and in the criminal spheres. However, from the perspective of the examination of these reports, the first position takes into account the fact that these companies are already regulated by the American regulatory authority (SEC), the level of regulation that it operates being among the highest in the world .•.". In addition, it was determined in Chapter E-3 that in those cases in which the Authority is of the opinion that it should consider use of powers it can turn first to the SEC"... (The emphases are mine —HG.) (The Securities Authority, Annual Report 2007, p. 37 (2007).

(1) An additional section that expresses the intention of the legislature according to which "... the Israeli legal system shall serve as "a second fiddle" as opposed to the foreign legal system, primarily the American system ..." (Amir Licht "Double Registration of Securities" 32(3) Mishpatim 561, 617 (2001)), is Section 35z of the law which provides:

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"Where an action is filed with the court in Israel pursuant to any law, whose cause of action stems from a nexus to securities of a foreign corporation, the court may, at the request of a party, stay the proceedings in the action, if it is apprised that an action has been filed with a court outside of Israel for the same cause of action or a similar cause of action and this is until the rendering of a judgment that is no longer subject to appeal in such action ..."

(m) This section expresses the existing law with respect to a lis alibi pendens and the jurisdiction of the court to stay proceedings under such circumstances. The operation of the section must be done with coordination with the general law and its interpretation and while respecting the jurisdiction of the foreign court on the basis of international comity. (Amir Licht "Double Registration of Securities" 32(3) Mishpatim 561, 617 (2001)).

(n) In addition, consideration must be given to the fact that investors in a doubly registered company are likely to be found in a number of different countries around the world. It is appropriate that the proceeding be handled, in a given case, with respect to one forum and according to one law. Professor Licht writes about this as follows:

The court ... must consider the special characteristics of the actions regarding securities. The outstanding characteristic in this context is the fact that alongside the plaintiff there is generally a public of holders of rights, regardless of whether an action was filed as a class action or not. This aspect must encourage the court to assist in concentrating all of the proceedings in the same matter before one forum ..." (the emphasis is mine — H.G.) (AYnir Licht "Double Registration of Securities" 32(3) Mishpatim 561, 617 (2001)).

(o) A multitude of plaintiffs from different countries also characterizes international cessation of repayment proceedings such as those that were adjudicated in the Tel Aviv District Court in the matter of the airline Tower Air. Indeed, as distinct from the matter before us, in that case a foreign judgment was rendered and the motion was regarding the Israeli

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court's direct recognition of the judgment. However, also in that matter a precedent question arose, which brought up, in a similar manner, the need to decide before the judicial officials of which country the proceeding will be litigated. In that matter, Judge Elsheich held as follows:

"As of now there is no international forum above the Israeli and American judicial forums and the law in these countries is not necessarily uniform. Under these circumstances, it must be decided which is the country in which the overall international proceedini will be litigated insofar as it is appropriate that only one forum control the rehabilitation or the overall liquidation of the company. My approach is that the test according to which the determination and ruling as to whether a foreign court has international jurisdiction to the extent that the matter relates to the enforcement and recognition of a judgment of a foreign forum in Israel is the test of "the major part of the interests ". This is the test that requires that the company have a strong nexus to the country in which the judicial forum is located, the meaning of which is that the greater part of the financial, social and other interests of the company in question are concentrated in such country, meaning that this country is "the center of the greater part of the company's interests". (The emphases are mine - - H.G.) Opening Motion (Tel Aviv) 408/00 Tower Air v. The Companies Registrar not published, May 28, 2000).

(p) As stated, at issue are two proceedings that differ with respect to their substance and their implications but despite this there are similarities from which an analogy may be made. In both cases there are parties with a right of action from a number of countries, where the central proceeding is being litigated in the United States, which has the greater part of the factual, economic and legal nexuses.

(q) In the instant case, the Petitioner is a foreign corporation which, as was stated, was incorporated and traded in the United States, was registered for trade in Israel pursuant to Section 35dd of the law and accordingly the

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Public File 3912-01-08 September 11, 2008 Stern v. "Verifone Folding, Inc.

provisions of Chapter E-3 of the law and the regulations promulgated by virtue of it apply to it. The center of its activity and the place of residence of most of the members of the Petitioner's management is, as stated, in the United States, the New York Stock Exchange is the place where most of its shares are traded, and when its shares started to be traded on the stock exchange in Israel it was made clear to the Israeli shareholders that the corporations law of the State of Delaware in the United States apply to the Petitioner. In addition, the Petitioner's reports were prepared, as stated, in accordance with the requirements of the American law and constitute a complete alternative to the disclosure and reporting pursuant to the Israeli law. The value of the shares was determined on the New York Stock Exchange and it was also there that the mistake in the financial statements was made. Similarly, the New York Stock Exchange is set forth in the Second Appendix to the law and the American law applicable to it and to the Petitioner has been found to satisfactorily insure the interest of the investing public in Israel.

(r) Moreover, there are 16 parallel actions against the Petitioner pending in the United States, most of which were filed prior to the filing of this Action and all of them are based upon the same factual foundation. The application of the Israeli law in this case would mean the application of two different legal regimes in a circumstance in which it is appropriate that there be one forum adjudicating. In the present era the changing legal and economic reality with the strengthening of the globalization of the securities markets cannot be ignored. The objective of the double registration arrangement is the strengthening of the local securities market, with reasonable preservation of protection of investors in Israel. The application of the Israeli law is likely to dissuade additional companies from joining the double registration and thus the objective of the arrangement will be thwarted, where at the base of this objective it was found that the American law indeed provides reasonable protection to investors.

(s) In this matter, Professor Licht's words are pertinent:

"...Differences between legal systems are always possible and the decisive consideration from this perspective is whether the plaintiffs will be awarded

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an effective remedy for their cause of action. There is no doubt that the American courts are graced with all of the knowledge that will enable them to grant such a remedy to the Israeli plaintiffs". (The emphases are mine — H.G.) (Amir Licht "Double Registration of Securities" 32(3) Mishpatim 561, 618 (2001)).

(t) As stated, the courts in Israel have not yet been asked to express their opinion regarding the new "double registration" arrangement, but Professor Licht's article sheds light on the objective of this arrangement:

Adoption of the arrangement expressed a fundamental position of the legislature according to which, despite its sovereignty to promulgate regulatory arrangements in everything that seems necessary to it for the protection of Israeli interests, it is preferable for it and for such interests to withdraw from regulatory arrangements whose source is the foreign sovereign...

... The below discussion is guided by the legislative objective of the arrangement, which is the reduction, to the extent possible, of the "friction" between the doubly registered corporations and the Israeli regulatory regime both from the perspective of the content of the law and from the perspective of its enforcement in the criminal and civil arenas. This, as an expression of the reduction of the regulatory burden and on the assumption that being subject to the law and the market discipline in the United States (in the first stagel provides reasonable protection," (The emphases are mine - H.G.) (Amir Licht "Double Registration of Securities" 32(3) Mishpatim 562, 604 (2001)).

(u) Indeed, it appears that the Israeli legislature has adopted, in the framework of the "double registration" arrangement, the requirements of the foreign law not only as to the technical aspect, which sets forth the manner for

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The Central ]District Court


filing of the reports, but also as to the substantive aspect, which deals with the responsibility of the foreign company traded in Israel, out of a desire to concentrate all of the legal proceedings in one place under one law, which is the American law.

7. Conclusion:

From all of the above I find that the applicable law is the American law.

The Respondent shall bear the Plaintiff's costs in the amount of 10,000 New Israeli Shekels plus VAT.

The Clerk's Office shall send a copy of this Decision to the Parties' counsels by registered mail and shall summon them to a hearing before me on November 16, 2008.

Handed down today, 11 Elul 5768, September 11, 2008, in the absence of the Parties.

Hila Gerstel, Judge Chief Judge

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Class Action File (Central District Court) 3912-01-08 David Stern v. Verifone Holding, Inc.

Central District Court Class Action File 3912-01-08

Before: the Honorable Judge Hila Gerstel, Presiding Judge

The Petitioner: David Stern

- V. -

The Respondent: Verifone Holding, Inc.

Ruling

Before me is a petition to cancel the stay of proceedings and to re-examine the ruling which was handed down on September 11, 2008, (hereinafter: the "Applicable Law Petition ") in which I wrote that the law which applies to the action which is presently at hand is American law (hereinafter: the "Petition ").

1. Background :

(a) The Respondent is a foreign company, which is incorporated under the laws of the State of Delaware in the United States, and which is engaged in the development of solutions and systems for secure electronic payments. The Respondent's shares are traded on the New York and Tel Aviv Stock Exchanges, and the Petitioner is one of the purchasers of its shares. On January 27, 2008, the Petitioner filed a petition for the certification of an action as a class action against the Respondent, for damage which had been sustained by the purchasers of its shares as a group, as the result of an error which had appeared in three of its financial statements that it had published the previous year. Due to that error, a collapse in the Respondent's share prices took place. The Petitioner complained about the fact that for eight months until the error was disclosed, the shares were traded at a price higher than its true price, which caused the parties which were interested in purchasing them to pay an amount which was higher than its actual price.

(b) On March 31, 2008, the Respondent filed a petition to strike the action in limine or to deny it, and alternatively, to stay the proceedings therein. Responses to that petition

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Class Action File (Central District Court) 3912-01-08 David Stern v. Verifone Holding,

were filed, and in a Court session which was held before me on May 25, 2008, the parties agreed that the question of the applicable law should first be decided. In my ruling of September 11, 2008, as set forth above, I ruled that the applicable law was American law (hereinafter: the "Applicable Law Ruling "). A petition for leave to appeal against my ruling was filed by Counsel for the Petitioner.

