<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended June 30, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-27872
MAY & SPEH, INC.
(Exact name of registrant as specified in its charter)
Delaware 36-2992650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1501 Opus Place, Downers Grove, Illinois 60515
(Address of principal executive offices) (Zip Code)
(630) 964-1501
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding as of August 13, 1997
Common Stock, par value $0.01 per share 25,147,354
<PAGE>
MAY & SPEH, INC.
INDEX
<TABLE>
<CAPTION>
Part I -- Financial Information Page
<C> <S> <C>
Item 1. Financial Statements
Balance Sheets -- June 30, 1997 1
and September 30, 1996
Statements of Operations -- Three and nine months 2
ended June 30, 1997 and June 30, 1996
Statements of Stockholders' Equity -- Nine months 3
ended June 30, 1997
Statements of Cash Flows -- Nine months ended 4
June 30, 1997 and June 30, 1996
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 6
and Results of Operations
Part II -- Other Information
Item 6. Exhibits and Reports on Form 8-K 10
</TABLE>
<PAGE>
PART 1 -- FINANCIAL INFORMATION
Item 1. Financial Statements
May & Speh, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, 1997 September 30, 1996
Assets (unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,241,315 $ 10,397,858
Marketable securities 25,118,626 20,334,278
Accounts receivable, net 23,639,281 21,003,095
Prepaid software royalties and other current assets 7,395,829 7,468,809
Deferred income taxes 726,000 726,000
------------ ------------
Total current assets 62,121,051 59,930,040
Property, plant and equipment, net 44,935,720 32,289,746
Intangible assets 19,189,490 16,863,811
Other assets 12,162,801 6,134,473
------------ ------------
Total assets $138,409,062 $115,218,070
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 5,846,550 $ 5,329,670
Accounts payable 3,051,509 3,713,421
Accrued payroll and other expenses 7,041,179 4,737,929
------------ ------------
Total current liabilities 15,939,238 13,781,020
Long-term debt 33,453,850 22,250,802
Deferred income taxes 3,455,000 3,455,000
------------ ------------
Total liabilities 52,848,088 39,486,822
------------ ------------
Stockholders' equity:
Common stock 250,484 249,342
Additional paid-in capital 47,141,060 46,967,691
Retained earnings 41,733,313 33,860,039
------------ ------------
89,124,857 81,077,072
Unearned ESOP compensation (3,563,883) (5,345,824)
------------ ------------
Total stockholders' equity 85,560,974 75,731,248
------------ ------------
Total liabilities and stockholders' equity $138,409,062 $115,218,070
============ ============
</TABLE>
See Accompanying Notes
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<PAGE>
May & Speh, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
---------------------------------------------------
1997 1996 1997 1996
---------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues $23,625,454 $19,997,045 $66,547,089 $55,173,175
----------- ----------- ----------- -----------
Operating expenses:
Wages and benefits 8,139,615 5,817,365 22,685,383 17,459,244
Services and supplies 1,070,194 1,715,978 4,848,039 4,700,336
Rents, leases and maintenance 5,217,533 5,018,676 14,384,674 13,061,278
Depreciation and amortization 1,063,698 422,959 2,946,338 1,150,883
Other operating expenses 2,192,528 1,573,258 6,115,376 4,940,875
ESOP principal payments 593,981 593,981 1,781,941 1,781,942
----------- ----------- ----------- -----------
Total operating expense 18,277,549 15,142,217 52,761,751 43,094,558
----------- ----------- ----------- -----------
Operating income 5,347,905 4,854,828 13,785,338 12,078,617
Interest and other expense:
ESOP interest 100,973 159,779 327,848 477,962
Other expense, net 266,666 (388,353) 757,616 (162,472)
----------- ----------- ----------- -----------
Income before income taxes 4,980,266 5,083,402 12,699,874 11,763,127
Income taxes 1,892,900 2,016,400 4,826,600 4,666,000
----------- ----------- ----------- -----------
Net income $ 3,087,366 $ 3,067,002 $ 7,873,274 $ 7,097,127
=========== =========== =========== ===========
Earnings per common share and common
equivalent shares outstanding $0.12 $0.12 $0.30 $0.30
Weighted average shares and common
equivalent shares outstanding 26,029,916 26,629,756 26,077,743 23,814,591
</TABLE>
See Accompanying Notes
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<PAGE>
May & Speh, Inc.
