UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended: Commission File Number:
March 31, 1999 333-36447
FEDERAL DATA CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 52-0940566
(State or other (I.R.S. Employer
jurisdiction of Identification Number)
incorporation)
4800 Hampden Lane, Bethesda, MD 20814
(Address of principal executive offices) (Zip Code)
(301) 986-0800
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year, if
changed since last report)
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 [ ]
As of the close of business April 30, 1999, the registrant had outstanding
2,927,521 shares of Common Stock, par value $.01 per share.
================================================================================
<PAGE>
INDEX
Page
Part I. Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 1998
and March 31, 1999 (Unaudited)...................................3
Consolidated Statements of Operations (Unaudited)for the
Three Months Ended March 31, 1998 and 1999.......................4
Consolidated Statements of Cash Flows (Unaudited) for the
Three Months Ended March 31, 1998 and 1999.......................5
Notes to Consolidated Financial Statements (Unaudited)...........6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................7
Item 3. Quantitative and Qualitative Disclosure about Market Risk.......11
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.............11
Item 6. Exhibits and Reports on Form 8-K................................11
2
<PAGE>
Part I. Financial Information
Item 1. Consolidated Financial Statements
Federal Data Corporation
Consolidated Balance Sheets
(In thousands, except share data)
December 31, March 31,
1998 1999
-------- --------
(Unaudited)
Assets
Cash and cash equivalents....................... $3,942 $3,010
Accounts receivable............................. 126,840 105,611
Net investment in sales-type leases............. 5,221 4,660
Inventory....................................... 963 4,630
Other assets.................................... 8,156 3,795
-------- --------
Total current assets................... 145,122 121,706
Net investment in sales-type leases............. 2,997 2,642
Leased and other property and equipment......... 5,120 4,595
Goodwill and intangibles........................ 69,411 66,615
Other assets.................................... 9,271 10,546
-------- --------
Total assets....................................... $231,921 $206,104
======== ========
Liabilities and stockholders' deficit
Nonrecourse obligations under capital leases.... $2,232 $2,449
Accounts payable and other liabilities.......... 87,846 61,950
-------- --------
Total current liabilities.............. 90,078 64,399
Recourse notes payable.......................... 141,000 144,000
Nonrecourse obligations under capital leases.... 1,551 903
Other liabilities............................... 2,464 2,430
-------- --------
Total liabilities...................... 235,093 211,732
-------- --------
Stockholders' deficit
Common stock, $.01 par value: 8,000,000
shares authorized; shares issued and
outstanding, 2,927,521 in 1998 and 1999........ 29 29
Capital in excess of par value.................. 42,807 43,949
Accumulated deficit............................. (46,008) (49,606)
-------- --------
Total stockholders' deficit............ (3,172) (5,628)
-------- --------
Commitments and contigencies
Total liabilities and stockholders' deficit......... $231,921 $206,104
======== ========
See notes to consolidated financial statements.
3
<PAGE>
Federal Data Corporation
Consolidated Statements of Operations
(In thousands)
(Unaudited)
Three Months Ended
March 31,
------------------------
1998 1999
-------- --------
Revenue
Product sales................................... $53,201 $62,650
Professional and support services............... 38,210 40,114
Interest and other.............................. 438 447
-------- --------
Total revenue...................... 91,849 103,211
-------- --------
Expenses
Cost of sales and services...................... 79,238 89,013
Selling, general and administrative............. 10,295 12,404
Goodwill and intangibles........................ 2,168 2,796
Interest........................................ 3,580 3,866
-------- --------
Total expenses..................... 95,281 108,079
-------- --------
Loss before income tax benefit...................... (3,432) (4,868)
Income tax benefit.................................. (968) (1,270)
-------- --------
Net loss............................................ ($2,464) ($3,598)
======== ========
See notes to consolidated financial statements.
