<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Mitek Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(4) Date Filed:
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<PAGE>
MITEK SYSTEMS, INC.
10070 CARROLL CANYON ROAD
SAN DIEGO, CALIFORNIA 92131
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 9, 2000
TO ALL STOCKHOLDERS OF
MITEK SYSTEMS, INC.
The Annual Meeting of Stockholders of Mitek Systems, Inc. (the
"Company") will be held at 1:00 p.m., local time, Wednesday, February 9, 2000,
at the San Diego Marriott La Jolla, 4240 La Jolla Village Dr., San Diego, CA
92037, for the following purposes:
1. To elect a board of five directors to hold the office during the
ensuing year and until their respective successors are elected and
qualified. The Board of Directors intends to nominate as directors the
five persons identified in the accompanying proxy statement.
2. To ratify the adoption of the Company's 1999 Stock Option Plan
3. To ratify the appointment of Deloitte & Touche LLP as the Company's
2000 Auditors.
4. To transact such business as may properly come before the meeting and
any adjournments thereof.
The Board of Directors has fixed the close of business on January 4,
2000 as the record date for determination of stockholders entitled to notice of
and to vote at the Annual Meeting and all adjournments thereof. A list of these
stockholders will be open to examination by any stockholder at the meeting and
for ten days prior thereto during normal business hours at the executive offices
of the Company, 10070 Carroll Canyon Road, San Diego, California 92131.
Enclosed for your convenience is a form of proxy which may be used at
the Annual Meeting and which, unless otherwise marked, authorizes the holders of
the proxy to vote for the proposed slate of directors and as the proxy holder
deems appropriate on any other matter brought before the Annual Meeting.
YOU ARE INVITED TO ATTEND THE MEETING IN PERSON. EVEN IF YOU EXPECT TO
ATTEND, IT IS IMPORTANT THAT YOU SIGN, DATE AND RETURN THE ATTACHED PROXY
PROMPTLY IN THE BUSINESS REPLY ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE
MEETING IN ORDER TO ASSURE THE PRESENCE OF A QUORUM. ANY SHAREHOLDER WHO SIGNS
AND SENDS IN A PROXY MAY REVOKE IT BY EXECUTING A NEW PROXY WITH A LATER DATE,
BY WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF THE COMPANY AT ANY TIME
BEFORE IT IS VOTED, OR BY ATTENDANCE AT THE MEETING AND VOTING IN PERSON.
BY ORDER OF THE BOARD OF DIRECTORS
John M. Thornton
Chairman of the Board
Date: January 12, 2000
<PAGE>
MITEK SYSTEMS, INC.
10070 CARROLL CANYON ROAD
SAN DIEGO, CALIFORNIA 92131
- -------------------------------------------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 9, 2000
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Mitek Systems, Inc. (the "Company") for
use at its Annual Meeting of Stockholders (the "Annual Meeting") to be held at
1:00 p.m., local time, Wednesday, February 9, 2000, at the San Diego Marriott La
Jolla, 4240 La Jolla Village Dr., La Jolla, CA 92037 and at any adjournments
thereof.
At the close of business on January 4, 2000, the record date for
determining stockholders entitled to notice of and to vote at the Annual
Meeting, the Company had issued and outstanding an aggregate of 10,514,541
shares of Common Stock.
The Company will pay the expenses of soliciting proxies for the Annual
Meeting including the cost of preparing, assembling and mailing the proxy
materials. Proxies may be solicited personally, by mail, by telephone, by
facsimile, or by telegram, by regularly employed officers and employees of the
Company who will not be additionally compensated therefor. The Company may
request persons holding stock in their names for others, such as brokers and
nominees, to forward proxy materials to their principals and request authority
for execution of the proxy, and the Company will reimburse them for their
expenses in connection therewith.
The Company's 1999 Annual Report to Stockholders is included herewith,
but is not incorporated in, and is not part of, this Proxy Statement and does
not constitute proxy-soliciting material. The Company intends to mail this Proxy
Statement and the accompanying material to stockholders of record on or about
January 12, 2000.
VOTING
Each shareholder of record on January 4, 2000 is entitled to one vote
for each share held on all matters to come before the meeting. All proxies which
are returned will be counted by the Inspector of Elections in determining the
presence of a quorum and on each issue to be voted on. An abstention from voting
or a broker non-vote will be used for the purpose of establishing a quorum, but
will not be counted in the voting process. The shares represented by proxies
which are returned properly signed will be voted in accordance with the
shareholders directions. If the proxy card is signed and returned without
direction as to how they are to be voted, the shares will be voted as
recommended by the Board of Directors. A stockholder giving a proxy may revoke
it at any time before it is exercised by filing with the Secretary of the
Company an instrument revoking it or a duly executed proxy bearing a later date,
or by written notice to the Company of the death or incapacity of the
stockholder who executed the proxy. The proxy will also be revoked if the person
executing the proxy is present at the Annual Meeting and elects to vote in
person. Unless revoked, the proxy will be voted as specified. The persons named
as proxies were selected by the Board of Directors.
PROPOSALS OF SHAREHOLDERS
For proposals of shareholders to be included at the 2000 annual meeting
of shareholders, anticipated to be held in February 2001, such proposals must be
received by the Company not later than September 14, 2000. The acceptance of
such proposals is subject to Securities and Exchange Commission guidelines.
<PAGE>
PROPOSAL NO. 1
TO ELECT FIVE DIRECTORS
ELECTION OF DIRECTORS
Pursuant to the Bylaws of the Company, the Board of Directors has fixed
the number of authorized directors at five. All five directors are to be elected
at the Annual Meeting, to hold office until the next annual meeting or until
their successors are duly elected. The five nominees receiving the highest
number of votes will be elected.
Unless authorization to do so is withheld, it is intended that the
persons named in the enclosed proxy will vote for the election of the nominees
proposed by the Board of Directors, all of whom are presently directors of the
Company. In the event, not presently anticipated, that any of the nominees
should become unavailable for election prior to the Annual Meeting, the proxy
will be voted for a substitute nominee or nominees, if any, designated by the
Board of Directors.
The following table sets forth the names and certain information
concerning the directors and executive officer of the Company. Each of the
directors are also nominees for election to the Board of Directors. All of the
nominees named below have consented to being named herein and to serve, if
elected.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
John M. Thornton (2)....................... 67 Chairman of the Board, President, Chief Financial Officer
Gerald I. Farmer, Ph. D..................... 65 Director
James B. DeBello (1)(2)..................... 41 Director
Daniel E. Steimle (1) (2)................... 51 Director
Sally B. Thornton (1)....................... 65 Director
</TABLE>
(1) Compensation Committee
(2) Audit Committee
DIRECTORS
JOHN M. THORNTON-Mr. Thornton, 67, a director of the Company since
March 1986, was appointed Chairman of the Board as of October 1, 1987.
Additionally, he has served as President, Chief Executive Officer and Chief
Financial Officer since September 1998. Previously, he served as President of
the Company from May 1991 through July 1991 and Chief Executive Officer from May
1991 through February 1992. From 1976 through 1988, Mr. Thornton served as
Chairman and Vice Chairman of the Board at Micom Systems, Inc. Mr. Thornton was
Chairman and President of Wavetek Corporation for 18 years. Mr. Thornton is also
Chairman of the Board of Thornton Winery Corporation. Mr. Thornton is the spouse
of Sally B. Thornton, a director.