(c) On April 30, 2009, the Petitioner petitioned for a stay of further proceedings in the action, pending a ruling by the Supreme Court on the petition for leave to appeal which he had filed as set forth above. On January 27, 2010, the Supreme Court struck the petition for leave to appeal and returned the matter to this Court in order for it to hand down a ruling on the petition for the stay of proceedings in the action, whereby the Petitioner reserved the right to plead, at a later stage, in the matter of the applicability of foreign law. On April 25, 2010, the parties announced their consent to a stay of proceedings in the action, whereby the Petitioner reserved the right to approach the Court with a petition to remove the stay of proceedings should a relevant change take place in the circumstances with respect to the proceedings which were being conducted before the court in the United States. This consent was confirmed by me and was given the validity of a Court judgment. In fact, on August 22, 2010, the Petitioner filed the present Petition, responses to which were subsequently filed. On February 28, 2011, the Petitioner filed a petition to submit a reference document — a ruling by the District Court of the Southern District of New York in re Vivendi Universal, S.A. Securities Litigation (hereinafter: the "Vivendi Case"). The Respondent consented to the petition, provided that it would be allowed to comment on the reference document. This being the case, I permitted the parties to file their comments to the reference document.

(d) In a Court session which was held before me on April 7, 2011, it was agreed that the Defendant would file a petition to dismiss in limine, and that after the responses had been filed, a decision would be initially handed down on the question of whether it was appropriate to change the Applicable Law Ruling, and if the answer was negative, a decision would then be handed down on the petition to dismiss in lirnine.

On July 4, 2011, the Petitioner and the Respondent filed a notice by common consent, pursuant to which they had reached a procedural arrangement which obviated the need for the issuance of a decision on the petition to dismiss the action in limine, and what was now requested was the issuance of a decision on the question of whether it was appropriate to change the Applicable Law Ruling.

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This being the situation to date, the time has now come to issue a decision.

2. Arguments by the Petitioner :

(a) The Petitioner argued in the petition, which was supported by an expert opinion by Adv. Alex Berman, who is licensed to practice law in the State of New York and is an expert on securities law in the United States, that the decision with regard to the stay of proceedings in the petition for the certification of the action as a class action should be canceled; the decision in which I ruled that the law which appropriately applies to the action is American law should be re-examined; and a ruling which states that Israeli law is the applicable law under the circumstances of the case should be issued. According to the Petitioner's version, the United States Supreme Court has recently ruled that the provisions of American law in the matter of the liability of public companies for erroneous information which they publish do not apply to trading on stock exchanges outside the borders of the United States, and this ruling, in his opinion, constitutes a change of circumstances which justifies changing the ruling on the stay of proceedings in the action and re-examining the decision which concerns the applicability of foreign law.

(b) The Petitioner went on to argue that the ruling in the matter of the applicability of foreign law was founded on the assumption that all of the proceedings should be concentrated in a single location and under a single legal system, on the assumption that American law confers protection upon investors on the stock exchange in Israel and that this being the case, the Israeli investors would be granted remedies in the proceedings which were being conducted in the United States. However, on June 24, 2010, the United States Supreme Court handed down a decision to the contrary in re

Morrison v. National Australia Bank Ltd. (hereinafter: the "Morrison Case"). That case was an action which was filed in the United States for damage which was caused as a result of the purchase of shares in an Australian bank on an exchange outside of the United States; the ruling held that United States law does not apply to trading on exchanges outside of the United States. As the Petitioner saw it, this was a new doctrine which constituted a change of circumstances, which justified the cancellation of the stay of proceedings. After all, in light of the new American case law, the members of the class, whom the Petitioner wishes to represent, would not be granted any remedy whatsoever in the proceedings which were being conducted in the United States, and this being the case, they were not included in the plaintiff class in the United States. Once the United States Supreme Court ruled that American law did not

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Class Action File (Central District Court) 3912-01-08 David Stern v. Verifone Holding Inc.

apply to trading on exchanges outside of the United States, the ruling that American law applied to the case which is presently at hand could no longer stand.

(c) Moreover, although the above-cited Morrison Case admittedly did not have to do with dual-listed shares, it is possible to conclude on the basis thereof that in any event, American law would not apply to trading in shares outside of the United States. The fact that the case which is presently at hand has to do with dual-listed shares, which are traded both on an exchange in the United States and on an exchange in Israel does not, in the Petitioner's opinion, change this conclusion.

(d) The Petitioner pointed out that the Morrison Case was interpreted in subsequent judgments in accordance with his position in the position of the expert on his behalf. According to his argument, c ase law was also applied to securities which were subject to dual trading so that actions which were filed in the United States against companies the securities of which were traded both in the United States and on foreign exchanges were denied in cases where the securities were purchased on a foreign exchange, and this constitutes new circumstances.

(e) The Petitioner went on to argue that in contrast to the argument raised by the Respondent, a number of decisions had already been handed down by courts in the United States in which the Morrison Case was examined in the context of dual-listed companies, and those decisions had ruled that the actions would be denied with respect to anyone who purchased the securities on an exchange outside of the United States. As the Petitioner would have it, the Respondent and the expert on its behalf are not correctly interpreting that which was ruled in the Morrison Case, whereby it is fitting and proper to provide a dynamic interpretation for the legislation with respect to the dual arrangement.

(f) The Petitioner concluded by arguing that when the Israeli legislature had enacted the dual listing arrangement, it had drawn American law into the Israeli legislation and, this being the case, when the American law was changed, this required a re-examination of the interpretation of the Israeli law. This determination, in the Petitioner's opinion, would not give rise to any effect as a result of the future change in the content of the foreign law because, after all, the foreign law is not the applicable law in the case which is presently at hand.

(g) The Petitioner further argued, in his supplementary pleadings, that by virtue of the case law which he had presented in the Vivendi Case, he would not be able to obtain

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Class Action File (Central District Court) 3912-01-08 David Stern v. Verifone Holding Inc.

any remedy whatsoever if the action were to be heard under American law because the courts in the United States apply the Morrison doctrine, pursuant to which American law does not apply to shares which were traded on an exchange outside of the United States.

(h) In light of that set forth above, it should be ruled that trading on the stock exchange in Israel is subject to Israeli law, which has adopted a number of requirements from American law, whereby those requirements deal exclusively with the issue of disclosure.

3. Arguments by the Respondent:

(a) The Respondent filed a response which was supported by an expert opinion by Prof. Amir Licht, who is an expert in the international regulation of securities and in legal aspects of the dual listing of securities (hereinafter: "Prof. Licht"), in which it argued that the Petition, by its very nature, constituted an appeal the filing of which was impossible from the procedural standpoint. The Petitioner filed a petition for leave to appeal against this ruling before the Supreme Court and at the same time, he filed the present Petition for re-examination; this being the case, on October 5, 2010, the Honorable Justice Grunis had ruled that the Petitioner was required to clarify why he had not chosen one of the proceedings. In commenting on the ruling, the Petitioner gave notice to the Supreme Court that he believed that it would be more correct to initially exhaust the proceedings before this Court. The Respondent believes that it would actually be correct to hear the question within the framework of the petition for leave to appeal and that, accordingly, the Petition should be dismissed in limine, as otherwise, a situation which involved conflicting rulings was liable to arise.

(b) On the merits as well, the Respondent believed that there was no justification for the Petition. This is because the above-cited Morrison Case is not relevant to the decision on the present issue, which is a decision in principle, and which has to do with the interpretation of provisions of Israeli legislation, and accordingly, that set forth above bears no relationship to the decision in the matter of foreign law. In other words, the change in the content of the American case law cannot affect the interpretation of Israeli law. In addition, the Petitioner's interpretation of that set forth in the above-cited Morrison Case is not correct. The Respondent relied on the expert opinion by Prof. Licht and explained that the Morrison Case had no effect on the case which was presently at hand, because American law, which applied prior to the ruling in that case, continued to apply even now.

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(c) The Respondent went on to argue that the legislation which underlies the dual listing arrangement did not limit itself to American law but, rather, allowed the possibility of determining which foreign law would apply. In other words, the decision in the matter which is presently at hand is not limited exclusively to American law; rather, it determines that the law of the state in which the trading took place is the law which applies, provided that the exchange in question is included in the list of exchanges which is set forth in the Second or Third Addendum to the Securities Law, 5728-1968 (hereinafter: the "Securities Law"). Accordingly, were the Petition to be allowed, this would give rise to an absurd outcome under which the change which took place in American case law pursuant to the Morrison Case would lead to the negation of the applicability of English law to a dual-listed company which was registered for trading both within and outside of Israel. In addition, a situation would arise whereby the interpretation of the Securities Law would vary in accordance with changes which took place in the content of any foreign law to which the dual listing arrangement refers.

(d) The Respondent interpreted the precedent-setting importance of the above-cited Morrison Case as determining new criteria for the applicability of the American securities laws, which concern the concept which is opposed to the extraterritorial applicability of local law. The Morrison Case changed the previous tests which were set forth in case law handed down by the federal court in the United States. The question of whether the Morrison doctrine rules out the applicability of the United States securities laws to trading on the stock exchange in Israel which involves the shares of a dual-listed company, which are also registered for trading on the New York Stock Exchange, is the relevant question in the case which is presently at hand. The answer to that question is in the negative — even after the ruling in the Morrison Case, the American securities laws continue to apply to the transaction in question.

(e) The Respondent believes that the judgment in the Morrison Case ruled that Section 10 (b) of the Securities and Exchange Act of 1934 includes both of the following alternatives: one, which applies to the case in which the transaction which was carried out involved a security which was registered for trading on an exchange in the United States; and the other, which applies in the case in which the element of registration for trading on an exchange in the United States was not fulfilled, but where the transaction in the security was carried out in the United States. The case which is presently at hand falls under the first alternative because all of the shares in the Respondent were registered for trading on the New York Stock Exchange. This

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Class Action File (Central District Court) 3912-01-08 David Stern v. Verifone Holding,

means that these transactions were subject to American law even after the Morrison Case.

