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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K 405


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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THESECURITIES EXCHANGE ACT OF 1934FOR THE
YEAR ENDED DECEMBER 31, 1999

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FEDERAL DATA CORPORATION(Exact
name of Registrant as specified in its charter)


|DELAWARE                            | 333-36447        | 52-0940566                         
|----------------------------------- | ---------------- | -----------------------------------
|(State or other jurisdiction
    of | (Commission File | (I.R.S. Employer
    Identification
|incorporation)                      | No.)             | Number)                            

4800 Hampden Lane Bethesda, MD
20814(Address of principal executive offices) (Zip
Code)

(301) 986-0800(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
None

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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates
  of the Registrant as of March 27, 2000 is $317,412. Because Federal Data Corporation
  is privately held, the aggregate value of such voting stock was computed on
  the basis of a $27 per share price, the price paid by the Company to purchase
  treasury stock from a former officer of the Company in December 1999, the time of the
  most recent common stock transaction.

As of the close of business February 29, 2000, the Registrant
had outstanding 2,917,996 shares of Common Stock, par value $.01 per
share.

Documents Incorporated By Reference

None

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PART I



Item 1. Business.

Federal Data Corporation and its subsidiaries (collectively, the
  "Company") are major suppliers of information technology to a wide range of
  customers within the U.S. federal government (the "Government"). The Company
  has assembled, through internal growth and strategic acquisitions, comprehensive
  information technology ("IT") services and products capabilities to
  address the unique needs of its Government customers. Management believes that
  the Company is strategically positioned to benefit from the current trends in
  the Government market for information technology and outsourcing of engineering,
  scientific and other professional services. The Government is among the world's
  largest purchasers of information technology with estimated total expenditures
  in the Government's 1999 fiscal year in excess of $33 billion. For the year
  ended December 31, 1999, the Company's total revenue was $583.8 million, loss
  before income taxes was $3.3 million, net loss was $4.2 million and EBITDA (as
  defined herein) was $27.8 million. Contributing to the Company's loss before
  income taxes for 1999 were non-cash charges totaling $9.1 million including
  $4.8 million related to amortization of certain intangible assets, $2.8 million
  related to a write-off of intangible assets associated with acquired contract
  backlog, and $1.5 million related to the vesting and issuance of stock options.
  These non-cash charges had a $7.4 million after-tax effect on the net loss.
  The intangible assets being amortized represent identifiable assets recorded
  in connection with the Company's acquisitions in 1997 and 1998, including contract
  backlog, covenants not to compete, work force, trade names and trademarks. The
  Company recorded $16.5 million of other intangible assets related to the acquired
  contract backlog which is equal to the present value of the pretax profits projected
  to be earned as a result of the Company's performance of such acquired contracts.
  This amount is being amortized over the remaining terms of the acquired contracts
  in the same manner and at the same time as the Company recognizes the related
  contract revenues. The value assigned to the other acquired intangible assets
  is $5.1 million and is being amortized over periods up to three years. Excluding
  the impact of future acquisitions, the Company expects that its non-cash charge
  for amortization of other intangible assets will decline in 2000 and thereafter.
  In 1998, the Company amended and restated its Stock Option Plan for Executives
  and Key Employees by accelerating the vesting of certain performance based options.
  In addition, the Company issued stock options in 1999 in accordance with the
  Company's 1995 merger agreement with FDC Holdings, Inc.  Without regard
  to any future changes in its Stock Option Plan, the Company expects that it
  will record non-cash compensation related to this change of approximately $0.2
  million in 2000 and none thereafter.

Founded in 1969, the Company serves a diverse and expanding
customer base representing over 20 Government agencies including the Department
of the Navy, the National Aeronautics and Space Administration ("NASA"), the
Federal Aviation Administration ("FAA"), the Department of Veterans Affairs, the
Internal Revenue Service ("IRS"), the National Institutes of Health ("NIH") and
the Department of State. Management believes that the Company's established
reputation and long-standing relationships with Government customers, and the
extensive knowledge gained from those relationships, have been critical to the
Company's strong record of growth and provide a key competitive advantage in
pursuing business opportunities with new and existing customers.

TC Group, L.L.C. d/b/a/ The Carlyle Group ("Carlyle"), a Washington
  D.C.-based global private merchant bank founded in 1987, through its affiliates
  became the Company's controlling stockholder in a 1995 recapitalization of the
  Company. Carlyle and its affiliates currently manage over $6 billion of private
  equity capital through various funds focused around the world. Carlyle has made
  over 60 investments in select industries including aerospace, defense, information
  technology and related services, telecommunications, health care and the Internet.

Prior to December 1, 1995, a substantial majority of the
Company's common stock was owned by its employees. On December 1, 1995, the
Company effected a recapitalization, through which FDC Holdings, Inc.
("Holdings") merged with and into Federal Data Corporation with Federal Data
Corporation continuing as the surviving corporation (the "Recapitalization").
Holdings was a company organized by Carlyle to facilitate the Recapitalization
and had no operating activity or history. The Recapitalization resulted in a
charge to stockholders' equity of $58.8 million to reflect redemption of certain
common stock. Carlyle has supported the Company's acquisition strategy with its
financial expertise and provided a critical source of equity capital for the
implementation of the Company's growth strategy.

ACQUISITIONS AND REFINANCING

Consistent with its strategy of providing a complete range of
information technology offerings to its Government customers, the Company has
pursued strategic acquisitions to broaden and strengthen key skill areas. In May
1997, the Company purchased NYMA, Inc. ("NYMA"), a provider of sophisticated
engineering and information technology services. NYMA complemented and
significantly expanded the Company's core capabilities in the technology and
engineering services sector, providing the Company with the ability to bid
effectively on new contracts with a higher component of technical services
requirements. In June 1997, the Company acquired Sylvest Management Systems
Corporation ("Sylvest"), a value-added reseller of commercial off-the-shelf
("COTS") hardware, software and technical services supporting open systems
architectures within the Government marketplace. Through the Sylvest
acquisition, the Company has become a leading value-added direct marketing
organization of COTS hardware and software to the Government and has
substantially expanded the number of customers to which it can market its
systems integration offerings.

To effect the acquisitions of NYMA and Sylvest and to secure the
  availability of additional capital for future acquisitions, in July 1997, the
  Company sold $105 million in aggregate principal amount of 10 1/8% Senior Subordinated
  Notes due 2005 (the "Private Notes") in a transaction exempt from the registration
  requirements of the Securities Act of 1933, as amended, (the "Private Placement").
  The Company used the proceeds of the Private Placement to (i) prepay $11.7 million
  of indebtedness incurred in connection with the Recapitalization and acquisition
  of Sylvest, (ii) repay all amounts (approximately $80.4 million) of long-term
  debt owing under the prior senior credit facility, (iii) pay $7.0 million in
  fees and expenses associated with the Private Placement and the new senior secured
  revolving credit facility (the "New Senior Credit Facility") and (iv) generate
  $5.9 million in additional cash for working capital purposes. None of the proceeds
  of the Private Placement are remaining. In addition, the Company terminated
  the prior senior credit facility and executed the New Senior Credit Facility,
  which provides revolving borrowing availability up to $75.0 million, subject
  to a borrowing base limitation. In December 1997, the Company completed an offer
  to exchange $1,000 principal amount of its 10 1/8% Senior Subordinated Notes
  Due 2005 (the "Exchange Notes") for each $1,000 principal amount of its outstanding
  Private Notes (the "Exchange Offer"), which exchange was registered under the
  Securities Act of 1933, as amended, pursuant to a registration statement on
  Form S-4. As a result of such Exchange Offer, the Company issued $105 million
  in aggregate principal amount Exchange Notes in exchange for all of the issued
  and outstanding Private Notes.

The Company has continued its strategy of expanding its core
customer base and strengthening its capability to service existing customers
through acquisitions in 1998. In February 1998, the Company acquired R.O.W.
Sciences, Inc. ("R.O.W."), a provider of information technology and health
science research services. The acquisition of R.O.W. expanded and strengthened
theCompany's already substantial presence at the NIH and
also broadened the Company's ability to offer professional services and
information technology solutions to federal and commercial health science
research organizations. In February 1998, the Company also acquired Telos
Information Systems ("TIS"), a division of the Telos Corporation. TIS provides
information technology and engineering services principally to NASA and the Jet
Propulsion Laboratory ("JPL"). TIS expands the Company's Pasadena, California
operations making it one of the leading information technology contractors at
JPL and provides additional capability to service NASA, one of the Company's
long-standing customers. In March 1998, the Company purchased Technical and
Management Assistance, Inc. ("TMA"), a provider of software development services
to Lockheed Martin Corporation, Computer Sciences Corporation, and the FAA. TMA
specializes in air traffic control software and complements the Company's FAA
business base.

The acquisitions have significantly enhanced the Company's
presence in the Government marketplace. Management believes the information
technology industry, particularly the portion serving Government customers, has
and will continue to consolidate, resulting in additional opportunities for the
Company to make attractive acquisitions that complement or expand its core
capabilities.

INDUSTRY OVERVIEW

According to Federal Sources, Inc., ("Federal Sources")
  an independent market research firm specializing in the federal information
  technology market, the Government is the world's largest single buyer of information
  technology services and products. Federal Sources estimated fiscal 1999 Government
  spending specifically designated for information technology to have been in
  excess of $33 billion. Despite continual budget pressures, Government outlays
  for third-party technology services and outsourcing have increased steadily
  as the Government has sought to control its spending and gain the efficiencies
  and flexibility experienced by commercial purchasers of these services. The
  General Services Administration ("GSA") anticipates a continuation of this trend
  toward increased Government use of outside information technology providers
  and estimates that the majority of all Government agencies operating in-house
  data systems may eventually outsource information technology services to the
  private sector at a significant cost savings. The current legislative and regulatory
  environment has supported and been successful with initiatives in the Government
  information technology sector to change procurement practices and become more
  like the private sector. Several statutory and regulatory changes have brought
  about a significant transition in Government procurement practices, dramatically
  increasing the number of procurement "vehicles" available to Government customers
  and generally reducing the lead time required to buy information technology
  services and products. The use of these vehicles, whether indefinite delivery,
  indefinite quantity ("IDIQ") contracts awarded to multiple contractors or teams
  of contractors, or established GSA Schedules and multiple-agency contracts ("MAC"),
  allows the Government to address an increasing portion of its information technology
  needs through relatively inexpensive, open architecture systems based on COTS
  hardware and software. This trend toward commercialization of Government procurements
  will continue to change the marketplace enabling the mission critical operations
  of the Government to be met in a timely and efficient manner. See "--Government
  Contracts."

BUSINESS AND GROWTH STRATEGY

The Company's goal is to be a leading one-stop information
technology solutions supplier, providing high-quality services and products that
meet the complete needs of its Government customer base. The Company's strategies
to meet this objective are the following:

-CREATE COMPREHENSIVE SKILL AND PRODUCT BASE.  The
  Company seeks to continuously add new information technology capabilities and
  strategically expand existing business areas to meet the changing information
  technology needs and buying patterns of its Government customers. By expanding
  its extensive technical skill base and ability to supply a broad and diverse
  set of COTS hardware and software, the Company can provide its customers with
  the widest possible range of cost effective solutions and engender a high level
  of customer satisfaction. Management believes that such capabilities, together
  with the Company's in-depth knowledge of changing Government procurement practices,
  should continue to create new opportunities for the Company.

-STRONG CUSTOMER KNOWLEDGE AND FOCUS.  The Company
strives to understand the full range of each of its customers' information
technology needs. This includes in-depth vertical expertise in selected
high-potential markets such as space systems, air traffic management and health
science research. The Company's strategy is to continue to leverage its strong
customer knowledge, advanced technical skills and supplier relationships to
tailor optimal solutions to its customers' specific needs and to offer
technology infrastructures that anticipate its customers' rapidly evolving
needs.

- PURSUE STRATEGIC ACQUISITIONS.  The Company seeks
  to continue expanding the breadth and quality of the information technology
  services and products it offers. The acquisitions have added important complementary
  skills to the Company's information technology capabilities and vertical customer
  expertise. Management expects to continue to pursue strategic acquisitions,
  which it believes can contribute significantly to the Company's future business
  growth.

- MAXIMIZE FLEXIBILITY OF GOVERNMENT CUSTOMERS.  A
  key component of the Company's success has been its ability to quickly adapt
  to the rapidly evolving Government procurement process. The Company continually
  pursues means of maximizing its customers' flexibility in acquiring a range
  of services and products with competitive prices and minimal bureaucratic delay
  by selecting the best methods available in the current, more streamlined procurement
  climate.

- CAPITALIZE ON OUTSOURCING OPPORTUNITIES.  The
Company seeks to pursue new opportunities created by changes in the Government
information technology industry. In particular, although the Government has
frequently hired service providers to fill specific roles in the past, the
Government is increasingly considering opportunities to outsource entire
functions to private industry. As part of this strategy, the Company intends to
leverage its customer relationships, technical skills and access to COTS hardware
and software in pursuing emerging opportunities in the outsourcing of certain
Government information technology functions.

SERVICES AND PRODUCTS

The Company focuses on providing a comprehensive array of high
  technology professional services in combination with hardware and software products
  from a variety of manufacturers. Although the Company is engaged in a single
  business activity, it delivers these services and products to its Government
  customers through two operating units as described below. For financial reporting
  purposes, these operating units have been aggregated. See Notes 1 and 3 to the
  consolidated financial statements. The Services & Solutions Group focuses
  primarily on providing sophisticated technical, scientific and engineering services
  to enhance IT performance and productivity, and integrates diverse hardware
  and software components into a single turnkey system, usually selling COTS hardware
  and software products as an element of the integrated solution. The Systems
  & Technology Group is a leading value-added direct marketing organization
  of hardware, software and related services to the Government.

SERVICES & SOLUTIONS GROUP

The Company has developed, both internally and through acquisition,
  a comprehensive array of high technology professional services and solutions
  which it offers in combination with premium COTS hardware and software products
  from a variety of leading original equipment manufacturers("OEMs"). The Company's service offerings range from complex systems integration
  projects to software development and networking solutions. Management believes
  that the Company's broad range of capabilities strengthens its position as a
  preferred provider by allowing the Company to support a wide array of its customer's
  IT requirements. Historically, the Company has delivered the majority of its
  services as part of large IT contracts, or programs, where it was the sole prime
  contractor. These programs involve not only delivering the Company's technical
  capabilities but also coordinating the efforts of subcontractors and vendors
  of COTS hardware and software. As a result, the Company has developed effective
  practices that ensure its ability to routinely deliver large-scale projects
  efficiently and with results that exceed its customers' expectations. This methodology
  contributes significantly to the Company's quality and consistency of performance
  and has resulted in the Company's receiving a high percentage of repeat business.
  In addition, the Company believes that the management experience, technical
  skills, and customer relationships gained through these long-term projects contribute
  to the Company's success across all of its service areas.

In conjunction with its services and solutions, the Company also
  sells COTS hardware and software from leading manufacturers. An integral part
  of management's strategy has been to focus on the sale of non-commodity products,
  such as networking equipment, that require a high level of expertise to configure
  and implement. As a result, the vast majority of the Company's product sales
  are made as part of an agency marketing strategy that involves a major component
  of associated services revenue. The Company's core competencies can generally
  be categorized into the following groups: complex systems engineering and integration,
  software engineering, technical consulting, data mining/warehousing, Microsoft
  consulting, electronic commerce, web-based development, information security,
  technology training, financial systems implementation, outsourcing and seat
  management, engineering services and health and biomedical systems.

COMPLEX SYSTEMS ENGINEERING AND INTEGRATION.  Systems
  integration refers to the assimilation of diverse information technology services
  and products , frequently including the combination of existing custom systems
  with COTS hardware and software into a single turnkey system. The Company provides
  large-scale, tailored solutions to its customers, generally including design,
  construction, and implementation, as well as the sale of any COTS hardware and
  software required for completion. In addition, these projects are characterized
  by complex features such as multi-year systems life, multiple vendors, technical
  complexity, the application and integration of leading-edge technology, and
  the selection and management of subcontractors and teaming partners with specific
  expertise. When no COTS solution or product exists, the Company also develops
  custom software applications to provide a total compliant solution. Over the
  past 30 years, the Company has completed contracts that have ranged from national
  defense programs to administrative, payroll, and inventory control functions
  of various Government departments and agencies. The Company's history and experience
  with legacy systems, including traditional mainframe systems, are particularly
  advantageous in integrating newer client/server architecture into existing environments.

SOFTWARE ENGINEERING.  The Company develops software
  under various contracts that support management information systems, air traffic
  control systems, grants management systems, and scientific data processing systems.
  The Company's experience includes a variety of platforms, languages, and operating
  environments. The Company has an SEI level II rating on several of its development
  projects and has achieved an SEI level III rating in one of the sectors of the Services
  & Solutions Group. SEI level II or III are frequently required in Government
  proposals and allow the Company to bid on contracts with more limited competition.
  Management believes that SEI level III development skills are in high demand
  and will contribute meaningfully to the Company's growth in the future.

TECHNICAL CONSULTING.  The Company provides a wide
  array of technical consulting services and solutions designed to help its customers
  utilize information technology to leverage resources more efficiently. The Company
  actively develops and directly markets these solutions, which combine the Company's
  core technology competencies with appropriate COTS products from various vendors
  to create effective, customized solutions for its customers.These
  "packaged" solutions are focused on addressing several high-demand market segments:
  data mining/warehousing, Microsoft consulting, electronic commerce, Web-based
  development, information security, financial systems implementation, and technology
  training. While these services are often employed in the Company's major systems
  integration programs, they are also increasingly promoted on a stand-alone basis
  to customers through Government wide acquisition contracts ("GWAC")
  and IDIQ contracts. Management believes that the Company's competencies in these
  areas are important to the sale of its other services and products.

DATA MINING/WAREHOUSING.  Data mining and data
warehousing enable organizations to extract knowledge regarding mission-critical
needs and answer core business questions that otherwise would have remained
obscured in voluminous data. The Company provides a comprehensive set of data
mining/warehousing consulting services including the identification of
appropriate business objectives, data preparation, building specialized data
repositories, statistical analysis, model training, and extracted knowledge
reporting. These services are often part of a system solution that provides
knowledge extraction on an ongoing basis. The Company is currently receiving
extremely high demand for data mining/warehousing services, and management
believes that the Company's growth in this area will be
significant.

MICROSOFT CONSULTING.  In 1998, the Company was selected
  as a Microsoft "Alliance Partner," Microsoft's highest level business relationship,
  to provide Government customers with comprehensive solutions and consulting
  in the areas of messaging/collaboration, electronic commerce, network and intranet
  integration, and systems accessibility. Consistent with the Company's strategy
  of partnering with leading IT suppliers, this alliance provides business referrals,
  exchange of technical expertise, joint marketing, and market recognition from
  being associated with the leading software company in the world.

