<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
May & Speh, Inc.
---------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
MAY & SPEH, INC.
1501 OPUS PLACE
DOWNERS GROVE, ILLINOIS 60515
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 11, 1998
----------------
TO THE STOCKHOLDERS OF MAY & SPEH, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of May & Speh, Inc., a Delaware corporation (the "Company"), will be
held at The Standard Club, 320 South Plymouth Court, Chicago, Illinois, on
Wednesday, March 11, 1998 at 10:00 a.m., Central Standard Time, for the
following purposes:
1. To elect five persons to the Board of Directors of the Company;
2. To approve an amendment to the Company's 1994 Executive Stock Option
Plan to increase the number of shares of Common Stock reserved
thereunder by 1,400,000 shares;
3. To approve an amendment to the Company's 1995 Key Employee Stock Option
Plan to increase the number of shares of Common Stock reserved
thereunder by 1,000,000 shares;
4. To ratify the appointment of Price Waterhouse LLP as the Company's
independent public accountants for the fiscal year ending September 30,
1998; and
5. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Stockholders of record as of the close of business on January 21, 1998 (the
"Record Date") will be entitled to notice of and to vote at the Annual Meeting
or any adjournment thereof. A list of stockholders entitled to vote at the
Annual Meeting will be available for inspection by stockholders for any
purpose germane to the Annual Meeting at the offices of the Company for the
ten days immediately preceding the Annual Meeting date. The Annual Report of
the Company for the fiscal year ended September 30, 1997 is being mailed to
all stockholders of record on the Record Date and accompanies the enclosed
Proxy Statement.
Whether or not you plan to attend the Annual Meeting, please complete, sign
and date the enclosed proxy card and return it promptly in the enclosed
envelope. Your proxy may be revoked in the manner described in the Proxy
Statement at any time before it has been voted at the Annual Meeting.
By Order of the Board of Directors,
/s/ Eric M. Loughmiller
Eric M. Loughmiller
Executive Vice President, Chief
Financial Officer and Secretary
Downers Grove, Illinois
February 6, 1998
<PAGE>
MAY & SPEH, INC.
1501 OPUS PLACE
DOWNERS GROVE, ILLINOIS 60515
----------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 11, 1998
----------------
GENERAL INFORMATION
This Proxy Statement is being furnished to the stockholders of May & Speh,
Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Company's Board of Directors for use at the
Annual Meeting of Stockholders to be held at The Standard Club, 320 South
Plymouth Court, Chicago, Illinois on Wednesday, March 11, 1998 at 10:00 a.m.,
Central Standard Time, and any adjournments thereof (the "Annual Meeting"). A
stockholder may revoke a proxy at any time before the meeting is convened by
filing with the Secretary of the Company an instrument of revocation or a duly
executed proxy bearing a later date. A proxy also may be revoked by attending
the Annual Meeting and voting in person, although attendance at the Annual
Meeting will not, in and of itself, constitute a revocation of proxy. This
Proxy Statement and the enclosed Notice of Annual Meeting and form of proxy
are first being sent to stockholders on or about February 6, 1998.
Stockholders are urged to sign the accompanying form of proxy and return it
as soon as possible in the envelope provided for that purpose. Returning a
proxy card will not prevent a stockholder from attending the Annual Meeting.
If the enclosed proxy is properly executed and returned in time for voting
with a choice specified thereon, the shares represented thereby will be voted
as indicated on such proxy. If no specification is made, the proxy will be
voted by the person(s) named thereon: (i) for the election of the nominees
named herein as directors (or a substitute therefor if a nominee is unable or
refuses to serve); (ii) for approval of an amendment to the Company's 1994
Executive Stock Option Plan (the "Executive Option Plan") to increase the
number of shares of the Company's common stock, par value $.01 per share (the
"Common Stock"), reserved thereunder by 1,400,000 shares; (iii) for approval
of an amendment to the Company's 1995 Key Employee Stock Option Plan (the "Key
Employee Option Plan") to increase the number of shares of Common Stock
reserved thereunder by 1,000,000 shares; (iv) for the ratification of Price
Waterhouse LLP as the Company's independent public accountants for the 1998
fiscal year; and (v) in the discretion of such person(s) upon such matters not
presently known or determined that properly may come before the Annual
Meeting. A stockholder who wishes to designate a person or persons to act as
his or her proxy at the Annual Meeting, other than the proxies designated by
the Board of Directors, may strike out the names appearing on the enclosed
form of proxy, insert the name of any other such person or persons, sign the
proxy and transmit it directly to such other designated person or persons for
use at the Annual Meeting.
Stockholders of record on January 21, 1998 (the "Record Date") are entitled
to notice of and to vote at the Annual Meeting. As of the Record Date, there
were 25,195,854 shares of Common Stock outstanding and entitled to one vote
each on all matters to be considered at the Annual Meeting. Stockholders do
not have the right to cumulate their votes in the election of directors. A
majority of the shares entitled to vote present, in person or by proxy, at the
Annual Meeting shall constitute a quorum. If a quorum is present, the
affirmative vote of a plurality of the shares that are present, in person or
by proxy, at the Annual Meeting and entitled to vote will be sufficient to
elect a director, and the affirmative vote of a majority of such shares will
be sufficient to approve the amendment of the Executive Option Plan and the
Key Employee Option Plan and to ratify the appointment of the independent
public accountants. Abstentions and broker non-votes will be treated as
present at the Annual Meeting for purposes of reaching a quorum. Abstentions
shall have no effect on the election of a director but shall be treated as a
vote against the amendment of the Executive Option Plan, the amendment of the
Key Employee Option Plan and the ratification of the independent public
accountants. Broker non-votes shall have no effect on the outcome of the vote
on any of the proposals.
<PAGE>
The cost of soliciting proxies will be borne by the Company. In addition to
solicitation by mail, directors, officers and employees of the Company may
solicit proxies in person or by telephone. Brokers, nominees, fiduciaries and
other custodians will be requested to forward soliciting materials to the
beneficial owners of shares of Common Stock and will be reimbursed by the
Company for their reasonable expenses in forwarding such materials.
PROPOSAL 1. ELECTION OF DIRECTORS
The Board of Directors presently consists of eight directors and is divided
into three classes. One class of directors is elected annually, and each
director in the class generally serves a three-year term. The Board has
nominated Deborah A. Bricker, Casey Cowell, Lawrence J. Speh, Paul G. Yovovich
and Jonathan Zakin for election to the Board at the Annual Meeting, each of
whom has indicated his or her willingness to serve if elected. To maintain the
number of directors in each class as nearly equal in number as reasonably
possible, Ms. Bricker and Mr. Speh have been nominated to serve as Class II
directors for a three-year term, Messrs. Cowell and Zakin have been nominated
to serve as Class I directors for a two-year term and Mr. Yovovich has been
nominated to serve as a Class III director for a one-year term. All of the
nominees are presently serving as directors of the Company. In the event that
a nominee should become unwilling or unable to serve as a director, all duly
executed proxies shall be voted for the election of such other person as may
be designated by the Board of Directors. Unless authority to vote for a
nominee is withheld, all votes represented by a properly executed proxy will
be cast in favor of the nominees.
The Board of Directors recommends a vote FOR the nominees for director.
The table below contains a brief description of the business experience and
positions held by the nominees and the other directors of the Company.
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY, BUSINESS
NAME AGE EXPERIENCE AND OTHER POSITIONS
---- --- --------------------------------
<S> <C> <C>
NOMINEES FOR ELECTION:
Deborah A. Bricker(1)(2)(3). 45 Ms. Bricker has served as a director of the Company
since March 1996. Ms. Bricker is the founder and
President of Bricker & Associates, Inc., a
productivity consulting firm based in Chicago,
Illinois.
Casey Cowell(1)(3).......... 45 Mr. Cowell has been Vice Chairman of 3Com Corporation
since June 1997. From 1983 to May 1997, Mr. Cowell was
Chairman and Chief Executive Officer of U.S. Robotics
Corporation. Mr. Cowell also served as President of
U.S. Robotics Corporation from 1983 to January 1996.
Mr. Cowell currently serves as a director of 3Com
Corporation, Mastering, Inc. and System Software
Associates.
Lawrence J. Speh(1)......... 48 Mr. Speh has served as a director of the Company since
July 1992, as Chief Executive Officer from January
1993 to September 1997, and as President from January
1993 to May 1997. Mr. Speh currently serves as a
consultant to the Company. Mr. Speh is the son of
Albert J. Speh, Jr., the Chairman Emeritus of the
Company.
Paul G. Yovovich(1)(2)(3)... 44 From 1993 to 1996, Mr. Yovovich was President of
Advance Ross Corp., a public company until its 1996
merger with CUC International. He served in various
executive capacities at Centel Corporation from 1982
to 1992, including as President of Central Telephone
Co., a subsidiary of Centel, from 1990 to 1992. Mr.
Yovovich is a director of 3Com Corporation, APAC
TeleServices, Inc., Comarco, Inc. and Mastering, Inc.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY, BUSINESS
NAME AGE EXPERIENCE AND OTHER POSITIONS
---- --- --------------------------------
<S> <C> <C>
Jonathan Zakin(1)........... 48 Mr. Zakin currently serves as President of Leeward
Management/ Seaview Holdings. From 1987 to 1997, Mr.
Zakin served in various senior management positions
and was a director of U.S. Robotics Corporation.
TERM EXPIRING IN 1999:
Albert J. Speh, Jr.(1)...... 78 Mr. Speh is a founder of the Company and served as
Chairman of the Board of Directors from 1992 to
November 1997. Prior to founding the Company, Mr. Speh
served in the Armed Forces during World War II. He was
later employed by Sears, Roebuck and Co., General
Finance, Inc. and Encyclopedia Britannica in the field
of data processing. Mr. Speh currently serves on the
board of Fenwick High School.
Peter I. Mason(1)........... 45 Mr. Mason has been a director of the Company since
November 1994, and has served as President and Chief
Operating Officer of the Company since May 1997, as
President and Chief Executive Officer since October
1997 and as Chairman since November 1997. Prior to
joining May & Speh, Mr. Mason was a partner in the
Chicago law firm of Freeborn & Peters, which he co-
founded in 1983, and served as chairman of its
operating committee from 1986 to 1996. He served as a
director of U.S. Robotics Corporation from 1983 to
1997, and currently serves as a director of Mastering,
Inc. and several privately held businesses.
TERM EXPIRING IN 2000:
Robert C. Early(1).......... 44 Mr. Early has served as a director since November 1994.
Mr. Early has served as Executive Vice President,
Corporate Development of the Company since January
1997. From October 1995 to January 1997, he served as
Executive Vice President, Chief Financial Officer and
Treasurer of the Company, and as Director of Corporate
Growth from 1993 through October 1995. Prior to
joining the Company, Mr. Early worked as an
independent contractor with business advisory firms,
including Ridge Capital Corp. and Ridge Advisors,
Inc., which provide mergers and acquisitions, capital
financing and strategic planning advisory services.
From 1990 through 1992 Mr. Early was also Vice
Chairman of Consolidated Convenience Systems, Inc., a
holding company. Prior to 1990, Mr. Early spent
approximately 12 years at Grant Thornton LLP, and was
the partner responsible for the Chicago office Capital
Markets Group from 1985 through 1990. Mr. Early is a
CPA.
</TABLE>
- --------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
3
<PAGE>
The Board of Directors has three standing committees, the Executive
Committee, the Audit Committee and the Compensation Committee. The Company does
not have a nominating committee. The nominating function is performed by the
Executive Committee, which has not established a formal policy or procedure for
considering stockholder nominations. Stockholder nominations must comply with
the notice requirements set forth in the Company's Bylaws.
The Executive Committee is empowered to exercise the authority of the Board
of Directors in the management of the business and affairs of the Company
between the meetings of the Board, except as provided by the Bylaws or limited
by the provisions of the Delaware General Corporation Law. During fiscal 1997,
the Executive Committee did not meet.
The Audit Committee recommends to the Board of Directors the appointment of
the independent certified public accountants for the following year and reviews
the scope of the audit, the independent certified public accountant's report
and the auditors' comments relative to the adequacy of the Company's system of
internal controls and accounting policies. During fiscal 1997, the Audit
Committee held four meetings.
The Compensation Committee is responsible for making determinations regarding
salaries, bonuses and other compensation for the Company's executive officers,
including decisions with respect to stock option grants. During fiscal 1997,
the Compensation Committee held two meetings.
During fiscal 1997, the Board of Directors held six meetings. All members of
the Board attended all of the Board meetings and meetings of their respective
committees during that period.