GERALD I. FARMER, PH.D.-Dr. Farmer, 65, a director of the Company since
May 1994, was Executive Vice President of the Company from November 1992 until
June, 1997. Prior to joining the Company, Dr. Farmer worked as Executive Vice
President of HNC Software, Inc. from January 1987 to November 1992. He has held
senior management positions with IBM Corporation, Xerox, SAIC and Gould Imaging
and Graphics.
JAMES B. DEBELLO-Mr. DeBello, 41, a director of the Company since
November 1994, has been President, Chief Operating Officer and a member of the
Board of Directors of CollegeClub.com since April 1999. From November 1998 to
April 1999 he was Chief Operating Officer of WirelessKnowledge, Inc. a joint
venture company between Microsoft and Qualcomm, Inc. Prior to that, from
November 1996 to November 1998, Mr. DeBello held positions as Assistant General
Manager and Vice President and General Manager of Qualcomm Eudora Internet
E-Mail Software Division of Qualcomm, Inc. From 1990 to 1996, he was President
and Chief Executive Officer of Solectek Corporation in San Diego, California.
<PAGE>
DANIEL E. STEIMLE-Mr. Steimle, 51, a director of the Company since
February 1987, has been Chief Financial Officer of Transmeta Corporation, a
startup technology company, from November 1998. From July 1997 to February 1998
he was Vice President, Finance and Administration and Chief Financial Officer of
Hybrid Networks, Inc., a broadband access network company. From December 1993 to
July 1997, Mr. Steimle was Vice President and Chief Financial Officer of
Advanced Fibre Communications. Mr. Steimle was Senior Vice President, Operations
and Chief Financial Officer of The Santa Cruz Operation from September 1991 to
December 1993.
SALLY B. THORNTON-Ms. Thornton, 65, a director of the Company since
April 1988, has been a private investor for more than forty years. She served as
a director of Micom Systems, Inc. from 1976 to 1988. From 1987 until 1996 she
served as Chairman of Medical Materials, Inc. Ms. Thornton is on the Board of
Directors of Thornton Winery Corporation in Temecula, CA. She has been a Trustee
of the Sjorgren's Syndrome Foundation in New York and Stephens College in
Missouri. Ms. Thornton is also a Life Trustee of the San Diego Museum of Art.
Ms. Thornton is the spouse of John M. Thornton, Chairman of the Board.
MEETINGS
The Board of Directors has one regularly scheduled meeting annually,
immediately following and at the same place as the Annual Meeting of
Stockholders. Additional meetings may be called as the need arises. During the
1999 fiscal year, there were seven meetings of the Board of Directors. All
directors attended at least 75% of all Board meetings during the year and of
each committee meetings of which they were members.
COMMITTEES
The Board of Directors has appointed from among its members two
committees to advise it on matters of special importance to the Company.
The Compensation Committee, which acts as the Administrative
Committee for the 1986, 1988, 1996 and 1999 Stock Option Plans, during fiscal
1999 was composed of Sally B. Thornton, Daniel E. Steimle and James B. DeBello.
The Compensation Committee reviews, analyzes and recommends compensation
programs to the Board of Directors. It also decides to which key employees of
the Company either incentive stock options or non-qualified stock options should
be granted. During fiscal 1999, the Compensation Committee held seven meetings,
concurrently with Board of Directors meetings.
The Audit Committee, during fiscal 1999, was composed of John M.
Thornton, Daniel E. Steimle and James B. DeBello. The Audit Committee meets with
the independent auditors and officers or other personnel of the Company
responsible for its financial reports. The Audit Committee is charged with
responsibility for reviewing the scope of the auditors examination of the
Company and the audited results of the examination. The Audit Committee is also
responsible for discussing with the auditors the scope, reasonableness and
adequacy of internal accounting controls. Among other matters, the Audit
Committee is also responsible for considering and recommending to the Board a
certified public accounting firm for selection by it as the Company's
independent auditor. The Audit Committee held one meeting during fiscal 1999.
REMUNERATION OF DIRECTORS
The Company does not pay compensation for service as a director to
persons employed by the Company. Outside directors are paid $1,000 for each
meeting they attend.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
ELECTION OF EACH NOMINEE AS A DIRECTOR OF THE COMPANY.
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table shows the compensation paid by the Company to its
Chief Executive Officer and other executive officers who served as such at the
end of fiscal 1999 and received annual compensation in excess of $100,000.
Common Stock All
Principal Annual Underlying Other
Position Year Salary Bonus Options Comp.
-------- ---- ------ ----- ------- -----
John M. Thornton 1999 200,000 85,000
Chairman of the Board 1998 100,000
1997 150,000
David Pintsov 1999 125,000 37,500 152,555 63,254(1)
Sr. Vice President
William Boersing 1999 125,000 100,000 250,000
V.P., No. American Sales
Noel Flynn 1999 110,000 33,000 140,148
V.P, Operations
Dennis Brittain 1999 120,000 36,000 120,000
Chief Technical Officer
(1) Consists solely of sales commissions.
<PAGE>
STOCK OPTIONS
The following table shows, as to the individuals named in the Summary
Compensation Table, information concerning stock options granted during the
fiscal year ended September 30, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
OPTIONS % OF TOTAL OPTIONS EXERCISE OR OPTION TERM (2)
GRANTED GRANTED TO EMPLOYEES BASE PRICE EXPIRATION ---------------------
(#)(1) IN FY 1999 (%) ($/SHARE) DATE 5%($) 10%($)
------- -------------------- ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
John M. Thornton -0- N/A N/A N/A N/A N/A
David Pintsov 52,500 4.56% $0.813 12/14/08 26,860 68,083
7,500 0.65% $1.90 02/09/09 3,837 9,726
66,555 5.78% $2.68 06/30/09 112,247 284,514
26,000 2.26% $2.90 09/14/09 47,449 120,271
William Boersing 100,000 8.68% $0.437 10/04/08 27,500 69,706
100,000 8.68% $1.25 01/24/09 76,863 199,388
50,000 4.34% $2.90 09/14/09 91,249 231,290
Noel Flynn 50,000 4.34% $0.813 12/14/08 25,581 64,841
1,000 0.09% $1.90 02/09/09 1,196 3,031
60,946 5.29% $1.75 02/10/09 67,118 170,126
6,202 0.54% $2.68 06/30/09 10,460 26,513
22,000 1.91% $2.90 09/14/09 40,149 101,767
Dennis Brittain 60,000 5.21% $0.437 10/04/08 16,500 41,824
40,000 3.47% $1.75 02/10/09 44,051 111,657
20,000 1.74% $2.90 09/14/09 36,499 92,516
</TABLE>
(1) Options when awarded, vest monthly over a three-year period and have terms
of either six or ten years, subject to earlier termination on the
occurrence of certain events related to termination of employment. In
addition, the full vesting of the option is accelerated in the event of a
change in control of the Company.
(2) The potential realizable value at assumed annual rates of stock price
appreciation for the option term represents hypothetical gains that could
be achieved for the respective options if exercised at the end of the
option term. The 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent our estimate or projection of our future
common stock prices. These amounts represent assumed rates of appreciation
in the value of our common stock from the fair market value on the date of
the grant. The amounts reflected in the table may not necessarily be
achieved.
