in re: mitek systems, inc. securities litigation 00-cv...

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ORIGINA LMILBERG WEISS BERSHADHYNES & LERACH LLP

WILLIAM S . LERACH (68581 )KEITH F . PARK (54275)SPENCER A . BURKHOLZ (147029)ELLEN GUSIKOFF STEWART (144892)DANIEL S . DROSMAN (200643 )600 West Broadway, Suite 1800San Diego, CA 92101Telephone : 619/231-1058

SCHIFFRIN & BARROWAY, LLPDAVID KESSLERThree Bala Plaza East, Suite 400Bala Cynwyd, PA 19004Telephone : 610/667-770 6

Co-Lead Counsel for Plaintiffs

02 JJAa'4 15 F 1 :55

~j Y,CIT Y

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNI A

In re MITEK SYSTEMS, INC . ) Master File No .SECURITIES LITIGATION ) 000V2028-L(AJB )

CLASS ACTION

This Document Relates To :} STIPULATION OF SETTLEMENT

ALL ACTIONS .

1 This Stipulation of Settlement dated as of October 23, 2001

2 (the "Stipulation"), is made and entered into by and among the

3 following Settling Parties (as defined further in §IV hereof) to

4 the above-entitled Litigation : (i) the Representative Plaintiffs

5 (on behalf of themselves and each of the Settlement Class Members)

6 by and through their counsel of record in the Litigation; and

7 (ii) the Defendants, by and through their counsel of record in the

8 Litigation . The Stipulation is intended by the Settling Parties to

9 fully, finally and forever resolve, discharge and settle th e

10 'Released Claims (as defined in ¶1 .16), upon and subject to the

11 terms and conditions hereof .

12 1 . THE LITIGATION

13 On or after October li, 2000, the following actions were filed

14 in the United States District Court for the Southern District of

15 California (the "Court") :

16 1 . Krauss, et al . v . Mitek Systems, Inc ., et al .,Case No . 000V2028-L(AJB) ;

172 . Kulle v . Mitek Systems, Inc ., et al : .-,

18 Case-No . 00CV2074-W(LSP) ;

19 3 . R .D. Price v . Mitek Systems, Inc ., et al .,Case No . 00CV2203-IEG(AJB) ;

204 . Jacobs v . Mi tek Systems, Inc ., et al .,

21 Case No . 00CV2262-BTM(JFS) ; and

22 5 . Lane v . Mitek Systems, Inc ., et al . ,Case No. 000V2333-IEG(JFS), -

23(collectively, the "Litigation") The five class actions were

24consolidated by the Court on March 5, 2001, as In re Mitek Systems,

25Inc . Securities Litigation, Master File No . 00CV2028-L(AJB) . Also

26on March 5, 2001, the Court granted the motion for appointment of

27lead plaintiffs under §21D(a) (3) (B) of the Securities Exchange Act

28of 1934 (the "Exchange Act") and approved, lead plaintiffs'

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1 selection of Milberg Weiss Bershad Hynes & Lerach LLP and Schiffrin

2 & Barroway, LLP as lead counsel pursuant to §21D (a) (3) (B) (v) of the-

3 Exchange Act .

4 The operative complaint in the Litigation is the Consolidated

5 Amended Complaint (the "Complaint"), filed April 19, 2001 . The

6 Complaint alleges violations of §§10(b) and 20(a) of the Exchange

7 Act and Rule 10b-5 promulgated thereunder on-behalf of a class of

8 purchasers of Mitek common stock during the period December 27,

9 1999 through September 29, 2000, inclusive .

10 II . DEFENDANTS' DENIALS OF WRONGDOING AND LIABILIT Y

11 The Defendants have denied and continue to deny each and all

12 of the claims and contentions alleged by the Representative

13- Plaintiffs (defined below) in the Litigation . The Defendants

14 expressly have denied and continue to deny all charges of

15 wrongdoing or liability against them arising out of any of the

16 conduct, statements, acts or omissions alleged, or that could have

17 been alleged, in the Litigation . The Defendants also have denied

18 and continue to deny, inter alia, the allegations that the

19 Representative Plaintiffs or the Class have suffered damage, that

20 the price of Mitek Systems, Inc . ("Mitek") common stock was

21 artificially inflated by reasons of alleged misrepresentations,

22 non-disclosures or otherwise, or that the Representative Plaintiffs

23 or the Class were harmed by the conduct alleged in the Litigation .

24 Nonetheless, the Defendants have concluded that further

25 conduct of the Litigation would be protracted and expensive, and

26 that it is desirable that the Litigation be fully and finally

27 settled in the manner and upon the terms and conditions set forth

28 in this Stipulation . The Defendants also have taken into accoun t

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1 the uncertainty and risks inherent in any litigation, especially in

2 complex cases like this Litigation . The Defendants have,

3 therefore, determined that it is desirable and beneficial to them

4 that the Litigation be settled in the manner and upon the terms and

5 conditions set forth in this Stipulation .

6 III . CLAIMS OF THE REPRESENTATIVE PLAINTIFFS AND BENEFITS OFSETTLEMENT .

7The Representative Plaintiffs believe that the claims asserted

8in the Litigation have merit and that the evidence developed to9 -

date supports the claims . However, counsel for the Representative10

Plaintiffs (defined below) recognize and' acknowledge the expense11

and length of continued proceedings- necessary to prosecute the12

Litigation against the Defendants through pretrial motions, trial13

and appeals . Counsel for the Representative Plaintiffs also have14

taken into account the uncertain outcome and the risk of any15

litigation, especially in complex actions such as this Litigation,16

as well as the difficulties and delays inherent in such litigation .17

Counsel for the Representative Plaintiffs also are mindful of the18

inherent problems of proof under and possible defenses to the19

federal securities law violations asserted in the Litigation .20

Counsel for the Representative Plaintiffs believe that the21

settlement set forth in this Stipulation confers substantial22

benefits upon the Settlement Class . Based on their evaluation,23

counsel for the Representative Plaintiffs have determined that the24

settlement set forth in this Stipulation is in the best interests25

of the Representative Plaintiffs and the Settlement Class .26

IV . TERMS OF STIPULATION AND AGREEMENT OF SETTLEMENT2,7

NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED by and28

among the Representative Plaintiffs (for themselves and the

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Settlement Class Members) and the Defendants, by and through their

respective counsel or attorneys of record, that, subject to the

approval of the Court, the Litigation and the Released Claims shall

be- finally and fully compromised, settled and released, and the

Litigation shall be dismissed with prejudice, as to all Settling

Parties, upon and subject to the terms and conditions of the

Stipulation .

1 . Definitions

As used in the Stipulation the following terms have the

meanings specified below :

1 .1 "Authorized Claimant" means any Settlement Class Member

whose claim for recovery has been allowed pursuant to the terms of

the Stipulation .

1 .2 "Claimant" means any Settlement Class Member who files a

Proof of Claim in such form and manner, and within such time, as

the Court shall prescribe .

1 .3 "Claims Administrator" means the firm of Gilardi & Co .

LLC .

1 .4 "Class" means all Persons who purchased Mitek common

stock during the period December 27, 1999 through September 29,

2000, inclusive . Excluded from the Class are Defendants, members

of the immediate family of any individual Defendant, any entity in

which any Defendant has a controlling interest, directors and

officers of Mitek, and the legal representatives, heirs,

successors, or assigns of any such excluded Person or entity .

1 .5 "Class Period" means the period commencing on December

27, 1999 through September 29, 2000, inclusive .

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1 1 .6 "Class Member" or "Member of the Class" mean a Person who

2 falls within the definition of the Class as set forth in ¶1 .4 of

3 the Stipulation .

4 1.7 "Defendants" means Mitek, William Boersing, John M .

5 Thornton, Noel Flynn, James DeBello and Dennis A. Brittain .

6 1 .8 "Effective Date" means the first date by which all of the

7 events and conditions specified in ¶7 .1 of the Stipulation have

8 been met and have occurred .

9 1.9 "Escrow Agent" means the law firm of Milberg Weiss

10 Bershad Hynes & Lerach LLP or its successor(s) .

11 1 .10 "Final" means when the last of the following with respect

12 to the Judgment approving the Stipulation, substantially in the

13 form of Exhibit B attached hereto, shall occur : (a) the expiration

14 of three (3) business days after the time to file a motion to alter

15 or amend the Judgment under Federal Rule of Civil Procedure 59(e)

16 has passed without any such motion having been filed ; (b) the

17 expiration of three (3) business days after the time in which to

18 appeal the Judgment has passed without any appeal having been taken

19 (which date shall be deemed to be thirty-three (33) days following

20 the entry of the Judgment, unless the date to take such an appeal

21 shall have been extended by Court order or otherwise, or unless the

22 thirty-third (33rd) day falls on a weekend or a Court holiday, in-

23 which case the date for purposes of this Stipulation shall be

24 deemed to be the next business day after such thirty-third (33rd)

25 day; and (c) if such motion to alter or amend is filed or if an

26• appeal is taken, three (3) business days after the determination of

27 that motion or appeal in such a' :manner - as to permit the

28 consummation of the settlement substantially in accordance with th e

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1 terms and conditions of this Stipulation. For purposes of this

2 definition, an "appeal" shall include any petition for a writ of

3 certiorari or other writ that may be filed in connection with

4 approval or disapproval of this settlement, but shall not include

5 any appeal which concerns only the issue of attorneys' fees and

6 reimbursement of expenses awarded to Representative Plaintiffs'

7 Counsel or any Plan of Allocation of the Settlement Fund, as

8 hereinafter defined .

9 1.11 "Judgment" means the judgment to be rendered by the

10 Court, substantially in the form attached-hereto as Exhibit B .

11 1 .12 "Person" means an individual, corporation, partnership,

12 limited partnership, association, joint stock company, estate,

13 legal representative, trust, unincorporated association, government

14 or any political subdivision or agency thereof, and any business or

15 legal entity and their spouses, heirs, predecessors, successors,

16 representatives, or assignees .

17 1.13 "Plaintiffs' Settlement Counsel" means Milberg Weiss

18 Bershad Hynes & Lerach LLP, Keith F . Park, Ellen Gusikoff Stewart,

19 600 W. Broadway, Suite 180,0,, San Diego, California, 92101-5050,

20 Telephone (619) 231-1058, and Schiffrin & Barroway, LLP, David

21 Kessler, Three Bala Plaza East, Suite 400, Bala Cynwyd,

22 Pennsylvania 19004, Telephone (610)667-7706 .

23 1 .14 "Plan of Allocation" means a plan or formula of

24 allocation . of . .the Settlement Fund whereby the Settlement Fund shall

25 be distributed to Authorized Claimants after payment of expenses of

26 notice and administration of the settlement, Taxes and Tax Expenses

27 and such attorneys' fees, expenses and interest as may be awarded

28 by the Court . Any plan of allocation is not part of th e

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11 Stipulation and Defendants and their Related Parties shall have n o

responsibility or liability with respect. thereto .

1 .15 "Related Parties" means each of a Defendant's past or

11present directors, officers, employees, partners, members ,

principals, agents, underwriters , insurers, co - insurers,

reinsurers , controlling shareholders, attorneys, accountants or-

auditors, including, but not limited to, Deloitte & Touche LLP an d

its partners and employees, banks or investment banks, associates,

personal or legal representatives, predecessors, successors,

parents, subsidiaries, divisions, joint ventures, assigns, spouses,

heirs, related or -affiliated entities, any entity in which a

Defendant has a controlling interest, any members of theirf r F 1

immediate families ; or any trust of which any Defendant is the

settlor or which is for the benefit of any Defendant and/or members

of his family .

1 .16 "Released Claims" shall collectively mean all claims

(including Unknown Claims as defined in ¶1 .23 hereof), demands,

rights, liabilities and causes of action of every nature an d

description whatsoever, known or unknown, whether or not concealed

or-hidden, asserted or that might have been asserted, including,

without limitation, claims for negligence, gross negligence, breach

of duty of care and/or breach of duty of loyalty, fraud, breach of

fiduciary duty, or violations of any state or federal statutes,

rules or regulations, by any Representative Plaintiff or Settlement

Class Member against the Released Persons arising out of, based

upon or related to both the purchase of Mitek common stock by any

Settlement Class Member during the Class Period and the facts ,

transactions, events, occurrences, acts, disclosures, statements ,

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1 omissions or failures to act which were or could have been alleges

2 in the Litigation .

3 1 .17 "Released Persons" means each and all of the Defendants

4 and their Related Parties .

5 1.18 "Representative Plaintiffs" means each of the plaintiffs

6 who filed a complaint in the Litigation .

7 1 .19 "Representative Plaintiffs' Counsel" or "Counsel for the

8 Representative Plaintiffs" mean counsel who have appeared for any

9 of the Representative Plaintiffs in the Litigation .

10 1.20 "Settlement Class" or "Settlement Class Member" consist

11 of or mean any Class Member who has not requested exclusion from

12 the Class as defined in ¶1 .4 hereof .

13 1.21 !'Settlement Fund" means . the principal amount, of Two

14 Million Dollars ($2,000,000) in cash to be paid by wire transfer to

15 the Escrow Agent pursuant to ¶2 .1 of this Stipulation . The Escrow

16 Agent shall invest the cash received and all interest earned shall

17 be for the benefit of the Settlement Fund .

18 1 .22 "Settling Parties" means, collectively, each of the

19 Defendants and the Representative Plaintiffs on behalf of

20 themselves and the members of the Settlement Class .

21 1.23 "Unknown Claims" means any Released Claims which any

22 Representative Plaintiff or Settlement Class Member does not know

23- or suspect to exist in his, her or its favor at the time of the

24 release of the Released Persons which, if known by him, her or it,

25 might have affected his, her or its settlement with and release of

26 the Released Persons, or might have affected his, her or its

27 decision not to . object to this settlement . With respect to any and

28 all Released Claims, the Settling Parties stipulate and agree that ,

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• •

1 upon the Effective Date, the Representative Plaintiffs shall

2 expressly and each of the Settlement Class Members shall be deemed

3 to have, and by operation of the Judgment shall have, expressly

4 waived the provisions, rights and benefits of California Civil Code

5 §1542,`which provides :

6 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICHTHE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS

7 FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH I FKNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT

8 WITH THE DEBTOR .

9 The Representative Plaintiffs shall expressly and each of the

10 Settlement Class members shall be deemed to have, and by operation

11 of the Judgment shall have, expressly waived any and all

12 provisions, rights and benefits conferred by any law of any state

13 or territory of the United States, or principle of common law,

14 which is similar, comparable or equivalent to California Civil Code

15 §1542 . The Representative Plaintiffs and Settlement Class Members

16 may hereafter discover facts in addition to or different from those

17 which he, she or it now knows or believes to be true with respect

18 to the subject matter of the Released Claims, but each

19 Representative Plaintiff shall expressly and each Settlement Class

20 Member, upon the Effective Date, shall be deemed to have, and by

21 operation of the Judgment shall have, fully, finally, and forever

22 settled and released any and all Released Claims, known or unknown,

23 suspected or unsuspected, contingent or non-contingent, whether orT

24 not concealed or hidden, which now exist, or heretofore have

25 existed upon any theory of law or equity now existing or coming

26 into existence in the future, including, but not limited to,

27 conduct which is negligent, intentional, with or without malice, or

28 a breach of any duty, law or rule, without regard to the subsequen t

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1 discovery or existence of such different or additional facts . The

2 Representative Plaintiffs acknowledge, and the Settlement Class

3 Members shall be deemed by operation of the Judgment to have

4 acknowledged, that the foregoing waiver was separately bargained

5 for and a key element of the settlement of which this release is a

6 part .