Pursuant to an employment agreement with Peter I. Mason, the Company has
agreed that Mr. Mason shall serve on the Executive Committee of the Board and,
if a nominating committee is established, the nominating committee. Under the
terms of the agreement, the Company also has agreed to have Casey Cowell serve
as a Class I director of the Company, and Paul G. Yovovich serve as a Class III
director. Pursuant to an employment agreement with Lawrence J. Speh, the Board
has agreed that, during the term of that agreement and provided Mr. Speh owns
at least 500,000 shares of Common Stock, Mr. Speh shall be nominated to serve
on the Board. In addition, for so long as he is a member of the Board or a
nominee to serve on the Board, Mr. Speh has agreed to vote all shares of Common
Stock owned directly or in a fiduciary capacity by him in favor of the
Company's nominees at the 1998 Annual Meeting, and all shares of Common Stock
owned by him for the Company's nominees in subsequent elections. In addition,
the Company's Chief Executive Officer has agreed to support the nomination and
election of Albert J. Speh, Jr. to the Board. See "--Executive Compensation--
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements."
COMPENSATION OF DIRECTORS
Directors who are also employees of the Company are not separately
compensated for serving on the Board of Directors. Non-employee directors are
compensated through participation in the Executive Option Plan and cash
payments for attendance at Board and committee meetings, and are reimbursed for
related travel expenses. Non-employee directors receive $1,000 for each Board
meeting attended and $750 for each standing committee meeting attended. Peter
I. Mason served as a non-employee director prior to becoming an officer of the
Company in May 1997. Mr. Mason was not separately compensated for his
attendance at any Board or committee meeting, although the law firm in which he
was a partner, Freeborn & Peters, was compensated for Board and committee
meetings attended by Mr. Mason based on his then standard hourly rate.
Pursuant to the Executive Option Plan, each non-employee director receives
options to purchase 21,600 shares of Common Stock, vesting over a three-year
period. No additional option grants are made to non-employee directors for
serving on a committee. The exercise price for such options is based upon the
fair market value of the Common Stock on the date of grant. Directors receive
grants on the effective date of their appointment. Subsequent comparable grants
of options will be made on the third anniversary date of each option grant.
4
<PAGE>
OWNERSHIP OF SECURITIES
The following table sets forth, as of January 26, 1998, the number of shares
of Common Stock beneficially owned by (i) all persons known by the Company to
beneficially own more than five percent of the outstanding Common Stock, (ii)
all directors and nominees, (iii) the persons named in the Summary Compensation
Table below, and (iv) all directors and executive officers as a group. Unless
otherwise indicated, the persons named below have sole voting and investment
power with respect to all shares shown as beneficially owned by them:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- ---------------- ----------------------- --------
<S> <C> <C>
May & Speh, Inc. Employee Stock Ownership
Plan...................................... 8,204,266(1) 32.5%
Lawrence J. Speh........................... 4,156,932(2) 16.3
Albert J. Speh, Jr......................... 1,852,391(3) 7.4
Robert C. Early............................ 285,130(4) 1.1
Michael J. Loeffler........................ 162,158(5) *
Terrance C. Cieslak........................ 158,166(6) *
Peter I. Mason............................. 91,200(7) *
Deborah A. Bricker......................... 14,400(8) *
Casey Cowell............................... 100,004(9) *
Paul G. Yovovich........................... 5,000 *
Jonathan Zakin............................. 68,003(10) *
All directors and executive officers as a
group (13 persons)........................ 7,450,184(2)(3)(11) 28.7
</TABLE>
- --------
*Less than one percent.
(1) The address of the May & Speh, Inc. Employee Stock Ownership Plan (the
"ESOP") is c/o Cole Taylor Bank, 850 W. Jackson Blvd., Chicago, Illinois
60607. Includes 6,899,180 shares that have been allocated or are available
for allocation to the accounts of certain employees or former employees of
the Company. ESOP participants have shared voting and investment power
with respect to the shares allocated to their individual accounts.
(2) Includes 645,876 shares held by trusts for the benefit of Lawrence J. Speh
and 2,911,366 shares held by trusts for the benefit of members of Mr.
Speh's family. Mr. Speh serves as sole trustee of each of these trusts and
has sole voting and investment power over the shares held by the trusts.
Also includes 341,000 shares issuable pursuant to currently exercisable
options, and 3,758 shares allocated to Mr. Speh's ESOP account. Also
includes 45,612 shares held by Mr. Speh's wife, as to which he disclaims
beneficial ownership. Mr. Speh's address is c/o May & Speh, Inc., 1501
Opus Place, Downers Grove, Illinois 60515.
(3) Includes 106,085 shares held by trusts for the benefit of members of
Albert J. Speh, Jr.'s family. Mr. Speh serves as sole trustee of each of
these trusts and has sole voting and investment power over the shares held
by the trusts. Also includes 3,758 shares allocated to Mr. Speh's ESOP
account. Mr. Speh's address is c/o May & Speh, Inc., 1501 Opus Place,
Downers Grove, Illinois 60515.
(4) Includes 21,312 shares held by a trust for the benefit of Mr. Early. Mr.
Early serves as sole trustee of the trust and has sole voting and
investment power over the shares held by the trust. Also includes 220,803
shares issuable pursuant to currently exercisable options, and 43,015
shares allocated to Mr. Early's ESOP account.
(5) Includes 76,100 shares issuable pursuant to currently exercisable options,
and 86,058 shares allocated to Mr. Loeffler's ESOP account.
(6) Includes 62,600 shares issuable pursuant to options that are currently
exercisable, and 95,566 shares allocated to Mr. Cieslak's ESOP account.
5
<PAGE>
(7) Includes 76,800 shares held by The Freeborn & Peters Profit Sharing Plan
for the benefit of Mr. Mason, and 14,400 shares issuable pursuant to
options that are currently exercisable or will become exercisable within
60 days.
(8) Shares issuable pursuant to options that are currently exercisable or will
become exercisable within 60 days.
(9) Shares held by a family limited partnership with respect to which Mr.
Cowell has sole voting and investment power.
(10) Shares held by a family foundation with respect to which Mr. Zakin has
shared voting and investment power.
(11) Includes 747,103 shares issuable pursuant to options that are currently
exercisable or that will become exercisable within 60 days, and 321,575
shares allocated to the ESOP accounts of the executive officers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and beneficial owners of more than ten percent of the Common
Stock to file initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission and to provide the Company with
copies of such reports. Based solely on a review of the copies provided to the
Company and written representations from the directors and executive officers,
the Company believes that all applicable Section 16(a) filing requirements have
been met, except for the inadvertent failure to file a Form 3 by Eric M.
Loughmiller upon becoming an executive officer of the Company in January 1997
and by John G. Jazwiec upon becoming an executive officer in May 1997.
6
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation paid for services rendered
to the Company during the Company's last three fiscal years in all capacities
by (i) the Company's Chief Executive Officer during fiscal 1997, and (ii) the
Company's four highest paid executive officers during fiscal 1997 other than
the Chief Executive Officer (the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
--------------- ------------
SECURITIES
FISCAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(2)
- --------------------------- ------ ------ ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Lawrence J. Speh(1)........ 1997 392,000 300,000 -- 39,632
1996 361,308 350,000 -- 42,970
1995 346,000 300,000 900,000 34,574
Albert J. Speh, Jr.(1)..... 1997 424,000 165,000 -- 76,399
Chairman Emeritus 1996 406,462 200,000 -- 79,737
1995 400,000 200,000 -- 74,000
Robert C. Early............ 1997 265,000 100,000 100,000 44,677
Executive Vice President, 1996 254,039 125,000 -- 48,222
Corporate Development 1995 192,000 40,000 600,000 44,508
Michael J. Loeffler........ 1997 225,000 152,915 -- 12,803
Executive Vice President, 1996 196,733 125,000 200,000 30,620
Direct Marketing Services 1995 175,000 324,000 180,000 30,033
Terrance C. Cieslak........ 1997 210,000 147,571 -- 12,803
Executive Vice President 1996 167,797 110,000 50,000 30,620
and Chief Technology 1995 156,000 91,000 132,000 30,058
Officer
</TABLE>
- --------
(1) Lawrence J. Speh and Albert J. Speh, Jr. served as the Company's Chief
Executive Officer and Chairman, respectively, during fiscal 1997.
(2) Includes contributions made by the Company to the Named Executive
Officer's ESOP account. Also includes premiums paid by the Company for
split-dollar life insurance policies in fiscal 1997, 1996 and 1995 as
follows: Lawrence J. Speh, $37,233, $37,233 and $34,574; Albert J. Speh,
$74,000, $74,000 and $74,000; and Robert C. Early, $15,000, $15,000 and
$14,450, respectively.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning grants of
stock options to the Named Executive Officers during fiscal 1997.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS(1) FOR OPTION TERM(3)
---------------------------------------------- -------------------------
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED FISCAL YEAR(2) SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert C. Early......... 100,000 8.6% $9.50 5/19/07 $597,450 $1,514,055
</TABLE>
- --------
(1) Options granted pursuant to the Executive Option Plan and subject to the
terms of such plan. All options were granted at an exercise price equal to
the fair market value of the Common Stock on the grant date and vest in
equal annual installments over a five-year period.
(2) Based on an aggregate of 1,162,000 options granted to employees of the
Company in fiscal 1997.
(3) Hypothetical gains based on assumed rates of annual compounded stock price
appreciation of 5% and 10% from the date of grant over the full option
term. The 5% and 10% assumed rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of future increases in the price of its
Common Stock.
7
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
The following table sets forth certain information regarding the exercise of
stock options during fiscal 1997 by the Named Executive Officers and the
number and value of unexercised options held by the Named Executive Officers
as of September 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lawrence J. Speh........ 19,000 $228,792 341,000 360,000 $4,022,095 $4,246,200
Robert C. Early......... 68,000 803,219 270,803 340,000 3,163,881 3,248,140
Michael J. Loeffler..... 44,000 522,533 98,600 232,000 806,187 1,309,240
Terrance C. Cieslak..... 26,000 308,708 62,600 88,000 649,167 681,160
</TABLE>
- --------
(1) The value of "in-the-money" options represents the difference between the
exercise price of such option and $13 7/8, the last sale price of a share
of Common Stock on September 30, 1997 as reported by The Nasdaq Stock
Market.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company entered into an employment agreement with Peter I. Mason in
April 1997 pursuant to which Mr. Mason became President and Chief Operating
Officer effective May 1997, and President and Chief Executive Officer
effective October 1997. The agreement provides for an initial term of five
years and a base salary at the rate of $350,000 per year in fiscal 1997 (pro
rated for the portion of the year Mr. Mason was employed by the Company) and
$400,000 per year thereafter, subject to review by the Compensation Committee
on an annual basis. Mr. Mason is entitled to participate in all plans,
programs and arrangements maintained by the Company for the benefit of its
employees, as well as any bonus plans or arrangements established by the
Company for the benefit of its senior executives, with a potential bonus of
$125,000 for fiscal 1997. Under the terms of the agreement, the Company will
pay the premiums on Mr. Mason's term life and long-term disability policies,
and reimburse Mr. Mason for certain club dues. The agreement also provides for
a grant of options to purchase 600,000 shares of Common Stock on the effective
date of the agreement, and an additional grant of options to purchase 295,000
shares in October 1997. However, due to limits on the number of shares that
may be granted to a participant under the plan in any single year, options to
purchase 100,000 shares that were to be granted in fiscal 1997 were granted in
fiscal 1998, and the Company has agreed to make deferred compensation payments
to Mr. Mason in the approximate amount of $525,000. The deferred compensation
arrangement is subject to review and approval by the Compensation Committee.
Mr. Mason will be entitled to a lump sum payment equal to his base salary in
the event of his death during the term of the agreement, and three times his
base salary in the event he is terminated without cause or he resigns for good
reason (including upon a change in control, a material breach of the agreement
by the Company or if Mr. Mason ceases to be a director of the Company other
than as a result of his resignation or refusal to stand for election). He also
is eligible to participate in the Company's group medical and health insurance
plans and other employee benefit plans and programs for a period of three
years following termination, and will be entitled to receive his base salary
and benefits for a period of one year if terminated due to disability. The
agreement provides for tax gross-up payments if Mr. Mason becomes subject to
certain excise taxes on payments under the agreement or any other plan,
arrangement or agreement with the Company.
The Company has agreed that Mr. Mason shall serve on the Executive Committee
of the Board and, if a nominating committee is established, the nominating
committee. Under the terms of the agreement, the Company also has agreed to
have Casey Cowell serve as a Class I director of the Company, and another
director proposed by Mr. Mason, Paul G. Yovovich, serve as a Class III
director.
The Company entered into an employment agreement with Michael J. Loeffler in
October 1994. The agreement provides for an annual base salary of at least
$180,000 over a five-year term, which is reviewed
8
<PAGE>
annually by the Compensation Committee. Mr. Loeffler is entitled to participate
in the Company's general employee benefit plans and any plans, programs or
arrangements for the benefit of its senior executives, and six months severance
in the event he is terminated without cause.