4
<PAGE>
Federal Data Corporation
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31,
------------------------
1998 1999
-------- --------
Cash flows from operating activities:
Net loss........................................... ($2,464) ($3,598)
Adjustments to reconcile net loss to
net cash flows from operating activities:
Depreciation and amortization...................... 2,485 3,324
Amortization of deferred financing costs........... 237 237
Non-cash compensation related to stock options..... - 1,142
Gain on sale of assets............................. - (125)
Income recorded on sales-type leases............... - (237)
Collections from sales-type leases................. 311 2,546
Increase in inventory.............................. (3,875) (3,667)
Decrease in accounts receivable.................... 13,200 21,229
Decrease in accounts payable and accrued expenses.. (11,603) (25,752)
Net change in other assets and liabilities......... 1,992 2,671
-------- --------
Net cash flows from operating activities.......... 283 (2,230)
-------- --------
Cash flows from investing activities:
Acquisitions of businesses, net of cash received... (30,346) -
Net proceeds from sale of property and equipment... - 488
Purchase of equipment for sales-type leases........ - (1,318)
Purchase of property and equipment................. (1,011) (366)
-------- --------
Net cash flows from investing activities.......... (31,357) (1,196)
-------- --------
Cash flows from financing activities:
Net borrowings under line of credit................ 25,171 3,000
Repayments of capital lease obligations............ (424) (506)
-------- --------
Net cash flows from financing activities.......... 24,747 2,494
-------- --------
Net change in cash and cash equivalents.............. (6,327) (932)
Cash and cash equivalents, beginning of period....... 6,327 3,942
-------- --------
Cash and cash equivalents, end of period............. $0 $3,010
======== ========
See notes to consolidated financial statements.
5
<PAGE>
Federal Data Corporation
Notes to Consolidated Financial Statements
(In thousands, except share data)
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of Federal Data Corporation and its wholly-owned subsidiaries
(collectively, the Company) and have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
note disclosures normally included in the annual financial statements, prepared
in accordance with generally accepted accounting principles, have been condensed
or omitted pursuant to those rules and regulations, although the Company
believes that the disclosures made are adequate to make the information
presented not misleading.
In the opinion of management, the accompanying unaudited consolidated financial
statements reflect all necessary adjustments and reclassifications (all of which
are of a normal, recurring nature) that are necessary for fair presentation for
the periods presented. It is suggested that these unaudited consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest annual report
to the Securities and Exchange Commission on Form 10-K 405 for the year ended
December 31, 1998.
The results of operations for the three month period ended March 31, 1999, are
not necessarily indicative of the results to be expected for the full fiscal
year ending December 31, 1999.
All of the Company's direct and indirect wholly-owned subsidiaries have fully
and unconditionally guaranteed, on a joint and several basis, the Company's
obligations under its Senior Subordinated Notes. The Company is a holding
company with no assets or operations other than its investments in its
subsidiaries. The separate financial statements of the subsidiary guarantors are
not presented because the Company's management believes that such financial
statements are not material to investors.
Note 2 - Stockholder's Equity
In December 1995, FDC Holdings, Inc. merged with and into the Company with the
Company continuing as the surviving corporation. In accordance with the merger
agreement, the Company was to replace options previously outstanding at the
merger date with options in the surviving corporation that provide substantially
the same economic benefit to the option holder as the benefits provided prior to
the merger. To fulfill this obligation, in March 1999, the Company issued fully
vested options to purchase 40,425 shares of the Company's common stock at an
exercise price of $2.00 per share. These options expire ten years from the date
of grant. Accordingly, the Company recorded non-cash compensation of $1,011
and a related increase in capital in excess of par value based on the difference
between the exercise price of the stock options and the current fair market
value.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
ACQUISITIONS
In February and March 1998, the Company purchased all of the outstanding common
stock of R.O.W. Sciences, Inc. (R.O.W.) and Technical and Management Assistance,
Inc. (TMA) and also in February 1998, purchased all of the assets of Telos
Corporation's Telos Information Systems Division (TIS), (collectively, the
Acquisitions). The aggregate purchase price of the Acquisitions was $33.5
million. The purchase price consisted of $31.5 million in cash and $2.0 million
in subordinated notes. The agreements also provide for additional cash payments
up to $0.4 million if certain revenue objectives are met. Such payments, if any,
will be accounted for as adjustments to the purchase price. Except as expressly
indicated, the following discussion does not give effect to the pre-acquisition
operations of R.O.W., TMA and TIS, or include pro forma financial information.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1998
REVENUE
Revenue for the three months ended March 31, 1999 was $103.2 million, up $11.4
million or 12% over the comparable period of 1998. The Acquisitions accounted
for $9.7 million of the increase in revenue over the comparable period of 1998.