<PAGE>
The following table shows, as to the individuals named in the Summary
Compensation Table, information concerning stock options values at the fiscal
year end September 30, 1999:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FY-END IN-THE-MONEY OPTIONS
NUMBER AT FY-END ($)(1)
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
John M. Thornton 0 0 0 0
David Pintsov 54,583 149,935 $65,908 $301,315
William Boersing 51,852 187,037 $40,741 $268,148
Noel Flynn 74,217 135,931 $81,789 $217,025
Dennis Brittain 59,443 105,557 $61,205 $154,283
</TABLE>
(1) Based on a closing bid price of $4.14 as of September 30, 1999 as
reported on the NASDAQ Small Cap Market.
REPORT OF THE COMPENSATION COMMITTEE
As members of the Compensation Committee it is our duty to monitor the
performance and compensation of executive officers and other key employees, to
review compensation plans and to administer the Company's Stock Option Plans.
The Company's executive and key employee compensation programs are designed to
attract, motivate and retain the executive talent needed to enhance shareholder
value in a competitive environment. The fundamental philosophy is to relate the
amount of compensation "at risk" for an executive directly to his or her
contribution to the Company's success in achieving superior performance
objectives and to the overall success of the Company. The Company's executive
and key employee compensation program consists of a base salary component, a
component providing the potential for an annual bonus based on overall Company
performance as well as individual performance, and a component providing the
opportunity to earn stock options that focus the executives and key employees on
building shareholder value through meeting longer-term financial and strategic
goals.
In designing and administering its executive compensation program, the
Company attempts to strike an appropriate balance among these various elements,
each of which is discussed in greater detail below.
In applying these elements to arrive at specific amounts or awards, the
members of the Compensation Committee apply their subjective evaluation of these
various factors and arrive at consensus through discussion. While specific
numerical criteria may be used in evaluating achievement of individual or
Company goals, the extent of achieving such goals is then factored in with other
more subjective criteria to arrive at the final compensation or award decision.
BASE SALARY
Base salary is targeted at the fiftieth percentile, consistent with
comparable high technology companies in the same general stage of development
and in the same general industry and geographic area. For this purpose, this
Committee utilizes the wage and salary surveys of the American Electronics
Association and industry and area trade groups of which the Company is a member.
This group of companies is not the same as the peer group chosen for the Stock
Performance Graph.
The Company's salary increase program is designed to reflect individual
performance related to the Company's overall financial performance as well as
competitive practice. Salary reviews are typically performed
<PAGE>
annually in conjunction with a performance review. Salary increases are
dependent upon the achievement of individual and corporate performance goals.
THE EXECUTIVE AND KEY EMPLOYEE BONUS PLAN
The Executive and Key Employee Bonus Plan is designed to reward Company
executives and other key employees for their contributions to corporate
objectives. Corporate objectives are established as part of the annual operating
plan process. Overall corporate objectives include target levels of pre-tax,
pre-bonus profit and net revenue.
Each eligible employee's award is expressed as a percentage of the
participant's October 1, 1998 base salary. Bonus achievement was dependent upon
meeting or exceeding the company's minimum goals for pre-tax, pre-bonus and net
revenue. For fiscal 1999, the Committee approved bonus awards for the Company
executive officers and key employees in recognition of the achievement of the
Company pre-tax, pre-bonus and net revenue goals. The bonuses were paid in
Fiscal 2000.
STOCK OPTION PLANS
The Company's 1986 Stock Option Plan (the "1986 Plan") authorized the
issuance of options to purchase up to an aggregate of 630,000 shares of the
Company's Common Stock. At September 30, 1999, 32,500 shares of Common Stock
were subject to outstanding options issued pursuant to the 1986 Plan. The 1986
Plan terminated on September 30, 1996 and no additional options may be granted
under that plan. The Company's 1988 Stock Option Plan (the "1988 Plan")
authorized the issuance of options to purchase up to 650,000 shares of the
Company's Common Stock. At September 30, 1999, 73,364 shares were subject to
outstanding options issued pursuant to the 1988 Plan. The 1988 Plan terminated
on September 13, 1998 and no additional options may be granted under that plan.
The Company's 1996 Stock Option Plan (the "1996 Plan") authorizes the Company to
grant its directors, officers and key employees options to purchase up to
1,000,000 shares of the Company's Common Stock. At September 30, 1999, 836,227
shares were subject to outstanding options and none remained available for
future grants under the 1996 Plan. The Company's 1999 Stock Option Plan (the
"1999 Plan") authorizes the Company to grant its directors, officers, employees
and consultants options to purchase up to 1,000,000 shares of the Company's
Common Stock. At September 30, 1999, 393,007 shares were subject to outstanding
options and 606,993 remained available for future grants under the 1999 Plan.
Approval of the 1999 Plan will be voted on by the Company's stockholders at the
Annual Meeting.
The Company's stock option plans are designed to:
1. Encourage and create ownership and retention of the Company's
stock;
2. Balance long-term with short-term decision making;
3. Link the officers' or key employees' financial success to that
of the stockholders;
4. Focus attention on building stockholder value through meeting
longer-term financial and strategic goals; and
5. Ensure broad-based participation of key employees (all
employees currently participate in the Stock Option Plans).
401(k) SAVINGS PLAN
In 1990 the Company established an Employee Savings Plan (the "Savings
Plan") intended to qualify under Section 401(k) of the Internal Revenue Code,
which is available to all employees who satisfy the age and service requirements
under the Savings Plan. The Savings Plan allows an employee to defer up to 15%
of the employee's compensation for the pay period elected in his or her salary
deferral agreement on a pre-tax basis pursuant to a cash
<PAGE>
or deferred arrangement under Section 401(k) of the Code (subject to maximums
permitted under federal law). This contribution will generally not be subject
to federal tax until it is distributed from the Savings Plan. In addition
these contributions are fully vested and non-forfeitable. Contributions to
the Savings Plan are deposited in a trust fund established in connection with
the Savings Plan. The Company may make discretionary contributions to the
Savings Plan at the end of each fiscal year as deemed appropriate by the
Board of Directors. Vested amounts allocated to each participating employee
are distributed in the event of retirement, death, disability or other
termination of employment. For fiscal 1999 the Committee determined that
participants would not receive a matching contribution.
OTHER COMPENSATION PLANS
The Company has adopted certain broad-based employee benefit plans in
which executive officers have been permitted to participate. The incremental
cost to the Company of benefits provided to executive officers under these life
and health insurance plans is less than 10% of the base salaries for executive
officers for fiscal 1999. Benefits under these broad-based plans are not
directly or indirectly tied to Company performance.
COMPENSATION COMMITTEE
SALLY B. THORNTON
DANIEL E. STEIMLE
JAMES B. DEBELLO
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below shows, as of January 4, 2000, the amount and class of
the Company's voting stock owned beneficially (within the meaning of Rule 13d-3
under the Securities Exchange Act of 1934, as amended) by (i) each director of
the Company, (ii) the executive officers named in the Summary Compensation
Table, (iii) all directors and executive officers as a group and (iv) each
person known by the Company to own beneficially 5% or more of any class of the
Company's voting stock (except as noted below). The business address for each of
these shareholders is c/o Mitek Systems, Inc., 10070 Carroll Canyon Road, San
Diego, California 92131.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT
NAME OF BENEFICIAL OWNER OR IDENTITY OF GROUP BENEFICIALLY OWNED OF CLASS
- --------------------------------------------- ------------------ ----------
<S> <C> <C>
John M. and Sally B. Thornton.................. 2,749,959 (1) 26.15%
Gerald I. Farmer............................... 81,416 (2) .77%
James B. DeBello............................... 20,000 (3) .19%
Daniel E. Steimle.............................. 29,521 (4) .28%
David Pintsov.................................. 250,055 (5) 2.34%
William Boersing............................... 238,889 (6) 2.22%
Noel Flynn..................................... 212,648 (7) 1.99%
Dennis Brittain................................ 225,000 (8) 2.11%
Directors and Officers as a Group.............. 3,807,488 (9) 33.36%
</TABLE>
(1) John M. Thornton and Sally B. Thornton, husband and wife, are trustees
of a family trust, and are each directors of the Company.