Consolidated Statements of Stockholders' Equity
For Nine Months Ended June 30, 1997
<TABLE>
<CAPTION>
Common Stock Additional Unearned Retained
Shares Amount paid-in-capital compensation earnings Total
<S> <C> <C> <C> <C> <C> <C>
Balance - September 30, 1996 24,934,154 $249,342 $46,967,691 ($5,345,824) $33,860,039 $75,731,248
Net income for the nine months 7,873,274 7,873,274
ended June 30, 1997(unaudited)
ESOP compensation earned 1,781,941 1,781,941
during the nine months ended
June 30, 1997 (unaudited)
Exercise of stock options 114,200 1,142 173,369 174,511
(unaudited) ---------- -------- ----------- ----------- ----------- -----------
Balance - June 30,1997 25,048,354 $250,484 $47,141,060 ($3,563,883) $41,733,313 $85,560,974
(unaudited) ========== ======== =========== ============ =========== ===========
</TABLE>
See Accompanying Notes
-3-
<PAGE>
May & Speh, Inc.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
1997 1996
--------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,873,274 $ 7,097,127
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,946,338 1,150,883
ESOP principal payments 1,781,942 1,781,942
Changes in assets and liabilities:
Accounts receivable, net (2,636,186) (3,380,132)
Prepaid expenses and other current assets (978,755) (654,407)
Income taxes payable/refundable 2,599,570 1,699,233
Accounts payable and accrued expenses 563,345 496,444
Other (1,081,014) (744,744)
------------ ------------
Net cash provided by operating activities 11,068,514 7,446,346
------------ ------------
Cash flows from investing activities:
Proceeds from sale of property and equipment 12,215,528
Purchases of property and equipment (12,212,728) (4,130,351)
Purchases of marketable securities (11,811,847) (29,502,564)
Sales of marketable securities 7,027,498 12,848,407
Cash paid for GIS and CSM (2,666,354)
Software development costs capitalized (4,978,459) (2,835,785)
Other (55,500) 126,484
------------ ------------
Net cash used in investing activities (12,481,862) (23,493,809)
------------ ------------
Cash flows from financing activities:
Capital lease principal payments (1,294,478)
Repayments of long-term obligations (2,623,230) (2,576,367)
Proceeds from issuance of common stock 174,511 43,489,905
------------ ------------
Net cash provided by financing activities (3,743,197) 40,913,538
------------ ------------
Net change in cash and cash equivalents (5,156,545) 24,866,075
Cash and cash equivalents:
Beginning of period 10,397,858 6,713,581
------------ ------------
End of period $ 5,241,313 $ 31,579,656
============ ============
</TABLE>
See Accompanying Notes
-4-
<PAGE>
May & Speh, Inc.
Notes to Financial Statements
(1) Basis of Presentation.
The financial statements as of June 30, 1997 and for the nine months then
ended are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary
for the fair presentation of the financial position and operating results
for the interim periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission (the "Commission"). Therefore, the
financial statements should be read in conjunction with the Financial
Statements and Notes thereto contained in the Company's Registration
Statement on Form S-1 (No. 33-98302), as amended, filed with the Commission
on October 18,1995. The results of operations for the nine months ended
June 30, 1997 are not necessarily indicative of the results for the entire
fiscal year.
-5-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
In addition to historical information, the following discussion contains
forward looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those anticipated,
including, but not limited to, renewal of customer and supplier contracts
by GIS (as defined below) as they expire on terms and conditions favorable
to the Company and GIS, changes in technology, and the risks and
uncertainties described in reports and other documents filed by the Company
with the Securities and Exchange Commission, including the Prospectus dated
March 26, 1996 included in the Company's Registration Statement on Form S-1
(File No. 33-98302).
Results of Operations
Three Months Ended June 30, 1997 Compared to the Three Months Ended
-------------------------------------------------------------------
June 30, 1996
-------------
Net revenues increased to $23.6 million for the three months ended June 30,
1997 from $20.0 million for the three months ended June 30, 1996, an
increase of $3.6 million or 18%. The Company's direct marketing services
revenues decreased to $14.1 million for the three months ended June 30,
1997 from $15.7 million for the three months ended June 30, 1996, a
decrease of 10%. This decrease was attributed to a reduction in revenues
from credit card issuing clients to $4.2 million for the three months ended
June 30, 1997 from $5.9 million for the three months ended June 30, 1996, a
decrease of 29%. The Company's data processing outsourcing services
revenues increased to $9.5 million for the three months ended June 30, 1997
versus $4.3 million for the three months ended June 30, 1996, an increase
of $5.2 million or 122%. Of this increase, $3.3 million is attributable to
revenues from GIS which was acquired in July, 1996.