The Company entered into an amended and restated employment agreement and
general release with Lawrence J. Speh in April 1997, which was further amended
in November 1997. Pursuant to the agreement, as amended, Mr. Speh agreed to
serve as an officer of the Company through September 1997 at his then current
base salary of $392,000, and as a consultant to the Company for an additional
five year period for an annual consulting fee of $300,000. The agreement also
entitles Mr. Speh to participate in all plans, programs and arrangements
maintained by the Company for the benefit of its employees and consultants,
provides for reimbursement by the Company of certain club dues, requires the
Company to pay life insurance premiums and up to $25,000 per year for office
support and facilities, and provides for a single payment of $1.8 million and a
bonus of $300,000 paid in January 1998. The Company also has agreed to register
with the Securities and Exchange Commission for sale to the public all shares
of Common Stock owned directly or in a fiduciary capacity by Mr. Speh upon the
request of Mr. Speh or in the event the Company is otherwise registering shares
of Common Stock for sale to the public, and to pay all expenses incident
thereto, other than underwriting discounts and commissions, taxes and expenses
of counsel engaged by Mr. Speh. Pursuant to the terms of the agreement, Mr.
Speh has agreed to release and discharge the Company, its stockholders,
directors, officers, employees and associated persons against any and all
claims and causes of actions of any kind or nature.
The Board has agreed that, during the term of the agreement and provided Mr.
Speh owns at least 500,000 shares of Common Stock, Mr. Speh shall be nominated
to serve on the Board. Mr. Speh has agreed, for so long as he is a member of
the Board or a nominee to serve on the Board, not to (i) sell or otherwise
dispose of any shares of Common Stock owned by him in a privately negotiated
block sale or to any person who has filed a Schedule 13D with the Securities
and Exchange Commission, (ii) solicit proxies or participate in a solicitation
in opposition to any recommendation of the majority of the Board, (iii) act in
concert with any other person for the purpose of acquiring, holding, voting,
giving of consents or disposing of shares of Common Stock, (iv) seek to control
or influence the management, Board or policies of the Company, (v) tender
shares of Common Stock in a hostile tender or exchange offer in opposition to a
Board recommendation, or (vi) solicit or encourage any offer to acquire the
Company, its securities or its assets, or a merger or consolidation involving
the Company. For so long as he is a member of the Board or a nominee to serve
on the Board, Mr. Speh also has agreed to vote all shares of Common Stock owned
directly or in a fiduciary capacity by him in favor of the Company's nominees
at the 1998 Annual Meeting, and all shares of Common Stock owned by him for the
Company's nominees in subsequent elections.
The Company entered into an employment agreement with Albert J. Speh in June
1995. The agreement provides for a five-year employment term, with an initial
base salary of $424,000. Following the employment term, the agreement provides
for Mr. Speh to be retained as a consultant to the Company for a period of five
years at $300,000 per year. During the employment term and consulting term, Mr.
Speh is entitled to participate in all benefit programs of the Company,
including the ability to receive bonus payments and option grants at the
direction of the Compensation Committee. Mr. Speh's employment term was
terminated in November 1997. Under the terms of the agreement, Mr. Speh is
entitled to receive his base salary for the remaining portion of the original
employment term, and the consulting fee for five years thereafter. In
connection with the termination of the employment term, Mr. Speh is entitled to
a bonus payment of $165,000 paid in January 1998, and the Company's Chief
Executive Officer has agreed to support the nomination and election of Mr. Speh
to the Board. In the event of the death of Mr. Speh, the Company will pay half
of Mr. Speh's base salary to his estate for the remainder of his employment
term.
9
<PAGE>
STOCK PERFORMANCE GRAPH
The graph below compares the quarterly percentage changes in the Company's
cumulative total stockholder return from March 26, 1996 (the date of the
Company's initial public offering) through September 30, 1997 (the last day of
the Company's 1997 fiscal year) with the cumulative total return of the CRSP
Total Return Index for the Nasdaq Stock Market (U.S. Companies) and the CRSP
Total Return Index for Nasdaq Computer & Data Processing Services Stocks for
the same period. The graph assumes the investment of $100 and the reinvestment
of all dividends. The stock price performance shown on the graph below is not
necessarily indicative of future stock price performance.
COMPARISON OF CUMULATIVE TOTAL RETURN
LOGO
<TABLE>
<CAPTION>
3/26/96 3/29/96 6/28/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
May & Speh, Inc......... 100 97.826 136.957 176.087 106.522 72.826 117.391 120.652
- -------------------------------------------------------------------------------------------
Nasdaq Stock Market
(U.S. Companies)........ 100 101.324 109.596 113.492 119.070 112.617 133.259 155.801
- -------------------------------------------------------------------------------------------
Nasdaq Computer & Data
Processing.............. 100 101.358 112.659 114.898 119.476 110.901 142.216 155.518
</TABLE>
BOARD COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors determines the
compensation for the Company's Chief Executive Officer and its other most
highly compensated executive officers. To ensure that the Company's executive
compensation program is administered in an objective manner, the Compensation
Committee is composed entirely of directors who are neither executive officers
nor employees of the Company. In addition to determining the salary and bonus
compensation for all of the Company's most highly compensated executive
officers, the Compensation Committee determines the nature, timing and amount
of awards and grants under the Company's stock option plans and makes
recommendations as to the administration of other compensation plans and
programs of the Company as they relate to executive officers.
10
<PAGE>
This report is intended to describe the philosophy that underlies the cash
and equity-based components of the Company's executive pay program. It also
describes the details of each element of the program, as well as the rationale
for compensation paid to the Company's Chief Executive Officer and its
executive officers in general.
Compensation of Executive Officers Generally
The Company's executive compensation program is designed to link executive
pay to Company performance and to provide an incentive to executives to manage
the Company with a principal view to enhancing stockholder value.
Generally, the Company's executive compensation program makes a significant
portion of each executive's pay contingent upon growth and improvement in the
Company's results of operations, with the potential for exceptional reward for
exceptional performance. More specifically, the program is designed to provide
compensation for meeting and exceeding internal goals for earnings per share
and to provide incentives to increase the market value of the Common Stock.
The program is also designed to attract and retain talented executives who are
essential to the Company's long-term success within a highly competitive
industry that demands unique talents, skills and capabilities.
Compensation criteria are evaluated annually to ensure they are appropriate
and consistent with the business objectives that are important in meeting the
Company's earnings per share, operating profits and revenue goals and in
enhancing stockholder value. The Company's policies and programs are intended
to (i) provide rewards contingent upon Company and individual performance,
(ii) link executive compensation to sustainable increases in stockholder
value, (iii) promote teamwork among executives and other Company employees,
(iv) encourage the retention of a strong management team, and (v) encourage
personal and professional development and growth.
Components of Compensation
The primary components of the Company's executive compensation package are
salary, bonus and stock options.
Salary. The Compensation Committee reviews each executive officer's salary
annually. Objective and subjective performance goals are set each year for
each executive officer which will vary depending upon the specific position or
role of the executive within the Company. The Compensation Committee's review
takes into consideration both the Company's performance with respect to
earnings per share, operating profits and revenue, together with the duties
and performance of each executive. The Compensation Committee also considers
provisions relating to salary set forth in employment agreements with certain
of the Company's executive officers. In making salary recommendations or
decisions, the Compensation Committee exercises its discretion and judgment
based on the foregoing criteria, without applying a specific formula to
determine the weight of each factor considered. The Compensation Committee
also considers equity and fairness when comparing base salaries of executives.
The salary changes for executive officers of the Company for fiscal 1997 were
in response to an improvement in performance at every level of the Company, in
earnings per share, operating profits and revenue, and in the achievement of
other individual performance objectives.
Bonus. Under the Company's Discretionary Compensation Plan for Senior
Executive Employees (the "Bonus Plan") as implemented for fiscal 1997, certain
employees of the Company who perform significant management and decision-
making functions were eligible to receive a performance bonus. Awards to
executives may be made by the Compensation Committee after considering the
recommendation of the Company's Chief Executive Officer (except for awards
granted to the Chief Executive Officer) and the financial performance of the
Company as measured by net earnings, operating income, earnings per share,
cash flow, return on equity or assets, pre-tax profit, earnings growth,
revenue growth, or any combination of the foregoing or any other factors that
the Compensation Committee deems relevant. Bonuses for fiscal 1997 were
awarded based on the Company's financial performance, as measured by a number
of the factors listed above.
11
<PAGE>
Stock Options. The Compensation Committee believes that the granting of
stock options is an important method of rewarding and motivating management by
aligning management's interests with those of the Company's stockholders on a
long-term basis. In addition, the Compensation Committee recognizes that the
Company conducts its business in an increasingly competitive industry and
that, in order for the Company to remain highly competitive and at the same
time pursue a high-growth strategy, it must employ the best and most talented
executives, managers, and research and development personnel who possess
demonstrated skills and experience. The Company believes that stock options
play an important role in attracting and retaining such employees. For these
reasons, the Company adopted the Executive Option Plan as a stock-based
incentive program primarily for its executive officers and directors. The
Committee believes the Executive Option Plan is an important feature of the
Company's executive compensation package. Under the Executive Option Plan, the
Compensation Committee may grant options to executive officers who are
expected to contribute materially to the Company's future success. In
determining the size of stock option grants, the Compensation Committee
focuses primarily on the Company's performance and the perceived role of each
executive in accomplishing such performance objectives, as well as the
satisfaction of individual performance objectives. Stock options granted to
executive officers generally become exercisable over a five-year period and
typically are granted with an exercise price equal to the fair market value of
the Common Stock as of the date of grant. The value of the stock options held
by an executive is directly tied to the increase in the value of a share of
the Common Stock.
Compensation of the Chief Executive Officer. Mr. Lawrence J. Speh served as
Chief Executive Officer of the Company during fiscal 1997. Mr. Speh was
compensated during the 1997 fiscal year utilizing the same general philosophy
and criteria used for other executive officers as described above, including
(i) the Company's achievement of earnings per share, operating profits and
revenue goals, (ii) the growth and expansion of the Company, (iii) setting the
strategic direction and vision for the Company, and (iv) increasing the
productivity of the Company and other subjective criteria. During the 1997
fiscal year, Mr. Speh received a salary of $392,000 pursuant to his employment
agreement with the Company and received a bonus of $300,000 which represented
approximately 32% of the aggregate bonuses paid under the Bonus Plan.
The Compensation Committee believes that Mr. Speh met his individual
performance objectives for the 1997 fiscal year, as reflected by the Company's
overall performance. The Company's net revenues increased 20% from $77.2
million in fiscal 1996 to $92.5 million in fiscal 1997, while net earnings
increased 15% from $10.2 million to $11.7 million and earnings per share
increased from $.42, based on 24.4 million weighted average shares
outstanding, to $.45, based on 26.2 million weighted average shares
outstanding. The Compensation Committee believes that Mr. Speh's total
compensation for the 1997 fiscal year fairly and sufficiently rewarded him for
such performance.
Tax Considerations. The Compensation Committee has determined that it is
unlikely that the Company would pay any amounts for fiscal 1997 that would
result in a loss of the federal income tax deduction under Section 162(m) of
the Internal Revenue Code of 1986, as amended, and, accordingly, has not
recommended that any special actions be taken or that any plans or programs be
revised at this time.
The Compensation Committee generally is responsible for making
determinations regarding executive compensation. However, during fiscal 1997,
the full Board of Directors approved the employment agreements with Peter I.
Mason and Lawrence J. Speh. Neither Mr. Mason nor Mr. Speh participated in the
Board's actions regarding their respective employment agreements. Furthermore,
Messrs. Cowell, Yovovich and Zakin, who were not members of the Board at the
time, did not participate in the Board's actions regarding the employment
agreements with Mr. Mason or Mr. Speh.
The Compensation Committee The Board of Directors
Deborah A. Bricker Peter I. Mason Albert J. Speh,
Casey Cowell Deborah A. Bricker Jr.
Paul G. Yovovich Lawrence J. Speh
Casey Cowell (from May 19, 1997)
Robert C. Early Paul G. Yovovich
(from May 19, 1997
Jonathan Zakin
(from November 12,
1997)
12
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1997, Deborah A. Bricker, and, from June 30, 1997, Casey
Cowell and Paul G. Yovovich, none of whom at any time have been employees of
the Company, served on the Compensation Committee of the Board of Directors.
Ms. Bricker is the President of Bricker & Associates, Inc. which provided
consulting services to the Company during fiscal 1997. In addition, Peter I.
Mason served as a member of the Compensation Committee prior to becoming an
officer of the Company in May 1997. At the time of his service on the
committee, Mr. Mason was a partner in the law firm of Freeborn & Peters, which
provided legal services to the Company in fiscal 1997. See "--Certain
Relationships and Related Transactions." Mr. Mason served as a director of
U.S. Robotics Corporation and Mr. Cowell served as the Chairman and Chief
Executive Officer of U.S. Robotics Corporation until May 1997. Mr. Cowell was
not involved in the Board of Directors' deliberations or actions in connection
with Mr. Mason's employment agreement with the Company, which was executed
before Mr. Cowell became a director of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to becoming an officer of the Company in May 1997, Peter I. Mason, who
has served as a director of the Company since November 1994, was a partner in
the law firm of Freeborn & Peters. Since 1993, Freeborn & Peters has served as
general counsel to the Company.
Deborah A. Bricker, a director of the Company, is the founder, President and
majority stockholder of Bricker & Associates, Inc., a productivity consulting
firm. Bricker & Associates, Inc. provides consulting services to the Company.
During fiscal 1997, the Company paid Bricker & Associates, Inc. approximately
$313,000 for such services.