(2) Represents 10,000 shares of Common Stock held by Dr. Farmer and includes
71,416 shares of Common Stock subject to options exercisable within 60
days of January 4, 2000.
(3) Represents 20,000 shares of Common Stock subject to options exercisable
within 60 days of January 4, 2000.
(4) Represents 14,521 shares of Common Stock held by Mr. Steimle and
includes 15,000 shares of Common Stock subject to options exercisable
within 60 days of January 4, 2000.
<PAGE>
(5) Represents 50,537 shares of Common Stock held by Dr. Pintsov and
includes an additional 199,518 shares of common stock issuable upon
exercise of options exercisable within 60 days of January 6, 1999.
(6) Represents 238,889 shares of Common Stock subject to options exercisable
within 60 days of January 4, 2000.
(7) Represents 2,500 shares of Common Stock held by Mr. Flynn and includes
210,148 shares of Common Stock subject to options exercisable within 60
days of January 4, 2000.
(8) Represents 80,000 shares of Common Stock held by Dr. Brittain and
includes 145,000 shares of Common Stock subject to options exercisable
within 60 days of January 4, 2000.
(9) Includes 899,971 shares of Common Stock subject to options exercisable
within 60 days of January 4, 2000.
Information with respect to beneficial ownership is based on
information furnished to the Company by each person identified above.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Officers,
directors and greater than 10% stockholders are required by Securities and
Exchange Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file. Based solely on a review of Forms 3, 4, and 5 and
amendments thereto furnished to the Company, the Company is not aware of any
director, officer or beneficial owner of 10% of the Company's common stock that
failed to file on a timely basis as disclosed on the above forms, reports
required by Section 16(a) of the Securities Exchange Act of 1934 during the most
recent fiscal year.
STOCK PERFORMANCE GRAPH
[CHART]
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C>
9/30/94 9/30/95 9/30/96 9/30/97 9/30/98 9/30/99
100.00 118.20 344.30 71.90 38.50 359.70
100.00 138.10 163.80 225.00 228.80 37.70
100.00 184.40 249.10 354.70 510.50 975.80
</TABLE>
The above graph compares the performance of the Company with that of
the NASDAQ Market Index and Peer Group based on SIC Code 3570 - Computer and
Office Equipment. The graph assumes an investment of $100 on October 1, 1994 and
the reinvestment of dividends.
<PAGE>
PROPOSAL NO. 2
PROPOSAL TO ADOPT THE 1999 STOCK OPTION PLAN
The Board of Directors believes that attracting and retaining highly
qualified key employees and directors is essential to the Company's growth and
success. In this regard, stock options have been and will continue to be an
important element of the Company's compensation program because options enable
directors, employees and providers of services to the Company to acquire or
increase their proprietary interest in the Company, thereby promoting a close
identity of interests between such individuals and the Company's shareholders.
Such options also provide an increased incentive to expend their maximum efforts
for the success of the Company's business.
The Board of Directors believes that it is in the interests of the
Company and its shareholders that the ability of the Company to grant stock
option awards be continued. Accordingly, on June 10, 1999, the Board of
Directors adopted, subject to shareholder approval, the 1999 Stock Option Plan
(the "1999 Plan"). The following discussion of the material features of the 1999
Plan is qualified by reference to the text of the 1999 Plan set forth in Exhibit
A hereto.
STOCK OPTIONS. The Compensation Committee of the Board of Directors
(the "Committee") is authorized to grant stock options, including both incentive
stock options ("ISOs"), which can result in potentially favorable tax treatment
to the participant, and nonqualified stock options. Except as provided in the
1999 Plan, generally the exercise price per share of common stock subject to an
option is determined by the Committee, provided that the exercise price of an
ISO may not be less than the fair market value of the common stock on the date
of grant. The term of each such option and the times at which each such option
shall be exercisable generally will be fixed by the Committee, except no option
will have a term exceeding ten years. Upon the termination of an optionholder's
employment with the Company other than for cause, all his unvested options will
immediately expire and his vested options will expire three months after the
occurrence giving rise to termination. Upon the termination of an optionholder's
employment for cause, all of his options will expire on the date of the
occurrence giving rise to the termination. Options may be exercised by payment
of the exercise price in cash, stock or promissory note, or as the Committee may
determine from time to time in accordance with applicable law.
SHARES SUBJECT TO THE PLAN. Under the 1999 Plan, 1,000,000 shares of
common stock will be available for issuance of options. The maximum number of
shares of common stock which may be granted to any individual under the 1999
Plan in any one-year period shall not exceed 500,000 shares, subject to the
adjustments described in the next paragraph.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The 1999 Plan provides
that, in the event of any change in the capital structure of the Company that
effects an increase or decrease in the number of outstanding shares of the
Company without receipt of consideration, the number of shares of common stock
covered by each outstanding option, and the exercise price thereof, shall be
proportionately adjusted by the Committee. The 1999 Plan provides that, in the
event of certain capital transactions, all outstanding options will terminate
upon such capital transaction unless they are assumed by a successor
corporation, provided that all vested options may be exercised during the 15
days prior to the capital transaction. The Committee may choose to accelerate
the vesting of any option.
ELIGIBILITY. Any officer, director or employee of, and certain persons
rendering services to, the Company and its subsidiaries is eligible to receive
awards under the 1999 Plan. Only employees may receive ISO's under the 1999
Plan.
ADMINISTRATION. The 1999 Plan will be administered by the Committee.
Subject to the terms and conditions of the 1999 Plan, the Committee is
authorized to designate participants who are employees, directors or consultants
of the Company and its subsidiaries, determine the number of options to be
granted, set terms and conditions of such options, interpret the 1999 Plan,
specify rules and regulations relating to the 1999 Plan, and make all other
determinations which may be necessary or advisable for the administration of the
1999 Plan.
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OTHER TERMS OF OPTIONS. The flexible terms of the 1999 Plan will permit
the Committee to impose performance conditions with respect to any option. Such
conditions may require that an option be forfeited, in whole or in part, if
performance objectives are not met, or require that the time of exercisability
of an option be linked to achievement of performance conditions.
No options may be granted under the 1999 Plan after June 10, 2009.
The exercise of an option is conditioned on the withholding of taxes.
Options granted under the 1999 Plan may not be pledged or otherwise encumbered
and are not transferable except by will or by the laws of intestate succession.
The Board of Directors may, subject to any shareholder approval
required by applicable law, amend the 1999 Plan with respect to any shares of
common stock at that time not subject to options.
FEDERAL TAX CONSEQUENCES OF THE 1999 PLAN. The federal income tax
consequences of the grant, exercise and disposition of stock options are
complex. A summary of the more significant federal income tax consequences of
options granted pursuant to the 1999 Plan is set forth below; however, each
optionee is advised to consult his or her individual tax advisor concerning
their personal tax consequences. In addition, optionees may be subject to state
taxation which may vary from the federal income tax treatment described below.