Revenue from product sales was $62.7 million, up $9.4 million or 18% over the
comparable period of 1998. The increase in revenue from product sales is
principally due to increased emphasis on the Company's sale of commercial off-
the-shelf (COTS) products. Revenue from professional and support services was
$40.1 million, up $1.9 million or 5% over the comparable period of 1998. The
Acquisitions accounted for $9.7 million of the increase in professional and
support services revenue over the comparable period of 1998. This increase in
professional and support services revenue was significantly offset by a
reduction in professional and support services revenue due to the expiration of
existing contracts. The largest contract that expired during 1998 was a contract
awarded to NYMA, Inc. (NYMA) in 1993 under section 8(a) of the Small Business
Act, which is intended to foster growth of small businesses owned and controlled
by socially and economically disadvantaged individuals. After the acquisition of
NYMA by the Company, NYMA's continued participation as a prime contractor
required a waiver from the Administrator of the Small Business Administration
which was not received.
COST OF SALES AND SERVICES
Cost of sales and services for the three months ended March 31, 1999 was $89.0
million, up $9.8 million or 12% over the comparable period of 1998. The
Acquisitions accounted for $8.1 million of the increase in cost of sales and
services over the comparable period of 1998. Cost of sales and services for the
three months ended March 31, 1999 and 1998 was 87% of sales and services
revenue.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE
Selling, general and administrative expense for the three month period ended
March 31, 1999 was $12.4 million, up $2.1 million or 20% over the comparable
period of 1998. The Acquisitions accounted for $0.8 million of the increase in
selling, general and administrative expense over the comparable period of 1998.
In addition, during the quarter ended March 31, 1999, the Company recorded a
non-cash charge of $1.0 milliom related to the issuance of stock options in
accordance with the Company's merger with FDC Holdings, Inc. in 1995. Excluding
the effect of the Acquisitions and the non-cash compensation, selling, general
and administrative expense for the three month period ended March 31, 1999 and
1998 was 11% of revenue.
7
<PAGE>
AMORTIZATION OF GOODWILL AND INTANGIBLE ASSET
The excess of the cost of acquisitions over the fair value of identifiable
net tangible and intangible assets acquired was $64.4 million and is being
amortized on a straight-line basis over fifteen years. The present value of the
contract profits of $16.5 million acquired in the acquisitions is being
amortized over the remaining terms of the acquired contracts in relation to the
recognition of related contract revenue. Other identified intangibles including
covenants not to compete, work force and trade names and trademarks of $5.5
million acquired in acquisitions are being amortized over periods up to
three years. Amortization of goodwill and intangible assets for the three month
period ended March 31, 1999 was $2.8 million, up $0.6 million, or 29% over the
comparable period of 1998.
INTEREST EXPENSE
Interest expense for the three month period ended March 31, 1999 was $3.9
million, up $0.3 million, or 8% over the comparable period of 1998. Recourse
interest expense increased $0.3 million for the three month period ended March
31, 1999 over the comparable period of 1998 primarily due to increased recourse
debt used to finance the Acquisitions. Interest expense on nonrecourse debt
was $0.1 million for the three months ended March 31, 1999 and 1998.
INCOME TAX BENEFIT
The income tax benefit for the three month period ended March 31, 1999 is based
on an estimated annual effective rate, excluding expenses not deductible for
income tax purposes. Before giving effect to the non-deductibility of the
amortization of goodwill and the value assigned to other identified intangibles
associated with certain acquisitions, the effective tax provision rate for the
year ending December 31, 1999 is estimated to be 40%, approximately the same
rate recorded during the three months ended March 31, 1998.
