UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM
8-K
CURRENT
REPORT PURSUANT
TO
SECTION 13 OR 15(D) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date
of
report (Date of earliest event reported) September
18, 2006
Mitek
Systems, Inc.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
(State
or
Other Jurisdiction of
Incorporation)
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0-15235
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87-0418827
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(Commission
File Number)
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(IRS
Employer Identification
No.)
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8911
Balboa Ave, Suite B, San Diego,
California
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92123
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(Address
of Principal Executive
Offices)
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(Zip
Code)
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(858)
503-7810
(Registrant's
Telephone Number, Including Area Code)
(Former
Name or Former Address, if Changed Since Last Report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see
General
Instruction A.2. below):
x Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
x Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
Item
1.01 Entry
Into a Material Definitive Agreement.
Merger
Agreement
On
September 18, 2006, Mitek Systems, Inc., a Delaware corporation ("Mitek")
entered into a definitive Amended and Restated Agreement and Plan of Merger
(the
"Merger Agreement") with Mitek Acquisition Sub, LLC, a Wyoming limited liability
company (the "Acquisition Sub"), Parascript, LLC, a Wyoming limited liability
company ("Parascript") and Parascript Management, Inc., a Wyoming corporation,
pursuant to which Parascript will merge with and into the Acquisition Sub (the
"Merger"). Upon consummation of the Merger, Parascript will be the surviving
company and Mitek will be the holder of all of the outstanding limited liability
company interests of Parascript.
Mitek
had
previously entered into and announced a definitive Asset Purchase Agreement
(the
"Asset Purchase Agreement") with Parascript dated July 13, 2006, pursuant to
which Mitek would acquire substantially all of the assets and liabilities of
Parascript. Mitek and Parascript subsequently agreed to modify the transaction
structure as a result of certain tax issues affecting Parascript. Mitek and
Parascript have structured the Merger to result in substantially identical
economic results for Mitek and Parascript as those contemplated by the Asset
Purchase Agreement.
At
the
closing of the Merger, Parascript unitholders will receive $80 million in cash
and approximately 51.8 million shares of Mitek common stock. Mitek common stock
having a value of approximately $4 million will be placed in escrow to secure
any indemnity claims that Mitek may have under the Merger Agreement, which
escrow will generally last until one year after the effective time of the
Merger.
For
federal income tax purposes, the Merger will be treated with respect to Mitek
as
if Mitek purchased all of the assets of Parascript from the unitholders of
Parascript. In general, Mitek’s tax basis in the purchased assets will be equal
to the fair market value of the Merger consideration paid at closing that is
not
placed in escrow (i.e., $80 million of cash plus fair market of the
approximately 51.8 million shares of Mitek common stock issued less the fair
market value of the shares of Mitek common stock placed into escrow). Asset
basis may be adjusted for shares distributed or released from the escrow. Mitek
expects that a substantial portion of the consideration paid will be allocated
to goodwill for federal income tax purposes. Under current federal income tax
rules, such goodwill would be amortizable over a 15-year straight-line
period.
Under
the
Merger Agreement, the Parascript unitholders are permitted to receive from
Parascript a cash distribution equal, in general, to 30% of the taxable income
of Parascript for Parascript's taxable periods ending on the date of the Merger.
Because Parascript is taxed as a partnership for federal and state income tax
purposes, it is not subject to income tax; rather its unitholders will pay
tax
on their proportionate share of Parascript's taxable income. The distributions
are intended to provide the necessary funds to the Parascript unitholders to
satisfy their income tax. Mitek views this distribution as neutral to it since
if the taxable income were earned by Mitek, Mitek would be subject to tax on
such income (or such income would otherwise reduce Mitek's net operating
losses).
Mitek
and
Parascript have made customary representations and warranties and covenants
in
the Merger Agreement. The Merger Agreement contains certain termination rights
for both Mitek and Parascript and further provides that upon termination of
the
Merger Agreement under specified circumstances the parties may be required
to
pay a termination fee of up to $1,000,000.
