<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 December 31, 1997
OR
[ ] 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 Identification No.)
incorporation or organization)
1501 Opus Place, Downers Grove, Illinois 60515
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (630) 964-1501
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 February 5, 1998
Common Stock, par value $0.01 per share 25,534,054
<PAGE>
MAY & SPEH, INC.
INDEX
Part I -- Financial Information
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets -- December 31, 1997
and September 30, 1997 -1-
Consolidated Statements of Operations -- Three months ended
December 31, 1997 and December 31, 1996 -2-
Consolidated Statements of Stockholders' Equity -- Three months
ended December 31, 1997 -3-
Consolidated Statements of Cash Flows -- Three months ended
December 31, 1997 and December 31, 1996 -4-
Notes to Financial Statements -5-
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations -7-
Part II -- Other Information
Item 2. Changes in Securities and Use of Proceeds -10-
Item 6. Exhibits and Reports on Form 8-K -10-
</TABLE>
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
May & Speh, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Assets December 31, 1997 September 30, 1997
(unaudited) (audited)
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 3,024,013 $ 1,888,817
Marketable securities 12,896,200 20,415,793
Accounts receivable, net 29,947,488 28,569,372
Income taxes refundable 6,301,217 6,301,217
Prepaid software royalties 6,518,476 5,442,796
Deferred income taxes and other current assets 5,594,995 2,445,829
------------ ------------
Total current assets 64,282,389 65,063,824
Property, plant and equipment, net 50,848,825 50,228,440
Goodwill 19,978,514 20,099,245
Other assets 13,522,314 13,404,419
------------ ------------
Total assets $148,632,042 $148,795,928
============ ============
Liabilities and stockholders' equity
Current liabilities:
Current maturities of long-term debt $ 5,867,996 $ 5,810,927
Accounts payable 4,219,114 5,017,666
Accrued wages and benefits and other expenses 7,459,554 7,195,717
------------ ------------
Total current liabilities 17,546,664 18,024,310
Long-term debt 30,150,736 31,546,484
Deferred income taxes 8,090,000 8,090,000
------------ ------------
Total liabilities 55,787,400 57,660,794
------------ ------------
Stockholders' equity:
Common stock 252,199 251,474
Additional paid-in capital 48,737,056 48,277,867
Retained earnings 46,231,309 45,575,694
------------ ------------
95,220,564 94,105,035
Unearned ESOP compensation (2,375,922) (2,969,901)
------------ ------------
Total stockholders' equity 92,844,642 91,135,134
------------ ------------
Total liabilities and stockholders' equity $148,632,042 $148,795,928
============ ============
</TABLE>
See Accompanying Notes
-1-
<PAGE>
May & Speh, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1997 1996
--------------------------------
<S> <C> <C>
Net revenues $26,350,565 $21,228,730
--------------------------------
Operating expenses:
Wages and benefits 8,948,912 7,143,274
Services and supplies 1,370,602 2,039,016
Rents, leases and maintenance 5,251,101 4,637,094
Depreciation and amortization 1,778,857 901,396
Other operating expenses 2,115,297 1,823,590
ESOP principal payments 593,979 593,980
Restructuring costs 4,700,000 0
--------------------------------
Total operating expenses 24,758,748 17,138,350
--------------------------------
Operating income 1,591,817 4,090,380
Interest and other expense:
ESOP interest 69,214 120,033
Other expense, net 467,385 152,744
--------------------------------
Income before income taxes 1,055,218 3,817,603
Income taxes 399,603 1,450,900
--------------------------------
Net income $ 655,615 $ 2,366,703
================================
Earnings per share:
Basic $0.03 $0.09
Weighted average shares outstanding 25,172,300 24,953,371
Diluted $0.02 $0.09
Weighted average shares outstanding,
including common equivalent shares 26,470,139 26,221,871
</TABLE>
See Accompanying Notes
-2-
<PAGE>
May & Speh, Inc.