7 2. The Settlement

8 a. The Settlement Fund

9 2.1 The principal amount of $2,000,000 in cash shall

10 constitute the Settlement Fund, which Defendants have paid or

11 caused to be paid in lawful funds via wire transfer to the Escrow,

12 Agent .

13 b. The Escrow Agent

14 2 .2 The Escrow Agent shall invest the Settlement Fund

15 deposited pursuant to ¶2 .1 hereof in instruments backed by the full

16 faith and credit of the United States Government or fully insured

17 by the United States Government or an agency thereof and shall

18 reinvest the proceeds of these instruments as they mature in

19 similar instruments at their then-current market rates . The Escrow

20 Agent shall bear all risks related to investment of the Settlement

21 Fund .

22 2 .3 The Escrow Agent shall not disburse the Settlement Fund

23 except as provided in the Stipulation, by an order of the Court, or

24 with the written agreement of counsel for Defendants and--

25 Plaintiffs' Settlement Counsel .

26 2 .4 Subject to further orders and/or directions as may be

27 made by-the Court, the Escrow Agent is authorized to execute such

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1 transactions on behalf of the Class Members as are consistent with

2 the terms of the Stipulation .

3 2 .5 All funds held by the Escrow Agent shall be deemed and

4 considered to be in custodia legis of the Court, and shall remain

5 subject to the jurisdiction of the Court, until such time as such

6 funds shall be distributed pursuant to the Stipulation and/or

7 further order(s) of the Court .

8 2 . 6 Within ten (10) days after payment of the Settlement Fund

9 to the Escrow Agent pursuant ¶2 .1 hereof, the Escrow Agent may

10 establish a "Class Notice and Administration Fund," and may deposit

11 up to $100,000 from the Settlement Fund in it . The Class Notice

12 and Administration Fund may be used by Plaintiffs' Settlement

13 Counsel to pay costs and expenses reasonably and actually incurred

14 in connection with providing notice to the Class, locating Class

15 Members, soliciting Class claims, assisting with the filing of

16 claims, administering and distributing the Settlement Fund to

17 Authorized Claimants, processing Proof of Claim and Release forms

18 and paying escrow fees and costs, if any . The Class Notice andi

19 Administration Fund may also be invested and earn interest as

20 provided for in ¶2 .-2 'of this-Stipulation .

21 c. Taxes

22 2 .7 (a) Settling Parties and the Escrow Agent agree to treat

23 the Settlement Fund as being at all times a "qualified settlement

24 fund" within the meaning of Treas . Reg . §1 .468B-1 . In addition,

25 the Escrow Agent shall timely make such elections as necessary or`

26 advisable to carry out the provisions of this ¶2 .7, including the

27 "relation-back election" (as defined in Treas . Reg . §1 .468B-1) back

28 to the earliest permitted date . Such elections shall be made in .

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1 compliance with the procedures and requirements contained in such

2 regulations . It shall be the responsibility of the Escrow Agent to

3 timely and properly prepare and deliver the necessary documentation

4 for signature by all necessary parties, and thereafter to cause the

5 appropriate filing to occur .

6 '(b) For the purpose of §468B of the Internal Revenue .

7 Code of 1986, as amended, and the regulations promulgated

8 thereunder, the "administrator" shall be the Escrow Agent . The

9 Escrow Agent shall timely and,properly file all informational and

10 other tax returns necessary or advisable with respect to the

11 Settlement Fund (including without limitation the returns described

12 in Treas . Reg . §1 .468B-2(k)) . Such returns (as well as the

13 election described in ¶2 .7(a)) shall be consistent with this ¶2 .7

14 and in all events shall reflect that all Taxes (including any

15 estimated Taxes, interest or penalties) on the income earned by the

16 Settlement Fund shall be paid out of the Settlement Fund as

17 provided in 12-7(c) hereof .

18 (c) 'All, (i)' Taxes (including any estimated Taxes,

19 interest or penalties) arising with respect to the income earned by

20., the Settlement Fund, including any Taxes ,or tax detriments that may

21 be imposed upon the Defendants with respect to any income earned by

22 the Settlement Fund for any period during which the Settlement Fund

23 does not qualify as a "qualified settlement fund" for federal or

24 state income tax purposes ("Taxes"), and (ii) expenses and costs

25 incurred in connection with the operation and implementation of

26 this ¶2 .7 (including, without limitation, expenses of tax attorneys

27 and/or accountants and mailing and distribution costs and expenses

28 relating to filing (or failing to file) the returns described i n

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1 this ¶2 .7) ("Tax Expenses"), shall be paid out of the Settlement

2 Fund; in all events neither the Defendants nor their Relatec

3 Parties shall have any liability or responsibility for the Taxes or

4 the Tax Expenses . The Escrow Agent shall indemnify and hold eacr

5 of the Defendants and the Related Parties harmless for Taxes anc

6 Tax Expenses (including, without limitation, Taxes payable b~

7 reason of any such indemnification) . Further, Taxes and Tax

8 Expenses shall be treated as, and considered to be, a cost of

9 administration of the Settlement Fund and shall be timely paid by

10 the Escrow Agent out of the Settlement Fund without prior order

11 from the Court and the Escrow Agent shall be obligated

12 (notwithstanding anything herein to the contrary) to withhold from

13 distribution to Authorized Claimants any funds necessary to pay

14 such amounts including the establishment of adequate reserves for

15 any Taxes and Tax Expenses (as well as any amounts that may be

16 required to be withheld under Treas . Reg . §1 .468B-2 (1) (2)) ; neither

17 the Defendants nor their Related Parties,- nor their counsel are

18 responsible nor shall they have any liability therefor . The

19 parties hereto agree to cooperate with the Escrow Agent, each

20 other, and their tax attorneys and accountants to the extent

21 reasonably necessary to carry out the provisions of this ¶2 .7 .

22 (d) For the purpose of this ¶2 .7, references to the

23 Settlement Fund shall include' both 'the Settlement Fund and the

24 Class Notice and Administration Fund and shall also include any

25 earnings thereon .

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1 d. Termination Of Settlement

2 2.8 In the event that the Stipulation is not approved, or is

3 terminated, canceled, or fails to become effective for any reason,

4 the Settlement Fund (including accrued interest) less expenses

5 actually incurred or due and owing in connection with the

6 settlement provided for herein, shall be refunded to Defendants as

7 described in ¶7 .5 below .

8 3. Notice Order And Settlement Hearing

9 3.1 Within five (5) business days after execution of the

10 Stipulation, the Settling Parties shall submit the Stipulation

11 together with its Exhibits to the Court and shall apply,for entry

12 of an order (the "Notice Order"), substantially in the form of

13 Exhibit A hereto, requesting, inter alia, the certification of a

14 class for settlement purposes only, the preliminary approval-of the

15 settlement set forth in the Stipulation, and approval for the

16 mailing and publication of a settlement notice, 'substantially in

17 the form of Exhibits A- .1 and A-3 attached hereto, which shall

18 include the general terms of the settlement set forth in the-

19 Stipulation, the proposed Plan of Allocation, the general terms of

20 the Fee and Expense Application as defined in ¶6 .1 below and the

21 date of the Settlement Hearing as defined below .

22 3 .2 Plaintiffs' Settlement Counsel shall request that after

23 notice is given, the Court hold a hearing (the "Settlement

24 Hearing") and approve the settlement of the Litigation as set forth

25 herein . At or after the Settlement Hearing, Plaintiffs' Settlement

26 Counsel also will request that the Court approve the proposed Plan

27 of Allocation and the Fee and Expense Application .

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4 . Releases

4 .1 Upon the Effective Date, as defined in ¶1 .8 hereof, the

Representative-Plaintiffs and each of the Settlement Class Members

shall be deemed to have, and by operation of the Judgment shall

have, fully, finally, and forever released, relinquished and

discharged all Released Claims against the Released Persons,

whether or not such Settlement Class Member executes and del-ivers-

a Proof of Claim. and Release .

4 .2 The Proof of Claim and Release to be executed by

Settlement Class Members shall release'all Released Claims against

the Released Persons and shall be substantially in the form

contained in Exhibit A-2 attached hereto .

4 .3 Upon the Effective Date, as defined in ¶1 .8 hereof, each

of the Released Persons shall be deemed to have, and by operation

of the Judgment shall have, fully, finally, and forever released,

relinquished and discharged each and all of the Settlement Class

Members and Counsel for the Representative Plaintiffs from all

claims (including Unknown Claims), arising out of, relating to, or

in connection with the institution, prosecution, assertion,

settlement or resolution of the Litigation or the Released Claims .

5 . Administration and Calculation of Claims, Fina lAwards and Supervision and Distribution ofSettlement Fund

5 .1 Plaintiffs' Settlement Counsel, or their authorized

agents, acting on behalf of the Settlement Class, and subject to

such supervision and direction of the Court as may be necessary or

as circumstances may require, shall administer and calculate the

claims submitted by Settlement Class Members and shall overse e

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1 distribution of the Net Settlement Fund (defined below) to

2 Authorized Claimants .

3 5.2 The Settlement Fund shall be applied as follows :

4 (a) to pay counsel to Representative Plaintiffs

5 attorneys' fees and expenses with interest thereon (the "Fee and

6 Expense Award"), if and to the extent allowed by the Court ;

7 (b) to pay all the costs and expenses reasonably and

8 actually incurred in connection with providing notice, locating

9 Class Members, soliciting Class claims, assisting with the filing

10 of claims, administering and distributing the Settlement Fund to

11 Authorized Claimants, processing Proof of Claim and Release forms

12 and paying escrow fees and costs, if any ;

13 (c) to pay the Taxes and Tax Expenses described in 12 .7

14 above ; and

15 (d) to distribute the balance of the Settlement Fund

16 (the "Net Settlement Fund") to Authorized Claimants as allowed by

17 the Stipulation, the Plan of Allocation, or the Court .

18 5 .3 Upon the Effective Date and thereafter, and in accordance

19 with the terms of-the Stipulation, the Plan of Allocation, or suchw

20 further approval and further order(s) of the Court as may be

21 necessary or as circumstances may require, the Net Settlement Fund

22 shall be distributed to Authorized Claimants, subject to and in

23 accordance with the following . .

24 5 .4 Within'ninety (90) days after the mailing of the Notice

25 or such other time as may be set by the Court, each Person claiming

26 to be an Authorized Claimant shall be required to submit to the

27 Claims Administrator a completed Proof of Claim and Release,

28 substantially in the form of'Exhibit A-2 attached hereto, signe d

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under penalty of perjury and supported by such documents as are

specified in the Proof of Claim and Release and as are reasonably

available to the Authorized Claimant .

5 .5 Except as otherwise ordered by the Court, all Settlement

Class Members who fail to timely submit a Proof of Claim and

Release within such period, or such other period as may be ordered

by the Court, or otherwise allowed, shall be forever barred fron

receiving any payments pursuant to the Stipulation and the

settlement set forth therein, but will. in all other respects be

subject to and bound by the provisions of the Stipulation, the

releases contained therein, and the Judgment .

5 .6 The Net Settlement Fund shall be distributed to the

Authorized Claimants substantially in accordance with a plan of

allocation to-be described-' iii the notice`-and approved by, the Court .

However, if there is any balance remaining in the Net Settlement

Fund after six (6), months' from the date of distribution of the Net

Settlement Fund (whether by reason of tax refunds, uncashed checks

or otherwise) Plaintiffs' Settlement Counsel shall reallocate such

balance among Authorized Claimants .: in an, equitable and economic .

fashion . Thereafter, any balance which still remains in the Net

Settlement Fund shall be donated to the San Diego Volunteer Lawyer

Program .

5 .7 The Defendants (except as provided in ¶ 12 .8 and 7 .5)

shall have no responsibility for, interest in, or liability

whatsoever with respect to the investment or distribution of the

Net Settlement Fund, the Plan of Allocation, the determination,

administration, or calculation of claims, the payment o r

- 17 - 00CV2028-L(AJB)

1 withholding of Taxes, or any losses incurred in connection

2 therewith .

3 5.8 No Person shall have any claim against Plaintiffs'

4 Settlement Counsel or any claims administrator, or other agent

5 designated by Plaintiffs' Settlement Counsel, or Defendants or

6 their Related Parties or their counsel based on the distributions

7 made substantially in accordance with the Stipulation and the

8 settlement contained therein, the Plan of Allocation, or further-

9 orders of the Court .

10 5 .9 It is understood and agreed by the Settling Parties that

11 any proposed 'Plan of Allocation of the Net Settlement Fund

12 including, but not limited to, any adjustments to an Authorized

13 Claimant's claim set forth therein, is not a part of the

14 Stipulation and is to be considered by the Court separately from

15 the Court's consideration of the fairness, reasonableness and

16 adequacy of the settlement set forth in the Stipulation, and any

17 order or proceedings relating to the Plan of Allocation shall not

18 operate to terminate or cancel the Stipulation or affect the

19 finality of the Court's Judgment approving the Stipulation and the_

20 settlement set forth therein, or any other orders entered pursuant

21 to,the Stipulation .

22 6 . Representative Plaintiffs- Counsel's Attorneys'Fees and Reimbursement of Expense s

236 .1 The Representative Plaintiffs or their counsel may submit

24an application or applications (the "Fee and Expense Application")

25for distributions to 'them from the Settlement Fund for : (a) an26 -

award of attorneys' fees ; plus (b) reimbursement of actual expenses27

and costs, including the fees- of any experts or consultants28

1 incurred in connection with prosecuting the Litigation, plus any

- 18 - 00CV2028 -L(AJB)

1 interest on such attorneys' fees and expenses at the same rate and

2 for the same periods as earned by the Settlement Fund (until paid)

3 as may be awarded by the Court . Representative Plaintiffs' Counsel

4 reserve the right to make additional applications for fees and

5 expenses incurred .