During fiscal 1997, the Company made an interest-free loan in the amount of
$80,000 to John G. Jazwiec, who joined the Company as Senior Vice President
and Chief Information Officer in May 1997. The Company extended the loan to
assist Mr. Jazwiec in paying certain relocation expenses. The loan must be
repaid in full within 24 months of the date of the loan.
PROPOSAL 2. AMENDMENT TO EXECUTIVE OPTION PLAN
Stockholders are being asked to vote upon a proposal to approve an amendment
to the Executive Option Plan that will increase the number of shares of Common
Stock available for issuance thereunder by 1,400,000 shares. The proposed
amendment has been adopted by the Board of Directors, subject to stockholder
approval at the Annual Meeting. The Board believes the amendment is necessary
to provide the Company with a sufficient reserve of Common Stock for future
option grants to attract and retain the services of executives, directors and
key employees who are essential to the Company's long-term success. The
following description of the general features of the Executive Option Plan is
qualified in its entirety by reference to the full text of the plan, a copy of
which may be obtained without charge upon written request to the Secretary of
the Company.
Under the Executive Option Plan, incentive stock options ("ISOs"), as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and non-qualified options may be granted to executives, nonemployee
directors and consultants of Company or any subsidiary. Approximately 13
individuals currently are eligible to receive options under the Executive
Option Plan. A total of 3,600,000 shares of Common Stock were reserved for
issuance under the Executive Option Plan. As of January 26, 1998,
approximately 233,600 shares were available for new grants under the plan.
Shares that are subject to options granted under the Executive Option Plan but
which are not issued because such options expire or are otherwise terminated
or canceled will again become available for issuance upon such expiration or
cancellation. The last sale price of the Common Stock on January 26, 1998 was
$13 per share, as reported by the Nasdaq Stock Market.
The Executive Option Plan is administered by the Compensation Committee of
the Board of Directors which, subject to the terms of the Executive Option
Plan, has authority to determine the material terms and
13
<PAGE>
provisions under which options are granted, including the individuals to whom
options may be granted, exercise prices and numbers of shares subject to
options, the time or times during which options may be exercised and certain
other terms and conditions. The Board and the Compensation Committee may from
time to time withdraw or amend the Executive Option Plan, provided the Board
and the Compensation Committee may not (i) withdraw or cancel any outstanding
option without the consent of the option holder, or (ii) increase the number
of shares reserved for issuance thereunder or change the class of persons to
whom an option may be granted without stockholder approval within one year of
such amendment.
The exercise price of ISOs granted under the Executive Option Plan may not
be less than 100% of the fair market value of the Common Stock on the date of
grant and, in the case of ISOs granted to holders of more than 10% of the
voting stock of the Company or any subsidiary, not less than 110% of the fair
market value of the Common Stock on the date of grant. The exercise price of
non-qualified options may be equal to or greater than the fair market value of
the Common Stock on the date of grant. ISOs granted to holders of more than
10% of the voting stock of the Company or any subsidiary may not be exercised
later than five years from the date of grant, and other options granted under
the Executive Option Plan may not be exercised later than ten years from the
date of grant. The aggregate fair market value (determined at the time of
grant) of shares issuable upon the exercise of ISOs granted to an optionee
under all plans of the Company or any subsidiary that become exercisable for
the first time during any one calendar year may not exceed $100,000. In no
case may options to purchase more than 500,000 shares of Common Stock be
granted to any participant in the Executive Option Plan in any fiscal year.
Options granted under the Executive Option Plan become exercisable in five
equal annual installments beginning on the first anniversary of the date of
grant, unless the Compensation Committee specifies a shorter or longer period
in any particular case. Options granted to non-employee directors generally
become exercisable in three equal annual installments beginning on the first
anniversary of the date of grant. See "Proposal 1. Election of Directors--
Compensation of Directors." All or any part of any unexercised option may be
exercised, whether or not then vested, by an optionee upon a "change of
control" of the Company or upon the occurrence of any other event which, in
the sole discretion of the Compensation Committee, deserves special
consideration. A "change of control" is defined in the Executive Option Plan
as the date on which any person or entity, or persons or entities acting in
concert, acquire beneficial ownership of 51% or more of the Company's Common
Stock within a period of six months. The Compensation Committee, in its
discretion, in lieu of issuing shares upon exercise of options, may pay cash,
in an amount equal to the difference between the then fair market value of the
shares and the exercise price.
Options granted under the Executive Option Plan are not transferable, except
to the extent that the representative of the estate or the heirs of a deceased
option holder are permitted to exercise such options, and, during such
holder's lifetime, are exercisable only by the holder or by his or her legal
representative. Options granted under the Executive Option Plan generally
terminate 30 days after the holder ceases to be an employee, director or
consultant of the Company or any subsidiary, except in the case of death or
disability, in which event vested options may be exercised at any time within
one year following the date of death or disability, and except in the case of
retirement upon attaining the age of 65, in which event vested options may be
exercised at any time within three months of the date of retirement. In no
event may an option be exercised later than the originally prescribed term of
the option. The Executive Option Plan will terminate in September 2004 unless
previously terminated by the Board of Directors.
A person who is granted a stock option under the Executive Option Plan will
not be subject to federal income tax at the time of grant, and the Company
will not be entitled to a tax deduction by reason of such grant. Upon exercise
of a non-qualified option, the difference between the exercise price and the
fair market value of the stock on the date of exercise will be taxable as
ordinary income in the taxable period in which the exercise occurs, and the
Company will be entitled to a corresponding deduction, to the extent permitted
under Section 162(m) of the Code. The Company will be entitled to the
deduction at the same time the employee recognizes income and in an amount
equal to the amount of ordinary income recognized by the employee, provided
the Company reports such income recognition to the Internal Revenue Service.
14
<PAGE>
Although no taxable income will be recognized by the employee upon exercise
of an ISO and the Company is not entitled to a tax deduction by reason of such
exercise, the excess of the fair market value on the date of exercise over the
exercise price is an adjustment which increases alternative minimum taxable
income, the base upon which alternative minimum tax is computed. Upon the sale
or other disposition of the ISO shares after the later of (i) two years after
the grant date, and (ii) one year after the purchase date, any gain or loss
will be treated as a capital gain or loss (long-term or short-term, depending
on the holding period of the stock sold). The tax basis of the option shares
in such case generally equals the exercise price. The Company will not be
entitled to a tax deduction with respect to the ISO shares under these
circumstances. If stock purchased pursuant to the exercise of an ISO is sold
within two years from the date of grant of the option or within one year after
the transfer of stock to the employee pursuant to exercise of the ISO, then
the difference between the exercise price and the lesser of (i) the fair
market value of the Common Stock at the date of purchase, or (ii) the sales
price, will be taxable as ordinary income and the Company will be entitled to
a corresponding deduction, to the extent permitted under Section 162(m).
As described above, the Company generally is entitled to an income tax
deduction for any compensation income taxed to participants in the Executive
Option Plan. Under Section 162(m) of the Code, however, unless the
compensation meets the stockholder approval and other requirements of Section
162(m), the Company would not be entitled to a deduction for compensation paid
to certain covered executives to the extent the compensation paid to any such
person exceeds $1 million. The Executive Option Plan is designed to meet the
stockholder approval and other requirements of Section 162(m).
The table below sets forth, as of January 26, 1998, the number of options
granted to the specified persons and groups under the Executive Option Plan
since its inception in 1994.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING
NAME AND POSITION OPTIONS
----------------- ----------
<S> <C>
Peter I. Mason, Chairman, President and Chief Executive Officer..... 916,600
Robert C. Early, Executive Vice President, Corporate Development.... 700,000
Michael J. Loeffler, Executive Vice President, Direct Marketing
Services........................................................... 480,000
Terrance C. Cieslak, Executive Vice President and Chief Technology
Officer............................................................ 232,000
Lawrence J. Speh.................................................... 900,000
Albert J. Speh, Jr., Chairman Emeritus.............................. 0
Deborah A. Bricker.................................................. 21,600
Casey Cowell........................................................ 21,600
Paul G. Yovovich.................................................... 21,600
Jonathan Zakin...................................................... 21,600
All current executive officers as a group (7 persons)............... 2,528,600
All current directors who are not executive officers as a group (6
persons)........................................................... 986,400
All employees, including all current officers who are not executive
officers, as a group
(5 persons)........................................................ 390,000
</TABLE>
NEW PLAN BENEFITS
The table below sets forth, with respect to the persons and groups specified
therein and as of January 26, 1998, the number of shares underlying options
that have been granted subject to stockholder approval of Proposal 2, and the
weighted average exercise price of such options. These grants are also
included in the table above. In addition to these grants, each non-employee
director will be granted an option to purchase 21,600 shares under the
Executive Option Plan when they first become a non-employee director, and an
additional grant on the third
15
<PAGE>
anniversary of the initial grant if they continue to serve as directors on
such date. See "Proposal 1. Election of Directors--Compensation of Directors."
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED
SECURITIES AVERAGE
UNDERLYING EXERCISE
NAME AND POSITION OPTIONS PRICE
----------------- ---------- --------
<S> <C> <C>
Peter I. Mason, Chairman, President and Chief Executive
Officer................................................... -- $ --
Robert C. Early, Executive Vice President, Corporate
Development............................................... 100,000 9.50
Michael J. Loeffler, Executive Vice President, Direct
Marketing Services........................................ 100,000 13.50
Terrance C. Cieslak, Executive Vice President and Chief
Technology Officer........................................ 50,000 13.50
Lawrence J. Speh........................................... -- --
Albert J. Speh, Jr., Chairman Emeritus..................... -- --
All current executive officers as a group (7 persons)...... 250,000 11.90
All current directors who are not executive officers as a
group (6 persons)......................................... 21,600 13.50
All employees, including all current officers who are not
executive officers, as a group (596 persons).............. -- --
</TABLE>
The affirmative vote of a majority of the shares of Common Stock present, in
person or by proxy, at the Annual Meeting and entitled to vote is required for
approval of the amendment to the Executive Option Plan.
The Board of Directors recommends a vote FOR approval of the amendment to
the Executive Option Plan.
PROPOSAL 3. AMENDMENT TO KEY EMPLOYEE OPTION PLAN
Stockholders are being asked to vote upon a proposal to approve an amendment
to the Company's Key Employee Option Plan that will increase the number of
shares available for issuance thereunder by 1,000,000 shares. The Board
believes the amendment is necessary to provide the Company with a sufficient
reserve of Common Stock for future option grants to attract and retain the
services of technical, sales and marketing and other key employees who are
essential to the Company's long-term success. Stockholder approval of the
amendment is not required under the terms of the plan or by law. However, the
Board believes stockholder input on this matter would be valuable, and
therefore has submitted this proposal to the stockholders and shall be bound
by the results of the vote. The following description of the general features
of the Key Employee Option Plan is qualified in its entirety by reference to
the full text of the plan, a copy of which may be obtained without charge upon
written request to the Secretary of the Company.
Directors and executive officers of the Company who are subject to Section
16 of the Securities Exchange Act of 1934 are not eligible to participate in
the Key Employee Option Plan. Under the Key Employee Option Plan, ISOs and
non-qualified stock options may be granted to employees, independent
contractors and officers (who are not subject to Section 16) of the Company
and its subsidiaries. A total of 2,000,000 shares of Common Stock were
reserved for issuance under the Key Employee Option Plan. As of January 26,
1998, approximately 530,500 shares were available for new grants under the
plan. In no case may options to purchase more than 500,000 shares of Common
Stock be granted to any participant in the Key Employee Option Plan in any
fiscal year. The Key Employee Option Plan may be administered by the Board of
Directors or a committee thereof, and its terms and conditions are
substantially similar to the terms of the Executive Option Plan. See "Proposal
2. Amendment to Executive Option Plan."
The affirmative vote of a majority of the shares of Common Stock present, in
person or by proxy, at the Annual Meeting and entitled to vote is required for
approval of the amendment to the Key Employee Option Plan.
The Board of Directors recommends a vote FOR approval of the amendment to
the Key Employee Option Plan.
16
<PAGE>
PROPOSAL 4. RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
Upon recommendation of the Audit Committee, the Board of Directors of the
Company has selected Price Waterhouse LLP as independent public accountants to
audit the consolidated financial statements of the Company, and has directed
that this selection be presented to the stockholders for approval at the
Annual Meeting. Price Waterhouse LLP has audited the Company's financial
statements since 1995. It is anticipated that representatives of Price
Waterhouse LLP will attend the Annual Meeting, will have the opportunity to
make a statement and will be available to respond to questions from
stockholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and entitled to vote at the Annual Meeting will
be required to ratify the selection of Price Waterhouse LLP. In the event
stockholders fail to ratify the appointment of Price Waterhouse LLP, the Board
of Directors will reconsider its selection. Even if the selection is ratified,
the Board of Directors, in its discretion, may direct the appointment of a
different independent accounting firm at any time if the Board determines that
such a change would be in the best interests of the Company and its
stockholders.
The Board of Directors recommends a vote FOR the ratification of Price
Waterhouse LLP as the Company's independent public accountants.