Wages and benefits expenses increased to $8.1 million for the three months
ended June 30, 1997 from $5.8 million for the three months ended June 30,
1996, an increase of 40%. This increase reflects the net addition of 120
employees as a result of the Company's continued expansion of business
volume, strengthening of its infrastructure, 1996 acquisition of GIS, and
1997 reduction of outside consultants.
Services and supplies expenses approximated $1.1 million for the three
months ended June 30, 1997, compared to $1.7 million for the three months
ended June 30, 1996, a decrease of 38%. This decrease reflects the
reduction in cost for outside consultants as full-time employees were
hired. Services and supplies generally consist of outsourced data entry
services, general supplies, contract labor and costs related to the use of
outside consultants.
Rents, leases and maintenance expenses increased to $5.2 million for the
three months ended June 30, 1997 from $5.0 million for the three months
ended June 30, 1996, an increase of 4%. This increase was primarily
attributable to leasing computers, computer peripheral hardware, additional
software, and facility rent.
Depreciation and amortization expenses increased to $1.1 million for the
three months ended June 30, 1997 from $0.4 million for the three months
ended June 30, 1996, an increase of 151%. This increase was primarily
attributable to continued investment in technology including the upgrade of
the
-6-
<PAGE>
Company's mainframe computer and the conversion of the lease for computer
equipment from an operating lease to a capital lease. In addition, the
acquisition of GIS in the fourth quarter of fiscal year 1996 and Strategic
Decision Services in the second quarter of fiscal year 1997 has created
goodwill in excess of $19 million that will be amortized over 40 years.
Other operating expenses increased to $2.2 million for the three months
ended June 30, 1997 from $1.6 million for the three months ended June 30,
1996, an increase of 39%. This increase was primarily attributable to
operating costs relating to specific customer contracts.
Research and development costs representing primarily wages and benefits
for information technology staff increased to $0.9 million for the three
months ended June 30, 1997 from $0.6 million for the three months ended
June 30, 1996, an increase of 56%. The Company's research and development
expenses relate primarily to new product development activities.
Income taxes decreased to $1.9 million for the three months ended June 30,
1997 from $2.0 million for the three months ended June 30, 1996. The
Company's effective tax rate was 38% for the three months ended June 30,
1997 and 40% for the three months ended June 30, 1996.
Nine Months Ended June 30, 1997 Compared to the Nine Months Ended
-----------------------------------------------------------------
June 30, 1996
-------------
Net revenues increased to $66.5 million for the nine months ended June 30,
1997 from $55.2 million for the nine months ended June 30, 1996, an
increase of $11.4 million or 21%. The Company's direct marketing services
revenues decreased to $40.6 million for the nine months ended June 30, 1997
versus $42.7 million for the nine months ended June 30, 1996, a decrease of
5%. The decrease was attributed to a reduction in revenues from credit card
issuing clients to $11.1 million for the nine months ended June 30, 1997
from $14.5 million for the nine months ended June 30, 1996, a decrease of
23%. The Company's data processing outsourcing services revenues increased
to $26.0 million for the nine months ended June 30, 1997, from $12.4
million for the nine months ended June 30, 1996, an increase of $13.6
million or 109%. Of this increase, $9.8 million is attributable to revenues
from GIS.
Wages and benefits expenses increased to $22.7 million for the nine months
ended June 30, 1997 from $17.5 million for the nine months ended June 30,
1996, an increase of 10%. This increase reflects the net addition of 120
employees as a result of the Company's continued expansion of business
volume, strengthening of its infrastructure, 1996 acquisition of GIS, and
1997 reduction of outside consultants.
Services and supplies expenses increased to $4.8 million for the nine
months ended June 30, 1997 from $4.7 million for the nine months ended June
30, 1996, an increase of 2%. Services and supplies generally consist of
outsourced data entry services, general supplies, contract labor and costs
related to the use of outside consultants.
Rents, leases and maintenance expenses increased to $14.4 million for the
nine months ended June 30, 1997 from $13.1 million for the nine months
ended June 30, 1996, an increase of 14%. The increase was primarily
attributable to leasing computers, computer peripheral hardware, additional
software, and facility rent.
Depreciation and amortization expenses increased to $2.9 million for the
nine months ended June 30, 1997 from $1.2 million for the nine months ended
June 30, 1996, an increase of 156%. The
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<PAGE>
increase was primarily attributable to continued investment in technology,
including the upgrade of the Company's mainframe computer and the
conversion of the lease for the mainframe from an operating lease to a
capital lease in July, 1996. In addition, goodwill related to the
acquisition of GIS and Strategic Decision Services of approximately $19
million is being amortized over 40 years.