6 6.2 The attorneys' fees and expenses, as awarded by the

7 Court, shall be paid to Plaintiffs' Settlement Counsel from the

8 Settlement Fund, as ordered, immediately after the Court executes-

9 an order awarding such fees and expenses . Plaintiffs' Settlement

10 Counsel shall thereafter allocate the attorneys' fees amongst

11 Representative Plaintiffs' Counsel in a manner in which they in

12 good faith believe reflects the contributions of such counsel to

13 the prosecution and settlement of the Litigation . In the event .

14 that the Effective Date does not occur., or the Judgment or the

15 order making the Fee and Expense Award is reversed or modified, or

16 the Stipulation is canceled or terminated for any other reason, and

17 in the event that the Fee and Expense Award has been paid to any

18 extent, then Representative Plaintiffs' Counsel shall within five

19 (5) business days from receiving notice from Defendants' counsel or

20 from a court of appropriate jurisdiction, refund to the Settlement

21 Fund the fees and expenses previously paid to them from the

22 Settlement Fund plus interest thereon at the same rate as earned on

23 the Settlement Fund in an amount consistent with such reversal or

24 modification . Each such Representative-Plaintiffs' Counsel's law

25 firm, as a condition of receiving such fees and expenses, on behalf

26 of itself and each partner and/or shareholder of it, agrees thaty Y ' I j

27 the law firm and its partners and/or shareholders are subject to

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the jurisdiction of the Court for the purpose of enforcing the

provisions of this ¶6 :2 :

6 .3 The procedure for and the allowance or disallowance by

the Court of any a licatio'ns by any pp y a y of the counsel to the

Representative Plaintiffs, for attorneys' fees and expenses,

including the fees of experts and consultants, to be paid out of

the Settlement, Fund, are-.not part of the'settlement set forth in

the Stipulation, and are to be considered by the Court separately

from the Court's consideration of the fairness, reasonableness an d

adequacy of the settlement set forth in the Stipulation, and any

orders or proceedings relating to the Fee and Expense Application ,

or any appeal from any order relating thereto or reversal or

modification thereof, shall not operate to terminate or cancel th e

Stipulation, or affect or delay the finality of the Judgment

approving the Stipulation and the settlement of the Litigation set

forth therein .

6 .4 Defendants and their Related Parties shall have n o

responsibility for, and no liability whatsoever with respect to,

any payment to Plaintiffs ' Settlement Counsel from the Settlement

Fund .

6 .5 Defendants and their Related Parties shall have n o

responsibility for, and no liability whatsoever with respect to the

allocation among Representative Plaintiffs' Counsel, and/or any

other Person who may assert some claim thereto, of any Fee and

Expense Award that the Court may' make in the Litigation, and

Defendants and their respective Related Parties take . no position

with respect to such matters .

- 20 - - 000V2028-L(AJB)

1 7. Conditions of Settlement , Effect of Disapproval,Cancellation or Termination

27 .1 The Effective Date of the Stipulation shall be

3conditioned on the'occurrence of all of the following events :

4

(a) Defendants have timely made their contributions to5

the Settlement Fund as required by ¶2 .1 above ;6

(b) the Court has entered the Notice Order, as required7

by ¶3 .1, above ;8

(c) the Court has entered the Judgment, or a judgment-9

substantially in the form of Exhibit B attached hereto ;10

(d) counsel for the Defendants have not given notice of11

intent to withdraw from the settlement pursuant to ¶7 .4 ; and12

(e) . the Judgment has become Final, as defined in ¶1 .1013

hereof .14

7 .2 Upon the occurrence of all of the events referenced in15

¶7 .1 hereof, any and all remaining interest or right of Defendants16

in or to the Settlement- Fund, if any, shall be absolutely and17

forever extinguished .18

7 .3 . If all of the conditions specified in ¶7 .1 are not met,19

then the Stipulation shall be canceled and terminated subject to20

¶7 .6 unless Plaintiffs' Settlement Counsel and counsel for21

Defendants mutually agree in writing to proceed with the22

Stipulation .23

7 .4 If prior to the Settlement Hearing, Persons who otherwise24

would be members of the Settlement Class have filed with the Court25

timely' requests for exclusion ("Requests for Exclusion") from the26

Settlement Class in accordance with the provisions of the Notice27

Order and the notice given pursuant thereto and such Persons in the28

aggregate purchased a number of shares during the Class Period i n

- 21 - 00CV2028-L (AJB)

1 an amount greater than the sum specified in a separate Supplemental

2 Agreement between the parties, the Defendants shall have, in their

3 sole and absolute discretion, the option to terminate this

4 Stipulation in accordance with the procedures set forth in the

5 Supplemental Agreement . The Supplemental Agreement will not be

6 filed with the Court unless and until a dispute among the parties

7 concerning its interpretation or application arises . Copies of all

8 Requests for Exclusion received, together with copies of all

9 written revocations of Requests for Exclusion shall be delivered t o

10 counsel for Defendants within three (3) business days . of receipt

11 but in no -event later than five (5) court days before the

12 Settlement Hearing .

13 7.5 Unless otherwise ordered by .the Court, in the event the

14 Stipulation shall terminate, or be canceled, or shall not become

15 effective for any- -reason, within five (5) business days after

16 written notification of, such event is sent by counsel for

17 Defendants or Plaintiffs' Settlement Counsel to the Escrow Agent,

18 the Settlement Fund (including accrued interest), plus any amount

19 then remaining in the Notice and Administration Fund (including

20 accrued interest), less expenses and any costs which have either

21 been disbursed pursuant to ¶2 .6 hereof, or are determined to be

22 chargeable to the Class Notice and Administration Fund shall . be

23 refunded by the Escrow Agent to the Defendants, plus actual

24 interest earned on said, contribution . At the request of counsel to

25 the Defendants, the Escrow Agent or its designee shall apply for

26 any tax refund owed to the Settlement Fund and pay the proceeds,

27 after deduction of any fees or expenses incurred in connection with

28 such application(s) for refund, to the Defendants .

- 22 - 00CV2028-L (AJB)

1 7.6 In the event that the Stipulation is not approved by the

2 Court or the settlement set forth in the Stipulation is terminated

3 or fails to become effective in accordance with its terms, the

4 Settling Parties shall be restored to their respective positions in

5 the Litigation as of May 20, 2001 . In such event, the terms and

6 provisions of the Stipulation, with the exception of ¶ 12 .2--2 . 7 ,

7 7 .3, 7 .5-7 .7, 8 .3, 8 .5-8 .6, 8 .12-8 .13, 8 .15 hereof, shall have no

8 further force and effect with respect to the Settling Parties and

9 shall not be used in this Litigation or in any other proceeding fo r

10 any purpose, and any Judgment or order entered by the Court in

11 accordance with the terms of the Stipulation shall be treated as

12 vacated, nunc pro tunc . No order of the Court or modification or

13 reversal on appeal of any order of the Court concerning the Plan of

14 Allocation or the amount of any attorneys' fees, expenses and

15 interest awarded by the Court to the Representative Plaintiffs or

16 any of their counsel shall constitute grounds for cancellation or

17 termination of the Stipulation .

18 7 .7 If the Effective Date does not occur, or if the

19 Stipulation is terminated pursuant to its terms, neither the

20 Representative Plaintiffs nor any of their counsel shall have any

21 obligation to repay any amounts actually and properly disbursed

22 from the Class Notice and Administration Fund . In addition, any

23 expenses already incurred and properly chargeable to the Class

24 Notice and Administration Fund pursuant to ¶2 .6 hereof at the time .

25 of such termination or cancellation but which have not been paid,

26 shall be paid by the Escrow Agent in accordance with the terms of

27 the Stipulation prior to the balance being refunded in accordance

28 with ¶7 .5 above .

23 - 00CV2028-L(AJB)

1 7.8 If .a case is commenced in respect to any Defendant under

2 Title 11 of the United States Code (Bankruptcy), or a trustee,

3 receiver or conservator is appointed under any similar law, and in

4 the event of the entry of a final order of a court of competent

5 jurisdiction determining the transfer of the Settlement Fund, or

6 any portion thereof, by or on behalf of such Defendant to be a-

7 preference, voidable transfer, fraudulent transfer or similar

8 transaction, then, as to such Defendant, the releases given and

9 Judgment entered in favor of such Defendant pursuant to this

10 Stipulation shall be null and void .

11 8. Miscellaneous Provision s

12 8.1 The Settling Parties (a) acknowledge that it is their

13 intent to consummate this agreement ; and (b) agree to cooperate to

14 the extent reasonably necessary to effectuate and implement all

15 terms and conditions of the Stipulation and to exercise their best

16 efforts to accomplish the foregoing terms and conditions of the

17 Stipulation .

18 8 .2 The parties acknowledge, represent and warrant that the

19 mutual releases and payments hereunder are such that each of the

20 parties is receiving consideration reasonably equivalent to the

21 consideration given, and no party will be rendered insolvent or

22 left with unreasonably small capital as a result of the

23 Stipulation. _

24 8.3 The parties further acknowledge that this Stipulation

25 constitutes a substantially contemporaneous exchange of

26 consideration for new value given .

27 8 .4 Each of the parties warrants and represents that he or it

28 is not "insolvent" within the meaning of 11 U .S .C .9101(32) as o f

- 24 - 000V2028-L(AJB)

1 the time this Stipulation is executed and as of the time any

2 payments are transferred or made as required by this Stipulation .

3 8 .5 The parties intend this settlement to be a final and

4 complete resolution of all disputes between them with respect to

5 the Litigation. The settlement compromises claims which are-

6 contested and shall not be deemed an admission by any Settling

7 Party as to the merits of any claim or defense . While retaining

8 their right to deny that the claims advanced in the Litigation were

9 meritorious, Defendants in any statement made to any medi a

10 representative (whether or not for attribution) will not assert

11 that the Litigation was not filed in good faith and with an

12 inadequate basis to comply with Rule 11 of the Federal Rules of

13 Civil Procedure . The Final Judgment will contain a finding-that

14 during the course of the Litigation, the parties and their

15 respective counsel at all times complied with the requirements of

16 Federal Rule of Civil Procedure 11 . The Settling Parties agree

17 that the amount. paid to the Settlement Fund and the other terms of

18 the settlement were negotiated in good-faith by the Settling

19 Parties, and reflect a settlement that was reached voluntarily

20 after, consultation with competent legal counsel . The Settling

21 Parties reserve their right to, rebut, in a manner that such party-

22 determines to be appropriate, any contention made in any public

23 forum that the-Litigation was brought or defended in bad faith or

24 without a reasonable basis .

25 8 .6 Neither the Stipulation nor the settlement contained

26 therein, nor any act performed or document executed pursuant to or

27 in furtherance of the Stipulation or the settlement : (a) is or may

28 be deemed to be or may be used as an admission of, or evidence of ,

- 25 - 00CV2028-L(AJB)

1 the validity of any Released Claim, or of any wrongdoing or

2 liability of the Defendants ; or (b) is or may be'deemed to be or .

3 may be used as an admission of, or evidence of, any fault or

4 omission of any of the Defendants in any civil, criminal or

5 administrative proceeding in any court, administrative agency or

6 other tribunal . Defendants may file the Stipulation and/or the

7 Judgment in any action that may be brought against them in order to

8 support a defense or counterclaim based on principles of res

9. judicata, collateral, estoppel, release, good faith settlement ,

10 judgment bar or reduction or any other theory of claim preclusion

11 or issue preclusion or similar defense or counterclaim or, use such

12 documents for any other purpose .

13 8.7 All agreements made and orders entered during the course

14 of the Litigation relating to the confidentiality of information

15 shall survive this Stipulation .

16 8 .8 All of the Exhibits to this Stipulation are material and

17 integral parts hereof and are fully incorporated herein by this

18 reference .

19 8 .9 The Stipulation may be amended or modified only by a

20 -written instrument signed by or on .behalf of all Settling Parties

21 or their respective successors-in-interest. -

22 8 .10 This Stipulation and the Exhibits attached hereto and the

23 Supplemental Agreement constitute the entire agreement among the

24 parties hereto and no representations, warranties or inducements

25 have been made to any party concerning the Stipulation or its`

26 Exhibits other than the representations, warranties and covenants

27 contained and memorialized in such documents . Except as otherwise

28 provided herein, each party shall bear its own costs .

- 26 - 00CV2028-L(AJB)

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8 .11 Plaintiffs' Settlement Counsel, on behalf of the Class ,

are expressly authorized by the Representative Plaintiffs to tak e

all appropriate action required or permitted to be taken by the

Class pursuant to the Stipulation to effectuate its terms and also

are expressly authorized to enter into any modifications or_

amendments to the Stipulation on behalf of the Class which the y

deem appropriate .

8 .12 Each counsel or other Person executing the Stipulation or

any of its Exhibits on behalf of any party hereto hereby warrants

that such Person has the full authority to do so .

8 .13 The Stipulation may be executed in one or more counter-

parts . All executed counterparts and each of them shall be deemed

to be one and the same instrument and a telecopied signature page

shall constitute an original for all purposes . A complete set of

original executed counterparts shall be filed with the Court .

8 .14 The Stipulation shall be binding upon, and inure .to the

benefit of, the successors and assigns of the parties hereto .

8 .15 The Court shall retain jurisdiction with respect t o

implementation and enforcement of the terms of this Stipulation,

and all parties hereto submit to the jurisdiction of the Court fo r

purposes of implementing and enforcing the settlement embodied in

this Stipulation .

8 .16 The Stipulation and the Exhibits thereto shall b e

considered to have been negotiated, executed and delivered, and to

be wholly performed, in the State of California, and the rights and

obligations of the parties to the Stipulation shall be construe d

and enforced in accordance with, and governed by, the internal ,

- 27 - 000V2028-L (AJB)

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substantive laws of the State. of California without giving effect

to that State's choice-of-law principles .

IN WITNESS WHEREOF, the parties hereto have caused the

Stipulation to be executed, by their duly authorized attorneys,

dated as of October 23, 2001 .

MILBERG WEISS BERSHADHYNES & LERACH LLP

WILLIAM S . LERACHKEITH F . PARKSPENCER A . BURKHOLZELLEN GUSIKOFF STEWARTDANIEL S . DROSMAN

&GUSIKSTEWART

600 West Broadway, Suite 1800San Diego, CA 92101Telephone : 619/231-1058

SCHIFFRIN & BARROWAY, LLPDAVID KESSLER

r

AVID KESSL

Three Bala Plaza East, Suite 400Bala Cynwyd, PA 19004Telephone : 610/667-7706

Co-Lead Counsel for Plaintiffs

LUCE, FORWARD, HAMILTON &SCRIPPS LL P

TIMOTHY R . PESTOTNIKRUSS

R . PESIOTNI K

- 28 - 000V2028-L(AJB)

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28 N:\CASES\Mitek.eet\SLH81189 .agr

GRAY, CARY, WARE & FREIDENRICH LLPSHIRLI FABBRI WEIS S

SHIRLI FABBRI WEISS

4365 Executive Drive, Suite 1100San Diego, CA .92121-2133

Telephone : 858/677-1400

Counsel for Defendant Dennis A .Brittain

- 4 - 00CV2028-L(AJB)

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8 UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

10In re MITEK SYSTEMS, INC . ) Master File No .