ELECTRONIC COMMERCE.  Electronic commerce includes
  many forms of online purchasing, information exchange, transaction processing,
  and product support. The Company provides a wide variety of related services
  including Internet and intranet consulting, web page development, hosting and
  maintenance, integrating electronic catalogs with legacy systems, transaction
  engine support, and online report viewing and is a recognized expert in electronic
  data interchange ("EDI") applications. Networking and other new tools and technologies
  have created a wide variety of applications for electronic commerce and thus,
  a high demand for these related services. Management believes that the Company's
  electronic commerce expertise positions the Company to take advantage of the
  forecasted post-year 2000 surge of spending on "e-Government" initiatives.

WEB-BASED DEVELOPMENT.  Web-enabled applications and
tools can dramatically reduce the costs of internal and external communication.
The Company specializes in web-enabling legacy systems, assessing enterprise web
potential, designing web-based applications, and building web infrastructures to
achieve these efficiencies for customers.

INFORMATION SECURITY.  The Company advises customers
on the management and technical disciplines necessary to implement effective
information security measures. The Company assesses customers' security
requirements, recommends the best solutions available, and implements those
solutions. Management believes that information security is rapidly becoming a
significant IT issue and a substantial business opportunity in the post-year
2000 era.

TECHNOLOGY TRAINING.  With over 15 years
of experience, the Company is a premier provider of technical and end-user
training. In 1999, the Company trained over 19,000 students in over 9,000
educational sessions. Many of the training sessions were conducted using the
Company's student focused WorkSmart training methodology, which was developed in
1999. Throughout the Company's history, the total number of training sessions
now exceeds 43,100. The Company provides training in a wide variety of IT areas
and is a Microsoft Authorized Technical Education Center. Training is provided
to Government and private sector customers and the Company personnel. Management
believes that these training services play a meaningful role in retaining
customers and key Company personnel.

FINANCIAL SYSTEMS IMPLEMENTATION.
 Through the expertise of the Company's accounting and technology
professionals, the Company designs and deploys accounting and business
management systems for the commercial marketplace and for not-for-profit
customers. Together with its alliance partner, the Company has experience with
more than 250 not-for-profit customers and has a high degree of expertise with
Navision Financials, a software product for mid-sized organizations.

OUTSOURCING AND SEAT MANAGEMENT.  The Company provides
  asset management, infrastructure management, user support, and other services
  and products to customers on the basis of a per user, or "seat," fee. As a prime
  contractor, the Company has partnered with over 30 leading service and product
  providers to subcontract certain functions such as help desk support and asset
  management. Currently, the Company is one of only three companies that won both
  of the major Government desktop outsourcing prime contracts awarded to date,
  GSA Seat Management ("SEAT") and Outsourcing Desktop Initiative for
  NASA ("ODIN"). In 1999, the Company won its first SEAT task order,
  a $12 million contract over 10 years to manage 220 initial users, or "seats,"
  for the Wright Patterson Air Force Base ("WPAFB"). After this pilot
  program is implemented, the Company has the potential to add as many as 24,000
  seats under the WPAFB contract. Management believes that outsourcing represents
  a substantial growth opportunity for the Company and expects that outsourcing
  will eventually be extended to almost every aspect of Government IT. Federal
  Sources projects that the Government desktop outsourcing market will grow from
  $140 million in 1999 to over $4 billion in 2003.

ENGINEERING SERVICES.  In conjunction with its core
IT competencies, the Company has gained specialized expertise in engineering
services that are targeted to meet the most sophisticated technical requirements
of specific "vertical" government markets such as aerospace and transportation.
The Company has enhanced its reputation for sophisticated technical capabilities
by providing the highest quality engineering services in aeromechanics,
aerospace technology, space experimentation, structures, materials,
instrumentation, and aeronautics. The Company is currently ISO 9001 certified at
the NASA Glenn Research Center and the NASA Langley Research Center and is
working toward certification at the Kennedy Space Center and JPL. Under contract
to NASA, the Company has developed experiments and instruments that have flown
on over 60 space shuttle missions.

HEALTH AND BIOMEDICAL SYSTEMS.  The Company is also
  a leader in providing health and biomedical related services that combine scientific
  expertise and state-of-the-art computer and communications capabilities to support
  NIH, Food and Drug Administration ("FDA"), and various other health
  related agencies. The Company's offerings in this area include research and
  services for health communications, education, and analysis for both public
  and private sector customers as well as outsourcing and laboratory services in
  support of biomedical research. Management believes these services are a critical
  differentiator in winning new IT contracts by increasing the Company's understanding
  of customer IT requirements, enhancing the Company's credibility with customers,
  and allowing the Company to identify potential IT requirements prior to public
  announcement.

SYSTEMS & TECHNOLOGY GROUP

The Company is a leading value-added direct marketing
organization of hardware, software and related services to the Government.
Consistent with the Company's strategy of offering solutions based on open
computing architectures, the Company has focused its reselling activities on
workstations, servers, enterprise networking hardware and related peripherals
and software. Along with providing a broad range of top quality products through
supplier and teaming relationships with hardware and software OEMs, the Company
makes its technical personnel available to provide its customers with customized
"value-added" technical support services. Information technology product sales
have been a core business for the Company and have provided it with the
marketing platform to become a major open systems solutions provider in the
Government marketplace.

The Systems & Technology Group employs
approximately 100 sales, marketing, business development and contract
representatives and approximately 50 technical personnel, each of whom has been
recruited based on his or her extensive knowledge of a particular customer
group, particular products sold by the Company, or both. The sales force's
extensive training in various Government procurement rules allows them to guide
customers to the most efficient acquisition vehicle for the Company's products,
whether that vehicle is an agency-specific IDIQ contract, a MAC, GWAC or a GSA
Schedule. See "--Government Contracts." These representatives maintain regular
contact and working relationships with a set of vendors and existing or
potential customers.

The Company's product reselling activities add value for both
  IT manufacturers and Government customers. Manufacturers gain access to the
  Company's sales force and its experience in the Government procurement and sales
  process, including capabilities and experience in electronic commerce, order
  entry and invoicing. Customers benefit from the Company's technical knowledge
  of available products and vendors, and also from the Company's procurement expertise,
  which helps them select the optimal procurement vehicle to meet their needs.
  The Company's procurement personnel also make it easier for Government customers
  to place orders and configure and set-up new systems. Management believes that
  the new contract vehicles resulting from Government procurement reform (see
  "--Government Contracts") has enhanced the Company's opportunities to provide
  value-added services to both suppliers and customers by allowing the Company
  to demonstrate how these vehicles can be used by suppliers to sell more products
  and by customers to buy more services and products.

The Company is one of the leading providers of networking and
  storage design, implementation, and support services and associated products
  to the Government market. The Company has established preferred partnerships
  with leading IT suppliers such as Cisco Systems Inc., Cabletron Systems Inc.,
  FORE Systems Inc., and EMC Corporation. These companies rely on the Company's
  technical capabilities and ability to access Government contracts and customers
  and navigate the Government procurement process. The Company's network engineers
  have experience in virtually all networking technologies and environments, and
  the Company has made substantial investments to maintain the highest degree
  of technical competency and certifications with all of its products. As a result,
  the Company has developed preferred referral and pricing relationships with
  the majority of its suppliers. Representative of this commitment, the Company
  is the only Cisco Gold-Certified partner, Cisco's highest certification level,
  dedicated exclusively to the Government market.  According to Federal Sources,
  enterprise networking and storage solutions are expected to increase over 20%
  annually from 1999 through 2003, thus making networking solutions among the
  fastest-growing segments of the Government IT market. Management believes the
  Company's superior technical competencies, direct sales force, and strategic
  partnerships will allow the Company to accelerate growth in this attractive
  market.

Management believes the Company is on the leading edge of electronic
  commerce for sales of information technology to the Government. The Company
  has developed Internet facilities including a World Wide Web site to support
  "paperless" contracting with the GSA Schedules and under the NIH Electronic
  Computer Store II ("ECS II") contract. ECS II is a MAC vehicle providing an
  electronic catalog from which agencies may place individual orders ranging in
  value from a few thousand dollars to several million dollars. Customers typically
  select from among the participating vendors based on prior or existing service
  relationships, breadth of product offerings, reputation and price. Management
  believes the Company is well positioned to benefit from its electronic commerce
  capabilities as more and more Government procurement vehicles are requiring
  these competencies as a condition of award.

The Company also provides expertise in the Government
procurement process as a subcontractor to OEMs, providing services including
initial bid and proposal preparation, contract management, customer support
services, technical management services and electroniccommerce services. Under a NASA Scientific and Engineering Workstation
Program II subcontract, the Company will provide several of these subcontracting
services to a leading microcomputer and workstation manufacturer for a specified
percentage of revenues.

Listed below are summary descriptions of the Company's major contracts
  and programs. Although the future status of any contract is uncertain after
  contract expiration, management believes that certain support and service functions
  being provided under many of these contracts may be subject to recompetition
  and rebid upon expiration, either alone or in combination with other services
  and/or products. However, the Company cannot guarantee with respect to any particular
  contract to which it is a party, that such contract will be rebid upon expiration
  or that if any such contract is rebid, that the follow-on contract will be awarded
  to the Company. For a description of Government contracts, see "--Government
  Contracts."

DEPARTMENT OF STATE.  The Company provides various
technical and hardware and software maintenance services functions in support of
the Department of State mainframe processing centers.

DEPARTMENT OF VETERANS AFFAIRS.  This contract forms
  the basis for information technology solutions for the Department of Veterans
  Affairs online processing systems in Austin, Texas. The Company provides mainframe
  hardware, software and services to the Austin Automation Center in support of
  its mission.

GSA SEAT MANAGEMENT .  SEAT is a multiple-award, fixed-price-per-seat
  IDIQ contract. This contract provides Government agencies with access to desktop
  outsourcing that includes the management, operation, and maintenance of desktop
  technology and its associated network infrastructure as a unified service. This
  service includes the entire suite of hardware, software, connectivity and support
  services required to support desktop computing in an administrative, engineering,
  scientific, or mixed-work environment. In 1999, the Company was awarded a task
  order under SEAT to provide outsourcing services to the Special Operations Forces,
  System Program Office at Wright Patterson Air Force Base. The Company is currently
  conducting a pilot program with an initial 220 seats.

HOST SOFTWARE SUPPORT.  The Company is a
subcontractor to Lockheed Martin under a fixed-price labor hour contract and
provides software support to the FAA's center in Atlantic City, New Jersey as
well as the seven FAA Air Route Traffic Control Centers east of the Mississippi
River. The enroute system monitors and directs aircraft while in air space
between airports. The Company performs project activities including software
engineering and maintenance, systems enhancements, systems programming, and data
reduction and analysis.

IMPAC II.  This cost-plus-fixed-fee contract was re-awarded
  to the Company by NIH in 1999 under a GSA Schedule contract using fixed-price
  labor hours. Under this contract, the Company maintains and enhances NIH's online
  grants management system developed by the Company under IMPAC I. The IMPAC system
  is a large-scale, Oracle-based grant management and financial database, which
  manages nearly $10 billion in NIH grants annually.

JOINT BASE OPERATIONS AND SUPPORT CONTRACT.  This
  ten-year contract was awarded to the Company in 1998, as a subcontractor to
  a joint venture led by Logicon/Northrup Grumman. This contract calls for the
  Company to supply the initial hardware, software, and long term related services
  for the management information system required to support a joint base operation
  for the Kennedy Space Center and Patrick Air Force Base.

MICROGRAVITY SUPPORT CONTRACT.  This contract,
awarded to the Company in 1999, calls for the Company to provide activities in
the development, fabrication, assembly, test, delivery, and operation of
microgravity research facilities and experiment payloads. The Company will
design and build the Fluids and Combustion Facility for the International Space
Station. The Company will also develop and build hardware and instruments for
microgravity flight experiments proposed by principal investigators that will be
flown aboard the Space Station, sounding rockets, or the Space Shuttle.

NATIONAL CENTER FOR TOXICOLOGICAL RESEARCH
("NCTR").  This five-year contract was re-awarded to the Company in
1999, and calls for the on-site support of NCTR's research center in Jefferson,
Arkansas. Under this contract, the Company provides sophisticated scientific
programming support to FDA researchers. The Company has had this contract for
five years and the successful recompete represents the first time that the
incumbent contractor has ever won the recompetition.

NIH CERTAN CORPORATE COMPUTING SYSTEMS.  Under this
IDIQ type contract, the Company provides state-of-the-art hardware, software,
supplies, training, maintenance, and professional services for NIH's Center For
Information Technology and the Clinical Center's Information Systems
Department.

OUTSOURCING DESKTOP INITIATIVE FOR NASA. Under this multiple-award
  "Master" contract, the Company offers comprehensive desktop computer, server,
  and intra-center communications services to NASA and NASA contractors. Requirements
  include the support and technology refreshment of general-purpose workstations
  and servers; high performance workstations and servers; peripherals; and intra-center
  communications such as LANs, voice, fax, pagers, audio/video, and cable plant
  services. The Company also offers standard support services such as hardware
  and software acquisition, installation, maintenance, shared services, and network
  access; server system administration; help desk support; and network support
  and management services. Under this contract, NASA will define the computer
  and communications capabilities for each job within NASA and purchase a particular
  bundle of equipment for each seat based on a fixed-price-per-seat. This contract
  is available to all agencies of the Government and must be used by all NASA
  centers. Individual awards are competed on a task order basis.

SCIENTIFIC AND ENGINEERING RELATED SERVICES. Under this
contract, the Company provides engineering services in the areas of
aeromechanics, aerospace technology, space experimentation, structures,
materials, instrumentation, aeronautics, and space mission operations at NASA's
Langley Research Center.

SERVICE OPERATIONS SUPPORT IV.  This six-year,
cost-plus-fixed-fee contract was awarded in 1996 by the William J. Hughes
Technical Center of the FAA. Under this contract, the Company performs
second-level software maintenance for the FAA's automation-intensive systems,
including air traffic control.

TECHNICAL AND APPLICATION PROGRAM SUPPORT.  The Company
  won a recompete of this nine-year contract in 1999, under which it provides
  software engineering, systems integration, systems administration, hardware
  procurement, field installation, and support of various communications systems
  at JPL.

TRAFFIC FLOW MANAGEMENT INFRASTRUCTURE ("TFMI"). 
Under this five-year contract, the Company manages the acquisition, development,
implementation, and life cycle support of decision support systems that increase
the capacity and efficiency of FAA Air Traffic Control and Traffic Flow
Management. TFMI was a follow-on to a previously awarded contract under which
the Company installed equipment at over 80 FAA facilities.

TREASURY DISTRIBUTION PROCESSING INFRASTRUCTURE ("TDPI"). 
  TDPI is a five-year Blanket Purchase Agreement ("BPA") under which
  the Company provides high-performance servers, workstations, storage management
  systems, enterprise networking solutions, peripherals, and software as well
  as associated training and services. The primary customer for TDPI is the IRS,
  but other Treasury organizations may also use the contract.

VETERANS BENEFIT ADMINISTRATION ("VBA")
MODERNIZATION.  This contract provides for the modernization of the
information technology environment in regional offices of the VBA. The Company
is providing mid-range computing platforms, LAN servers, and workstations,
which, in conjunction with existing mainframes, provide nationwide claims
processing infrastructure for the Department of Veterans Affairs.

COMPETITION

In providing a broad range of services and products that address
  the complete information technology needs of its customers, the Company participates,
  to varying degrees, in multiple areas of the IT market, including markets for
  systems engineering, development and integration, networking, and product and
  component sales. In each area, the Company experiences vigorous competition
  with firms of varying size and different specializations and skills. The number
  and size of competitors vary among operating groups and within the individual
  divisions of each group. Frequently, the number and identity of competitors
  vary even from program to program within a given business area. While the recent
  trend toward increased use of GSA and IDIQ contracts has changed some aspects
  of how companies sell to the Government, the Company has experienced no material
  change in the overall competitiveness of the federal market. Many of the Company's
  competitors are significantly larger and have greater financial resources than
  the Company. Some of these competitors are divisions or subsidiaries of large,
  diversified companies that have access to the financial resources of their parent
  companies. In the Systems & Technology Group, the Company competes with
  certain computer manufacturers (including the Company's suppliers), who occasionally
  sell directly to the Government market, as well as a substantial number of systems
  integrators, resellers and distributors.

The Company believes that the principal competitive
  factors in the Government services market are technical knowledge, sales force
  expertise, management capability, past contract performance, personnel qualifications
  and price. During its recent history, the Company has been successful in winning
  new and repeat contract awards in each of its businesses and in having customers
   exercise contract option years in its services business, both of which the
  Company believes are attributable to the strength of its past contract performance,
  its technical knowledge, and its competitive prices. Further, the Company's
  senior management team has extensive, industry-specific technical and managerial
  experience. As a result, the Company believes that it has generally been able
  to compete successfully on each of the principal competitive factors within
  each of its business lines.

BACKLOG

The Company's total contract backlog is only a portion
  of the total contract capacity (i.e., the maximum amount that the Government
  can purchase under its contracts with the Company) and represents management's
  estimate of the aggregate revenue that is likely to be earned by the Company
  over the life of all of its contracts, including option periods. Because many
  of the Company's contracts are multi-year contracts and contracts with option
  years, total contract backlog represents revenue expected to be realized over
  a number of years into the future. In addition, the Government's ability to
  select multiple winners under IDIQ contracts, as well as its right to limit
  orders to any particular awardee, mean that there is no assurance that unfunded
  contract backlog will result in actual orders. The Company's estimated total
  contract backlog as of December 31, 1999 was approximately $1.6 billion. The
  Company's estimates of revenue from such contracts are based on the Company's
  history with such contracts and similar contracts, and management believes such
  estimates to be reasonable. However, because total contract backlog is based
  on management's estimate as to the future potential of existing contracts, there
  can be no assurances that all of such backlog will be recognized as revenue.

Because the Government operates under annual
appropriations by Congress, agencies of the Government typically fund contracts
on an incremental basis. Accordingly, only a portion of theCompany's total contract backlog is "funded." Funded backlog consists of
the aggregate dollar portion of contracts currently appropriated by Government
customers and allocated to contracts under delivery orders by the purchasing
Government agencies or otherwise allocated for payment by customers upon
completion of specified work. As of December 31, 1999, the Company's funded
contract backlog was approximately $226 million. Funded backlog generally varies
depending on procurement and funding cycles and other factors beyond the
Company's control. Accordingly, period-to-period comparisons are difficult and
not necessarily indicative of any future trends in revenue.

The preceding information regarding contract backlog
and future revenue to be derived therefrom, is forward-looking and is subject to
certain risks and uncertainties including, but not limited to, a dependence on
the continued funding of Government programs and contract procurements and the
risk of contract termination described elsewhere in this report.

GOVERNMENT CONTRACTS

The Company derives substantially all of its revenue
from business performed under Government contracts. These include services,
systems integration and other contracts obtained through a negotiated
procurement process, as well as product sales contracts made under GSA
Schedules, MACs and similar IDIQ vehicles.