INCENTIVE STOCK OPTIONS
No gain or loss is required upon the grant or exercise of an ISO.
However, the excess of the fair market value of the stock received upon the
exercise of an ISO over the exercise price is an "item of tax preference" for
purposes of the alternative minimum tax described under Code Section 55.
Gain or loss required on the disposition of stock acquired pursuant to
the exercise of an ISO is long-term capital gain or loss if the stock is held
for at least 2 years from the date of the grant and 1 year from the date of
exercise. There are no tax consequences to the Company upon the grant or
exercise of an ISO if these holding requirements are met. If stock acquired
pursuant to the exercise of an ISO is disposed of without satisfying the holding
requirements at a price in excess of the exercise price, the optionee will
recognize, at the time of sale, ordinary income equal to the lesser of (1) the
gain on the sale, or (2) the excess of the fair market value over the option
exercise price on the date of exercise. Any additional gain in such event will
be capital gain. Further, the Company would be allowed a deduction for federal
income tax purposes equal to the ordinary income recognized by the optionee.
NONQUALIFIED OPTION
A participant who is granted a Nonqualified Option under the 1999 Plan
will not recognize taxable income upon the grant of the option. An optionee will
recognize ordinary income upon the exercise of an option in an amount equal to
the excess of the fair market value of the stock at the time of exercise over
the exercise price. However, if the underlying stock is restricted, the
recognition of the ordinary income will be deferred until the lapse of the
restriction. A deduction for Federal income tax purposes will be allowed to the
Company in an amount equal to the ordinary income taxable to an optionee upon
exercise, provided that such amount constitutes an ordinary and necessary
business expense to the Company and the Company satisfy certain withholding and
reporting requirements.
An optionee's tax basis in the shares received on exercise of such a
Nonqualified Option will be equal to the amount of any cash paid by the optionee
on exercise, plus the amount of ordinary income recognized as a result of the
receipt of such shares. Any gain or loss recognized upon the disposition of a
Nonqualified Option will be capital gain.
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The ordinary income recognized by an employee with respect to the
exercise of an option, will be subject to both wage withholding and employment
taxes. The holding period for such shares will begin on the date of exercise.
The foregoing statement is based on present federal tax laws and
regulations, and does not purport to be a complete description of the federal
income tax aspects of the 1999 Plan. In addition, participants may be subject to
certain state taxes, which are not described herein. Accordingly, each
participant should consult his or her tax advisor with regard to the tax aspects
of his or her participation in the 1999 Plan.
INTERESTED PARTIES. Daniel E. Steimle, James B. DeBello, Gerald I.
Farmer, David Pintsov, William Boersing, Noel Flynn, and Dennis Brittain, who
are directors and executive officers of the Company, have each been granted
stock options contingent upon shareholder approval of the 1999 Plan. The
following table sets forth the options that will be received under the 1999 Plan
that are currently determinable:
NEW PLAN BENEFITS
MITEK SYSTEMS, INC. 1999 STOCK OPTION PLAN
<TABLE>
<CAPTION>
DOLLAR NUMBER OF
NAME AND POSITION VALUE ($) OPTIONS
----------------- --------- ---------
<S> <C> <C>
Daniel E. Steimle, Director $3.25 5,000
James B. DeBello, Director $3.25 5,000
Gerald I. Farmer, Director $3.25 5,000
David Pintsov, Sr. Vice President $2.68 66,555
$2.90 26,000
William Boersing, V.P., North American Sales $2.90 50,000
Noel Flynn, Vice President, Operations $2.68 6,202
$2.90 22,000
Dennis Brittain, Chief Technical Officer $2.90 20,000
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS PROPOSAL.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF AUDITORS
Based upon the recommendation of the Audit Committee, the Board of
Directors has authorized the firm of Deloitte & Touche, LLP, independent
certified public accountants, to serve as auditors for the fiscal year ending
September 30, 2000. A representative of Deloitte & Touche, LLP will be present
at the Annual Meeting and will have the opportunity to make a statement and
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THIS PROPOSAL.
OTHER BUSINESS
The Annual Meeting is called for the purposes set forth in the attached
Notice of Annual Meeting of Stockholders. Management is unaware of any matters
for action by shareholders at this meeting other than those described in such
Notice. The enclosed proxy, however, will confer discretionary authority with
respect to matters which are not known to management at the date of printing
hereof and which may properly come before the Annual Meeting or any adjournment
thereof. It is the intention of the proxy holders to vote in accordance with
their best judgment on any such matters.
ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
John M. Thornton
Chairman of the Board
San Diego, California
January 12, 2000
<PAGE>
EXHIBIT A
MITEK SYSTEMS, INC.
1999 STOCK OPTION PLAN
1. PURPOSE. This Stock Option Plan (the "Plan") is intended to serve as
an incentive to, and to encourage stock ownership by certain eligible
participants rendering services to Mitek Systems, Inc., a Delaware corporation,
and certain affiliates as set forth below (the "Corporation"), so that they may
acquire or increase their proprietary interest in the Corporation and to
encourage them to remain in the service of the Corporation.
2. ADMINISTRATION.
1. COMMITTEE. The Plan shall be administered by the Board
of Directors of the Corporation (the "Board of Directors"), or a committee of
two or more members appointed by the Board of Directors (the "Committee") who
are Non-Employee Directors as defined in Rule 16b-3 promulgated under Section
16 of the Securities Exchange Act of 1934 and an outside director as defined
in Treasury Regulation Section 1.162-27(e)(3). The Committee shall select one
of its members as Chairman and shall appoint a Secretary, who need not be a
member of the Committee. The Committee shall hold meetings at such times and
places as it may determine and minutes of such meetings shall be recorded.
Acts by a majority of the Committee in a meeting at which a quorum is present
and acts approved in writing by a majority of the members of the Committee
shall be valid acts of the Committee.
2. TERM. If the Board of Directors selects a Committee, the
members of the Committee shall serve on the Committee for the period of time
determined by the Board of Directors and shall be subject to removal by the
Board of Directors at any time. The Board of Directors may terminate the
function of the Committee at any time and resume all powers and authority
previously delegated to the Committee.
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3. AUTHORITY. The Committee shall have sole discretion and
authority to grant options under the Plan to eligible participants rendering
services to the Corporation or any "parent" or "subsidiary" of the Corporation,
as defined in Section 424 of the Internal Revenue Code of 1986, as amended (the
"Code") ("Parent or Subsidiary"), at such times, under such terms and in such
amounts as it may decide. For purposes of this Plan and any Stock Option
Agreement (as defined below), the term "Corporation" shall include any Parent or
Subsidiary, if applicable. Subject to the express provisions of the Plan, the
Committee shall have complete authority to interpret the Plan, to prescribe,
amend and rescind the rules and regulations relating to the Plan, to determine
the details and provisions of any Stock Option Agreement, to accelerate any
options granted under the Plan and to make all other determinations necessary or
advisable for the administration of the Plan.
4. TYPE OF OPTION. The Committee shall have full authority and
discretion to determine, and shall specify, whether the eligible individual will
be granted options intended to qualify as incentive options under Section 422 of
the Code ("Incentive Options") or options which are not intended to qualify
under Section 422 of the Code ("Non-Qualified Options"); provided, however, that
Incentive Options shall only be granted to employees of the Corporation, or a
Parent or Subsidiary thereof, and shall be subject to the special limitations
set forth herein attributable to Incentive Options.