Other operating expenses increased to $6.1 million for the nine months
ended June 30, 1997 from $4.9 million for the nine months ended June 30,
1996, an increase of 24%. The increase was primarily attributable to
operating costs relating to specific customer contracts.
Research and development costs representing primarily wages and benefits
for information technology staff increased to $2.5 million for the nine
months ended June 30, 1997 from $1.8 million for the nine months ended June
30, 1996, an increase of 35%. The Company's research and development
expenses relate primarily to new product development activities.
Income taxes increased to $4.8 million for the nine months ended June 30,
1997 from $4.7 million for the nine months ended June 30, 1996. The
Company's effective tax rate was 38% for the nine months ended June 30,
1997 and 40% for the nine months ended June 30, 1996.
Liquidity and Capital Resources
-------------------------------
The Company's working capital decreased to $45.5 million as of June 30,
1997 from $46.1 million as of September 30, 1996. The decrease was
primarily due to capital expenditures, including capitalized software cost,
and payment of $1.3 million for the acquisition of the assets of Credit
Strategy Management. The Company's investment policy is to invest in
marketable, investment-grade debt instruments of the U.S. Government or
tax-free municipal bonds. The Company's investments typically have
maturities of three years or less. The Company historically limits its
concentration of investments in individual municipalities to $500,000 or
less. These tax-free municipal bonds are backed by U.S. Treasuries or
insured by a major municipal insurer (principal and interest). As of June
30, 1997, the Company's net accounts receivable were $22.9 million, an
increase of 14% over the previous fiscal year end. The increase reflects an
increase in work-in-process related to several major projects which were
not billed at June 30, 1997. Days outstanding for billed accounts
receivable is approximately 70 which is consistent with the previous
quarter and a decrease from 77 for fiscal year 1996.
The Company has available a $2.0 million revolving credit facility. There
are no outstanding borrowings under this credit facility. Borrowings
under a $10.0 million real estate loan are being repaid over a five year
period with interest at 8.5%. Long-term debt increased $14.6 million in
the third quarter as a result of recording the sale-leaseback transaction
completed in June. The assets were sold at net book value. The lease is
accounted for as a capital lease. The Company entered into a loan at the
time of the formation of the Company's Employee Stock Ownership Plan, which
currently has an outstanding balance of $3.6 million. Borrowings under
this ESOP loan are being repaid through December 31, 1998 with interest at
9.3% on the fixed rate portion of the loan ($2.8 million at June 30, 1997)
and at 80% of the lender's prime rate for the floating rate portion of the
loan ($0.8 million at June 30, 1997), currently 6.8%.
Effective July 1, 1996, the Company purchased all of the outstanding
capital stock of GIS for $16.1 million in cash, guaranteed deferred
payments totaling $1,000,000, common stock warrants to purchase 180,000
shares of the Company's Common stock at $16.51 per share and certain
contingent payments.
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<PAGE>
The company has recorded $18.3 million of goodwill that will be amortized
over 40 years using the straight-line method for financial reporting
purposes.
Effective February 3, 1997, the Company purchased all of the assets of
Credit Strategy Management, Inc., now known as Strategic Decision Services
(SDS), for $1.4 million in cash. The Company has recorded $1.4 million of
goodwill that will be amortized over 40 years using the straight-line
method for financial reporting purposes.
Effective April 1, 1997, the Company into a new license agreement with a
major software vendor for software used for our outsourcing services
clients. This new agreement permits the Company to increase its outsourcing
client base and mainframe capacity to nearly double current levels without
an increase in the fixed license fee for 7 years. While this new
arrangement increased rents, leases and maintenance for the third quarter
of current fiscal year, we believe this arrangement may provide an
opportunity for increased operating margins in the future as our
outsourcing revenues increase.
-9-
<PAGE>
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10.1 Employment and Consulting Agreement and General Release,
dated April 29, 1997, between the Company and Lawrence J.
Speh.
27 Financial Data Schedule.
(b) No reports on Form 8-K were filed by the Company during the
period covered by this report.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May & Speh, Inc.