NET LOSS
Net loss for the three month period ended March 31, 1999 was $3.6 million, a
$1.1 million increase from the net loss of $2.5 million recorded in the
comparable period of 1998 based on the reasons discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is cash provided by operations and
financing activities. In general, the Company's liquidity requirements vary
seasonally with revenue, which are historically higher in the third and fourth
quarters of each fiscal year. Cash flow from the collection of accounts
receivable from the U.S. Government (the Government) has generally been
predictable and dependable. Cash and cash equivalents were $3.0 million at
March 31, 1999, down $0.9 million from December 31, 1998 primarily as a result
of net cash used in operating activities of $2.2 million and net cash used in
investing activities of $1.2 million being partially offset by cash generated
from financing activities of $2.5 million. Net cash used from operating
activities was primarily a result of the increased focus on COTS products which
used $3.7 million in cash to increase inventory over the December 31, 1998
levels. A decrease in accounts payable and other liabilities of $25.8 million,
was partially offset by decreases in accounts receivable of $21.2 million. Net
cash used in investing activities amounted to $1.2 million for the three months
ended March 31, 1999, primarily as a result of purchases of equipment for sales-
type leases totaling $1.3 million. Net cash flow from financing activities was
$2.5 million for the three months ended March 31, 1999 primarily as a result of
net borrowings under the Company's working capital line of credit of $3.0
million. In April 1999, the Company amended certain financial covenants within
its Senior Credit Facility.
EBITDA represents the sum of loss before income tax benefit, net recourse
interest expense, depreciation and amortization and one-time non-cash charges.
EBITDA is not a measure of performance or financial condition under generally
accepted accounting principles, but is presented to provide additional
information related to debt service capability. EBITDA should not be considered
in isolation or as a substitute for other measures of financial performance or
liquidity under generally accepted accounting principles. While EBITDA is
frequently used as a measure of operations and the ability to meet debt service
requirements, it
8
<PAGE>
is not necessarily comparable to other similarly titled captions of other
companies due to the potential inconsistencies in the method of calculation.
The following presentation represents the Company's computation of EBITDA (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1999
-------- -------
<S> <C> <C>
Loss before income tax benefit....................... ($3,432) ($4,868)
Net recourse interest expense........................ 3,463 3,768
Non-cash compensation related to stock options....... - 1,142
Depreciation and amortization........................ 2,722 3,324
-------- -------
EBITDA........................................... $2,753 $3,366
======== =======
</TABLE>
YEAR 2000 COMPLIANCE
State of Readiness: The Company is aware of the issues associated with the
programming code in existing computer systems as the year 2000 approaches.
Certain computer operations will be affected by the roll-over of the two-digit
year value to 00. The issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that do not
properly recognize such information could generate erroneous data or cause a
system to fail.
In order to attempt to identify and remediate any material Year 2000 issues that
may affect the Company, the Company has formed a Year 2000 Readiness Team led by
the Vice Presidents of its operating divisions and supported by appropriate
contracts and technical resources throughout the Company. The Readiness Team's
plan addresses internal systems and processes, critical suppliers and customers.
A Year 2000 analysis of the Company's core software and hardware systems is
underway, focusing on the most critical systems first. This process includes the
following steps: inventory, classification of criticality, assessment of
compliance, remediation and testing. The Company estimates that this effort is
approximately 70% complete. The expected completion date is July 31, 1999, for
critical systems and September 30, 1999, for non-critical systems. All of the
Company's core administrative systems, including payroll, human resources,
operations and finance, are COTS products that are either Year 2000 compliant or
have Year 2000 compliant versions of the software available under maintenance
agreements. The Company is currently in the process of upgrading its Deltek
accounting system, and expects that such upgrade will be completed by July 31,
1999. Although the Company has completed assessments of core administrative
systems and assets with embedded systems, assessments will continue to occur
until the year 2000. This ongoing assessment is needed to make sure new assets
and systems are compliant.