Consolidated Statements of Stockholders' Equity
For Three Months Ended December 31, 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, 1997 25,147,354 $251,474 $48,277,867 ($2,969,901) $45,575,694 $91,135,134
Net income for the three months ended
December 31, 1997 (unaudited) 655,615 655,615
ESOP compensation earned during the three
months ended December 31, 1997 (unaudited) 593,979 593,979
Exercise of stock options (unaudited) 72,500 725 459,189 459,914
---------- --------- --------------- ------------- ----------- -----------
Balance-December 31, 1997 (unaudited) 25,219,854 $252,199 $48,737,056 ($2,375,922) $46,231,309 $92,844,642
========== ========= =============== ============= =========== ===========
</TABLE>
See Accompanying Notes
-3-
<PAGE>
May & Speh, Inc.
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended December 31, Ended December 31,
1997 1996
------------------ ------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 655,615 $ 2,366,703
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 1,778,857 901,396
ESOP principal payments 593,979 593,980
Changes in assets and liabilities:
Accounts receivable, net (1,378,116) 3,245,691
Prepaid expenses and other current assets (4,224,846) 656,124
Accounts payable and accrued expenses (534,715) (1,113,982)
Other (399,395) (148,372)
------------------ -------------------
Net cash provided by (used in) operating activities (3,508,621) 6,501,540
------------------ -------------------
Cash flows from investing activities:
Purchases of property and equipment (1,978,511) (948,384)
Purchases of marketable securities 0 (6,861,098)
Sales of marketable securities 7,519,593 2,232,339
Software development costs capitalized 0 (1,658,479)
Increase in cash surrender value of insurance (18,500) (18,500)
Other 0 (12,862)
------------------ -------------------
Net cash provided by (used in) investing activities 5,522,582 (7,266,984)
------------------ -------------------
Cash flows from financing activities:
Capital lease principal payments (544,699) (288,211)
Repayments of long-term obligations (793,980) (635,268)
Exercise of stock options 459,914 141,667
------------------ -------------------
Net cash used in financing activities (878,765) (781,812)
------------------ -------------------
Net change in cash and cash equivalents 1,135,196 (1,547,256)
Non-cash and cash equivalents:
Beginning of period 1,888,817 10,397,858
------------------ -------------------
End of period $ 3,024,013 $ 8,850,602
================== ===================
Cash financing/investing activities:
Acquisition of equipment under capital leases $ 382,460
Additional goodwill relating to GIS acquisition $ 1,355,269
</TABLE>
See Accompanying Notes
-4-
<PAGE>
May & Speh, Inc.
Notes to Financial Statements
(1) Basis of Presentation.
The financial statements as of December 31, 1997 and for the three months ended
December 31, 1997 and 1996 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.
Therefore, the financial statements should be read in conjunction with the
Financial Statements and Notes thereto contained in the Company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1997. The results of
operations for the three months ended December 31, 1997 are not necessarily
indicative of the results for the entire fiscal year.
(2) Earnings Per Share
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" (SFAS 128) during the first quarter of fiscal 1998. SFAS
128 requires presentation of both basic EPS and diluted EPS on the face of the
income statement. Basic EPS, which replaces primary EPS, is computed by dividing
net income available to common stockholders (numerator) by the weighted average
number of common shares outstanding (denominator) during the period. Unlike the
computation of primary EPS, basic EPS excludes the dilutive effect of stock
options. Diluted EPS replaces fully diluted EPS and gives effect to all dilutive
potential common shares outstanding during a period. In computing diluted EPS,
the average stock price for the period is used in determining the number of
shares assumed to be purchased under the treasury stock method from exercise of
stock options rather than the higher of the average or ending stock price as
used in the computation of fully diluted EPS. Earnings per share for the three
months ended December 31, 1996 have been restated in accordance with SFAS 128.
