-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, W2Og7VbbzECNy0q//tIitpmlxoSQjClQFXyq3FR9Zicr+b4mrmOYNyDqRL8GgA25 CnYzHcJ8ZCavfux9UGeLuQ== 0000950131-98-001053.txt : 19980218 0000950131-98-001053.hdr.sgml : 19980218 ACCESSION NUMBER: 0000950131-98-001053 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980213 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAY & SPEH INC CENTRAL INDEX KEY: 0001002521 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DIRECT MAIL ADVERTISING SERVICES [7331] IRS NUMBER: 362992650 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27872 FILM NUMBER: 98539479 BUSINESS ADDRESS: STREET 1: 1501 OPUS PL CITY: DOWNERS GROVE STATE: IL ZIP: 60515 BUSINESS PHONE: 7089641501 MAIL ADDRESS: STREET 1: 1501 OPUS PLACE CITY: DOWNERS GROVE STATE: IL ZIP: 60515 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended December 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-27872 MAY & SPEH, INC. (Exact name of registrant as specified in its charter) Delaware 36-2992650 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 1501 Opus Place, Downers Grove, Illinois 60515 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (630) 964-1501 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of February 5, 1998 Common Stock, par value $0.01 per share 25,534,054 MAY & SPEH, INC. INDEX Part I -- Financial Information
Page ---- Item 1. Financial Statements Consolidated Balance Sheets -- December 31, 1997 and September 30, 1997 -1- Consolidated Statements of Operations -- Three months ended December 31, 1997 and December 31, 1996 -2- Consolidated Statements of Stockholders' Equity -- Three months ended December 31, 1997 -3- Consolidated Statements of Cash Flows -- Three months ended December 31, 1997 and December 31, 1996 -4- Notes to Financial Statements -5- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations -7- Part II -- Other Information Item 2. Changes in Securities and Use of Proceeds -10- Item 6. Exhibits and Reports on Form 8-K -10-
PART I -- FINANCIAL INFORMATION Item 1. Financial Statements May & Speh, Inc. Consolidated Balance Sheets
Assets December 31, 1997 September 30, 1997 (unaudited) (audited) Current assets: Cash and cash equivalents $ 3,024,013 $ 1,888,817 Marketable securities 12,896,200 20,415,793 Accounts receivable, net 29,947,488 28,569,372 Income taxes refundable 6,301,217 6,301,217 Prepaid software royalties 6,518,476 5,442,796 Deferred income taxes and other current assets 5,594,995 2,445,829 ------------ ------------ Total current assets 64,282,389 65,063,824 Property, plant and equipment, net 50,848,825 50,228,440 Goodwill 19,978,514 20,099,245 Other assets 13,522,314 13,404,419 ------------ ------------ Total assets $148,632,042 $148,795,928 ============ ============ Liabilities and stockholders' equity Current liabilities: Current maturities of long-term debt $ 5,867,996 $ 5,810,927 Accounts payable 4,219,114 5,017,666 Accrued wages and benefits and other expenses 7,459,554 7,195,717 ------------ ------------ Total current liabilities 17,546,664 18,024,310 Long-term debt 30,150,736 31,546,484 Deferred income taxes 8,090,000 8,090,000 ------------ ------------ Total liabilities 55,787,400 57,660,794 ------------ ------------ Stockholders' equity: Common stock 252,199 251,474 Additional paid-in capital 48,737,056 48,277,867 Retained earnings 46,231,309 45,575,694 ------------ ------------ 95,220,564 94,105,035 Unearned ESOP compensation (2,375,922) (2,969,901) ------------ ------------ Total stockholders' equity 92,844,642 91,135,134 ------------ ------------ Total liabilities and stockholders' equity $148,632,042 $148,795,928 ============ ============
See Accompanying Notes -1- May & Speh, Inc. Consolidated Statements of Operations (Unaudited)
Three Months Ended December 31, 1997 1996 -------------------------------- Net revenues $26,350,565 $21,228,730 -------------------------------- Operating expenses: Wages and benefits 8,948,912 7,143,274 Services and supplies 1,370,602 2,039,016 Rents, leases and maintenance 5,251,101 4,637,094 Depreciation and amortization 1,778,857 901,396 Other operating expenses 2,115,297 1,823,590 ESOP principal payments 593,979 593,980 Restructuring costs 4,700,000 0 -------------------------------- Total operating expenses 24,758,748 17,138,350 -------------------------------- Operating income 1,591,817 4,090,380 Interest and other expense: ESOP interest 69,214 120,033 Other expense, net 467,385 152,744 -------------------------------- Income before income taxes 1,055,218 3,817,603 Income taxes 399,603 1,450,900 -------------------------------- Net income $ 655,615 $ 2,366,703 ================================ Earnings per share: Basic $0.03 $0.09 Weighted average shares outstanding 25,172,300 24,953,371 Diluted $0.02 $0.09 Weighted average shares outstanding, including common equivalent shares 26,470,139 26,221,871
