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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
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Commission File No. 33-63838
Neodata Services, Inc.
(a Delaware Corporation)
I.R.S. Employer Identification Number 75-2333190
833 W. South Boulder Road
Louisville, Colorado 80027
(303) 666-7000
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 requirement for the past 90 days. Yes [ X ] No [ ]
As of February 12, 1998, the registrant had outstanding 1,173 shares of its
common stock, $.01 par value per share.
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<PAGE>
Neodata Services, Inc.
Form 10-Q
Table of Contents
Page No.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets......................... 3
Condensed Consolidated Statements of Operations............... 4
Condensed Consolidated Statements of Cash Flows............... 5
Notes to Consolidated Financial Statements.................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................. 10
SIGNATURE................................................................ 11
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
NEODATA SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share information)
(Unaudited)
December 31, June 30,
Assets 1997 1997
---- ----
<S> <C> <C>
Current assets:
Cash ................................................. $ 3,785 $ 1,786
Intercompany accounts receivable ..................... 3,811 --
Accounts receivable, net ............................. 80,319 67,800
Prepaid expense and other ............................ 15,255 10,859
-------- --------
Total current assets ............................... 103,170 80,445
Property, plant and equipment, net of depreciation ...... 48,477 47,593
Computer software, net of amortization .................. 17,544 18,362
Excess of cost over acquired net assets, net of
amortization .......................................... 8,976 9,517
Debt issue costs and other assets ....................... 5,821 7,278
-------- --------
Total assets ....................................... $183,988 $163,195
======== ========
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable...................................... $ 22,628 $ 34,329
Accrued liabilities................................... 31,234 27,387
Current maturities of long-term debt and capital
lease obligations................................... 4,890 1,804
-------- --------
Total current liabilities........................... 58,752 63,520
Intercompany debt ....................................... 44,304 --
Long-term debt and capital lease obligations, net of
current maturities..................................... 178,233 192,153
Customer deposits........................................ 13,199 12,521
Other liabilities........................................ 2,246 3,598
-------- --------
Total liabilities................................... 296,734 271,792
-------- --------
Commitments and contingencies
Stockholders' deficit:
Common stock, par value $.01 per share, 10,000 shares
authorized, 1,173 shares issued and outstanding..... -- --
Additional paid-in capital............................ 28,029 28,029
Contributed capital................................... 54,946 54,946
Accumulated deficit................................... (196,048) (192,019)
Cumulative translation adjustment..................... 327 447
-------- --------
Total stockholders' deficit......................... (112,746) (108,597)
-------- --------
Total liabilities and stockholders' deficit......... $183,988 $163,195
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
NEODATA SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands)
(Unaudited)
Three Months Ended Six Months Ended
December 31 December 31
----------- -----------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Revenues.................................... $ 80,068 $ 71,302 $153,214 $128,685
-------- -------- -------- --------
Expenses:
Operating and production, excluding depreciation
and amortization shown below................ 60,365 48,054 113,145 88,223
Selling, general and administrative........... 10,218 11,283 21,837 20,950
Depreciation and amortization................. 4,703 4,071 9,555 7,855
-------- -------- -------- --------
Income before interest expense.................. 4,782 7,894 8,677 11,657
Interest expense................................ 5,439 6,142 11,633 12,288
-------- -------- -------- --------
Income (loss) before extraordinary loss......... (657) 1,752 (2,956) (631)
Extraordinary loss - early extinguishment
of debt....................................... -- -- (1,073) --
-------- -------- -------- --------
Net income (loss)............................... $ (657) $ 1,752 $ (4,029) $ (631)
======== ======== ======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
NEODATA SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six months ended
December 31,
1997 1996
---- ----
<S> <C> <C>
Net cash provided by (used in) operating activities..... $ (8,868) $ 1,895
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment........ (5,777) (1,091)
Proceeds from sales of property, plant, and
equipment....................................... 1,000 120
Payments for acquisitions, net of cash acquired... -- (3,218)
Purchases and development of computer software.... (4,255) (3,538)
-------- --------
Net cash used in investing activities......... (9,032) (7,727)
-------- --------
Cash flows from financing activities:
Change in book overdrafts.......................... (13,451) 4,444
Borrowings under long-term lines of credit and
Promissory Notes................................. 49,113 64,370
Payments on long-term lines of credit.............. (14,122) (62,710)
Dividends to Holding for payments on Meredith Note. -- (815)
Payments on capital leases and long-term debt...... (1,521) (331)
-------- --------
Net cash provided by financing activities...... 20,019 4,958
-------- --------
Change resulting from cumulative translation
adjustment................................... (120) (77)
-------- --------
Net change in cash...................................... 1,999 (951)
Cash at beginning of period............................. 1,786 1,304
-------- --------
Cash at end of period................................... $ 3,785 $ 353
======== ========
The accompanying notes are an integral part of these financial statements.