The following is a reconciliation of the numerators and denominators for the
computations of basic and diluted EPS:
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Basic EPS computation
Numerator $ 655,615 $ 2,366,703
=========== ===========
Denominator:
Weighted average shares outstanding 25,172,300 24,953,371
----------- -----------
Basic EPS $ .03 $ .09
=========== ===========
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
December 31, December 31,
1997 1996
------------ -------------
Diluted EPS computation
<S> <C> <C>
Numerator $ 655,615 $ 2,366,703
=========== ===========
Denominator:
Weighted average shares outstanding 25,172,300 24,953,371
Common stock equivalent of stock options 1,297,839 1,268,500
----------- -----------
Total shares 26,470,139 26,221,871
----------- -----------
Diluted EPS $ .02 $ .09
=========== ===========
</TABLE>
Options to purchase 1,150,100 and 345,000 shares of common stock that were
outstanding as of December 31, 1997 and 1996, respectively, were not included in
the computation of diluted EPS because the exercise price was greater than the
average market price of the common shares in each period.
(3) Restructuring Costs
In October 1997, the Company announced a one-time charge of approximately $4.7
million ($2.9 million after-tax) which represents the present value of payments
under existing contracts with prior members of management
-6-
<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 as they expire on terms
and conditions favorable to the Company, 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 December 31, 1997 Compared to the Three Months Ended December
31, 1996
Net revenues increased to $26.4 million for the three months ended December 31,
1997 from $21.2 million for the three months ended December 31, 1996, an
increase of 24%. The Company's direct marketing services revenues increased to
$15.4 million for the three months ended December 31, 1997 compared to $13.3
million for the three months ended December 31, 1996, an increase of 16%.
Information Technology ("IT") outsourcing services revenues increased to $10.9
million for the three months ended December 31, 1997 compared to $7.9 million
for the three months ended December 31, 1996, an increase of 38%.
Wages and benefits expenses increased to $8.9 million for the three months ended
December 31, 1997 from $7.1 million for the three months ended December 31,
1996, an increase of 25%. The increased expenses reflect additional employees
hired to continue the Company's expansion of business volume and the
strengthening of its infrastructure.
Services and supplies expenses decreased to $1.4 million for the three months
ended December 31, 1997 from $2.0 million for the three months ended December
31, 1996, a decrease of 33%. This decrease reflects the reduction in cost for
outside consultants as full-time employees were hired. Service 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 $5.3 million for the three
months ended December 31, 1997 from $4.6 million for the three months ended
December 31, 1996, an increase of 13%. The increase was primarily due to leasing
computers, computer peripheral hardware, additional software and additional
facility rent to accommodate overall growth and new employees. A portion of this
increase is due to the acquisition in fiscal year 1997 of Credit Strategy
Management ("CSM"), now known as Strategic Decision Services ("SDS"), and its
existing facility leases.
Depreciation and amortization expenses increased to $1.8 million for the three
months ended December 31, 1997 from $0.9 million for the three months ended
December 31, 1996, an increase of 97%. The increase was primarily attributable
to continued investment in technology including the
-7-
<PAGE>
purchase of the Hitachi Data System Skyline 21 mainframe computer during the
third quarter of fiscal 1997. In addition, the Company recorded additional
goodwill of $3.7 million in fiscal 1997 relating to the acquisition of CSM and
incentive payments and estimated costs to be incurred in consolidating the
operations of GIS, which the Company acquired during the fourth quarter of
fiscal 1996, resulting in increased goodwill amortization.
Other operating expenses increased to $2.1 million for the three months ended
December 31, 1997 from $1.8 million for the three months ended December 31,
1996, an increase of 16%. The increase was primarily attributable to variable
costs relating to several client contracts.
Research and development costs representing primarily wages and benefits for
information technology staff and reflected as such in the Company's financial
statements increased to $1.0 million for the three months ended December 31,
1997 from $0.8 million for the three months ended December 31, 1996, an increase
of 28%. The Company's research and development expenses relate primarily to new
product development activities.