(f) The Respondent rejected the argument by the Petitioner, to the effect that the purchasers in Israel of shares in dual-listed companies would not be included in the plaintiff class in the United States because if the litigation were to take place before a federal court, the argument by either of the parties with respect to the absence of a cause of fraud would not be heard on the grounds of non-applicability of American law. In addition, the courts in Israel frequently hear actions in which the applicable law is a foreign law, and this was actually the purpose of the legislation that incorporated the dual listing arrangement into the Securities Law.

(g) The Respondent argued that the Vivendi Case did not have anything to do with trading in dual-listed shares and that this being the case, no deduction could be made therefrom with respect to the matter which is presently at hand. In the case which is presently at hand, the shares in the Respondent are ordinary shares which were registered for trading and were actually traded on both the New York Stock Exchange and the Tel Aviv Stock Exchange, with no difference between them. This being the case, the Morrison doctrine has no implications for the matter which is presently at hand, and American law, which applied prior to the ruling in the Morrison Case, continues to apply to the matter which is presently at hand.

(h) As for the petition to cancel the ruling on the stay of proceedings in the action, the Respondent believes that the decision to stay the proceedings was a direct outcome of the decision with respect to the applicability of foreign law. This being the case, in light of the fact that the petition for re-examination should not be heard, it is certainly not appropriate to order the cancellation of the stay of proceedings, which, as set forth above, gave the validity of a Court judgment to the consent of the parties.

4. Discussion and decision :

Having examined the Petition, the response by the Respondent, the reply by the Petitioner to the response, and the supplementary pleadings, I have decided that it is not appropriate to change the decision in which I ruled that the applicable law is American law.

(a) As set forth above, in his Petition, the Petitioner has requested a change in the decision in which I ruled that the applicable law is foreign law, in light of the case law which was handed down by the Supreme Court in the Morrison Case. As he

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would have it, that case law constitutes a change of circumstances which justifies the re-examination of the Applicable Law Ruling.

The decision in the Morrison Case was handed down on June 24, 2010. This was an action which was filed in the United States for damage which was caused as a result of the purchase of shares in an Australian bank on an exchange outside of the United States. The Supreme Court ruled that in the case which it was hearing, which concerned an action for compensation for the publication of a deceptive detail with respect to securities which were traded on exchanges outside of the United States, the United States securities laws have no applicability.

I do not accept the Petitioner's argument which holds that as a result of that set forth above, the rights of the investors on the stock exchange in Israel, who purchased the Respondent's securities, were harmed because on one hand, they cannot obtain a remedy in the proceedings which are being held in the United States in light of the ruling that United States securities laws do not apply to their case but, on the other hand, the proceedings in the present action have been stayed pending the issuance of the decision in the proceedings which are being held in the United States, when it seems that the courts in the United States will not even hear these actions.

Obviously, the Petitioner should not be left with no recourse whatsoever, thereby creating a situation which is tantamount to a legal vacuum. In the case which is presently at hand, however, there is no legal vacuum because the proceeding is not being conducted in the United States, but in Israel — under American law. What this means is that the examination of the issue will be conducted under American law, where it applies to actions which are heard before the Court — and not where it does not apply.

The examination will be performed, when it is performed, in accordance with the legal tools which American law provides for the hearing of actions which are lawfully filed before the courts in the United States, and to which American law applies, and not those which were excluded by the ruling in the Morrison Case.

(b) I shall add the following: the Morrison Case did not have anything to do with dual listing. On the other hand, in the case which is presently at hand, there can be no dispute that the Respondent comes under the "dual listing" arrangement, which is governed by the Securities Law ( Amendment No. 21), 5760-2000, Chapter E 3 (hereinafter: the "Law"), by virtue of which the Securities Regulations (Periodic and

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Immediate Reports of a Foreign Corporation), 5761-2001, (hereinafter: the "Regulations") were enacted. As I determined in the Applicable Law Ruling, the foreign law applies to companies which are traded under a dual listing, not only from the technical standpoint, with respect to the duty of reporting, but also from the material standpoint, which concerns the companies' duties vis -a-vis their investors as a group. This may be learned from the wording of Section 1 of the Law and from Section 35R of the Law, which gives the Minister of Finance the authority to determine which exchanges outside of Israel will be added to or, alternatively, removed from the list of exchanges which is set forth in the Third Addendum to the Law, to which the dual listing arrangement will apply. It may be seen that the Israeli legislature considered the foreign law as the law which will apply in cases involving a breach of Chapter E 3 of the Law, and the liability vis -a-vis the investors results from that law.

From the practical point of view as well, given that there may well be many investors in dual-listed companies who come from various countries and who purchased the securities on various exchanges, it is fitting and proper for one law to apply to all of them.

(c) As I see it, given that the legislature gave preference to the foreign law over Israeli law, it cannot be ruled that a new doctrine which has been determined by the United States Supreme Court — the Morrison doctrine — concerning which there is doubt as to whether it changes American law, and even if it does, is capable of changing the content of Israeli law, which, as set forth above, has determined that the foreign law is the applicable law.

(d) Today, the Third Addendum to the Law lists the NASDAQ Exchange and the London Exchange. According to the Petitioner's interpretation, any change in foreign case law or in foreign law would give rise to a change in the interpretation of Israeli law. If we adopt this method, then, for example, a change in case law in Britain — whether or not it gave rise to a change in British law — would cause a change in Israeli law, by making it apply instead of English law. This interpretation creates a situation of uncertainty for the investors who chose to invest in companies which are governed by the dual listing arrangement. Thus, in the case of investors who chose, according to this example, to invest in a company which is traded under the dual listing arrangement on the London exchange, the foreign law would apply to their case exclusively from the technical standpoint with regard to the duties of reporting; on the other hand, from the material standpoint pursuant to which the companies'

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liability vis-a-vis their investors as a group is determined, Israeli law would apply. At the same time, investors who chose to invest in companies which are also traded on the American exchange would be governed exclusively by American law, from both the technical and the material standpoint. This conclusion, aside from the non-uniform outcome to which it leads, invalidates the content of the purpose for which the dual listing arrangement was initially incorporated into the Law — the recognition of foreign regulatory entities.

(e) In addition, it is inconceivable that there could be a situation whereby any change in a foreign law would entail a change in Israeli legislation. If the Petitioner's argument were to be allowed, a situation of uncertainty would arise with respect to the question of which law applies — both to potential Israeli investors and to the companies which are subject to the dual listing arrangement. This situation is certainly not a desirable one. The power to determine that a change in a foreign law gives rise to a change in Israeli law is vested in the Minister of Finance, subject to that set forth in Section 35S of the Law, by deleting the exchange in question from the list that appears in the Third Addendum to the Law. This was the intention of the legislature, and no deviation from that intention is possible.

(f) In excess of that which is required, I shall further point out that in my opinion, the Morrison Case does not change the applicability of the United States securities laws to transactions which were carried out on the Israeli exchange and involved securities of companies governed by the dual listing arrangement.

Admittedly, the Morrison Case changed the tests which had been customary in the American courts for determining when the applicability of the American securities laws arises, and especially the applicability of Section 10 (b) of the Securities and Exchange Act of 1934 (by virtue of which the United States Securities and Exchange Commission enacted Rule lOb-5, which concerns securities fraud) to cases which involve a foreign element.

Prof. Licht explains in his expert opinion that the United States Supreme Court formulated a new test pursuant to which two alternatives are relevant to the matter which is presently at hand: one, which concerns securities that are registered on an exchange in the United States; and the other, in which the securities are not registered on that exchange, but the transaction involving the securities was carried out in the United States. According to the first alternative, that which applies to the case which is presently at hand, the securities — which, as set forth above, are registered on an

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exchange in the United States — are governed by Section 10 (b) and, by virtue of that section, the American laws apply to them, and the question of the exchange on which the purchase or sale of the securities was carried out is of no significance. This being the case, the territorial applicability of American law is determined by the very fact of the registration on an exchange in the United States.

The change which was made in the Morrison Case is focused on the second alternative — which, as set forth above, is not relevant to the case which is presently at hand — concerning which it was determined that the place of purchase or sale of the securities must be in the United States. In other words, that alternative has to do with local transactions.

The Respondent's securities are registered for trading on an American exchange; however, given that they were purchased within the confines of the State of Israel, this is not a local transaction of the type addressed in the Morrison Case. Accordingly, American law applies to them, and the change which was made by the Morrison Case is not relevant. This being so, American law confers protection and remedies upon the Israeli investors, and the desire of the Israeli legislature — for the applicable law in cases which involve a breach of the provisions of Chapter E 3 of the Law to be the foreign law — is fulfilled.

It is important to state that in subsequent case law in the American courts, there are differences of opinion as to the interpretation and application of the Morrison doctrine. This was also pointed out by the Court in the Vivendi Case.

(g) On the basis of all of that which has been set forth above, I have come to the conclusion that in the matter which is presently at hand, there is no other choice than to rule that the applicable law is American law, which the [Israeli] legislature adopted within the framework of the dual listing arrangement.

5. Conclusion:

On the basis of all of that which has been set forth above, I hereby rule that the Petition, insofar as it concerns re-examination of the Applicable Law Ruling, is denied.

Pursuant to the procedural arrangement which was reached by the parties on July 4, 2011, if the Petition is denied, the stay of proceedings in the action will continue, pending a decision on the appeal which is being conducted in the United States. This being the case, I

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hereby rule that the stay of proceedings of the action will continue pending a decision as set forth above.

The Petitioner shall bear the Respondent's costs, in the amount of NIS 7,500 plus Value Added Tax.

The Office of the Court Clerk shall send a copy of this decision to Counsel for the parties to the Petition, by registered postal mail.

Given this day, 25 Av 5771 (August 25, 2011), in the absence of the parties.

Hila Gerstel 54678313

The wording of this document is subject to changes in phrasing and editing.