</TABLE>
5
<PAGE>
NEODATA SERVICES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements have been prepared
by Neodata Services, Inc. (the "Company") pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). The Company is a wholly owned
subsidiary of Neodata Corporation ("Holding"). Holding is a wholly owned
subsidiary of Electronic Data Systems Corporation ("EDS"). Certain information
and footnote disclosures normally accompanying financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such SEC rules and regulations. In management's opinion, all
adjustments necessary for a fair presentation of the results of operations for
the periods presented have been made and are of a normal and recurring nature.
These consolidated financial statements and accompanying notes should
be read in conjunction with the consolidated financial statements and notes
thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Report on Form
10-K for the fiscal year ended June 30, 1997, as filed with the SEC.
2. Related party transactions
Concurrent with the acquisition of Holding by EDS in August 1997 (the
"EDS Acquisition"), all amounts outstanding under the Company's revolving line
of credit facility (the "Senior Credit Facility") and the Company's acquisition
credit facility (the "Acquisition Credit Facility") were repaid by EDS, and the
related credit agreements were terminated. The Senior Credit Facility and the
Acquisition Credit Facility were replaced with two promissory notes dated August
29, 1997 (the "Promissory Notes"). The Senior Credit Facility was replaced with
a Promissory Note between the Company and EDS, which provided for intercompany
borrowings of up to $40,000,000 with no interest. On December 9, 1997, the
$40,000,000 Promissory Note was replaced with a similar Promissory Note which
provides for intercompany borrowings of up to $47,500,000, with interest
computed and charged semi-annually on the outstanding principal balance of the
note as of the date of calculation at the applicable federal rate for the period
of calculation (7.45% at December 31, 1997). The Acquisition Credit Facility was
replaced with a Promissory Note between a consolidated Subsidiary and EDS, which
provided for intercompany borrowings of up to $4,372,000 with no interest. On
December 9, 1997, the $4,372,000 Promissory Note was replaced with a similar
Promissory Note which provides for intercompany borrowings of up to $4,371,542,
with interest computed and charged semi-annually on the outstanding principal
balance of the note as of the date of calculation at the applicable federal rate
for the period of calculation (7.45% at December 31, 1997). At the option of
EDS, additional principal may be advanced or repaid at any time under the terms
of the Promissory Notes. All amounts outstanding under the $47,500,000
Promissory Note are due and payable on the earlier of 1) January 31, 2002 or 2)
on demand at any time following the repayment in full of the Company's Senior
Deferred Coupon Notes (the "Notes"). All amounts due under the $4,371,542
Promissory Note are due and payable on demand. Total borrowings from EDS under
the Promissory Notes amounted to $44,304,000 at December 31, 1997. At June 30,
1997, $5,000,000 and $4,300,000 were outstanding under the Senior Credit
Facility and the Acquisition Credit Facility, respectively.
6
<PAGE>
Pursuant to the terms of the Company's Senior Deferred Coupon Notes
(the "Notes"), the Company was required to offer to redeem the Notes as a result
of the EDS Acquisition. Holders of an aggregate total of $10,650,000 principal
value of the Notes accepted this tender offer. Funds in the total amount of
$10,788,450 to pay the principal redemption, the tender premium, and accrued
interest were advanced to the Company by EDS. The total borrowings are reflected
as a long-term intercompany obligation, under a Promissory Note dated November
10, 1997, with interest computed and charged semi-annually on the outstanding
principal balance of the note as of the date of calculation at the applicable
federal rate for the period of calculation. At the option of EDS, principal may
be repaid at any time under the terms of the Promissory Notes. All amounts
outstanding under the $10,788,450 Promissory Note are due and payable on the
earlier of 1) January 31, 2002 or 2) on demand at any time following the
repayment in full of the Company's Senior Deferred Coupon Notes (the "Notes").
Of the total advance, $10,650,000 is a replacement of the debt redeemed under
the tender offer described above.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This discussion should be read in conjunction with the Company's
unaudited consolidated financial statements and accompanying notes included
herein and the Company's Report on Form 10-K for the fiscal year ended June 30,
1997, as filed with the SEC.