Restructuring costs of $4.7 million ($2.9 million after-tax) for the three
months ended December 31, 1997 represent a one-time charge equal to the present
value of payments under existing contracts with prior members of management.
Excluding this one-time charge, operating income and net income would have been
approximately $6.3 million and $3.6 million, respectively.
Income taxes decreased to $0.4 million for the three months ended December 31,
1997 from $1.5 million for the three months ended December 31, 1996. The
Company's effective tax rate was 38% for the three months ended December 31,
1997 and 1996.
Liquidity and Capital Resources
- -------------------------------
The Company's working capital was $46.7 million as of December 31, 1997 compared
to $47.0 million as of September 30, 1997. Cash and marketable securities
decreased to $15.9 million at December 31, 1997 from $22.3 million at September
30, 1997. The decrease in cash and marketable securities reflects $2.0 million
for capital expenditures and $3.5 million for general operating expenses,
including approximately $2.0 million for payments under existing contracts with
prior members of 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. These 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 (as to principal and interest) by a
major municipal insurer. As of December 31, 1997, the Company's net accounts
receivable were $29.9 million, an increase of 5% from September 30, 1997.
The Company has available $2.0 million under the existing credit facility. At
December 31, 1997, there were no outstanding borrowings under this credit
facility. Borrowings under a $12.0 million
-8-
<PAGE>
unsecured term loan were $10.0 million at December 31, 1997, bear interest at
8.5% per annum and mature in 2005. Capital lease debt aggregated $22.9 million
at December 31, 1997. This debt primarily consists of sale-leaseback of the
Company's primary facility and related land during fiscal 1997 and an upgrade of
one of the Company's mainframe computers in fiscal 1996. Interest on capital
lease debt approximates 8.0% per annum. The Company entered into a loan at the
time of the formation of the Company's Employee Stock Ownership Plan ("ESOP").
This loan currently has an outstanding balance of $2.4 million with a blended
interest rate of approximately 8.8% per annum.
In connection with the Company's acquisition of GIS, the Company is required to
pay $.5 million of the purchase price on a deferred basis in the fourth quarter
of fiscal 1998. In addition, the Company paid $1.1 million to the former GIS
shareholder in fiscal 1997 based on the Company's earnings from former GIS
clients and expects to make a similar payment in fiscal year 1998.
Effective April 1, 1997, the Company entered into a new license agreement with a
major software vendor for software used for IT outsourcing services clients.
This agreement permits the Company to increase its outsourcing client base and
mainframe capacity to double current levels without an increase in the fixed
license fee for seven years. This new arrangement increased rents, leases and
maintenance expenses for the three months ended December 31, 1997 compared to
the three months ended December 31, 1996.
The Company expects capital expenditures in calendar 1998 to be approximately
$15 million.
-9-
<PAGE>
PART II -- OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
During the first quarter of fiscal 1998, the Company used approximately
$2.0 million of the net proceeds from its March 1996 initial public offering for
capital expenditures and approximately $3.5 million for general corporate
operating purposes.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment No. 6 to Term Loan Agreement by and between The
Northern Trust Company and the Registrant dated November
10, 1988
10.2 First Amendment to Amended and Restated Security Agreement
dated May 16, 1994 by and between the Registrant and The
Northern Trust Company
27 Financial Data Schedule
(b) No reports on Form 8-K were filed by the Company during the
period covered by this report.
-10-
<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: February 12, 1997 By: /s/ Eric M. Loughmiller
-------------------------
Eric M. Loughmiller
Executive Vice President,
Chief Financial Officer
and Secretary
-11-
<PAGE>
Exhibit 10.1
AMENDMENT NO. 6
---------------
THIS AMENDMENT NO. 6 (this "Amendment"), dated as of January 30, 1998,
is between MAY & SPEH, INC., an Illinois corporation ("Borrower"), and THE
NORTHERN TRUST COMPANY, an Illinois banking corporation ("Lender").