11 SECURITIES LITIGATION ) '00CV2028-L(AJB)

12 )CLASS ACTIONThis Document Relates To :

13 ) [PROPOSED] ORDER PRELIMINARILYALL ACTIONS . - ) APPROVING SETTLEMENT AND

14 . ) PROVIDING FOR NOTICE

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28 EXHIBIT A

1 WHEREAS, a consolidated class action is pending before the

2 Court entitled In re Mitek Systems, Inc . Securities Litigation,

3 Master File No . OOCV2028-L(AJB) (the "Litigation'") ;

4 WHEREAS, the Court has received the Stipulation of Settlement

5 dated as of October 23, 2001 (the "Stipulation") , that has been

6 entered into by the Representative Plaintiffs and Defendants, and

7 the Court has reviewed the Stipulation and its attached Exhibits ;

8 and

9 WHEREAS, the parties having made application, pursuant to

10 Federal Rule of Civil Procedure 23(e), for an order preliminarily

11 approving the settlement of this Litigation, in accordance with the

12 Stipulation which, together with the Exhibits annexed thereto sets

13 forth the terms and conditions for a proposed settlement of the

14 Litigation and for dismissal of the Litigation with prejudice upon

15 the terms and conditions set forth therein ; and the Court having

16 read and considered the Stipulation and the Exhibits annexed

17 thereto ; and

18 WHEREAS, the Stipulation provides for the conditional

19 certification of a Settlement Class for the purposes of the

20 settlement ; and

21 WHEREAS, all defined terms contained herein shall have the

22 same meanings as set forth in the Stipulation ;

23 NOW, THEREFORE, IT IS HEREBY ORDERED that :

24 1 . Pursuant to Rule 23 of- the Federal Rules of Civil

25 Procedure, this Court hereby certifies, for purposes of

26 effectuating this settlement, a Settlement Class of all Persons

27 (except Defendants, members of the immediate family of any

28 individual Defendant, any entity in which any Defendant has a

1 - f00CV2028-L(AJB)

1 controlling interest, directors and officers of Mitek, and the

2 legal representatives, heirs, successors or assigns of any such

3 excluded Person or entity) who purchased Mitek common stock during

4 the period December 27, 1999 through September 29, 2000, inclusive .

5 Also excluded from the Settlement Class are those Persons who

6 request to be excluded from the Settlement Class pursuant to the

7 Notice of Pendency and Proposed Settlement of Class Action to be

8 sent to Class Members pursuant to this Order .

9 2. The Court does hereby preliminarily approve the

10 Stipulation and the settlement set forth therein, subject to

11 further consideration at the Settlement Hearing described below .

12 3 . A hearing (the "Settlement Hearing") shall be held before

13 this Court on , 2002, at .m ., at the United

14 States Courthouse, 940 Front Street, San Diego, California, to

15 determine whether the proposed settlement of the Litigation on the

16 terms and conditions provided for in the Stipulation is fair, just,

17 reasonable -and adequate to the Settlement Class and should be

18 approved by the Court ; whether a Judgment as provided in ¶1 .11 of

19 the Stipulation should be entered herein ; whether the proposed Plan

20 of Allocation should be approved ; and to determine the amount of

21 fees and expenses that should be awarded to Representative

22 Plaintiffs' Counsel . The Court may adjourn the Settlement Hearing

23 without further notice to Members of the Class .

24 4 . The Court approves, as to form and content, the Notice of

25 Pendency and Proposed Settlement of Class Action (the "Notice"), .

26 the Proof of Claim and Release form (the "Proof of Claim") , and the

27 Summary Notice annexed as Exhibits A--1, A-2 and A-3 hereto and

28 finds that the mailing and distribution of the Notice an d

- 2 - 00CV2028-L(AJB)

1 publishing of the Summary Notice substantially in the manner and

2 form set forth in ¶f6-7 of this Order meet the requirements of

3 Federal Rule of Civil Procedure 23 and due process, and is the best

4 notice practicable under the circumstances and shall constitute due

5 and sufficient notice to all Persons entitled thereto .

6 5 . The certification of the Settlement Class shall be

7 binding only with respect to the settlement of the Litigation . If,

8 for any reason, the Stipulation is terminated, or the Effective

9 Date for any reason does not occur, the certification of th e

10 Settlement Class shall automatically be vacated, and the Litigation

11 shall proceed as though the Settlement Class has never been

12 certified, and Defendants may assert all objections to class

13 certification .

14 6 . Plaintiffs' Settlement Counsel are hereby authorized to

15 retain the firm of Gilardi & Co .- LLC ("Claims Administrator") to

16 supervise and administer the notice procedure as well as the

17 processing of claims as more fully set forth below .

18 (a) Plaintiffs' Settlement Counsel shall make reasonable

19 efforts to identify all Persons who are members of the Settlement

20 Class including beneficial owners whose Mitek shares are held by

21 banks, brokerage firms, or other nominees ;

22 (b) Not later than , 2002 (the "Notice Date"),

23 Plaintiffs' Settlement Counsel shall cause a copy of the Notice and

24 the Proof of Claim, substantially in the form annexed as Exhibits

25 A-1 and A-2 hereto, to be mailed by first class mail to all Class

26 Members who can be identified with reasonable effort ;

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- 3 - 000V2028-L(AJB)

. . •

1 (c) Not later than , 2002, Plaintiffs'

2 Settlement Counsel shall cause the Summary Notice to be published

3 once in Investor's Business Daily ; and

4 (d) At least seven (7) days prior to the Settlement

5 Hearing, Plaintiffs' Settlement Counsel shall cause to be served on

6 Defendants' counsel and filed with the Court proof, by affidavit or

7 declaration, of such mailing and publishing .

8 7 . Nominees who purchased the common stock of Mitek during

9 the period December 27, 1999 through September 29, 2000, inclusive,

10 shall send the Notice and the Proof of Claim to all beneficial

•11 owners-of such Mitek stock within ten (10) days after receipt

12 thereof, or send a list of the names and addresses of such

13 beneficial owners to the Claims Administrator within ten (10) days

14 of receipt thereof in which event the Claims Administrator shall

15 promptly mail the Notice and Proof of Claim to such beneficial

16 owners . Plaintiffs' Settlement Counsel shall, if requested,

17 reimburse banks, brokerage houses or other nominees solely for

18 their reasonable out-of-pocket- expenses incurred in providing

19 notice to beneficial owners who are Settlement Class Members out of

20 the Settlement Fund, which expenses would not have been incurred

21 except for the sending of such Notice, subject to further order of

22 this Court with respect to any dispute concerning such

23 compensation .

24 8 . Any Person falling within the definition of the Class

25 may, upon request, be excluded from the settlement . Any such

26 Person must submit to the . Claims Administrator a request for

27 exclusion ("Request for Exclusion"), postmarked no later than

28 , 2002 . A Request for Exclusion must state : (a) the

rtr = 4 - 00CV2028-L(AJB)

1 name, address, and telephone number of the Person requesting

2 exclusion ; (b) the Person's purchases and sales of Mitek common

3 stock made during the Class Period, including the dates, the number

4 of shares and the price paid or received per share for each such

5 purchase or sale ; and (c) that the Person wishes to be excluded

6 from the Class . All Persons who submit valid and timely Requests

7 for Exclusion in the manner set forth in this paragraph shall have

8 no rights under the Stipulation, shall not share in the

9 distribution of the Settlement Fund, and shall not be bound by the

10 Stipulation or the Final Judgment .

11 9 . All members of the Settlement Class shall be bound by all

12 determinations and judgments in the Litigation concerning the

13 settlement, whether favorable or unfavorable to the Settlement

14 Class .

15 10 . Settlement Class Members who wish to participate in the

16 settlement shall complete and submit Proof of Claim forms in

17 accordance with the instructions contained therein . Unless the

18 Court orders otherwise, all Proof of Claim forms must be submitted

19 no later than ninety (90) days from the Notice Date . Any

20 Settlement Class Member who does not timely submit a Proof of Claim

21 within the time provided for, shall be barred from sharing in the

22 distribution of the proceeds of the Settlement Fund, unless

23 otherwise ordered by the Court, but the claims of such Settlement

24 Class Members shall nonetheless be barred by entry of the Judgment .

25 11 . Any member of the Settlement Class may enter an

26 appearance in the Litigation, at their own expense, individually or

27 through counsel of their own choice . If they do not enter an

28

- 5 - 00CV2028-L(AJB)

1 appearance, they will be represented by Plaintiffs' Settlement

2 Counsel .

3 12 . Pending resolution of these settlement proceedings, no

4 other action now pending or hereafter-filed arising out of all or

5 any part of the subject matter of the Litigation shall be

6 maintained as a class action, and except as provided by this or

7 further order of the Court, for good cause shown, all Persons are

8 hereby enjoined during the pendency of these settlement proceedings

9 from filing or prosecuting purported class actions against any

10 Defendant with respect to any of the Released Claims .

11 . 13 . Any member of the Settlement Class may appear and show

12 cause, if he, she or it has any, why the proposed settlement of the

13 Litigation should or should not be approved as fair, just,

14 reasonable and adequate, why a judgment should or should not be

15 entered thereon, why the Plan of Allocation should or should not be

16 approved, or why attorneys' fees -and expenses should or should not

17 be awarded to counsel for the Representative Plaintiffs ; provided,

18 however, that no Settlement Class Member or any other Person shall

19 be heard or entitled to contest the approval of the terms and

20 conditions of the proposed settlement, or, if approved, the

21 Judgment to be entered thereon approving the same, or the order

22 approving the Plan of Allocation, or the attorneys' fees and

23 expenses to be awarded to counsel for the Representative

24 Plaintiffs, unless that Person has delivered by hand or sent by

25 first class mail written objections and copies of any papers and

26 briefs such that they are received on or before

27 2002, by Milberg Weiss Bershad Hynes & Lerach LLP, Keith F . Park,

28 Ellen Gusikoff Stewart, 401 B Street, Suite 1700, San Diego ,

- 6 - 00CV2028-L(AJB)

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California 92101 ; Schiffrin & Barroway, LLP, David Kessler, Three

Bala Plaza East, Suite 400, Bala Cynwyd, Pennsylvania 19004 ; Luce,

Forward, Hamilton & Scripps LLP, Timothy R . Pestotnik, Russell A .

Gold,600 West Broadway, Suite 2600, San Diego, California 92101-

3391 ; Gray, Cary, Ware & Freidenrich LLP, Shirli Fabbri Weiss, 401

B Street, Suite 1700 San Diego, CA 92101-4297, and filed said

objections, papers and briefs with the Clerk of the United States

District Court for the Southern District of California, on or

before , 2002 . Any member of the Settlement Class who

does not make his, her or its objection in the manner provided

shall be deemed to have waived such objection and shall forever be

foreclosed from making any objection to the fairness or adequacy o f

the proposed settlement as set forth in the Stipulation, to, the

Plan of Allocation, or to the award of attorneys' fees and expenses

to Counsel for the Representative Plaintiffs, unless otherwis e

ordered by the Court .

14 .' The passage of title and ownership of the Settlement Fund

to the Escrow Agent in accordance with the terms and obligations of

the Stipulation is approved . No Person that is not a Settlement

Class Member or Counsel for the Representative Plaintiffs shal l

have any right to any portion of, or in the distribution of, the

Settlement Fund unless otherwise ordered by the Court or otherwis e

provided in the Stipulation .

15 . All funds held by the Escrow Agent shall be deemed and

considered to be in custodia legis of the Court, and shall remain

subject to the jurisdiction of the Court, until such time as such

funds shall be distributed pursuant to the Stipulation and/o r

further order(s)-of the Court .

- 7 - 00CV2028-L(AJB)

1 16. All papers in support of the settlement, the Plan of

2 Allocation, and any application by Counsel for the Representative

3 Plaintiffs for attorneys' fees or'reimbursement of expenses shall

4 be filed and served seven (7) days prior to the Settlement Hearing .

5 17 . Neither Defendants and their Related Parties nor

6 Defendants' counsel shall have any responsibility for the Plan of

7 Allocation or any application for attorneys' fees or reimbursement

8 of expenses submitted by Representative Plaintiffs' Counsel, and

9 such matters will be considered separately from the fairness,

10 reasonableness and adequacy of the settlement .

11 18 . At or after the Settlement Hearing, the Court shall

12 determine whether the Plan of Allocation proposed by Plaintiffs'

13 Settlement Counsel, and any application for attorneys' fees or

14 reimbursement of expenses shall be approved .

15 19. All reasonable . expenses incurred in identifying and

16 notifying Class members, as well as administering the Settlement

17 Fund, shall be paid as set forth in the Stipulation . In the event

18 the settlement is not approved by the Court, or otherwise fails to

19 become effective, neither the Representative Plaintiffs nor any of

20 their counsel shall have any obligation to repay any amounts4 -

21 actually and properly disbursed from the Class Notice and

22 Administration Fund .

23 20. Neither the Stipulation, nor any of its terms or

24 provisions, nor any of the negotiations or proceedings connected

25 with it, shall be construed as an admission or concession by

26 Defendants of the truth of any of the allegations in the

27 Litigation, or of any liability, fault, or wrongdoing of any kind .

28

- 8 - 000V2028 -L(AJB)

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21 . The Court reserves the right to adjourn the date of the

Settlement Hearing without further notice to the members of the

Settlement Class, and retains jurisdiction to consider all further

applications arising out of or connected with the proposed

settlement . The Court may approve the settlement, with such

modifications as may be agreed to by the Settling Parties, if

appropriate, without further notice to the Class .

DATED :THE HONORABLE M . JAMES LORENZ

UNITED STATES DISTRICT JUDG E

Submitted by :


WILLIAM S . LERACHKEITH F . PARKSPENCER A . BURKHOLZELLEN GUSIKOFF STEWART

DANIEL S . DROSMAN

ELLEN GUSIKOFF STEWART

600 West Broadway, Suite 1800

San Diego, CA 92101Telephone : 619/231-1058

SCHIFFRIN & BARROWAY, LLP

DAVID KESSLE R

Three Bala Plaza East, Suite 400Bala Cynwyd, PA 19004

Telephone : 610/667-770 6

Co-Lead Counsel for Plaintiff s

N :\CASES\Mitek .set\DLM83704 .e-a

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SCHIFFRIN & BARROWAY, LLPDAVID KESSLE RThree Bala Plaza East, Suite 400Bala Cynwyd, PA 19004Telephone : 610/667-770 6



SOUTHERN DISTRICT OF CALIFORNIA

In re MITEK SYSTEMS, INC .SECURITIES LITIGATION

This Document Relates To

ALL ACTIONS .