Results of Operations
Net Revenues. Net Revenues for the three months ended December 31, 1997
was $80.1 million, an increase of $8.8 million, or 12%, over the comparable
period in 1996. Approximately $5.7 million of the increase was due to revenue
from new clients, and $8.4 million of the increase was due to the acquisition of
The Lacek Group. These increases were offset by a net decrease in revenue from
existing clients. For the six months ended December 31, 1997, revenue was $153.2
million, an increase of $24.5 million, or 19%, over the comparable period in
1996. Approximately $11.7 million of the increase was due to revenue from new
clients, and $12.8 million of the increase was due to the acquisition of The
Lacek Group. Net revenue from existing clients for the six month period was
comparable to the prior year.
Operating and Production Expenses. Operating and production expenses as
a percentage of revenue were 75% and 67% for the three months ended December 31,
1997 and 1996, respectively. Operating and production expenses as a percentage
of revenue were 74% and 69% for the six months ended December 31, 1997 and 1996,
respectively. The increases over 1996 as a percentage of revenue were
attributable primarily to increased labor costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the three months ended December 31, 1997 were $10.2
million, a decrease of $1.1 million, or 10%, from the comparable period in 1996.
The decrease was primarily due to decreased general corporate expenses and a
lower provision for doubtful accounts receivable offset by certain severance
arrangements. Selling, general and administrative expenses for the six months
ended December 31, 1997 were $21.8 million, an increase of $0.9 million, or 4%,
from the comparable period in 1996. The increase was primarily due to certain
severance arrangements offset by decreased general corporate expenses.
Depreciation and Amortization Expenses. Depreciation and amortization
expenses for the three months ended December 31, 1997 were $4.7 million, an
increase of $0.6 million, or 16%, from the comparable period in 1996.
Depreciation and amortization expenses for the six months ended December 31,
1997 were $9.6 million, an increase of $1.7 million, or 22%, from the comparable
period in 1996. The increases over 1996 were primarily due to increased
amortization of computer software, in addition to amortization of the excess of
cost over acquired net assets.
Interest Expense. Interest expense for the three months ended December
31, 1997 was $5.4 million, a decrease of $0.7 million, or 11%, from the
comparable period in 1996. Interest expense for the six months ended December
31, 1997 was $11.6 million, a decrease of $0.7 million, or 5%, from the
comparable period in 1996. The decreases from 1996 were primarily due to
decreased interest expense under the Notes, in addition to the replacement of
the Senior Credit Facility and the Acquisition Credit Facility with the
Promissory Notes, which are non-interest bearing.
Extraordinary Loss. Concurrent with the EDS Acquisition, the Senior
Credit Facility and the Acquisition Credit Facility were repaid in full and the
related agreements were terminated. Unamortized
8
<PAGE>
debt issue costs of $1.1 million related to the Senior Credit Facility and the
Acquisition Credit Facility were charged as an extraordinary loss.
Liquidity and Capital Resources
Cash from Operations and Working Capital. Cash used in operations
during the six months ended December 31, 1997 was $8.9 million, a decrease of
$10.8 million from cash provided by operations of $1.9 million during the
comparable period in 1996. The decrease in cash provided by operations was due
primarily to a larger increase in accounts receivable as compared to the prior
period, in addition to a smaller increase in accounts payable and accrued
liabilities. Working capital at December 31, 1997 was $45.9 million, as compared
to $16.9 million at June 30, 1997, due primarily to increased accounts
receivable.
Cash Used in Investing. Cash used in investing activities during the
six months ended December 31, 1997 totaled $9.0 million, as compared to $7.7
million for comparable period in 1996. The increase was primarily due to
increased expenditures for property, plant, and equipment and computer software,
offset by a $3.2 million decrease in payments for acquisitions.
The Company has a significant investment in property, plant, equipment and
computer software utilized in providing service to its clients, which requires
annual routine capital expenditures. Management believes that cash flow from
operations will be sufficient to fund anticipated capital expenditures for the
remainder of the fiscal year ending June 30, 1998.
Long-term debt. As of December 31, 1997, the Company had $44.3 million
outstanding under the Promissory Notes due to EDS, with remaining availability
of $7.6 million. The Company anticipates that utilization of the Promissory
Notes will continue for the remainder of the fiscal year ended June 30, 1998.
The Company was in compliance with all financial and technical requirements of
the Notes as of December 31, 1997.