See Accompanying Notes -2- May & Speh, Inc. Consolidated Statements of Stockholders' Equity For Three Months Ended December 31, 1997
Common Stock Additional Unearned Retained ---------------------- Shares Amount paid-in-capital compensation earnings Total ---------- --------- --------------- ------------- ----------- ----------- Balance-September 30, 1997 25,147,354 $251,474 $48,277,867 ($2,969,901) $45,575,694 $91,135,134 Net income for the three months ended December 31, 1997 (unaudited) 655,615 655,615 ESOP compensation earned during the three months ended December 31, 1997 (unaudited) 593,979 593,979 Exercise of stock options (unaudited) 72,500 725 459,189 459,914 ---------- --------- --------------- ------------- ----------- ----------- Balance-December 31, 1997 (unaudited) 25,219,854 $252,199 $48,737,056 ($2,375,922) $46,231,309 $92,844,642 ========== ========= =============== ============= =========== ===========
See Accompanying Notes -3- May & Speh, Inc. Consolidated Statements of Cash Flows (unaudited)
Three Months Three Months Ended December 31, Ended December 31, 1997 1996 ------------------ ------------------ Cash flows from operating activities: Net income $ 655,615 $ 2,366,703 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,778,857 901,396 ESOP principal payments 593,979 593,980 Changes in assets and liabilities: Accounts receivable, net (1,378,116) 3,245,691 Prepaid expenses and other current assets (4,224,846) 656,124 Accounts payable and accrued expenses (534,715) (1,113,982) Other (399,395) (148,372) ------------------ ------------------- Net cash provided by (used in) operating activities (3,508,621) 6,501,540 ------------------ ------------------- Cash flows from investing activities: Purchases of property and equipment (1,978,511) (948,384) Purchases of marketable securities 0 (6,861,098) Sales of marketable securities 7,519,593 2,232,339 Software development costs capitalized 0 (1,658,479) Increase in cash surrender value of insurance (18,500) (18,500) Other 0 (12,862) ------------------ ------------------- Net cash provided by (used in) investing activities 5,522,582 (7,266,984) ------------------ ------------------- Cash flows from financing activities: Capital lease principal payments (544,699) (288,211) Repayments of long-term obligations (793,980) (635,268) Exercise of stock options 459,914 141,667 ------------------ ------------------- Net cash used in financing activities (878,765) (781,812) ------------------ ------------------- Net change in cash and cash equivalents 1,135,196 (1,547,256) Non-cash and cash equivalents: Beginning of period 1,888,817 10,397,858 ------------------ ------------------- End of period $ 3,024,013 $ 8,850,602 ================== =================== Cash financing/investing activities: Acquisition of equipment under capital leases $ 382,460 Additional goodwill relating to GIS acquisition $ 1,355,269
See Accompanying Notes -4- May & Speh, Inc. Notes to Financial Statements (1) Basis of Presentation. The financial statements as of December 31, 1997 and for the three months ended December 31, 1997 and 1996 are unaudited and reflect all adjustments (consisting only of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the financial position and operating results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. Therefore, the financial statements should be read in conjunction with the Financial Statements and Notes thereto contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 1997. The results of operations for the three months ended December 31, 1997 are not necessarily indicative of the results for the entire fiscal year. (2) Earnings Per Share The Company adopted Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128) during the first quarter of fiscal 1998. SFAS 128 requires presentation of both basic EPS and diluted EPS on the face of the income statement. Basic EPS, which replaces primary EPS, is computed by dividing net income available to common stockholders (numerator) by the weighted average number of common shares outstanding (denominator) during the period. Unlike the computation of primary EPS, basic EPS excludes the dilutive effect of stock options. Diluted EPS replaces fully diluted EPS and gives effect to all dilutive potential common shares outstanding during a period. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased under the treasury stock method from exercise of stock options rather than the higher of the average or ending stock price as used in the computation of fully diluted EPS. Earnings per share for the three months ended December 31, 1996 have been restated in accordance with SFAS 128. The following is a reconciliation of the numerators and denominators for the computations of basic and diluted EPS:
December 31, December 31, 1997 1996 ------------ ------------ Basic EPS computation Numerator $ 655,615 $ 2,366,703 =========== =========== Denominator: Weighted average shares outstanding 25,172,300 24,953,371 ----------- ----------- Basic EPS $ .03 $ .09 =========== ===========
-5-
December 31, December 31, 1997 1996 ------------ ------------- Diluted EPS computation Numerator $ 655,615 $ 2,366,703 =========== =========== Denominator: Weighted average shares outstanding 25,172,300 24,953,371 Common stock equivalent of stock options 1,297,839 1,268,500 ----------- ----------- Total shares 26,470,139 26,221,871 ----------- ----------- Diluted EPS $ .02 $ .09 =========== ===========
Options to purchase 1,150,100 and 345,000 shares of common stock that were outstanding as of December 31, 1997 and 1996, respectively, were not included in the computation of diluted EPS because the exercise price was greater than the average market price of the common shares in each period. (3) Restructuring Costs In October 1997, the Company announced a one-time charge of approximately $4.7 million ($2.9 million after-tax) which represents the present value of payments under existing contracts with prior members of management -6- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations In addition to historical information, the following discussion contains forward looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated, including, but not limited to, renewal of customer and supplier contracts as they expire on terms and conditions favorable to the Company, changes in technology, and the risks and uncertainties described in reports and other documents filed by the Company with the Securities and Exchange Commission, including the Prospectus dated March 26, 1996 included in the Company's Registration Statement on Form S-1 (File No. 33-98302). Results of Operations Three Months Ended December 31, 1997 Compared to the Three Months Ended December 31, 1996 Net revenues increased to $26.4 million for the three months ended December 31, 1997 from $21.2 million for the three months ended December 31, 1996, an increase of 24%. The Company's direct marketing services revenues increased to $15.4 million for the three months ended December 31, 1997 compared to $13.3 million for the three months ended December 31, 1996, an increase of 16%. Information Technology ("IT") outsourcing services revenues increased to $10.9 million for the three months ended December 31, 1997 compared to $7.9 million for the three months ended December 31, 1996, an increase of 38%. Wages and benefits expenses increased to $8.9 million for the three months ended December 31, 1997 from $7.1 million for the three months ended December 31, 1996, an increase of 25%. The increased expenses reflect additional employees hired to continue the Company's expansion of business volume and the strengthening of its infrastructure. Services and supplies expenses decreased to $1.4 million for the three months ended December 31, 1997 from $2.0 million for the three months ended December 31, 1996, a decrease of 33%. This decrease reflects the reduction in cost for outside consultants as full-time employees were hired. Service and supplies generally consist of outsourced data entry services, general supplies, contract labor and costs related to the use of outside consultants. Rents, leases and maintenance expenses increased to $5.3 million for the three months ended December 31, 1997 from $4.6 million for the three months ended December 31, 1996, an increase of 13%. The increase was primarily due to leasing computers, computer peripheral hardware, additional software and additional facility rent to accommodate overall growth and new employees. A portion of this increase is due to the acquisition in fiscal year 1997 of Credit Strategy Management ("CSM"), now known as Strategic Decision Services ("SDS"), and its existing facility leases. Depreciation and amortization expenses increased to $1.8 million for the three months ended December 31, 1997 from $0.9 million for the three months ended December 31, 1996, an increase of 97%. The increase was primarily attributable to continued investment in technology including the -7- purchase of the Hitachi Data System Skyline 21 mainframe computer during the third quarter of fiscal 1997. In addition, the Company recorded additional goodwill