Master File No .} 000V2028-L(AJB)

CLASS ACTION

NOTICE OF PENDENCY ANDPROPOSED SETTLEMENT OF CLASSACTION

EXHIBIT A-1

1 TO : ALL PERSONS WHO PURCHASED MITEK SYSTEMS, INC . ("MITEK")COMMON STOCK DURING THE PERIOD DECEMBER 27, 1999 THROUGH

2 SEPTEMBER 29, 2000, INCLUSIVE

3 PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY . YOUR

4 RIGHTS MAY BE AFFECTED BY PROCEEDINGS IN THIS LITIGATION . PLEASE

5 NOTE THAT IF YOU ARE A SETTLEMENT CLASS MEMBER, YOU MAY BE ENTITLED

6 TO SHARE IN THE PROCEEDS OF THE SETTLEMENT DESCRIBED IN THIS

7 NOTICE . TO CLAIM YOUR SHARE OF THIS FUND, YOU MUST SUBMIT A VALID

8 PROOF OF CLAIM POSTMARKED ON OR BEFORE , 2002 .

9 This Notice has been sent to you pursuant to Rule 23 of the

10 Federal Rules of Civil Procedure and an order of the United States

11 District Court for the Southern District of California (the

12 "Court") . The purpose of this Notice is to inform you of the

13 proposed settlement of this class action litigation and of the

14 hearing to be held, by the Court to consider the fairness,

15 reasonableness, and adequacy of the settlement . The proposed

16 settlement would resolve the class action litigation regarding

17 Mitek pending in the federal court, as more fully described in

18 Section III, below . This Notice is not intended to be, and should

19 not' be construed as,' an expression of any opinion by the Court with

20 respect to the truth of the allegations in the Litigation or the

21 merits of the claims or defenses asserted . This Notice describes

22 the rights you may have in connection with the settlement and what

23 steps you may take in relation to the settlement and this class

24 action litigation .

25 The proposed settlement creates a fund in the amount. of

26 $2,000,000 (the "Settlement Fund") and will include interest that

27 accrues on the Settlement Fund prior to distribution . Based on

28 Representative Plaintiffs' estimate of the number of share s

- 1 - 00CV2028-L(AJB)

1 entitled to participate in the settlement, and the anticipated

2 number of claims to be submitted by Class members, the average

3 distribution per share would be approximately $0 .56 before

4 deduction of court-approved fees and expenses . However, your

5 actual recovery'from this fund will depend on a number of variables

6 including the number of claimants, the number of shares you

7 purchased or sold, the expense of administering the claims process,

8 and the timing of your purchases and sales, if any .

9 Representative Plaintiffs and Defendants do not agree on the

10 average amount of damages per share that would be recoverable if

11 Representative Plaintiffs were to have prevailed on each claim

12 asserted, nor that plaintiffs would have prevailed at all . The

13 issues on which the parties disagree include (1) the appropriate

14 economic model for determining the amount by which Mitek common

15 stock was allegedly artificially inflated (if at all) during the

16 Class Period ; (2) the amount by which Mitek common stock was

17 allegedly artificially inflated (if at all) during the Class

18 Period ; (3) the effect of various market forces influencing the

19 trading price of Mitek common stock at various times during the

20 Class Period ; (4) the extent to which external factors, such as

21 general market conditions, influenced the trading price of Mitek

22 common stock at various times during the Class Period ; (5) the

23 extent to which the various matters that Representative Plaintiffs

24 . alleged were materially false or misleading influenced (if at all)

25 the trading price of Mitek common stock at various times during the

26 Class Period ; (6) the extent to which the various allegedly adverse

27 material 'facts that Representative Plaintiffs alleged were omitted

28 influenced (if at all). . the trading price of Mitek common stock a t

- 2 - 00CV2028-L(AJB)

1 various times during the Class Period ; (7) the extent to which

2 actions by third parties other than the Defendants may have given

3 rise to plaintiffs' claims ; and (8) whether the statements made or

4 facts allegedly omitted were false, material or otherwise

5 actionable under the federal securities laws .

6 The Representative Plaintiffs believe that the proposed

7 settlement is a good recovery and is in the best interests of the

8 Class . Because of the risks associated with continuing to litigate

9 and proceeding to trial, there was a danger that Representative

10 Plaintiffs would not have prevailed on any of their claims, in

11 which case the Class would receive nothing . In addition, the

12 amount of damages recoverable by the Class was and is challenged by

13 Defendants . Recoverable damages in this case are limited to losses

14 caused by conduct actionable under applicable law and, had the

15 litigation gone to trial, Defendants intended to assert, among

16 other defenses, that all of the losses of Class Members were caused

17 by non-actionable market, industry or general economic factors and

18 therefore that there were no recoverable damages per share .

19 Defendants would also assert that throughout the Class Period the

20. uncertainties and risks associated with Mitek's business and

21 financial condition were fully and-adequately disclosed .

22 Representative Plaintiffs' Counsel have not received any

23 payment for their services in conducting this Litigation on behalf

24 of the Representative Plaintiffs and the members of the Settlement

25 Class, nor have they been reimbursed for their out-of-pocket

26 expenditures . If the settlement is approved by the Court, counsel

27 for the plaintiffs will apply to the Court for attorneys' fees of

28 25% of the settlement proceeds plus reimbursement of out-of-pocke t

- 3 - 00CV2028-L(AJB)

1 expenses not to, exceed $120,000, to be paid from the settlement

2 proceeds . If the amount requested by counsel is approved by the

3 Court, the average cost per share would be $0 .17 . The average cost

4 per share could vary depending on the number of shares for which

5 claims are filed .

6 For further information regarding this settlement you may

7 contact : Rick Nelson, Milberg Weiss Bershad Hynes & Lerach LLP, 401

8 B Street, Suite 1700, San Diego, California 92101, Telephone :

9 (619)231-1058, or David Kessler, Schiffrin & Barroway, LLP, Three

10 Bala Plaza East, Suite 400, Bala Cynwyd, Pennsylvania, 19004,

11 Telephone : (610)667-7706 . Please do not call any representative or

12 counsel of Mitek or the Court .

13 I .' NOTICE OF HEARING ON PROPOSED SETTLEMENT

14 A settlement hearing will be held on , 2002, at

15 _.m., before the Honorable M . James Lorenz, United States

16 District Judge, at the United States Courthouse, Southern District

17 of California, 940 Front Street, San Diego, California (the

18 "Settlement Hearing") . The purpose of the Settlement Hearing will

19 be to determine : (1) whether the settlement consisting of

20 $2,000,000 in cash (plus accrued interest) should be approved as

21 fair, just, reasonable and adequate to each of the parties ;

22 (2) whether the proposed plan to distribute the settlement proceeds

23 (the "Plan of Allocation") is fair, just, reasonable, and adequate ;

24 (3) whether Representative Plaintiffs' Counsel have adequately

25 represented the class ; (4) whether the application by

26 Representative Plaintiffs' Counsel for an award of attorneys' fees

27 and expenses should be approved ; . and (5) whether the Litigation

28 shbuld be dismissed with prejudice . The-Court may adjourn or

- 4 00CV2028-L(AJB)

•1 continue the Settlement Hearing without further notice to the

2 Settlement Class .

3 II . DEFINITIONS USED IN THIS NOTICE

4 1. "Defendants" means Mitek, William Boersing, John M .

5 Thornton, Noel Flynn, James DeBello and Dennis A . Brittain .

6 2. "Related Parties" means each of a Defendant's past or

7 present directors, officers, employees, partners, members,

8 principals, agents, underwriters, insurers, co-insurers,

9 reinsurers, controlling shareholders, attorneys, accountants or

10 auditors, including, but not limited to, Deloitte & Touche LLP and

11 its partners and employees, banks or investment banks, associates,

12 personal or legal representatives, predecessors, successors,

13 parents, subsidiaries, divisions, joint ventures, assigns, spouses,

14 heirs, related or affiliated entities, any entity in which a

15 Defendant has a controlling interest, any members of their

16 immediate families, or any trust of which any Defendant is the

17 settler or which is for the benefit of any Defendant and/or members

18 of his family .

19 3 . "Released Claims" shall collectively mean all claims

20 (including Unknown Claims as defined below), demands, rights,

21 liabilities and causes of action of every nature and description

22 whatsoever, known or unknown, whether or not concealed or hidden,

23 asserted or that might have been asserted,' including, without

24 limitation, claims for negligence, gross negligence, breach of duty

25 of care and/or breach of duty of loyalty, fraud, breach 'of

26 fiduciary duty, or violations of any state or federal statutes,

27 rules or regulations, by any Representative Plaintiff or Settlement

28 Class Member against the Released Persons arising out of, based

- 5 - 000V2028 -L(AJB)

1 upon or related to both the purchase of Mitek common stock by any

2 Settlement Class member during the Class Period and the facts,

3 transactions, events, occurrences, acts, disclosures, statements,

4 omissions or.failures to act which were or could have been alleged


6 4 . "Released Persons" means each and all of the Defendants

7 and their Related Parties .

8 5 . "Representative Plaintiffs" means each of the plaintiffs

9 who filed a complaint in the Litigation .

10 6 . "Settlement Class" or "Settlement Class Member" consist

11 of or mean all Persons (who do not request exclusion from the

12 Class) who purchased Mitek common stock during the period December

13 27, 1999 through September 29, 2000, inclusive . Excluded from the

14 Class are Defendants, members of the immediate family of any

15 individual Defendant, any entity in which any Defendant has a

16 controlling interest, officers and directors of Mitek, and the

17 legal representatives,-heirs, successors,-or assigns of any such

18 excluded Person or entity .

19 7 . "Unknown Claims" means any Released Claims which any


21 or suspect to exist in his, her or its favor at the time of the


23 might have affected his, her or its settlement with and release of


25 decision not to object to this settlement . With respect to any and

26 all Released Claims, the Settling Parties stipulate and agree that,

27 upon the Effective Date, the Representative Plaintiffs shall

28 expressly and each of the Settlement Class Members shall be deeme d

- 6 - 000V2028-L (AJB)

1 to have, and by operation of the Judgment shall have, expressly

2 waived the provisions, rights and benefits of California Civil Code

3 §1542, which provides :

4 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICHTHE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS

5 FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH I FKNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT

6 WITH THE DEBTOR .


8 Settlement Class Members shall be deemed to have, and by operation

9 of the Judgment shall, have, expressly waived any and al l

10 provisions, rights and benefits conferred by any law of any state

11 or territory of the .United States, or principle of common law,


13 §1542 . The Representative Plaintiffs and Settlement Class Members








21 suspected or unsuspected, contingent or non-contingent, whether orl



24 into existence in the future ., including, but, not limited to,

25 conduct which is negligent, intentional, with or without malice, or

26 a breach of any duty, law or rule, without regard to the subsequent


28 Representative Plaintiffs acknowledge, and the Settlement Clas s

- 7 - 00CV2028-L (AJB)

1 Members shall be deemed by operation of the Judgement to have

2 acknowledged, that the foregoing waiver was separately bargained

3 for and a key element of the settlement of which this release is a

4 part .

5 III . THE LITIGATION

6 On or after October 11, 2000, the following actions were filed

7 in the United States District Court for the Southern District of

8 California :

9 1. Krauss, et al . v . Mitek Systems, Inc ., et al .,Case No . 000V2028-L(AJB) ;

102 . Kulle v . Mitek Systems, Inc ., et al .,

11 Case No. 000V2074-W(LSP) ;

12 3 . R.D . Price v . Mitek Systems, Inc ., et al .,Case No . 00CV2203-IEG(AJB) ;

134 . Jacobs v . Mitek Systems, Inc ., et al .,

14 Case No. 000V2262-BTM(JFS) ; and

15 5 . Lane v . Mitek Systems, Inc ., et al .,Case No . 00CV2333-IEG(JFS) ,

16(collectively, the "Litigation") . The five class actions were

17consolidated by the Court on March 5, 2001, as In re Mitek Systems,

18Inc . Securities Litigation, Master File No . 00CV2028-L(AJB) . Also,

19on March 5-,-2001, the Court granted the motion for-appointment of

20lead plaintiffs under .§21D(a) (3) (B) of the Securities Exchange Act

21

of 1934 (the "Exchange Act") and approved lead plaintiffs'22

selection of Milberg Weiss Bershad Hynes & Lerach LLP and Schiffrin23

& Barroway, LLP as lead counsel pursuant to §21D (a) (3) (B) (v) of the24 .

Exchange Act .25

The operative complaint in the Litigation is the Consolidated26

Amended Complaint (the "Complaint"), filed April 19, 2001 . The27

Complaint alleges violations of H10(b) and 20(a) of the Exchange28

Act and Rule 10b-5 promulgated thereunder on behalf of a'class of

- 8 - 000V2028-L(AJB)

1 purchasers of Mitek common stock during the period December 27,

2 1999 through September 29, 2000, inclusive .

3 IV. CLAIMS OF THE REPRESENTATIVE PLAINTIFFS AND BENEFITS OFSETTLEMENT

4

The Representative Plaintiffs believe that the claims asserted5

in the Litigation have merit and that the evidence developed to6

date supports the claims . However, counsel for the Representative7

Plaintiffs recognize and acknowledge the expense and length of8

continued proceedings necessary to prosecute the Litigation against9

the Defendants through pretrial motions, trial and appeals .10

Counsel for the Representative Plaintiffs also have taken into11

account the- uncertain outcome and the risk of any litigation,12

especially in complex actions such as this Litigation, as well as13

the difficulties and delays inherent in such litigation . Counsel14

for the Representative Plaintiffs also are mindful of the inherent15

problems of proof under and possible defenses to the federal16

securities law violations asserted in the Litigation . Counsel for17

the Representative Plaintiffs believe that the settlement set forth18

in the Stipulation confers substantial benefits upon the Settlement19

Class . Based on their evaluation, counsel for the Representative20

Plaintiffs have determined that the settlement set forth in the21

Stipulation is in the best interests of the Representative22

Plaintiffs and the Settlement Class .23 '

V . DEFENDANTS' MAKE NO ADMISSION OF WRONGDOING OR24 LIABILITY

25 The Defendants have denied and continue to deny each and all

26 of the claims and contentions alleged by the Representative

27 Plaintiffs in the Litigation .' The Defendants expressly have denied

28 and continue to deny all charges of wrongdoing or liability agains t

- 9 - 00CV2028-L(AJB)

1 them arising out of any of the conduct, statements, acts or

2 omissions alleged, or that could have been alleged, in the

3 Litigation . The Defendants also have denied and continue to deny,

4 inter alia, the allegations that the Representative Plaintiffs or

5 the Class have suffered damage, that the price of Mitek common

6 stock was artificially inflated by reasons of alleged

7 misrepresentations, non-disclosures or otherwise, or that the

8 Representative Plaintiffs or the Class were harmed by the conduct

9 alleged in the Litigation .