Date: August 13, 1997 By: /s/ Eric M. Loughmiller
Eric M. Loughmiller
Executive Vice President, Chief
Financial Officer
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<PAGE>
EMPLOYMENT AND CONSULTING AGREEMENT
AND GENERAL RELEASE
THIS EMPLOYMENT AND CONSULTING AGREEMENT AND GENERAL RELEASE (the
"Agreement") is made and entered into as of the 29th day of April, 1997, by and
between May & Speh, Inc., a Delaware corporation (the "Employer"), and Lawrence
J. Speh ("Speh"). This Agreement is an amendment and restatement of the
Employment Agreement entered into on the 13th day of October, 1995 between the
Employer and Speh.
RECITALS
--------
A. Speh has been employed as President and Chief Executive Officer of the
Employer, and the Employer and Speh have agreed that Speh shall resign as
President of the Employer effective on or about May 19, 1997 and as Chief
Executive Officer of the Employer, and from all other offices of the Employer
held by Speh (except as a director of the Employer), effective on or about
October 15, 1997.
B. The Employer desires that Speh continue to provide employment services
for the benefit of the Employer through October 15, 1997, and Speh desires to
accept such continued employment with the Employer.
C. The Employer desires that Speh be engaged as a consultant to the
Employer after October 15, 1997 for an additional five (5) year period, and Speh
agrees to such an engagement with the Employer.
D. The Employer and Speh acknowledge that Speh will perform services at
the direction of the Employer and, in consideration of his on-going employment,
his consulting engagement, and the other terms and conditions herein, Speh will
release any and all claims and causes of action he may have against the Employer
and will enter into a non-competition/protective agreement with the Employer.
NOW, THEREFORE, in consideration of the above premises and the following
mutual covenants and conditions, the parties agree as follows:
1. Engagement. The Employer shall engage Speh, and Speh hereby accepts such
engagement, on the following terms and conditions.
2. Term of Engagement. Pursuant to the terms of this Agreement, Speh shall
continue to be employed by the Employer as its President through on or about May
19, 1997 and as its Chief Executive Officer through on or about October 15,
1997. From on or about October 16, 1997 through October 15, 2002, Speh shall be
engaged as a consultant to the Employer.
3. Duties. Speh hereby resigns as President of the Employer, effective on
or about May 19, 1997, and, effective on or about October 15, 1997, as Chief
Executive Officer of the
<PAGE>
Employer, and from all other offices of the Employer held by Speh (except as a
director of the Employer). From on or about October 16, 1997 through October 15,
2002, Speh shall perform projects to be mutually agreed upon by the Employer and
Speh, such projects to be performed during reasonable business hours. Speh shall
diligently, competently, and faithfully perform all such assigned projects, and
expressly agrees to (i) attend meetings with customers and employees, as
requested from time to time by the Employer, (ii) provide input on corporate
strategy, and (iii) continue to serve as a director of the Employer.
4. Compensation.
A. Salary. The Employer shall pay Speh through October 15, 1997 a
monthly salary equivalent to his current base monthly salary (the
"Salary"), payable in accordance with the Employer's payroll policy from
time to time in effect. The Salary shall be subject to any payroll or other
deductions as may be required to be made pursuant to law, government order,
or by agreement with, or consent of, Speh. From October 16, 1997 through
October 15, 2002, Speh shall receive an annual consulting fee of $300,000
per year, payable in accordance with the Employer's payroll policy from
time to time in effect.
B. Benefits. Speh shall be a participant, to the extent he meets the
eligibility requirements of general application, in any and all plans,
programs and arrangements maintained by the Employer and which provide
benefits for its employees and consultants. In addition to the foregoing,
the Employer shall (i) continue to reimburse Speh for all reasonable
business expenses, including reasonable travel expenses to the Employer's
principal place of business or to customer sites or locations, (ii)
continue to reimburse Speh for DuPage Club dues, (iii) permit Speh to use
the Employer's limousine, if necessary to conduct the Employer's business,
and to use the Employer's limousine for personal business, provided Speh
reimburses the Employer for such personal usage, (iv) provide Speh with
adequate support and facilities, including secretarial support as needed,
and (v) continue to pay the premiums associated with any key man insurance
policy maintained on Speh's life, so long as Speh is an employee,
consultant or director of the Employer.
C. Options. The Employer and Speh hereby agree that, as provided in
the Amended and Restated 1994 Executive Stock Option Plan of May & Speh,
Inc., Speh shall continue to be entitled to, and vest in, the Options
already granted to him, as long as he remains a director, employee or
consultant of the Employer.
D. Additional Payment. On or before December 31, 1997, Speh shall
receive in a single cash payment the sum of $1,800,000, subject to such
payroll or other deductions as may be required to be made pursuant to law,
government order, or by agreement with, or consent of, Speh.
