Attached files
| file | filename |
|---|---|
| 8-K - MITEK SYSTEMS INC | v211037_8-k.htm |
| EX-99.1 - MITEK SYSTEMS INC | v211037_ex99-1.htm |
| EX-99.2 - MITEK SYSTEMS INC | v211037_ex99-2.htm |
EXHIBIT
99.3
February
7, 2011
Via
Email
|
James
B. DeBello
President,
CEO
Mitek
Systems, Inc.
8911
Balboa Avenue, Suite B
San
Diego, CA 92123
|
John
M. Thornton
Chairman
c/o
Mitek Systems, Inc.
8911
Balboa Avenue, Suite B
San
Diego, CA 92123
|
Dear Jim
and John:
I am
writing to resign as a member of Mitek Sytems Inc.’s Board of Directors,
effective at the close of business on February 18, 2011. As I explain below, I
am doing so because I disagree with a practice of taking retribution against a
director for exercising his fiduciary duties when such exercise results in an
action opposed by the company’s CEO, which Mitek’s Board of Directors has done
to me for expressing my opposition to what I considered an excessive grant of
stock options to Jim. Director independence is the hallmark of a well
functioning board. Instead of embracing my independent views, however, you
responded to it by refusing to renominate me to Mitek’s board of directors. I am
unwilling to serve on a board where personal relationships with the CEO infect
the decision-making process and where the board seeks to retaliate against a
board member for exercising his independent judgment.
It is
beyond dispute that I have long been a loyal, dedicated and valuable member of
Mitek’s board. Until recently, both of you looked to me as a key member of
Mitek’s core strategic team. Last Fall, Jim acknowledged the value I bring by
selecting me as one of only two outside directors (in addition to John) to serve
on a special committee to explore potential strategic opportunities. And Jim’s
January 21 letter confirms that my service on Mitek’s board has benefitted the
company in many ways. It is equally clear, however, that your decision not to
renominate me to Mitek’s board is attributable to the events of November 2010,
which I describe below.
As you
know, in early November 2010, Jim recommended that the board grant additional
stock options to employees. Initially, Jim recommended an additional grant of
10% of the then-current stock options held by most Mitek employees, including
himself. I was not opposed to this initial proposal. In short order, however,
Jim came back to the board twice, seeking an increase in his personal grant,
first to 15% of his current stock options, and, then, to 17%, for a total of
356,830 additional options. When I learned of Jim’s first proposed increase, I
expressed some surprise at the increase in Jim’s share to 15%, which I noted was
not consistent with the “10% Model” that we had previously discussed. On
Thursday evening, November 11, Jim sent me an e-mail asking whether I would be
available for a meeting of the Compensation Committee, of which I am a member. I
responded by e-mail, stating that I was tied up in morning meetings on Friday
and then a return flight from the East Coast, but would make myself available
for a weekend call of the
committee if necessary. In my response, I noted that I still had questions and
did not “see any purpose in rushing to judgment on this.” Jim later explained
that his urgency resulted from his desire to have the board grant the additional
stock options before Mitek issued a highly favorable earnings announcement on
November 16. Jim’s assessment of the market’s response to the earning
announcement was correct. Mitek’s stock price more than doubled in the weeks
following the earnings release, resulting in Jim’s additional options being over
$1 million in the money.
-1-
James B.
DeBello
John M.
Thornton
February
7, 2011
Page
Two
The
following week, I was appalled to learn that, without having given me notice of
the meeting or obtaining from me a waiver of notice, the Compensation Committee
met without me on Monday, November 15, and approved Jim’s request for a 17%
increase to his personal option grant. Upon learning of this action, I
immediately sent an e-mail to Jim and the other two members of the Compensation
Committee, stating, simply, that “I have a major problem with this.” I followed
this up with an e-mail to the members of the committee, along with John as
Chairman, expressing my view that the 17% grant to Jim was
“excessive:”
“While
I’m sure it’s too late to do anything about it, I also have a problem with the
17% stock grant that was given to Jim. I believe Jim certainly deserves a
top-off grant along with everyone else, but I’m of the opinion that 17% is
excessive---this brings Jim’s total holdings to 10% of the fully diluted shares
of the company which is too large for a non-founding CEO, in my experience. I
doubt we’ll get any shareholder challenges on this---nonetheless I’d like for
the record to show that I was not present and I did not vote at the Comp
Committee meeting where this was approved.”
I was not
surprised that my views were not well received, either by Jim, who of course had
a vested financial interest in the grant, or by the other members of the board,
who are extremely close with Jim. Nonetheless, I was stunned when the two of you
called me on Friday, January 14, to inform me that I would not be nominated to
serve another term.
In our
conversation, and in Jim’s January 21 letter, you assert that you wanted to
replace me to make way for Alex Hart, whom you state has experience in the
mobile payments business. But bringing in Mr. Hart is no reason to remove me
from the board. It would have been a simple and straightforward matter to have
added an additional director. And even if you wanted for some reason to keep the
current board size intact, there are other board members who would have been
more sensible candidates than me to replace.
-2-
James B.
DeBello
John M.
Thornton
February
7, 2011
Page
Three
In the
end, the conclusion is inescapable that you, with the Mitek board, retaliated
against me for having exercised my fiduciary duties and gone on record with my
objection to an overly generous stock grant to the company’s CEO, especially in
light of the fact that it was granted immediately prior to an earnings
announcement that was expected to, and did, result in a stock price
increase (which resulted in Jim’s stock option grant being over $1 million in
the money within weeks). I am proud of my service as a member of Mitek’s board.
But I disagree with a practice of taking retribution against a director for
exercising his fiduciary duties when such exercise results in an action opposed
by the company’s CEO, and have concluded, regrettably, that the board has lost
sight of its mission and the principles of good corporate governance. Because I
disagree with this practice, and have reached that conclusion, I must
resign.
Sincerely,
/s/
Michael Bealmear
Michael
Bealmear
-3-