5. INTERPRETATION. The interpretation and construction by the
Committee of any provisions of the Plan or of any option granted under the Plan
shall be final and binding on all parties having an interest in this Plan or any
option granted hereunder. No member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan or any
option granted under the Plan.
3. ELIGIBILITY.
1. GENERAL. All directors, officers, employees of and certain
persons rendering services to the Corporation, or any Parent or Subsidiary
relative to the Corporation's, or any Parent's or Subsidiary's management,
operation or development shall be eligible to receive options under the Plan.
The selection of recipients of options shall be within the sole and absolute
discretion of the Committee. No person shall be granted an Incentive Option
under this Plan unless such person is an employee of the Corporation on the date
of grant. No person shall be granted an option under this Plan unless such
person has executed, if requested by the Committee, the grant representation
letter set forth on Exhibit "A," as such Exhibit may be amended by the Committee
from time to time. No person shall be granted more than 500,000 options in any
one year period.
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2. TERMINATION OF ELIGIBILITY.
3.2.1 If an optionee ceases to be employed by the
Corporation, or its Parent or Subsidiary, is no longer an officer or member
of the Board of Directors of the Corporation, or no longer performs services
for the Corporation, or its Parent or Subsidiary, for any reason (other than
for "cause," as hereinafter defined, or such optionee's death), any option
granted hereunder to such optionee shall expire three months after the
occurrence giving rise to such termination of eligibility (or 1 year in the
event an optionee is "disabled," as defined in Section 22(e)(3) of the Code)
or upon the date it expires by its terms, whichever is earlier. Any option
that has not vested in the optionee as of the date of such termination shall
immediately expire and shall be null and void. The Committee shall, in its
sole and absolute discretion, decide, utilizing the provisions set forth in
Treasury Regulations Section 1.421-7(h), whether an authorized leave of
absence or absence for military or governmental service, or absence for any
other reason, shall constitute termination of eligibility for purposes of
this Section.
3.2.2 If an optionee ceases to be employed by the
Corporation, or its Parent or Subsidiary, is no longer an officer or member
of the Board of Directors of the Corporation, or no longer performs services
for the Corporation, or its Parent or Subsidiary, and such termination is as
a result of "cause," as hereinafter defined, then all options granted
hereunder to such optionee shall expire on the date of the occurrence giving
rise to such termination of eligibility or upon the date it expires by its
terms, whichever is earlier, and such optionee shall have no rights with
respect to any unexercised options. For purposes of this Plan, "cause" shall
mean an optionee's personal dishonesty, misconduct, breach of fiduciary duty,
incompetence, intentional failure to perform stated obligations, willful
violation of any law, rule, regulation or final cease and desist order, or
any material breach of any provision of this Plan, any Stock Option Agreement
or any employment agreement.
3. DEATH OF OPTIONEE AND TRANSFER OF OPTION. In the event
an optionee shall die, an option may be exercised (subject to the condition
that no option shall be exercisable after its expiration and only to the
extent that the optionee's right to exercise such option had accrued at the
time of the optionee's death) at any time within six months after the
optionee's death by the executors or administrators of the optionee or by any
person or persons who shall have acquired the option directly from the
optionee by bequest or inheritance. Any option that has not vested in the
optionee as of the date of death or termination of employment, whichever is
earlier, shall immediately expire and shall be null and void. No option shall
be transferable by the optionee other than by will or the laws of intestate
succession.
4. LIMITATION ON INCENTIVE OPTIONS. No person shall be granted
any Incentive Option to the extent that the aggregate fair market value of the
Stock (as defined below) to which such options are exercisable for the first
time by the optionee during any calendar year (under all plans of the
Corporation as determined under Section 422(d) of the Code) exceeds $100,000.
4. IDENTIFICATION OF STOCK. The Stock, as defined herein, subject to
the options shall be shares of the Corporation's authorized but unissued or
acquired or reacquired common stock (the "Stock"). The aggregate number of
shares subject to outstanding options shall
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<PAGE>
not exceed 1,000,000 shares of Stock (subject to adjustment as provided in
Section 6). If any option granted hereunder shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject
thereto shall again be available for purposes of this Plan. Notwithstanding
the above, at no time shall the total number of shares of Stock issuable upon
exercise of all outstanding options and the total number of shares of Stock
provided for under any stock bonus or similar plan of the Corporation exceed
30% as calculated in accordance with the conditions and exclusions of Seciton
260.140.45 of Title 10, California Code of Regulations, based on the shares
of the issuer which are outstanding at the time the calculation is made.
5. TERMS AND CONDITIONS OF OPTIONS. Any option granted pursuant to the
Plan shall be evidenced by an agreement ("Stock Option Agreement") in such form
as the Committee shall from time to time determine, which agreement shall comply
with and be subject to the following terms and conditions:
1. NUMBER OF SHARES. Each option shall state the number of
shares of Stock to which it pertains.
2. OPTION EXERCISE PRICE. Each option shall state the option
exercise price, which shall be determined by the Committee; provided, however,
that (i) the exercise price of any Incentive Option shall not be less than the
fair market value of the Stock, as determined by the Committee, on the date of
grant of such option, (ii) the exercise price of any option granted to any
person who owns more than 10% of the total combined voting power of all classes
of the Corporation's stock, as determined for purposes of Section 422 of the
Code, shall not be less than 110% of the fair market value of the Stock, as
determined by the Committee, on the date of grant of such option, and (iii) the
exercise price of any Non-Qualified Option shall not be less than 85% of the
fair market value of the Stock, as determined by the Committee, on the date of
grant of such option.
3. TERM OF OPTION. The term of an option granted hereunder
shall be determined by the Committee at the time of grant, but shall not exceed
ten years from the date of the grant. The term of any Incentive Option granted
to an employee who owns more than 10% of the total combined voting power of all
classes of the Corporation's stock, as determined for purposes of Section 422 of
the Code, shall in no event exceed five years from the date of grant. All
options shall be subject to early termination as set forth in this Plan. In no
event shall any option be exercisable after the expiration of its term.
4. METHOD OF EXERCISE. An option shall be exercised by written
notice to the Corporation by the optionee (or successor in the event of death)
and execution by the optionee of an exercise representation letter in the form
set forth on Exhibit "B," as such Exhibit may be amended by the Committee from
time to time. Such written notice shall state the number of shares with respect
to which the option is being exercised and designate a time, during normal
business hours of the Corporation, for the delivery thereof ("Exercise Date"),
which time shall be at least 30 days after the giving of such notice unless an
earlier date shall have been mutually agreed upon.
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<PAGE>
At the time specified in the written notice, the Corporation shall deliver to
the optionee at the principal office of the Corporation, or such other
appropriate place as may be determined by the Committee, a certificate or
certificates for such shares. Notwithstanding the foregoing, the Corporation may
postpone delivery of any certificate or certificates after notice of exercise
for such reasonable period as may be required to comply with any applicable
listing requirements of any securities exchange. In the event an option shall be
exercisable by any person other than the optionee, the required notice under
this Section shall be accompanied by appropriate proof of the right of such
person to exercise the option.
5. MEDIUM AND TIME OF PAYMENT. The option exercise price shall
be payable in full on or before the option Exercise Date in any one of the
following alternative forms:
5.5.1 Full payment in cash or certified bank or
cashier's check;
5.5.2 A Promissory Note (as defined below);
5.5.3 Full payment in shares of Stock having a fair
market value on the Exercise Date in the amount equal to the option exercise
price;
5.5.4 Through a special sale and remittance procedure
pursuant to which the optionee shall concurrently provide irrevocable written
instruction to (a) a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be withheld by
the Corporation by reason of such exercise and (b) the Corporation to deliver
the certificates for the purchased shares directly to such brokerage firm in
order to complete the sale.