9
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Exhibits
- --------
10.1 Promissory Note, dated as of December 9, 1997, between the Company and
EDS
10.2 Promissory Note, dated as of December 9, 1997, between Neodata Creative
Services, Inc. and EDS
10.3 Promissory Note, dated as of November 10, 1997, between the Company and
EDS
27 Financial Data Schedule
Reports on Form 8-K
- -------------------
None.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NEODATA SERVICES, INC.
Date: February 12, 1998 /s/ Nicholas J. Cuccaro
-------------------------------------
Nicholas J. Cuccaro
Senior Vice President and Chief
Financial Officer
(principal financial and accounting
officer of the Company)
11
Exhibit 10.1
PROMISSORY NOTE
$47,500,000 December 9, 1997
FOR VALUE RECEIVED, Neodata Services, Inc. (the "Maker") hereby promises to
pay on the Maturity Date (as hereinafter defined) to the order of Electronic
Data Systems Corporation (the "Payee") the principal sum of Forty Seven Million,
Five Hundred Thousand and no/100 Dollars ($47,500,000.00), or, if less, the
unpaid principal amount of all loans made by Payee (which amount as of the date
of this Note equals $39,990,638.87, including amounts outstanding under the
Promissory Note of Maker to Payee dated August 29, 1997 in the principal amount
of $40,000,000.00, which Note is being surrendered to Maker concurrently with
the execution hereof) to the Maker. In addition, the Maker promises to pay
interest on the unpaid principal amount hereof from time to time outstanding as
hereinafter provided. This Note is meant to evidence existing and future
indebtedness of Maker to Payee, it being understood that principal amounts may
be repaid and readvanced from time to time at the option of Payee.
1. Interest. This Note shall bear interest on the unpaid principal
amount hereof from time to time outstanding at a rate per annum equal to the
appropriate "applicable federal rate" as defined in Section 1274(d) of the
Internal Revenue Code of 1986, as amended, as in effect from time to time.
Interest shall be calculated on May 31 and November 30 of each year on the
outstanding principal balance of this Note as of the date of calculation at the
applicable federal rate for the period of calculation. Regardless of any
provision contained in this Note, no holder of this Note shall ever be entitled
to receive, collect or apply, as interest on any amount owing hereunder, any
amount in excess of the maximum permitted to be charged under applicable law.
2. Maturity. Subject to acceleration in the event of default under
Section 5 hereof, this Note shall mature, and all unpaid principal and all
accrued and unpaid interest thereon shall become due and payable, on the earlier
of (i) January 31, 2002 and (ii) the demand of the holder of this Note at any
time following the repayment in full of the Company's 12% Senior Deferred Coupon
Notes due 2003 (the "Senior Notes") (the "Maturity Date").
3. Repayment of Principal and Interest. All outstanding principal
and accrued interest thereon shall be due and payable on the Maturity Date.
4. Optional Prepayments. The Maker may at any time and from time to
time prepay all or any portion of the principal amount of this Note, without
penalty or premium.
5. Events of Default. If any of the following events ("Events of
Default") shall have occurred and be continuing:
(a) the Maker shall fail in the payment of any portion of the
principal amount of this Note when the same becomes due and payable;
<PAGE>
(b) the Maker shall (i) fail generally to pay Maker's debts as
they become due, (ii) file, or consent to the filing of, a petition seeking
liquidation, reorganization or other relief with respect to Maker's debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect,
(iii) consent to the appointment of a trustee, receiver, liquidator, custodian
or other similar official for any substantial part of Maker's properties, or
(iv) make a general assignment for the benefit of Maker's creditors;
(c) an order shall be entered by a court or other governmental
authority of competent jurisdiction (i) granting any relief with respect to the
Maker or Maker's debts in any case or proceeding for liquidation, reorganization
or otherwise under any bankruptcy, insolvency or other similar law now or
hereafter in effect, (ii) appointing, without the consent of the Maker, a
trustee, receiver, liquidator, custodian or other similar official for any
substantial part of Maker's properties, or (iii) pursuant to the terms of which
the Maker is adjudicated to be insolvent; provided, however, that any such order
specified in clause (i), (ii) or (iii) above shall not have been dismissed
within 30 days; or
(d) the Maker shall be dissolved, liquidated or terminated for any
reason; then, and in any such event, the Payee may, by notice to the Maker,
declare this Note (together with all interest accrued hereon) to be, and this
Note shall thereupon become, immediately due and payable without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
notice of any kind, all of which are hereby waived by the Maker; provided,
however, that in the case of any of the Events of Default specified in clause
(b), (c) or (d) above, without any notice to Maker or any other act by the
Payee, this Note (together with the accrued interest thereon) shall
automatically become due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or notice of any other
kind, all of which are hereby waived by the Maker.