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EXHIBIT C


From: Eli Greenstein Sent: Wednesday, November 17, 2010 5:37 PM To: 'Gil Ron' Subject: RE: Verifone - update

Dear Gil:

My apologies for not responding sooner. We are in the middle of several extremely busy cases.

We are still waiting for a ruling from the Court on defendants' most recent motion to dismiss. We expect a ruling most likely before the end of the year.

Our position with respect to the impact of the Supreme Court's Morrison decision has not changed. The law is still being developed in the various circuit courts in the U.S. and we have not seen any authority in the Ninth Circuit Court of Appeals that deals specifically with shares of a U.S. Company, listed and traded on a U.S. exchange, that also can be traded on a foreign exchange. It would be helpful if you can send us the citations to the cases you referenced in your email and include the excerpted language that you think supports your position. We will consider those cases and let you know if our position changes. Until then, we are still waiting for a ruling here in the U.S. and will keep you apprised of any new developments.

Best regards,

-Eli

From: [email protected] [mailto:gilron.grkfgmail.com ] On Behalf Of Gil Ron Sent: Saturday, November 13, 2010 11:38 AM To: Eli Greenstein Cc: Aharoni Rabinovich; Kobby Subject: Verifone - update

Dear Eli,

I want to make sure you got my message on November 4 (below).

Thanks, Best Regards,

Gil

Gil Ron, Keinan & Co., Law Office Lessin Theatre House 32 Weizmann Street Tel-Aviv, 62091 Israel T +972.3.696.7676


F +972.3.696.7673 I www.ronlaw.co.il E gilgronlaw.co.il I [email protected]

On 4 November 2010 15:24, Gil Ron <gil(&ronlaw.co.il > wrote:

Dear Eli,

I hope you are well as always.

Here in Verifone's case we have submitted an application to lift the stay of proceedings, and cancel the decision regarding the applicability of the US laws, on the basis of the Morrison decision and its application, especially in the Sgalambo, Alstom and Stackhouse cases, which deal with dual traded companies. This was done very recently, so we still have no news from the court.

Where are things on your side? I understand there is still no decision in the motion to dismiss. Is this motion still relevant, after you submitted the third amended and restated complaint? What are expected to be the next steps?

Last, but surely not least, in light of the existing situation in the US, under which it is clear, as a matter of law, that the lawsuit there does not include the purchasers in the Tel-Aviv Stock Exchange, is there still a reason not to confirm formally that these purchaser are not represented there? I think there should be no problem, but as in the past I respect any position you take. If you can give us such a confirmation, we would be grateful.

Thanks, Best Regards,

Gil

*************

Gil Ron, Keinan & Co., Law Office Lessin Theatre House 32 Weizmann Street Tel-Aviv, 62091 Israel T +972.3.696.7676 F +972.3.696.7673 I www.ronlaw.co.il E gilgronlaw.co.il I [email protected]


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EXHIBIT D



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In the Supreme Court

Leave for Civil Appeal 3973/10 Before: The Honorable Chief Justice A. Grunis

The Honorable Justice U. Vogelman The Honorable Justice N. Sohlberg

The Petitioner: David Stern

- V. -

The Respondent: Verifone Holdings, Inc.

Petition for leave to appeal against rulings which were handed down by the Honorable Presiding Judge H. Gerstel of the Central District Court on April 26, 2010, and August 25, 2011, in Class Actions File 3912-01-08

Date of the session: 27 Tevet 5773 (January 9, 2013)

Panel secretary: Itai Tzidon

Counsel for the Adv. Gil Ron, Adv. Aharon Rabinovitz, Adv. Yaakov Aviad, Adv. Nadav Petitioner: Miara

Counsel for the Adv. Yossi Ashkenazi, Adv. Moshe Yacov, Adv. Hanan Haviv Respondent:

Transcript

The Honorable Chief Justice A. Grunis: Admittedly, you wrote the matter down several times, so that there would be no misunderstanding: if the proceeding in the United States is concluded successfully, then the Israelis, including the Petitioner, are included in the class.

Adv. Ashkenazi: We declare that we would not object to the inclusion of the Israeli shareholders.

The Honorable Chief Justice A. Grunis: It is difficult for me to believe that the Court would bring that up at its own initiative.

Adv. Ashkenazi: The ones that my colleague added are the Defendants. The definition of the class is general.

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The Honorable Chief Justice A. Grunis: Do you agree that the Israeli shareholders, including the Petitioner, are included in the class if a ruling is handed down in the United States?

Adv. Ashkenazi: Yes.

The Honorable Chief Justice A. Grunis: You say that American law does not apply. Let us assume that it does not apply. Section 35 determined, on the assumption that you are correct and that Israeli law applies — what was determined, was determined. The Ninth Circuit Court of Appeals decided whatever it decided. Their chances, I believe, for the petition for an additional hearing by the entire panel — its chances are not that great, generally speaking, but perhaps they will prevail. So why should the Court in Israel deal with it, whether Israeli law or American law applies in this case, if the Israelis plaintiffs, including the Petitioner, are in that class?

Adv. Ron: First of all, the Israeli members of the class are not included in the class in the United States, according to the material which I presented.

The Honorable Chief Justice A. Grunis: No, we will interpret Morrison. Morrison does not apply to a large company. You have already said, Sir, that you know what will happen, now that your colleague has agreed that they are included there. The moment there is that kind of a declaration, it is hard to believe that the American judge, at his own initiative, would say that because of Morrison, they are not part of the class — although anything is possible. Should the proceeding be conducted here on that basis?

Adv. Ron: I do not purport to know what the judgment will be in the United States. Last week, with the consent of my colleague, we filed case law.

The Honorable Chief Justice A. Grunis: But that does not have anything to do with the stay of proceedings.

Adv. Ron: With regard to Perrigo, an action was filed in the United States following Morrison. The ones who filed the action were Israeli entities, and they deleted them, because they were not part of the class.

The Honorable Chief Justice A. Grunis: Because that is what they asked for. It is hard for me to believe that the American court, at its own initiative, without the opposing party asking for it, would do a thing like that.

Adv. Ron: The statement of claim which was filed in the United States talks about companies which are traded — where? In the United States. When we read the action, the name of the



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Israeli stock exchange is not even mentioned, and that's why we need to ourselves. With regard to the stay of proceedings, which is the main point, the causes of action are different because the laws are different. What is the major difference in the causes of action? The law in the United States requires the mental element. The law in Israel underwent an important reform, starting in 2004.

The Honorable Chief Justice A. Grunis: If the action is allowed in the United States, and if the Court awards compensation there, then what? Then will it be necessary to conduct an action in Israel as well for a thing like that? Why should the Court in Israel have to hear it, if it is being conducted in the United States? In my opinion, there is prima facie no reason for a court in Israel to devote its time to that matter, when it is being conducted before a court in the United States.

Adv. Ron: Our cause of action is different; it's better. Causes are included there which are not related to our case — for example, the use of inside information, trading and so forth. The proceeding is being conducted there according to a different legal system, and different causes are involved, and therefore, the rights of the class here should not be suspended. Furthermore, we conducted an examination this week — if we take Teva, during the last year, transactions were executed on the Exchange in Tel Aviv at a scope of NIS 15 billion. Partner is NIS 3 billion. The capital market is crying out for it. It should be known that when we're talking about our pension funds and our provident funds, which are invested — and the capital market does not know how the law applies? If Teva is traded in Israeli currency on the stock exchange in Israel, does Israeli law apply, or foreign law?

The Honorable Chief Justice A. Grunis: What difference does it make, which law applies? There is a proceeding, and therefore I said that I am starting with the assumption that Israeli law applies and Section 35 determined — then why do we have to deal with this question, because you say to us, Sir, that the capital market is eagerly waiting for this decision?

Adv. Ron: In my opinion, it is necessary to deal with the question of the applicable law because the causes of action are different.

The Honorable Chief Justice A. Grunis: Let us assume that it is determined, in the petition for leave to appeal, that this or the other legal system applies. The question still arises: why should the proceedings not be stayed?

Adv. Ron: If it is determined that Israeli law applies, the Petitioner will file a petition; we will be able to know which causes exist under Israeli law and which in the United States, and perhaps we will consider that it would be better to stay the proceedings. We have to keep the good of the class in mind. If we believe that the proceedings should be stayed, we will agree



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to it. With regard to whether or not to stay the proceedings as well, the question is: what is the applicable law? Because then we will examine the rights here in Israel, and we will be able to know that a more responsible duty is incumbent upon the other companies.

The Honorable Chief Justice A. Grunis: Would it be correct to say that you will agree to stay the proceedings, in this case, only if Israeli law applies?

Adv. Ron: No. We have agreed that if the foreign law applies, there will be a stay of proceedings. We have also come to an agreement that if the foreign law applies and the actions in the United States — we know our limitations, and we will not conduct proceedings here when the actions of the United States are denied. If Israeli law applies, we want to see the response by the Respondent and to examine — keeping only the good of the class in mind — the question of whether it would be correct to stay the proceedings on the basis of the arguments which are up for discussion in both of the proceedings.

The Honorable Chief Justice A. Grunis: After having consulted on the matter, we are not convinced by your reasoning, Sir. We need to consider our own resources. In such a situation, if a proceeding is conducted in the United States and continues to be conducted, in fact, it is possible to argue the opposite of your procedural arrangement, which is puzzling — because if the action there is denied on the basis of American law, then it is possible to argue that if Israeli law applies, [the case] deserves to be heard under Israeli law.

Adv. Ron: I haven't given that up.

The Honorable Chief Justice A. Grunis: I saw that. It makes sense. I say again: if they decide whatever they decide in the United States, then do we need to waste our time?