10 Nonetheless, the Defendants have concluded that further

11 conduct of the Litigation would-..be protracted and expensive, and

12 that it is desirable that the Litigation be fully and finally

13 settled in the manner and upon the terms and conditions set forth

14 in the Stipulation . The Defendants also have taken into account

15 the uncertainty and risks inherent in any litigation, especially in

16 complex cases like this Litigation . The Defendants have,

17 therefore, determined that it is desirable and beneficial to them

18 that the Litigation be settled in the manner and upon the terms and

19 conditions set forth in the Stipulation .

20 VI . TERMS OF THE PROPOSED SETTLEMENT

21 The Defendants have paid or caused to be paid into an escrow

22 account, pursuant to the terms of the Stipulation of Settlement

23 dated as of October 23, 2001 (the "Stipulation"), cash in the

24 amount of $2,000,000 which has been earning and will continue to

25 earn interest for the benefit of the Settlement Class .

26 A portion of the settlement proceeds will be used for certain

27 administrative expenses, including costs of printing and mailing

28 this Notice, the cost of publishing a newspaper notice, payment o f

- 10 - 00CV2028-L(AJB)

I any taxes assessed against the Settlement Fund and costs associated

2 with the processing of claims submitted . In addition, as explained

3 below, a portion of the Settlement Fund may be awarded by the Court

4 to counsel for Representative Plaintiffs as attorneys' fees and for

5 reimbursement of out-of-pocket expenses . The balance of the

6 Settlement Fund (the "Net Settlement Fund") will be distributed

7 according to the Plan of Allocation described below to Settlement

8 Class Members who submit valid and timely Proof of Claim forms .

9 VII . PLAN OF ALLOCATION

10 The Net Settlement Fund will be distributed to Settlement

11 Class Members who submit valid, timely Proof of Claim forms

12 ('"Authorized Claimants") under the Plan of Allocation described

13 below .

14 For purposes of determining the amount an Authorized Claimant

15 may recover under the Plan of Allocation, Representative

16 Plaintiffs' Counsel have consulted with their damage consultants

17 and the Plan of Allocation reflects an assessment of the damages

18 that could have been recovered had Representative Plaintiffs

19 prevailed at trial as well as Representative Plaintiffs' Counsel's

20 assessment of the likelihood of establishing liability for various

21 periods of the Class .

22 To the extent there are sufficient funds in the Net Settlement

23 Fund, each Authorized Claimant will receive an amount equal to the

24 Authorized Claimant's claim, as defined below . If, however, the

25 amount in . the Net Settlement Fund ,.is hot 'sufficient to permit

26 payment of the total claim of each Authorized Claimant, then each

27 Authorized Claimant shall be paid the percentage of the Net

28 Settlement Fund that each Authorized Claimant's claim bears to th e

- 11 - 00CV2028-L(AJB)

1 total of the claims of all Authorized Claimants . Payment in this

2 manner shall be deemed conclusive against all Authorized Claimants .

3

4 A claim will be calculated as follows :

5 For shares of Mitek common stock that were purchased onDecember 27, 1999 through September 29, 2000, and

(a) sold prior to September 29, 2000, the claim per7 share is $0 ;

8 (b) retained at the end of September 29, 2000, theclaim per share is $1 .594 .

9The date of purchase or sale is the "contract" or "trade" date

10as distinguished from the "settlement" date . The determination of

11

the price paid per share and the price received per share, shall be12

exclusive of all commissions, taxes, fees and charges .13 •

For Class Members who held shares at the beginning of the14

Class Period or made multiple purchases or sales during the Class15

Period, the first-in, first-out ("FIFO") method will be applied to16

such holdings, purchases and sales for purposes of calculating a17

claim. Under the FIFO method, sales of shares during the Class18

Period will be matched, in chronological order, first against19

shares held at the beginning of the Class Period . The remaining20

sales of shares during the Class Period will then be matched, in21

chronological order, against shares purchased during the Class22

Period .23

A Class Member will be eligible to receive a distribution from24

the Net Settlement Fund only if a Class Member had a net loss,25

after all .profits from transactions in Mitek common stock during26

the Class Period are subtracted from all losses . However, the27

proceeds from sales of shares which have been matched against28

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shares held at the beginning of the Class Period will not be used

in the calculation of such net loss .

The Court has reserved jurisdiction to allow, disallow or

adjust the claim of any Settlement Class Member on equitable

grounds .

VIII . ORDER CERTIFYING A CLASS FOR PURPOSES OF SETTLEMENT

On 2002, the Court certified a class for

settlement purposes only, as defined above .

IX. PARTICIPATION IN THE CLAS S

If you fall within the definition of the Settlement Class, you

will be bound by any judgment entered with respect to the

settlement in the Litigation whether or not you file a Proof of

Claim and Release . If you choose, you may enter an appearance

individually or through your own counsel at your own expense .

TO PARTICIPATE IN THE DISTRIBUTION OF THE NET SETTLEMENT FUND,

YOU MUST TIMELY COMPLETE AND RETURN THE PROOF OF CLAIM AND RELEASE

FORM THAT ACCOMPANIES THIS NOTICE . The Proof of Claim and Release

must be postmarked on or before 2002, and delivered

to the Claims Administrator at the address below . Unless the Court

orders otherwise, if you do not timely submit a valid Proof of

Claim and Release, you will be barred from receiving any payments

from the Net Settlement Fund, but will in all other respects be

bound by the provisions of the Stipulation and the .Judgment .

X . EXCLUSION FROM THE CLASS

You may request to be excluded from the Settlement Class . To

do so, you must mail-'a written request to :

- 13 - 00CV2028-L (AJB)

1 Mitek Securities LitigationClaims Administrato r

2 c/o Gilardi & Co . LLCP .O . Box 804 0

3 San Rafael, CA 94912-804 0

4 The request for exclusion must state : (1) your name, address,

5 and telephone number ; (2) all purchases and sales of Mitek stock

6 made during the Class Period, including the dates, the number of

7 Mitek shares and price paid or received per share for each such

8 purchase or sale ; and (3) that you .wish to be excluded from the

9 Settlement Class . TO BE VALID, A REQUEST FOR EXCLUSION MUST STAT E

10 ALL OF THE FOREGOING INFORMATION . YOUR EXCLUSION REQUEST MUST BE

11 POSTMARKED ON OR BEFORE , 2002 . If you submit a

12 valid and timely request for exclusion, you shall have no rights

13 under the settlement, shall not share in the distribution of the

14 Net Settlement Fund, and shall not be bound by the Stipulation or

15 the Judgment .

16 XI . DISMISSAL AND RELEASE S

17 If the proposed settlement is approved, the Court will enter

18 a Final Judgment and Order of Dismissal with Prejudice

19 ("Judgment") . The Judgment will dismiss the Released Claims with

20 prejudice`as to all Defendants .

21 The Judgment will provide that all Settlement Class Members

22 who do not validly and timely request to be excluded from the

23 Settlement Class shall be deemed to have released and forever

24 discharged all Released Claims (to the extent members of the

25 Settlement Class have such claims) against all,Released Persons .

26 XII . APPLICATION-FOR FEES .AND EXPENSE S

27 At the Settlement Hearing, Counsel for the Representative

28 Plaintiffs will request the Court~ .to award attorneys' fees of 25 %

- 14 - 000V2028-L(AJB)

e

1 of the Settlement Fund, plus reimbursement of the expenses, not to

2 exceed $120,000, which were advanced in connection with the

3 Litigation, plus interest thereon . Settlement Class Members are

4 not personally liable for any such fees or expenses .

5 To date, Representative Plaintiffs' Counsel have not received

6 any payment for their services in conducting this Litigation on

7 behalf of Representative Plaintiffs and the Members of the Class,

8 nor have counsel been reimbursed for their out-of-pocket expenses .

9 The fee requested by Representative Plaintiffs' Counsel woul d

10 compensate counsel for their efforts in achieving the Settlement

11 Fund for the benefit of the Settlement Class, and for their risk in

12 undertaking this representation on a contingency basis . The fee

13 requested is within the range of fees awarded to plaintiffs'

14 counsel under similar circumstances in litigation of this type .

15 XIII . CONDITIONS FOR SETTLEMENT

16 The settlement is conditioned upon the occurrence of certain

17 events described in the Stipulation . Those events include, among

18 other things : (1) entry of'the Judgment by the Court, as provided

19 for in the Stipulation ; and (2) expiration of the time to appeal

20 from or alter or amend the Judgment . If, for any reason, any one

21 of the conditions described in the Stipulation is not met, the

22 Stipulation might be terminated and, if terminated, will become

23 null and void, and the parties to the Stipulation will be restored

24 to their respective positions as of May 20, 2001 .

25 XIV . THE RIGHT TO BE HEARD AT THE HEARING

26 Any Settlement Class Member who has not validly and timely

27 requested to be excluded from the Settlement Class, and who objects

28 to any aspect of the settlement, the Plan of Allocation, the

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adequacy of representation by Representative Plaintiffs' Counsel,

or the application for attorneys' fees and expenses, may appear and

be heard at the Settlement Hearing . Any such person must submit a

written notice of objection, received on or before

2002, by each of the following :

CLERK OF THE COURTUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF CALIFORNIA880 Front Street, Suite 429 0San Diego, California 92101-890 0

Counsel for Plaintiffs :


KEITH F . PARK

ELLEN GUSIKOFF STEWART401 B Street, Suite 1700San Diego, CA 92101

SCHIFFRIN & BARROWAY, LLPDAVID KESSLERThree Bala Plaza East, Suite 400Bala Cynwyd, PA 1900 4

Counsel for Defendants :

LUCE, FORWARD, HAMILTON &SCRIPPS LLP

TIMOTHY R . PESTOTNIKRUSSELL A . GOLD600 West Broadway, Suite 2600San Diego, CA 92101-339 1

GRAY, CARY, WARE & FREIDENRICH LLPSHIRLI FABBRI WEIS S401 B Street, Suite 1700

San Diego, CA 92101-429 7

The notice of objection must demonstrate the objecting person' s

membership in the Settlement Class, including the number of Mitek

shares purchased and sold during the Class Period, and contain a

statement of the reasons for objection . Only -members of the

Settlement Class who'have submitted written notices of objection i n

- 16 - 00CV2028-L(AJB)

1 this manner will be entitled to be heard at the Settlement Hearing,

2 unless the Court orders otherwise .

3 XV. SPECIAL NOTICE TO NOMINEE S

4 If you hold any Mitek common stock purchased during the Class

5 Period as nominee for a beneficial owner, then, within ten (10)

6 days after you receive this Notice, you must either : ( 1) send a

7 copy of this Notice and the Proof of Claim by first class mail to

8 all such persons ; or (2) provide a list of the names and addresses

9 of such persons to the Claims Administrator :

10 Mitek Securities LitigationClaims Administrato r

11 c/o Gilardi & Co . LLCP .O . Box 804 0

12 San Rafael, CA 94912-804 0

13 If you choose to mail the Notice and Proof of Claim yourself,

14 you may obtain from the Claims Administrator (without cost to you)

15 as many additional copies of these documents as you will need to

16 complete the mailing .

17 Regardless of whether you choose to complete the mailing

18 yourself or elect to have the mailing performed for you, you may

19 obtain reimbursement for or advancement of reasonable

20 administrative costs actually incurred or expected to be incurred

21 in connection with forwarding the Notice and Proof of Claim and

22 which would not have been incurred but for the obligation to

23 forward the Notice and Proof of Claim, upon submission of

24 appropriate documentation to the Claims Administrator .

25 XVI . EXAMINATION OF PAPERS

26 This Notice is a summary and does not describe all of the

27 details of the Stipulation . For full details of the matters

28 discussed in this Notice, you may review the Stipulation filed wit h

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the Court, which may be inspected during business hours, at the

office of the Clerk of the Court, United States Courthouse,

Southern District of California, 880 Front Street, San Diego,

California .

If you have any questions about the settlement of the

Litigation, you may' contact Plaintiffs' Settlement Counsel by

writing :

3

DATED :


KEITH F . PARKELLEN GUSIKbFF STEWART401 B Street, Suite 1700San Diego, CA 92101

SCHIFFRIN & BARROWAY,-LLPDAVID KESSLERThree Bala Plaza East, Suite 400Bala Cynwyd, PA 19004

DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE .

N :\CASES\Mitek .set\DLM83765 .a-1

2002 BY ORDER OF THE COURTUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF CALIFORNIA

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SCHIFFRIN & BARROWAY, LLPDAVID KESSLERThree Bala Plaza East, Suite 400Bala Cynwyd, PA 19004Telephone : 610/667-770 6




In re MITEK SYSTEMS, INC .SECURITIES LITIGATION

This Document Relates To

ALL ACTIONS .

Master File No .000V2028-L(AJB )

CLASS ACTION

PROOF OF CLAIM AND RELEAS E

EXHIBIT A-2

1 I . GENERAL INSTRUCTIONS

2 1. To recover as a Member of the Class based on your claims

3 in the consolidated action entitled In re Mitek Systems, Inc .

4 Securities Litigation, Master File, No . 00CV2028-L(AJB) (the

5 "Litigation"), you must complete and, on page 11 hereof, sign this

6 Proof of Claim and Release . If you fail to file a properly

7 addressed (as set forth in paragraph 3 below) Proof of Claim and

8 Release , your claim may be rejected and you may be precluded from

9 any recovery from the Settlement Fund created in connection with

10 the proposed settlement of the Litigation .

11 2 . Submission of this Proof of Clairri and Release, however,

12 does not assure that you will share in the proceeds of settlement

13 in the Litigatioff .

14 3 . YOU MUST MAIL YOUR COMPLETED AND SIGNED PROOF OF CLAIM

15 AND RELEASE POSTMARKED ON OR BEFORE , 2002 , ADDRESSED

16 AS FOLLOWS :

17 .Mitek Securities*Liti 'gationClaims Administrato r

18 c/o Gilardi & Co . LLC-P .O . Box 804 0

19 San Rafael, CA 94912-804 0

20 If you are NOT a Member of the Class (as defined in the Notice of

21 Pendency and Proposed Settlement of Class Action) DO NOT submit a

22 Proof of Claim and Release form .

23 4 . If you are a Member of the Class and you did not timely

24 request exclusion, you are bound by the terms of any judgment

25 entered in the Litigation, WHETHER OR NOT YOU SUBMIT A PROOF OF

26 CLAIM AND RELEASE .

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II . DEFINITIONS

1 . "Defendants" means Mitek, William Boersing, John M .