Traditional negotiated procurement contracts
typically authorize a single contractor or team of contractors to provide a
defined set of services and products to a single Government agency. These
contracts include cost-reimbursement contracts (both cost-plus-fixed-fee and
cost-plus-award-fee), time and materials contracts, fixed-price contracts and
IDIQ contracts.

Cost-plus-fixed-fee contracts generally provide for
the reimbursement of incurred costs during contract performance, to the extent
that such costs are allowable and allocable, and the payment of a fee, the size
of which is fixed in the contract. Cost-plus-award-fee contracts typically
provide for the reimbursement of costs with a base fee and an additional fee
that is based upon a periodic evaluation of the contractor's performance against
specified criteria. Under time and materials contracts, the contractor agrees to
provide certain categories of labor and materials at negotiated rates. To the
extent a contractor's costs differ from the negotiated rates, the contractor
realizes all of the benefit or detriment resulting from the difference between
the contract price and the contractor's cost for a unit of labor or product.
Risks associated with these fluctuations have been mitigated for information
technology providers by the consistent decline in product costs over time,
although these reductions must frequently be anticipated in the proposal
process. Under fixed-price contracts, the contractor agrees to perform specified
work for a fixed price and, accordingly, realizes all the benefit or detriment
resulting from decreases or increases in the cost of performing the
work.

The IDIQ contracts historically negotiated by the Company
  typically specify the prices at which certain services and/or products are to
  be provided. These contracts have been and continue to be used for large-scale
  Government purchases of integrated systems that include a significant service
  or maintenance component, along with the provision of computer hardware and
  software. These IDIQ contracts are typically awarded to a single bidder or team
  of bidders chosen through a formal competitive bidding process. The periods
  of performance for IDIQ contracts typically span a base year and a number of
  option years. IDIQ contracts do not obligate the Government to purchase goods
  or services at the levels set out in the request for proposal, and allow the
  Government to terminate the contract if it is dissatisfied with the contractor's
  pricing or performance, or simply for convenience. Alternatively, IDIQ vehicles
  offer both the Government and the contractor flexibility to introduce new services
  and products as technology changes over the life of the contract.

Over the past few years, reforms of the Government
procurement process have introduced a dramatic increase in the flexibility and
alternatives available to the federal information technologybuyer. Regulations that effectively encouraged large scale, long term,
single award procurements have given way to a more "commercial" buying approach.
Government customers, particularly those buying computer hardware and software
without a custom service element, are spending an increasing share of their
procurement budgets through smaller scale, shorter term, multiple award,
multiple agency contract vehicles and task orders. While each of these flexible
contract vehicles has its own unique characteristics, they have several major
elements in common. Because these vehicles do not require the Government to make
specific purchases, they are generally characterized as IDIQ contracts, and
function as procurement "schedules" or catalogs. Although contractors must
compete for the right to participate in these multi-agency, multi-vendor
vehicles, winning the right to participate does not guarantee revenues, which
require an effective post-award sales effort.

In addition to purchasing from multiple IDIQ contracts,
  Government agencies may also purchase from GSA Schedules or Macs Historically,
  the GSA would produce schedules for each agency, after extensive bidding and
  review processes that would dictate the products, prices and vendors for all
  purchases by that agency. As a result of recent changes to the rules governing
  use of GSA Schedules for Government agency purchases of hardware, software and
  services, GSA Schedules now frequently act as broadly defined IDIQ contracts
  under which multiple Government agencies may procure hardware, software or related
  services from contractors authorized to sell under such GSA Schedules without
  minimum or maximum order limitations. Contractors participating in the GSA Schedule
  program are eligible to market their products to a broad range of Government
  customers. The GSA Schedules together with related Blanket Purchasing Agreements,
  for larger volume purchases at reduced prices, offer Government agencies the
  advantage of an established contracting infrastructure including staff who are
  expert in the technologies offered by various vendors, volume driven pricing,
  access to the latest technology and streamlined purchasing mechanisms.

At the time of initial award, prices to the end-users
under the Company's GSA Schedules are set, either at a specified level for the
duration of the contract or at specified levels varying over time. In addition,
under certain circumstances, the Company is required under the terms of its GSA
Schedules to pass on any savings, resulting from supplier discounts or other
price reductions, to the Government in the form of corresponding price
reductions. GSA Schedules do not have pre-set delivery schedules or minimum
purchase levels. The uncertainties related to future contract performance costs,
quantities to be shipped and dates of delivery make it difficult to predict the
future revenue and profitability performance that may be associated with any
particular GSA Schedule.

Similar to GSA Schedules, Macs offer multiple agencies
  the opportunity to procure products from a broad range of vendors. For example,
  45 contractors, including the Company, now hold Macs through the NIH's ECS II
  contract, which is a series of electronic hardware and software catalogs from
  which any Government agency that elects to participate may order. Macs specify
  products and prices and are issued by a specific Government agency to multiple
  contractors.

The evolution of procurement methods has had the
effect of making the procurement of information technology in the Government
more similar to that in the commercial sector. The new procurement methods allow
for more timely purchases of information technology products and for multiple
vendors selling the same services and products, resulting in increasing
competition for contract orders. Thus, whereas historically a contract award
typically assured the winning bidder of a predictable amount of revenue, in the
current environment the contractor's post-award sales, marketing, and customer
service effectiveness frequently dictate the amount and timing of all revenue to
be realized under the contract or schedule. In effect, the new vehicles
necessitate two selling cycles: one to win participation as a vendor under the
umbrella contract and a second to actually win specific orders after contract
award.

SUPPLIERS

The Company maintains strong relationships with all
of its key suppliers. These relationships allow the Company to work with these
suppliers to fashion joint solutions for its customers. Management believes that
the Company provides significant value to its suppliers by allowing them to take
advantage of the Company's extensive knowledge of the Government and its
procurement regulations. In addition, the Company's sales and marketing
capabilities allow its suppliers to access new end-user markets without
expanding their marketing functions. The Company currently has relationships
with most leading hardware and software suppliers. The Company does not rely on
any single supplier of services or products.

SALES AND MARKETING

The Company maintains dedicated resources across its
  business units that focus on pre-award sales, including identifying and qualifying
  new contracts for the Company to bid and responding to request for proposals.
  Pre-award sales are principally handled through group marketing organizations
  that coordinate the efforts of specialized resources throughout the Company
  depending on the particular needs of each proposal. These awards include agency-specific
  IDIQ contracts, GWACs, and BPAs.

After contract award, various post-award sales
professionals assume responsibility for servicing and generating revenue under
the contracts. In the case of many program-focused, single-award contracts, a
post-award sales effort is less important as the quantity and type of services
and products to be purchased are largely predetermined. However, an increasing
number of contracts are multiple-award, which guarantee no revenue to the
Company upon award and require a post-award sales effort to compete for task
orders. Because the Company possesses a broad portfolio of contract vehicles, it
can typically offer its customers a choice in procurement channels and direct
customers to the most advantageous contracts for their needs. The emphasis of
the Company's post-award sales efforts is on generating, without preference for
the contract vehicle utilized, the highest volume of profitable revenue from its
customers.

MAJOR CUSTOMERS

The Government accounted for substantially all the
  Company's revenue during 1997, 1998 and 1999. The Company has derived and expects
  to continue to derive substantially all of its revenue from Government contracts.
  Contracts with the Department of the Navy, NASA and FAA represented approximately
  12%, 9% and 7% of 1999 revenue, respectively. Sales utilizing GSA Schedules
  accounted for approximately 37% of 1999 revenue. The various Government customers
  exercise independent purchasing decisions, and except for financial reporting
  purposes, sales to the Government are generally not regarded as constituting
  sales to one customer. Instead, each contracting entity is considered to be
  a separate customer.

EMPLOYEES

On December 31, 1999, the Company employed
approximately 1,350 persons, 880 of these employees were technical personnel,
160 were marketing/sales personnel, 130 were program/project management
personnel, and 180 were other administrative staff. The Company believes that it
is competitive in hiring and retaining qualified personnel. None of the
Company's employees are covered by collective bargaining agreements with labor
unions. The Company considers its relations with its employees to be good and
has not experienced any significant labor problems.



Item 2. Facilities.

The Company leases substantially all of the offices
  and facilities used in connection with its operations. The following table sets
  forth information relating to the significant facilities leased by the Company.
  In addition, the Company leases customer support offices near customer facilities
  in various states.

|Location      | Purpose                                                | Square
      Footage | Expiration of 
        Lease(s)
|------------- | ------------------------------------------------------ | -------------------- | -------------------------------
|              |                                                        |                      |                                
|Bethesda, MD  | Corporate headquarters,
      sales & contract support | 67,602               | December 31, 2004              
|Greenbelt, MD | Sales & contract support                               | 66,746               | December 31, 2004              
|Rockville, MD | Sales & contract support                               | 57,198               | January 7, 2003                



Item 3. Legal Proceedings.

The Company is not involved in any material legal proceedings.
From time to time, the Company or its competitors file protests, as permitted
under procurement regulations, in connection with specific contract awards.
Historically, these proceedings have not had any material effect on the
Company's financial condition, results of operations, or cash flow. There can be
no assurance that the Company will not become involved in material legal
proceedings or contract bid protest proceedings in the future.



Item 4. Submission of Matters to a Vote of Security
Holders.

None



PART II



Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.

The Company's common stock is not traded on any established
public trading market. As of March 27, 2000, there were 28 holders of record and
approximately 22 beneficial owners of the Company's common stock. The majority
of the shares of the Company's common stock are owned of record and beneficially
by affiliates of TC Group, L.L.C. d/b/a/ The Carlyle Group or the directors and
officers of the Company. The Company has not paid or announced a cash dividend
on account of its common stock during the two fiscal years preceding December
31, 1999 or during the first quarter of 2000. The Company has no present
intention to pay cash dividends on its common stock for the foreseeable future
in order to retain all earnings for investment in the Company's business and the
repayment of the Company's indebtedness. The Company's Senior Credit Facility
and the trust indenture for the Exchange Notes include certain restrictions on
the Company's ability to pay cash dividends on the Company's common stock
including, without limitation an aggregate limitation on all dividends since
July 25, 1997 in excess of 50% of the Company's consolidated net income since
the date thereof.

Recent Sales of Unregistered Securities

Since January 1, 1999, the Company has sold and issued the
following unregistered securities:

On June 21, 1999, options to purchase 4,675 shares of the Company's
  common stock were exercised at $2.00 per share.

No underwriters were engaged in connection with the foregoing
sales of securities. Such sales were made in reliance upon the exemption from
the registration provisions of the Securities Act set forth in Section 4(2)
thereof as transactions not involving a public offering, the respective
purchasers thereof having acquired such shares for their respective accounts
without a view to the distribution thereof.



Item 6. Selected Financial Data.

The consolidated statements of operations data set forth below
with respect to the years ended December 31, 1995, 1996, 1997, 1998 and 1999 and
the consolidated balance sheet data at December 31, 1995, 1996, 1997, 1998 and
1999 have been derived from, and are qualified by reference to, the Company's
consolidated financial statements and notes thereto audited by
PricewaterhouseCoopers LLP, independent accountants. The selected consolidated
financial data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and notes thereto in Items 7 and
8.

|                                                                                                                 | Year Ended December 31, |  
|---------------------------------------------------------------------------------------------------------------- | ----------------------- | -
|(In thousands)                                                                                                   | 1995                    |  
|                                                                                                                 |                         |  
|Income Statement Data:                                                                                           |                         |  
|Revenue                                                                                                          | $129,819                |  
|Expenses:                                                                                                        |                         |  
|Cost
      of sales and services                                                                                 | 107,366                 |  
|Selling,
      general and administrative                                                                        | 20,943                  |  
|Goodwill
      and intangibles                                                                                   | -                       |  
|Interest
      (a)                                                                                               | 3,663                   |  
|Total
      expenses                                                                                             | 131,972                 |  
|                                                                                                                 |                         |  
|(Loss)
      income before extraordinary                                                                         |                         |  
|item
      and income taxes                                                                                      | (2,153                  | )
|                                                                                                                 |                         |  
|Income
      tax (benefit) provision                                                                             | (3,950                  | )
|Income
      (loss) before extraordinary item                                                                    | 1,797                   |  
|Extraordinary loss from
        early retirement of 
                debt, net of income tax benefit
        (b) | -                       |  
|                                                                                                                 |                         |  
|Net
      income (loss)                                                                                          | $1,797                  |  
|                                                                                                                 |                         |  
|Operating Data (f):                                                                                              |                         |  
|EBITDA (c)                                                                                                       | ($847                   | )
|Net recourse
      interest expense (d)                                                                          | 40                      |  
|Net cash
      recourse interest expense (e)                                                                     | 40                      |  
|Depreciation
      and amortization                                                                              | 1,266                   |  
|Non-cash
      stock compensation                                                                                | -                       |  
|                                                                                                                 |                         |  
|Balance Sheet Data at End of Period:                                                                             |                         |  
|Working capital                                                                                                  | $11,025                 |  
|Total assets                                                                                                     | 150,102                 |  
|Long-term
      debt                                                                                             | 43,412                  |  
|Stockholders'
      (deficit) equity (g)                                                                         | (25,962                 | )

(a) Interest expense includes interest on both recourse and
nonrecourse notes payable and obligations under capital leases.

(b) During the year ended December 31, 1997, the Company
  wrote-off the deferred financing fees related to the Recapitalization and the
  NYMA and Sylvest acquisition debt that was refinanced in July 1997.

(c) EBITDA represents the sum of (loss) income  before
extraordinary item and income taxes, 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 is
not necessarily comparable to other similarly titled captions of other companies
due to the potential inconsistencies in the method of calculation.

(d) Net recourse interest expense is interest expense minus interest
  expense on nonrecourse notes payable and nonrecourse obligations under capital
  leases of $2,669, $2,015, $1,161, $235 and $235 and minus interest income on
  cash balances of $954, $179, $293, $325 and $195 for the years ended December
  31, 1995, 1996, 1997, 1998 and 1999, respectively.

(e) Net cash recourse interest expense is net recourse interest
expense minus amortization of deferred financing costs of $817, $804, $949 and $949
for the years ended December 31, 1996, 1997, 1998 and 1999, respectively, and minus
interest expense of $627 for the year ended December 31, 1996 on notes that were
paid through the issuance of payment in kind notes.

(f) Net cash flows from operating activities was ($2,767), $1,452,
  $20,907, $15,666 and $20,231 for the years ended December 31, 1995, 1996, 1997,
  1998 and 1999, respectively. Net cash flows from investing activities was ($52,841),
  $49,703, ($58,471), ($37,905) and ($9,378) for the years ended December 31,
  1995, 1996, 1997, 1998 and 1999, respectively. Net cash flows from financing
  activities was $50,327, ($60,275), $42,700, $19,854 and ($10,700) for the years
  ended December 31, 1995, 1996, 1997, 1998 and 1999, respectively.

(g) Stockholders' (deficit) equity includes the effect of the
Recapitalization which included a charge to stockholders' equity of $58.8
million in 1995. In connection with the Recapitalization and the acquisitions of
NYMA and Sylvest, Carlyle and management have contributed approximately $43.1
million of cash to the Company. See Notes 2 and 4 to the Company's consolidated
financial statements.



Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.

THE FOLLOWING DISCUSSION AND ANALYSIS OF THE COMPANY'S CONSOLIDATED
  FINANCIAL CONDITION AND CONSOLIDATED RESULTS OF OPERATIONS SHOULD BE READ IN
  CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
  APPEARING ELSEWHERE IN THIS REPORT. EXCEPT AS EXPRESSLY INDICATED, THE FOLLOWING
  DISCUSSION DOES NOT GIVE EFFECT TO THE PRE-ACQUISITION OPERATIONS OF NYMA AND SYLVEST
  (COLLECTIVELY, THE "1997 ACQUISITIONS"), R.O.W., TIS AND TMA (COLLECTIVELY,
  THE "1998 ACQUISITIONS") OR INCLUDE PRO FORMA FINANCIAL INFORMATION.

GENERAL

The Company is a major supplier of information technology to a
wide range of customers within the Government. The Company has assembled,
through internal growth and strategic acquisitions, comprehensive information
technology services and product capabilities to address the unique needs of its
Government customers.

Prior to December 1, 1995, the majority of the
Company's common stock was owned by its employees. On December 1, 1995, the
Company effected the Recapitalization wherein FDC Holdings, Inc. ("Holdings") merged with and
into the Company with the Company continuing as the surviving corporation.
Holdings was a company organized by Carlyle to facilitate the Recapitalization
and had no operating activity or history. The merger was accounted for as a
recapitalization, which resulted in a charge to stockholders' equity of $58.8
million to reflect the redemption of common stock.

In May 1997, the Company purchased all of the outstanding shares
  of common stock of NYMA, Inc. ("NYMA") for $34.6 million. The purchase
  price consisted of $29.6 million in cash of which $1.8 million was paid in 1998
  after certain operating objectives related to new business activity were met,
  and $5.0 million in subordinated notes. The Company financed the acquisition
  of NYMA through additional borrowing of $28.0 million and the sale of 555,556
  shares of the Company's common stock, primarily to existing stockholders, for
  $15.0 million. A portion of the new borrowings was used to retire existing Company
  and NYMA indebtedness. NYMA is a provider of high technology engineering and
  information technology services under contracts with various Government agencies
  and subcontracts with large Government contractors. In June 1997, the Company
  purchased all of the outstanding shares of common stock of Sylvest Management
  Systems Corporation ("Sylvest") for $41.0 million. The purchase price
  consisted of $33.0 million in cash and subordinated notes of $8.0 million of
  which $1.0 million was issued in 1998 after certain earnings objectives were
  met. Subordinated notes of $4.0 million were prepaid in August 1997. The Company
  financed the acquisition of Sylvest through additional borrowing of $27.4 million
  and the sale of 444,444 shares of the Company's common stock, primarily to existing
  stockholders, for $12.0 million. A portion of the new borrowings was used to
  retire existing Sylvest indebtedness. Sylvest is a leading reseller and technical
  services vendor supporting open systems architecture within the federal marketplace.
  Of the total fees and expenses related to these transactions, $1.0 million was
  paid to an affiliate of Carlyle.

In December 1997, the Company sold substantially all of the
assets of its wholly-owned subsidiary, DoxSys, Inc. for $7.0 million, of which
$2.8 million was recorded in 1998 as a result of DoxSys achieving certain
earnings objectives.