The Company is assessing the potential for Year 2000 issues with third
parties with whom the Company has a material relationship. The Company expects
to complete this assessment phase by August 1, 1999. The Company has been, and
continues to contact suppliers regarding such suppliers' potential Year 2000
issues. The Company has made reasonable efforts to incorporate the Year 2000
requirements and warranty provisions of its customer contracts into its material
supply agreements so as to achieve "back-to-back" warranties from its suppliers.
However, in some instances the customer's requirement may vary from a supplier's
commercial terms relative to the Year 2000. In the event that any key supplier's
products are not found to be Year 2000 compliant, the end-user customer will be
so notified, and the Company will work with such customer to identify a Year
2000 compliant alternative. Despite such efforts, the Company expects to have
only a limited understanding of the potential Year 2000 shortcomings of many of
its suppliers, and will therefore be uncertain as to the full nature and extent
of the potential supplier-derived impact on the Company. Should supplier Year
2000 issues arise, such issues could interrupt the flow of products and services
to the Company, which could in turn impact the Company's timely delivery under
its customer contracts.
9
<PAGE>
Costs to Address the Company's Year 2000 Issues: The Company is incurring
internal staff costs as well as certain consulting expenses and product costs to
examine and address its Year 2000 readiness. The Company estimates that it will
incur approximately $700,000 to remediate any material Year 2000 issues, of
which approximately $550,000 has been incurred to date. Management does not
believe that future project costs will have a material adverse effect on the
Company's business or results of operations. Maintenance, modification costs and
software purchased with the express purpose of fixing the Year 2000 issue will
be expensed as incurred in accordance with the Emerging Issues Task Force of the
Financial Accounting Standards Board Issue No. 96-14, "Accounting for the Costs
Associated with Modifying Computer Software for the Year 2000". Network
components that may have Year 2000 compliance issues such as workstations,
printers and network components are being systematically repaired or replaced as
part of the normal information technology infrastructure replacement strategy.
The annual expenditures for these components are not significantly above levels
that the Company has historically incurred in the normal course of business. The
Company's Year 2000 program is an ongoing effort and the estimated costs and
completion dates set forth herein are subject to change. The Company cannot
assure that these estimates will prove accurate. Specific factors that could
cause material differences include, but are not limited to, the availability and
cost of personnel skilled in Year 2000 remediation, the ability to identify,
assess, remediate and test all relevant computer codes, third party remediation
plans and similar uncertainties.
Risks of the Company's Year 2000 Issues: Due to the varying degrees of
Year 2000 readiness of the Government agencies with whom the Company does
business, the Company is unable to estimate the possible impact of the Year 2000
on its customers' operations or buying patterns. While such agencies have
indicated that they are working to resolve their Year 2000 problems, the Company
regards their ability to achieve this objective as uncertain. Because the
Company's understanding of the ways in which the Government could experience
Year 2000 difficulties is inherently limited, the Company is uncertain as to the
full nature and extent of the potential Government-derived Year 2000 impact on
the Company. However, the Company is concerned that Year 2000 problems affecting
Government financial administration functions could interrupt or delay the
orderly flow of payments to the Company under its Government contracts. Because
of the Company's substantial debt service obligations and reliance on Government
contracts, any such interruption or delay could severely impact the Company's
financial condition.
The Company continues to receive requests for certifications, representations or
other commentary regarding Year 2000 issues from its customers. In some cases,
such requests have resulted in contract modifications regarding statements about
the Year 2000 compliance of the Company's products. In addition, the Federal
Acquisition Regulation requires that each contract entered into with the
Government after October 21, 1997 incorporate by reference a provision of the
Federal Acquisition Regulations which requires that all information technology
acquired by Government agencies be Year 2000 compliant. There can be no
assurance that the Company will not be adversely affected if its customers
enforced Year 2000 requirements contained in the Company's prime contracts,
whether through incorporation of the Federal Acquisition Regulations or
otherwise, which are found to be inconsistent with the Company's suppliers'
commitments with respect to Year 2000 compliance or warranty or which are
related to products produced, or services performed, solely by the Company.