Thornton, Noel Flynn, James DeBello and Dennis A . Brittain .

-2 . "Released Persons" means each and all of the Defendants

and their Related Parties .

III . CLAIMANT IDENTIFICATION

1 . If you purchased Mitek Systems, Inc . ("Mitek") common

stock and held the certificate(s) in your name, you are the

beneficial purchaser as well as the record purchaser . If, however,

you purchased this Mitek common stock and the certificate( s) were

registered in the name of a third party, such as a nominee or

brokerage firm, you are the' beneficial . purchaser and the . third

party is .the record purchaser .

2 . Use Part I .of this form entitled "Claimant

Identification" to identify each purchaser or seller of record

("nominee"), if different,' from the beneficial purchaser of Mitek

stock which forms the basis of this claim . THIS CLAIM MUST BE

FILED BY-, THE~'ACTUAL BENEFICIAL 'PURCHASER OR PURCHASERS, OR THE

LEGAL REPRESENTATIVE OF SUCH PURCHASER OR PURCHASERS, OF THE MITEK

SECURITIES UPON WHICH THIS CLAIM IS BASED .

3 . All joint purchasers must sign this claim . Executors,

administrators, guardians, conservators and trustees must complete

and sign this claim on behalf of persons represented by them and

their authority must accompany this claim and their titles orl

capacities must be stated . The Social. Security (or taxpayer

identification) number and telephone number of the beneficial owner

may be used in verifying the claim. Failure to provide. the

- 2 - 000V2028-L(AJB)

1 foregoing information could delay verification of your claim or

2 result in rejection of the claim .

3 IV . CLAIM FORM

4 1. Use . Part II of this form' entitled "Schedule of

5 Transactions in Mitek Common Stock" to supply all required details

6 of your transaction(s) in Mitek common stock . If you need more

7 space or additional schedules, attach separate sheets giving all of

8 the required information in substantially the same form . Sign and

9 print or type your name on each additional sheet .

10 2 . on the schedules, provide all of the requested

11 information with respect to all of your purchases and all of your

12 sales of Mitek common stock which took place at any time beginning

13 December 27, 1999 through September 29, 2000, inclusive (the "Class

14 Period") , whether such transactions resulted in a profit or a loss .

15 Failure to report all such transactions may result in the rejection

16 of your claim .

17 3 . List each transaction in the Class Period separately and

18 in chronological order, by trade date, beginning with the earliest .

19 You must accurately provide the month, day and year of each

20 transaction you list .

21 4 . The date of covering a "short sale" is deemed to be the

22 date of purchase of Mitek common stock . The date of a "short sale"

23 is deemed to be the date of sale of Mitek common stock .

24 - .5'. Broker ticonfirmations or,,, other - .documentation of your

25 transactions in Mitek common stock should "be attached to your

26 claim . Failure to provide, this documentation could delay

27 verification of your claim or .result in rejection of your claim .

28 }

OOCV2028-L (AJB)

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SOUTHERN DISTRICT OF CALIFORNI A

In re Mitek .Systems, Inc . Sec . Litig .Master File .No .'000V2028-L(AJB)

PROOF OF CLAI MMust be Postmarked No Later Than :

2002

Please Type or Print

PART I : CLAIMANT IDENTIFICATION

Beneficial Owner's Name (First, Middle, Last )

Street Addres s

City State Zip Code

Foreign Province Foreign Country

IndividualSocial Security Number orTaxpayer Identification Number Corporation/Other

(work)Area Code Telephone Number

(home) .Area Code Telephone Numbe r

Record Owner's Name (if different from beneficial owner listedabove)

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In re Mitek Systems, Inc . Sec . Litig .Master File No . 00CV2028-L(AJB )

PART II : SCHEDULE OF TRANSACTIONS IN MITEK COMMON STOCK

A . Number of shares of Mitek common stock held at thebeginning of trading on December 27, 1999 :

B . Purchases (December 27 1999 - September 29, 2000 ,inclusive) of Mitek common stock :

Trade Date Number of Tota lMo . Day Year Shares Purchased Purchase Price

1 . 1 . 1 .

2 . 2 . 2 .

3 . 3 . 3 .

IMPORTANT : Identify by number listed above all purchases inwhich you covered a "short sale" :

C . Sales (December 27, 1999 - September 29, 2000, inclusive)of Mitek common stock :

Trade Date Number of TotalMo . Day Year Shares Sold Sales Price

1. 1. 1.

2. 2. 2.

3. 3. 3.

D. Number of shares of Mitek common stock held at close o ftrading on September 29, 2000 :

If you require additional space, attach extra schedules in the sameformat as above ., Sign and print your name on each additional page .

YOU MUST READ THE RELEASE AND SIGN ON PAG E

- 5 - 00CV2028-L(AJB)

1 V. SUBMISSION TO JURISDICTION OF COURT AND ACKNOWLEDGMENT S

2 I submit this Proof of Claim and Release under the terms of the

3 Stipulation of Settlement described in the Notice . I also submit

4 to the jurisdiction of the United States District Court for the

5 Southern District of California, with respect to my claim as a

6 Settlement Class Member and for purposes of enforcing the release

7 set forth herein . I further acknowledge that I am bound by and

8 subject to the terms of any judgment that may be entered in the

9 Litigation . I agree to furnish additional information t o

10 Plaintiffs' Settlement Counsel to support this claim if required to

11 do so . I have not submitted any other claim covering the same

12 purchases or sales of Mitek common stock during the Class Period

13 and know of no other person having done so on my behalf .

14 VI . RELEASE

15 1 . I hereby acknowledge full and complete satisfaction of,

16 and do hereby fully, finally and forever settle, release and

17 discharge from the Released Claims each and all of the Defendants

18 and each and all of their "Related Parties," defined as each of a

19 Defendant's past or present directors, officers, employees,

20 partners, members, principals, agents, underwriters, insurers, co-

21 insurers, reinsurers, controlling shareholders, attorneys,

22 accountants or auditors, including, but not limited to, Deloitte &

23 Touche LLP and its partners and employees, banks or investment

24 banks, associates, personal or legal representatives, predecessors,

25 successors, parents, subsidiaries, divisions, joint ventures,

26 assigns, spouses, heirs, related or affiliated entities, any entity

27 in which a Defendant has a controlling interest, any members of

28 their immediate families, or any trust of which any Defendant i s

- 6 - 00CV2028-L(AJB)

1 the settlor or which is for the benefit of any Defendant and/or

2 members of his family .

3 2 . "Released Claims" shall collectively mean all claims

4 (including Unknown Claims as defined below), demands, rights,

5 liabilities and causes of action of every nature and description

6 whatsoever, known or unknown, whether or not concealed or hidden,

7 asserted or that might have been asserted, including, without

8 limitation, claims for negligence, gross negligence, breach of duty

9 of care and/or breach of duty of loyalty, fraud, breach o f

10 fiduciary duty, or violations of any state or federal statutes,

11 rules or regulations, by any Representative Plaintiff or Settlement

12 Class Member against the Released Persons arising out of, based

13 upon or related to both the purchase of Mitek common stock by any

14 Settlement Class Member during the Class Period and the facts,

15 transactions, events, occurrences, acts, disclosures, statements,

16 omissions or failures to act which were or could have been alleged


18 3 . "Unknown Claims" means any Released Claims which any


20 or suspect to exist in his, her or its favor at the time of the


22 might .have affected his, her or its settlement with and release of


24 decision not to object to this settlement . With respect to any and

25 all Released Claims, the Settling Parties have stipulated and

26 agreed that, upon .the Effective Date, the Representative Plaintiffs

27 shall expressly and each of the Settlement Class Members shall be

28 deemed to have, and by operation of the Judgment shall have ,

- 7 - 00CV2028-L(AJB)

1 expressly waived the provisions, rights and benefits of California

2 Civil Code §1542, which-provides :

3 A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THECREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT

4 THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HI M

MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE

5 DEBTOR .


7 Settlement Class Members shall be deemed to have, and by operation

8 of the Judgment shall have, expressly waived any and all

9 provisions, rights and benefits conferred by any law of any stat e

10 or territory of the United States, or principle of common law,


12 .§1542 . The Representative Plaintiffs and Settlement Class Members








20 suspected or unsuspected, contingent or non-contingent, whether or



23 into existence in the future, including, but not limited to,

24 conduct which is negligent, intentional, with. or without malice, or

25 a breach of any duty, law or rule, without regard to the subsequent


27 Representative Plaintiffs acknowledge, and the Settlement Class

28 Members shall be deemed by operation of the Judgement to have

- 8 - 000V2028-L(AJB)

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acknowledged, that the foregoing waiver was separately bargained

for and a key element of the settlement of which this release is a

part .

4 . This release shall be of no force or effect unless an d

until the Court approves the Stipulation of Settlement and the

Stipulation becomes effective on the Effective Date (as defined in

the Stipulation) .

5 . I (We) hereby warrant and represent that I (we) have not

assigned or transferred or purported to assign or transfer,

voluntarily or involuntarily, any matter released pursuant to this

release or any other part or portion thereof .

6 . I (We) hereby warrant and represent that I (we) have

included information about all of my (our) transactions in Mitek

common stock which occurred during the Class Period as well as the

number of shares of Mitek common stock held by me (us) at the close

of trading on September 29, 2000 . .

- 9 - 000V2028-L(AJB)

1 SUBSTITUTE FORM W- 9

2 Request for Taxpayer Identification Number ("TIN") and

3 Certification

4 PART I

5NAME :

6Check appropriate box :

7 El Individual/Sole Proprietor El Pension Plan

8 El Corporation El Partnership El Trus t

9 0 IRA El Other

10Enter TIN on appropriate line .

11• For individuals, this is your Social Security Number

12 (ISSN") .

13 • For sole proprietors, you must show your individualname, but you may also-enter your business or "doing

14 business as" name . You may enter either your SSN oryour'Employer Identification Number (" EIN") .

15• For other entities, it is your EIN .

16- _ _ - _ _ _ _ or - _ - _ _ _

17 Social Security Number Employer Identification Number

18PART II

19For Payees Exempt from Backup Withholding

20If you are exempt from backup withholding, enter your correct

21 TIN in Part I and write "exempt" on the following line .

2 2

23 PART III

24 - Certification

25 UNDER THE PENALTY OF PERJURY, I (WE) CERTIFY THAT :

26 (1) The number shown on this form is my correct TIN ; and

27 (2) I (We) certify that I am (we are) NOT subject to backupwithholding -under the provisions of Section 3406

28 (a) (1) (C) of the Internal Revenue Code because : (a) I am(we are) exempt from backup withholding ; or (b) I (we)

- 10 - 000V2028-L(AJB)

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have not been notified by the Internal Revenue Servicethat I am '(we . are) subject to backup withholding as aresult of a failure to report all interest or dividends ;or (c) the Internal Revenue Service has notified me (us)that I am '(we are) no longer subject to backupwithholding .

NOTE : If you have been notified by the "Internal Revenue Servicethat you are subject to backup withholding, you mustcross out the language in Item 2 above .

SEE ENCLOSED FORM W-9 INSTRUCTIONS

The Internal Revenue Service does not require your consent to any

provision of this document other than the certification required to

avoid backup withholding .

I declare under penalty of perjury under the laws of the United

States of America that the foregoing information supplied by the

undersigned is true and correct .

Executed this day of(Month / Year )

in ,(City) (State / Country )

(Sign your name here )

Type or print your name her e

(Capacity of person(s) signing,e .g ., Beneficial Purchaser,Executor or Administrator )

ACCURATE CLAIMS PROCESSING TAKES A

SIGNIFICANT AMOUNT OF TIME .

THANK YOU FOR YOUR PATIENCE .

Reminder Checklist: -

1 . Please sign the above release and declaration .

2 . Remember to attach supporting documentation, ifavailable .

- 11 - O0CV2028-L (AJB)

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3 . Do not send original or copies of stock certificates .

4 . Keep a copy of your claim form for your records .

5 . If you desire an acknowledgment of receipt of yourclaim form, please send it Certified Mail, ReturnReceipt Requested .

6 . If you move, please send us your new address .

N:\CASES\Mitek . set\DLM83706 .a-2

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WILLIAM S . LERACH (68581 )KEITH F . PARK (54275) -SPENCER A . BURKHOLZ (147029)ELLEN GUSIKOFF STEWART (144892)DANIEL S . DROSMAN (200643 )600 West Broadway, Suite 1800

San Diego, CA 92101

Telephone : 619/231-1058

SCHIFFRIN & BARROWAY, LLP

DAVID KESSLERThree Bala Plaza East, Suite 400Bala Cynwyd, PA 19004Telephone : 610/667-770 6




In re MITEK. SYSTEMS., .: INC,. _ ) Master File-No .SECURITIES LITIGATION ' t ) 000V2028'-L (AJB )

This Document Relates To :

ALL ACTIONS .

) CLASS ACTION) .

) -.SUMMARY NOTIC E

EXHIBIT A-3

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TO : ALL PERSONS WHO PURCHASED MITEK SYSTEMS, INC . ("MITEK"")COMMON STOCK DURING THE PERIOD DECEMBER 27, 1999 THROUGHSEPTEMBER 29, 2000, INCLUSIVE

YOU ARE HEREBY NOTIFIED, pursuant to an Order of the United

States District Court for the Southern District of California ,

that a hearing will be held on , 2002, at _ .m . ,

before the Honorable M . James Lorenz, at the United States

Courthouse, 940 Front Street, San Diego, California, for the

purpose of determining (1) whether the proposed settlement of the

claims in the Litigation for the sum of $2,000,000 in cash (plu s

accrued interest) should be approved by the Court as fair, just,

reasonable and adequate ; (2) whether, thereafter, this Litigation

should be dismissed with prejudice' as set forth in the Stipulation

of Settlement dated as of October 23, 2001 ; (3) whether the Plan of

Allocation is fair, just, reasonable and adequate and therefor e

should be approved ; and. (4) whether the application of

Representative Plaintiffs' . Counsel for the payment of attorneys'

fees and reimbursement of-expenses incurred in connection with this

Litigation should be approved . . '

If you purchased the common stock of Mitek during the perio d

beginning December 27, 1999 through September 29, 2000, inclusive,

your rights may be affected by the settlement of this Litigation .