of $3.7 million in fiscal 1997 relating to the acquisition of CSM and incentive payments and estimated costs to be incurred in consolidating the operations of GIS, which the Company acquired during the fourth quarter of fiscal 1996, resulting in increased goodwill amortization. Other operating expenses increased to $2.1 million for the three months ended December 31, 1997 from $1.8 million for the three months ended December 31, 1996, an increase of 16%. The increase was primarily attributable to variable costs relating to several client contracts. Research and development costs representing primarily wages and benefits for information technology staff and reflected as such in the Company's financial statements increased to $1.0 million for the three months ended December 31, 1997 from $0.8 million for the three months ended December 31, 1996, an increase of 28%. The Company's research and development expenses relate primarily to new product development activities. Restructuring costs of $4.7 million ($2.9 million after-tax) for the three months ended December 31, 1997 represent a one-time charge equal to the present value of payments under existing contracts with prior members of management. Excluding this one-time charge, operating income and net income would have been approximately $6.3 million and $3.6 million, respectively. Income taxes decreased to $0.4 million for the three months ended December 31, 1997 from $1.5 million for the three months ended December 31, 1996. The Company's effective tax rate was 38% for the three months ended December 31, 1997 and 1996. Liquidity and Capital Resources - ------------------------------- The Company's working capital was $46.7 million as of December 31, 1997 compared to $47.0 million as of September 30, 1997. Cash and marketable securities decreased to $15.9 million at December 31, 1997 from $22.3 million at September 30, 1997. The decrease in cash and marketable securities reflects $2.0 million for capital expenditures and $3.5 million for general operating expenses, including approximately $2.0 million for payments under existing contracts with prior members of management. The Company's investment policy is to invest in marketable, investment-grade debt instruments of the U.S. Government or tax-free municipal bonds. These investments typically have maturities of three years or less. The Company historically limits its concentration of investments in individual municipalities to $500,000 or less. These tax-free municipal bonds are backed by U.S. Treasuries or insured (as to principal and interest) by a major municipal insurer. As of December 31, 1997, the Company's net accounts receivable were $29.9 million, an increase of 5% from September 30, 1997. The Company has available $2.0 million under the existing credit facility. At December 31, 1997, there were no outstanding borrowings under this credit facility. Borrowings under a $12.0 million -8- unsecured term loan were $10.0 million at December 31, 1997, bear interest at 8.5% per annum and mature in 2005. Capital lease debt aggregated $22.9 million at December 31, 1997. This debt primarily consists of sale-leaseback of the Company's primary facility and related land during fiscal 1997 and an upgrade of one of the Company's mainframe computers in fiscal 1996. Interest on capital lease debt approximates 8.0% per annum. The Company entered into a loan at the time of the formation of the Company's Employee Stock Ownership Plan ("ESOP"). This loan currently has an outstanding balance of $2.4 million with a blended interest rate of approximately 8.8% per annum. In connection with the Company's acquisition of GIS, the Company is required to pay $.5 million of the purchase price on a deferred basis in the fourth quarter of fiscal 1998. In addition, the Company paid $1.1 million to the former GIS shareholder in fiscal 1997 based on the Company's earnings from former GIS clients and expects to make a similar payment in fiscal year 1998. Effective April 1, 1997, the Company entered into a new license agreement with a major software vendor for software used for IT outsourcing services clients. This agreement permits the Company to increase its outsourcing client base and mainframe capacity to double current levels without an increase in the fixed license fee for seven years. This new arrangement increased rents, leases and maintenance expenses for the three months ended December 31, 1997 compared to the three months ended December 31, 1996. The Company expects capital expenditures in calendar 1998 to be approximately $15 million. -9- PART II -- OTHER INFORMATION Item 2. Changes in Securities and Use of Proceeds During the first quarter of fiscal 1998, the Company used approximately $2.0 million of the net proceeds from its March 1996 initial public offering for capital expenditures and approximately $3.5 million for general corporate operating purposes. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10.1 Amendment No. 6 to Term Loan Agreement by and between The Northern Trust Company and the Registrant dated November 10, 1988 10.2 First Amendment to Amended and Restated Security Agreement dated May 16, 1994 by and between the Registrant and The Northern Trust Company 27 Financial Data Schedule (b) No reports on Form 8-K were filed by the Company during the period covered by this report. -10- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. May & Speh, Inc. Date: February 12, 1997 By: /s/ Eric M. Loughmiller ------------------------- Eric M. Loughmiller Executive Vice President, Chief Financial Officer and Secretary -11- EX-10.1 2 AMENDMENT #6 TO TERM LOAN AGREEMENT Exhibit 10.1 AMENDMENT NO. 6 --------------- THIS AMENDMENT NO. 6 (this "Amendment"), dated as of January 30, 1998, is between MAY & SPEH, INC., an Illinois corporation ("Borrower"), and THE NORTHERN TRUST COMPANY, an Illinois banking corporation ("Lender"). W I T N E S S E T H: WHEREAS, Lender and Borrower are parties to that certain Term Loan Agreement dated as of November 10, 1988 (as amended by Amendment No. 1 dated November 21, 1989, Amendment No, 2 dated December 13, 1991, Amendment No. 3 dated February 28, 1993, Amendment No. 4 dated May 16, 1994, and Amendment No, 5 dated March 31, 1995, the "Existing Loan Agreement" and as amended and modified by this Amendment, the "Term Loan Agreement"); WHEREAS, Borrower has requested certain amendments be made to the Existing Loan Agreement; and WHEREAS, subject to the terms and conditions of this Amendment, Lender is willing to agree to such amendments; NOW, THEREFORE, in consideration of the premises, the mutual covenants herein contained and other good and valuable consideration (the receipt, adequacy and sufficiency of which is hereby acknowledged), the parties hereto, intending legally to be bound, hereby agree as follows: 1. Definitions and Interpretations. Terms defined in the Term Loan Agreement shall have the same respective meanings when used herein. 2. Loan Documents. This Amendment shall be deemed included in the Loan Documents for all purposes of the Term Loan Agreement and the other Loan Documents. 3. Amendments. The Existing Loan Agreement is hereby amended effective as of the date hereof as follows: A. Section 7.4 of the Existing Loan Agreement is hereby amended by deleting it in its entirety and inserting the following in lieu thereof: "(a) Current Ratio. Maintain at all times the ratio of consolidated current assets to consolidated current liabilities of not less than 2.0:1.0. (b) Net Income. Maintain, during each fiscal quarter, Net Income of not less than $1.00." B. Lender hereby consents to an amendment to the Security Agreement and the release of the "Collateral" other than the "ESOP Note" and the "Pledged Shares" by the "Agent" (as those terms are defined in the Security Agreement) and directs the Agent to execute the first amendment to Security Agreement (the "First Amendment to Security Agreement) in substantially the form attached hereto as Exhibit A and execute UCC-3 termination statements delivered to the Agent by the Borrower. C. Borrower agrees to maintain at all times the availability to borrow under that certain Revolving Credit Agreement dated January 30, 1998 between Borrower and Harris Trust and Savings Bank as in effect as of the date hereof (the "Harris Agreement") in an amount equal to the principal amount and interest due Lender under the Term Loan Agreement. D. Notwithstanding anything contained in the Existing Loan Agreement to the contrary, the failure by Borrower to perform or observe any financial covenant of Borrower under the Harris Agreement shall constitute an Event of Default under the Term Loan Agreement. 4. Documents Remain in Effect. Except as amended and modified by this Amendment, and the First Amendment to Security Agreement, the Existing Loan Agreement and the other Loan Documents remain in full force and effect and Borrower hereby ratifies, adopts and confirms its representations, warranties, agreements and covenants contained in, and obligations and liabilities under, the Term Loan Agreement and the other Loan Documents. 5. References in Other Documents. References to the Existing Loan Agreement as amended by this Amendment in any Loan Document shall be deemed to be a reference to the Term Loan Agreement, whether or not reference is made to this Amendment. 