6. Amendment; Waiver. The terms and provisions of this Note may be
modified or amended, and the observance of any term or provision hereof may be
waived, only by a written instrument executed by the Maker and the Payee or any
other holder hereof. No failure to exercise any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
7. Parties in Interest; Assignment. This Note shall be binding upon
and inure to the benefit of the Maker and the Payee and their respective
successors and assigns. The Payee may at any time assign this Note or Payee's
rights and interests herein to any person. If the Payee makes such an
assignment, Payee shall provide notice thereof to the Maker within ten Business
Days of such assignment.
<PAGE>
8. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCEPT THAT NO EFFECT SHALL BE
GIVEN TO ANY CONFLICTS OF LAW PRINCIPLES WHICH WOULD REQUIRE THE APPLICATION OF
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS).
IN WITNESS WHEREOF, the undersigned has executed this Note as of the 9th
day of December, 1997.
NEODATA SERVICES, INC.
By: /s/ Nicholas J. Cuccaro
---------------------------------
Name: Nicholas J. Cuccaro
Title: Senior Vice President
Exhibit 10.2
PROMISSORY NOTE
$4,371,541.67 December 9, 1997
FOR VALUE RECEIVED, the undersigned, Neodata Creative Services, Inc.
("Maker"), promises to pay to the order of Electronic Data Systems Corporation
("Payee"), at the offices of Payee at 5400 Legacy Drive, Plano, Texas 75024, the
sum of Four Million, Three Hundred Seventy-One Thousand, Five Hundred Forty-One
and 67/100 Dollars ($4,371,541.67), or so much thereof as has been advanced and
not previously repaid, together with interest on the unpaid principal amount
hereof from time to time outstanding as hereinafter provided. This Note is meant
to evidence existing and future indebtedness of Maker to Payee, it being
understood that principal amounts may be repaid and readvanced from time to time
at the option of Payee.
This Note shall bear interest on the unpaid principal amount hereof
from time to time outstanding at a rate per annum equal to the appropriate
"applicable federal rate" as defined in Section 1274(d) of the Internal Revenue
Code of 1986, as amended, as in effect from time to time. Interest shall be
calculated on May 31 and November 30 of each year on the outstanding principal
balance of this Note as of the date of calculation at the applicable federal
rate for the period of calculation. Regardless of any provision contained in
this Note, no holder of this Note shall ever be entitled to receive, collect or
apply, as interest on any amount owing hereunder, any amount in excess of the
maximum permitted to be charged under applicable law.
All outstanding principal and accrued interest thereon shall be due and
payable on demand.
If this Note is placed in the hands of an attorney for collection, or
in the event this Note is collected in whole or in part through legal
proceedings of any nature, then and in any such case Maker promises to pay all
costs of collection, including, but not limited to, reasonable attorneys' fees
incurred by the holder hereof on account of such collection, whether or not suit
is filed.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF TEXAS (EXCEPT THAT NO EFFECT SHALL BE GIVEN TO ANY
CONFLICTS OF LAW PRINCIPLES WHICH WOULD REQUIRE THE APPLICATION OF THE LAWS OF A
JURISDICTION OTHER THAN THE STATE OF TEXAS).
<PAGE>
This Note is issued in substitution and replacement for that certain
Promissory Note of Maker to Payee dated August 29, 1997, in the principal amount
of $4,371,541.67, which note is being surrendered to Maker concurrently with the
execution hereof.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the
9th day of December, 1997.
NEODATA CREATIVE SERVICES, INC.
By: /s/ Nicholas J. Cuccaro
---------------------------------
Name: Nicholas J. Cuccaro
Title: Senior Vice President
Exhibit 10.3
PROMISSORY NOTE
$10,788,450.00 November 10, 1997
FOR VALUE RECEIVED, Neodata Services, Inc. (the "Maker") hereby promises
to pay on the Maturity Date (as hereinafter defined) to the order of Electronic
Data Systems Corporation (the "Payee") the principal sum of Ten Million, Seven
Hundred Eighty-Eight Thousand Four Hundred Fifty and no/100 Dollars
($10,788,450.00), or, if less, the unpaid principal balance hereof. In addition,
the Maker promises to pay interest on the unpaid principal amount hereof from
time to time outstanding as hereinafter provided.