If you have not received a detailed Notice of Pendency and Proposed

Settlement of Class Action and a copy of the Proof of Claim an d

Release form , you may obtain copies by writing to Mitek Securities

Litigation , Claims Administrator , c/o Gilardi & Co . LLC, P .O . Box

8040, San Rafael, CA 94912-8040 . 'If you are a Class Member, in

order to share in the distribution of the Net Settlement Fund, you

must submit a Proof of Claim and Release no later tha n

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2002, establishing that you are entitled to recovery . You will be

bound by any judgment rendered in the Litigation whether or not you

make a claim . _

All Members of the Class who desire to exclude themselves from

the Class must do so by , 2002 .

Any objection to the settlement must be mailed or delivered

such that it is received by each of the following no later tha n

, 2002 :

CLERK OF THE COURTUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF CALIFORNIA

880 Front. Street, Suite 4290San'Diego, California 92101-8900

Counsel for Plaintiffs :


KEITH .F . PARK .ELLEN GUSIKOFF STEWART401 B Street, Suite 1700San Diego, CA 92101

SCHIFFRIN & BARROWAY,'LLPDAVID KESSLERThree Bala Plaza EastSuite 40 0Bala Cynwyd, PA 19004

Counsel for Defendants :

LUCE, FORWARD, HAMILTON &SCRIPPS

TIMOTHY R . PESTOTNIKRUSSELL A . GOLD600 West Broadway, Suite 2600San Diego, CA 92101-339 1

GRAY, CARY, WARE & FREIDENRICH LLP

SHIRLI FABBRI WEIS S401 B Street, Suite 1700San Diego, CA 92101-4297Telephone : 619/699-270 0

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• •

PLEASE DO NOT CONTACT THE COURT OR THE CLERK' S

OFFICE REGARDING THIS NOTICE .

DATED : , 2002 BY ORDER OF THE COURTUNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF CALIFORNIA

f

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8 UNITED STATES DISTRICT COURT

9 SOUTHERN DISTRICT OF CALIFORNIA

10In re MITEK SYSTEMS, INC . ) Master File No .

11 SECURITIES LITIGATION- 00CV2028-L(AJB)

12 )CLASS ACTIONThis Document Relates To :

13 ) [PROPOSED] FINAL JUDGMENT ANDALL ACTIONS . ) ORDER OF DISMISSAL WITH

14 ) PREJUDICE

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28 EXHIBIT B

1 This matter came before the Court for hearing pursuant to the

2 Order of this Court, dated , 2002, on the application

3 of the parties for approval of the settlement set forth in the

4 Stipulation of Settlement dated as of October 23, 2001 (the

5 "Stipulation") . Due and adequate notice having been given of the

6 settlement as required in said Order, and the Court having

7 considered all papers filed and proceedings had herein and

8 otherwise being fully informed in'the premises andt good cause

9 appearixig therefore, IT IS HEREBY ORDERED, ADJUDGED AND DECREED

10 that :

11 1 . This Judgment incorporates by reference the definitions

12 in the . Stipulation and all terms used herein shall have the same

13 meanings as set forth in the Stipulation .

14 2 . This Court has jurisdiction over the subject matter of

15 the Litigation and over all parties to the Litigation, including

16 all members of the Settlement Class .

17 3 . Pursuant to Rule 23 of the Federal Rules of Civil

18 Procedure, this Court certifies a Class of all Persons (except

19 Defendants, members of the immediate family'of any individual

20 Defendant, any entity in which any Defendant has a controlling

21 interest, the officers and directors of Mitek, and the legal

22 representatives, heirs, successors or assigns of any such Person or

23 entity) who purchased Mitek common,stock during the period December

24 27, 1999 through September 29, 2000, inclusive, excluding those

25 Persons (identified in Exhibit 1 hereto) who timely and validly

26 requested exclusion from the Class .

27 4 . With respect to the Class, this Court finds and concludes

28 that : .(a) the Members of the Class are so numerous that joinder o f

- 1 - 00CV2028-L(AJB)

1 all Class Members in the class action is impracticable ; (b) there

2 are questions of law and fact common to the Class which predominate

3 over any individual questions ; (c) the claims of the Representative

4 Plaintiffs are typical of the claims of the Class ; (d) the

5 Representative Plaintiffs and their counsel have fairly and

6 adequately represented and protected, the interests of the Class

7 Members ; and (e) a class action is superior to other available

8 methods' for the fair and efficient adjudication of the controversy,

9 considering : (i) the interests of the Members of the Class i n

10 individually controlling the prosecution of the separate actions,

11 (ii) the extent and nature of any litigation concerning the

12 controversy already commenced by Members of the Class, (iii) the

13 desirability or undesirability of continuing the litigation of

14 these claims in this particular forum, and (iv) the difficulties

15 likely tribe encountered in the management 'of theIclass-'action .

16- 5. Except as to any 'individual claim of those Persons

17 (identified in Exhibit 1 hereto)• who have validly' and timely

18 requested exclusion from the Class, the class action and all claims

19 contained therein,-as well as all of the Released Claims are

20 dismissed with prejudice, as to the, Representative-Plaintiffs andj

21 the other members of the Class, and as against the Released

22 'Persons . The parties are to bear their own costs, except as

23 otherwise provided in the Stipulation .

24 6 . Pursuant to Rule 23 of the Federal Rules of Civil

25 Procedure, this Court hereby approves the settlement set forth in

26 the Stipulation and finds that said settlement is, in all respects,

27 fair, reasonable and adequate to the Representative Plaintiffs, the

28 Class and each of the Class Members, in light of the complexity ,

- 2 = 00CV2028 -L(AJB)

1 expense and possible duration of further litigation, the discovery

2 and investigation conducted, and the risk and difficulty of

3 establishing liability, causation and damages . This Court further

4 finds the settlement set forth in the Stipulation is the result of

5 arm's-length negotiations between experienced counsel representing

6 the interests of the Representative Plaintiffs, the Class Members

7 and the Defendants . Accordingly, the settlement embodied in the

8 Stipulation is hereby approved and shall be consummated in

9 accordance with the terms and provisions of the Stipulation .

10 7. Upon the Effective Date hereof, the Representative

11 Plaintiffs and each of the Class Members shall be deemed to have,

12 and by operation of this Judgment shall have, fully, finally, and

13 forever released, relinquished and discharged all Released Claims

14 against the Released Persons, whether or not such Class Member

15 executes and delivers Proof of Claim and-Release .

16 8 . All Class Members are-hereby forever barred and enjoined

17 from prosecuting the Released Claims against the Released Persons .

18 9. Upon the Effective Date hereto, each of the Released

19 Persons shall be deemed to have, and by operation of this Judgment

20 shall have, "-fully, finally, ' and forever . released,,relinquished and

21 discharged each and all of the Class Members and Counsel for the

22 Representative Plaintiffs from all claims (including Unknown

23 Claims), arising out of, relating to, or in connection with the

24 institution, prosecution, assertion, settlement or resolution of

25 the Litigation or the Released Claims .

26 10 . The Notice of Pendency and Proposed Settlement of Class

27 Action given to the Class was the best notice practicable under the

28 circumstances, including the individual notice to all Members o f

- 3 - 00CV2028-L(AJB)

1 the Class who could be identified through reasonable effort . Said

2 Notice provided the best notice practicable under the circumstances

3 of those proceedings and of the matters set forth therein,

4 including the proposed settlement set forth in the Stipulation, to

5 all Persons entitled to such notice, and said Notice fully

6 satisfied the requirements of Federal Rule of Civil Procedure 23

7 and the requirements of due process .

8 11. Any plan of allocation of settlement proceeds submitted

9 by Plaintiffs' Settlement Counsel or any order entered or pending

10 motion regarding the attorneys' fees application shall in no way

11 disturb or affect this Final Judgment and shall be considered

12 separate from this Final Judgment .

13 12 . Neither the Stipulation nor the settlement contained

14 therein, nor any act performed or document executed pursuant to or

15 in furtherance of•the Stipulation or the settlement : (a) is or may

16 be deemed to be or may be used as an admission of, or evidence--of,

17 the validity of any Released Claim, or of any wrongdoing or

18 liability of the Defendants, or .(b) is or may be deemed to be or

19 may be used as an admission of, or evidence of, any fault or

20 omission of any of the Defendants in any civil, criminal or

21 administrative proceeding in any court, administrative agency or

22 other tribunal . Defendants may file the Stipulation and/or the

23 Judgment from this action in any other action that may be brought

24 against them in order to support a defense or counterclaim based on

25 principles. of . res judicata, collateral estoppel, release, good

26 faith' settlement,, .,judgment Mbar or .reduction or any theory of claim

27 preclusion or issue preclusion or .sitilar defense or counterclaim .

28 '.

4 - 00CV2028-L (AJB)

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13 . Without affecting the finality of this Judgment in any

way,' this Court hereby retains continuing jurisdiction over

(a) implententat,ion of this settlement and any award or distribution

of the Settlement Fund, including interest earned thereon ;

(b) disposition of the Settlement Fund ; (c) hearing and determining

applications for attorneys ' fees, . interest and expenses in the

Litigation; and (d) all parties hereto for the purpose of

construing, enforcing and administering the Stipulation .

14 . The Court find's that during the course of the Litigation,

the Settling Parties and their respective counsel at all times

complied with the requirements of Federal Rule of Civil Procedure

11 .

15 . In the event that the settlement does not become

effective in accordance with the terms of the Stipulation or in the

event that the Settlement Fund, or any portion thereof, is returned

to the Defendants, then this Judgment shall be-rendered null and

void to the extent provided by and in accordance with the

Stipulation and shall be vacated and, in such event, all orders

entered and releases delivered in connection herewith shall be nul l

- 5 - 00CV2028-L (AJB) .

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and void to the extent provided by and in accordance with the

Stipulation .

IDATED :THE HONORABLE M . JAMES LORENZUNITED STATES DISTRICT JUDGE

Submitted by :

MILBERG,WEISS BERSHADHYNES & LERACH LLP

WILLIAM S . LERACHKEITH F . PARK

SPENCER A . BURKHOLZ

ELLEN GUSIKOFF STEWARTDANIEL S . DROSMAN

ELLEN GUSIKOFF STEWART

600 West Broadway, Suite 1800

San Diego, CA 92101Telephone : 619/231-1058

SCHIFFRIN & BARROWAY, LLPDAVID KESSLER

Three Bala Plaza East, Suite 400Bala Cynwyd, PA 19004Telephone : 610/667-7706


N :\CASES\Mitek .set\DLMS3708 .e-b

- 6 - 00CV2028-L(AJB)

1 DECLARATION OF SERVICE BY MAIL

2I, the undersigned, declare :

31 . That declarant is and was, at all times herein mentioned,

4a citizen of the United States and a resident of the County of San

5Diego, over the age of 18 years, and not a party to or interest in

6the within action ; that declarant's business address is 600 West

7Broadway, Suite 1800, San Diego, California 92101 .

82 . That on December 6, 2001,, declarant served the

9STIPULATION OF SETTLEMENT by depositing a true copy thereof in a

10United States mailbox at San Diego, California in a sealed envelope

11with postage thereon fully prepaid and addressed to the parties

12listed on the attached Service List .

133 . That there is a regular communication by mail between the

14place of mailing and the places so addressed .

15I declare under penalty of perjury that the foregoing is true

16 -and correct . Executed this 6th day of December, 2001, at San

17Diego, California .

1 8

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20 L. HAMILTON

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000V2028 -L(AJB)

MITEK • p~Service List --12/05/0 1Page 1

COUNSEL FOR PLAINTIFF(S )

Kevin J. Yourman David KesslerWEISS & YOURMAN SCHIFFRIN & BARROWAY, LL P10940 Wilshire Blvd ., 24th Floor Three Bala Plaza East, Suite 400Los Angeles, CA 90024 Bala Cynwyd, PA 19004310/208-2800 610/667-7706310/209-2348 (fax) 610/667-7056 (fax )

Charles J . PivenLAW OFFICES OF CHARLES J .

PIVEN, P .A .The World Trade Cente r401 East Pratt Street, Suite 2525Baltimore, MD 21202410/332-003 0410/685-1300 (fax )

Michael D . BraunMarc L . GodinoSTULL, STULL & BRODY10940 Wilshire Blvd ., SuiteLos Angeles, CA 90024310/209-2468310/209-2087 (fax)

Brian M . FelgoiseLAW OFFICES OF BRIAN M .

FELGOISE230 South Broad StreetSuite 404Philadelphia, PA 19102215/735-6810215/735-5185 (fax )

Evan Smit hBRODSKY & SMITH, LLC11 Bala Avenue, SuiteBala Cynwyd, PA 19004610/668-798 7610/660-0450 (fax)

Paul J . GellerCAULEY, GELLER, BOWMAN &COATES, LLP

2255 Glades Road, Suite 421ABoca Raton, FL 33431

561/750-300 0561/750-3364 (fax )

William S .'LerachSpencer A . Burkhol z

39 Daniel S. DrosmanMILBERG WEISS.BERSHAD HYNES &LERACH LLP

600 West Broadway, Suite 1800San Diego, CA 92101-5050619/231-105 8619/231-7423 (fax)

Francis M . GregorekBetsy C . ManifoldFrancis A . Bottini, Jr .WOLF HALDENSTEIN ADLER FREEMAN

& HERZ, LLP750 B Street, Suite 2770San Diego, CA 92101

619/239-4599619/234-4599 (fax )

Gary S . GraifmanKANTROWITZ, GOLDHAMER &GRAIFMAN, P .C .

2300 747 Chestnut Ridge RoadChestnut Ridge, NY 10977914/356-2570914/356-4335 (fax)

MITEKService List - 12/05/01Page 2

COUNSEL FOR PLAINTIFF(S )

Jules BrodyHoward LongmanSTULL, STULL & BRODY6 East 45th Street, 4th FloorNew York, NY 10017

212/687-723 0212/490-2022 (fax )

Robert C . SchubertJuden Justice ReedSCHUBERT & REED LLPTwo Embarcadero Cente rSuite 166 0San Francisco, CA 94111415/788-4220415/788-0161 (fax )

COUNSEL FOR DEFENDANT S

Timothy R . PestotnikCharles A . BirdLUCE, FORWARD, HAMILTON &

SCRIPPS600 West Broadway, Suite 2600San Diego, CA 92101-3391619/236-141 4619/645-5321 (fax)

Jeffrey .R . KrinskGregory A. HartlettFINKELSTEIN & KRINSK501 West Broadway, Suite 1250San Diego, CA 92101

619/238-133 3619/238-5425 (fax )

Shirli FabbriCRAY CARY WARE

LLP4365 ExecutiveSan Diego, CA858/638-6950858/677-1477

Weiss& FREIDENRICH

Drive, Suite 110092121-2133

(fax)

in re: mitek systems, inc. securities litigation 00-cv...

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