In February 1998, the Company purchased all of the outstanding
  common stock of R.O.W. Sciences, Inc. ("R.O.W.") for $9.7 million.
  The purchase price consisted of $8.7 million in cash, of which $0.5 million
  and $0.1 million were paid later in 1998 and 1999, respectively, after certain
  revenue objectives were met and $1.0 million in subordinated notes. The agreement
  also provides 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. In February 1998, the Company also purchased all of the
  assets of Telos Corporation's Telos Information Systems Division ("TIS") for
  $14.7 million. The entire purchase price was paid in cash. In March 1998, the
  Company purchased all of the outstanding common stock of Technical and Management
  Assistance, Inc. ("TMA") for $9.2 million. The purchase price consisted of $8.2
  million in cash and $1.0 million in subordinated notes. The Company financed
  the R.O.W., TIS, and TMA acquisitions through borrowings under its existing
  revolving line of credit facility. R.O.W. provides services that combine expert
  knowledge in life and health sciences with state-of-the-art computer based technologies
  principally to Government agencies. TIS provides engineering and information
  technology services to JPL and other Government customers. TMA provides information
  technology services principally to the air traffic management function within
  the Federal Aviation Administration.

Management believes the continuing consolidation within the information
  technology industry, particularly among companies serving Government customers,
  should result in additional opportunities for the Company to make attractive
  acquisitions. As a result, the Company is continually involved in the investigation
  and evaluation of potential acquisition candidates. Any such transactions are
  typically subject to numerous conditions, including due diligence investigations,
  contract reviews and negotiation of a definitive purchase agreement in addition
  toavailability of existing borrowing capacity. In evaluating
  acquisition targets, the Company considers, among other things, their competitive
  market position, management teams, growth potential, technical skills and contract
  base. As of March 27, 2000, the Company is not a party to any definitive binding
  acquisition, however at any time the Company may have one or more offers outstanding
  and may have executed one or more letters of intent. There can be no assurance,
  however, that any such understandings, letters of intent or discussions will
  result in any particular transaction being consummated, or that acceptable financing
  will be available.

The Company's operating performance is affected by the number of
Government contracts held, the types of contracts, the timing of installation or
delivery and the relative margins of the services performed or products sold, as
the case may be. In general, the Company earns its highest margins on its most
specialized systems integration work and lower margins on cost-plus services
contracts and on sales of COTS products, which tend to have a lower services
component associated with such sales and a more competitive after-award sales
environment. However, profitability regularly varies from contract to contract
and product to product over the contract term.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED
DECEMBER 31, 1998

For the year ended December 31, 1999, the Company's total revenue
  was $583.8 million, loss before income taxes was $3.3 million, net loss was
  $4.2 million and EBITDA (as defined herein) was $27.8 million. Contributing
  to the Company's loss before income taxes for 1999 were non-cash charges totaling
  $9.1 million including $4.8 million related to amortization of certain intangible
  assets, $2.8 million related to a write-off of intangible assets associated
  with acquired contract backlog, and $1.5 million related to the vesting and
  issuance of stock options. These non-cash charges had a $6.6 million after-tax
  effect on the net loss. The intangible assets being amortized represent identifiable
  assets recorded in connection with the Company's acquisitions in 1997 and 1998,
  including contract backlog, covenants not to compete, work force, trade names
  and trademarks. The Company recorded $16.5 million of other intangible assets
  related to the acquired contract backlog which is equal to the present value
  of the pretax profits projected to be earned as a result of the Company's performance
  of such acquired contracts. This amount is being amortized over the remaining
  terms of the acquired contracts in the same manner and at the same time as the
  Company recognizes the related contract revenues. The value assigned to the
  other acquired intangible assets is $5.1 million and is being amortized over
  periods up to three years. Excluding the impact of future acquisitions, the
  Company expects that its non-cash charge for amortization of other intangible
  assets will decline in 2000 and thereafter. In 1998, the Company amended and
  restated its Stock Option Plan for Executives and Key Employees by accelerating
  the vesting of certain performance based options. In addition, the Company issued
  stock options in 1999 in accordance with the Company's 1995 merger agreement
  with FDC Holdings, Inc. Without regard to any future changes in its Stock
  Option Plan, the Company expects that it will record non-cash compensation related
  to this change of approximately $0.2 million in 2000 and none thereafter.

The following table sets forth, for the periods
indicated, selected consolidated statements of operations data as a percentage
of total revenue:

|                                            | Year Ended December 31, |  
|------------------------------------------- | ----------------------- | -
|                                            | 1997                    |  
|Revenue                                     |                         |  
|Product
        sales                       | 62.8                    | %
|Professional
        and support services   | 35.7                    |  
|Interest
        and other                  | 1.5                     |  
|                                            |                         |  
|Total
        revenue                       | 100.0                   |  
|                                            |                         |  
|Expenses                                    |                         |  
|Cost
        of sales and services          | 83.5                    |  
|Selling,
        general and administrative | 11.2                    |  
|Goodwill
        and intangibles            | 1.5                     |  
|Interest                                    | 3.3                     |  
|                                            |                         |  
|Total
        expenses                      | 99.5                    |  
|                                            |                         |  
|Income (loss) before extraordinary item and |                         |  
|income
        taxes                        | 0.5                     | %
|                                            |                         |  

REVENUERevenue for the year ended December 31, 1999 was $583.8 million, up $63.5 million
  or 12% over 1998. The 1998 Acquisitions accounted for $9.7 million of the increase
  in revenue over 1998. Revenue from product sales was $410.5 million, up $68.9
  million or 20% over 1998. The increase in revenue from product sales is primarily
  due to increased volume as a result of repeat customer business, partner referrals,
  outbound solicitation and electronic commerce. Revenue from professional and
  support services was $172.2 million, down $1.6 million from 1998. Excluding
  the effect of the 1998 Acquisitions, professional and support services revenue
  was down $11.3 million or 7% from 1998. This reduction in professional and support
  services revenue was primarily due to the expiration of existing contracts.
  The largest contract that expired during the year ended December 31, 1998 was
  a contract awarded to 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 in May 1997, NYMA's continued participation as a prime
  contractor required a waiver from the Administrator of the Small Business Administration
  which was not received. The reduction in professional and support services revenue
  was partially offset by professional and support services revenue of $9.7 million
  related to the 1998 Acquisitions and revenue from recently awarded professional
  and support services contracts.

COST OF SALES AND SERVICES

Cost of sales and services for the year ended December 31, 1999
  was $509.0 million, up $59.7 million or 13% over 1998. The 1998 Acquisitions
  accounted for $8.1 million of the increase in cost of sales and services over
  1998. Cost of sales and services for the year ended December 31, 1999 was 87%
  of product sales and professional and support services revenue which was not
  significantly different in 1998. Cost of sales and services and margin analysis
  do not reflect the amortization of the present value of contract profits acquired
  through the 1997 and 1998 Acquisitions.

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE
  Selling, general and administrative expense for the year ended December 31,
  1999 was $50.6 million, up $2.1 million or 4% over 1998. The 1998 Acquisitions
  accounted for $0.8 million of the increase in selling, general and administrative
  expense over 1998. During the year ended December 31, 1998, the Company modified
  its Stock Option Plan for Executive and Other Key Employees by accelerating
  the vesting of certain performance options. During the year ended December 31,
  1999, the Company issued stock options in accordance with the Company's 1995
  merger agreement with FDC Holdings, Inc.  Accordingly, the Company recorded
  non-cash compensation of $2.1 million and $1.5 million during the years ended
  December 31, 1998 and 1999, respectively, 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. Excluding the effect of
  the 1998 Acquisitions and the non-cash compensation, selling, general and administrative
  expense for the year ended December 31, 1999 was 8% of revenue, which was not
  significantly different from 1998.

AMORTIZATION OF GOODWILL AND INTANGIBLES

The excess of the cost of acquisitions over the fair value of
  identifiable net tangible and intangible assets acquired was $65.0 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 acquisitions is being
  amortized over the remaining terms of the acquired contracts in relation to
  the recognition of related contract revenue. In 1999, the Company expensed $2.8
  million of intangible assets related to acquired contract backlog recorded in
  connection with certain acquisitions. This write-off was based on an analysis
  of the current net book value of these intangibles and the remaining estimated
  present value of the contract profits relating to the acquisitions. Other identified
  intangibles including covenants not to compete, work force and trade names and
  trademarks of $5.1 million acquired in acquisitions are being amortized over
  periods up to three years. Amortization of goodwill and intangibles for the
  year ended December 31, 1999 was $11.8 million, down $0.2 million, or 2% from
  1998, primarily due to the amortization of the value of trade names and trademarks
  which was fully amortized by March 31, 1999, which was partially offset by the
  write-off of intangible assets related to acquired contract backlog.

INTEREST EXPENSE
  Interest expense for the year ended December 31, 1999 was $15.7 million, down
  $0.3 million, or 2% from 1998, due to reduced level of borrowings under the
  revolving line of credit.

INCOME TAXES
  The effective tax provision rate for the year ended December 31, 1999 was 30%
  as compared with 24% for 1998 due principally to an increased amount of non-deductible
  goodwill and intangible assets. The 1999 tax provision resulted from the
  effect of the taxable loss incurred during the year, offset by the non-deductibility
  of the amortization of goodwill and the value assigned to other identified intangibles
  associated with the acquisitions of NYMA and R.O.W. and the non-cash compensation
  related to stock options.

NET LOSSNet loss for the year ended December 31,
1999 was $4.2 million, a $2.5 million decrease from the net loss of $6.7 million
recorded in 1998 based on the factors discussed above.

YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED
DECEMBER 31, 1997

REVENUE
  Revenue for the year ended December 31, 1998 was $520.3 million, up $184.0 million
  or 55% over 1997. Revenue from product sales was $341.6 million, up $130.5 million
  or 62% over 1997. The 1997 and 1998 Acquisitions accounted for $79.9 million
  of the increase in product sales revenue over 1997.The
  remaining increase in revenue from product sales is principally due to the strong
  performance from the Company's sale of COTS products. Revenue from professional
  and support services was $173.8 million, up $53.7 million or 45% over 1997.
  The 1997 and 1998 Acquisitions accounted for $85.7 million of the increase in
  professional and support services revenue over 1997. This increase in professional
  and support services revenue was offset by reductions 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 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 year ended December 31, 1998
  was $449.2 million, up $168.3 million or 60% over 1997. The 1997 and 1998 Acquisitions
  accounted for $146.4 million of the increase in cost of sales and services over
  1997. Cost of sales and services in 1998 was 87% compared with 85% of sales
  and services revenue for 1997. Cost of sales and services and margin analysis
  do not reflect the amortization of the present value of contract profits acquired
  through the 1997 and 1998 Acquisitions.

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSE
  Selling, general and administrative expense for the year ended December 31,
  1998 was $48.4 million, up $10.6 million or 28% over 1997. The 1997 and 1998
  Acquisitions accounted for a $12.1 million increase in selling, general and
  administrative expense over 1997. In 1998, the Company amended and restated
  its Stock Option Plan for Executive and Other Key Employees by accelerating
  the vesting of certain performance options. Accordingly, the Company recorded
  non-cash compensation of $2.1 million 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. Excluding the effect of the 1997
  and 1998 Acquisitions and the non-cash compensation, selling, general and administrative
  expense for the year ended December 31, 1998 decreased $3.6 million from the
  comparable period of 1997 primarily due to reductions associated with the expiration
  of existing contracts. Excluding the effect of the 1997 and 1998 Acquisitions
  and the non-cash compensation, selling, general and administrative expense for
  the year ended December 31, 1998 was 10% of revenue compared with 15% in 1997.
  This decrease in selling, general and administrative expense as a percent of
  revenue was due primarily to economies of scale achieved during the period.

AMORTIZATION OF GOODWILL AND INTANGIBLE ASSETS

The excess of the cost of the 1997 and 1998 Acquisitions over
  the fair value of identifiable net tangible and intangible assets acquired was
  $64.9 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 1997
  and 1998 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 $5.1 million acquired in the 1997 and 1998 Acquisitions
  are being amortized over periods up to three years. Amortization of goodwill
  and intangible assets for the year ended December 31, 1998 was $12.0 million,
  up $7.0 million, or 139% over 1997.

INTEREST EXPENSE
  Interest expense for the year ended December 31, 1998 was $16.0 million, up
  $5.1 million, or 46% over the comparable period of 1997. Recourse interest expense
  increased $6.0 million for the year ended December 31, 1998 over 1997 primarily
  due to increased recourse debt used to partially finance the 1997 and 1998 Acquisitions.
  Interest expense on nonrecourse debt declined $0.9 million forthe
  year ended December 31, 1998 from 1997 due to a reduced average level of capital
  leases outstanding.

INCOME TAXESThe effective tax provision rate for
the year ended December 31, 1998 was 24% as compared with the effective tax
benefit rate of 12% for 1997. The 1998 tax provision resulted from the effect of
the taxable loss incurred during the year, offset by the non-deductibility of
the amortization of goodwill and the value assigned to other identified
intangibles associated with the acquisitions of NYMA and R.O.W. and the non-cash
compensation related to stock options.

NET LOSSNet loss for the year
ended December 31, 1998 was $6.7 million, a $4.2 million increase from the net
loss of $2.5 million recorded in 1997 based on the reasons discussed
above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary source of liquidity is cash provided by
  operations. The Company's liquidity requirements vary seasonally with revenue,
  which is generally higher in the third and fourth quarters of each year. Historically,
  cash flow from the collection of accounts receivable from the Government has
  been predictable and dependable. Cash and cash equivalents were $4.1 million
  at December 31, 1999, a $0.2 million increase from December 31, 1998 as a result
  of net cash flow from operating activities of $20.2 million, being partially
  offset by net cash flow used in financing activities of $9.4 million and net
  cash flow used in investing activities of $10.7 million. Net cash flow from
  operating activities was primarily due to increases in accounts payable and
  other liabilities of $12.2 million, sales-type lease activity of $6.1 million,
  depreciation and amortization of $15.2 million and non-cash compensation of
  $1.5 million which was partially offset by the net loss of $4.2 million and
  increase in inventory of $5.1 million. Net cash used in investing activities
  amounted to $9.4 million for 1999, primarily as a result of purchases of equipment
  for sales-type leases and property and equipment totaling $9.7 million. Net
  cash flow used in financing activities was $10.7 million for 1999 primarily
  as a result of net repayments of $8.0 million under the revolving line of credit.

As of December 31, 1999, the Company had outstanding recourse
  debt of $133.0 million, which includes $105.0 million of Senior Subordinated
  Notes. The Company may from time to time consider purchasing all or any portion
  of the outstanding Senior Subordinated Notes in the open market if market conditions
  are appropriate and if excess cash is available to make such a purchase. However,
  the Company may decide to continue to apply any excess cash balances towards
  the prepayment of bank debt as it has to date or to use such excess cash for
  other purposes such as acquisitions, capital expenditures or working capital
  needs. In order to purchase the Senior Subordinated Notes in the open market,
  the Company would need approval under its Senior Credit Facility. The total
  recourse debt excludes $1.7 million of nonrecourse obligations under capital
  leases, which the Company recorded in connection with the financing of certain
  equipment sales and leases.

The Company's Senior Credit Facility and the trust indenture with
  respect to the Exchange Notes includes certain restrictions as to the Company's
  ability, among other things, to acquire or dispose of assets, to pay dividends
  and to incur additional indebtedness. In addition, the Company is required to
  maintain a minimum net worth and certain operating ratios, including, among
  others, interest and leverage coverage. Such requirements could limit the Company's
  ability to incur debt and could thereby limit the Company's liquidity and ability
  to make certain acquisitions. All of the Company's assets not otherwise pledged
  are utilized as collateral under the Company's Senior Credit Facility. The Senior
  Credit Facility also provides for a maximum availability based upon a borrowing
  base comprised of 85% of Eligible Receivables and 60% of Eligible Inventory
  (as defined in the Senior Credit Facility), up to a maximum availability of
  $75.0 million. At March 24, 2000 there were borrowings of $34.0 million outstanding
  under the revolving line of credit. The Senior Credit Facility bears interest
  at either (a) 1.25% plus the highest of the rate which is 1/2 of 1% in excess
  of the Federal Funds Effective Rate (3.99% at December 31, 1999) or the prime
  lending rate (8.50% at December 31, 1999) or (b) 2.25% plus the eurodollar rate
  (6.50% at December 31, 1999).  At March 24, 2000, the Company had $28.7
  million available under the Senior Credit Facility.

The Company also maintains an inventory and receivables financing
  facility ("Floor Plan Financing Facility") with an asset-based lender to facilitate
  the purchase of inventory fromapproved vendors for prompt
  resale to customers. The Company pays no interest on accounts drawn under such
  Floor Plan Financing Facility for negotiated periods and such drawn amounts
  are reflected in accounts payable and accrued contract expenses during such
  periods.

In March 2000, the Company amended its Senior Credit Facility
  to modify certain financial covenants and to provide an increase in the aggregate
  amount of borrowings available under the Senior Credit Facility and the Floor
  Plan Financing Facility.

Stockholders' deficit amounted to $6.3 million at December 31,
  1999, an increase in stockholders' deficit of $3.1 million from December 31,
  1998. This increase is principally due to the 1999 net loss of $4.2 million.
  In 1998, the Company amended and restated its Stock Option Plan for Executive
  and Other Key Employees by accelerating the vesting of certain performance options.
  In addition, the Company issued stock options in accordance with the Company's
  1995 merger agreement with FDC Holdings, Inc. Accordingly, the Company recorded
  non-cash compensation of $1.5 million in 1999 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. The stockholders' equity
  amounted to $3.2 million at December 31, 1998, a reduction in stockholders'
  equity of $4.2 million from December 31, 1997. This reduction is principally
  due to the 1998 net loss of $6.7 million. In 1998, the Company recorded non-cash
  compensation of $2.1 million and a related increase in capital in excess of
  par value based the amendment and restatement of its Stock Option Plan for Executive
  and Other Key Employees.

As of December 31, 1999, the Company had no significant capital
expenditure commitments.

Based on the Company's current level of operations, management
believes that available cash, together with the available borrowings under the
Senior Credit Facility and the Floor Plan Financing Facility, should be adequate
to meet the Company's anticipated future requirements for working capital,
capital expenditures and scheduled payments of principal and interest on its debts through at
least the next twelve months.

INFLATION AND GENERAL ECONOMIC CONDITIONS

Although the Company cannot accurately anticipate the effect of
inflation on its operations, it does not believe that inflation has had, or is
likely in the foreseeable future to have, a material impact on its results of
operations. Unlike other service providers, the Company does not have a
significant number of fixed price service contracts where the Company bears the
risk of cost increases. The Company's operating results would be adversely
affected by increases in interest rates which would result in higher interest
payments by the Company under its variable rate credit facilities. As of March
24, 2000, the Company had borrowings of $34.0 million outstanding under its
variable rate credit facilities. If interest rates rise, the Company's cost of
capital and debt service requirements would increase. The Company has not
historically entered into hedging transactions with respect to its variable rate
debt, but may do so in the future.

YEAR 2000 DISCLOSURE

To date, the Company has not experienced any significant
  failures or disruptions in its internal operating systems or in its dealings
  with third party suppliers and customers. The Company continues to monitor its
  infrastructure and its critical business partners to ensure continued Year 2000
  compliance. There can be no assurance that the Company will not experience unanticipated
  negative consequences and/or material costs caused by undetected errors or defects
  in the technology used in its internal systems, which are comprised of third
  party products, or by unidentified problems experienced by its suppliers or
  customers. However, the Company does not believe that a material adverse effect
  from Year 2000 issues is likely. The Company incurred $0.9 million in connection
  with Year 2000 compliance, and does not anticipate any significant future costs.