OTHER MATTERS
The Board of Directors is not aware of any matters to be presented at the
Annual Meeting other than those listed in the notice of the meeting. If any
other matters do come before the Annual Meeting, it is intended that the
holders of proxies solicited by the Board of Directors will vote on such other
matters in their discretion in accordance with their best judgment.
ADDITIONAL INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K, FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE WITHOUT CHARGE UPON WRITTEN
REQUEST ADDRESSED TO THE CORPORATE SECRETARY OF MAY & SPEH, INC., 1501 OPUS
PLACE, DOWNERS GROVE, ILLINOIS 60515.
STOCKHOLDER PROPOSALS
In the event any stockholder intends to present a proposal at the Annual
Meeting of Stockholders to be held in 1999, such proposal must be received by
the Corporate Secretary of the Company, in writing, on or before October 9,
1998 to be considered for inclusion in the Company's proxy materials relating
to that meeting.
By Order of the Board of Directors,
/s/ Eric M. Loughmiller
Eric M. Loughmiller
Executive Vice President, Chief
Financial Officer and Secretary
Downers Grove, Illinois
February 6, 1998
17
<PAGE>
- --------------------------------------------------------------------------------
PROXY
MAY & SPEH, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Peter I. Mason and Eric M. Loughmiller,
jointly and individually, as proxies, each with full power of substitution, and
hereby authorizes them to represent and to vote, as directed below, all shares
of Common Stock, par value $.01 per share, of May & Speh, Inc., a Delaware
corporation (the "Company"), that the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of the Company to be
held on Wednesday, March 11, 1998, or any adjournment thereof, as follows:
1. ELECTION OF DIRECTORS:
Nominees: Deborah A. Bricker, Casey Cowell, Lawrence J. Speh,
Paul G. Yovovich, Jonathan Zakin
-------------------------------------------------------------
(Except nominees written above)
[_] FOR ALL
[_] AGAINST ALL
[_] FOR ALL EXCEPT
2. PROPOSAL TO AMEND THE 1994 EXECUTIVE STOCK OPTION PLAN
[_] FOR [_] AGAINST [_] ABSTAIN
3. PROPOSAL TO AMEND THE 1995 KEY EMPLOYEE STOCK OPTION PLAN
[_] FOR [_] AGAINST [_] ABSTAIN
4. PROPOSAL TO RATIFY PRICE WATERHOUSE LLP as the Company's independent public
accountants for the 1998 fiscal year.
[_] FOR [_] AGAINST [_] ABSTAIN
5. In accordance with their discretion upon such other matters as may properly
come before the meeting and any adjournment thereof.
When properly executed, this proxy will be voted in the manner directed by
the undersigned stockholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE PROPOSALS SET FORTH HEREIN.
Dated: , 1998
--------------- ---------------------------------------------
(Signature)
---------------------------------------------
(Signature)
(Please sign exactly as name appears on stock
certificate. Where stock is registered
jointly, all owners must sign. Corporate
owners should sign full corporate name by an
authorized person. Executors, administrators,
trustees or guardians should indicate their
status when signing.)
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE>
THE FOLLOWING MATERIALS ARE BEING FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO INSTRUCTION 3 TO ITEM 10 OF SCHEDULE 14A. THESE MATERIALS
ARE NOT PART OF THE PROXY STATEMENT TO BE PROVIDED TO STOCKHOLDERS.
(Qualified plan under (S)16)
AMENDED AND RESTATED
1994 EXECUTIVE STOCK OPTION PLAN
OF
MAY & SPEH, INC.
1. Introduction and Purpose. The purpose of this Stock Option Plan (the
"Plan") is to advance the interests of May & Speh, Inc. (the "Corporation") by
encouraging and enabling the acquisition of a larger personal proprietary
interest in the Corporation by Eligible Executives upon whose judgment and keen
interest the Corporation and its Subsidiaries are largely dependent for the
successful conduct of their service and operations. It is anticipated that the
acquisition of such proprietary interest in the Corporation will stimulate the
efforts of such Eligible Executives, on behalf of the Corporation and its
Subsidiaries, and strengthen their desire to remain with the Corporation and its
Subsidiaries. It is also expected that the opportunity to acquire such a
proprietary interest will enable the Corporation and its Subsidiaries to attract
desirable personnel.
2. Definitions. When used in this Plan, unless the context otherwise
requires:
a. "Board of Directors" or "Board" shall mean the Board of Directors
of May & Speh, Inc. as constituted at any time.
b. "Change in Control" shall mean the date on which any person or
entity, or persons or entities acting in concert, shall acquire the
beneficial ownership, as defined by the Board of Directors in its sole
discretion, of fifty-one percent (51%) or more of the Corporation's Shares
then outstanding within a period of six (6) months.
c. "Committee" shall mean the Stock Option and Compensation
Committee, as described in Section 3 hereof, appointed by the Board to
administer this Plan.
d. "Common Stock" means the common stock of the Corporation, par
value $.01 per share, including both treasury shares and authorized but
unissued shares, or any security of the Corporation issued in substitution,
exchange or in lieu thereof.
e. "Corporation" shall mean May & Speh, Inc.
f. "Effective Date" shall have the meaning assigned in Section 3.c.
of this Plan.
g. "Eligible Executives" shall have the meaning assigned in Section 4
of this Plan.
<PAGE>
h. "Fair Market Value" on a specified date shall mean (i) the average
of the bid and asked closing prices at which one Share is traded on the
over-the-counter market, as reported on the National Association of
Securities Dealers Automated Quotation System, but if no Shares were traded
on such date, then on the last previous date on which a Share was so
traded, or (ii) if (i) above is not applicable, the closing price for a
Share on the stock exchange, if any, on which Shares are primarily traded,
but if no Shares were traded on such date, then on the last previous date
on which a Share was so traded, or (iii) if none of the above is
applicable, the value of a Share as established by the Committee for such
date using any reasonable method of valuation.
i. "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended, or any successor thereto.
j. "Issue Date" shall mean the date designated by the Committee for
measuring the vesting of an Eligible Executive's Options under Section 5
hereof. Unless otherwise designated by the Committee, the Issue Date of an
Option shall be the date that the Option is awarded to the Eligible
Executive by the Committee.
k. "Non-employee Director" shall have the meaning assigned in Section
3.c of this Plan.
l. "Options" shall mean the stock options issued pursuant to this
Plan.
m. "Original Issue Date" shall have the meaning assigned in Section
3.c of this Plan.
n. "Plan" shall mean this Amended and Restated 1994 Executive Stock
Option Plan of May & Speh, Inc., as originally adopted by the Board of
Directors and approved by the stockholders of the Corporation and made
effective on September 30, 1994, as amended and restated hereby in its
entirety, and as may be further amended from time to time.
o. "Plan Year" means the calendar year.
p. "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended from time to time, or
any successor thereto.
q. "Securities Exchange Act of 1934" shall mean the Securities
Exchange Act of 1934, as amended from time to time, or any successor
thereto.
r. "Share" shall mean a share of Common Stock of the Corporation.
2
<PAGE>
s. "Subsidiary" shall mean any "subsidiary corporation", as such term
is defined in Section 424(f) of the Internal Revenue Code.
t. "Voting Power" means the voting power of all securities of the
Corporation then outstanding, generally entitled to vote for the election
of directors of the Corporation.
3. Administration of the Plan.
a. The Committee shall be appointed by the Board of Directors and
shall consist of at least two (2) members of the Board of Directors. Each
and every member of the Committee shall be a "disinterested person" within
the meaning of Rule 16b-3 under the Securities Exchange Act of 1934. The
Committee shall award Options under the Plan and shall have the authority
to administer the Plan as provided herein and, in exercising this
authority, shall establish such rules and procedures as are necessary or
advisable to administer the Plan.
b. Each member of the Committee shall hold office until the next
regular annual meeting of the Board of Directors following his or her
designation and until his or her successor is designated as a member of the
Committee. Any vacancy in the Committee may be filled by a resolution
adopted by a majority of the Board of Directors. Any member of the
Committee may be removed at any time, with or without cause, by resolution
adopted by a majority of the Board of Directors. A member of the Committee
may resign from the Committee at any time by giving written notice to the
President, Secretary or Assistant Secretary of the Corporation in person or
by certified or registered mail, return receipt requested, sent to 1501
Opus Place, Downers Grove, Illinois 60515, and, unless otherwise specified
therein, such resignation shall take effect upon receipt of such written
notice. The acceptance of such resignation by the President, Secretary or
Assistant Secretary of the Corporation shall not be necessary for such
resignation to be made effective.
c. Each member of the Board of Directors who is not also an employee
of the Corporation, including members of the Committee ("Non-employee
Directors"), shall receive Options under the Plan pursuant to the formula
set forth in this Section 3.c. Options to purchase 21,600 Shares shall be
issued on the later to occur of (i) the effective date of a registration
statement on Form S-1 filed with the Securities and Exchange Commission by
the Corporation pursuant to the Securities Act of 1933, as amended (the
"Effective Date"), and (ii) the date such person is appointed as a director
of the Corporation (the "Original Issue Date"). Such Options issued to
Non-Employee Directors shall vest and become exercisable in equal annual
installments over a three-year period commencing one year after the Issue
Date of such Option. Options to purchase an additional 21,600 Shares shall
be issued to each Non-employee Director who continues to serve on the Board
of Directors on the third anniversary of the Original Issue Date, and every
three years thereafter. The exercise price of any Option granted to a Non-
employee
3
<PAGE>
Director hereunder shall be equal to the Fair Market Value as of the Issue
Date, except as provided in Sections 6 and 7 hereof. The provisions of this
paragraph may not be amended more than once every six months, other than to
comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act of 1974, as amended, or the rules under such statutes.
4. Participants. Except as hereinafter provided, the class of individuals
who are potential recipients of Options to be granted under this Plan ("Eligible
Executives") consists of those individuals who, in the sole discretion of the
Committee, are the key executive employees of the Corporation or any of its
Subsidiaries who shall be in a position, in the opinion of the Committee, to
make the most significant contributions to the growth, management, and success
of the Corporation or its Subsidiaries; provided, however, that Options may be
granted to a director or independent contractor of the Corporation who, at the
time of such grant, is not an employee of the Corporation or its Subsidiary
(such persons are included in the definition of "Eligible Executives"). The
Eligible Executives to whom Options are granted under this Plan and the number
of Shares subject to each such Option shall be determined by the Committee in
its sole discretion, in accordance with the terms and conditions of this Plan.
5. Grant and Vesting of Options.
a. The Committee may, but shall not be required to, grant in
accordance with this Plan, Options to purchase an aggregate of up to
3,600,000 Shares of Common Stock, which may be either treasury shares or
authorized but unissued Shares.
b. Except as otherwise provided herein, Options awarded pursuant to
this Plan shall vest and become exercisable in equal annual installments
over a five-year period commencing one year after the Issue Date of such
Option; provided, however, that the Committee may in its discretion specify
a shorter or longer vesting period in any particular case.
c. Options granted under this Plan may be either non-qualified stock
options or incentive stock options, within the meaning of Section 422 of
the Internal Revenue Code. An Option granted under this Plan shall be
deemed to be a non-qualified stock option unless the Committee, in its sole
discretion, designates otherwise. Options which are designated not to be
incentive stock options shall not be treated as such for purposes of this
Plan and the Internal Revenue Code.
d. Nothing contained herein shall be construed to prohibit the grant
of Options at different times to the same Eligible Executive, provided,
however, that in no event shall an Eligible Executive be granted an Option
to purchase more than 500,000 Shares in any fiscal year of the Corporation.
4
<PAGE>
e. The terms of any Option granted to an Eligible Executive shall,
subject to the terms and provisions of this Plan, be conclusively
determined by the Committee, in its sole discretion. The terms and
provisions of the Option shall be set forth in writing in a certificate or
agreement (the "Option Certificate") signed by the Option holder and on
behalf of the Corporation by the President, any Vice President or the
Treasurer of the Corporation. The Option Certificate shall state whether
or not the Option is an incentive stock option or a non-qualified stock
option. At the time an Option is granted, the Committee may, in its sole
discretion, establish one or more conditions to the exercise of such
Option, provided that if such Option is designated as an incentive stock
option, then such condition or conditions shall not be inconsistent with
Section 422 of the Internal Revenue Code.
6. Price. The exercise price per Share of the Shares to be purchased
pursuant to any Option shall be fixed by the Committee at the time an Option is
granted and may be equal to or greater than (but not less than) the Fair Market
Value of the Common Stock on the date such Option is granted; provided, however,
if the Option is an incentive stock option, in no event shall the price be less
than one hundred ten percent (110%) of the Fair Market Value of a Share if the
employee is a greater than ten percent (10%) shareholder within the meaning of
Section 422(b)(6) of the Internal Revenue Code.
7. Duration of Options. The duration of any Option granted under this
Plan shall be for a period fixed by the Committee, in its sole discretion, but
not more than ten (10) years from the date upon which the Option is granted
(five (5) years if the option is an incentive stock option and the employee is a
greater than ten percent (10%) shareholder within the meaning of Section
422(b)(6) of the Internal Revenue Code).