W I T N E S S E T H:
WHEREAS, Lender and Borrower are parties to that certain Term Loan
Agreement dated as of November 10, 1988 (as amended by Amendment No. 1 dated
November 21, 1989, Amendment No, 2 dated December 13, 1991, Amendment No. 3
dated February 28, 1993, Amendment No. 4 dated May 16, 1994, and Amendment No, 5
dated March 31, 1995, the "Existing Loan Agreement" and as amended and modified
by this Amendment, the "Term Loan Agreement");
WHEREAS, Borrower has requested certain amendments be made to the
Existing Loan Agreement; and
WHEREAS, subject to the terms and conditions of this Amendment, Lender
is willing to agree to such amendments;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration (the receipt,
adequacy and sufficiency of which is hereby acknowledged), the parties hereto,
intending legally to be bound, hereby agree as follows:
1. Definitions and Interpretations. Terms defined in the Term Loan
Agreement shall have the same respective meanings when used herein.
2. Loan Documents. This Amendment shall be deemed included in the
Loan Documents for all purposes of the Term Loan Agreement and the other Loan
Documents.
3. Amendments. The Existing Loan Agreement is hereby amended
effective as of the date hereof as follows:
A. Section 7.4 of the Existing Loan Agreement is hereby amended by
deleting it in its entirety and inserting the following in lieu thereof:
"(a) Current Ratio. Maintain at all times the ratio of
consolidated current assets to consolidated current
liabilities of not less than 2.0:1.0.
(b) Net Income. Maintain, during each fiscal quarter, Net Income
of not less than $1.00."
<PAGE>
B. Lender hereby consents to an amendment to the Security Agreement
and the release of the "Collateral" other than the "ESOP Note" and the "Pledged
Shares" by the "Agent" (as those terms are defined in the Security Agreement)
and directs the Agent to execute the first amendment to Security Agreement (the
"First Amendment to Security Agreement) in substantially the form attached
hereto as Exhibit A and execute UCC-3 termination statements delivered to the
Agent by the Borrower.
C. Borrower agrees to maintain at all times the availability to
borrow under that certain Revolving Credit Agreement dated January 30, 1998
between Borrower and Harris Trust and Savings Bank as in effect as of the date
hereof (the "Harris Agreement") in an amount equal to the principal amount and
interest due Lender under the Term Loan Agreement.
D. Notwithstanding anything contained in the Existing Loan Agreement
to the contrary, the failure by Borrower to perform or observe any financial
covenant of Borrower under the Harris Agreement shall constitute an Event of
Default under the Term Loan Agreement.
4. Documents Remain in Effect. Except as amended and modified by
this Amendment, and the First Amendment to Security Agreement, the Existing Loan
Agreement and the other Loan Documents remain in full force and effect and
Borrower hereby ratifies, adopts and confirms its representations, warranties,
agreements and covenants contained in, and obligations and liabilities under,
the Term Loan Agreement and the other Loan Documents.
5. References in Other Documents. References to the Existing Loan
Agreement as amended by this Amendment in any Loan Document shall be deemed to
be a reference to the Term Loan Agreement, whether or not reference is made to
this Amendment.
6. Representations. Borrower hereby represents and warrants to
Lender that:
(a) Borrower is a corporation duly organized, validly existing, and
in good standing under the laws of the state of its incorporation; and
Borrower is duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction where, because of the nature
of its activities or properties, such qualification is required;
(b) the execution, delivery and performance of this Amendment, the
First Amendment to Security Agreement and any other Loan Document executed
in connection herewith or therewith to which Borrower is a party is within
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, have received all necessary consents and approvals (if
any shall be required), and do not and will not contravene or conflict with
any provision of law or of the charter or by-laws of Borrower, or of any
material agreement binding upon Borrower or its property;
(c) this Amendment, the First Amendment to Security Agreement and any
other Loan Document executed in connection herewith or therewith to which
Borrower is a party
2
<PAGE>
are (or, when duly executed and delivered will be) the legal, valid, and
binding obligations of Borrower, enforceable against Borrower in accordance
with their respective terms; and
(d) the representations and warranties contained in the Term Loan
Agreement are true and correct on the date hereof, except to the extent
that such representations and warranties solely relate to an earlier date.