###

This annual report on Form 10-K 405 contains
statements which, to the extent that they are not recitations of historical
fact, constitute "forward-looking statements" that are based onmanagement's expectations, 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
services or products 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 and the other
financial information, included elsewhere in this report.

###

Item 7A. Quantitative and Qualitative Disclosures about
Market Risk.

The Company is exposed to market risks from adverse changes in
interest rates. See Notes 3 and 9 to the consolidated financial
statements.



Item 8. Consolidated Financial Statements.



INDEX TO FINANCIAL STATEMENTS

Report of Independent Accountants

Consolidated Balance Sheets as of December 31, 1998 and
1999

Consolidated Statements of Operations for the Years Ended December 31,
1997, 1998 and 1999

Consolidated Statements of Changes in Stockholders' (Deficit) Equity for
the Years Ended December 31, 1997, 1998 and 1999

Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1998 and 1999

Notes to
Consolidated Financial Statements

Financial statement schedules are omitted because they are not
applicable or the required information is shown in the consolidated financial
statements or notes thereto.



REPORT OF
INDEPENDENT ACCOUNTANTS





To the Board of Directors and Stockholders  of
Federal Data Corporation

In our opinion, the accompanying consolidated balance sheets and
  the related consolidated statements of operations, of changes in stockholders'
  (deficit) equity and of cash flows present fairly, in all material respects,
  the financial position of Federal Data Corporation and its subsidiaries (the
  Company) at December 31, 1998 and 1999, and the results of their operations
  and their cash flows for each of the three years in the period ended December
  31, 1999 in conformity with accounting principles generally accepted in the
  Unites States. These financial statements are the responsibility of the Company's
  management; our responsibility is to express an opinion on these financial statements
  based on our audits. We conducted our audits of these statements in accordance
  with auditing standards generally accepted in the United States, which require
  that we plan and perform the audit to obtain reasonable assurance about whether
  the financial statements are free of material misstatement. An audit includes
  examining, on a test basis, evidence supporting the amounts and disclosures
  in the financial statements, assessing the accounting principles used and significant
  estimates made by management, and evaluating the overall financial statement
  presentation. We believe that our audits provide a reasonable basis for the
  opinion expressed above.

/s/ PricewaterhouseCoopers LLP

Washington, D.C.
  March 24, 2000







Federal Data CorporationConsolidated Balance
Sheets(In thousands, except share data)

|                                                                  | December 31, |  
|----------------------------------------------------------------- | ------------ | -
|                                                                  | 1998         |  
|Assets                                                            |              |  
|                                                                  |              |  
|Cash and cash equivalents                                         | $3,942       |  
|Accounts receivable                                               | 126,840      |  
|Net investment in
        sales-type leases                       | 5,221        |  
|Inventory                                                         | 963          |  
|Other assets                                                      | 8,156        |  
|Total
        current assets                                      | 145,122      |  
|                                                                  |              |  
|Net
        investment in sales-type leases                       | 2,997        |  
|Leased and other property
        and equipment                   | 5,120        |  
|Goodwill and intangibles                                          | 69,411       |  
|Other assets                                                      | 9,271        |  
|Total
        assets                                              | $231,921     |  
|                                                                  |              |  
|Liabilities and stockholders' deficit                             |              |  
|                                                                  |              |  
|Accounts payable
        and other liabilities                    | $87,846      |  
|Recourse notes
        payable                                    | -            |  
|Nonrecourse
        obligations under capital leases              | 2,232        |  
|Total
        current liabilities                                 | 90,078       |  
|                                                                  |              |  
|Recourse notes payable                                            | 141,000      |  
|Nonrecourse obligations
        under capital leases              | 1,551        |  
|Other liabilities                                                 | 2,464        |  
|Total
        liabilities                                         | 235,093      |  
|Stockholders' deficit                                             |              |  
|                                                                  |              |  
|Common
      stock, $.01 par value: 8,000,000 shares authorized;  |              |  
|2,927,521
      shares issued and outstanding in 1998 and         |              |  
|2,932,196
        shares issued and 2,917,996 outstanding in 1999 | 29           |  
|Capital in
        excess of par value                            | 42,807       |  
|Accumulated
        deficit                                       | (46,008      | )
|Total
        stockholders' deficit                               | (3,172       | )
|Commitments and contingencies (Note
      15)                     |              |  
|Total
        liabilities and stockholders' deficit               | $231,921     |  

The accompanying notes are an integral part of
these consolidated financial statements



Federal Data Corporation
  Consolidated Statements of Operations
  (In thousands)



|                                                        | Year Ended December 31, |  
|------------------------------------------------------- | ----------------------- | -
|                                                        | 1997                    |  
|Revenue                                                 |                         |  
|Product sales                                           | $211,118                |  
|Professional and support services                       | 120,150                 |  
|Interest and
      other                                | 5,038                   |  
|Total
      revenue                                     | 336,306                 |  
|Expenses                                                |                         |  
|Cost of sales and
      services                        | 280,903                 |  
|Selling,
      general and administrative               | 37,804                  |  
|Goodwill and
      intangibles                          | 5,031                   |  
|Interest                                                | 10,947                  |  
|Total
      expenses                                    | 334,685                 |  
|                                                        |                         |  
|Income (loss) before extraordinary item
      and       |                         |  
|income
    taxes                                        | 1,621                   |  
|Income tax provision                                    | 1,368                   |  
|Income (loss) before extraordinary item                 | 253                     |  
|                                                        |                         |  
|Extraordinary loss from early retirement of
      debt, |                         |  
|net of income tax benefit
      of $1,697               | (2,770                  | )
|Net loss                                                | ($2,517                 | )

The accompanying notes are an integral part of
these consolidated financial statements





Federal Data CorporationConsolidated
Statements of Changes in Stockholders' (Deficit) Equity(In thousands, except
share data)





















|                                    | Common Stock |   | Capital in Excess of |  | Accumulated |   |          |  
|----------------------------------- | ------------ | - | -------------------- |  | ----------- | - | -------- | -
|                                    | Shares       |   | Par Value            |  | Par Value   |   | Deficit  |  
|                                    |              |   |                      |  |             |   |          |  
|Balance, December 31, 1996          | 1,910,896    |   | $19                  |  | $13,950     |   | ($36,795 | )
|Net loss                            | -            |   | -                    |  | -           |   | (2,517   | )
|Proceeds from sale of common stock, |              |   |                      |  |             |   |          |  
|net of
      expenses of $882       | 1,000,000    |   | 10                   |  | 26,108      |   | -        |  
|Deferred compensation               | -            |   | -                    |  | 242         |   | -        |  
|                                    |              |   |                      |  |             |   |          |  
|Balance, December 31, 1997          | 2,910,896    |   | 29                   |  | 40,300      |   | (39,312  | )
|Net loss                            | -            |   | -                    |  | -           |   | (6,696   | )
|Proceeds from sale of common stock  | 16,625       |   | -                    |  | 449         |   | -        |  
|Non-cash compensation related to    |              |   |                      |  |             |   |          |  
|stock
      options                 | -            |   | -                    |  | 2,058       |   | -        |  
|                                    |              |   |                      |  |             |   |          |  
|Balance, December 31, 1998          | 2,927,521    |   | 29                   |  | 42,807      |   | (46,008  | )
|Net loss                            | -            |   | -                    |  | -           |   | (4,241   | )
|Proceeds from sale of common stock  | 4,675        |   | -                    |  | 9           |   | -        |  
|Non-cash compensation related to    |              |   |                      |  |             |   |          |  
|stock options                       | -            |   | -                    |  | 1,535       |   | -        |  
|Purchase of treasury stock          | (14,200      | ) | -                    |  | (383        | ) | -        |  
|Balance, December 31, 1999          | 2,917,996    |   | $29                  |  | $43,968     |   | ($50,249 | )

The accompanying notes are an integral part of
these consolidated financial statements





Federal Data CorporationConsolidated
Statements of Cash Flows(In thousands)



|                                                         | Year Ended December 31, |  
|-------------------------------------------------------- | ----------------------- | -
|                                                         | 1997                    |  
|Cash flows from operating activities:                    |                         |  
|Net
        loss                                         | ($2,517                 | )
|Adjustments to reconcile
        net loss to             |                         |  
|net cash
        flows from operating activities:        |                         |  
|Extraordinary loss from early
   retirement of debt,     |                         |  
|net of income tax benefit of $1,697                      | 2,770                   |  
|Depreciation and amortization                            | 7,099                   |  
|Amortization of deferred
        financing cost          | 804                     |  
|Non-cash compensation related
        to stock options   | -                       |  
|Gain on sale of subsidiaries                             | (1,600                  | )
|Gain on
      sale of property and equipment             | -                       |  
|Loss (income) recorded
        on sales-type leases      | 465                     |  
|Collections from sales-type
        leases               | 5,655                   |  
|(Increase) decrease in
        inventory                 | (1,347                  | )
|Decrease (increase) in
        accounts receivable       | 11,511                  |  
|Increase in accounts
        payable                     |                         |  
|and
        accrued expenses                             | 1,626                   |  
|Net change in other
        assets and liabilities       | (3,559                  | )
|Net cash flows from
        operating activities         | 20,907                  |  
|Cash flows from investing activities:                    |                         |  
|Acquisitions of businesses,
        net of cash received | (54,175                 | )
|Purchase of equipment for
        sales-type leases      | (2,151                  | )
|Net
      proceeds from sale of property and equipment   | -                       |  
|Purchase of property
     and equipment                  | (2,145                  | )
|Net cash flows from
        investing activities         | (58,471                 | )
|Cash flows from financing activities:                    |                         |  
|Proceeds from borrowings                                 | 160,400                 |  
|Repayments of borrowings                                 | (99,650                 | )
|Net
        (repayments) borrowings under line of credit | (29,058                 | )
|Proceeds from sale of common
        stock               | 27,000                  |  
|Purchase of treasury stock                               | -                       |  
|Recapitalization, stock
        issuance and debt        |                         |  
|acquisition
        costs                                | (10,988                 | )
|Repayments of capital lease
        obligations          | (5,004                  | )
|Net
        cash flows from financing activities         | 42,700                  |  
|Net change in cash and cash equivalents                  | 5,136                   |  
|Cash and cash equivalents, beginning of year             | 1,191                   |  
|Cash and cash equivalents, end of year                   | $6,327                  |  

The accompanying notes are an integral part of
these consolidated financial statements








Federal Data CorporationNotes to
Consolidated Financial Statements(In thousands, except share
data)



Note 1 - Nature of Business

The accompanying consolidated financial statements include the
  accounts of Federal Data Corporation and its wholly-owned subsidiaries (collectively,
  the "Company"). The Company engages in the sale of high technology
  professional services in combination with hardware and software products from
  a variety of manufacturers to the United States Government ("Government").
  The Government accounted for substantially all of the Company's revenue during
  1997, 1998 and 1999. The Company, which is engaged in a single business activity,
  delivers these services and products through two operating units. For financial
  reporting purposes, these operating units have been aggregated (see Note 3).

The Company's information technology solutions are sold or leased to
the Government under various types of agreements providing for, in certain
cases, purchase options or other lease to ownership arrangements. Most contracts
with Government agencies expire on September 30 of each year (the Government's
fiscal year end) and are renewable for additional fiscal years subject to the
appropriation of funding. While the Company's Government contracts provide for
fiscal funding termination, the Company has not experienced any early
terminations of significant contracts since its inception.



---



Note 2 - Merger

In December 1995, FDC Holdings, Inc. ("Holdings") merged
  with and into the Company with the Company continuing as the surviving corporation
  (the "Merger"). Holdings was a company organized by The Carlyle Group
  ("Carlyle") to facilitate the Merger and had no operating activity
  or history. The Merger was accounted for as a recapitalization which resulted
  in a charge to stockholders' equity of $58,795 to reflect the redemption of
  common stock.

Concurrent with the acquisition of a controlling interest in the
Company by Carlyle in 1995, the Company entered into a management agreement with
an affiliate of Carlyle for certain management and financial advisory services
to be provided to the Company and its subsidiaries. The agreement provides for
the payment of annual management fees in an amount equal to $300. In addition,
concurrent with the acquisition of Carlyle's controlling interest, the Company
entered into a three-year consulting agreement with the former majority
shareholder and a three-year agreement to lease a corporate aircraft with an
affiliate of the former majority shareholder. The consulting agreement provided
for annual payments of $200 and the lease of the aircraft provided for annual
payments of $300 plus a usage charge which amounted to $48 and $95 during 1997
and 1998, respectively. The lease of the aircraft and the consulting agreement
expired in November 1998 and January 1999, respectively.



---



Note 3 - Summary of Significant Accounting
Policies

The accounting policies of the Company conform to generally
accepted accounting principles. All significant intercompany accounts and
transactions have been eliminated in consolidation. Those policies significantly
affecting the consolidated financial statements are summarized below.

Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

Revenue Recognition

Revenue from fixed price sales and sales-type leases is recorded
upon installation or shipment to the customer's site, depending on contractual
terms. On cost reimbursable contracts, revenue is recorded as contract costs are
incurred, plus a proportionate amount of the fee expected to be realized on the
contract. Other professional and support service revenue is recognized as
services are provided.

Depreciation and Amortization

Leased and other property and equipment are stated at cost, net
  of accumulated depreciation and amortization, and are depreciated and amortized
  by the Company using principally straight-line methods over their estimated
  useful lives. The estimated useful lives of principal items of computer, furniture,
  office and other equipment range from three to ten years. Leasehold improvements
  are amortized over the term of the related lease. Deferred financing fees are
  being amortized over the terms of the related notes payable.

Cash, Cash Equivalents and Short-term
Investments

Cash and cash equivalents consist primarily of short-term,
highly liquid investments with insignificant interest rate risk and original
maturities of three months or less at date of acquisition. Similar investments
with original maturities beyond three months are considered short-term
investments and are carried at cost, which approximates market value.

Inventory

Inventory of computer equipment and software is carried at the
lower of cost or market, using the specific identification method.

Fair Value of Financial Instruments

The fair value of cash and cash equivalents, receivables, accounts
  payable and accrued expenses approximate their carrying value because of their
  short-term nature. The fair value of long-term debt has been estimated using
  quoted market prices or discounted cash flow analysis using rates currently
  available to the Company for debt with similar terms and maturities.



The carrying and fair value of the Company's long-term debt
including current maturities consist of the following as of December
31:

|                                                  | 1998           |  | 1999     
|------------------------------------------------- | -------------- |  | ---------
|                                                  | Carrying Value |  | FairValue
|Long-term debt including current
      maturities | $141,000       |  | $142,050 

The Company recognizes deferred income taxes for the expected
future tax consequences of "temporary differences" by applying enacted statutory
tax rates to differences between the financial statement carrying amounts and
the tax basis of existing assets and liabilities.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to
  concentrations of credit risk consist of cash and accounts receivable. The Company
  maintains its cash principally in one United States bank. Accounts receivable
  result primarily from contracts with the Government. Contracts with the Government
  do not require collateral or other arrangements. The Company does not believe
  significant credit risk exists as of December 31, 1999.

Goodwill and Intangible Assets

Goodwill represents the excess of the cost of acquiring
businesses over the fair value of identifiable net tangible and intangible
assets acquired. Goodwill is amortized on a straight-line basis over the period
for which the Company estimates it will benefit directly from the acquisition.
Although the period of benefit from the goodwill can be difficult to estimate,
the Company considers goodwill to be recoverable as long as the acquisition
generates positive cash flow from operations after implementation of the
Company's strategic plan or completion of reorganization efforts, if any.
Recoverability of goodwill is evaluated periodically based on current
undiscounted cash flow projections of each specific acquired business. Goodwill
related to the acquisitions described in Note 4 amounted to $64,992 and is being
amortized over fifteen years. Goodwill amortization expense for the years ended
December 31, 1997, 1998 and 1999 was $1,784, $4,036 and $4,275,
respectively.

Other intangible assets represents covenants not to compete, work
  force, trade names and trademarks and contract backlog which is recorded at
  the present value of the projected pretax profits. The present value of the
  contract profits relating to the acquisitions described in Note 4 of $16,519
  is being amortized over the remaining terms of the acquired contracts in relation
  to the recognition of related contract revenue. In 1999, the Company expensed
  $2,778 of intangible assets related to acquired contract backlog recorded in
  connection with certain acquisitions. This write-off was based on an analysis
  of the current net book value of these intangibles and the remaining estimated
  present value of the contract profits relating to the acquisitions.The value
  assigned to covenants not to compete, work force and trade names and trademarks
  of $5,100 acquired in the acquisitions is being amortized over periods up to
  three years. The amortization of these intangible assets amounted to $3,247,
  $7,999 and $7,552 for the years ended December 31, 1997, 1998 and 1999, respectively.

Earnings per Share

The Company has adopted Statement of Financial Accounting Standards
  No. 128, "Earnings per Share" ("SFAS 128"). Under SFAS 128, the Company
  is not required to present earnings per share for as long as the common stock
  of the Company is not publicly held.

Comprehensive Income

The Company has adopted Statement of Financial Accounting Standards
  No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes
  standards for the reporting and presenting of comprehensive income and its components
  (revenue, expenses, gains and losses) in a full set of general-purpose financial
  statements. For the years ended December 31, 1997, 1998 and 1999, there was
  no impact on the Company's financial reporting as a result of its adoption of
  SFAS 130.

Segment Data

The Company has adopted Statement of Financial Accounting Standards
  No. 131, "Disclosures about Segments of an Enterprise and Related Information"
  ("SFAS 131"). SFAS 131 defines segments under the "management" approach,
  which designates the internal reporting that is used by management for making
  operating decisions and assessing performance as the source of the Company's
  reportable segments. SFAS 131 also requires disclosures about services and products,
  geographic areas and major customers. The adoption of SFAS 131 did not affect
  the Company's results of operations or financial position. The Company's two
  operating units have been reflected as a single reporting segment in accordance
  with the aggregation criteria of SFAS 131.

Reclassification

Certain amounts have been reclassified in the prior years to
conform to the current year presentation. These reclassifications had no effect
on net loss or retained earnings as previously reported.