8. Limitations Regarding Ten Percent Stockholders. No Option which is
intended to qualify as an incentive stock option may be granted under this Plan
to any Eligible Executive who, at the time the Option is granted, owns, or is
considered to own, within the meaning of Section 422 of the Internal Revenue
Code, Shares possessing more than ten percent (10%) of the total combined voting
power or value of all classes of stock of the Corporation or its Subsidiaries,
unless (i) the exercise price under such Option is at least one hundred ten
percent (110%) of the Fair Market Value of a Share on the date such Option is
granted and (ii) the duration of such Option is no more than five (5) years.
9. Option Holder Not a Stockholder. An Option holder shall not be deemed
to be the holder of or to have any of the rights of a stockholder with respect
to any Shares subject to such Option, unless and until (i) the Option shall have
been exercised pursuant to the terms thereof, (ii) the Corporation shall have
issued and delivered Shares to the Option holder, and (iii) said holder's name
shall have been entered as a stockholder of record on the books of the
Corporation. Thereupon, said holder shall have full voting, dividend and other
ownership rights with respect to such Shares.
5
<PAGE>
10. Non-Transferability of Options. Options and all rights thereunder
shall be non-transferable and non-assignable by the holder thereof, except to
the extent that the representative of the estate or the heirs of a deceased
Option holder may be permitted to exercise such options and rights thereunder
and, during the holder's lifetime, shall be exercisable only by the holder or
his or her legal representative.
11. Exercise of Options.
a. Except as otherwise provided herein, an Option, after the grant
and vesting thereof in accordance with Section 5 of this Plan, shall be
exercisable by the holder of such Option at such rate and times as may be
fixed by the Committee at the time the Option is granted; provided,
however, no Option granted to an officer, director or ten percent (10%)
beneficial holder, as defined in Rule 16a-1(a) of the Securities Exchange
Act of 1934, shall be exercised earlier than six (6) months from the date
such Option is granted; and, provided further, no Option may be exercised
in part or in full, prior to the approval of the Plan by a majority vote of
the shareholders of the Corporation, as provided in Section 20 herein.
b. Notwithstanding any other provision of this Plan, any Option
granted under the Plan which is an incentive stock option shall not be
exercisable to the extent that the Fair Market Value of the Shares
(determined as of the date of grant), with respect to which such Option
(and any other incentive stock option granted to the holder under this Plan
or any other stock option plan maintained by the Corporation or any
Subsidiary) first becomes exercisable in any calendar year, exceeds
$100,000.
c. All or any part of any remaining unexercised Options granted to
any Eligible Executive may be exercised in full, after approval of the Plan
by the stockholders of the Corporation as provided in Section 20 herein,
whether or not then vested and exercisable, upon a Change in Control or
upon the occurrence of such special circumstance or event which, in the
sole discretion of the Committee, merits special consideration.
d. An Option shall be exercised by the delivery of a written notice
duly signed by the Option holder thereof (or the representative of the
estate or the heirs of a deceased Option holder), together with the Option
Certificate and either (i) cash, (ii) a certified check payable to the
order of the Corporation, (iii) Shares duly endorsed over to the
Corporation (which Shares shall be valued at their Fair Market Value as of
the date preceding the day of such exercise) or (iv) any combination of
such methods of payment which together amount to the full exercise price of
the Shares purchased pursuant to the exercise of the Option. Such payment
shall be delivered to the Treasurer, Secretary or Assistant Secretary of
the Corporation who has been designated for the purpose of receiving the
same.
6
<PAGE>
e. No Option may be granted or exercised pursuant to the provisions
herein when such Option, or the granting or exercise thereof, may result in
the violation of any law or governmental order or regulation.
f. Within a reasonable time after the exercise of an Option, the
Corporation shall cause to be delivered to the person entitled thereto a
certificate for the Shares purchased pursuant to the exercise of the
Option. If the Option shall have been exercised with respect to less than
all of the Shares subject to the Option, the Corporation shall (i) cause to
be delivered to the person entitled thereto a new Option Certificate in
replacement of the Option Certificate surrendered at the time of the
exercise of the Option, indicating the number of Shares with respect to
which the Option remains available for exercise or (ii) endorse the
original Option Certificate to give effect to the partial exercise thereof.
g. No incentive stock option issued herein shall be exercised by an
Eligible Executive until such employee has been in the employ of the
Company for a period of at least three (3) months following the date such
Option is granted.
12. Disposition of Shares. If the Option is an incentive stock option, no
Shares acquired pursuant to the exercise of an Option granted herein may be
sold, exchanged, gifted or otherwise disposed of within two (2) years of the
date such Option was granted or one (1) year of the date such Option was
exercised, whichever is later.
13. Fractional Shares. The Corporation shall not be required to issue
fractional Shares pursuant to this Plan and, accordingly, Eligible Executives
may be required to accumulate vested Options, or portions thereof, until they
can purchase a whole Share or Shares.
14. Exchange of Options for Cash. The Committee may, from time to time,
in its sole discretion, grant cash to an Eligible Executive, upon his or her
written request, in exchange for any Option granted herein which is vested but
has not been exercised by such employee. The amount of cash to be granted shall
be conclusively determined by the Board, in its sole discretion, as equal to the
difference between (i) the Fair Market Value of a Share on the date such written
request is received and (ii) the exercise price of the Option. Such written
request shall be considered received when personally delivered to the Secretary
or Assistant Secretary of the Corporation or upon the receipt of a letter sent
by certified or registered mail, return receipt requested, to 1501 Opus Place,
Downers Grove, Illinois 60515, or three (3) days after such letter is sent,
whichever is earlier. Upon the Committee's grant of cash, as provided herein,
such Option or Options exchanged shall be immediately terminated. This
paragraph 14 shall not be interpreted as creating any affirmative obligation on
the Committee, Corporation or its Subsidiary to purchase any such options of an
Eligible Executive, which decision shall rest in the sole discretion of the
Committee.
7
<PAGE>
15. Termination of Services.
a. All or any part of any Option, to the extent unexercised, shall
terminate immediately if the Option holder ceases to be an employee of the
Corporation or its Subsidiary, or (if applicable) ceases to be a director
or independent contractor awarded an Option pursuant to Section 4 herein;
except that the Option holder shall have until the end of the thirtieth
(30th) day following the date he or she ceases to be an employee, director
or independent contractor of the Corporation or its Subsidiary to exercise
any unexercised vested Option rights that he or she could have exercised
immediately prior to such cessation; provided, however, that such exercise
must be accomplished prior to the expiration of the term of such Option.
All unvested Options shall immediately lapse if the Option holder ceases to
be an employee of the Corporation or any of its Subsidiaries or a director
or independent contractor who is awarded an Option pursuant to Section 4
herein. Notwithstanding the foregoing, if an individual ceases to be an
employee of the Corporation or its Subsidiary due to (i) retirement on or
after attaining the age of sixty-five (65) years (or such earlier date as
such person shall be permitted under the Corporation's retirement plan),
(ii) disability (as such term is defined in Section 422(c)(6) of the
Internal Revenue Code, the existence of which shall be conclusively
determined by the Committee in its sole discretion), or (iii) death, then
the Option holder, or the representative of the estate or the heirs of a
deceased Option holder, shall have the privilege of exercising the Options
which are unexercised at the time of such retirement, disability or death;
but only to the extent that such Options, which are then vested, are
exercised (i) within three (3) months of the Option holder's retirement,
(ii) within one (1) year of the Option holder's disability, or (iii) within
one (1) year of the Option holder's death, as the case may be; provided,
however, that such exercise must be accomplished prior to the expiration of
the term of such Option. If an Option holder ceases to be an employee,
director, or independent contractor of the Corporation or its Subsidiary
because of the Option holder's violation of his or her duties to the
Corporation and its Subsidiaries, the existence of such violation to be
conclusively determined by the Committee in its sole discretion, all
unexercised Options of such Option holder shall immediately terminate and
such Option holder shall have no right to exercise any unexercised Option
he or she might have exercised prior to the date he or she ceased to be an
employee, director, or independent contractor of the Corporation or its
Subsidiary.
b. Nothing contained herein or in the Option Certificate shall be
construed to confer on any Eligible Executive any right to continue in the
employ of the Corporation or its Subsidiaries or derogate from any right of
the Corporation or its Subsidiaries to request, in its sole discretion, the
retirement, resignation or discharge of such Eligible Executive, at any
time, with or without cause.
8
<PAGE>
16. Adjustment of Shares.
a. If, prior to the complete exercise of any Option, there shall be
declared and paid a stock dividend upon the Common Stock of the Corporation
or if the Common Stock of the Corporation shall be split, converted,
exchanged, reclassified or in any way substituted, the Option, to the
extent that it has not been exercised, shall entitle the holder thereof,
upon the future exercise of the Option, to such number and kind of
securities, cash or other property, subject to the terms of the Option, to
which he or she would have been entitled had he or she actually owned the
Shares subject to the unexercised portion of the Option at the time of the
occurrence of such stock dividend, split, conversion, exchange,
reclassification or substitution; and the aggregate exercise price upon the
future exercise of the Option shall be the same as if the originally
optioned Shares were being purchased thereunder. If, prior to the complete
exercise of any Option, there shall be a spin-off transaction pursuant to
the reorganization of the Corporation, the Option, to the extent that it
has not been exercised, shall be adjusted by adjusting the exercise price
of the Option and adjusting the number of Shares subject thereto, in order
to reflect the decrease, if any, in the fair market value of the Shares
resulting from the spin-off transaction; in any such case, the Option as
adjusted, shall entitle the holder thereof, upon the future exercise of the
Option, to the number of Shares which have a fair market value, immediately
after the occurrence of the spin-off transaction, equal to the fair market
value of the Shares subject to the Option on the day before the occurrence
of such spin-off transaction, and the aggregate exercise price upon the
future exercise of the Option shall be the same as the aggregate exercise
price of the Shares subject to the Option on the day before the occurrence
of such spin-off transaction. Any fractional Shares or other securities
payable upon the exercise of the Option, as a result of such adjustment due
to the occurrence of such stock dividend, stock split, conversion,
exchange, reclassification, substitution or spin-off transaction, shall be
payable in cash based upon the Fair Market Value of such Shares or
securities at the time of such exercise. If any such event should occur,
the number of Shares, with respect to which Options remain to be issued or
with respect to which Options may be reissued, shall be adjusted in a
similar manner.
b. Except as otherwise provided in Section 11.c. hereof, upon the
dissolution or liquidation of the Corporation, or upon a reorganization,
merger or consolidation in which the Corporation is not the surviving
corporation or entity, or in which the Corporation becomes a subsidiary of
another corporation, or upon the sale of substantially all of the property
of the Corporation to another corporation, both the Plan and the Options
issued thereunder shall terminate, unless a provision is made in connection
with such transaction for (i) the assumption of Options theretofore granted
or (ii) the substitution for such Option with options of the successor
employer corporation or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares and the per share exercise
prices.
9
<PAGE>
17. Issuance of Shares and Compliance with Securities Laws.
a. Before issuing and delivering any Shares to an Option holder, the
Corporation may: (i) require the holder to give satisfactory assurances
that the Shares are being purchased for investment and not with a view to
resale or distribution, and will not be transferred in violation of
applicable federal and state securities laws, rules and regulations,
including but not limited to the Securities and Exchange Commission Rule
144 and Section 16(b) of the Securities Exchange Act of 1934, (ii) restrict
the transferability of such Shares and require a legend to be endorsed on
the certificates representing the Shares, as appropriate to reflect resale
restrictions, if any, imposed by the Committee pursuant to the Option when
granted, or as appropriate to comply with any applicable state or federal
securities laws, rules or regulations, and (iii) condition the exercise of
an Option or the issuance and delivery of Shares upon the listing,
registration or qualification of the Shares covered by such Option upon a
securities exchange or under applicable securities laws.
b. Any provision inconsistent with Rule 16b-3 under the Securities
Exchange Act of 1934 shall thereafter be inoperative and shall not affect
the validity of the Plan.
18. Income Tax Withholding. If the Corporation or its Subsidiary shall be
required to withhold any amounts by reason of federal, state or local tax laws,
rules or regulations, in respect of the issuance of Shares pursuant to the
exercise of an Option, the Corporation or such Subsidiary shall be entitled to
deduct and withhold such amounts from any cash payments to be made to the Option
holder. In any event, the holder shall promptly make available to the
Corporation or such Subsidiary, when requested by the Corporation or such
Subsidiary, sufficient funds to meet the requirements of such withholding, and
the Corporation or such Subsidiary shall be entitled to take and authorize such
steps as it may deem advisable in order to have such funds made available to the
Corporation or such Subsidiary from any funds or property due or to become due
to the holder.