6. Representations. Borrower hereby represents and warrants to Lender that: (a) Borrower is a corporation duly organized, validly existing, and in good standing under the laws of the state of its incorporation; and Borrower is duly qualified and in good standing as a foreign corporation authorized to do business in each jurisdiction where, because of the nature of its activities or properties, such qualification is required; (b) the execution, delivery and performance of this Amendment, the First Amendment to Security Agreement and any other Loan Document executed in connection herewith or therewith to which Borrower is a party is within Borrower's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary consents and approvals (if any shall be required), and do not and will not contravene or conflict with any provision of law or of the charter or by-laws of Borrower, or of any material agreement binding upon Borrower or its property; (c) this Amendment, the First Amendment to Security Agreement and any other Loan Document executed in connection herewith or therewith to which Borrower is a party 2 are (or, when duly executed and delivered will be) the legal, valid, and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms; and (d) the representations and warranties contained in the Term Loan Agreement are true and correct on the date hereof, except to the extent that such representations and warranties solely relate to an earlier date. 7. Conditions Precedent The effectiveness of this Amendment is subject to receipt by Lender of the following conditions precedent: (a) an executed original of the First Amendment to Security Agreement; (b) a certificate of the Secretary of Borrower certifying: (i) copies of all corporate action taken by Borrower, including resolutions of its board of directors, authorizing the execution, delivery, and performance of this Amendment by Borrower, the First Amendment to Security Agreement and other Loan Documents to be delivered pursuant to this Amendment; and (ii) the names and true signatures of the officers of Borrower authorized to sign this Amendment, the First Amendment to Security Agreement and the other Loan Documents to be delivered by the Borrower under this Amendment; (c) a consent letter from Harris Trust and Savings Bank ("Harris") pursuant to which it consents to the execution and delivery of the First Amendment to Security Agreement by the Agent and the release of the Collateral other than the ESOP Note and the Pledged Shares by The Northern Trust Company, as the Agent and directs the Agent to execute the First Amendment to Security Agreement and UCC-3 termination statements, as the Agent on behalf of Harris under the Security Agreement; and (d) such other instruments, agreements and documents as Lender may reasonably request, in each case duly executed as required and otherwise in form and substance satisfactory to Lender. 8. Costs and Expenses. Borrower acknowledges and agrees that this Amendment shall be of no force or effect unless and until Lender shall have received full reimbursement for its costs and expenses, including but not limited to, legal fees, incurred by Lender in connection with this Amendment and the First Amendment to Security Agreement. 9. Miscellaneous. (a) Section headings use in this Amendment are for convenience of reference only, and shall not affect the construction of this Amendment. 3 (b) This Amendment and any amendment hereof or supplement hereto or any waiver granted in connection herewith may be executed in any number of counterparts and by the different parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same agreement. (c) This Amendment shall be a contract made under and governed by the internal laws of the State of Illinois, without giving effect to the principles of conflicts of laws. (d) All obligations of Borrower and rights of Lender, that are expressed herein, shall be in addition to and not in limitation of those provided by applicable law. (e) Whenever possible, each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law; but it any provision of this Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment. (f) This Amendment shall be binding upon Borrower, Lender and their respective successors and assigns, and shall inure to the benefit of Borrower and Lender and the successors and assigns of Lender. [signature page(s) to follow] 4 IN WITNESS WHEREOF, the parties hereto have caused the execution and delivery hereof by their respective representatives thereunto duly authorized as of the date first herein appearing. THE NORTHERN TRUST COMPANY By: Sarah V. Dwortz ------------------------------ Its: Second