1. Interest. This Note shall bear interest on the unpaid principal
amount hereof from time to time outstanding at a rate per annum equal to the
appropriate "applicable federal rate" as defined in Section 1274(d) of the
Internal Revenue Code of 1986, as amended, as in effect from time to time.
Interest shall be calculated on May 31 and November 30 of each year on the
outstanding principal balance of this Note as of the date of calculation at the
applicable federal rate for the period of calculation. Regardless of any
provision contained in this Note, no holder of this Note shall ever be entitled
to receive, collect or apply, as interest on any amount owing hereunder, any
amount in excess of the maximum permitted to be charged under applicable law.
2. Maturity. Subject to acceleration in the event of default under
Section 5 hereof, this Note shall mature, and all unpaid principal and all
accrued and unpaid interest thereon shall become due and payable, on the earlier
of (i) January 31, 2002 and (ii) the demand of the holder of this Note at any
time following the repayment in full of the Company's 12% Senior Deferred Coupon
Notes due 2003 (the "Senior Notes") (the "Maturity Date").
3. Repayment of Principal and Interest. All outstanding principal
and accrued interest thereon shall be due and payable on the Maturity Date.
4. Optional Prepayments. The Maker may at any time and from time to
time prepay all or any portion of the principal amount of this Note, without
penalty or premium.
5. Events of Default. If any of the following events ("Events of
Default") shall have occurred and be continuing:
(a) the Maker shall fail in the payment of any portion of the
principal amount of this Note when the same becomes due and payable;
<PAGE>
(b) the Maker shall (i) fail generally to pay Maker's debts as they
become due, (ii) file, or consent to the filing of, a petition seeking
liquidation, reorganization or other relief with respect to Maker's debts under
any bankruptcy, insolvency or other similar law now or hereafter in effect,
(iii) consent to the appointment of a trustee, receiver, liquidator, custodian
or other similar official for any substantial part of Maker's properties, or
(iv) make a general assignment for the benefit of Maker's creditors;
(c) an order shall be entered by a court or other governmental
authority of competent jurisdiction (i) granting any relief with respect to the
Maker or Maker's debts in any case or proceeding for liquidation, reorganization
or otherwise under any bankruptcy, insolvency or other similar law now or
hereafter in effect, (ii) appointing, without the consent of the Maker, a
trustee, receiver, liquidator, custodian or other similar official for any
substantial part of Maker's properties, or (iii) pursuant to the terms of which
the Maker is adjudicated to be insolvent; provided, however, that any such order
specified in clause (i), (ii) or (iii) above shall not have been dismissed
within 30 days; or
(d) the Maker shall be dissolved, liquidated or terminated for any
reason; then, and in any such event, the Payee may, by notice to the Maker,
declare this Note (together with all interest accrued hereon) to be, and this
Note shall thereupon become, immediately due and payable without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
notice of any kind, all of which are hereby waived by the Maker; provided,
however, that in the case of any of the Events of Default specified in clause
(b), (c) or (d) above, without any notice to Maker or any other act by the
Payee, this Note (together with the accrued interest thereon) shall
automatically become due and payable without presentment, demand, protest,
notice of intent to accelerate, notice of acceleration or notice of any other
kind, all of which are hereby waived by the Maker.
6. Amendment; Waiver. The terms and provisions of this Note may be
modified or amended, and the observance of any term or provision hereof may be
waived, only by a written instrument executed by the Maker and the Payee or any
other holder hereof. No failure to exercise any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege.
7. Parties in Interest; Assignment. This Note shall be binding upon
and inure to the benefit of the Maker and the Payee and their respective
successors and assigns. The Payee may at any time assign this Note or Payee's
rights and interests herein to any person. If the Payee makes such an
assignment, Payee shall provide notice thereof to the Maker within ten Business
Days of such assignment.
<PAGE>
8. Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCEPT THAT NO EFFECT SHALL BE
GIVEN TO ANY CONFLICTS OF LAW PRINCIPLES WHICH WOULD REQUIRE THE APPLICATION OF
THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS).
9. Use of Proceeds. Funds advanced by Payee to Maker under this Note
shall be used by Maker for the purpose of redeeming certain Senior Notes
tendered for redemption, including payment of principal, tender premium and
accrued interest thereon.
IN WITNESS WHEREOF, the undersigned has executed this Note as of the 10th
day of November, 1997.
NEODATA SERVICES, INC.
By: /s/ Nicholas J. Cuccaro
---------------------------------
Name: Nicholas J. Cuccaro
Title: Senior Vice President
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