5.5.5 A combination of the consideration set forth in
Sections 5.4.1, through 5.4.4 equal to the option exercise price; or
5.5.6 Any other method of payment complying with the
provisions of Section 422 of the Code with respect to Incentive Options,
provided the terms of payment are established by the Committee at the time of
grant and any other method of payment established by the Committee with respect
to Non-Qualified Options.
6. FAIR MARKET VALUE. The fair market value of a share of Stock on any
relevant date shall be determined in accordance with the following provisions:
5.6.1 If the Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, then the fair market value shall be determined by the Committee after
taking into account such factors as the Committee shall deem appropriate.
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5.6.2 If the Stock is not at the time listed or
admitted to trading on any stock exchange but is traded in the over-the-counter
market, the fair market value shall be the mean between the highest bid and
lowest asked prices (or, if such information is available, the closing selling
price) of one share of Stock on the date in question in the over-the-counter
market, as such prices are reported by the National Association of Securities
Dealers through its NASDAQ system or any successor system. If there are no
reported bid and asked prices (or closing selling price) for the Stock on the
date in question, then the mean between the highest bid price and lowest asked
price (or the closing selling price) on the last preceding date for which such
quotations exist shall be determinative of fair market value.
5.6.3 If the Stock is at the time listed or admitted
to trading on any stock exchange, then the fair market value shall be the
closing selling price of one share of Stock on the date in question on the stock
exchange determined by the Committee to be the primary market for the Stock, as
such price is officially quoted in the composite tape of transactions on such
exchange. If there is no reported sale of Stock on such exchange on the date in
question, then the fair market value shall be the closing selling price on the
exchange on the last preceding date for which such quotation exists.
7. PROMISSORY NOTE. Subject to the requirements of applicable
state or Federal law or margin requirements, payment of all or part of the
purchase price of the Stock may be made by delivery of a full recourse
promissory note ("Promissory Note"). The Promissory Note shall be executed by
the optionee, made payable to the Corporation and bear interest at such rate as
the Committee shall determine, but in no case less than the minimum rate which
will not cause under the Code (i) interest to be imputed, (ii) original issue
discount to exist, or (iii) any other similar results to occur. Unless otherwise
determined by the Committee, interest on the Note shall be payable in quarterly
installments on March 31, June 30, September 30 and December 31 of each year. A
Promissory Note shall contain such other terms and conditions as may be
determined by the Committee; provided, however, that the full principal amount
of the Promissory Note and all unpaid interest accrued thereon shall be due not
later than five years from the date of exercise. The Corporation may obtain from
the optionee a security interest in all shares of Stock issued to the optionee
under the Plan for the purpose of securing payment under the Promissory Note and
may retain possession of the stock certificates representing such shares in
order to perfect its security interest.
8. RIGHTS AS A SHAREHOLDER. An optionee or successor shall
have no rights as a shareholder with respect to any Stock underlying any option
until the date of the issuance to such optionee of a certificate for such Stock.
No adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such Stock certificate is issued, except as
provided in Section 6.
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9. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS. Subject to
the terms and conditions of the Plan, the Committee may modify, extend or renew
outstanding options granted under the Plan, or accept the surrender of
outstanding options (to the extent not exercised) and authorize the granting of
new options in substitution therefor.
10. VESTING AND RESTRICTIONS. The Committee shall have
complete authority and discretion to set the terms, conditions, restrictions,
vesting schedules and other provisions of any option in the applicable Stock
Option Agreement and shall have complete authority to require conditions and
restrictions on any Stock issued pursuant to this Plan; provided, however, that.
except with respect to options granted to officers or directors of the
Corporation, options granted pursuant to this Plan shall be exercisable or
"vest" at the rate of at least 20% per year over the 5-year period beginning on
the date the option is granted. Options granted to officers and directors shall
become exercisable or "vest," subject to reasonable conditions, at any time
during any period established by the Corporation.
11. OTHER PROVISIONS. The Stock Option Agreements shall
contain such other provisions, including without limitation, restrictions or
conditions upon the exercise of options, as the Committee shall deem advisable.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
1. SUBDIVISION OR CONSOLIDATION. Subject to any required
action by shareholders of the Corporation, the number of shares of Stock covered
by each outstanding option, and the exercise price thereof, shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Stock of the Corporation resulting from a subdivision or consolidation
of shares, including, but not limited to, a stock split, reverse stock split,
recapitalization, continuation or reclassification, or the payment of a stock
dividend (but only on the Stock) or any other increase or decrease in the number
of such shares effected without receipt of consideration by the Corporation. Any
fraction of a share subject to option that would otherwise result from an
adjustment pursuant to this Section shall be rounded downward to the next full
number of shares without other compensation or consideration to the holder of
such option.
2. CAPITAL TRANSACTIONS. Upon a sale or exchange of all or
substantially all of the assets of the Corporation, a merger or consolidation in
which the Corporation is not the surviving corporation, a merger, reorganization
or consolidation in which the Corporation is the surviving corporation and
shareholders of the Corporation exchange their stock for securities or property,
a liquidation of the Corporation, or similar transaction as determined by the
Committee ("Capital Transaction"), this Plan and each option issued under this
Plan, whether vested or unvested, shall terminate, unless such options are
assumed by a successor corporation in a merger or consolidation, immediately
prior to such Capital Transaction; provided, however, that unless the
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outstanding options are assumed by a successor corporation in a merger or
consolidation, subject to terms approved by the Committee, all optionees will
have the right, during the 15 days prior to such Capital Transaction, to
exercise all vested options. The Corporation shall, subject to any nondisclosure
provisions, attempt to provide optionees at least 15 days notice of the option
termination date. The Committee may (but shall not be obligated to) (i)
accelerate the vesting of any option or (ii) apply the foregoing provisions,
including but not limited to termination of this Plan and options granted
pursuant to the Plan, in the event there is a sale of 51% or more of the stock
of the Corporation in any two year period or a transaction similar to a Capital
Transaction.
3. ADJUSTMENTS. To the extent that the foregoing adjustments
relate to stock or securities of the Corporation, such adjustments shall be made
by the Committee, whose determination in that respect shall be final, binding
and conclusive.
4. ABILITY TO ADJUST. The grant of an option pursuant to the
Plan shall not affect in any way the right or power of the Corporation to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets.
5. NOTICE OF ADJUSTMENT. Whenever the Corporation shall take
any action resulting in any adjustment provided for in this Section, the
Corporation shall forthwith deliver notice of such action to each optionee,
which notice shall set forth the number of shares subject to the option and the
exercise price thereof resulting from such adjustment.
6. LIMITATION ON ADJUSTMENTS. Any adjustment, assumption or
substitution of an Incentive Option shall comply with Section 425 of the Code,
if applicable.
7. NONASSIGNABILITY. Options granted under this Plan may not be sold,
pledged, assigned or transferred in any manner other than by will or by the laws
of intestate succession, and may be exercised during the lifetime of an optionee
only by such optionee. Any transfer in violation of this Section shall void such
option, and any Stock Option Agreement entered into by the optionee and the
Corporation regarding such transferred option shall be void and have no further
force or effect. No option shall be pledged or hypothecated in any way, nor
shall any option be subject to execution, attachment or similar process.