Adv. Ron: As we know, many times, these cases end in a settlement. With regard to the settlement as well, we believe that the cause of the Israeli class is stronger than the cause in the United States. Accordingly, we can examine the good of the class on the basis of the applicable law. In addition, this matter has arisen and is still arising in additional proceedings. If not in this case, it will be brought before the Court in another proceeding. Accordingly, we believe that as far as the system is concerned, it would be good for the system, from the standpoint of resources and from the standpoint of the certainty which would prevail in the capital market, if we were to know that with regard to 30% of the stock exchange in Tel Aviv, [it] will be trading according to foreign law for Israeli law. In our opinion, this is important from the standpoint of the law and from the standpoint of the system — because it is correct to discuss this. The test of the stock exchange must be carried

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out on the basis of proper disclosure. I am familiar with companies which were deleted from actions in the United States and did not file actions in Israel, and this is something which is bad for the Israeli public, because in those actions — we are familiar with one case which, within a certain period of time, is likely to expire under the statute of limitations. Israeli law, on one hand, determines a high level of liability but, on the other hand, determines a short limitation period. It was convenient for us to agree to a stay of proceedings and to focus on what was happening in the United States, but it's not good for the system.

The Honorable Chief Justice A. Grunis: Then do it. It's very good for the system. There is no reason for the judiciary system to devote judiciary resources when a proceeding is being conducted in the United States on an issue which is quite similar, in the context of the same company, and when the Israelis will prima facie not be harmed.

Adv. Ron: We believe they will be harmed.

The Honorable Chief Justice A. Grunis: The matter has been excluded. The question is whether you, Sir, agreed to our proposal to wait for the ruling in the United States on the petition for an additional hearing. If it is allowed and the action is denied, then you have some kind of procedural arrangement, and it will apparently be valid, and then it will be necessary to see what should be done. If the petition is denied, the case will go back there and the proceeding will be conducted, and the section states, "until the issuance of a judgment which is no longer subject to appeal" — then you will have to decide what to do.

Adv. Ron: Even if we wait — if we wait for a ruling — the question of whether Israeli law applies there will arise.

The Honorable Chief Justice A. Grunis: If the action is allowed there, and on the assumption that the Israelis are part of the class, then the case will apparently come to an end here as well. Of course, there is a possibility that at that point, the argument will be raised that the proceedings should be conducted in Israel, because higher amounts of compensation may be awarded.

Adv. Ron: That is what's going to happen, because in our opinion, there is a cause of action as provided by law.

After a recess

Adv. Ron: After having consulted on the matter, I would like to formulate the content of the agreement: we agree to a stay of proceedings as a procedural matter. We would like to clarify

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that this does not derogate from our argument with respect to cause of action pursuant to the Israeli Securities Law, including Section 38C of the Law, and agreement to a stay of proceedings does not derogate. The Respondent will approach the Court in the United States and will ask to clarify that the buyers in Israel are included with the class, in order to ensure that their case will be heard. I will also add that the stay of proceedings is agreed upon until the conclusion of the proceedings in the United States, or, should it transpire that the Israeli class is excluded from the proceedings in the United States, then the stay of proceedings will be removed. In addition, we — because we are dealing with a petition for leave to appeal against a stay of proceedings, and will clarify that if the stay of proceedings is removed, the removal will take the form of renewing the petition for leave to appeal because, before the District Court, we are under a stay of proceedings. If we resume the proceeding from the point where we are now, we will have to approach the Honorable Court with a new petition for leave to appeal, and I would ask for the deadlines not to apply to us. Subject to that, we agree to the recommendation by Your Honor.

Adv. Ashkenazi: We agree, and we ask for the reservation of rights and arguments to be reciprocal. I would like to comment that if the petition there is allowed, this, in any event, will be a different story.

The Honorable Chief Justice A. Grunis: We would ask for the agreement between the parties to be set forth in writing and filed before us.

Counsel for the parties: We will do this.

After a recess

Adv. Ashkenazi: We would like to request a few days' time so that I may speak with the appropriate entities. In fact, my colleague and I agree as to what the notice should include.

The Honorable Chief Justice A. Grunis: If we do not receive a notice by common consent, we will decide on the matter without your being summoned to an additional hearing.

A ruling was handed down.

[Stenographer: Ronit]

Z


EXHIBIT E


C~ Translation

IN THE SUPREME COURT IN JERUSALEM ALA 3973/10

IN THE MATTER OF: DAVID STERN

acting by his attorneys, Advs. Gil Ron, Keinan & Co., and by the law firm of Aviad, Seren & Co. whose address for the purpose of the

proceedings is c/o Gil Ron, Keinan & Co., Lessin House, 32 Weizman Street, Tel Aviv 62091, Tel. 03-6967676, Fax. 03-6967673

The Applicant

- AGAINST --

VERIFONE HOLDINGS, INC.

acting by its attorneys, Herzog, Fox & Neeman, Advocates, of Asia house, 2 Weizman Street, Tel Aviv 64239, Tel. 03-6922020, Fax, 03-

6966464

The Respondent

Notice on Behalf of the Parties

Further to the Honorable Court's decision dated January 9, 2013, the parties respectfully notify as follows:

The Respondent notified the Applicant that it is willing to notify the Court in the United States in which the proceedings are pending (the California District Court) that it agrees that the purchasers on the stock exchange in Israel will be included in the class there. The Respondent informed the Applicant that this notice will be given no later than the certification of the claim as a class action, if and insofar it is certified (without derogating from the Respondent's arguments with respect to this matter) and did not agree to commit to a specific date.

2. The Applicant is of the view that this notice is not sufficient and does not serve the interests of the members of the class that he is seeking to represent — the purchasers on the stock exchange in Israel. The Applicant does not see any reason why the Respondent should not seek to clarify, In a clear and explicit manner, that the purchasers on the stock exchange in Israel are included as members of the class in the proceedings in the United States, as was represented by it in clear and explicit words at the hearing (see the protocol for the hearing that took place on January 9, 2013, page 1, lines 13-14, see also, page 5, lines 22-23 and 32-33). The Applicant does not even see any reason in delaying the giving of the notice until the certification of the claim as a class action, a date that is unknown. As the Applicant's counsel clarified at the hearing, he suspects that the members of the class will not be included in the proceedings in the United States, and if the proceedings here are stayed on the basis of the Respondent's claim that the purchasers on the stock exchange in


2

Israel are included in the class there, it is only required that a clarification motion should be filed, without delay. The fact that the Respondent is not willing to give such a clear notice and its refusal to file a notice already at this stage raises questions.

3. Nevertheless, in light of what was said at the hearing, the Applicant agrees that the proceedings will be stayed, while all the rights and claims of the parties (including the Applicant's argument that the purchasers on the stock exchange in Israel have causes of action by virtue of the Israeli Securities Act 1968), including the ability of the Applicant to resume the existing proceedings if there are circumstances justifying this (for example, if it becomes clear that the purchasers in Israel are not part of the members of the class in the United States), while each party reserves its claims. In such a case, [the Court] is requested to instruct that the proceedings will be resumed from the stage they were stayed, without the need to file a new application for leave to appeal.

4. The Respondent does not object to the stay of the proceedings based on these circumstances, while it reserves all of its claims, and without this constituting consent to what is argued by the Applicant in Section 2 above.

5. The Respondent would like to update the Honorable Court that just before filing this notice, its counsel in the US were informed of the denial of the motion of rehearing an bank by the Ninth Circuit and, as a result, the proceedings will now return to the California District Court.

s/

s/ Gil Ron, Adv. Yossi Ashkenazi, Adv. Counsel for the Applicant

Counsel for the Respondent

Decision (1 0th February, 2013)

The proceedings held in Israel between the parties will be stayed, as stated in their joint notice dated February 4, 2013.

This proceeding will be struck out without prejudice, however in the event that the applicant will apply to resume it, it will be resumed from the point it stopped.


EXHIBIT F


Gil Ron, Keinan and Co., Law Office j' r' nw -riven ,'niwi t ill 11 0a Gil Ron Eyal Keinan Aharon Rabinovitz Michal Herzherg Bosmat Miodovnik Nadav Miyara

Lessin House - 32 Weizmann St. Tel-Aviv 62091 Israel T + 972.3.696 7676 F + 972.3.696 7673 E officeeronlaw.co.il

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November 7, 2013 File no.: 3233

by facsimile and electronic mail Mr. Patrick J. Coughlin Robbins Geller Rudman & Dowd LLP 655 West Broadway, Suite 1900 San Diego, California 92101

Dear Colleague,

Re: Verifone Securities Case — Interest of Purchasers of Shares in the Tel-Aviv Stock Exchange

My firm, together with the firm of Aviad, Seren & Co., represents Mr. David Stern, in an application to certify a class action, on behalf of purchasers of VeriFone stock on the Tel Aviv Stock Exchange (the "TASE") during the period beginning on March 7, 2007 and ending on December 2, 2007. As we know, the volume of the transactions in the TASE in this period was approximately NIS 2,500,000,000 (about US$ 600,000,000).

Our class action was filed in Israel independently of the American class action. The action is currently stayed, until termination of the proceedings in the United States, while both parties reserve their rights and claims. More specifically, we reserved the right to contend that Israeli laws apply to purchases on the TASE.

We believe that actions taken in the settlement proceedings in the United States are substantively unfair to the TASE purchasers.

The American class action did not explicitly sue for the purchasers on the TASE. Indeed no operative complaint in the American lawsuit ever named the TASE purchasers in the class definition. Somehow, without motion to the court, the class definition was changed in the Stipulation of Settlement to include purchasers on "any foreign exchange".


-2-

We believe that the last minute slight-of-hand change in the class definition, to include purchasers on foreign exchanges, is improper. It materially prejudices the rights of the TASE purchasers, who have superior legal rights to purchasers whose claims depend upon American law. The Israeli law was revised several years ago, equaling the liability for misleading statements in the secondary market, to the liability that applies in the initial market. As a result, Israeli purchasers do not have to prove scienter or intent as required under American law. Therefore, the class we represent deserves a preferential allocation of the settlement proceeds. The settlement should be revised to reflect this.