---



Note 4 - Acquisitions

In May 1997, the Company purchased all of the outstanding shares
  of common stock of NYMA, Inc. ("NYMA") for $34,582. The purchase price
  consisted of $29,582 in cash, of which $1,802 was paid in 1998 after certain
  new business activity objectives were met and $5,000 in subordinated notes.
  The Company financed the acquisition of NYMA through additional borrowing of
  $28,000 and the sale of 555,556 shares of the Company's common stock, primarily
  to existing stockholders, for $15,000. A portion of the new borrowings was used
  to retire existing Company and NYMA working capital debt. NYMA is a provider
  of high technology engineering and information technology services under contracts
  with various Government agencies and subcontracts with large Government contractors.
  In June 1997, the Company purchased all of the outstanding shares of common
  stock of Sylvest Management Systems Corporation ("Sylvest") for $41,017.
  The purchase price consisted of $33,017 in cash and subordinated notes of $8,000,
  of which $1,000 was issued during 1998 after certain earnings objectives were
  met. Subordinated notes of $4,000 were paid in August 1997. The Company financed
  the acquisition of Sylvest through additional borrowing of $27,400 and the sale
  of 444,444 shares of the Company's common stock, primarily to existing stockholders,
  for $12,000. A portion of the new borrowings was used to retire existing Sylvest
  working capital debt. Sylvest is a leading reseller and technical services vendor
  supporting open systems architecture within the federal marketplace. Of the
  total fees and expenses related to these transactions, $1,000 was paid to an
  affiliate of Carlyle.

In February 1998, the Company purchased all of the
  outstanding common stock of R.O.W. Sciences, Inc. ("R.O.W.") for $9,672.
  The purchase price consisted of $8,672 in cash, of which $475 and $135 were
  paid later in 1998 and 1999, respectively, after certain revenue objectives
  were met and $1,000 in subordinated notes. The agreement also provides for additional
  cash payments up to $390 if certain revenue objectives are met. Such payments,
  if any, will be accounted for as adjustments to the purchase price. In February
  1998, the Company also purchased all of the assets of Telos Corporation's Telos
  Information Systems Division ("TIS") for $14,740. The entire purchase
  price was paid in cash. In March 1998, the Company purchased all of the outstanding
  common stock of Technical and Management Assistance, Inc. ("TMA")
  for $9,187. The purchase price consisted of $8,187 in cash and $1,000 in subordinated
  notes. The Company financed the R.O.W., TIS and TMA acquisitions through borrowings
  under its existing revolving line of credit facility. R.O.W. provides services
  that combine expert knowledge in life and health sciences with state-of-the-art
  computer based technologies principally to Government agencies. TIS provides
  engineering and information technology services to the Jet Propulsion Laboratory
  and other Government customers. TMA provides information technology services
  principally to the air traffic management function within the Federal Aviation
  Administration.

Condensed unaudited pro forma operating data which
gives effect to the acquisitions of NYMA, Sylvest, R.O.W., TMA and TIS for the
years ended December 31, 1997 and 1998 is provided below. Such unaudited pro
forma operating data has been prepared as if the acquisitions occurred as of the
beginning of 1997.

|                                                | 1997     |   | 1998     |  
|----------------------------------------------- | -------- | - | -------- | -
|Revenue                                         | $505,283 |   | $529,890 |  
|Loss before extraordinary item and income taxes | ($5,056  | ) | ($5,510  | )
|Net loss                                        | ($5,306  | ) | ($6,828  | )

In the opinion of management, the unaudited pro forma
combined results of operations are not indicative of the actual results that
would have occurred had the acquisitions been consummated at the beginning of
1997 or of future operations of the combined companies under the ownership and
management of the Company.

---



Note 5 - Accounts Receivable

Accounts receivable consisted of the following as of December
31:



|                                           | 1998     |   | 1999     |  
|------------------------------------------ | -------- | - | -------- | -
|Billed                                     | $114,674 |   | $113,359 |  
|Unbilled                                   | 9,150    |   | 9,899    |  
|Other                                      | 3,471    |   | 7,102    |  
|Less allowance for doubtful
      accounts | (455     | ) | (586     | )
|Total accounts receivable                  | $126,840 |   | $129,774 |  

Unbilled accounts receivable consisted primarily of
revenue not yet billable because of contract terms, differences between actual
and provisional indirect rates for years open to Government audit and contract
retainages. Retainages are generally billable upon acceptance of work by
customers or completion of contract audits by the Government.



---



Note 6 - Net Investment in Sales-Type Leases

Net investment in sales-type leases consisted of the following
as of December 31:

|                                                    | 1998   |   | 1999   |  
|--------------------------------------------------- | ------ | - | ------ | -
|Minimum lease payments
    receivable               | $8,909 |   | $9,117 |  
|Less unearned income                                | (691   | ) | (731   | )
|Total net investment in sales-type
      leases     | 8,218  |   | 8,386  |  
|Less current portion                                | 5,221  |   | 5,672  |  
|Long-term net investment in sales-type
      leases | $2,997 |   | $2,714 |  



Future minimum lease payments receivable as of December 31, 1999
are due as follows:



|2000 | $6,127
|---- | ------
|2001 | 2,510 
|2002 | 480   

---



Note 7 - Other Assets

Other assets consisted of the following as of December
31:

|                                         | 1998    |  | 1999     
|---------------------------------------- | ------- |  | ---------
|                                         | Current |  | Long-term
|Deferred financing fees                  | $0      |  | $6,241   
|Prepaid expenses                         | 2,823   |  | 559      
|Deferred income tax asset                | -       |  | 2,156    
|Refundable income taxes                  | 1,467   |  | -        
|Receivable from sale of
      subsidiary | 3,100   |  | -        
|Other                                    | 766     |  | 315      
|Total other assets                       | $8,156  |  | $9,271   

In 1997, the Company recorded a charge to earnings of
$4,467 related to deferred financing fees associated with the debt incurred to
finance the Merger and the NYMA and Sylvest acquisitions. This debt was
refinanced with proceeds from the Senior Subordinated Notes. This charge to
earnings was reduced by an income tax benefit of $1,697 which produced an
extraordinary loss of $2,770. Amortization of deferred financing fees which is
included in interest expense amounted to $804, $949 and $949 during 1997, 1998
and 1999, respectively.

In 1997, the Company sold substantially all the assets and business
  of its wholly-owned subsidiaries, DoxSys, Inc. ("DoxSys") and VAD
  International, Inc. ("VAD") resulting in a pretax gain of $1,600.
  The operations of DoxSys and VAD were not material to the Company's financial
  condition or results of operations. During 1998, the Company recorded an additional
  pretax gain of $2,825 as a result of DoxSys achieving certain earnings objectives.



---



Note 8 - Leased and Other Property and
Equipment

Leased and other property and equipment consisted of the
following as of December 31:

|                                                     | 1998    |   | 1999    |  
|---------------------------------------------------- | ------- | - | ------- | -
|Furniture, office and other
      equipment          | $11,553 |   | $13,573 |  
|Leasehold improvements                               | 4,428   |   | 4,208   |  
|Less accumulated depreciation and
      amortization | (10,861 | ) | (11,710 | )
|Total leased and other property and
      equipment  | $5,120  |   | $6,071  |  



Total depreciation and amortization expense related to leased
  and other property and equipment during 1997, 1998 and 1999 was $1,326, $2,315
  and $2,426, respectively. In 1999, the Company sold or disposed of $1,893 of
  leased and other property and equipment with associated accumulated depreciation
  and amortization of $1,577.



---



Note 9 - Notes Payable

Recourse notes payable consisted of the following as of December
31:

|                                                       | 1998     |  | 1999     | 
|------------------------------------------------------ | -------- |  | -------- | 
|Senior Subordinated Notes payable in August
      2005 | $105,000 |  | $105,000 | 
|Revolving line of credit                               | 25,000   |  | 17,000   | 
|Other subordinated notes                               | 11,000   |  | 11,000   | 
|Total recourse notes payable                           | 141,000  |  | 133,000  | 
|Less current portion                                   | -        |  | 2,000    | 
|Long-term recourse notes
    payable                   | $141,000 |  | $131,000 | 

In July 1997, the Company issued $105,000 of
Senior Subordinated Notes and utilized the proceeds to repay its indebtedness
under its existing term loans as well as the additional borrowings incurred to
finance the NYMA and Sylvest acquisitions. 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 the 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.

The Senior Subordinated Notes bear interest at 10.125% per annum
with interest payable semi-annually. The principal of the Senior Subordinated
Notes is due in August 2005. The Company may redeem a portion of the Senior
Subordinated Notes at any time prior to August 2001 with the net proceeds of one
or more public equity offerings. At any time after August 2001, the indenture
provides that a portion of the Senior Subordinated Notes may be redeemed upon a
change of control and also provides for other optional redemptions. All
redemptions prior to August 2005 require the Company to pay a premium. The
indenture includes certain restrictions as to the Company's ability, among other
things, to acquire or dispose of assets, incur additional debt, or to pay
dividends. In addition, the Company is required to maintain a minimum net worth
and certain operating ratios, including among others, interest and leverage
coverage.

At December 31, 1999, the Company had a $75,000 revolving line
  of credit facility which expires in July 2002. Interest accrues on borrowings
  under the revolving line of credit at either (a) 1.25% plus the highest of the
  rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate (3.99%
  at December 31, 1999) or the prime lending rate (8.50% at December 31, 1999)
  or (b) 2.25% plus the eurodollar rate (6.50% at December 31, 1999). In addition,
  the Company pays a commitment fee of 0.5% of the unused line of credit facility.
  At December 31, 1999, the Company had outstanding borrowings of $15,000 at 8.75%
  and $2,000 at 9.75%. The Company's revolving line of credit agreement includes
  certain restrictions as to the Company's ability, among other things, to acquire
  or dispose of assets or to pay dividends. In addition, the Company is required
  to maintain a minimum net worth and certain operating ratios, including among
  others, interest and leveragecoverage. All of the Company's
  assets not otherwise pledged are utilized as collateral under the Company's
  credit agreements.

The other subordinated notes outstanding as of December 31, 1999
were issued by the Company in connection with the NYMA, Sylvest, R.O.W. and TMA
acquisitions. The NYMA and Sylvest subordinated notes bear interest payable
semi-annually at increasing rates starting at 9% per annum and increasing to 13%
per annum. The principal of these notes is due in 2004. The R.O.W. and TMA
subordinated notes bear interest payable semi-annually at 9% per annum and the
principal is due in 2000.

The Company finances certain equipment leases to Government
customers with borrowings or capital leases that are recourse only to the
related payment stream and property leased. In most circumstances, the Company's
future obligation under nonrecourse agreements, in the event of default by the
end user lessee, would be limited to ensuring the return of the associated
assets to the lender.

---



Note 10 - Nonrecourse Obligations Under Capital
Leases

Nonrecourse obligations under capital leases
consisted of the following as of December 31:

|                                                             | 1998   |   | 1999   |  
|------------------------------------------------------------ | ------ | - | ------ | -
|Minimum lease payments                                       | $4,077 |   | $1,750 |  
|Less deferred interest                                       | (294   | ) | (59    | )
|Total nonrecourse obligations under capital
      leases     | 3,783  |   | 1,691  |  
|Less current portion                                         | 2,232  |   | 1,691  |  
|Long-term nonrecourse obligations under
      capital leases | $1,551 |   | $0     |  



---





Note 11 - Accounts Payable and Other
Liabilities

Accounts payable and other liabilities consisted of the
following as of December 31:

|                                                   | 1998    |  | 1999     
|-------------------------------------------------- | ------- |  | ---------
|                                                   | Current |  | Long-term
|                                                   |         |  |          
|Accounts payable                                   | $50,829 |  | $0       
|Accrued contract expenses                          | 11,730  |  | -        
|Other accrued expenses                             | 14,188  |  | 1,316    
|Accrued interest payable                           | 4,657   |  | -        
|Deferred income                                    | 3,309   |  | 1,148    
|Income taxes payable                               | 2,496   |  | -        
|Deferred income tax liability                      | 57      |  | -        
|Other                                              | 580     |  | -        
|Total accounts payable and other
      liabilities | $87,846 |  | $2,464   

As of December 31, 1999, accounts payable and accrued contract
  expenses include approximately $26,600 in amounts payable to an asset-based
  lender under an arrangement established to facilitate the purchase of inventory.
  Under this arrangement, the lender directly pays the vendors for purchases made
  by the Company. The arrangement provides the Company with up to $30,000 in credit
  from the lender for inventory purchases. The terms of the arrangement enable
  the Company to repay outstanding amounts paid by the lender, interest free,
  within a stipulated time period from the initial purchase from the vendors.
  After the stipulated time period, interest under this arrangement accrues at
  the prime rate plus 2.0% as determined by the lender (10.50% at December 31,
  1999). This arrangement requires the Company to maintain a minimum net worth
  and certain operating ratios, including among others, interest and leverage
  coverage.

In connection with this arrangement, the asset-based lender
entered into an Intercreditor and Subordination Agreement (the "Intercreditor
Agreement") with the bank group that has extended the Company a revolving line of
credit facility (see Note 9). Under the Intercreditor Agreement, all advances
made by the asset-based lender are collateralized by the Company's inventory and
accounts receivable resulting from the sale of inventory purchased under the
above arrangement.

---



Note 12 - Income Taxes

The income tax (benefit) provision consisted of the following
for the years ended December 31:

|                                        | 1997  |   | 1998   |   | 1999   |  
|--------------------------------------- | ----- | - | ------ | - | ------ | -
|Current income tax provision:           |       |   |        |   |        |  
|                                        |       |   |        |   |        |  
|Federal                                 | $364  |   | $1,552 |   | $1,190 |  
|State                                   | 157   |   | 1,041  |   | 1,208  |  
|Total current income tax provision      | 521   |   | 2,593  |   | 2,398  |  
|                                        |       |   |        |   |        |  
|Deferred income tax benefit:            |       |   |        |   |        |  
|                                        |       |   |        |   |        |  
|Federal                                 | (723  | ) | (1,114 | ) | (1,202 | )
|State                                   | (127  | ) | (197   | ) | (212   | )
|Total deferred income tax
      benefit | (850  | ) | (1,311 | ) | (1,414 | )
|Total income tax (benefit) provision    | ($329 | ) | $1,282 |   | $984   |  

Income tax (benefit) provision as reflected on the
consolidated statements of operations consisted of the following:

|                                            | 1997   |   | 1998   |  | 1999 | 
|------------------------------------------- | ------ | - | ------ |  | ---- | 
|Income (loss) before extraordinary
    item |        |   |        |  |      | 
|and
      income taxes                      | $1,368 |   | $1,282 |  | $984 | 
|Extraordinary
    loss                      | (1,697 | ) | -      |  | -    | 
|Total income tax (benefit)
      provision  | ($329  | ) | $1,282 |  | $984 | 



Deferred tax assets and
liabilities consisted of the following as of December 31:

|                                         | 1998   |  | 1999   | 
|---------------------------------------- | ------ |  | ------ | 
|Deferred tax assets:                     |        |  |        | 
|Deferred
      income                    | $1,641 |  | $1,189 | 
|Compensation and employee
      benefits | 1,458  |  | 970    | 
|Accounts receivable
      reserves       | 102    |  | 223    | 
|Goodwill and
      intangibles           | 1,157  |  | 2,129  | 
|Other                                    | 1,017  |  | 1,614  | 
|Total deferred tax
      assets          | 5,375  |  | 6,125  | 
|Deferred tax liabilities:                |        |  |        | 
|Contractually unbilled
      revenue     | 2,266  |  | 2,024  | 
|Accrual to cash
      conversion         | 559    |  | -      | 
|Fixed assets                             | -      |  | 301    | 
|Other                                    | 451    |  | 285    | 
|Total deferred tax
      liabilities     | 3,276  |  | 2,610  | 
|Net deferred tax asset                   | $2,099 |  | $3,515 | 



Net deferred income taxes as reflected on the consolidated
balance sheets consisted of the following as of December 31:



|                                             | 1998   |   | 1999   |  
|-------------------------------------------- | ------ | - | ------ | -
|                                             |        |   |        |  
|Current deferred income tax asset            | $2,863 |   | $1,728 |  
|Less current deferred income tax liability   | (2,920 | ) | (2,118 | )
|Net current deferred income tax liability    | (57    | ) | (390   | )
|                                             |        |   |        |  
|Long-term deferred income tax asset          | 2,512  |   | 4,397  |  
|Less long-term deferred income tax liability | (356   | ) | (492   | )
|Net long-term deferred income tax asset      | 2,156  |   | 3,905  |  
|Net deferred income tax asset                | $2,099 |   | $3,515 |  



A reconciliation between the (benefit) provision for income taxes
  computed on income before tax at the statutory federal tax rate and the (benefit) provision
  for income taxes is as follows for the years ended December 31:

|                                                 | 1997   |  | 1998   |  | 1999   | 
|------------------------------------------------ | ------ |  | ------ |  | ------ | 
|                                                 |        |  |        |  |        | 
|Statutory federal income tax rate                | -34.0% |  | -34.0% |  | -34.0% | 
|State income taxes. net of federal
      benefit | 3.6%   |  | 12.7%  |  | 3.1%   | 
|Nondeductible goodwill and intangibles           | 37.8%  |  | 37.3%  |  | 53.3%  | 
|Other nondeductible expenses                     | 1.4%   |  | 1.1%   |  | 2.4%   | 
|Other                                            | -20.4% |  | 6.6%   |  | 5.4%   | 
|Effective income tax rate                        | -11.6% |  | 23.7%  |  | 30.2%  | 

At December 31, 1997, 1998 and 1999, the Company has not recorded
  any tax valuation allowance to reflect management's assessment that the realization
  of the deferred tax asset is more likely that not.



---



Note 13 - Stockholders' Equity and Transactions with
Stockholders

In 1984, a principal stockholder of the Company transferred
shares of the Company's common stock to certain key employees. The Company has
accounted for this transaction as if the Company, and not the principal
stockholder, had transferred the stock. At December 31, 1997, the Company had
fully amortized the compensation expense related to this transaction.

In 1996, the Company adopted a Stock Option Plan for Executives
  and Key Employees of Federal Data Corporation (the "Plan"). Under the Plan, options
  may be granted at not less than fair value to purchase up to 445,645 shares
  of common stock. Options granted under the Plan have vesting periods of up to
  ten years and all expire ten years from the date of grant or in accordance with
  other terms as specified by the Company's Board of Directors. In 1998, the Company
  amended and restated the Plan by accelerating the vesting of certain performance
  based options. Accordingly, the Company recorded non-cash compensation of $2,058
  in 1998 and $524 in 1999 and related increases 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. 
  Immediately prior to the Merger, options to purchase 93,500 shares of the Company's
  common stock at a weighted average exercise price of $7.53 per share were outstanding
  and exercisable under the then existing stock incentive plan. In accordance
  with the Merger agreement, the Company was to replace these options with options
  in the surviving corporation that provided substantially the same economic benefit
  to the option holder as the benefits provided prior to the Merger. To fulfill
  this obligation, in 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 in 1999 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.