E. Consideration. Ten percent (10%) of the payments made hereunder
shall be in consideration of the release of any claim under the Age
Discrimination in Employment Act of 1967, as amended, and as described in
Paragraph 5. The remainder of the payments shall be in consideration of the
duties described above in Paragraph 3, the release of all
2
<PAGE>
other claims described below in Paragraph 5, and the Protective Agreement
described in, and incorporated by reference in, Paragraph 9.
F. Continuing Rights. Speh agrees that he has been paid the full
amount of earned but unused vacation pay to which he is entitled. Other
than as set forth in this Agreement, no other sums (contingent or
otherwise) shall be paid to Speh in respect of his employment, or
consulting relationship, with the Employer, and any such sums (whether or
not owed) are hereby expressly waived by Speh, including, but not limited
to, any fees or payments to which Speh otherwise would be entitled as a
director of the Employer.
5. General Release. As a material inducement to the Employer to enter into
this Agreement and in consideration of the payments to be made by the Employer
to Speh in Paragraph 4 above, Speh, with full understanding of the contents and
legal effect of this Agreement, and having the right and opportunity to consult
with his counsel, releases and discharges the Employer, its stockholders,
officers, directors, supervisors, managers, employees, agents, representatives,
attorneys, divisions, subsidiaries and affiliates, and its and their
predecessors, successors, heirs, executors, administrators, and assigns
(collectively, the "Released Parties") from any and all claims, actions, causes
of action, grievances, suits, charges, or complaints of any kind or nature
whatsoever, that he ever had or now has, whether fixed or contingent, liquidated
or unliquidated, known or unknown, suspected or unsuspected, and whether arising
in tort, contract, statute, or equity, before any federal, state, local, or
private court, agency, arbitrator, mediator, or other entity, regardless of the
relief or remedy. Without limiting the generality of the foregoing, it being the
intention of the parties to make this Agreement as broad and as general as the
law permits, this Agreement specifically includes any and all claims arising
from any alleged violation by the Released Parties under the Age Discrimination
in Employment Act of 1967, as amended; Title VII of the Civil Rights Act of
1964, as amended; the Civil Rights Act of 1866, as amended by the Civil Rights
Act of 1991 (42 U.S.C. (S) 1981); the Rehabilitation Act of 1973, as amended;
the Employee Retirement Income Security Act of 1974, as amended; the Illinois
Wage Payment and Collection Act; the Illinois Human Rights Act, and other
similar state or local laws; the Americans with Disabilities Act; the Family and
Medical Leave Act; the Equal Pay Act; Executive Order 11246; Executive Order
11141; and any other statutory claim, employment or other contract claim or
implied contract claim, or common law claim for wrongful discharge, defamation,
or invasion of privacy arising out of or involving his employment or engagement
with the Employer, the termination of his employment or engagement with the
Employer, or involving any continuing effects of his employment or engagement
with the Employer or termination of his employment or engagement with the
Employer. The foregoing notwithstanding, this Paragraph 5 does not release the
Released Parties from any claims Speh may have with respect to the enforcement
of the terms of this Agreement.
6. Covenant Not to Sue. Speh, for himself, his heirs, executors,
administrators, successors and assigns covenants and agrees not to bring, file,
charge, claim, sue or cause, assist, or permit to be brought, filed, charged or
claimed any action, cause of action, or proceeding regarding or in any way
related to any of the claims released under Paragraph 5 hereof, and further
covenants and agrees that this Agreement is, will constitute and may be pleaded
as, a bar to any such claim, action, cause of action or proceeding.
3
<PAGE>
7. Indemnification. Speh will fully indemnify the Employer and its
stockholders, officers, directors, employees and independent contractors against
and will hold its stockholders, officers, directors, employees and independent
contractors harmless from any and all claims, costs, damages, demands, expenses
(including without limitation attorneys' fees), judgments, losses or other
liabilities of any kind or nature whatsoever arising from or directly or
indirectly related to any or all of this Agreement and the conduct of Speh
hereunder, including without limitation any material breach or failure to comply
with any or all of the provisions of this Agreement.