7. Conditions Precedent The effectiveness of this Amendment is
subject to receipt by Lender of the following conditions precedent:
(a) an executed original of the First Amendment to Security
Agreement;
(b) a certificate of the Secretary of Borrower certifying: (i) copies
of all corporate action taken by Borrower, including resolutions
of its board of directors, authorizing the execution, delivery,
and performance of this Amendment by Borrower, the First
Amendment to Security Agreement and other Loan Documents to be
delivered pursuant to this Amendment; and (ii) the names and true
signatures of the officers of Borrower authorized to sign this
Amendment, the First Amendment to Security Agreement and the
other Loan Documents to be delivered by the Borrower under this
Amendment;
(c) a consent letter from Harris Trust and Savings Bank ("Harris")
pursuant to which it consents to the execution and delivery of
the First Amendment to Security Agreement by the Agent and the
release of the Collateral other than the ESOP Note and the
Pledged Shares by The Northern Trust Company, as the Agent and
directs the Agent to execute the First Amendment to Security
Agreement and UCC-3 termination statements, as the Agent on
behalf of Harris under the Security Agreement; and
(d) such other instruments, agreements and documents as Lender may
reasonably request, in each case duly executed as required and
otherwise in form and substance satisfactory to Lender.
8. Costs and Expenses. Borrower acknowledges and agrees that this
Amendment shall be of no force or effect unless and until Lender shall have
received full reimbursement for its costs and expenses, including but not
limited to, legal fees, incurred by Lender in connection with this Amendment and
the First Amendment to Security Agreement.
9. Miscellaneous.
(a) Section headings use in this Amendment are for convenience of
reference only, and shall not affect the construction of this Amendment.
3
<PAGE>
(b) This Amendment and any amendment hereof or supplement hereto or
any waiver granted in connection herewith may be executed in any number of
counterparts and by the different parties on separate counterparts and each
such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same agreement.
(c) This Amendment shall be a contract made under and governed by the
internal laws of the State of Illinois, without giving effect to the
principles of conflicts of laws.
(d) All obligations of Borrower and rights of Lender, that are
expressed herein, shall be in addition to and not in limitation of those
provided by applicable law.
(e) Whenever possible, each provision of this Amendment shall be
interpreted in such manner as to be effective and valid under applicable
law; but it any provision of this Amendment shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Amendment.
(f) This Amendment shall be binding upon Borrower, Lender and their
respective successors and assigns, and shall inure to the benefit of
Borrower and Lender and the successors and assigns of Lender.
[signature page(s) to follow]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused the execution and
delivery hereof by their respective representatives thereunto duly authorized as
of the date first herein appearing.
THE NORTHERN TRUST COMPANY
By: Sarah V. Dwortz
------------------------------
Its: Second Vice President
------------------------------
MAY & SPEH, INC
By: Eric M. Loughmiller
--------------------------------
Its: Executive Vice President, Chief
Financial Officer and Secretary
-------------------------------
5
<PAGE>
EXHIBIT 10.2
FIRST AMENDMENT TO SECURITY AGREEMENT
This First Amendment to Security Agreement, dated as of January 30,
1998 made by May & Speh, Inc., an Illinois corporation (the "Borrower"), to The
Northern Trust Company, in its capacity as collateral agent (the "Agent") to the
Lenders referred in the Security Agreement (defined below).