The
closing of the Merger is subject to various closing conditions, including:
(i)
approval by the stockholders of Mitek of (a) an increase in the number of its
authorized shares to provide sufficient shares to be issued in connection with
the Merger and (b) a change of the name of Mitek to “Parascript, Inc.” after
closing; (ii) entry by Mitek into definitive financing agreements of from $85
million to $95 million in order to consummate the Merger; (iii) approval of
the
Merger Agreement by the unitholders of Parascript, (iv) regulatory approvals,
(v) the effectiveness of the registration statement to be filed by Mitek (the
"Registration Statement"), and (vi) the satisfaction or waiver of other
customary conditions.
Funding
for the Merger is to be provided by a combination of $35 million in subordinated
convertible notes and $55 million in senior debt obtained from or through
Plainfield Asset Management, LLC ("Plainfield"). The subordinated notes will
be
convertible into approximately 21.9 million shares of Mitek common stock at
a
conversion price of $1.60 per share. From the remaining funds obtained from
Plainfield, it is anticipated that approximately $10 million will be used for
expenses related to the Merger. In addition, Plainfield is expected to provide
a
revolving line of credit for up to $5 million. Upon completion of the Merger
and
on a fully-diluted basis, Mitek shareholders will own approximately 22% of
the
company, Parascript unitholders approximately 55% and Plainfield approximately
23% on an as-if-converted basis.
After
the
closing of the Merger, the executive offices will be located in Boulder,
Colorado. The board of directors will be composed of seven (7) members,
including, Mitek's President and Chief Executive Officer James DeBello,
Parascript's President and Chief Executive Officer Jeffrey Gilb, Mitek's
Chairman John M. Thornton, and a board member of Parascript's Manager, Aron
Katz, who will be Chairman of Mitek post-closing. Also included will be three
(3) independent directors to be mutually agreed upon who meet the independence
requirements of NASDAQ.
The
foregoing description of the Merger and the Merger Agreement does not purport
to
be complete and is qualified in its entirety by reference to the Merger
Agreement, which is filed as Exhibit 2.1 hereto, and is incorporated into this
report by reference. The Merger Agreement has been included to provide investors
and stockholders with information regarding its terms. It is not intended to
provide any other factual information about Mitek or Parascript. The Merger
Agreement contains representations and warranties that the parties to the Merger
Agreement made to and solely for the benefit of each other, and the assertions
embodied in such representations and warranties are qualified by information
contained in confidential disclosure schedules that the parties exchanged in
connection with signing the Merger Agreement. Accordingly, investors and
stockholders should not rely on such representations and warranties as
characterizations of the actual state of facts or circumstances, since they
were
only made as of the date of the Merger Agreement and are modified in important
part by the underlying disclosure schedules.
Additional
Information
The
Registration Statement will include a related joint proxy statement/prospectus.
Mitek stockholders are urged to read the joint proxy statement/prospectus
regarding the proposed transaction when it becomes available, because it will
contain important information. Mitek stockholders will be able to obtain a
free
copy of the proxy statement/prospectus (when available), as well as other
filings containing information about Mitek, without charge, at the SEC's
internet site (http://www.sec.gov). In addition, investors and security holders
may obtain free copies of the documents filed with the SEC by Mitek by directing
a request to Mitek Systems, Inc., 8911
Balboa Ave, Suite B, San Diego, California,
92123.
The respective directors and executive officers of Mitek and other persons
may
be deemed to be participants in the solicitation of proxies in respect of the
proposed Merger. Information regarding Mitek's directors and executive officers
is available in its Form 10-KSB for the year ended September 30, 2005, filed
with the SEC. Other information regarding the participants in the proxy
solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, will be contained in the proxy
statement/prospectus and other relevant materials to be filed with the SEC
when
they become available.
Item
9.01 Financial
Statements and Exhibits.
(d) Exhibits
Exhibit
2.1 Amended
and Restated Agreement and Plan of Merger dated as of September 18, 2006 by
and
among Mitek Systems, Inc., Mitek Acquisition Sub, LLC, Parascript, LLC and
Parascript Management, Inc. (the schedules have been omitted pursuant to Item
601(b)(2) of Regulation S-B).
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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MITEK
SYSTEMS,
INC. |
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| Date: September
22, 2006 |
By: |
/s/ Tesfaye
Hailemichael |
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Tesfaye
Hailemichael |
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Chief
Financial Officer |