8. No Disparaging, Untrue Or Misleading Statements. From and after April
25, 1997, Speh represents that he has not made, and agrees that he will not
make, to any third party any disparaging, untrue, or misleading written or oral
statements about or relating to the Employer or its products or services (or
about or relating to any officer, director, agent, employee, or other person
acting on the Employer's behalf). The Employer agrees not to make any
disparaging, untrue, or misleading written or oral statements about Speh. Speh
acknowledges that his continuing entitlement to payments under Paragraph 4 of
the Agreement, and his continuing right to exercise options to purchase common
stock of the Employer, as described therein, shall be conditioned upon his
continuing compliance with Paragraphs 8 and 9 of the Agreement and any violation
of Paragraphs 8 or 9 by Speh shall terminate the Employer's obligation to
continue to make payments under Paragraph 4 and shall terminate Speh's right to
exercise options to purchase the common stock of the Employer.
9. Protective Agreement. Concurrent with the execution of this Agreement,
Speh has entered into a Protective Agreement, a copy of which is attached hereto
and incorporated herein by reference.
10. Severability. If any provision of this Agreement shall be found by a
court to be invalid or unenforceable, in whole or in part, then such provision
shall be construed and/or modified or restricted to the extent and in the manner
necessary to render the same valid and enforceable, or shall be deemed excised
from this Agreement, as the case may require, and this Agreement shall be
construed and enforced to the maximum extent permitted by law, as if such
provision had been originally incorporated herein as so modified or restricted,
or as if such provision had not been originally incorporated herein, as the case
may be. The parties further agree to seek a lawful substitute for any provision
found to be unlawful; provided, that, if the parties are unable to agree upon a
lawful substitute, the parties desire and request that a court or other
authority called upon to decide the enforceability of this Agreement modify the
Agreement so that, once modified, the Agreement will be enforceable to the
maximum extent permitted by the law in existence at the time of the requested
enforcement.
11. Waiver. A waiver by the Employer of a breach of any provision of this
Agreement by Speh shall not operate or be construed as a waiver or estoppel of
any subsequent breach by Speh. No waiver shall be valid unless in writing and
signed by an authorized officer of the Employer.
4
<PAGE>
12. Miscellaneous Provisions.
A. Speh agrees that he will keep the terms and amounts set forth in
this Agreement completely confidential and, other than as required by
statute, final regulation or a court of competent jurisdiction, will not
disclose any information concerning this Agreement's terms and amounts to
any person other than his attorney, accountants, tax advisors, or immediate
family.
B. Speh represents and certifies that he has carefully read and fully
understands all of the provisions and effects of this Agreement, has
knowingly and voluntarily entered into this Agreement freely and without
coercion, and acknowledges that on April 25, 1997, the Employer advised him
to consult with an attorney prior to executing this Agreement and further
advised him that he had twenty-one (21) days within which to consider this
Agreement. Speh is voluntarily entering into this Agreement and neither the
Employer nor its agents, representatives, or attorneys made any
representations concerning the terms or effects of this Agreement other
than those contained in the Agreement itself.
C. Speh acknowledges that he has seven (7) days from the date this
Agreement is executed in which to revoke his acceptance of this Agreement,
and this Agreement will not be effective or enforceable until such seven
(7)-day period has expired.
13. Complete Agreement. This Agreement sets forth the entire agreement
between the parties, and fully supersedes any and all prior agreements or
understandings between the parties pertaining to actual or potential claims
arising from Speh's employment or engagement with the Employer or the
termination of Speh's employment or engagement with the Employer, including but
not limited to, the Employment Agreement entered into on October 13, 1995
between the Employer and Speh.
14. Reimbursement. If Speh or his heirs, executors, administrators,
successors or assigns (a) breaches the Protective Agreement, or (b) attempts to
challenge the enforceability of this Agreement, or (c) files a charge of
discrimination, a lawsuit, or a claim of any kind for any matter released
herein, Speh or his heirs, executors, administrators, successors or assigns
shall be obligated to tender back to the Employer all payments made to him or
them under this Agreement, and to indemnify the Employer from and against all
liability, costs and expenses, including attorneys' fees, arising out of said
breach, challenge or action by Speh, his heirs, executors, administrators,
successors or assigns.
15. Amendment. This Agreement may not be altered, amended, or modified
except in writing signed by both Speh and the Employer.
16. Assignment. Speh acknowledges that the services to be rendered by him
are unique and personal. Accordingly, Speh may not assign any of his rights or
delegate any of his duties or obligations under this Agreement.