8. NO RIGHT OF EMPLOYMENT. Neither the grant nor exercise of any option
nor anything in this Plan shall impose upon the Corporation or any other
corporation any obligation to employ or continue to employ any optionee. The
right of the Corporation and any other corporation to terminate any employee
shall not be diminished or affected because an option has been granted to such
employee.
9. TERM OF PLAN. This Plan is effective on the date the Plan is adopted
by the Board of Directors and options may be granted pursuant to the Plan from
time to time within a period of ten (10) years from such date, or the date of
any required shareholder approval required under the Plan, if earlier.
Termination of the Plan shall not affect any option theretofore granted.
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10. AMENDMENT OF THE PLAN. The Board of Directors of the Corporation
may, subject to any required shareholder approval, suspend, discontinue or
terminate the Plan, or revise or amend it in any respect whatsoever with respect
to any shares of Stock at that time not subject to options.
11. APPLICATION OF FUNDS. The proceeds received by the Corporation from
the sale of Stock pursuant to options may be used for general corporate
purposes.
12. RESERVATION OF SHARES. The Corporation, during the term of this
Plan, shall at all times reserve and keep available such number of shares of
Stock as shall be sufficient to satisfy the requirements of the Plan.
13. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall
not impose any obligation upon the optionee to exercise such option.
14. APPROVAL OF BOARD OF DIRECTORS AND SHAREHOLDERS. The Plan shall not
take effect until approved by the Board of Directors of the Corporation. This
Plan shall be approved by a vote of the shareholders within 12 months from the
date of approval by the Board of Directors. In the event such shareholder vote
is not obtained, all options granted hereunder, whether vested or unvested,
shall be null and void. Further, any stock acquired pursuant to the exercise of
any options under this Agreement may not count for purposes of determining
whether shareholder approval has been obtained.
15. WITHHOLDING TAXES. Notwithstanding anything else to the contrary in
this Plan or any Stock Option Agreement, the exercise of any option shall be
conditioned upon payment by such optionee in cash, or other provisions
satisfactory to the Committee, of all local, state, federal or other withholding
taxes applicable, in the Committee's judgment, to the exercise or to later
disposition of shares acquired upon exercise of an option.
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16. PARACHUTE PAYMENTS. Any outstanding option under the Plan may not
be accelerated to the extent any such acceleration of such option would, when
added to the present value of other payments in the nature of compensation which
becomes due and payable to the optionee would result in the payment to such
optionee of an excess parachute payment under Section 280G of the Code. The
existence of any such excess parachute payment shall be determined in the sole
and absolute discretion of the Committee.
17. SECURITIES LAWS COMPLIANCE. Notwithstanding anything contained
herein, the Corporation shall not be obligated to grant any option under this
Plan or to sell, issue or effect any transfer of any Stock unless such grant,
sale, issuance or transfer is at such time effectively (i) registered or exempt
from registration under the Securities Act of 1933, as amended (the "Act"), and
(ii) qualified or exempt from qualification under the California Corporate
Securities Law of 1968 and any other applicable state securities laws. As a
condition to exercise of any option, each optionee shall make such
representations as may be deemed appropriate by counsel to the Corporation for
the Corporation to use any available exemption from registration under the Act
or qualification under any applicable state securities law.
18. RESTRICTIVE LEGENDS. The certificates representing the Stock issued
upon exercise of options granted pursuant to this Plan will bear any legends
required by applicable securities laws as determined by the Committee.
19. NOTICES. Any notice to be given under the terms of the Plan shall
be addressed to the Corporation in care of its Secretary at its principal
office, and any notice to be given to an optionee shall be addressed to such
optionee at the address maintained by the Corporation for such person or at such
other address as the optionee may specify in writing to the Corporation.
20. INFORMATION TO PARTICIPANTS. The Corporation shal make available
to all holders of options the information required pursuant to Section
260.140.46 of the California Code of Regulations.
As adopted by the Board of Directors on June 10, 1999.
MITEK SYTEMS, INC., a Delaware Corporation
By: /s/ John M. Thornton
-------------------------
John M. Thornton, Chairman
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EXHIBIT A
____________, 1999
Mitek Systems, Inc.
10070 Carroll Canyon Road
San Diego, California 92131
Re: 1999 STOCK OPTION PLAN
To Whom It May Concern:
This letter is delivered to Mitek Systems, Inc., a Delaware corporation (the
"Corporation"), in connection with the grant to__________ (the "Optionee") of
an option (the "Option") to purchase _____ shares of common stock of the
Corporation (the "Stock") pursuant to the Mitek Systems, Inc. 1999 Stock
Option Plan dated June 10, 1999 (the "Plan"). The Optionee understands that
the Corporation's receipt of this letter executed by the Optionee is a
condition to the Corporation's willingness to grant the Option to the
Optionee.
In addition, the Optionee makes the following representations and
warranties with the understanding that the Corporation will rely upon them.
1. The Optionee acknowledges receipt of a copy of the Plan and
Agreement. The Optionee has carefully reviewed the Plan and Agreement.
2. The Optionee acknowledges receipt of a prospectus regarding the Plan
which includes the information required by Section (a)(1) of Rule 428 under the
Securities Act of 1933.
3. The Optionee understands and acknowledges that the Option and the
Stock are subject to the terms and conditions of the Plan.
EXHIBIT A - PAGE 1
<PAGE>
4. The Optionee understands and agrees that, at the time of exercise of
any part of the Option for Stock, the Optionee may be required to provide the
Corporation with additional representations, warranties and/or covenants similar
to those contained in this letter.
5. The Optionee is a resident of the State of __________.
6. The Optionee will notify the Corporation immediately of any change
in the above information which occurs before the Option is exercised in full by
the Optionee.
The foregoing representations and warranties are given on
______________, 1999 at ____________________.
OPTIONEE:
---------------------------
EXHIBIT A - PAGE 2
<PAGE>
EXHIBIT B
____________, 1999
Mitek Systems, Inc.
10070 Carroll Canyon Road
San Diego, California 92131
Re: 1999 STOCK OPTION PLAN
To Whom It May Concern:
I (the "Optionee") hereby exercise my right to purchase____________
shares of common stock (the "Stock") of Mitek Systems, Inc., a Delaware
corporation (the "Corporation"), pursuant to, and in accordance with, the
Mitek Systems, Inc. 1999 Stock Option Plan dated June 10, 1999 (the "Plan")
and Stock Option Agreement (the "Agreement") dated____________ , 1999. As
provided in such Plan, I deliver herewith payment as set forth in the Plan in
the amount of the aggregate option exercise price. Please deliver to me at my
address as set forth above stock certificates representing the subject shares
registered in my name (and (SPOUSE) , as (STYLE OF VESTING)).
The Optionee hereby represents and agrees as follows:
1. The Optionee acknowledges receipt of a copy of the Plan and
Agreement. The Optionee has carefully reviewed the Plan and Agreement.
2. The Optionee is a resident of the State of __________.
3. The Optionee represents and agrees that if the Optionee is an
"affiliate" (as defined in Rule 144 under the Securities Act of 1933) of the
Corporation at the time the Optionee desires to sell any of the Stock, the
Optionee will be subject to certain restrictions under, and will comply with all
of the requirements of, applicable federal and state securities laws.
The foregoing representations and warranties are given on
____________ at____________
OPTIONEE:
--------------------------------------------
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