Vice President ------------------------------ MAY & SPEH, INC By: Eric M. Loughmiller -------------------------------- Its: Executive Vice President, Chief Financial Officer and Secretary ------------------------------- 5 EX-10.2 3 FIRST AMENDMENT TO AMENDED AND RESTATED EXHIBIT 10.2 FIRST AMENDMENT TO SECURITY AGREEMENT This First Amendment to Security Agreement, dated as of January 30, 1998 made by May & Speh, Inc., an Illinois corporation (the "Borrower"), to The Northern Trust Company, in its capacity as collateral agent (the "Agent") to the Lenders referred in the Security Agreement (defined below). WHEREAS, the Borrower and the Agent are parties to that certain Amended and Restated Security Agreement dated as of May 16, 1994 (the "Security Agreement"); and WHEREAS, the Borrower has requested the Agent, and the Agent on behalf of the Lenders has agreed, to release the lien on certain assets of the Borrower; NOW THEREFORE, in consideration of the foregoing and other good and valuable considerations, the parties hereby agree as follows: 1. Amendment to Security Agreement. The Security Agreement is hereby amended by deleting Section 1 thereof in its entirety and substituting the following in lieu thereof: "1. Grant of Security Interest. The Borrower hereby grants to the Agent for the benefit of the Lenders to secure the payment of all monies due by the Borrower to the Lenders and the performance of all obligations of the Borrower to the Lenders under the Northern Loan Agreement, under any note issued from time to time in connection with the Northern Loan Agreement, under the Harris Note and under all other documents and agreements delivered pursuant to the Northern Loan Agreement or the Harris Note (collectively, the "Loan Documents"), of every kind and description whether absolute or contingent, due or to become due, now existing or hereafter incurred (collectively, the "Obligations"), a security interest in the following assets of the Borrower (the "Collateral"): (a) the ESOP Note and the Pledged Shares; and (b) all additions, replacements, substitutions, accessions, proceeds and products of the foregoing." 2. No Other Amendment. Except for the amendment expressly set forth above, the text of the Security Agreement and all other Loan Documents shall remain unchanged and in full force and effect. The Borrower acknowledges and expressly agrees that the Lenders reserve the right to, and do in fact, require strict compliance with all terms and provisions of the Security Agreement and the other Loan Documents. 3. Governing Law. This Amendment shall be deemed to be made pursuant to the laws of the State of Illinois with respect to agreements made and to be performed wholly in the State of Illinois, and shall be construed, interpreted, performed and enforced in accordance therewith. 4. Definitions. All capitalized terms not otherwise defined herein shall have the meanings set forth in the Security Agreement. 5. Counterparts. This Amendment may be executed in multiple counterparts, each of which shall be deemed to be an original and all of which, taken together, shall constitute one and the same agreement. Delivery of an executed counterpart of this Amendment by facsimile transmission shall be as effective as delivery of a manually executed counterpart hereof. 2 IN WITNESS WHEREOF, the Borrower has executed this Amendment as of the date first above written. MAY & SPEH, INC. By: /s/ Eric M. Loughmiller ----------------------------------- Title: Executive Vice President, Chief Financial Officer and Secretary ------------------------------- ATTEST By: /s/ Willard E. Engel Jr. -------------------------------------- Its: VP Treasurer/Chief Accounting Officer ------------------------------------- THE NORTHERN TRUST COMPANY, as Agent By: -------------------------- Title: ----------------------- Accepted and Agreed to By: THE NORTHERN TRUST COMPANY By: ------------------------------ Title: --------------------------- HARRIS TRUST AND SAVINGS BANK By: /s/ John M. Dillon ------------------------------ Title: Vice President --------------------------- 3 EX-27 4 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the financial statements included in the Company's quarterly report on Form 10-Q for the quarter ended December 31, 1997 and is qualified in its entirety by reference to such financial statements. 3-MOS SEP-30-1998 OCT-01-1997 DEC-31-1997 3,024,013 12,896,200 30,277,488 330,000 0 64,282,389 63,009,856 12,161,031 148,632,042 17,546,664 0 0 0 252,199 92,592,443 148,632,042 0 26,350,565 0 24,758,748 536,599 0 755,663 1,055,218 399,603 655,615 0 0 0 655,615 .03 .02
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