5
<PAGE>
17. Resolution of Disputes. In the event of any controversy between the
parties hereto arising out of, or relating to, this Agreement (other than a
dispute arising out of the Protective Agreement), within sixty (60) days of the
date the dispute arose, such controversy shall be finally settled by arbitration
conducted expeditiously in accordance with the American Arbitration Association
Commercial Arbitration Rules by a board of three independent arbitrators. Either
the Employer or Speh may institute such arbitration proceeding by giving written
notice to the other party and by designating one independent arbitrator. Within
ten (10) days thereafter, the other party shall designate a second independent
arbitrator, and such two (2) arbitrators shall thereafter select the third
independent arbitrator. A hearing shall be held by the three (3) arbitrators in
the City of Chicago, Illinois, and a decision of the matter submitted to them
shall be rendered promptly in accordance with the rules of the American
Arbitration Association. The decision of a majority of the arbitrators shall be
final and binding upon all parties hereto. Judgment upon the award rendered may
be entered in any court having jurisdiction thereof. If the responding party
shall fail to appoint an independent arbitrator within the 10-day period
provided above, the American Arbitration Association may be called upon by the
other party to appoint such independent arbitrator and such two (2) arbitrators
shall thereupon select a third independent arbitrator and the three arbitrators
thus chosen shall constitute the board of arbitration. The cost of arbitration
(excluding attorneys' fees and other legal expenses) shall be borne by the
Employer. The arbitrators are not empowered to award damages in excess of
compensatory damages and each party hereby irrevocably waives any damages in
excess of compensatory damages.
18. Legal Fees and Expenses. In the event of litigation or arbitration
under this Agreement, both the Company and Speh shall pay their own attorneys'
fees and other legal expenses; provided, however, that (i) Speh shall pay the
attorneys' fees and legal expenses of the Employer in connection with an
evidentiary hearing where Speh is enjoined either preliminarily or permanently
due to his breach or threatened breach of any provision of this Agreement, and
(ii) the Employer shall pay Speh's attorneys' fees and legal expenses in
connection with an evidentiary hearing which results in a court refusing to
issue a preliminary or permanent injunction against Speh due to his breach or
threatened breach of any provision of this Agreement.
19. Notice. Any notice required or permitted to be given under this
Agreement shall be sufficient if given in writing and personally delivered or
sent by registered or certified mail, return receipt requested, or by facsimile,
telegram or telex followed by a confirmation letter sent by registered or
certified mail, return receipt requested, addressed as follows:
If to the Employer: May & Speh, Inc.
1501 Opus Place
Downers Grove, Illinois 60515
Attn: Eric Loughmiller
If to Speh: Lawrence J. Speh
_______________________
_______________________
6
<PAGE>
20. Successors. This Agreement shall be binding upon, and inure to the
benefit of, the Employer and Speh, and, in the case of the Employer, its
successors and assigns and any person acquiring, whether by merger,
consolidation, purchase of assets or otherwise, all or substantially all of the
Employer's assets and business, and in the case of Speh, his heirs, executors,
administrators, legal representatives, successors and assigns.
21. Headings. The headings in this Agreement are inserted for convenience
only and are not to be considered a construction of the provisions hereof.
22. Execution of Agreement. This Agreement may be executed in several
counterparts, each of which shall be considered an original, but which when
taken together, shall constitute one Agreement.
23. Recitals. The recitals to this Agreement are an integral part hereof
and shall be considered as substantive and not precatory language.
24. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois, and any court action
commenced to enforce Paragraph 9 of this Agreement shall have as its sole and
exclusive venue the County of DuPage, Illinois.
IN WITNESS WHEREOF, the parties have set their signatures on the date first
written above.
MAY & SPEH, INC. LAWRENCE J. SPEH
By: _________________________________ ____________________________________
Its:_________________________________
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
financial statements included in the company's quarterly report on form 10-Q for
the quarter ended JUNE 30, 1997 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 5,241,315
<SECURITIES> 25,118,626
<RECEIVABLES> 23,639,281
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 62,121,051
<PP&E> 54,322,847
<DEPRECIATION> 9,387,127
<TOTAL-ASSETS> 138,409,062
<CURRENT-LIABILITIES> 15,939,235
<BONDS> 33,453,850
0
0
<COMMON> 250,484
<OTHER-SE> 85,310,490
<TOTAL-LIABILITY-AND-EQUITY> 138,409,062
<SALES> 66,547,089
<TOTAL-REVENUES> 66,547,089
<CGS> 0
<TOTAL-COSTS> 52,761,751
<OTHER-EXPENSES> (836,354)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,921,818
<INCOME-PRETAX> 12,699,874
<INCOME-TAX> 4,826,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,873,274
<EPS-PRIMARY> .30
<EPS-DILUTED> .30
</TABLE>