Furthermore, having no explicit reference to the proceedings pending in Israel, the settlement does not have the effect of settling the claims included in our proceedings. When considering the fact that the settling parties were well aware of the proceedings taken in Israel, this conclusion is inevitable.

As a procedural matter, a settlement entered in proceedings held in the United States, cannot have the effect of acquitting a lawsuit filed in Israel (likewise, you would not expect that a lawsuit filed in the United States in the name of American purchasers, against an Israeli company whose shares are traded in the NYSE, would be settled here). We filed the application to certify the lawsuit under the Israeli Class Actions Law, 2006 (the "Israeli Class Action Law"). Such application can be settled, removed or cancelled only in accordance with the provisions of that Law.

As you are probably aware, both before and after the Morrison ruling, the Israeli Central District Court has ruled that US securities laws apply to purchases of the Verifone stock on the TASE. That ruling is not final. We appealed these decisions, and in the appeal proceedings we reserved our clients' rights to contest such ruling. This will be determined after the termination of the proceedings in the Unites States.

These two decisions differ one from the other, in a material aspect. In the first decision the District Court ruled that all proceedings will be held together, in the United States. Following the Morrison ruling, the Court held that while US laws apply (which opinion we disagree with), in any event the proceedings enforcing the TASE purchasers' rights will be handled in Israel. Such ruling further bases our view, that proceedings held in Israel cannot be settled in another jurisdiction. Specific procedure, under the Israeli Class Action Law, is required.

Another defect in the proposed settlement relates to the attorneys fees payment. Those are paid on award, notwithstanding any objection or when the class members are paid their share of the settlement fund. This strange provision is not disclosed in the class notice. It is an important item for the class to know as it bears on whether class counsel is acting exclusively in the interests of the class. This provision disincentives class counsel from looking after the claims administration and funds distribution process. At a minimum, disclosure is required. In fairness, this term should be removed from the settlement. The fees should be paid to all counsel when class members get their benefit.

Finally, we were not asked to be part of the plaintiffs' attorneys group, that will apply for fees and expenses to which we are entitled. As far as we know, claims of our class, the TASE purchasers, were part of the damages you used in negotiating the settlement. Furthermore, as you are well aware, the settlement offers compensation to purchasers on foreign exchanges — only as a result of our actions, taken to serve the class, here in Israel. Fairness requires that we and our client be entitled to attorneys fees and plaintiffs fees, consistent with the damages attributable to purchasers on the Israeli exchange. Initially looking into the figures, we estimate the part of the Israeli purchasers to be around 20% of the amounts covered in the settlement, and the fees should be allocated accordingly. Kindly note that any resolution of the Israeli class claims requires approval of the Israeli court.


Isla

This is not an exhaustive list of our concerns or potential objections. We retain our right to raise additional issues.

We hope to resolve these matters with you in an amicable manner. We may be satisfied if we could also participate in the existing settlement, provided that it be revised, so the TASE receive a preferential allocation, reflecting their unique causes of action. We must also receive our fair portion of attorneys fees and expense allocation. Furthermore, we require to establish proceedings to have the settlement approved under the Israeli Class Actions Law.

If we cannot negotiate a resolution, we will have to arrange for a counsel in the United States, and will intervene, pursue discovery into the circumstances surrounding the attempted settlement of our clients' claims, object and appeal as necessary to remedy this unfair and improper treatment of the TASE purchasers we seek to represent.

Being well aware of the schedule governing the settlement proceedings, we ask that you address this letter urgently.

We look forward to amicably solve the differences, having the interest of the TASE purchasers against our eyes.

Ver1ruly Yours,

it Ron

cc: Mr. David Stem • Mr. Joseph Ashkenazi

Mr. Jacob Aviad Mr. Asaf Pink


EXHIBIT G


Robbins Geller Rudman&Dowd tip

Atlanta Chicago Melville Philadelphia San Francisco Boca Raton Manhattan Nashville San Diego Washington, DC

Potrkk 1. Coughlin pmc'ugrgrdlaw•com

November 20, 2013

Mr. Gil Ron Gil Ron, Keinan and Co. Lessin House 32 Weizmann St. Tel-Aviv, Israel 62091

Re: In re VeriFone Holdings, Inc. Sec. Litig., Case No. 3:07-cv-06140-EMC

Dear Mr. Ron:

Thank you for your November 7, 2013 letter regarding the above referenced matter. We have been serving as lead counsel in the VeriFone litigation for the past six years, during which time VeriFone Holdings, Inc. ("VeriFone" or the "Company") has reported in its filings with the U.S. Securities and Exchange Commission ("SEC") that the case in Israel was stayed and that the Israeli courts ruled that U.S. law would apply in determining the Company's liability.

You claim in your letter that the actions taken in the settlement proceedings in the United States are substantially unfair to persons who purchased VeriFone securities on the Tel Aviv Stock Exchange ("TASE") because the U.S. class action does not explicitly sue for the purchasers on the TASE and the settlement class includes purchasers on "any foreign exchange." You claim that the actions materially prejudices the rights of TASE purchasers because they do not have to prove scienter under Israeli securities laws.

We believe those claims are factually and legally incorrect. The operative complaint alleges that the U.S. class action was brought on behalf of all persons who purchased the publicly traded securities of VeriFone between August 31, 2006 and April I, 2008. The class has never been limited to persons purchasing VeriFone securities in the United States. In addition, a group of Israeli institutional investors that purchased Lipman Electronic Engineering Ltd. and VeriFone shares on the TASE understood the U.S. class action included TASE purchasers as they made a motion to be appointed lead plaintiff in the U.S. class action in 2008.

In addition, it is clear from hearings in the Israeli Supreme Court and documents filed therein that you were assured TASE purchasers were included in the U.S. class action. The

8924591

One Montgomery Street Suite 1800 San Francisco, CA 94104 Tel 415 288 4545 Fax 415 288 4534 www.rgrdlaw.com


Robbins Geller Rudman&Dowd l.LP

Mr. Gil Ron November 20, 2013 Page 2

transcript from the January 9, 2013 hearing before the Israeli Supreme Court shows that this issue was discussed and that VeriFone's counsel agreed that Israeli shareholders were included in the U.S. class. That representation prompted Chief Justice A. Grunis to ask why the Israeli court should even deal with the case. Indeed, the Chief Justice stated that there was no reason for the Israeli court to devote time and resources to the case when it was being conducted in the United States. You responded by stating that Israeli members were not included in the U.S. class action, but Chief Justice A. Grunis rejected that contention and stated that it was hard to believe the U.S. District Court would say that TASE purchasers were not part of the class given defendants' agreement that they were. You then stated during the hearing that you agreed to stay the Israeli action until completion of the U.S. class action and that VeriFone's counsel would approach the U.S. District Court to clarify that buyers in Israel were included in the class to ensure that their case would be heard.

In a notice subsequently submitted by the parties on February 4, 2013, you wrote that defendants should immediately notify the U.S. District Court that purchasers of stock on the TASE were included in the U.S. class action, as opposed to VeriFone's position of informing the U.S. District Court no later than the certification of the action as a class action. Indeed, you wrote that "[t]he Applicant does not see any reason why the Respondent should not seek to clarify, in a clear and explicit manner, that the purchasers on the stock exchange in Israel are included in as members of the class in the proceedings in the United States." Nevertheless, you agreed to the Israeli action being stayed. Despite your stated concerns about receiving assurance that TASE purchasers were included in the U.S. class action, we did not hear from you until we received your November 7, 2013 letter. Moreover, your contention that the inclusion of TASE purchasers in the U.S. class action was improper and materially prejudicial is completely at odds with your statements to the Israeli. Supreme Court that you wanted assurance TASE purchasers were included in the U.S. class action.

Regarding your claim that TASE purchasers do not have to prove scienter under Israeli securities laws, you acknowledge in your letter (and VeriFone has reported in its SEC filings) that the Israeli District Court ruled that U.S. law applies in determining the Company's liability in the Israeli action and then reaffirmed that holding after the U.S. Supreme Court's decision in Morrison v. Nat'l Australia Bank Ltd., 130 S. Ct. 2869 (2010). Thus, scienter would have to be proven in the Israeli action. In Morrison, the Supreme Court ruled that §10(b) applied if "the purchase or sale is made in the United States, or involves a security listed on a domestic exchange:' Id, at 2884, 2886. Section 10(b) applies to transactions in VeriFone stock on the TASE because VeriFone stock was also listed on the New York Stock Exchange ("NYSE"). As the Israeli District Court stated in its August 25, 2011 opinion, the exchange on which the purchase or sale of VeriFone securities was carried out is of no significance given the dual registration of VeriFone's stock on the NYSE and

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Robbins Geller Rudman&Dowd LIP


TASE. We understand you have reserved the right to appeal, but we believe the Israeli District Court ruled correctly.

Although we believe that the U.S. class action has always included persons who purchased VeriFone securities on the TASE (and other foreign exchanges) and that U.S. law applies to the Israeli action, other statements in your letter indicate that it is your position that the settlement of the U.S securities class action will not prejudice your client at all. Specifically, you claim the settlement of the U.S. class action does not settle the claims asserted in the Israeli action because the settlement does not include an explicit reference to the Israeli action. If that is correct, you are free to continue litigating the Israeli action.

You wrote that the Israeli District Court ruled after the Morrison decision that the proceedings enforcing the TASE purchasers' rights will be handled in Israel. We are unaware of such a ruling.

You also assert that the proposed settlement is defective because it is not disclosed in the notice that attorneys' fees are paid on award notwithstanding any objection or when the class members are paid their share of the settlement fund. We disagree. The timing of the payment of attorneys' fees is included in the Stipulation of Settlement, which was preliminarily approved by the Court. The Stipulation of Settlement is publicly available on the claim administrator's web site (see https://www.verifonesettlement.com/ssl/documents.aspx.) . Further, class members have the right to object to any requested attorneys' fees, and the Court will not rule on any request for attorneys' fees until after the deadline for submitting objections. All of this is explained in the notice. Moreover, the timing of the payment of attorneys' fees is a standard term and has been approved by courts in the vast majority of securities class action settlements.