WHEREAS, the Borrower and the Agent are parties to that certain
Amended and Restated Security Agreement dated as of May 16, 1994 (the "Security
Agreement"); and
WHEREAS, the Borrower has requested the Agent, and the Agent on behalf
of the Lenders has agreed, to release the lien on certain assets of the
Borrower;
NOW THEREFORE, in consideration of the foregoing and other good and
valuable considerations, the parties hereby agree as follows:
1. Amendment to Security Agreement. The Security Agreement is hereby
amended by deleting Section 1 thereof in its entirety and
substituting the following in lieu thereof:
"1. Grant of Security Interest. The Borrower hereby grants to the
Agent for the benefit of the Lenders to secure the payment of all
monies due by the Borrower to the Lenders and the performance of
all obligations of the Borrower to the Lenders under the Northern
Loan Agreement, under any note issued from time to time in
connection with the Northern Loan Agreement, under the Harris Note
and under all other documents and agreements delivered pursuant to
the Northern Loan Agreement or the Harris Note (collectively, the
"Loan Documents"), of every kind and description whether absolute
or contingent, due or to become due, now existing or hereafter
incurred (collectively, the "Obligations"), a security interest in
the following assets of the Borrower (the "Collateral"): (a) the
ESOP Note and the Pledged Shares; and (b) all additions,
replacements, substitutions, accessions, proceeds and products of
the foregoing."
2. No Other Amendment. Except for the amendment expressly set forth
above, the text of the Security Agreement and all other Loan Documents shall
remain unchanged and in full force and effect. The Borrower acknowledges and
expressly agrees that
<PAGE>
the Lenders reserve the right to, and do in fact, require strict compliance with
all terms and provisions of the Security Agreement and the other Loan Documents.
3. Governing Law. This Amendment shall be deemed to be made pursuant
to the laws of the State of Illinois with respect to agreements made and to be
performed wholly in the State of Illinois, and shall be construed, interpreted,
performed and enforced in accordance therewith.
4. Definitions. All capitalized terms not otherwise defined herein
shall have the meanings set forth in the Security Agreement.
5. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement. Delivery of an
executed counterpart of this Amendment by facsimile transmission shall be as
effective as delivery of a manually executed counterpart hereof.
2
<PAGE>
IN WITNESS WHEREOF, the Borrower has executed this Amendment as of the
date first above written.
MAY & SPEH, INC.
By: /s/ Eric M. Loughmiller
-----------------------------------
Title: Executive Vice President, Chief
Financial Officer and Secretary
-------------------------------
ATTEST
By: /s/ Willard E. Engel Jr.
--------------------------------------
Its: VP Treasurer/Chief Accounting Officer
-------------------------------------
THE NORTHERN TRUST COMPANY,
as Agent
By:
--------------------------
Title:
-----------------------
Accepted and Agreed to By:
THE NORTHERN TRUST COMPANY
By:
------------------------------
Title:
---------------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/ John M. Dillon
------------------------------
Title: Vice President
---------------------------
3
<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 December 31, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,024,013
<SECURITIES> 12,896,200
<RECEIVABLES> 30,277,488
<ALLOWANCES> 330,000
<INVENTORY> 0
<CURRENT-ASSETS> 64,282,389
<PP&E> 63,009,856
<DEPRECIATION> 12,161,031
<TOTAL-ASSETS> 148,632,042
<CURRENT-LIABILITIES> 17,546,664
<BONDS> 0
0
0
<COMMON> 252,199
<OTHER-SE> 92,592,443
<TOTAL-LIABILITY-AND-EQUITY> 148,632,042
<SALES> 0
<TOTAL-REVENUES> 26,350,565
<CGS> 0
<TOTAL-COSTS> 24,758,748
<OTHER-EXPENSES> 536,599
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 755,663
<INCOME-PRETAX> 1,055,218
<INCOME-TAX> 399,603
<INCOME-CONTINUING> 655,615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 655,615
<EPS-PRIMARY> .03
<EPS-DILUTED> .02
</TABLE>