The following is a summary of stock option activity
for outstanding options:

|                             | Weighted AverageExercised
      Price |  | Number ofShares |  
|---------------------------- | ------------------------------------- |  | --------------- | -
|Balance at December 31, 1996 | $10.00                                |  | 243,000         |  
|                             |                                       |  |                 |  
|Granted                      | -                                     |  | -               |  
|Exercised                    | -                                     |  | -               |  
|Forfeited                    | 10.00                                 |  | (12,000         | )
|Cancelled                    | -                                     |  | -               |  
|Balance at December 31, 1997 | 10.00                                 |  | 231,000         |  
|                             |                                       |  |                 |  
|Granted                      | 29.21                                 |  | 192,000         |  
|Exercised                    | -                                     |  | -               |  
|Forfeited                    | 15.39                                 |  | (20,500         | )
|Cancelled                    | -                                     |  | -               |  
|Balance at December 31, 1998 | 18.89                                 |  | 402,500         |  
|                             |                                       |  |                 |  
|Granted                      | 2.00                                  |  | 40,425          |  
|Exercised                    | 2.00                                  |  | (4,675          | )
|Forfeited                    | -                                     |  | -               |  
|Cancelled                    | 19.33                                 |  | (43,500         | )
|Balance at December 31, 1999 | $17.31                                |  | 394,750         |  

As of December 31, 1999, options to purchase 43,500 shares
were available for granting.

The following is a summary of stock options outstanding and
exercisable as of  December 31, 1999:



|Outstanding         |  | Exercisable
|------------------- |  | -----------
|ExercisePrice Range |  | Options    
|                    |  |            
|$2.00               |  | 35,750     
|$10.00              |  | 205,000    
|$27.00              |  | 133,500    
|$54.00              |  | 20,500     
|                    |  | 394,750    

The Company has adopted the disclosure-only provisions
  of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-based
  Compensation." Had compensation cost for the Company's stock option plan been
  determined based on the fair value at the grant date for awards in 1997, there
  would not have been a material impact on the Company's results of operations.
  In 1998 and 1999, the net loss would have been increased by $1,100 and $627,
  respectively. The weighted average fair value of stock options granted under the
  stock option plan during 1997, 1998 and 1999 was $0.00, $4.82 and $25.00, respectively.The fair value was estimated using the Minimum Value Approach based
on the weighted average assumptions of:

|                        | 1998 |  | 1999 | 
|----------------------- | ---- |  | ---- | 
|                        |      |  |      | 
|Expected life in years  | 5    |  | 5    | 
|Risk-free interest rate | 5.7% |  | 6.2% | 
|Dividend yield          | 0.0% |  | 0.0% | 

In 1999, the Company purchased 14,200 shares of treasury stock
  at $27.00 per share from former officers of the Company.



---



Note 14 - Supplemental Disclosure of Cash Flow
Information

|                                         | 1997     |  | 1998    |  | 1999    | 
|---------------------------------------- | -------- |  | ------- |  | ------- | 
|Cash paid during the year for:           |          |  |         |  |         | 
|Interest                                 | $5,621   |  | $15,453 |  | $14,905 | 
|Income
    taxes                         | 1,452    |  | 567     |  | 3,456   | 
|                                         |          |  |         |  |         | 
|Details of acquisitions (Note 4):        |          |  |         |  |         | 
|Fair value of assets
      acquired      | $127,572 |  | $42,563 |  | $0      | 
|Liabilities
    assumed                  | 54,775   |  | 9,724   |  | -       | 
|Subordinated notes issued
      and paid | 4,000    |  | -       |  | -       | 
|Subordinated notes
      issued          | 8,000    |  | 2,000   |  | -       | 
|Cash paid at
      acquisition           | 60,797   |  | 30,839  |  | -       | 
|Earnout
      payments                   | -        |  | 2,427   |  | 134     | 
|Less
      cash required                 | 6,622    |  | 628     |  | -       | 
|Net
      Cash paid for acquisitions     | $54,175  |  | $32,638 |  | $134    | 

In 1998, the Company issued additional subordinated
notes amounting to $1,000 in connection with an earnout associated with the
Sylvest acquisition after certain earning objectives were met.

During 1997, 1998 and 1999, the Company financed through capital
leases the acquisition of computer equipment which was sold to customers of $0,
$1,828 and $234, respectively.



---



Note 15 - Commitments and
Contingencies

The Company leases office space and equipment under various
operating lease agreements. Leases for principal office space typically have
terms of five to seven years and carry optional renewal periods of three to five
years. Most leases include provisions for fixed annual increases to base rent
payments and escalations based on increases in operating expenses and real
estate taxes.

Future minimum payments as of December 31, 1999, for all
noncancellable operating leases with initial terms of one year or more are as
follows:

| | 2000 | $5,279
| | ---- | ------
| | 2001 | 5,241 
| | 2002 | 4,790 
| | 2003 | 3,666 
| | 2004 | 3,610 

Operating lease expense was $3,879, $4,165 and $5,246
  during 1997, 1998 and 1999, respectively. The Company received $0, $316 and
  $0 from sublease rentals during 1997, 1998 and 1999, respectively.

The Company is subject to contract audits by Government agencies.
  Completed and future audits may result in various billed and unbilled costs
  being disallowed. As of December 31, 1999, audits have been completed through 1996.
  In the opinion of management, adequate reserves have been provided for the remaining
  open audit periods.

In the ordinary course of business, the Company may be party
  to various legal proceedings. In the opinion of management, the Company's liability,
  if any, in all pending litigation or other legal proceedings will not have a
  material effect upon the Company's financial condition, results of operations
  or cash flows.



---



Note 16 - Retirement Plans

The Company sponsors several defined contribution plans that
provide all salaried employees, that meet certain age requirements, and certain
hourly employees an opportunity to accumulate funds for their retirement. The
Company's contributions to these plans are based on either a percentage of
employee contributions or an amount at the discretion of the Company. The
Company recognized expense of $1,029, $2,548 and $2,153 during 1997, 1998 and
1999, respectively.



---



Item 9. Disagreements on Accounting and Financial
Disclosure.

None



PART III



Item 10. Directors and Executive Officers of the
Registrant.

The following table sets forth certain information with respect
to the members of the Board of Directors and the executive officers of the
Company. Executive officers of the Company are chosen by the Board of Directors
and serve at its discretion. Directors of the Company serve until the election
and qualification of their successors.

|Name                      | Title                                                                                    | Age
|------------------------- | ---------------------------------------------------------------------------------------- | ---
|                          |                                                                                          |    
|William E. Conway, Jr.    | Chairman of the Board                                                                    | 50 
|C. Robert Hanley          | Director and Chairman
Emeritus                                                           | 67 
|Daniel R. Young           | Vice Chairman and CEO                                                                    | 66 
|Harry T. Marren           | Director, President and COO                                                              | 65 
|Peter J. Clare            | Director                                                                                 | 34 
|Allan M. Holt             | Director and Secretary                                                                   | 48 
|Peter C. Belford, Sr.     | Senior Vice President                                                                    | 53 
|Rene B. LaVigne           | Senior Vice President, Systems &
      Technology      Group                             | 38 
|Paul A. Taltavull         | Senior Vice President, Services &
      Solutions      Group                             | 45 
|John W. Wayne             | Senior Vice President, Services &
      Solutions      Group, Solutions
      Sector     | 43 
|James M. Dean             | Vice President, Chief Financial Officer
      and      Treasurer                         | 52 
|Maggie M. Hird            | Vice President, Human
    Resources                                                      | 42 
|Sterling E. Phillips, Jr. | Vice President, Services &
      Solutions      Group, Science &
      Engineeing Sector | 53 

William E. Conway, Jr. was elected as a Director of the
Company in 1996. He has been a Managing Director of The Carlyle Group, a
Washington, D.C.-based private merchant bank, since 1987. Mr. Conway was Senior
Vice President and Chief Financial Officer of MCI Communications Corporation
from 1984 until 1987, and was a Vice President and Treasurer of MCI from 1981 to
1984. Mr. Conway presently serves on the Board of Directors of Nextel
Communications, Inc. and several privately held companies.

C. Robert Hanley has been a Director of the Company since its
founding in 1969. Mr. Hanley was President and Chief Executive Officer of the
Company from 1969 until 1985, when he became its Chairman and Chief Executive
Officer. He retired in January 1996, and served as a consultant to the Company
until January 1999.

Daniel R. Young has been a Director of the Company since 1977
and was named Vice Chairman of the Board of Directors in 1998. He has been the
Chief Executive Officer since 1996 and its President from 1985 through 1998. Mr.
Young joined the Company in 1976 as its Executive Vice President and became its
President and Chief Operating Officer in 1985. Prior to joining the Company, Mr.
Young was employed by Data Transmission Company as Executive Vice President and
held various management positions at Texas Instruments Incorporated.

Harry T. Marren was elected as a Director of the Company in 1997
and became its President and Chief Operating Officer in 1998. He has been
President of FDC Technologies, Inc. and its predecessor organization, Federal
Data Systems Corporation, since 1989. Mr. Marren joined the Company in 1977 as
General Manager of Operations and was promoted to Vice President in 1980 and
Senior Vice President in 1988.

Peter J. Clare was elected as a Director of the Company in 1996.
He is currently a Managing Director with The Carlyle Group, a Washington,
D.C.-based private merchant bank which he joined in 1992. Mr. Clare was
previously with First City Capital, a private investment group. From 1987 to
1989, he worked in the mergers and acquisitions and merchant banking groups at
Prudential-Bache. Mr. Clare currently serves on the boards of several privately
held companies.

Allan M. Holt was elected as a Director of the Company in 1996.
He is a Managing Director of The Carlyle Group, a Washington, D.C.-based private
merchant bank which he joined in 1991. He was previously with Avenir Group, a
private investment and advisory group, and from 1984 to 1987 was Director of
Planning and Budgets at MCI Communications Corporation, which he joined in 1982.
Mr. Holt currently serves on the boards of several privately held
companies.

Peter C. Belford, Sr. has been Senior Vice President of the
Company since 1998, having previously been Senior Vice President of the Science
& Engineering Group since 1997, and President and Chief Operating Officer of
NYMA, Inc. since 1994. Mr. Belford joined NYMA in 1985 as its Executive Vice
President. Mr. Belford was previously employed by Computer Sciences Corporation
("CSC") as Vice President, Product Management and Product Assurance. He joined
CSC in 1977 as a Program Manager and became Assistant to the President of the
System Sciences Division of that company, with executive management
responsibilities.

Rene B. LaVigne has been Senior Vice President of the Systems
  & Technology Group since 1999, having previously been Vice President of
  the Systems & Technology Group from 1994 to 1999. He was previously Chief
  Financial Officer of Sylvest Management Systems Corporation from 1993 to 1994,
  and was previously employed by Ernst & Young from 1983 to 1993.

Paul A. Taltavull has been Senior Vice President of the Services
& Solutions Group since 1999, having previously been Senior Vice President
of the Solutions Group since 1997. Mr. Taltavull joined the Company in
1982 as a Federal Marketing Representative and has held a series of marketing
management positions with the Company, including Senior Vice President of
Marketing from 1992 to 1997. Before joining the Company, Mr. Taltavull was a
sales representative for Hewlett-Packard Company and a practicing engineer for
the U.S. Government.

John W. Wayne has been Senior Vice President of the Services &
  Solutions Group, Solutions Sector since 1999, having previously been Senior
  Vice President of the Systems Integration Group since 1998 and Vice President
  of the Systems Integration Group since 1990. He previously directed the Company's
  systems design and engineering group. He joined Federal Data Corporation in
  1981 as an Operations Project Manager and was subsequently promoted to Director
  of Technical Services. Prior to joining the Company, Mr. Wayne was employed
  as a Systems Engineer with Inforex Incorporated and by TRW Data Systems as a
  Customer Engineer.

James M. Dean has been Vice President and Chief Financial
Officer of the Company since 1986 and its Treasurer since 1987. Mr. Dean joined
Federal Data Corporation in 1983 as its Controller. He was previously employed
by Price Waterhouse from 1969 to 1983.

Maggie M. Hird has been Vice President of Human Resources since
1998. From 1996 to 1998, she served as Vice President of Human Resources
for AMERICOM, Inc. From 1989 to 1996, Ms. Hird served as Vice President and
Chief Administrative Officer of KCI Technologies, Inc., where she was also a
member of the Board of Directors.

Sterling E. Phillips, Jr. has been Vice President of the
Services & Solutions Group, Science & Engineering Sector since 1999,
having previously been Vice President of the Science & Engineering Group
since 1998 and Vice President of Corporate Marketing since 1997. He joined FDC
Technologies, Inc. in 1996 as Vice President of its Services Group. He was
previously employed as Chief Operating Officer of TRI-COR Industries, Inc. and
President of Business Development of the federal business unit of Computer
Sciences Corporation. From 1968 to 1992, Mr. Phillips held various
positions in management, sales and marketing with the IBM
Corporation.

The Company does not currently pay any fees or remuneration to
its directors for service on the Board.



Item 11. Executive Compensation.

The following table sets forth information with respect to the
  compensation paid by the Company for services rendered in the years ended December
  31, 1997, 1998 and 1999 to the Chief Executive Officer and to each of the four
  other most highly compensated executive officers of the Company (the "Named
  Executive Officers"), and two additional employees for whom disclosure would
  have been required if they were executive officers.



|                                |  | Annual Compensation |  | Long-Term Compensation |  |                      
|------------------------------- |  | ------------------- |  | ---------------------- |  | ---------------------
|                                |  |                     |  |                        |  |                      
|Name                            |  | Year                |  | Salary
        ($)     |  | Bonus (1)
        ($)
|Daniel R. Young                 |  | 1999                |  | 300,000                |  | -                    
|Vice
        Chairman and       |  | 1998                |  | 300,000                |  | 150,000              
|Chief
        Executive Officer |  | 1997                |  | 300,000                |  | 200,000              
|                                |  |                     |  |                        |  |                      
|Harry T. Marren                 |  | 1999                |  | 200,000                |  | -                    
|President
        and           |  | 1998                |  | 200,000                |  | 100,000              
|Chief
      Operating Officer   |  | 1997                |  | 200,000                |  | 175,000              
|                                |  |                     |  |                        |  |                      
|Peter C. Belford, Sr. (4)       |  | 1999                |  | 224,280                |  | -                    
|Senior
        Vice President   |  | 1998                |  | 250,000                |  | -                    
|                                |  | 1997                |  | 148,130                |  | -                    
|                                |  |                     |  |                        |  |                      
|Rene B. LaVigne (4)             |  | 1999                |  | 131,333                |  | 153,011              
|Senior
        Vice President   |  | 1998                |  | 115,000                |  | 156,318              
|                                |  | 1997                |  | 60,000                 |  | 63,241               
|                                |  |                     |  |                        |  |                      
|Paul A. Taltavull               |  | 1999                |  | 186,000                |  | -                    
|Senior
        Vice President   |  | 1998                |  | 175,000                |  | 100,000              
|                                |  | 1997                |  | 175,000                |  | 100,000              
|                                |  |                     |  |                        |  |                      
|Lorraine A. Guevara             |  | 1999                |  | 60,000                 |  | 463,362              
|Account
        Manager         |  | 1998                |  | 57,000                 |  | 333,246              
|                                |  | 1997                |  | 50,004                 |  | 143,137              
|                                |  |                     |  |                        |  |                      
|Paul H. Tardif (4)              |  | 1999                |  | 188,664                |  | 80,237               
|Vice President, Systems &       |  | 1998                |  | 174,019                |  | 82,500               
|Applied
      Sciences Sector   |  | 1997                |  | -                      |  | -                    

(1) Bonus awards include commissions and other incentive
compensation and are reflected in the year to which they are attributable and
not the year in which they are actually paid. Bonuses are awarded to executive
officers at the discretion of management subject to review by the Board of
Directors.

(2) Fringe benefit amounts are omitted to the extent the
aggregate value of such benefits is less than 10% of the salary and bonus, or
$50,000.

(3) The options listed were awarded in 1998 and 1999 pursuant to
the Company's Stock Option Plan for Executives and Other Key Employees (the
"Plan"). Options granted under the Plan have vesting periods of up to 10 years
and all expire 10 years from the date of grant or in accordance with other terms
as specified by the Company's Board of Directors. In 1998, the Company amended
and restated this Plan by accelerating the vesting of certain performance based
options.

(4) Messrs. Belford, LaVigne and Tardif joined the Company in
May 1997, June 1997 and February 1998, respectively.



OPTIONS GRANTED IN LAST FISCAL YEAR

|                  |  | Individual Grants                                                   |  |                                                                               |  |                        |  |                                    |  |               |  |                                                                                                        |  |        
|----------------- |  | ------------------------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | ---------------------- |  | ---------------------------------- |  | ------------- |  | ------------------------------------------------------------------------------------------------------ |  | -------
|                  |  | Number of
        Securities
        Underlying
        Option/SRAs |  | Percent of Total
        Options/SRAs
        Granted To
        Employees in |  | Exercise or Base Price |  | Market Price at
        Grant Date |  | Expiration    |  | Potential Realizable Value at Assumed Annual
        Rates of Stock Price Appreciation for Option Term
|Name              |  | Granted (#)                                                         |  | Fiscal Year                                                                   |  | ($/sh)                 |  | ($/sh)                             |  | Date          |  | 0% ($)                                                                                                 |  | 5% ($) 
|Paul A. Taltavull |  | 16,500                                                              |  | 46%                                                                           |  | 2                      |  | 27                                 |  | March 30,2009 |  | 412,500                                                                                                |  | 535,583

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information regarding the
Company's option grants during the fiscal year ended December 31, 1999. The
Company has granted no stock appreciation rights.

|                      |  | Number of
      SecuritiesUnderlying UnexercisedOptionsAt Fiscal Year-End
      (#) |  | Value of UnexercisedIn the
      MoneyOptions at FiscalYear-End ($) (1)
|--------------------- |  | ----------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------
|Name                  |  | Exercisable                                                                         |  | Unexercisable                                                          
|Daniel R. Young       |  | 55,250                                                                              |  | 29,750                                                                 
|Harry T. Marren       |  | 32,150                                                                              |  | 17,850                                                                 
|Peter C. Belford, Sr. |  | 14,375                                                                              |  | 10,625                                                                 
|Rene B. LaVigne       |  | 11,500                                                                              |  | 8,500                                                                  
|Paul A. Taltavull     |  | 33,000                                                                              |  | 8,500                                                                  
|Lorraine A. Guevara   |  | 538                                                                                 |  | 462                                                                    
|Paul H. Tardif        |  | 500                                                                                 |  | 500                                                                    

(1) As a privately held Company not then engaged in any transaction
  requiring a current valuation of its shares, the Company did not determine the
  value of its common stock at year-end. The aggregate value of such voting stock
  was computed on the basis of a $27 per share price, the price paid by the Company
  to purchase treasury stock from a former officer of the Company in December 1999, the time of the
  most recent common stock transaction.
  Item 12. Security Ownership of Certain Beneficial Owners and Management.