Regarding your contention that you were not asked to be part of the plaintiffs' attorneys group that will apply for fees and expenses and that you are entitled to such fees, we are unaware of any work your firm or Aviad, Seren & Co. has completed related to the prosecution of the U.S. class action. Further, as noted above, despite the Israeli Supreme Court's recommendation in January 2013 that the parties meet and confer regarding inclusion of the Israeli plaintiffs in the U.S. class action, we were never contacted by anyone representing Mr. Stern or anyone else in the Israeli action until we received your November 7, 2013 letter. In any event, you do not need an invitation from us to file a request for fees in the U.S. class action.

You contend that the settlement offers compensation to purchasers on foreign exchanges only as a result of your actions in the Israeli action and that fairness requires that you and your client are entitled to fees consistent with the damages attributable to purchasers on the TASE, which you estimate to be around 20% of the amounts covered in the settlement. The settlement offers compensation to purchasers on foreign exchanges because of the efforts of the lead plaintiff and

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Mr. 011 Ron November 20, 2013 Page 4

lead counsel in the U.S. class action over the past six years . Indeed , it offers compensation to persons who purchased VeriFone securities on the TASE that are not covered in the Israeli action because the class period in the U.S. class action (August 31 , 2006 to April 1, 2008) is longer than the class period in the Israeli action (March 7, 2007 to December 2, 2007). The Israeli action has also been stayed during the six years we have vigorously prosecuted the U.S. class action, and the existence of the Israeli action has nothing to do with the settlement offering compensation to purchasers on foreign exchanges.

You did not explain how you estimated that TASE purchasers represent around 20% of the total damages in the case, and we believe they represent a much lower percentage. We know from filings with the SEC that U.S. institutions owned between 96% and 99% of VeriFone's shares, which would have traded on the NYSE . In addition, the volume of trades in VeriFone stock on the TASE from March 7, 2007 to December 2 , 2007 was 16.1 million shares, or 6% of the combined volume on the NYSE and TASE during that time period (257.2 million). Moreover, the 16.1 million shares traded on the TASE from March 7, 2007 to December 2, 2007 was just 2.5% of total volume during the August 31, 2006-April 1, 2008 class period alleged in the U.S. action (636.3 million). Thus, we can find no basis for your 20% claim.

Finally, you concluded your letter by stating that you hoped to resolve these matters in an amicable manner by participating in a revised settlement so TASE purchasers receive a preferential allocation reflecting their unique causes of action . We are not willing to revise the plan of allocation because we do not believe there is a unique cause of action in Israel that warrants a preferential allocation to persons who purchased VeriFone securities on the TASE during the class period . Regarding your contention that you must receive a fair portion of attorneys' fees and expenses, we do not agree that your firm is entitled to a fee. However, you can make a request in the U.S . District Court . In fact , we will rile any request for a fee you wish to submit . Finally, we do not agree that the settlement must be approved under Israeli class action law.

Sincerely,

PJC:sgm

PA I ~U

$92459_1


EXHIBIT H


Gil Ron, Keinan and Co., Law Office err inii 'nwJn,'r11V1 PP ,I yia Gil Ron Eyal Keinan Aharon Rabinovitz Michal Herzberg Bosmat Miodovnik Nadav Miyara

Lessin House - 32 Weizmann St. Tel-Aviv 62091 Israel T + 972.3.696 7676 F + 972.3.696 7673 E [email protected]

Ii -17'3 13-1117'x

''an'ai jinx Ytaxin 7D'n

p'3arn'n nnvW2 rnx'n a-n

62091 a'1x-7n 32 1nx'I aIn1 - 1'01n'3 03.696 7676 U 03.696 7673 0

off iceCronlaw.co.il .x.-r

www.ronlaw.co.il

November 24, 2013 File no.: 3233

by Facsimile and electronic mail

Confidential Settlement Discussions Mr. Patrick J. Coughlin Robbins Geller Rudman & Dowd LLP 655 West Broadway, Suite 1900 San Diego, California 92101

Dear Mr. Coughlin,

Re: Verifone Securities LItiiation — Israeli Purchasers' Interest

Thank you for your November 20, 2013 letter, the contents of which we totally reject. Furthermore, upon reading your letter, it is inevitable to conclude that you are incorrect in your understanding of the actions taken in Israel, on behalf of purchasers of Verifone Holdings, Inc. ("Verifone") stock on the Tel-Aviv Stock Exchange (respectively, the "Israeli Group" and the "TASE"). Furthermore, regrettably, it seems that you are not interested in reaching a fair and amicable solution.

First and foremost, with all due respect, any level of decency requires acknowledgement on your part, that the Israeli Group is included in the settlement, of as a result of the actions taken by us in Israel. In the course of this litigation, and not elsewhere, Verifone stated that the Israeli Group would be included in the claim handled in the United States. The inclusion of the Israeli Group in the settlement was based on this statement.

As you surely know, the Revised Third Amended Consolidated Complaint for Violations of the Federal Securities Laws, dated September 15, 2010, signed by you, relates only to Verifone's shares traded on the New York Stock Exchange. The fact that Verifone's shares were traded also on the TASE is not even mentioned there. As an example, Section 379 of the Complaint provides that "VeriFone's stock met the requirements for listing, and was listed and actively traded on the NYSE, a highly efficient and automated market. As a regulated issuer, VeriFone filed periodic public reports with the SEC and the NYSE". You gave no clue as to the trading of Verifone stock on the TASE, and submission of reports to the Israeli Securities Authority. Had you intended to include the purchasers on the TASE, you would have referred to such trading and submissions in the Complaint.


-2-

Therefore, we totally reject your statement, that the "existence of the Israeli action has nothing to do with the settlement offering compensation to purchasers on foreign exchanges".

Furthermore, following the Supreme Court's ruling in Morrison v, National Australia Bank Ltd., 130 S.Ct. 2869 (2010) ("Morrison"), purchasers of securities on foreign exchanges are excluded from class actions taken in the United States - In re Alstom SA Securities Litigation, 741 F.Supp.2d 469 (S.D.N.Y. 2010); Stackhouse v. Toyota Motor Co., 2010 U.S. Dist. LEXIS 79837 (C.D. Cal. July 16, 2010); In re Royal Bank of Scotland Group PLC Securities Litigation, 765 F.Supp.2d 327 (S.D.N.Y. 2011); In re Vivendi Universal, S.A. Securities Litigation, 765 F.Supp.2d 512 (S.D.N.Y. 2011); In re UBS Securities Litigation, U.S. Dist. LEXIS 106274 (S.D.N.Y. Sept. 13, 2011); In re BP p.1. c. Securities Litigation, 843 F.Supp.2d 712 (S.D. Tex. 2012); and more. Specifically, in Clal Finance Batucha Investment Management, Ltd. v. Perrigo Co., 2011 U.S. Dist. LEXIS 110607; Fed. Sec. L. Rep. (CCH) P96, 551 (S.D.N.Y. Sep. 21, 2011), purchasers on the TASE of dual traded shares were removed from a US class action. In these cases several times your interpretation of the Morrison ruling was raised, and indeed rejected. I assume you are aware of that.

Under these circumstances, when defendants easily succeed in eliminating purchasers on foreign exchanges from class actions in the United States, it is clear that Verifone's willingness to include the Israeli Group in the class, was certainly the result of our insistence to pursue the rights of this class and the vigorous actions taken by us.

Your purported reliance on actions taken by Israeli institutional investors, in the proceedings for the appointment of the lead plaintiffs, has no merits. These proceedings preceded the Morrison ruling, which changed the legal landscape altogether. Following the Morrison ruling, this issue became irrelevant as the claims of the Israeli purchasers, whether through acquisition or otherwise, could not be included. Moreover, in the Memorandum and Order of Lead Plaintiff Appointment dated August 22, 2008, the Court speculated in a footnote that "... it is unclear if this litigation would be given res judicata effect in Israel.... Although Israel seems to have its own class action equivalent - the Israeli Class Actions Act of 2006 - there is no definitive authority on the res judicata effect of this litigation in Israel".

Therefore, we have to reject the conclusions that you purport to draw regarding the understanding of several Israeli institutional investors. The conclusions one may draw from the Memorandum and Order of Lead Plaintiff Appointment are better based. And following the Morrison ruling, the situation is crystal clear. The Israeli Group was not intended to be included in the US proceedings in the first place, and it would have not been included there, had we not continued to pursue its rights here.

Having read the transcript of the hearing held in the Supreme Court of Israel on January 9, 2013, you surely noted that the Supreme Court Justices never suggested that we withhold the appeal due to the applicability of the US laws. Furthermore, as it appears in the minutes of the hearing, Chief Justice Asher Grunis commented that he assumes (for the purpose of the discussion) that the Israeli laws apply. You surely also noted my comment, relating to a possible settlement in the US proceedings. I commented that the strength of the cause of action held by the Israeli Group should be considered in a possible settlement.


-3-

Given this information, and knowing that we are pursuing the Israeli Group's rights in courts for so many years, you should have contacted us and cooperate with us, when promoting the settlement. The course of action you took - negotiating with Verifone behind our back - is indeed disappointing, not to say inappropriate. Furthermore, you knew, or should have known, that we hold the position that in any settlement the Israeli Group should get preferential treatment, due to the unique cause of action it holds. You decided to ignore this aspect.

We also disagree with your reading of the notice submitted to the Supreme Court following the hearing. Verifone stated that the Israeli Group would be included in the US class action. However, it was not willing to submit a clear notice to the court handling the US proceedings, to that effect. Having the interest of the Israeli Group against our eyes, we felt uncomfortable with this suggested course of action. We thought that given Verifone's position that the Israeli Group is included in the US proceedings, it should not wait, and submit the notice forthwith. In no way this position can be interpreted as waiving our contention, that the Israeli Group has better claims, and that the rights of the Israeli Group will ultimately be determined by the courts in Israel.