Contingency Plans: The Company will develop appropriate contingency plans
for any items which are not Year 2000 compliant and which are deemed likely to
have a significant impact on the Company's business operations. The Company
intends to implement any such contingency plans by October 31, 1999. Management
believes it is expending appropriate efforts in addressing the Year 2000 issue
so that the Company's business operations will not be significantly disrupted.
However, there can be no assurance that the Company will not incur Year 2000
problems relating to its efforts or those involving its customers or suppliers
or that the costs of such efforts will not be greater than currently estimated.
###
This quarterly report on Form 10-Q contains statements which, to the extent that
they are not recitations of historical fact, constitute "forward-looking
statements" that are based on management's expectations,
10
<PAGE>
estimates, projections and assumptions. Words such as "expects," "anticipates,"
"plans," "believes," "estimates," variations of such words and similar
expressions are intended to identify such forward-looking statements that
include, but are not limited to, projections of future performance, assessment
of contingent liabilities and expectations concerning liquidity, cash flow and
contract awards. Such forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. These
statements are not guarantees of future performance and involve certain risks
and uncertainties that are difficult to predict. Therefore, actual future
results and trends may differ materially from what is forecast in forward-
looking statements due to a variety of factors, including the Company's
successful execution of internal performance plans; performance issues with key
suppliers and subcontractors; developments with respect to contingencies such as
legal proceedings or administrative proceedings challenging any contract award;
labor negotiations; changing priorities or reductions in the budgets of
Government agencies who purchase products or services from the Company;
termination of Government contracts due to unilateral Government action; and the
impact of the "Year 2000" issue on the Company and its customers and suppliers.
For additional information, see "Risk Factors" in the Company's Registration
Statement on Form S-4, SEC File Number 333-36447.
The previous discussion and analysis should be read in conjunction with the
financial statements and related notes included elsewhere in this report.
###
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The Company is exposed to market risk from changes in interest rates due to
investments in instruments made for non-trading purposes. The interest rate risk
relates primarily to the Company's portfolio of short-term investment grade
securities. The Company is also subject to risk relating to fluctuating interest
rates under its Senior Credit Facility. The Company believes that interest rate
risk is immaterial to the Company.
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On March 30, 1999, the stockholders of the Company holding 2,332,493 shares of
common stock of the Corporation, which number of shares constitutes a majority
of the voting stock, took action by written consent without a meeting to approve
an increase in the number of shares subject to the Stock Option Plan for
Executive and Other Key Employees of Federal Data Corporation and its
Subsidiaries from 415,000 to 445,645.
Item 6 (a). Exhibits
4.14 Amendment to the Senior Credit Facility.
27 Financial Data Schedule.
Item 6 (b). Reports on Form 8-K
None
11
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FEDERAL DATA CORPORATION
By:/s/ James M. Dean
----------------------------
James M. Dean
Vice President and
Chief Financial Officer
Date: May 13, 1999
12
EXHIBIT 4.14
AMENDMENT
AMENDMENT (the "Amendment"), dated as of April 23, 1999, among
FEDERAL DATA CORPORATION (the "Borrower"), the institutions party to the Credit
Agreement referred to below (the "Lenders") and BANKERS TRUST COMPANY, as Agent
(the "Agent"). All capitalized terms used herein and not otherwise defined shall
have the respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Agent are parties to
a Credit Agreement dated as of July 25, 1997 (as currently in effect, the
"Credit Agreement");
WHEREAS, the parties hereto wish to amend the Credit Agreement
as herein provided;
NOW, THEREFORE, it is agreed:
1. Section 8.10 of the Credit Agreement is hereby amended by
deleting the line reading:
"March 31, 1999 through
December 31, 1999 5.25:1.0"
and inserting in lieu thereof:
"March 31, 1999 and
June 30, 1999 5.90:1.0
September 30, 1999 5.50:1.0
December 31, 1999 5.25:1.0"
2. Section 8.11 of the Credit Agreement is hereby amended by
deleting the line reading:
"September 30, 1999 through
September 30, 1999 1.75 to 1.0"
and inserting in lieu thereof:
"March 31, 1999 and
June 30, 1999 1.65 to 1.0
September 30, 1999 1.75 to 1.0"
3. This Amendment is limited as specified and shall not
constitute a modification, acceptance or waiver of any other provision of the
Credit Agreement or any other Credit Document.