19. Administration and Amendment of the Plan.
a. Except as hereinafter provided, the Board of Directors and the
Committee may, at any time, withdraw or, from time to time, amend the Plan
as it relates to the terms and conditions of any Options not theretofore
granted. The Board of Directors and the Committee, with the consent of
each affected Option holder may, at any time, withdraw or cancel any
outstanding Option or, from time to time, amend the Plan as it relates to
the terms and conditions of any outstanding Option. Notwithstanding the
foregoing, any amendment which would increase the number of Shares issuable
under Options or change the class of persons to whom Options may be granted
must be adopted by the Board of Directors and shall be contingent upon the
approval of the stockholders of the Corporation within one (l) year of such
amendment.
10
<PAGE>
b. Determinations of the Committee as to any question which may arise
with respect to the interpretation of the provisions of the Plan and
Options shall be final. The Committee may authorize and establish such
rules, regulations and revisions thereof, not inconsistent with the
provisions of the Plan, as it may deem advisable to make the Plan and
Options effective or provide for their administration and may take such
other action with regard to the Plan and Options as it shall deem desirable
to effectuate their purpose.
20. Effective Date of the Plan.
a. This 1994 Executive Stock Option Plan, in the form as amended and
restated hereby, has been adopted and approved by the Board of Directors,
and shall be effective as of the effective date of a registration statement
on Form S-1 filed with the Securities and Exchange Commission by the
Corporation pursuant to the Securities Act of 1933, as amended, provided
that it shall have been approved pursuant to the affirmative vote of the
holders of a majority of the outstanding Shares of the Corporation's voting
stock, either in person, by proxy or by consent, within 12 months following
its adoption by the Board of Directors.
b. The Plan shall remain in full force and effect until the close of
business on September 30, 2004, at which time the right to grant Options
under the Plan shall automatically terminate, unless the stockholders of
the Corporation approve an extension or renewal of the Plan for such new or
additional term agreed upon by the stockholders. Any options granted
before the termination of the right to grant options under the Plan shall
continue to be governed thereafter by the terms of the Plan.
21. Severability. If any provision herein shall be held unlawful or
otherwise invalid or unenforceable in whole or in part, such unlawfulness,
invalidity or unenforceability shall not affect any other provision of the Plan
or part thereof, each of which shall remain in full force and effect. If the
making of any payment required under the Plan shall be held unlawful or
otherwise invalid or unenforceable, such unlawfulness, invalidity or
unenforceability shall not prevent any other payment from being made under the
Plan, and if the making of any payment in full, as required under the Plan,
would be unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity or unenforceability shall not prevent such payment from being made in
part, to the extent that it would not be unlawful, invalid, or unenforceable,
and the maximum payment that would not be unlawful, invalid or unenforceable
shall be made under the Plan.
22. Governing Law. The Plan and all determinations made and actions taken
hereunder, to the extent not otherwise governed by the Code or laws of the
United States of America, shall be governed by the laws of the State of Illinois
and construed accordingly.
11
<PAGE>
1995 KEY EMPLOYEE
STOCK OPTION PLAN OF
MAY & SPEH, INC.
(As amended and restated August 8, 1996)
1. Introduction and Purpose. The purpose of this Stock Option Plan (the
"Plan") is to advance the interests of May & Speh, Inc. (the "Corporation") by
encouraging and enabling the acquisition of a larger personal proprietary
interest in the Corporation by Eligible Employees upon whose judgment and keen
interest the Corporation and its Subsidiaries are largely dependent for the
successful conduct of their service and operations. It is anticipated that the
acquisition of such proprietary interest in the Corporation will stimulate the
efforts of such Eligible Employees, on behalf of the Corporation and its
Subsidiaries, and strengthen their desire to remain with the Corporation and its
Subsidiaries. It is also expected that the opportunity to acquire such a
proprietary interest will enable the Corporation and its Subsidiaries to attract
desirable personnel.
2. Definitions. When used in this Plan, unless the context otherwise
requires:
a. "Board of Directors" or "Board" shall mean the Board of Directors
of May & Speh, Inc. as constituted at any time.
b. "Change in Control" shall mean the date on which any person or
entity, or persons or entities acting in concert, shall acquire the
beneficial ownership, as defined by the Board of Directors in its sole
discretion, of fifty-one percent (51%) or more of the Corporation's Shares
then outstanding within a period of six (6) months.
c. "Committee" shall mean the committee described in Section 3
hereof appointed by the Board to administer this Plan.
d. "Common Stock" means the common stock of the Corporation, par
value of $.01 per share, including both treasury shares and authorized but
unissued shares, or any security of the Corporation issued in substitution,
exchange or in lieu thereof.
e. "Corporation" shall mean May & Speh, Inc.
f. "Eligible Employees" shall have the meaning assigned in Section 4
of this Plan.
g. "Fair Market Value" on a specified date shall mean (i) the
average of the bid and asked closing prices at which one Share is traded on
the over-the-counter market, as reported on the National Association of
Securities Dealers Automated Quotation System, but if no Shares were traded
on such date, then on the last previous date on which a Share was so
traded, or (ii) if (i) above is not applicable, the closing price for a
Share on the
<PAGE>
stock exchange, if any, on which Shares are primarily traded, but if no
Shares were traded on such date, then on the last previous date on which a
Share was so traded, or (iii) if none of the above is applicable, the value
of a Share as established by the Committee for such date using any
reasonable method of valuation.
h. "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended, or any successor thereto.
i. "Issue Date" shall mean the date designated by the Committee for
measuring the vesting of an Eligible Employee's Options under Section 5
hereof. Unless otherwise designated by the Committee, the Issue Date of an
Option shall be the date that the Option is awarded to the Eligible
Employee by the Committee.
j. "Options" shall mean the stock options issued pursuant to this
Plan.
k. "Plan" shall mean the 1995 Key Employee Stock Option Plan of May
& Speh, Inc., as amended from time to time.
l. "Plan Year" means the calendar year.
m. "Securities Exchange Act of 1934" shall mean the Securities
Exchange Act of 1934, as amended from time to time, or any successor
thereto.
n. "Share" shall mean a share of Common Stock of the Corporation.
o. "Subsidiary" shall mean any "subsidiary corporation," as such
term is defined in Section 424(f) of the Internal Revenue Code.
p. "Voting Power" means the voting power of all securities of the
Corporation then outstanding, generally entitled to vote for
the election of directors of the Corporation.
3. Administration of the Plan.
a. The Committee shall be appointed by the Board of Directors and
shall consist of either the entire Board or a committee designated by the
Board for purposes of administering the Plan. The Committee shall award
Options under the Plan and shall have the authority to administer the Plan
as provided herein and, in exercising this authority, shall establish such
rules and procedures as are necessary or advisable to administer the Plan.
b. Each member of the Committee shall hold office until the next
regular annual meeting of the Board of Directors following his or
2
<PAGE>
her designation and until his or her successor is designated as a member of
the Committee. Any vacancy in the Committee may be filled by a resolution
adopted by a majority of the Board of Directors. Any member of the
Committee may be removed at any time, with or without cause, by resolution
adopted by a majority of the Board of Directors. A member of the Committee
may resign from the Committee at any time by giving written notice to the
President, Secretary or Assistant Secretary of the Corporation in person or
by certified or registered mail, return receipt requested, sent to 1501
Opus Place, Downers Grove, Illinois 60515, and, unless otherwise specified
therein, such resignation shall take effect upon receipt of such written
notice. The acceptance of such resignation by the President, Secretary or
Assistant Secretary of the Corporation shall not be necessary for such
resignation to be made effective.
4. Participants. Except as hereinafter provided, the class of individuals
who are potential recipients of Options to be granted under this Plan ("Eligible
Employees") consists of those individuals who, in the sole discretion of the
Committee, are the key employees of the Corporation or any of its Subsidiaries
who (i) contribute materially to the success of the Corporation or its
Subsidiaries and (ii) are not subject to the reporting requirements of Section
16 of the Securities Exchange Act of 1934 and the rules promulgated thereunder
on the date that the Option is awarded under this Plan, provided, however, that
Options may be granted to an independent contractor who, at the time of such
grant, is not an employee of the Corporation or its Subsidiary (such persons are
included in the definition of "Eligible Employees"). The Eligible Employees to
whom Options are granted under this Plan and the number of Shares subject to
each such Option shall be determined by the Committee in its sole discretion, in
accordance with the terms and conditions of this Plan.
5. Grant and Vesting of Options. The Committee may, but shall not be
required to, grant in accordance with this Plan, Options to purchase an
aggregate of up to 2,000,000 Shares of Common Stock, which may be either
treasury shares or authorized but unissued Shares.
a. Options awarded pursuant to this Plan shall vest and become
exercisable in equal annual installments over a five-year period commencing
one year after the Issue Date of such Option; provided, however, that the
Committee may in its discretion specify a shorter or longer vesting period
in any particular case.
b. Options granted under this Plan may be either non-qualified stock
options or incentive stock options, within the meaning of Section 422 of
the Internal Revenue Code. An Option granted under this Plan shall be
deemed to be a non-qualified stock option unless the Committee, in its sole
discretion, designates otherwise. Options which are designated not to be
incentive stock options shall not be treated as such for purposes of this
Plan and the Internal Revenue Code.
c. Nothing contained herein shall be construed to prohibit the grant
of Options at different times to the same Eligible Employee, provided,
however, that in no event shall
3
<PAGE>
an Eligible Employee be granted an Option to purchase more than 500,000
Shares in any fiscal year of the Corporation.
d. The terms of any Option granted to an Eligible Employee shall,
subject to the terms and provisions of this Plan, be conclusively
determined by the Committee, in its sole discretion. The terms and
provisions of the Option shall be set forth in writing in a certificate or
agreement (the "Option Certificate") signed by the Option holder and on
behalf of the Corporation by the President, any Vice President or the
Treasurer of the Corporation. The Option Certificate shall state whether
or not the Option is an incentive stock option or a non-qualified stock
option. At the time an Option is granted, the Committee may, in its sole
discretion, establish one or more conditions to the exercise of such
Option, provided that if such Option is designated as an incentive stock
option, then such condition or conditions shall not be inconsistent with
Section 422 of the Internal Revenue Code.
6. Price. The exercise price per Share of the Shares to be purchased
pursuant to any Option shall be fixed by the Committee at the time an Option is
granted and may be equal to or greater than (but not less than) the Fair Market
Value of the Common Stock on the date such Option is granted; provided, however,
if the Option is an incentive stock option, in no event shall the price be less
than one hundred ten percent (110%) of the Fair Market Value of a Share if the
employee is a greater than ten percent (10%) shareholder within the meaning of
Section 422(b)(6) of the Internal Revenue Code.
7. Duration of Options. The duration of any Option granted under this
Plan shall be for a period fixed by the Committee, in its sole discretion, but
not more than ten (10) years from the date upon which the Option is granted
(five (5) years if the option is an incentive stock option and the employee is a
greater than ten percent (10%) shareholder within the meaning of Section
422(b)(6) of the Internal Revenue Code).
8. Limitations Regarding Ten Percent Stockholders. No Option which is
intended to qualify as an incentive stock option may be granted under this Plan
to any Eligible Employee who, at the time the Option is granted, owns, or is
considered to own, within the meaning of Section 422 of the Internal Revenue
Code, Shares possessing more than ten percent (10%) of the total combined voting
power or value of all classes of stock of the Corporation or its Subsidiaries,
unless (i) the exercise price under such Option is at least one hundred ten
percent (110%) of the Fair Market Value of a Share on the date such Option is
granted and (ii) the duration of such Option is no more than five (5) years.
9. Option Holder Not a Stockholder. An Option holder shall not be deemed
to be the holder of, or to have any of the rights of a stockholder with respect
to, any Shares subject to such Option, unless and until (i) the Option shall
have been exercised pursuant to the terms thereof, (ii) the Corporation shall
have issued and delivered Shares to the Option holder, and (iii) said holder's
name shall have been entered as a stockholder of record on the books of the
Corporation.
4
<PAGE>
Thereupon, said holder shall have full voting, dividend and other ownership
rights with respect to such Shares.
10. Non-Transferability of Options. Options and all rights thereunder
shall be non-transferable and non-assignable by the holder thereof, except to
the extent that the representative of the estate or the heirs of a deceased
Option holder may be permitted to exercise such Options and rights thereunder
and, during the holder's lifetime, shall be exercisable only by the holder or
his or her legal representative.
11. Exercise of Options.
a. Except as otherwise provided herein, an Option, after the grant
and vesting thereof in accordance with Section 5 of this Plan, shall be
exercisable by the holder of such Option at such rate and times as may be
fixed by the Committee at the time the Option is granted; provided,
however, no Option may be exercised in part or in full, prior to the
approval of the Plan by a majority vote of the shareholders of the
Corporation, as provided in Section 20 herein.
b. Notwithstanding any other provision of this Plan, any Option
granted under the Plan which is an incentive stock option shall not be
exercisable to the extent that the Fair Market Value of the Shares
(determined as of the date of grant), with respect to which such Option
(and any other incentive stock option granted to the holder under this Plan
or any other stock option plan maintained by the Corporation or any
Subsidiary) first becomes exercisable in any calendar year, exceeds
$100,000.
c. All or any part of any remaining unexercised Options granted to
any Eligible Employee may be exercised in full, after approval of the Plan
by the stockholders of the Corporation as provided in Section 20 herein,
whether or not then vested and exercisable, upon a Change in Control or
upon the occurrence of such special circumstance or event which, in the
sole discretion of the Committee, merits special consideration.
d. An Option shall be exercised by the delivery of a written notice
duly signed by the Option holder (or the representative of the estate or
the heirs of a deceased Option holder), together with the Option
Certificate and either (i) cash, (ii) a certified check payable to the
order of the Corporation, (iii) Shares duly endorsed over to the
Corporation (which Shares shall be valued at their Fair Market Value as of
the date preceding the day of such exercise) or (iv) any combination of
such methods of payment which together amount to the full exercise price of
the Shares purchased pursuant to the exercise of the Option. Such payment
shall be delivered to the Treasurer, Secretary or Assistant Secretary of
the Corporation who has been designated for the purpose of receiving the
same.