In fact, until this day we are still under a sense of discomfort, which results from the failure to relate to the Israeli Group in the US proceedings in very clear words. We are not aware of any statement given to the United States District Court of the Northern District of California, which relates specifically to the Israeli Group, the legal actions taken in Israel to protect its rights, and the unique aspects of the Israeli Group's claims. The slight-of-hand change in the class definition, by inserting the words "or foreign exchange", does not adequately represent the facts relating the Israeli Group and the litigation in Israel. We find in your letter (or elsewhere) no explanation to the absence of such a statement.

We have conducted an initial review of the transcripts of the hearings held in connection with the settlement, and the Lead Plaintiffs Response to the Court's September 5, 2013 Order Re Supplemental Briefing, filed by you on September 12, 2013. As in the other documents, we can find no mentioning of the existence of the Israeli Group and its litigation.. Such mentioning was required, in order to adequately present the state of things to the court. For example, when presenting that "There Were Risks that Lead Plaintiff Would Not Be Able to Prove Defendants Knowingly or Recklessly Made False Statements that Caused Damage to the Class" (Part III.B. of the Lead Plaintiffs Response), it was worthwhile presenting the position that such requirement does not apply to the Israeli Group. Furthermore, when dealing with institutional investors, in various places, you did not make it clear if the percentage ownership indicated by you takes in consideration the shares traded on the TASE. These are two examples, showing that the Israeli Group's aspects should have been better dealt with in the settlement proceedings.

As you know, we hold the position that the settlement does not settle causes of action under Israeli law, which base the actions we took in Israel. In your letter, you respond that "if that is correct, you are free to continue litigating the Israeli action". However, Verifone has already notified the Israeli Central District Court that in its view, the settlement does acquit the Israeli Group's claims. Therefore, we understand that the parties to the settlement regard differently this critically important aspect. Since you claim to have negotiated the settlement on behalf of the Israeli Group, this aspect should have been well dealt with by you, and not left under disagreement.


-4-

Following receipt of your letter, we have examined again our initial calculations with regard to the damages incurred by the. Israeli Group. This time, we tried to estimate the part of the compensation under the settlement, which will be paid to the Israeli Group. Our initial estimates show that the Israeli Group's part in the settlement compensation is approximately 19%. In such calculation we disregarded the differences between the periods claimed in the proceedings in the United States and Israel. Given the terms of the settlement, such differences have a minor impact on the outcome.

Finally, as we made it clear to you, we were willing to discuss the matter. We hoped you would be open to promote together with us a fair solution, taking in consideration your work and efforts and their outcome, and also the unique interest of the Israeli Group, our contribution to the rights granted to this group, and the need to have the settlement approved by the Israeli court. Your negative reaction leaves us with no alternative, other than appointing a US counsel, to intervene in the settlement proceedings.

Sincerely,

on -- --

cc: Mr. David Stem Mr. Joseph Ashkenazi Mr. Jacob Aviad Mr. Asaf Pink


EXHIBIT I


Robbins Geller Rudman &Dowd uP Atlanta Chicago Melville Philadelphia San Francisco

Boca Raton Manhattan Nashville San Diego Washington, DC

Patrick J. Coughlin patcgrgrdlaw.com

November 26, 2013

VIA E-MAIL

Mr. Gil Ron Gil Ron, Keinan and Co. Lessin House 32 Weizmann St. Tel-Aviv, Israel 62091

Re: In re VeriFone Holdings, Inc. Sec. Litig., Case No. 3:07-cv-06140-EMC

Dear Mr. Ron:

I write in response to your November 24, 2013 letter. As stated in my previous letter, the class in the U.S. class action has never been limited to persons purchasing VeriFone securities in the United States; and the settlement offers compensation to purchasers of VeriFone securities on the Tel Aviv Stock Exchange ("TASE") due to the efforts of the lead plaintiff and lead counsel in the U.S. class action. We disagree with your contention that the operative complaint needed to explicitly reference purchasers on the TASE to reflect the intent to include them in the class. Similarly, we reject your contention that TASE purchasers are included only as a result of the actions taken by you in the Israeli action. Indeed, as I wrote in my previous letter, the settlement covers a larger class of TASE purchasers than those you claim to represent because the class period in the U.S. action (August 31, 2006-April 1, 2008) is longer than the class period in the Israeli action (March 7, 2007-December 2, 2007).

You contend incorrectly that the failure to mention the TASE in ¶379 of the operative complaint indicates that we did not intend to include TASE purchasers in the class. The allegations in ¶379, however, relate to market efficiency and not the class of purchasers covered by the U.S. action. Paragraphs I and 373 state that the action was brought on behalf of all persons who purchased VeriFone securities on the open market between August 31, 2006 and April 1, 2008 and is not limited to securities purchased in the United States.

In my previous letter, I also pointed out that a group of Israeli institutional investors that purchased Lipman Electronic Engineering Ltd. and VeriFone securities on the TASE understood that the U.S. class action included TASE purchasers as they moved to be appointed lead plaintiff in the U.S. class action in 2008. You responded that those proceedings preceded the Morrison ruling,

8964801

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Robbins Geller Rudman & Oowd I.I.P


which changed the legal landscape. That response does not contradict our point that these Israeli institutions understood that the U.S. class action included TASE purchasers. Indeed, your response is an acknowledgement that TASE purchasers were included in the U.S. class action before the Morrison opinion and when you filed the Israeli action on January 27, 2008. That, of course, raises the question of why your firm filed the Israeli action rather than participate in the U.S. class action.

As I wrote in my previous letter, we understand that you believe TASE purchasers have a unique cause of action because you believe that scienter does not have to be proven in the Israeli action. Similarly, you contend that it would have been "worthwhile" for us to include your belief in our September 12, 2013 response to the Court's Order requesting supplemental briefing. However, as I also wrote previously, the Israeli District Court has rejected your contention twice, including in an August 25, 2011 opinion that considered Morrison.

You did not dispute that you sought and received assurances in the Israeli action that TASE purchasers would be included in the U.S. class action, which we noted was completely at odds with the contentions in your November 7, 2013 letter that the settlement was improper and materially prejudicial. In addition, you did not dispute that you failed to contact us before November 7, 2013 even though you did not want VeriFone to delay providing that assurance until the U.S. action was certified as a class action. However, you contend that we should have contacted you and instead negotiated with VeriFone behind your back. That contention is baseless. The mediation was not a secret. On March 11, 2013, VeriFone disclosed in its Form I0-Q that it had "agreed with lead plaintiff to hold a mediation on March 26, 2013"; and the mediation and the subsequent settlement discussions were disclosed in numerous pleadings filed with the U.S. District Court. Thus, you failed to contact us despite knowing about the mediation and wanting assurances that TASE purchasers were included in the U.S. class action. Your complaints now ring hollow in light of these indisputable facts.

In your November 24, 2013 letter, you contend that you examined your initial calculations regarding damages incurred by the Israeli Group and that they represent approximately 19%, excluding the differences between class periods asserted in the two actions. You again failed to explain how you arrived at the 19% estimate and did not dispute — or even address — the points we made in my November 20, 2013 letter, including that the volume of trades in VeriFone stock on the TASE from March 7, 2007 to December 2, 2007 was just 6% of the combined volume on the NYSE and TASE during that time period and just 2.5% of total volume during the August 31, 2006-April 1, 2008 class period. In any event, we obtained compensation for TASE purchasers during the Class Period.

You again state that it is your position that the settlement does not settle the causes of action under Israeli law. However, you also state that VeriFone has notified the Israeli district court that,

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in its view, the settlement acquits the Israeli Group's claims. You assert that we disagree with VeriFone's position because I previously wrote that you were free to litigate the Israeli action if your position was correct. Contrary to your assertion, I simply pointed out the obvious: If your position is correct , you will be able to continue litigating the Israeli action ; and the settlement of this action will be irrelevant. We intended to settle all claims dealing with the purchase of VeriFone securities during the Class Period of August 31, 2006 to April 1, 2008 no matter the exchange as VeriFone is a U.S. company primarily trading on and listed on the NYSE. The fact that a small percentage of the stock trades on other exchanges around the world does not prevent us from settling the claims we brought on behalf of such purchasers. Indeed, the Tel Aviv Stock Exchange is not the only foreign exchange upon which VeriFone stock traded during the Class Period. But again , should an Israeli Court determine that the settlement and compensation not end your attempts to get additional compensation for purchasers of VeriFone stock purchased on the TASE that is entirely up to Israel.

We are open to discussing a fair and amicable solution, but we do not agree with the positions outlined in your letters. As I wrote previously, we are not willing to revise the plan of allocation because we do not believe there is a unique cause of action in Israel that warrants a preferential allocation to TASE purchasers. In addition, we do not believe that your firm is entitled to a fee; but you can make a request, and we are willing to file any request you choose to submit.

Sincerely,

PATRI ~UGHGIN

PJC:drd

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CERTIFICATE OF SERVICE

I hereby certify that on December 16, 2013, I authorized the electronic filing of the

foregoing with the Clerk of the Court using the CM/ECF system which will send notification of

such filing to the e-mail addresses denoted on the attached Electronic Mail Notice List, and I

hereby certify that I caused to be mailed the foregoing document or paper via the United States

Postal Service to the non-CM/ECF participants indicated on the attached Manual Notice List.

I certify under penalty of perjury under the laws of the United States of America that the

foregoing is true and correct. Executed on December 16, 2013.

s/ CHRISTOPHER P. SEEFER CHRISTOPHER P. SEEFER

ROBBINS GELLER RUDMAN & DOWD LLP

Post Montgomery Center One Montgomery Street, Suite 1800 San Francisco, CA 94104 Telephone: 415/288-4545 415/288-4534 (fax) E-mail: [email protected]


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