4. This Amendment may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which counterparts when executed and delivered shall be an original, but all
of which shall together constitute one and the same instrument. A complete set
of counterparts shall be lodged with the Borrower and the Agent.
5. This Amendment and the rights and obligations of the
parties hereunder shall be construed in accordance with and governed by the law
of the State of New York.
<PAGE>
6. This Amendment shall become effective on the date (the
"Effective Date") on which all of the following conditions shall have been
satisfied:
(i) each of the Borrower and the Required Banks shall have
signed a copy hereof (whether the same or different copies) and shall have
delivered (including by way of telecopier) the same to the Agent at its Notice
Office; and
(ii) the Borrower shall have paid to the Agent for the account
of each Bank that has executed and delivered on or prior to the Effective Date a
counterpart of this Amendment an Amendment Fee equal to .125% of the amount of
the Commitment of each such Bank.
7. At all times on and after the Effective Date, all
references in the Credit Agreement and each of the Credit Documents to the
Credit Agreement shall be deemed to be references to such Credit Agreement after
giving effect to this Amendment.
* * *
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Amendment to be duly executed and delivered as of the date
first above written.
FEDERAL DATA CORPORATION
By: /s/ James M. Dean
----------------------------------
Name: James M. Dean
Title: Vice President and
Chief Financial Officer
BANKERS TRUST COMPANY,
Individually as Agent and
as Collateral Agent
By: /s/ Gregory Shefrin
----------------------------------
Name: Gregory Shefrin
Title: Principal
IBJ WHITEHALL FINANCIAL
GROUP
By: /s/ David Thalman
----------------------------------
Name: David Thalman
Title: Director
<PAGE>
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ Patrick Rounds
----------------------------------
Name: Patrick Rounds
Title: Vice President
By: /s/ Jack Bertges
----------------------------------
Name: Jack Bertges
Title: Senior Vice President
FIRST SOURCE FINANCIAL LLP
By: FIRST SOURCE FINANCIAL INC.,
Its Agent/Manager
By: /s/ Kathi J. Innorio
----------------------------------
Name: Kathi J. Innorio
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Marie V. Duprey
----------------------------------
Name: Marie V. Duprey
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Ronald R. Reedy
----------------------------------
Name: Ronald R. Reedy
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Mark Koneval
----------------------------------
Name: Mark Koneval
Title: Vice President
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
By: /s/ William P. Gennario
----------------------------------
Name: William P. Gennario
Title: Vice President
FIRST UNION COMMERCIAL CORPORATION
By: /s/ Michael J. Landin
----------------------------------
Name: Michael J. Landin
Title: Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,010
<SECURITIES> 0
<RECEIVABLES> 106,048
<ALLOWANCES> 437
<INVENTORY> 4,630
<CURRENT-ASSETS> 121,706
<PP&E> 19,129
<DEPRECIATION> 14,534
<TOTAL-ASSETS> 206,104
<CURRENT-LIABILITIES> 64,399
<BONDS> 144,000
0
0
<COMMON> 29
<OTHER-SE> (5,657)
<TOTAL-LIABILITY-AND-EQUITY> 206,104
<SALES> 102,764
<TOTAL-REVENUES> 103,211
<CGS> 89,013
<TOTAL-COSTS> 108,079
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 7
<INTEREST-EXPENSE> 3,866
<INCOME-PRETAX> (4,868)
<INCOME-TAX> (1,270)
<INCOME-CONTINUING> (3,598)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,598)
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> NOT REQUIRED TO PRESENT EPS AS LONG AS THE COMPANY IS NOT
PUBLICLY HELD.
</FN>
</TABLE>