5
<PAGE>
e. No Option may be granted or exercised pursuant to the provisions
herein when such Option, or the granting or exercise thereof, may result in
the violation of any law or governmental order or regulation.
f. Within a reasonable time after the exercise of an Option, the
Corporation shall cause to be delivered to the person entitled thereto a
certificate for the Shares purchased pursuant to the exercise of the
Option. If the Option shall have been exercised with respect to less than
all of the Shares subject to the Option, the Corporation shall (i) cause to
be delivered to the person entitled thereto a new Option Certificate in
replacement of the Option Certificate surrendered at the time of the
exercise of the Option, indicating the number of Shares with respect to
which the Option remains available for exercise or (ii) endorse the
original Option Certificate to give effect to the partial exercise thereof.
g. No incentive stock option issued herein shall be exercised by an
Eligible Employee until such employee has been in the employ of the
Corporation for a period of at least three (3) months following the date
such Option is granted.
12. Disposition of Shares. If the Option is an incentive stock option, no
Shares acquired pursuant to the exercise of an Option granted herein may be
sold, exchanged, gifted or otherwise disposed of within two (2) years of the
date such Option was granted or one (1) year of the date such Option was
exercised, whichever is later.
13. Fractional Shares. The Corporation shall not be required to issue
fractional Shares pursuant to this Plan and, accordingly, Eligible Employees may
be required to accumulate vested Options, or portions thereof, until they can
purchase a whole Share or Shares.
14. Exchange of Options for Cash. The Committee may, from time to time,
in its sole discretion, grant cash to an Eligible Employee, upon his or her
written request, in exchange for any Option granted herein which is vested but
has not been exercised by such employee. The amount of cash to be granted
shall be conclusively determined by the Board, in its sole discretion, as equal
to the difference between (i) the Fair Market Value of a Share on the date such
written request is received and (ii) the exercise price of the Option. Such
written request shall be considered received when personally delivered to the
Secretary or Assistant Secretary of the Corporation or upon the receipt of a
letter sent by certified or registered mail, return receipt requested, to 1501
Opus Place, Downers Grove, Illinois 60515, or three (3) days after such letter
is sent, whichever is earlier. Upon the Committee's grant of cash, as provided
herein, such Option or Options exchanged shall be immediately terminated. This
paragraph 14 shall not be interpreted as creating any affirmative obligation on
the Committee, Corporation or its Subsidiary to purchase any such Options of an
Eligible Employee, which decision shall rest in the sole discretion of the
Committee.
6
<PAGE>
15. Termination of Services.
a. All or any part of any Option, to the extent unexercised, shall
terminate immediately if the Option holder ceases to be an employee of the
Corporation or its Subsidiary, or (if applicable) ceases to be an
independent contractor awarded an Option pursuant to Section 4 herein;
except that, unless otherwise provided by the Committee, the Option holder
shall have until the end of the thirtieth (30th) day following the date he
or she ceases to be an employee or independent contractor of the
Corporation or its Subsidiary to exercise any unexercised vested Option
rights that he or she could have exercised immediately prior to such
cessation; provided, however, that such exercise must be accomplished prior
to the expiration of the term of such Option. All unvested Options shall
immediately lapse if the Option holder ceases to be an employee of the
Corporation or any of its Subsidiaries or an independent contractor who is
awarded an Option pursuant to Section 4 herein. Notwithstanding the
foregoing, if an individual ceases to be an employee or independent
contractor of the Corporation or its Subsidiary due to (i) retirement on or
after attaining the age of sixty-five (65) years (or such earlier date as
such person shall be permitted under the Corporation's retirement plan),
(ii) disability (as such term is defined in Section 422(c)(6) of the
Internal Revenue Code, the existence of which shall be conclusively
determined by the Committee in its sole discretion), or (iii) death, then
the Option holder, or the representative of the estate or the heirs of a
deceased Option holder, shall have the privilege of exercising the Options
which are unexercised at the time of such retirement, disability or death;
but only to the extent that such Options, which are then vested, are
exercised (i) within three (3) months of the Option holder's retirement,
(ii) within one (1) year of the Option holder's disability, or (iii) within
one (1) year of the Option holder's death, as the case may be; provided,
however, that such exercise must be accomplished prior to the expiration of
the term of such Option. If an Option holder ceases to be an employee or
independent contractor of the Corporation or its Subsidiary because of the
Option holder's violation of his or her duties to the Corporation and its
Subsidiaries, the existence of such violation to be conclusively determined
by the Committee in its sole discretion, all unexercised Options of such
Option holder shall immediately terminate and such Option holder shall have
no right to exercise any unexercised Option he or she might have exercised
prior to the date he or she ceased to be an employee or independent
contractor of the Corporation or its Subsidiary.
b. Nothing contained herein or in the Option Certificate shall be
construed to confer on any Eligible Employee any right to continue in the
employ of the Corporation or its Subsidiaries or derogate from any right of
the Corporation or its Subsidiaries to request, in its sole discretion, the
retirement, resignation or discharge of such Eligible Employee, at any
time, with or without cause.
7
<PAGE>
16. Adjustment of Shares.
a. If, prior to the complete exercise of any Option, there shall be
declared and paid a stock dividend upon the Common Stock of the Corporation
or if the Common Stock of the Corporation shall be split, converted,
exchanged, reclassified or in any way substituted, the Option, to the
extent that it has not been exercised, shall entitle the holder thereof,
upon the future exercise of the Option, to such number and kind of
securities, cash or other property, subject to the terms of the Option, to
which he or she would have been entitled had he or she actually owned the
Shares subject to the unexercised portion of the Option at the time of the
occurrence of such stock dividend, split, conversion, exchange,
reclassification or substitution; and the aggregate exercise price upon the
future exercise of the Option shall be the same as if the originally
optioned Shares were being purchased thereunder. If, prior to the complete
exercise of any Option, there shall be a spin-off transaction pursuant to
the reorganization of the Corporation, the Option, to the extent that it
has not been exercised, shall be adjusted by adjusting the exercise price
of the Option and adjusting the number of Shares subject thereto, in order
to reflect the decrease, if any, in the fair market value of the Shares
resulting from the spin-off transaction; in any such case, the Option as
adjusted, shall entitle the holder thereof, upon the future exercise of the
Option, to the number of Shares which have a fair market value, immediately
after the occurrence of the spin-off transaction, equal to the fair market
value of the Shares subject to the Option on the day before the occurrence
of such spin-off transaction, and the aggregate exercise price upon the
future exercise of the Option shall be the same as the aggregate exercise
price of the Shares subject to the Option on the day before the occurrence
of such spin-off transaction. Any fractional Shares or other securities
payable upon the exercise of the Option, as a result of such adjustment due
to the occurrence of such stock dividend, stock split, conversion,
exchange, reclassification, substitution or spin-off transaction, shall be
payable in cash based upon the Fair Market Value of such Shares or
securities at the time of such exercise. If any such event should occur,
the number of Shares, with respect to which Options remain to be issued or
with respect to which Options may be reissued, shall be adjusted in a
similar manner.
b. Except as otherwise provided in Section 11.c hereof, upon the
dissolution or liquidation of the Corporation, or upon a reorganization,
merger or consolidation in which the Corporation is not the surviving
corporation or entity, or in which the Corporation becomes a subsidiary of
another corporation, or upon the sale of substantially all of the property
of the Corporation to another corporation, both the Plan and the Options
issued thereunder shall terminate, unless a provision is made in connection
with such transaction for (i) the assumption of Options theretofore granted
or (ii) the substitution for such Option with options of the successor
employer corporation or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kinds of shares and the per share exercise
prices.
8
<PAGE>
17. Issuance of Shares and Compliance with Securities Laws. Before
issuing and delivering any Shares to an Option holder, the Corporation may: (i)
require the holder to give satisfactory assurances that the Shares are being
purchased for investment and not with a view to resale or distribution, and will
not be transferred in violation of applicable federal and state securities laws,
rules and regulations, including but not limited to the Securities and Exchange
Commission Rule 144, (ii) restrict the transferability of such Shares and
require a legend to be endorsed on the certificates representing the Shares, as
appropriate to reflect resale restrictions, if any, imposed by the Committee
pursuant to the Option when granted, or as appropriate to comply with any
applicable state or federal securities laws, rules or regulations, and (iii)
condition the exercise of an Option or the issuance and delivery of Shares upon
the listing, registration or qualification of the Shares covered by such Option
upon a securities exchange or under applicable securities laws.
18. Income Tax Withholding. If the Corporation or its Subsidiary shall be
required to withhold any amounts by reason of federal, state or local tax laws,
rules or regulations, in respect of the issuance of Shares pursuant to the
exercise of an Option, the Corporation or such Subsidiary shall be entitled to
deduct and withhold such amounts from any cash payments to be made to the Option
holder. In any event, the holder shall promptly make available to the
Corporation or such Subsidiary, when requested by the Corporation or such
Subsidiary, sufficient funds to meet the requirements of such withholding, and
the Corporation or such Subsidiary shall be entitled to take and authorize such
steps as it may deem advisable in order to have such funds made available to the
Corporation or such Subsidiary from any funds or property due or to become due
to the holder.
19. Administration and Amendment of the Plan.
a. Except as hereinafter provided, the Board of Directors and the
Committee may, at any time, withdraw or, from time to time, amend the Plan
as it relates to the terms and conditions of any Options not theretofore
granted. The Board of Directors and the Committee, with the consent of
each affected Option holder may, at any time, withdraw or cancel any
outstanding Option or, from time to time, amend the Plan as it relates to
the terms and conditions of any outstanding Option. Notwithstanding the
foregoing, any amendment which would cause any Option that is intended to
qualify as an incentive stock option to fail to qualify must be adopted by
the Board of Directors and shall be contingent upon the approval of the
stockholders of the Corporation within one (l) year of such amendment.
b. Determinations of the Committee as to any question which may
arise with respect to the interpretation of the provisions of the Plan and
Options shall be final. The Committee may authorize and establish such
rules, regulations and revisions thereof, not inconsistent with the
provisions of the Plan, as it may deem advisable to make the Plan and
Options effective or provide for their administration and may take such
other action with regard to the Plan and Options as it shall deem desirable
to effectuate their purpose.
9
<PAGE>
20. Effective Date of the Plan.
a. This Plan has been adopted and approved by the Board of
Directors, and shall be effective as of February 1, 1996; provided, that
no options may be granted under the Plan that are designated by the
Committee as incentive stock options pursuant to Section 5 hereof prior to
(i) the effective date of a registration statement on Form S-1 filed with
the Securities and Exchange Commission by the Corporation pursuant to the
Securities Act of 1933, as amended, and (ii) the approval by the
affirmative vote of the holders of a majority of the outstanding Shares of
the Corporation's voting stock, either in person, by proxy or by consent,
within 12 months following the adoption of the Plan by the Board of
Directors. In the event that this Plan is not approved by the stockholders
of the Corporation as aforesaid, options designated as incentive stock
options hereunder shall be void and of no force or effect.
b. The Plan shall remain in full force and effect until the close of
business on October 25, 2005, at which time the right to grant Options
under the Plan shall automatically terminate, unless the stockholders of
the Corporation approve an extension or renewal of the Plan for such new or
additional term agreed upon by the stockholders. Any options granted
before the termination of the right to grant options under the Plan shall
continue to be governed thereafter by the terms of the Plan.
21. Severability. If any provision herein shall be held unlawful or
otherwise invalid or unenforceable in whole or in part, such unlawfulness,
invalidity or unenforceability shall not affect any other provision of the Plan
or part thereof, each of which shall remain in full force and effect. If the
making of any payment required under the Plan shall be held unlawful or
otherwise invalid or unenforceable, such unlawfulness, invalidity or
unenforceability shall not prevent any other payment from being made under the
Plan, and if the making of any payment in full, as required under the Plan,
would be unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity or unenforceability shall not prevent such payment from being made in
part, to the extent that it would not be unlawful, invalid, or unenforceable,
and the maximum payment that would not be unlawful, invalid or unenforceable
shall be made under the Plan.
22. Governing Law. The Plan and all determinations made and actions taken
hereunder, to the extent not otherwise governed by the Internal Revenue Code or
laws of the United States of America, shall be governed by the laws of the State
of Illinois and construed accordingly.
10