The following table sets forth the ownership of common stock of
the Company by each person known by the Company to be the owner of 5% or more of
the Company's outstanding common stock, by each person who is a director or
Named Executive Officer of the Company and by all directors and executive
officers of the Company as a group.

|Beneficial Owner (1)                                               |  | All OutstandingCommon Stock |  | Percentage ofNumber of
      Shares
|------------------------------------------------------------------ |  | --------------------------- |  | -----------------------------------
|TCG Holdings, L.L.C. (2)                                           |  | 2,485,356                   |  | 78.8                               
|William E. Conway, Jr. (3)                                         |  | -                           |  | -                                  
|C. Robert Hanley (4) (7)                                           |  | 73,172                      |  | 2.3                                
|Daniel R. Young (5) (6)                                            |  | 155,407                     |  | 4.9                                
|Harry T. Marren (6)                                                |  | 31,000                      |  | 1.0                                
|Peter J. Clare (3)                                                 |  | -                           |  | -                                  
|Allan M. Holt (3)                                                  |  | -                           |  | -                                  
|Peter C. Belford, Sr. (6)                                          |  | 47,208                      |  | 1.5                                
|Rene B. LaVigne (6)                                                |  | 4,625                       |  | *                                  
|Paul A. Taltavull (6)                                              |  | 15,880                      |  | *                                  
|All directors and executive officers as a
      group (13 persons) |  | 343,087                     |  | 11.8                               

* less than one percent

(1) Except as otherwise indicated, each beneficial owner has the
sole power to vote, as applicable, and to dispose of all units owned by such
beneficial owner.

(2) TCG Holdings, L.L.C., a Delaware limited liability company,
is the sole managing member of TC Group, L.L.C., a Delaware limited liability
company, which is the sole general partner of Carlyle Partners II, L.P., a
Delaware limited partnership, Carlyle Partners III, L.P., a Delaware limited
partnership, Carlyle International Partners II, L.P., a Cayman Islands limited
partnership, Carlyle International Partners III, L.P., a Cayman Islands limited
partnership, and certain other partnerships formed by Carlyle, each of which is
a record holder of the Company's common stock. TC Group, L.L.C. or an affiliate
also exercises investment discretion and management, with respect to the shares
of common stock held of record by certain other investors. The address of TCG
Holdings L.L.C. is c/o The Carlyle Group, 1001 Pennsylvania Avenue, N.W.,
Washington, D.C. 20004. William E. Conway, Jr., Daniel A. D'Aniello and David M.
Rubenstein, as the managing members of TCG Holdings, L.L.C., may be deemed to
share beneficial ownership of the shares shown as beneficially owned by TCG
Holdings, L.L.C. Such persons disclaim such beneficial ownership.

(3) The address of such person is c/o The Carlyle Group, 1001
Pennsylvania Avenue, N.W., Washington, D.C. 20004.

(4) The address of C. Robert Hanley is 2808 Tarflower Way,
Naples, Florida 34105.

(5) 7,000 of these shares (0.2% of the total outstanding shares
of the Company) are owned by the Daniel R. Young Irrevocable Unitrust U/A dated
November 16, 1994, for which Daniel R. Young is the trustee.

(6) The address of such person is c/o Federal Data Corporation,
4800 Hampden Lane, Bethesda, Maryland 20814.

(7) All of these shares are owned by the C. Robert Hanley
Grantor Retained Annuity Trust dated July 15, 1998, for which C. Robert Hanley
is the trustee.



Item 13. Certain Relationships and Related
Transactions.

Concurrent with the acquisition of the Company by Carlyle in 1995,
  the Company entered into a management agreement (the "Management Agreement")
  with TC Group, L.L.C. for certain management and financial advisory services
  to be provided to the Company. In consideration of the management and financial
  advisory services, the Company pays TC Group, L.L.C. an annual management fee
  of $300,000. Based on fees being paid by comparably situated companies, the
  Company believes that this Management Agreement is on terms no less favorable
  to the Company than could have been obtained from an independent third party.

In connection with the Recapitalization, the Company sold an airplane
  to an entity controlled by C. Robert Hanley, a Director of the Company and its
  former Chief Executive Officer. Mr. Hanley purchased the airplane for approximately
  $1.5 million, its aggregate estimated value. The Company entered into a three-year
  consulting agreement with Mr. Hanley, which expired in January 1999, and a three-year
  agreement for use of the airplane from an affiliate of Mr. Hanley, which expired
  in December 1998. The consulting agreement provided for annual payments of $200,000,
  and the lease of the airplane provided for annual payments of $300,000 plus
  a usage charge which amounted to approximately $95,000 in the year ended December
  31, 1998. Mr. Hanley regularly provided consulting services to the Company pursuant
  to the consulting agreement and continues to serve as Director to the Company
  without compensation.

In 1999, the Company purchased 1,200 and 13,000 shares of treasury
  stock at $27.00 per share from former officers of the Company,  Michael D. Brant and Charles
  M. Mathews, respectively.

In connection with the Recapitalization, the stockholders of the
  Company executed a Holders Agreement dated as of November 30, 1995 (as amended,
  supplemented or replaced, the "Holders Agreement"). The Holders Agreement restricts
  transfer of the common stock of the Company (except to affiliates, to the public
  in a registered offering or pursuant to Rule 144 under the Securities Act, transfers
  in a merger or sale of the Company, or transfer pursuant to certain rights under
  the Holders Agreement). The Holders Agreement also provides for tag-along rights
  on transfers of more than 15% of the common stock, bring-along rights with respect
  to more than 50% of the common stock and registration rights.



PART IV



Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.

(1) - - Financial Statements

The following Consolidated Financial Statements of the Company
and its subsidiaries are included in this Report:

1. Financial Statements:

Report of Independent Accountants

Consolidated Balance Sheets as of December
  31, 1998 and 1999

Consolidated Statements of Operations
  for the years ended December 31, 1997, 1998 and 1999

Consolidated Statements of Changes in
  Stockholders' (Deficit) Equity for the years ended December 31, 1997, 1998 and
  1999

Consolidated Statements of Cash Flows
  for the years ended December 31, 1997, 1998 and 1999

Notes to Consolidated Financial Statements

2. Financial Statement Schedules:

All schedules are omitted because they are not applicable or the
required information is shown in the Consolidated Financial Statements or the
notes thereto under Item 8.

3. Exhibits:

|EXHIBIT
        NUMBER |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                           
|---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d)2.5                 |  | Stock Purchase Agreement by and among Federal
      Data Corporation and Ralph O. Williams, Frederic M. Cullen, Trustees of
      R.O.W. Sciences ESOP, John C. Smith, Paul H. Tardif and R.O.W. Sciences,
      Inc. dated as of February 17, 1998                                                                                                                                   
|(e)2.5                 |  | Asset Purchase Agreement dated as of February
      20, 1998 by and among Telos Corporation and NYMA, Inc.                                                                                                                                                                                                                                                                            
|(e)2.6                 |  | Interim Agreement dated as of February 28, 1998
      by and among Telos Corporation and NYMA, Inc.                                                                                                                                                                                                                                                                                   
|(f)2.7                 |  | Stock Purchase Agreement among Federal Data Corporation
      and Harry P. Headley, as Trustee, Dorothy Headley, as Trustee, Michael K.
      Headley, Kathleen Kowis, George Kowis and Technical and Management Assistance,
      Inc. dated March 11, 1998                                                                                                                          
|(a)3.1                 |  | Certificate of Incorporation of Federal Data
      Corporation                                                                                                                                                                                                                                                                                                                        
|(a)3.2                 |  | By-laws of Federal Data Corporation                                                                                                                                                                                                                                                                                                                                                   
|(a)3.3                 |  | Certificate of Incorporation of FDCT Corp.                                                                                                                                                                                                                                                                                                                                            
|(a)3.4                 |  | By-laws of FDCT Corp.                                                                                                                                                                                                                                                                                                                                                                 
|(a)3.5                 |  | Articles of Incorporation of NYMA, Inc.                                                                                                                                                                                                                                                                                                                                               
|(a)3.6                 |  | By-laws of NYMA, Inc.                                                                                                                                                                                                                                                                                                                                                                 
|(a)3.7                 |  | Articles of Incorporation of Sylvest Management
      Systems Corporation                                                                                                                                                                                                                                                                                                             
|(a)3.8                 |  | By-laws of Sylvest Management Systems Corporation                                                                                                                                                                                                                                                                                                                                     
|(a)3.9                 |  | Certificate of Incorporation of FDC Technologies,
      Inc.                                                                                                                                                                                                                                                                                                                          
|(a)3.10                |  | By-laws of FDC Technologies, Inc.                                                                                                                                                                                                                                                                                                                                                     
|(f)3.15                |  | Certificate of Incorporation of R.O.W. Sciences,
      Inc.                                                                                                                                                                                                                                                                                                                           
|(f)3.16                |  | By-laws of R.O.W. Sciences, Inc.                                                                                                                                                                                                                                                                                                                                                      
|(f)3.17                |  | Articles of Incorporation of Technical and Management
      Assistance, Inc.                                                                                                                                                                                                                                                                                                          
|(f)3.18                |  | By-laws of Technical and Management Assistance,
      Inc.                                                                                                                                                                                                                                                                                                                            
|(a)4.1                 |  | Indenture dated as of July 15, 1997 among Federal
      Data Corporation, FDCT Corp., NYMA, Inc., Sylvest Management Systems Corporation,
      FDC Technologies, Inc., DoxSys, Inc., VAD International, Inc. and Norwest
      Bank Minnesota, National Association                                                                                                                  
|(a)4.2                 |  | Specimen Certificate of 10 1/8% Senior Subordinated
      Notes due 2005 (included in Exhibit 4.1)                                                                                                                                                                                                                                                                                    
|(a)4.3                 |  | Purchase Agreement dated as of July 18, 1997
      among Federal Data Corporation, BT 
      Securities Corporation and Lehman Brothers                                                                                                                                                                                                                                               
|(a)4.4                 |  | Registration Rights Agreement dated as of July
      25, 1997 among Federal Data 
      Corporation, BT Securities Corporation and Lehman Brothers                                                                                                                                                                                                                                    
|(b)4.5                 |  | Credit Agreement dated as of July 25, 1997 among
      Federal Data Corporation, various lending institutions signatories thereto
      and Bankers Trust Company as Agent, as amended by First Amendment to Credit
      Agreement dated as of August 4, 1997 among Federal Data Corporation, various
      lending institutions signatory thereto and Bankers Trust Company as Agent
|(a)4.6                 |  | Form of 9% Increasing Rate Subordinated Note
      due 2004 dated May 21, 1997                                                                                                                                                                                                                                                                                                        
|(a)4.7                 |  | Form of 9% Increasing Rate Subordinated Note
      due 2004 dated June 30, 1997                                                                                                                                                                                                                                                                                                       
|(f)4.8                 |  | Form of 9% Rate Subordinated Note due 2000 dated
      February 17, 1998                                                                                                                                                                                                                                                                                                              
|(f)4.9                 |  | Form of 9% Rate Subordinated Note due 2000 dated
      March 13, 1998                                                                                                                                                                                                                                                                                                                 
|4.10                   |  | The Company is a party to several non-recourse
      financing agreements evidenced by promissory notes, none of which exceed
      10 percent of the total assets of the Company and its subsidiaries on a
      consolidated basis. The Company hereby agrees to furnish a copy of such
      agreements to the Commission upon request.                                            
|(c)4.11                |  | Security Agreement-Inventory dated September
      5, 1997 among Federal Data Corporation, Sylvest Management Systems Corporation,
      FDC Technologies, Inc. and Nationscredit Commercial Corporation of America                                                                                                                                                                   
|(c)4.12                |  | Intercreditor Agreement dated as of September
      11, 1997 between Bankers Trust Company, as Agent, and Nationscredit Commercial
      Corporation of America                                                                                                                                                                                                                       
|(c)4.13                |  | First Supplemental Indenture dated as of December
      19, 1997 between Federal Data Corporation and Norwest Bank, Minnesota, National
      Association                                                                                                                                                                                                                             
|(g)4.14                |  | Amendment to the Senior Credit Facility dated
      April 23, 1999                                                                                                                                                                                                                                                                                                                    
|(h)4.15                |  | Amendment to the Senior Credit Facility dated
      October 22, 1999                                                                                                                                                                                                                                                                                                                  
|*  4.16                |  | Amendment to the Senior Credit Facility dated
      March 23, 2000                                                                                                                                                                                                                                                                                                                    
|(a)10.1                |  | +Employment Agreement dated April 30, 1997 between
      NYMA, Inc. and Peter C. Belford                                                                                                                                                                                                                                                                                              
|(b)10.2                |  | +Stock Option Plan dated February 16, 1996 for
      Executives and Other Key Employees                                                                                                                                                                                                                                                                                               
|(b)10.3                |  | +Form of Executive Management Incentive Stock
      Option Agreement                                                                                                                                                                                                                                                                                                                  
|(a)10.4                |  | Agreement of Lease dated December 5, 1984 between
      Federal Data Corporation and 
      Community Motors Property Associates Limited Partnership                                                                                                                                                                                                                                  
|(a)10.6                |  | Lease Agreement dated February 2, 1988 between
      Second Trade Center Office Associates Limited Partnership and NYMA, Inc.,
      as modified by Lease Modification Agreement dated December 22, 1988 between
      Second Trade Center Office Associates Limited Partnership and NYMA, Inc.                                                                                       
|(f)10.7                |  | Lease Assignment, Modification and Extension
      Agreement                                                                                                                                                                                                                                                                                                                          
|(a)10.9                |  | Trust Agreement dated December 27, 1994 among
      Federal Data Corporation, Charles R. 
      Hanley, II, Daniel Young, Harry Marren, Marvin Haber and Paul Taltavull                                                                                                                                                                                                               
|(b)10.10               |  | +Management Agreement dated as of December 1,
      1995 among FDC Technologies, 
      Inc., the subsidiaries listed on Schedule A thereto and TC Group, L.L.C.                                                                                                                                                                                                                      
|*  21.1                |  | Subsidiaries of Federal Data Corporation                                                                                                                                                                                                                                                                                                                                              
|*  27                  |  | Financial Data Schedule                                                                                                                                                                                                                                                                                                                                                               
|*                      |  | Filed herewith                                                                                                                                                                                                                                                                                                                                                                        
|(a)                    |  | Incorporated by reference to exhibits to the
      Company's Registration Statement on Form S-4, filed on September 26, 1997.                                                                                                                                                                                                                                                         
|(b)                    |  | Incorporated by reference to exhibits to the
      Company's Amendment No. 1 to Registration Statement on Form S-4, filed on
      November 26, 1997.                                                                                                                                                                                                                                 
|(c)                    |  | Incorporated by reference to exhibits to the
      Company's Amendment No. 2 to Registration Statement on Form S-4, filed on
      December 19, 1997.                                                                                                                                                                                                                                 
|(d)                    |  | Incorporated by reference to the exhibits to
      the Company's Report on form 8-K, filed on March 3, 1998.                                                                                                                                                                                                                                                                          
|(e)                    |  | Incorporated by reference to the exhibits to
      the Company's Report on form 8-K, filed on March 16, 1998.                                                                                                                                                                                                                                                                         
|(f)                    |  | Incorporated by reference to the exhibits to
      the Company's Report on form 10-K 405, filed on March 31, 1998.                                                                                                                                                                                                                                                                    
|(g)                    |  | Incorporated by reference to the exhibits to
      the Company's Report on form 10-Q, filed on May 13, 1999.                                                                                                                                                                                                                                                                          
|(h)                    |  | Incorporated by reference to the exhibits
      to the Company's Report on form 10-Q, filed on November 12, 1999.                                                                                                                                                                                                                                                                     
|+                      |  | Executive Compensation Plan or Arrangement                                                                                                                                                                                                                                                                                                                                            

(4) Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of the Section 13 or 15(d) 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, in
  Bethesda, Maryland on March 28, 2000.

|    | FEDERAL DATA CORPORATION                                               
|--- | -----------------------------------------------------------------------
|    |                                                                        
|By: | /s/ James M. Dean                                                      
|    | James M. DeanVice President, Chief
      Financial Officerand Treasurer

Pursuant to the requirements of the Securities Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and the dates indicated.















|SIGNATURE                                              |  | TITLE                                                                                                                          |  | DATE          
|------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------------ |  | --------------
|/s/William E. Conway, Jr.
      William E. Conway, Jr. |  | Chairman of the Board                                                                                                          |  | March 27, 2000
|/s/Daniel R. Young
      Daniel R. Young               |  | Vice Chairman and Chief
           Executive Officer                                                                           |  | March 27, 2000
|/s/James M. Dean
      James M. Dean                   |  | Vice President, Chief Financial
           Officer and Treasurer
      (Principal      Financial and Accounting
      Officer) |  | March 27, 2000
|/s/Allan M. Holt
      Allan M. Holt                   |  | Director and Secretary                                                                                                         |  | March 27, 2000
|/s/Peter J. Clare
      Peter J. Clare                 |  | Director                                                                                                                       |  | March 27, 2000
|/s/Harry T. Marren
      Harry T. Marren               |  | Director, President and
           Chief Operating Officer                                                                     |  | March 27, 2000
|/s/C. Robert Hanley
      C. Robert Hanley             |  | Director and Chairman
Emeritus                                                                                                 |  | March 27,
2000



QUICKLINKS





Part IItem 1. Business.
Item 2. Facilities.Item 3.
Legal Proceedings.
Item 4. Submission of Matters to a vote of  Security
Holders.
Part II Item 5. Market for the Registrant's Common Equity and
  Related Stockholder Matters. Item 6. Selected Financial Data. Item 7. Management's Discussion and Analysis of Financial
  Condition and Results of Operations. Item 8. Consolidated Financial Statements. Index to Financial Statements.Report of
Independent AccountantsConsolidated Balance Sheets as of December 31, 1998 and
1999Consolidated Statements of Operations for the Years Ended December 31,
1997, 1998 and 1999Consolidated
Statements of Changes in Stockholders' (Deficit) Equity for the Years Ended
December 31, 1997, 1998 and 1999Consolidated
Statements of Cash Flows for the Years Ended December 31, 1997, 1998 and
1999Notes to Consolidated Financial StatementsNote 1- Nature of Business
Note 2 - Merger
Note 3 - Summary of
Significant Accounting Policies
Note 4 - Acquisitions
Note 5 - Accounts
Receivable
Note 6 - Net Investment in Sales-Type Leases
Note 7 - Other
Assets
Note 8 - Leased and Other Property and Equipment
Note 9 - Notes
Payable
Note 10 - Nonrecourse Obligations Under Capital Leases
Note 11 -
Accounts Payable and Other Liabilities
Note 12 - Income Taxes
Note 13 -
Stockholders' Equity and Transactions with Stockholders
Note 14 -
Supplemental Disclosure of Cash Flow Information
Note 15 - Commitments and
Contingencies
Note 16 - Retirement Plans
Item 9. Disagreements on
Accounting and Financial Disclosure.
Part III
Item 10.
Directors and Executive Officers of the Registrant.
Item 11. Executive
Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
Item 13. Certain Relationships and Related
Transactions.Part IV
Item 14. Exhibits, Financial
Statement Schedules, and Reports on Form 8-K.
Signatures.